By Szu Ping Chan9:02PM BST 15 Oct 2012 The Government's pursuit of austerity is "fundamentally mad" and could cast a shadow over the British economy for up to 15 years, Nobel prize-winning economist Paul Krugman has warned. Mr Krugman also said that the argument that a borrowing increase would cause a spike in interest rates was wrong. "I know that the government here likes to point to low interest rates as proof of the confidence that it is engendering by its policies, but in fact the track of British interest rates is no different from the track of US interest rates or that of any country that retains monetary independence," he said. Mr Krugman admitted that Japanese-style debt to GDP ratios of 200pc were "bad", but said that the claim that government debt became poisonous once it reached between 80pc and 100pc of GDP was not borne out in reality. "Given that even Japan is suffering no visible adverse effect from its debt at this point, neither the US or UK is at a point when this becomes crucial." http://www.telegraph.co.uk/finance/...ttacks-mad-austerity-policies-in-Britain.html
what people fail to grasp is that, in the us at least, austerity gone bad would increase the debt. extreme austerity would cause instant depression in this country. the government would be forced to step in even more.
Krugman is just a political hack. He must have found economics a boring subject since he has trown all the rules out the window. Maybe, like Obama, he thinks once you get a Nobel Prize you become a God in your own mind. The only rules are the ones you make.