Economists are busy disagreeing with each other again.
What idiots governments are. They are reigning in their spending far too soon. If they don’t throw another stimulus package at the economy, we will all go hurtling back to recession, or so says one of the most respected economists in the world, not to mention former winner of the Nobel Memorial Prize for Economics.
In fact it is as if there is a new football team called Nobel Winners United, because the there are a fair few wise men of economics who want the government to just spend more.
Then again, there is a list of economists as long as your arm, not to mention our very own Mervyn King who say: “What idiots governments are. If they don’t start reigning back on spending soon, we are going to suffer one almighty crisis.”
The chief goal scorer of the Nobel Prize Winners United team is Paul Krugman. He reckons that the big problem in the world is that we have become scared of risk, and so we are pumping our money into government bonds. Therefore, not only can the government afford to borrow, it’s the government’s duty to borrow and spend the money, us consumers are refusing to spend, on our half.
But for every Fernando Torres who scores the goals, a football team needs a Steven Gerrard to lay on the passes.
And so it is. While Krugman gets the tap in, another Nobel winner, Joseph Stitlitz (pictured) is going for the volleys. Yesterday, Joe, who isonly is a former Nobel winner, he is also a former chief economist at the World Bank and an arch critic of the IMF, told Bloomberg that unless the US embarks on another round of fiscal stimulus we will see a “double dip” recession.
The midfield general for Nobel United told Bloomberg TV that it will be “2012 or 2013 at the earliest that we will be back to normality.” Stiglitz added: “This is a scenario that is putting us a little better but not much better than the Japanese malaise.”
Then again, on Tuesday, Mervyn King seemed to score a goal for the other team.
In a speech he gave at Exeter University, in a very nice sort of way, he told Alistair Darling to cut spending or else.
First he quoted his US opposite number Ben Benrnake, who said “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth”. Then Mr King added, in what seemed like a thinly disguised warning, “the Chancellor has made clear that the Spring Budget provides the opportunity to do precisely that.”
So on the one hand we have Messrs Krugman and Stiglitz calling for more government spending. On the other hand with have Messrs Bernnake and King calling for governments to cut back.
Who is right?
It’s a tougher cookie all right.
But actually in his speech at Exeter Mervyn King did make a far more important point. See the next article: Why sudoku explains what’s wrong with the economy
© Investment & Business News 2013