The Doyens of Deflation

That phrase in Paul Krugman's NYT column this morning caught my eye.  Reminiscent of Spiro Agnew's famous "Nabobs of Negativism" jibe at the press during the Vietnam war protests, Krugman's ire is directed at the policy makers in Europe and to a lesser extent America during the fiscal crisis in 2008 and beyond.   Instead of proposing large scale stimulus backed by government spending, the  Europeans and their Republican soulmates decried the ballooning deficits and preached fiscal austerity.  Fortunately for us, the Obama administration and the Federal Reserve ignored the chicken littles of the GOP and the result is the strongest recovery in the world.  Meanwhile, led by the Germans, the Eurozone continues to suffer with a deflationary spiral, aggravated by an aging population and wrong-headed policies.  The so-called doyens of deflation continue to call for sacrifices from other people while they congratulate themselves on their perceived virtue.  The elections in Greece may put a far left party in power with a mandate to renegotiate the crushing terms of the bailout of their economy.  With 60% unemployment among younger Greeks, the austerity model is wearing thin on a country which may lose 2 generations of productivity.  If Europe refuses to alter the terms and Greece defaults, the resulting crisis may echo around the world, putting even the American recovery at risk.   No wonder Krugman scorns the policymakers in the Eurozone.