Headlines to ponder

UK maintains growth momentum

German business confidence soars

Those are two of the countries which have done the most to commit to subsequent decreases in government spending.  It would be wrong, wrong, wrong to causally attribute their growth to those spending decreases.  Still, fairly firm expectations of spending decreases don't exactly seem to be driving them under, and we do know that AD stimulation is all about credible expectations, not just the current flow of spending…


"UK maintains growth momentum" and "German business confidence soars" both link to the same address at the moment, not sure if that's intentional.

Perhaps is good for business confidence that they believe total incompetents aren't in charge of the government?

Wrong? Check the scoreboard.

J Thomas, if you recognize that a candidate is lying, you can vote accordingly. Would that more people had done that in 08.

The US in the early 50's is another great example. Massive, MASSIVE cuts in spending, and we saw huge growth.

federal government spending only fell for two years in the 1950s -- 1954 and 1955 -- and the average annual growth from 1949 to 1959 was about 10%.

@Evan Harper,

"I am glad that you say, "It would be wrong, wrong, wrong to causally attribute their growth to those spending decreases." But before you make the "correlation is not causation" disclaimer I think you should actually check whether a correlation exists in the first place."

He's already admitted his conclusion is false, so logically why does it matter whether the starting assumptions are false too?

Maybe we can get Richard Posner to write a piece on how budget cuts, which have not been enacted or been in effect yet, can be responsible for turnarounds, given his experience in writing, 6 months after stimulus spending went into effect, that stimulus was ineffective.

If you've had any clients who compete with European firms you would understand that when the dollar got stronger, and the Euro weaker, the Euro manufacturers did better.

Cuts in government spending CAN stimulate growth: obviously this is so if the spending cuts are to activities that inhibited growth. The notion that a cut in G, no matter to what component of G, will reduce AD and will hence supress output is rubbish regardless of whatever may be said by Cowen, Krugman or their apparent diety, Lord Keynes.

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