Friday, March 11, 2011

Cognitive dissonance alert: Mish and austerity

- by New Deal democrat

Yesterday I damn rear had a case of whiplash when I read this from MIsh.
Europe is in trouble. The PIIGS are imploding under austerity measures and the most of the rest of Europe except perhaps Germany does not look very good
(my bold)

Huh?!? Is this the same Mish who last May worried about:

Austerity Measures Postponed, Scaled Back, Stretched Out, Abandoned

These austerity programs will not last long.

Expect to see Greece, Romania, France, Germany, and the UK all scale back, abandon, or stretch out austerity plans when the global economy does a second half relapse under the weight $trillion in consumer debt and round after round of "stimulus" measures that did little but rack up still more debt.

(my emphasis)

And certainly this must not be the same Mish who wrote last June:

Britain’s new coalition government on Tuesday unveiled the most severe package of spending cuts and tax increases since the early days of Margaret Thatcher’s era.

....[T]he sharp reductions defy conventional economic wisdom, which holds that governments should increase spending to stimulate growth when the private sector is weak.

The steps outlined to the House of Commons by George Osborne, the chancellor of the Exchequer, would cut the annual government deficit by nearly $180 billion over the next five years
While I disagree with raising taxes, it is crystal clear Osborne has his head on straight as to what will drive a sustainable recovery

I cannot stress enough the significance of these austerity measures. In the long-term cutting deficits is exactly what needs to happen. In the short-term however, global "growth" is going to take a hit.

....The Keynesian clowns are howling all over the globe about this state of affairs.

However, it is very important not to blame austerity measures for killing the recovery, regardless of what happens. There was no global recovery to save in the first place, only a massive, fiscally reckless, coordinated reflation effort that masked the true state of the economy.

It is impossible to spend one's way to prosperity. Europe appears to have gotten the message.
So let me get this straight: people like Krugman are 'Keynesian clowns' whose calls for fiscal stimulus will lead their countries to ruin: a "relapse." On the contary, Austerity is the shining, gleaming path to the future: "exactly what needs to happen ."

And less than a year later, the US is posting 3% growth, while countries which embraced Mish's Austerianism are "imploding."

No, no contradiction there.

Who's the clown?