Revisiting Fiscal Multipliers

Traffic Jams and Multipliers, Uneasy Money, 12 Dec 2014
“In the disequilibrium environment of a recession, it is at least possible that injecting additional spending into the economy could produce effects that a similar injection of spending, under “normal” macro conditions, would not produce, just as somehow withdrawing a few cars from a congested road could increase the average speed of all the remaining cars on the road, by a much greater amount than would withdrawing a few cars from an uncongested road. In other words, microresponses may be sensitive to macroconditions.”

Unforgiving Debt

Countries faced with uncomfortably high debt ratios have several options available to them. Monetisation, prolonged austerity and debt default clearly have lots of problems attached. Selling the family silver through privatisations is popular but its inherent unsustainability hardly commends it as a way of life. Cheating, by reclassifications of what is private rather than public debt, is also popular but you usually get found out – destroying any credibility benefits. Fiddling the books is more likely to raise risk premia than reduce them. Pleading for debt relief might work but Greece’s targeted, asset-windfall approach has to win plaudits for irony…
Greece Wants Germany to Pay War Reparations, Wall St Journal, 24 Apr 2013