from http://finance.yahoo.com/blogs/daily-ticker/niall-ferguson-paul-krugman-still-wrong-government-spending-150100183.html
Niall Ferguson has two words for Paul Krugman: you’re wrong. The Harvard University history professor and author of “Civilization: The West and the Rest” says Krugman’s pro-government spending thesis not only fails to address the core problems facing the U.S. and Europe today but also has dire consequences for individuals living in these economies. “You can’t borrow trillions of dollars a year for the rest of time,” Ferguson says in an interview with The Daily Ticker at the Milken Institute Global Conference 2013. “Once a government gets to a very very high level of debt, the risk is very small increases in borrowing costs which create a vast ocean of red ink. So that risk is not negligible. Very large debts do not simply disappear by magic.” [note: Michael Milken (who is behind the Milken Institute Global Conference) "was indicted for racketeering<http://en.wikipedia.org/wiki/Racketeering>and securities fraud <http://en.wikipedia.org/wiki/Securities_fraud> in 1989 in an insider trading <http://en.wikipedia.org/wiki/Insider_trading> investigation. As the result of a plea bargain <http://en.wikipedia.org/wiki/Plea_bargain>, he plead guilty to securities and reporting violations but not to racketeering or insider trading. Milken was sentenced to ten years in prison, fined $600 million, and permanently barred from the securities industry by the Securities and Exchange Commission<http://en.wikipedia.org/wiki/Securities_and_Exchange_Commission>. His sentence was later reduced to two years for cooperating with testimony against his former colleagues and for good behavior." (from the Wikipedia).] Ferguson argues that Carmen Reinhart’s and Ken Rogoff’s conclusions about the relationship between high debt and low growth are still true. The two Harvard economists had to defend their seminal book “This Time is Different: Eight Centuries of Financial Folly” after three University of Massachusetts academics “correctly identified a spreadsheet coding error that led us to miscalculate the growth rates of highly indebted countries since World War II,” according to Reinhart and Rogoff. (Lawmakers across the world cited their work as justification to institute austerity policies; they argued that economic growth slowed after a country's public debt equaled 90 percent of its GDP). [correction: it's not the book that the UMass folks criticized, but an important R&R article.]* *<http://finance.yahoo.com/blogs/daily-ticker/did-harvard-economists-excel-error-lead-economic-austerity-185852805.html> “The headlines have done a disservice to Ken Rogoff and Carmen Reinhart,” Ferguson notes. “It’s extremely implausible that governments with already high debt can improve their situation by making their debt even larger. High debt scenarios often end with inflation or default. They don’t end with a rapid increase in the growth rate. A minor error in the Rogoff and Reinhart paper does not refute the case that governments with excessively large public debt have to bring them under control.” Moreover, Ferguson compares government accounting of public debt to one of the most famous – and hated – public companies that ever existed. “If companies behaved like governments, they would essentially be Enron,” he says. “There is a fundamental problem with government accounting.” [to sum up, the reason why Keynesian stimulus using government deficits is wrong is because it's wrong.] -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
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