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Let me remind you that Greece was running deficits even before the crisis hit and the automatic stabilizers kicked in. Look, if you want to run Keynesian policy, either through automatic stabilizers or stimulus programs, you need to have at least semi-sound public finances before the crisis hits. And after the crisis, you need to pay down debt, so you have a space financial space available to borrow heavily during the next crisis.

Sadly, politicians far prefer spending during bad times than they enjoy saving during good times (try to convince the Swabian housewifes that taxes must rise during good times to increase the size of the budget surplus), which is likely why Keynesians has gotten such a bad reputation.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Feb 18th, 2012 at 02:24:43 PM EST
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That's only true under a commodity standard or pegged ForEx policy.

It is true that ideally you would attempt to deter inflation whenever this is consistent with full employment. But under a floating FX regime and absent atavistic commodity pegs, nothing about having spent yesteryear prevents you from spending this year.

Yes, spending yesteryear may have created inflation. But it makes no sense to encourage deflation today just because because there was inflation yesterday. For the same reason it makes no sense to shoot a man in the back after he has been shot in the front, on the theory that "the average bullet velocity through his chest will be zero."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 18th, 2012 at 03:39:48 PM EST
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