"Austerity" Was Not on the Ballot In Europe

Of course, nearly every media outfit is covering the European elections as a defeat for "austerity."  Nauseating.  Let's strike a blow for truth by using words based on their true meaning.  So, I must revive this post:

"Austerity" Is Nothing of the Sort

The most enlightening essay you will ever read if you want to understand politics and become a more educated and sophisticated voter/citizen is George Orwell's "Politics and the English Language." It remains the gold standard in demonstrating how words shape (read: distort) the substantive debate.

Today's sovereign debt crisis in Europe is a great case study. Europeans in general, and the ideological allies of the social democratic welfare state in particular, complain about the "austerity" being either contemplated or imposed on certain European nations. Greece, of course, is the poster child here. Yet, no reasonable, economically literate person would characterize the move from how the Greeks have managed their economy to how they should manage their economy - expressed principally by the German government - as "austerity." Any reasonable analysis would call it moving from "profligacy" to "normalcy". Spending what you can afford is definitionally "normal." Spending more than you can reasonably afford is definitionally "profligate." Spending modestly, less than you can afford, is "austere." Germany may be advocating that Greece be "more austere" in relative terms, but it is by no means proposing "austerity." Greece has an enormously unproductive and inconsequential economy, and yet they have pretended for years to have the living standards of much more prosperous and productive neighbors. They did this by creating needless work for tens of thousands of people and paying them compensation well beyond their competitive worth, and borrowed ungodly sums to pay for it all. Greek civil servants earn 14 months of salary for 12 months work and there are about 30% more of them on the government payroll than needed. Ceasing this fantasy is not "austerity" as a true description of their state of affairs. What is being asked of Greece is a return to normalcy, and only austere relative to its former profligacy.

Yet the likes of the Greeks, the Portugese, the Italians, the Spanish, and all their ideological allies are crying a river over what "austerity" will do to their economies when what they mean is what having to abandon profligacy will do to their economies. They may be right in terms of what the shift will do - I suspect they are wrong, see here - but they are being dishonest over the terms of the debate. Do you really think they'd win their terms by moaning over what "abandoning profligacy" will do to them? They have to shield the reality of the debate by manipulating language - the difference between "more austere" with no reference to starting point and "austerity" as an absolute state of being simply must get lost in the shuffle to serve their political goals.

The same is going on here in America. We hear the same arguments about budget cuts. Over-stretched government entities talk about cutting "necessary" services, when close to 50% of what government spends its money on is completely superfluous. This is what must happen to win in politics, the superfluous must become the necessary, normalcy must be austerity.

So they next time you hear that austerity is killing Europe, understand it for the socialist nonsense dressed up in Keynesian jargon that it is.

:Austerity" was not on the ballot.  What was on the ballot across Europe this past weekend was Continued Severe Profligacy vs. Slightly Reduced Profligacy.  Continued Severe Profligacy won.  Thus the markets will no have to rebuke the voters and attempt to pressure the newly elected to go back on their campaign promises. Otherwise, the voters will have voted for bankruptcy, as bankruptcy always succeeds profligacy that is unchecked.  Monsieur Hollande will not prove much of a socialist if he is to prevent a total collapse of France's economy.

"Austerity" Is Nothing of the Sort

The most enlightening essay you will ever read if you want to understand politics and become a more educated and sophisticated voter/citizen is George Orwell's "Politics and the English Language." It remains the gold standard in demonstrating how words shape (read: distort) the substantive debate.

Today's sovereign debt crisis in Europe is a great case study. Europeans in general, and the idealogical allies of the social democratic welfare state in particular, complain about the "austerity" being either contemplated or imposed on certain European nations. Greece, of course, is the poster child here. Yet, no reasonable, economically literate person would characterize the move from how the Greeks have managed their economy to how they should manage their economy - expressed principally by the German government - as "austerity." Any reasonable analysis would call it moving from "profligacy" to "normalcy". Spending what you can afford is definitionally "normal." Spending more than you can reasonably afford is definitionally "profligate." Spending modestly, less than you can afford, is "austere." Germany may be advocating that Greece be "more austere" in relative terms, but it is by no means proposing "austerity." Greece has an enormously unproductive and inconsequential economy, and yet they have pretended for years to have the living standards of much more prosperous and productive neighbors. They did this by creating needless work for tens of thousands of people and paying them compensation well beyond their competitive worth, and borrowed ungodly sums to pay for it all. Greek civil servants earn 14 months of salary for 12 months work and there are about 30% more of them on the government payroll than needed. Ceasing this fantasy is not "austerity" as a true description of their state of affairs. What is being asked of Greece is a return to normalcy, and only austere relative to its former profligacy.

Yet the likes of the Greeks, the Portugese, the Italians, the Spanish, and all their idealogical allies are crying a river over what "austerity" will do to their economies when what they mean is what having to abandon profligacy will do to their economies. They may be right in terms of what the shift will do - I suspect they are wrong, see here - but they are being dishonest over the terms of the debate. Do you really think they'd win their terms by moaning over what "abandoning profligacy" will do to them? They have to shield the reality of the debate by manipulating language - the difference between "more austere" with no reference to starting point and "austerity" as an absolute state of being simply must get lost in the shuffle to serve their political goals.

The same is going on here in America. We hear the same arguments about budget cuts. Over-stretched government entities talk about cutting "necessary" services, when close to 50% of what government spends its money on is completely superfluous. This is what must happen to win in politics, the superfluous must become the necessary, normalcy must be austerity.

So they next time you hear that austerity is killing Europe, understand it for the socialist nonsense dressed up in Keynesian jargon that it is.

New Lefty Bane: Austerity

The anti-austerity crowd - big government types of all sorts from Krugman and Stiglitz to union bosses - are waging a desperate campaign to discredit the austerity programs embarked upon in Europe in the face of the sovereign debt crisis. See here, here, and here for example (and that sample is merely one MSM outlet beating up on just one austerity-pushing leader). There is only one problem. The facts on the ground aren't cooperating. The pound is strengthening as retailing and manufacturing are looking up. Debt investors love the direction, sending UK companies' bonds up in price. Home prices are up (bonus UK version of "Unexpectedly"). And it is not just the UK, good news is breaking out all over Europe.

Of course, Europe walked to the edge of the abyss, stared down in, and got a little religion, sense, whatever you want to call it. The one word summary of this newfound economic sense is commonly referred to as "austerity". And it is the bane of statists/liberals/collectivists/progressives everwhere. You see if it works in Europe, hell, it can work in other places too, and if a little bit works, why some dastardly bugger might suggest more than a little bit. What would become of the long march to progressive utopia then? The thought is almost too much to contemplate, so it's all hands to the ramparts - "austerity" must go down in flames. Naturally the media are falling into line and austerity is universally associated with doom and gloom. Of course, go back and it was the lack of austerity - consumer borrowing and spending - that was the recipe for disaster. Now that same formula, if only performed by the government, is the only possible elixir for our ills. Funny that, the same behavior exhibited by you and me is bad unless perfomed by the government, in which case it is clearly good, necessary even.

Just a quick note on Stiglitz. This guy was preaching "aid to states" from the rafters in the months leading up to the failed stimulus, and he got his wish. In spades I might add, with the extra aid for teachers' jobs that just went through. Nearly everything that Obama and the Pelosicrats have done has contained massive aid to the states, and yet the states' as well the national picture looks no better. When is a heavy-weight economist going to come out and call ole' Aid to States Joe out on the carpet?

Austerity Fallacy

There are many fallacies pervading the issue of fiscal austerity around the globe. The first fallacy is theoretical or semantic. Governments around the world, particularly in Europe are not faced with the "pain" of going from normal to austere - they are faced with the requirement to go from profligate to more reasonable. They are not moving towards true austerity, they are moving slightly away from profligacy.

The second fallacy relates to practice. Keynesian jugheads in the media and in government keep telling us that economies will suffer greatly if faced with so-called "austerity" policies, i.e. government spending cutbacks. This is incorrect both in theory and in practice, but small government types can hardly hope to carry the day by arguing the theory, lefties are impervious to this. So we have to show that economies can grow despite, nay because of, reductions in government spending. Even then it will be an uphill battle, but it'll be somewhat easier. So it is good news that Ireland's economy is showing resiliency and growth under its "austerity" regime.

Ireland's economy grew strongly in the second quarter despite cutbacks in government spending, boosting hopes that it can stick to the terms of its bailout program and return to the international bond markets in 2013.

The Central Statistics Office said Thursday gross domestic product in the three months to June was 1.6% higher than in the first quarter and 2.3% higher than in the same period of 2010.

That was the fastest year-on-year expansion since the last three months of 2007, after which Ireland's previously fast-growing economy was felled by the financial crisis and the collapse of a debt-fueled property boom.

While the likes of Greece and Portugal attempt to sucker their new lenders with phony austerity, Ireland is getting down to the business of truly repairing its economy with credible measures. In time we're likely to hold Ireland out as a model of reform and recovery, and as an example that disproves all the Keynesian hokum (in addition to our failed stimulus here at home), much the same way that the stagflation of the 1970s (and today) has discredited the Phillips Curvers.

Abandoned Reason

I said that "austerity" (which is nothing of the sort) would be the bane of leftists the world over and the new target of ire of the MSM.  I was absolutely correct and yet I didn't expect the sheer shamefulness and idiocy (silly naive me) that the MSM would embrace in order to purvey a campaign of fear over "austerity" (did I mention the Orwellian bullshit logic that labels slightly less profligacy as "austerity"?  I guess I did.) 

Anyway, the irresponsibly atrocious story that got my Irish up this week was this story about the putative outbreak of child abandonment taking place in Europe, which CNBC directly links to "austerity".  This is flatly bogus.  I am not denying that abandonment is going on, although the data appear to be thinly and dubiously sourced; I am sure abandonment is happening in increasing numbers.  But, just as in the example of Greece's lack of aspirin, the cruelty is not in the remedial actions taken to save/mitigate an exploding system, the real cruelty lies in building and subjecting a populace to a system that will inevitably collapse in destructive fashion.  Any outbreak in abandonment is not attributable to "austerity", but it is attributable to the European social model exploding in catastrophic fashion.  "Austerity" is a result of the larger failure, not the cause of it.  Children are being abandoned because they were always effectively wards of state, their government-dependent parents essentially just middlemen, nominal providers of resources that have their origin with the state.  Now that the state, the real provider for many children, is bankrupt, these children have no provider and are being abandoned to the hope of care and provision elsewhere in society.

More "Austerity" Blather from CNBC

CNBC continues its awful coverage of the European sovereign crisis.  In an article on Greece running out of money, there is this small, wildly nutty tidbit:

Prolonged austerity is making it harder, not easier, for governments like Greece to become self-reliant again.

This is unadulterated poppycock.  Austerity is a million miles from Greece.  It is an utterly discredited model and bankrupt system that has made Greece unable to become self-reliant.  Greece's continuing relative profligacy is just hastening the implosion of the country.  Greece is a voracious, all-devouring sinkhole, no amount of continued assistance will stabilize it or set it on any type of reasonably stable course.   Austerity, which has yet to be seen, is coming...not by virtue of any political choice, but by physics - cold, hard, reality.

Bloomberg Resorts to "Hidden Hunger" To Bash "Austerity"

Remember I said that the media would be all over the cruel and savage "austerity" that they will claim is plunging European governments back into recession.  I said the UK would come in for particularly brutal criticism by virtue of having a Conservative government.  Well, Bloomberg News lends a helping hand to the meme today with a heart-string tugging attack on austerity in Britain that is suspiciously without any data or perspective, and adds a nice touch with something called "hidden hunger."  Yep, it's hidden so you can't see it, but trust us...

Why no numbers?  Because if they gave you the numbers, you'd see that austerity is a myth, not just in Britain but all across Europe.  The Euros have put the spending binge in neutral and have maintained spending at ridiculously profligate levels, only reining in the growth of government largesse.  And this is what all the lefty caterwauling is about, the lack of more and more government spending.  So all the sob stories you here are of people suffering because the government isn't giving them more of what they've been getting for years, money that the governments have never had.

Yes, Mme. Lagarde, We Would Like You To Grovel

I said that the ever so mild fiscal conservatism of the Cameron government in the UK would a) not result in a slowing economy, b) wasn't really "austerity" and c) would be used mercilessly by the media to lambaste putative austerity and the Cameron government.

Of course, leading the charge of anti-"austerity" and anti-Cameron catcalls was not other than the IMF, the grand poobahs on Euro-Keynesian nonsense.  Alas they got it entirely wrong and now Christine Lagarde has to answer for it publicly.  Her answer is interesting.

Christine Lagarde has asked whether she needs to grovel on her knees before George Osborne over the IMF’s incorrect warnings on the UK economy, as she warned against raising taxes.

“Do I have to go on my knees?” Ms Lagarde, the head of the International Monetary Fund said, when asked whether she has apologised to George Osborne over the fund’s low growth forecasts and calls to adopt a ‘Plan B’ of less austerity – calls the body now accept it got wrong.

Well, yes actually, it would be nice if you did get on your knees and beg for forgiveness, but we'll spare  Madame Lagarde the embarrassing ritual if we could disband the IMF.  Otherwise, yes, get down on bended knee and repudiate your statist, Keynesian nonsense once and for all.

Reminder: All Talk of Austerity Is Pure, Unadulterated Poppycock

The Zero Hedge people are saying what I have been saying for awhile - there is absolutely no such thing as "austerity" going on in Europe or anywhere else for that matter.  If words have any meaning, "austerity" is nowhere close to what is going on or even what is contemplated to go on in Europe.  What is going on in Europe is "ever so slightly less profligacy."  What is contemplated for Europe is "a return to only moderately profligate" or "as much profligacy as we can get away with, but less than the maximum our lenders will tolerate."

Global Finance Heh

You've heard of the BRICs. Now meet the PIIGS...

"The Portuguese government failed to find sufficient investor interest in its bonds on Feb. 3, with only 300 million euros ($417 million) of its 12-month bonds sold out of an expected 500 million euro bond offering. The interest that Portugal will have to pay on the bonds was 1.38 percent, compared to 0.93 percent at a Jan. 20 auction. The increase in the cost of financing debt indicates investor skepticism toward Portuguese debt. This follows Portugal’s Jan. 25 budget announcement in which Lisbon failed to convince credit rating agencies — specifically Fitch and Moody’s — that its austerity measures were sufficient to cut its budget deficit. Furthermore, Portugal’s 2009 budget deficit was 9.3 percent of gross domestic product — higher than the forecast 8.5 percent — and Lisbon will only be able to reduce the deficit by 1 percent in 2010. The news of a poor bond sale from Portugal follow some positive news from Greece, where a semblance of investor confidence returned on Feb. 3 — interest on government bonds fell to 6.73, after hitting a high of 7.16 on Jan. 28 — due to positive comments from the EU Commission regarding the Greek budget austerity plan. The dire news from Portugal, however, indicates that investors still lack confidence in the PIIGS (Portugal, Ireland, Italy, Greece and Spain) as a group. A sufficiently negative perception of PIIGS economies could force financing costs to skyrocket, making it difficult for Eurozone’s peripheral states to finance their ballooning budget deficits. This could force the EU to step in; rumors have swirled recently around European capitals that eurozone members are discussing the possibility of floating a eurozone-wide bonds which would then provide funding for countries in trouble. It is unclear at the moment, however, how willing Berlin is to offer such a lifeline to the PIIGS when it wants to put the onus on budgetary austerity measures instead."

Shocker: Austerity Was Phony

I told ya' so. 

The Big Lie over in Europe for the last few years has been this notion of "austerity".  First that it is happening and second that it is really, really bad.

Of course, I've been telling you that nothing even remotely close to what can reasonably be called "austerity" is happening anywhere in Europe.  Because that is what is needed, thus there was no way it was going to happen. 

And now we are finding out that, yeah, maybe it was all phony all along...

Vindication!

Aha!  I have been vindicated.  Two themes I've been writing about here at NBfPB are 1) there is no such thing as "austerity" going on in Europe, and 2) even so, what little fiscal retrenching European nations are doing will be good for their economies but yet be skewered in the press as disastrous, driven by all manner of delusion and/or fealty to nutty Keynesian notions of the economy.

Well, the WSJ carries an analysis piece today highlighting the confounding reality that the UK economy is doing well despite all manner of predictions to the contrary, all based on "theory." 

Here is the headline:

For five years, the British economy has persistently failed to behave as predicted by theory—and continues to do so with increasing evidence it is growing faster than almost any other major Western economy.

Some choices tidbits:

Yet this growth spurt has taken economists almost entirely by surprise. It is hard to identify a single leading forecaster predicting such a strong recovery at the start of the year, or even at the end of the first quarter.

As recently as July, the International Monetary Fund was so gloomy about the U.K. that it was advising the government to loosen its deficit-reduction strategy. This month, it raised its 2013 growth forecast by half, to 1.4%.

Gee, globalist government econo-bureaucrats were advocating more unaffordable government spending?  No kidding.

The answer to the first question is becoming clear: More policy makers and economists now accept that the most plausible explanation for the U.K.'s postcrisis underperformance and its recent outperformance lies in the workings of the financial system—something that barely features in standard macroeconomic models.

 Gee, f**k with the banking system and things go awry.  Where have I heard that before?

Previous attempts to blame the U.K.'s weak performance on the government's fiscal policies have been undermined by the recovery and by the fact that U.K. austerity hasn't actually been very austere.

 +1 for DB.

While economists argued over Keynesian demand-side remedies, the main problem was one of supply—specifically the supply of finance.

Stuck on demand-side thinking.  I think that was even the title of one of my posts!

If you want more background as to how supply-side economic analysis has been pasting demand-side (Keynesian) analysis these last few years, check out here and here.

European Austerity Is (Still) Bullshit

I have said it for a long time - European "austerity" is a farce. 

Finally, it is getting some (and I stress only some) MSM exposure, courtesy of Bloomberg News.

But the Keynesians are out in full force attempting to salvage the reputation of their bankrupt economic ideology - see here and here.

Economics Smackdown!! Fate of the World Hangs In the Balance!!

Stop the presses.  The economics world is about to be rocked (or is being rocked) by another spectacular, epic fight over the fate of the world.  Well, actually only over some obscure math.

Today the Twitterverse exploded with chatter about a new research paper claiming to find holes in a landmark academic paper that’s been cited to justify extreme austerity measures. By mid-afternoon the authors—Harvard economists Carmen Reinhart and Kenneth Rogoff—had e-mailed reporters a quick reply defending their work.

...
 “Growth in a Time of Debt” (2010) by Reinhart and Rogoff argues that countries’ economic growth slows when government debt levels rise, with a noticeable breaking point at debt equal to or exceeding 90 percent of gross domestic product.

So economics journalists went bonkers after Mike Konczal of the Roosevelt Institute in New York reported on a new critique (PDF) by three economists from the University of Massachusetts at Amherst—Thomas Herndon, Michael Ash, and Robert Pollin. What makes the UMass study credible is that Reinhart and Rogoff gave the authors the original data, allowing them to try to replicate the results.  Herndon, Ash, and Pollin said they found three important errors in what they described as a working paper.

The Rogoff/Reinhart thesis has been dynamite in the economics world (inexplicably of course; how the notion that excessive debt leads to ruin can be groundbreaking is beyond us mere layfolk), and to be challenged not as a matter of theory, but of computation, is dynamite as well.  Well, maybe not.  Larry Summers wrote an influential paper that was found to be garbage when the conclusions fell apart by removing data from one country, (economic power house Botswana), and he did OK for himself. 

DeLong and Lawrence Summers co-authored "Equipment Spending and Economic Growth" in the Quarterly Journal of Economics in 1991, and "Equipment Spending and Economic Growth: How Strong is the Nexus?" in the Brookings Papers on Economic Activity in 1992. The papers were presentations of an empirical study showing higher social returns to capital equipment investment than would be predicted by the classic Solow growth model. But only a year later, "Reassessing the Social Returns to Equipment Investment," an NBER Working Paper by Hassett, Alan J. Auerbach and Stephen D. Oliner, revealed that DeLong and Summers were just flat-out wrong, and for the most embarrassing of reasons: their results fell apart with the removal of Botswana from their data set:

"DeLong and Summers' own data fail to reject the Solow model for the OECD countries. The same is true even for their full sample of quite heterogeneous nations if we exclude just one country (Botswana). These results clearly refute DeLong and Summers' claim to have uncovered robust evidence of uniformly high social returns to equipment investment."

Hassett's paper was published in 1994 in the Quarterly Journal of Economics -- the same Harvard-sponsored journal that had published the original erroneous DeLong/Summers work. After this embarrassing debacle, Teflon-coated Summers managed to go on with his career, eventually becoming Treasury secretary under Bill Clinton, and then president of Harvard.

Even if the critique turns out to be valid and Rogoff and Reinhart's paper does not hold up, do not weep for them.  Their careers and stature will be intact.  That said, it will be embarrassing for the rarefied air of the Harvard economics department to have been sullied with the notion of professional accountability at the hands of ...BLEH...UMASS.

Of course, the media is quick to turn to the political implications because this relatively meaningless fight over math is an opening by which they can trash the right.

It’s been cited repeatedly in the U.S. and elsewhere to justify budget cuts by policymakers and legislators, House Budget Committee Chairman Paul Ryan among them.

Putting aside the fact that what is being called "austerity" is complete bullshit, the notion that if R-R's calculation are incorrect then massive, debt-fueled government spending is somehow not dangerous, is preposterous.  But then again we are talking about academic economics here.  So, forget Greece, forget the slow-rolling collapse of massively indebted European PIIGs, forget toilet-swirling Argentina...Paul Ryan is a dastardly evil heartless shit because...R-R's spreadsheets!

Regardless of the way this spat turns out, the truth remains, countries DO go bust (with the attendant economic collapse) and they go bust by accumulating too much DEBT.  You don't need a spreadsheet to know that much.

You Heard It Hear First

I've been saying that "austerity" in Europe, and particularly in Britain, is non-existent.  Now, Forbes is backing me up.

I also noted a while back that no commercial ship with armed guards has been hijacked by pirates even while sailing through the pirate infested waters off Somalia, Nigeria or Indonesia, the world's piracy hotspots.  Today on the WSJ Op-Ed pages we learn that very same tidbit again.

Italy to Balance Budget? Cats to Sleep With Dogs?

This is awesome, great, spectacular news.

Italy: Budget To Be Balanced By 2013 - PM

November 30, 2011

Italian Prime Minister Mario Monti intends for Italy to have a balanced budget by 2013, he said Nov. 30, Reuters reported. Italy will adopt a “vast political and economic operation” Dec. 5 that will implement the austerity measures decided by the previous government, he said. Monti said he will present a new finance law to his Cabinet on Dec. 5 that includes provisions for structural reform and measures to curb Italian debt in the short run, AGI reported.

We all have every reason to be skeptical, very skeptical...but if they can pull this off and maintain it over the longer term, the news is truly earth-shatteringly good. Actually, upon reflection there was never any reason to believe that any government in Europe couldn't pull this off. Their budgets are just a soup of bribes to various constituencies built up over decades, all of which are easily scaled back and/or eliminated. The notion that this was critical spending necessary for proper functioning of their economies was laughable. The ability was always there to balance the budget, just not the will. Now that power is not derived from actual voting, but by Eurocratic fiat, poiltical bribes need not be paid or honored (at least in Italy and Greece). It was hard to focus on that fact through all the Armageddon talk. Maybe Jon Corzine was on to something after all, his timing was just off...maybe...

This, along with the Spanish voting to take their medicine (theoretically), bodes very well for a non-Armageddonish resolution to the Euro crisis. Stay very tuned.

Checking In On the Austere

Just in case you were wondering...austerity still not killing UK economy. Sorry Keynesian lefties.

Yes, Greece Is Still a Disaster

When a nation's youth unemployment rate hits 60%, which it has in Greece, it is not a "recession".  It is a total collapse of the the economy.  Let's diagnose the problem correctly here, this has nothing to do with this level of "austerity" or that amount of "stimulus".  The Greek state effectively ran the economy and the state has collapsed into a pit of insolvency, thus has the economy done so as well.

It is just worth noting every time we are reminded of the catastrophe that is Greece that the US is heading in that direction under Obama.  We may or may not ever get there, but it is undeniable, that is the general direction in which we are headed.

Lastly, it is worth noting again that we ought to think deeply about whether we showing the "compassion" that many of us think we are showing by expanding government into every corner of our lives.  How compassionate is it to build a giant structure that collapses in on everybody?

BA of PIIGS

Speaking of Bond Market Vigilantes, what countries, after Greece, have the biggest exposure to foreign investors? Or put another way, what governments have been the least successful in forcing their banks to aid and abet the fiscally unsustainable social model? Answer: Austria and Belgium. Everyone simply assumes Portugal, Spain and Italy are next in line to cause trouble in the Eurozone. That may well be given their deficit/GDP ratios, but this assumes that a failure to impose enough austerity will be what triggers the next phase of the crisis. What if the bond markets impose a solution and differentiate little between peripheral economies. What if investors say, "Germany, UK, US...that's all that is really low risk, the rest is all just varying degrees of garbage." What if. Then throw Belgium and Austria right into the mix too.

We are a long way from this being over.

Oh, and just to give you a sense of what a bunch nimrods these Euros are...the city of Athens has 2,000 buses for its municipal system but they have about three times as many drivers on the payroll.

A Five Run Inning for the Supply Side?

Scott Grannis helpfully reminds us of the massive resurgence in the value of global equities. As I have said before, a good chunk of this increase in wealth has likely accrued to those who analyze the world through a supply-side lens (I lump Friedmanite monetarists in as "supply-siders" for simplicity). Viewing the world through a supply-side lens versus a Keynesian or neo-classical lens was the key differentiator in correctly analyzing the financial crisis and making the appropriate investment decisions. Indeed, it is not just in equity markets that supply-siders are raking it in, check out this runup in TIPS. Any supply-sider worth his salt could have seen inflation coming even while the conventional wisdom was fearing deflation. These developments represent important wins versus competing viewpoints on the idealogical scoreboard. But it doesn't stop there, traditional, demand-side theory on economic growth, aka Keynesianism, is currently taking a beating in the real world laboratory. The blow could eventually prove fatal. If the US's economic torpor persists despite unprecedented "stimulus" and if Europe decisively rescues itself by adhering to a doctrine of austerity, Keynesian theory will be forever hobbled, if not defeated. There's nothing like a decisive real world counter-factual to trash a good theory. While Milton Friedman and Edmund Phelps eventually won Nobel prizes for their work burying the long accepted Phillips Curve, it wasn't until the 1970s delivered stagflation that Phillips Curvers had a permanent, undeniable, debilitating flaw attached to their beloved theory. Here's hoping that the next few years bring further vindication to supply-side theories so that we will be less likely to have to live under the dreadful policies that emanate from the demand side such as $1 trillion stimuli, "quantitative easing" and all the rest.