Mauldin’s claim is that we are in what he calls the “endgame,” meaning that the Keynesian option of increasing government borrowing is no longer available to European countries. The only willing lenders are banks, which in turn need to be propped up, and ultimately they can only be propped up by printing money.
My take-away from Mauldin is that, contra the mainstream media narrative, the real dilemma in Europe is not fiscal–deciding whether to maintain government spending or not. The real dilemma is financial–whether to recognize losses and absorb defaults (by both governments and banks) or turn loose the monetary printing presses.
Creo que si. It is increasingly clear that Spain’s recent “austerity” has been forced, rather than a voluntarist mistake. Here is yet more wisdom from Scott Sumner:
… if I thought higher demand was needed, I’d recommend that the fiscal authorities raise their inflation target from 2% to 4%. Oddly, I’ve never seen a fiscal proponent make that recommendation. Why not? My hunch is that deep down they know that fiscal authorities can’t really control inflation. But in that case, how can they control aggregate demand?