{"id":4586,"date":"2011-04-28T11:55:14","date_gmt":"2011-04-28T16:55:14","guid":{"rendered":"http:\/\/onthe8spot.com\/?p=4586"},"modified":"2011-04-28T11:55:14","modified_gmt":"2011-04-28T16:55:14","slug":"repostuk-not-ok-nytimes-com","status":"publish","type":"post","link":"http:\/\/onthe8spot.com\/index.php\/2011\/04\/28\/repostuk-not-ok-nytimes-com\/","title":{"rendered":"rePost::UK, Not OK – NYTimes.com"},"content":{"rendered":"

April 27, 2011, 9:18 AM
\nUK, Not OK
\nThe bad GDP number for the UK isn\u2019t a surprise \u2014 in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it\u2019s doubleplusungood: zero growth over the past 6 months, with every reason to be worried on the downside looking forward, as Cameron\u2019s austerity bites deeper.
\nJonathan Portes gets to the nub of it:
\nOn fiscal policy, the message is that we should listen to economists, not credit rating agencies. Most mainstream economists argued that the impact of the government\u2019s fiscal consolidation on confidence and consumer demand would be negative; so it has proved.
\n\u2026
\nMeanwhile, the argument that fiscal overkill was necessary to appease the credit rating agencies has again been disproved by market reaction \u2013 or the lack of it \u2013 to the Standard & Poor\u2019s outlook warning last week in America, where US Treasury yields hardly budged.
\nIn short, there is no confidence fairy; and S&P can call invisible bond vigilantes from the vasty deep, but they won\u2019t actually come when called.
\nPortes hits, in particular, on a point I\u2019ve tried to make a number of times, here and more recently here: right now, we\u2019re living in a world in which basic economics points to conclusions utterly at odds with what Very Serious People are supposed to believe, in which radical outsiders base their views on standard economics while orthodox types turn to heterodox, highly dubious speculations.
\nEcon 101, buttressed if you like by fancier New Keynesian models, says that contractionary fiscal policy is, well, contractionary. Yet much of the world of movers and shakers bought into the exotic notion that expectational effects \u2014 the confidence fairy \u2014 would make contractionary policy expansionary. And they clung to this belief even as the supposed historical evidence in favor of expansionary austerity was thoroughly debunked.
\nvia UK, Not OK – NYTimes.com<\/a>.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

April 27, 2011, 9:18 AM UK, Not OK The bad GDP number for the UK isn\u2019t a surprise \u2014 in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it\u2019s doubleplusungood: zero growth over the past 6 months, with … <\/p>\n

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