Saturday, January 14, 2012

Why did S&P downgrade Europe?

Slightly obscured in the S&P downgrade, Paul Krugman notes that they had cited (in their FAQ section) some very obvious and clear reasoning:
The financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU’s core and the so-called “periphery”. 
As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.
Roughly translated: cutting = less money in circulation = less consumer spending = job cuts = lower tax revenue = more cutting = .......

Death Spiral.

It's coming, and it's because Germans think they're better than everyone else.

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