'..Estonia .. Lithuania and Latvia .. All these nations have implemented strict austerity measures and vastly reduced government indebtedness – now they are back on a solid growth path. According to Krugman, this is not possible, which may be why he has so far somehow neglected to mention it.'<blockquote>'..We agree that the eurocracy is unrealistic* and seems increasingly unsure of how to handle the problem. Dissent within the euro area is growing, as the social mood deteriorates and political incumbents everywhere are facing the prospect of losing elections. Alas, none of this proves that austerity won't work for the economies concerned. In fact, it appears it
has worked in the Baltic nations. They kept their euro pegs, and one of them, Estonia, implemented such a harsh austerity regime that the country was able to join the euro late last year by fulfilling the criteria of the stability pact.
Its economy is slated to grow by 5.9% this year. Its fiscal deficit in 2011 will be 0.5% of GDP. How about that? Apparently Estonia has managed to achieve what according to Krugman is 'impossible'. Lithuania and Latvia are close behind, with Lithuania's growth
expected to hit 5.6% this year and
Latvia's expected to hit 4%. Latvia's economy shrank by 25% when the impoverishment of the boom was unmasked. All these nations have implemented strict austerity measures and vastly reduced government indebtedness – now they are back on a solid growth path. According to Krugman, this is not possible, which may be why he has so far somehow neglected to mention it.'
- Acting Man,
Paul Krugman's Verdict Is In – And It's Wrong May, 26th, 2011</blockquote>
*
'..mainly because they do not take into account the process of entrepreneurial creativity and the evolution of subjective [1] time..'<blockquote>'Significantly, however, Ludwig von Mises, in his important theoretical treatises on money, credit and economic cycles, has always resisted basing his analysis on the study of the credit expansion multiplier we have just worked out in the text. These writings of Mises all focus on the disruptive effects of creating loans unbacked by an increase in actual saving, and the fractional-reserve banking system which carries out such loan creation by generating deposits or fiduciary media. Mises’s resistance to the multiplier is perfectly understandable, considering the aversion the great Austrian economist felt to the use of mathematics in economics and more specifically to the application of concepts which, like the bank multiplier, may be justly labeled “mechanistic,” often inexact and even deceptive, mainly because they do not take into account the process of entrepreneurial creativity and the evolution of subjective time. Furthermore, from the strict viewpoint of economic theory, it is unnecessary to work out the multiplier mathematically to grasp the basic concept of credit and deposit expansion and how this process inexorably provokes economic crises and recessions. (Ludwig von Mises’s chief theoretical goal was to arrive at such an understanding.)..'
Note 20,
Money, Bank Credit, and Economic Cycles (
pdf), page 202</blockquote>
Context<blockquote>
'..Krugman supports a failed economic theory..' - '..there exists a widespread lack of understanding..''..Mises-Hayek theory of business cycles.' - Underrated Classics'..to promote saving and capital accumulation.'</blockquote>
Note[1] '..the ideas of the Classical School have continued to predominate in the Monetarist and Keynesian Schools, the developers of which have thus far disregarded the subjectivist revolution started in 1871.' -
‘..disregarded the subjectivist revolution..’