KEY REPUBLICANS WANT THE US TO MIRROR GREECE

…Greek Demonstrations against economic austerity

The conservatives show us clearly why their advice should not be followed.

 

OK, it’s time to put on my economist hat.  Now, don’t go to sleep just yet, I’m doing this with a little help, and with a story about how if we don’t make the right decisions in the voting booth, we could see ourselves in Great Recession - Part II.

A Nobel Prize winning economist is again warning us that America could go the way of Greece’s economy, but it’s not the warning you may think you already know.  You know, the warnings that the Republican budget hawks, such as Wisconsin’s Paul Ryan, keep trying to sell us.

In fact, according to the super conservatives, if America were to follow the conservative’s interpretation of the lessons from Greece, the politics coming from the far right would just insure that we would become another “super-version” of what Greece has become.

The Nobel economist I referred to is Paul Krugman.  For months, Krugman and his ilk have been warning us as to just how dangerous it would be if we were to follow the right wing's economic recommendations. 

 

Per Mr. Krugman, "Greece has played an outsized role in the US political debate, as a symbol of the terrible things that will supposedly happen — any day now — unless we stop helping the less fortunate and printing money to fight unemployment," Krugman also writes. "And Greece does indeed offer important lessons to the rest of us. But they’re not the lessons you think, and the people most likely to deliver a Greek-style economic disaster here in America, are the very people who love to use Greece as a boogeyman."

Yes, it’s the far-right wing of the GOP that has consistently said that easing money during the recession, and failing to implement more austerity measures in America, will lead to runaway inflation. They've been saying that since 2011. You will notice, their prediction has not happened here, but it has happened for all those western European countries that followed that concept of severe austerity.

The conservatives also say that it’s extremely dangerous to have our current national debt situation.

And Krugman once again blows-off that statement by explaining what happened in Greece and their debt problem

Yes, Greece did run up its national debt, but that was mainly due to their irresponsible lenders in charge of the Greek treasury.  In fact, by historical standards, Greece’s debt was high, but not that high.

If you consider Greece’s situation at the end of 2009, the Greek government debt was near 130% of their GDP (Gross Domestic Product), which is definitely a big number. But it is by no means unprecedented. As it happens, Greece’s debt ratio in 2009 was about the same as America’s was in 1946, just after the war. But as another example, Great Britain’s debt ratio in 1946 was twice as high.

Today, the Greek debt is over 170% of GDP and is still rising.  But is that because Greece just kept on borrowing?  No, absolutely not.  The Greek debt is up only 6% since 2009, and it's only 6% because it did receive some debt relief in 2012.  However, the ratio of debt to GDP is up because their GDP is down by more than 20%.

And why is the Greek GDP down?

Well, the GDP is down mainly due to the strict austerity measures Greece’s European creditors forced it into.

Look, as Krugman puts it, sometimes austerity works, especially when you control your own currency. Krugman then cites Canada in the '90s as an example. The difference was that Canada instituted austerity, but at the same time, they eased the money supply. Unfortunately, being that Greece is using the Euro, that option is not available to Greece.

"Greece, unfortunately, no longer had its own currency when it was forced into drastic fiscal retrenchment," Krugman writes. "The result was the economic implosion that ended up making the debt problem even worse. Greece’s formula for disaster, in other words, didn’t just involve austerity; it involved the toxic combination of austerity with hard money."

And the same kind of austerity that was imposed on Greece, is exactly what the Paul Ryan’s and the GOP want to impose on the United States.  They want austerity with no easing of the money supply.

Both Ryan and the GOP want to reduce US spending, especially on America’s poor, and they continually attack the Federal Reserve for cutting off the money supply.  Per Krugman,  "They deliver solemn lectures on the evils of ‘debasing’ the dollar, when the main difference between the effects of austerity in Canada and in Greece was precisely that Canada could ‘debase’ its currency, while Greece couldn’t. Oh, and many Republicans hanker for a return to the gold standard, which would effectively put the US into a euro-like straitjacket."

This is the same basic Keynesian, lesson that I learned in Econ I in my first year at the university.  I would have thought that such a nerdy numbers guy, such as the former Republican Budget Chairman, Paul Ryan, he would have understood this.  But I forget, Ryan is a Republican conservative that follows the novelist - philosopher, Ayn Rand (not an economist), and not the economist, John Maynard Keynes.

So, as usual, when it comes to doing the right thing for the country, I again have to say: “Attention all voters: Buyer Be Very Aware!”

Copyright G.Ater  2015