The problem was created by too much debt. The debate is whether trying to be virtuous today is more dangerous than trying to save the economy through yet more debt (ie is certain pain today better or worse than uncertain pain later

However, not all debt is created equal. Debt taken out by the sovereign to finance infrastructure development during a serious business depression (you aren't really claiming that Germany couldn't use any more railways, are you?) is not the same beast as debt taken out to maintain consumption in the face of falling real income. During the next boom, this debt has to be removed, of course, either by higher tax income, an explicit default or a quiet default through devaluation and inflation.

and how would that future pain be)

The pain of trying to deleverage the public sector is without a shadow of doubt greater when you do it at the same time that the private sector is trying to deleverage. I didn't realise that this point was controversial at all, outside certain monetarist fantasies.

- Jake

Friends come and go. Enemies accumulate.