Crossposted from The Stars Hollow Gazette
Good for them. Go Vikings! (We’re everywhere).
Portugal Yield Soars to 12-Year High as Socrates Quits; Irish Bonds Tumble
By Lukanyo Mnyanda and Keith Jenkins, Bloomberg News
Mar 24, 2011 5:26 AM ET
Socrates’s resignation is “another nail in the coffin in terms of a bailout package,” said David Schnautz, a fixed- income strategist at Commerzbank AG in London. “In terms of Ireland, Greece and Portugal, this may be another underlying burdening factor. It doesn’t seem to be the case that you can say that the possibility of default is off the table.”
Portugal’s government collapses
The Economist online
Mar 23rd 2011, 21:53
The death of Sócrates
IN IRELAND a bail-out by the euro zone’s rescue fund helped to force the government into calling (and losing) an early election. In Portugal an early election may force the government into accepting a bail-out. The question is: which government?
Tonight’s defeat of the minority Socialist government, led by José Sócrates (pictured), in a parliamentary vote on austerity measures-the fourth such package in 12 months-triggered his prompt resignation as prime minister. But it also created a political vacuum in which nobody may have enough authority to negotiate a bail-out
Portugal’s political turmoil and its urgent need for a rescue will create new problems at the EU summit, which is due to sign off on an effective expansion of the bail-out fund and a German-led “pact for the euro”. If EU leaders agree to bail out Portugal, they may find they have already used quite a big chunk of their fund. Judging by experience, the markets will then move on to attack the Spanish. The bail-out fund can easily finance Portugal. But it is not clear that it could deal with Spain.
Austerity Debate Fells Portugal’s Premier
By RAPHAEL MINDER and LANDON THOMAS Jr., The New York Times
Published: March 23, 2011
Ahead of the vote, Mr. Sócrates had warned that parliamentary rejection of his latest austerity measures would prompt him to quit. The main Social Democratic opposition party, however, had warned it would oppose an austerity package that would inflict further pain on Portuguese citizens, notably by raising taxes for pensioners.
Instead, the Social Democrats demanded a snap general election, possibly opening the door for the formation of a coalition government between Portugal’s main parties.
In the end, lawmakers from all five opposition parties rejected further austerity measures, leaving 97 Socialist lawmakers to vote in favor the plan, out of 230 members of Parliament.
And how is that Austerity thing working out for you?
In New Budget, Britain Sticks to a Path of Austerity, Despite Slowing Growth
By LANDON THOMAS Jr., The New York Times
Published: March 23, 2011
The government’s newly independent economic forecast body also lowered its estimate for growth in gross domestic product for 2011 to 1.7 percent from the 2.1 percent seen in November. For 2012, the forecast was trimmed to 2.5 percent, from 2.6 percent.
Mr. Osborne’s austerity budget comes at a time of growing political pressure for similarly minded governments in Europe. Irish voters recently voted out the long-ruling Fianna Fail party, which had agreed to terms on a tough bailout package with the International Monetary Fund and the European Union. In Greece, Prime Minister George Papandreou’s Socialist Party is rapidly losing popularity, and in Portugal, the government is teetering on a knife’s edge as opposition to its own austerity program builds
Why? Because Economics has ceased to be even a “Social” Science and instead become a cult of greed and naked Mammon worship.
Nobodies of Macroeconomics (Very Wonkish)
Paul Krugman, The New York Times
March 21, 2011, 2:21 pm
And so I was somewhat stunned when, as the fiscal debate unfolded, we had all these Chicago types sneeringly asserting that “nobody”, except possibly people at “third-tier” departments, has believed for decades that fiscal expansion can actually expand demand; Obstfeld and Rogoff are pretty prominent nobodies. I was equally stunned by assertions that Ricardian equivalence would wipe out any expansionary effect from fiscal policy, and that government spending necessarily crowds out an equal amount of private spending, when influential modern papers have shown quite clearly, and as rigorously as anyone could want, that it just ain’t so.
But in retrospect, it’s quite clear: Lucas and Sargent declared final victory over all things Keynesian in the 1970s, and the closed minds of their followers were such that they didn’t even notice the revival of Keynesianism that took place over the three decades that followed.
And Brad is right: if you’ve reached the point where you don’t pay attention to anything that might disturb your orthodoxy, you’re not doing science, you’re not even pursuing a discipline. All you’re doing is perpetuating a smug, closed-minded sect.
Asymmetrical Ignorance (Wonkish and Self-Indulgent)
Paul Krugman, The New York Times
March 21, 2011, 5:32 pm
I know that RBC exists; I know how it works; I just think it’s wrong. That’s very different from the reaction of the freshwater types to Keynesian arguments, which makes it clear that they just don’t know that modern Keynesianism exists, and have no idea what underlies the arguments people on the other side are making. This is, by the way, not a new asymmetry: it’s been clear for decades that a grad student from Princeton or MIT, asked how an equilibrium business cycle type would answer a question, can do that; but a student from Minnesota or (less reliably) Chicago hasn’t the least idea how alternative models work.
More broadly, I do pay attention to contrary arguments and points of view. I don’t make economists who I consider consistently wrong-headed part of my daily reading, since life is short, but I check in whenever I have reason to think that they’re making a case I need to take seriously. Regular readers may remember, for example, how I responded to fiscal policy critiques by Alesina and others – not by sneering at their academic qualifications, not by pulling rank, but by explaining why I didn’t trust their evidence; a lack of trust borne out a bit later by researchers at the IMF.
The point is that it’s OK to consider other economists, even a whole school of thought, wrong; what’s not OK is to be so closed-minded that you aren’t even aware that there are not obviously stupid people who disagree with you.
“Crito, we owe a rooster to Asclepius. Please, don’t forget to pay the debt.”
(h/t Chris in Paris @ AmericaBlog)