Deflation is no way to reduce debt

Slí Eile: The IIEA held an interesting seminar recently on sovereign debt. Here is the link.
Ann Pettifor quoted Henry Liu: ‘“The young, the working poor and the elderly to pay for the careless profligacy and corruption of governments, the propertied rich, and financiers.” She heavily criticised the deflationary tide across Europe
The other two speakers were Lee Buchheit US legal expert on sovereign debt issues (also chair of the Icelandic government’s negotiating committee in the Icesave dispute …) and Dietmar Hornung of Moody’s .
Ann Pettifor’s presentation is available online here. And you can hear her speak by podcast here.
She drew on ‘Fiscal consolidation: A history from a century of UK macroeconomic statistics’. Victoria Chick and Ann Pettifor June 2010
The key conclusion was that
“The economic policies of ‘synchronised austerity’ will not only increase EU unemployment and social dislocation - they will also increase the public debt….
Sooner or later, governments, financial markets and international authorities will be forced to recognise the validity of Keynes’s analysis, ........just as they were forced to do in the 1930s”
Far from being over, as the Moody's speaker claimed, the debate has hardly begun. Events, events, events as the saying goes.

Posted in: Economics • Economics

Tagged with: Keynes • Deflation