Friday 19 September 2014

Convenient justications

I recently saw in the French press that Francois Hollande had said in a press conference "Sometimes, one serves the future rather than the present".

So, that is the new way that the current atrocious policies are sold. Well well well...

First of all, I would like to remind Mr Hollande of a quote that everyone should know and understand:
"But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again."
Thank you, Mr Keynes. 

Second, there is now clear evidence that the current policies are harming BOTH the present and future. Sorry, but keeping a huge part of a whole generation of young workers in long-term unemployment is not a smart move for your future prospects. Neither is declining to invest when you borrow at interst rates so high that they are, er, the lowest in your country's (or continent's) history and you have plenty of needs for investment -such as moving to a decarbonised economy, possibly the most challenging investment program in the history of mankind.
As Brad deLong has shown, with very conservative hypothesis on fiscal multiplier and hysteresis of the slump, austerity has a negative impact even on the long-term fiscal position.
Of course, if you are not insane and recognise that reducing debt is not the be all and end all of a government (especially reducing debt while ignoring assets) then it is even more obvious. For example, owning a functional network of renewable energy plants and having thermally efficient buildings should certainly count as a positive, all things considered.
But third, and this one really should be obvious even to someone who has little time for complex points, even assuming that those insane policies could have a positive impact on the future, who in his right mind would think that now is a good time to completely ignore the present? As a reminder, unemployment in Greece and Spain is north of 25%. Admittedly, France is doing slightly better than the Eurozoneas a whole, but the Eurozone is doing much worse than Europe during the30s, a time that prompted the Keynes quote above.

Courtesy of Paul Krugman:

Mr Hollande's statement was nothing short of indecent. 

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