Does Fiscal Austerity Reassure Markets? – Paul Krugman Blog – NYTimes.com

Does Fiscal Austerity Reassure Markets? – Paul Krugman Blog – NYTimes.com.

My favorite line from this article is the last one:

But hey, what are you going to believe: what everyone knows, or your own lying eyes?”

Krugman spends all this time basically analyzing whether it’s a good time to move away from deficit spending and more towards some kind of balanced approach to spending.  I have always thought this was one thing that was ignored by all of the critics when the stimulus package and budget were first being rolled out by the Obama administration.

Specifically, that this deficit spending and all of the activities by the Treasury and the Fed had to happen now, but also had to be temporary.  That the monetary base of the Fed would decrease as it wound down and that the Treasury had no desire to be the owner of AIG or GM forever.  But we had to do this for a while, at the least.

After all of that, Krugman then says that those who push for “fiscal austerity” now have “blind eyes.”  Way to go, Paul.