Wednesday, January 18, 2012

"...persuading economists to re-examine critically certain of their basic assumptions..."

Again, from the Krugman link to Understanding Eurozone debt developments by nation by Gianluca Cafiso at VOX:

Debt-to-GDP ratios started to increase in Europe in 2008. This was when governments undertook measures in an effort to avoid things getting any worse...

"Debt-to-GDP ratios started to increase ... in 2008."

Started to increase in 2008.

Oh -- and by "debt-to-GDP ratios" Cafiso means government debt. Debt to GDP ratios started going up in 2008 when governments started rescuing the financial sector. But what was the financial sector doing, I wonder? And how was the financial sector doing it for 60 years without increasing debt-to-GDP ratios??? Of course, the financial sector DID increase those ratios.

Apparently, Cafiso does not look at private debt. Private debt doesn't count, when one speaks of debt, apparently. So there was some unidentified problem in the financial sector, to which governments responded by dramatically increasing their debt. And the problem that concerns Cafiso is this government response.

This is what happens when people assume credit use is always good for growth.

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