Blogging from an airport lounge and on an Apple as well is new territory but the world is filled with such amazing information that I had to give it a try.
This article from The New York Times on the end of Keynesian economics in Europe is quite worth the read. There is a major shift in the world of macroeconomics before us. The practice of macroeconomic policy has changed before our eyes. Our textbooks are complete junk to the extent that they continue to peddle this Keynesian idiocy.
The article itself, obviously written by someone raised on this dying orthodoxy, merely notes what can no longer be doubted. Public spending as a cure for recession does not work. These deficits have made things only worse. Getting our fiscal house in order as the necessary condition for recovery is finally being embraced.
As a totally related matter, the front page story in the AFR is headlined, “China rate rise rattles markets”. Even in China, with all of its financial resources, there is now a clear need to reverse the spending programs that have been indulged in since the end of 2008.
Who knows what new paradigm will emerge out of this mess? I know what I think but so much of the attention has been focused on side issues like the efficient market hypothesis that it is hard to know. Behavioural economics with a large slice of the economics of happiness might become the new mainstream. Meanwhile, the classical theory of the cycle, where some serious answers may be found, will continue to be ignored as they have been since the 1930s.