Bloomberg, on Losing End of Austerity Debate, Continues Fight

Imagine George Foreman got up off the floor after being counted out in his fight with Muhammad Ali and started taking wild swings at the champ. This is what Mark Whitehouse, a member of Bloomberg View editorial board, effectively did in a column yesterday.

In response to a Paul Krugman column pointing out that the UK's austerity package has led to a virtual recession, making the current downturn worse for the UK than the Great Depression, Whitehouse calls attention to the decline in the price of credit default swaps on UK debt relative to euro zone countries. He touts the fact that lower interest rate on UK debt will make it easier for the country to get its deficits down to a manageable level.

The missing elephant from Whitehouse's story is that the price of credit default swaps on everyone's debt has fallen relative to the euro zone countries. The relative decline in interest rates on UK debt doesn't speak to the wise policies of the UK government, but rather the foolishness of the European Central Bank, which has done its best to convince markets that it will not act as a lender of last resort and will actually let euro zone countries default on their debt.

The key issue here is having a central bank that will act as a lender of last resort. This is the reason that not only the United States, but Canada, Sweden, Denmark and even fiscally prudent Japan all enjoy lower interest rates than the UK.

Krugman Can Only Rope-A-Dope One Dope a Day
written by izzatzo, January 31, 2012 1:23 PM

Exactly. Who does Whitehouse think he is anyway, John Cochrane the Comeback Economist? Get in line.

Like Ali, Krugman doesn't do rematches because there's always another dope going forward to take down at the margin rather than deal with those already knocked reeling into the bin of unrecoverable sunk cost.

Stupid liberals.

-4

United Kingdom General government total expenditure statistics
written by AndrewDover, January 31, 2012 3:38 PM

Contrary to what you might think, the UK government expenditure continue to rise. Even as a percent of GDP, they remain higher than 2008.

http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/weorept.aspx?sy=2000&ey=2012&scsm=1&ssd=1&sort=country&ds=.&br=1&c=158,112,111&s=GGX,GGX_NGDP&grp=0&a=&pr1.x=83&pr1.y=11

-3

?
written by David, January 31, 2012 7:02 PM

I followed the link given by Andrew, but the estimate for the last 3 years is that as a percentage of GDP UK govt spending decreased, not continuing to rise. The gross quantities are meaningless, so what if they rise? They're taking less of the pie, as ordered by Brown and his thugs. And only in 2009 did the UK govt spending relative to GDP exceed the 2010-2012 percentages, not in 2008. Obviously when the GDP got hit and revenues were much lower than expected, the government got scared and cut expenditures, or that seems the most likely analysis here. Government expenditures continue to rise in gross because their population is growing.

In other words, I'm not sure what Andrew's point was and I mistrust his comment, especially since he carefully stated some point facts that distort the actual trend.

Oops
written by David, January 31, 2012 7:11 PM

Well, I should have had a tea first before responding. Still, my point (that once the size of revenue shortfalls showed up, the UK government is reigning it in) is true. Too bad about the side effects, eh? Population growth is problematic, especially during such a catastrophic downturn; expenditures have to go up, or the population will go down, or there will be social unrest, and no one wants the angry masses at their doorstep.

This bubble nearly killed the world economy (jury still out); but the next one down the line will be even more destructive, especially given the rising inequalities in the major economies.

...
written by AndrewDover, January 31, 2012 9:49 PM

Quite often, I'm just curious about the data, and am not really trying to convince people one way or another. In this case I expected more of a decline in Government expenditure than I saw, so I noted it.

Which "Brown" would that be?
Gordon Brown resigned as Prime Minister and leader of the Labour Party on May 11 after the General Election 2010.

Bloomberg, on Losing End of Austerity Debate, Continues Fight

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