The Lehmann
Letter (SM)
Take a look
at today's New York Times article about May Day rallies across Europe
protesting that continent's austerity policies:
Nations
across Europe have been tightening their fiscal belts: Reducing expenditures
and raising taxes. These policies have shrunk aggregate demand, contracting output, employment and income. It is a classic "rules of the game" policy,
designed to maintain uniform currency levels - i.e. preserve the euro - in the
face of investor skepticism. Nations hope that investors won't dump their bonds
if they are confident that budgets will be balanced.
The
consequences are clear. Today's New York Times carries a story about the recession
in Holland:
Yesterday's
Wall Street Journal published a story about recession in Spain:
French
presidential elections, concluding soon, will determine France's willingness to
maintain austerity. Irish voters will also have their say.
Germany, Europe's
principal austerity advocate, continues scolding its weaker compatriots.
Chancellor Angela Merkel must respect the wishes of her own citizens: They are
tired of bailing out the profligate nations on Europe's fringe. Perhaps
Chancellor Merkel can convince her electorate to feel the rest of Europe's pain
and ease demands for austerity.
But no one in
a position of leadership is suggesting that Europe forsake its long-run project
and abandon the euro.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
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