Comments due by April 4, 2015
A lot of the recent data coming in show a substantial acceleration in European growth. And you know what will be coming next: claims that this (a) vindicates austerity and (b) shows that there is no reason to worry about Japanification.
Time, then, for some prophylaxis.
First, on austerity: one of the truly amazing and depressing things about the whole fiscal policy debate is the apparent inability of large numbers of supposedly sophisticated commentators to appreciate the distinction between levels and rates of change. Maybe it would help to note that the US economy grew 10.8 percent — that’s right, 10.8 percent — in 1934, but nobody would claim that the Great Depression was over? Nah, it won’t help at all.
Still, for what it’s worth: think of Keynesian economics as asserting that
GDP = multiplier*government spending + other stuff
Then if we’re looking at growth
Change in GDP = multiplier*Change in government spending + change in other stuff
Now look at euro area fiscal policy, as estimated by the IMF:
There was a major tightening after the Greek crisis struck and Germany reverted to type, but there hasn’t been much further tightening recently. So there’s nothing especially troubling about a return to growth.
What about Japanification? There seems to be a widespread misperception that Japan spent its lost decade in a continual downward spiral, with never an uptick. Not so. There was, in fact, a return to growth in the mid-1990s that lasted until contractionary fiscal policy and a banking crisis led to recession, and another period of growth under Koizumi that, however, wasn’t enough to get Japan out of deflation:
You really don’t want to take a short-run rise in growth as a sign that secular stagnation is no longer a worry.
Right now, I’d argue that Europe is benefiting a lot from the weaker euro, which is coinciding with a de facto, if unacknowledged, pause in austerity. But the downdrafts — shrinking working-age population, a single currency in a distinctly non-optimum currency area, and the intellectual rigidity of too many policymakers — remain. (Paul Krugman)
13 comments:
The data from the article states that Europe is growing at a substantial rate and this will next claim that it a strong an economy s it used to be. What I found very interesting was that how much the United States grew in 1934 at 10.8%. What I don’t understand is why people thought they were still in the great depression. I would also have to agree with Paul Krugman that some countries in Europe are benefitting from the weak euro.
This was an interesting article. It was shocking to hear that the US economy grew 10.8 percent in 1934. That is a large growth for the economy and to think that people thought they were in the Great Depression is mind-boggling. Although there is a benefit, as Krugman stated, that Europe may be benefiting a lot from the weaker euro, that is just one of the plus sides to it. A downside to it is the shrinking work-age population, which is what will affect the economy.
This blog discusses the recent substantial European growth. Some may look at the European growth as having its benefits whereas others may look at it as possibly being followed by negative austerity. However, I agree with Paul Krugman that currently Europe is benefiting from the weaker euro. With a weaker euro, European companies are making their products cheaper overseas and lifting the value of dollar based sales. Additionally, US companies could benefit from the weaker euro due to lower borrowing costs and better performance at their European located units.
Consequently, I also agree with Krugman in that we “shouldn’t take a short-run rise in growth as a sign that stagnation is no longer a worry”. Using Japanification as an example, Japan had a return to growth in the mid-1990s only to fall back into a recession after a banking crisis. The recession in Japan was then followed by another period of growth but wasn’t enough to pull them out of deflation. Therefore, if you were to only look at the short-run periods where there was actually growth in the economy, it could be misleading.
This article discusses the recent growth in the euro. The european economy has been through a recession and is now noticing growth in the economy. Many people in Europe are happy to see the euro doing well but many people are skeptical due to Japans elongated economic issues. Japan has been going through many economic issues fro a while with periods of growth that was immediately followed a continuous economic downward spiral. So, even through the euro is growing, many Europeans are anticipating the euro to drop again. But a weaker euro is not all bad for the European economy. Europe is actually somewhat benefiting from the weak euro.
There was a past recession and Europe and this article explains how the economy is visibly growing. Europe is benefitting from the weak euro therefor a weak euro clearly isn't that bad. Just like others, I was shocked to see the economic growth of the US in 1943. 10.8% growth is a high number. I agree that we shouldn't just be looking at the short run growth. Europe is making their products much cheaper overseas and I see this as a benefit for us.
The blog discusses the recent economic growth that Europe has been going through these past several years. Although Europe's economy is improving, many people are still rather skeptical and not convinced yet that Europe has really turned the corner. Europe just went through a rough time period so it's almost inevitable for Europe's economy to only get better after being at a low point. But just cause the economy is improving, that doesn't necessarily mean that it's growth can't go downwards again. As shown in Japan's economy there were many short run periods of economic growth but then again it's economy would go back to a period of struggle due to various reasons. Is this the case with Europe?
As of now Europe is benefiting from the weaker Euro and only time will tell how powerful its Economy actually is.
This article showed that Europe is currently growing at a substantial rate. Paul Krugman claims that Europe benefits from the weaker Euro. I found it interesting in particular that the United States Economy grew at 10.8% in 1934 because this was the period of time in which the Great Depression occurred. This article shows me a different perspective of the Great Depression because I never would have thought that the US economy was growing at that rate in 1934.
In many ways you can see that europe and euro is treading towards failure. The main reason they pushed for euro union was to be like US. Have a great overall economy that can also carry weaker economies. At one point Turkey was knocking at the doorsteps of european union, europe ignored it. Turkey then thrived on its mechanics and policies and became major economy. After the greece and spakn debt crisis, it was europe who wanted Turkey to be part of europe who declined that european hnion is nowhere near as it was before. European union puts too much faith in united currency in the abscence of a greater political union that controls all the significant decisions in the region. What we have is Germany and Scandnaivan countries who thrive and Greece and Spain who are in huge debt crisis.
Economists have attributed the GDP with the overall health of a given economy. In Europe, the austerity, or severity, of their economic state is said to be under control. In other words, Europe is not in trouble financially. In fact, it is growing. So the question lies in what reasons are causing the successful economic boost. Could it be more workers and greater levels of output, or is it that the euro is currently more highly valued? I also believe that all economies are constantly shifting, and may be very well off now, but not so much in a few years. For Europe's sake, I do hope they keep the good fortune alive!
This article discusses the current growth in Europe. Right now Europe is benefiting from the weaker euro, however, this does not mean Europe is in the clear from suffering from another downfall. Though Europe's economy seems prosperous as of lately, many natives are still uncertain that Europe has made a recognizable comeback. This is due to the idea of Japanification; for example, the Japanese had a return to growth in the mid-1990s according to the chart shown, but only to fall back into a recession due to the contractionary fiscal policy and a banking crisis. Also, another period of growth under Koizumi which was not enough to get Japan out of deflation. So I will agree with Krugman when he states, “ we shouldn’t take a short-run rise in growth as a sign that stagnation is no longer a worry” because there is a possibility that Europe can still fall back into a decline in the economy.
“Eurobounce” discusses the recent economic growth trend that Europe is undergoing. After the Greek crisis struck, major tightening in the economy followed. There are claims that the acceleration in European growth will vindicate austerity and it shows that there is no reason to worry about Japanification. An interesting point in this article was that the US economy grew 10.8 percent in 1934, but people still did not believe that the Great Depression was over. A near 11 percent increase in the economy must be evident to many people, it boggles my mind as to why they still wanted to think they were in a depression. It’s like they needed it or something.
Europe is reaping the benefits of the stronger American economy (and perhaps more american tourists spending their stronger dollars) and falling oil prices. A full European recovery is inevitable eventually, if the Russians don't mess things up. The tragedy is that austerity has delayed and weakened the European recovery at great cost in terms of the economic suffering inflicted upon the less affluent. This nightmare should have ended years ago.
Growth is a very odd thing when discussing economies. In theory, it is supposed to show that countries and areas are improving and getting better however, it is clear that things are not completely the optimal in Europe and they certainly were not in America in 1938. Things are also interesting because of the weaker Euro currently speaking which allows companies and businesses to make more and better products which should stimulate the economy even more so.
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