Friday, May 14, 2010

Paul Krugman Debunks Myths About Greece and the U.S. Economy

If you listen to the CNN/CNBC/MSNBC pundits, America is cursed and damned, like a fiscally irresponsible Odysseus drifting in a sea of debt, while Zeus is itching to strike and Poseidon can't wait to whip up a terrible storm.

Paul Krugman gives the keynote at Woodrow Wilson
School on May 13. Photo: Hans Sandberg.
If you on the other instead listen to Paul Krugman, which I did yesterday at seminar held by the Center for International Security Studies at the Woodrow Wilson School, you would worry about the long-term debt the U.S. is accumulating (mostly thank's to the Bush-Cheney tax-cuts for the rich and senseless invasion of Iraq), but you would never even consider joining the Tea-party.

"We are not Greece," Krugman said, pointing out that the greek economy is about the size of the State of Michigan, and it tanked without pulling the U.S. economy down with it. Another thing to remember is that the U.S. export is only 3 percent of GNP. The root of the Greek crisis has, according to Krugman, a lot to to with the Euro, which he feels was pushed through way to early by the European elites, shackling the possibilities of a country like Greece to adjust by devaluing their currency. He seemed very pessimistic about the possibility to solve the Greek financial crisis, and expects it to blow up later on, as the austerity policy could lead to deflation and economic implosion. His most common answer during the Q&A-session was to shake his head. It's bad news for Greece, but it's not going to pull the U.S. or the world into a malstroem...

Here is a video clip from the keynote:

Here is Krugman's May 14-column for the New York Times:
We’re Not Greece.

Hans Sandberg

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