Friday, June 8, 2012

Krugman vs. Estonia

There was a very interesting spat between Paul Krugman and Estonian President Toomas Hindrek Ilves.  Estonia is the poster child for austarity advocates (austrian economists).  Krugman firmly believes in Keysnian economics.  Krugman posted a small blog about Estonia, and President Ilves then posted a very mean insulting Twitter post in response.  You can read all about it here. 

1 comment:

  1. Krugman is a complete jerk, but its probably not the best thing to make those kind of remarks if you are head of a state.

    As for Estonia and Latvia's austerity, it clearly worked for them, however I don't think that means that it will work for other countries like Greece, Pourtugal, Spain, and Italy. The Baltics had very low levels of debt and their banks are mostly foreign-owned and Sweden stayed committed to its banking system. These conditions don't exist for other countries and I think the only real long term solution is exit the Euro and devalue their currency. If they stay with austerity, even if the make the most pro-market reforms on labor and regulation, they will still have depression levels of unemployment for a long time.