Christopher Caldwell’s article contains an interesting aside about George Osborne and his German opposite number:
- “An aide who was present at Schäuble's meetings with George Osborne in London last October was struck by the similarities in the two ministers' economic philosophies. Both have absorbed the lessons laid out in Carmen Reinhart and Kenneth Rogoff's history of financial crises, This Time Is Different, and both believe in ‘Ricardian equivalence’, the idea that trying to stimulate an economy with borrowed money can backfire because people will store money away to pay for inevitable tax hikes.”
Serendipitously, Bloomberg carries an article from Reinhart and Rogoff on American and European prospects for economic recovery. The authors give it to us straight:
- “On the point of whether the aftermath of financial crises plays out differently than normal recoveries, the evidence isn’t mixed at all. As our studies and many others have confirmed… financial crises leave behind deep recessions of long duration and considerable volatility.”
Pretty obvious, you might think, but many on the left and the right don’t seem to have noticed. Instead, they advance their competing quick fix growth solutions – oblivious to the fact that you can’t comprehensively wreck a financial system without doing lasting damage to the economies that depend upon it.