Slow Learners

Another post from Dr. Krugman's blog, stating a truth that has long been visible, if not seen.

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Slow Learners

The WSJ has an article today pointing out that the euro crisis isn’t really about fiscal irresponsibility:

So if public debt is your yardstick, then the Spaniards were paragons of virtue. They borrowed lightly despite the fact that their euro-zone membership gave them an all-you-can-eat buffet of financing at bargain-basement rates.

As Europe scrambles to find a solution to a debt crisis that’s threatening the world economy, it’s crucial to understand what actually happened in countries like Spain. Otherwise, policymakers will end up prescribing the wrong medicine, with disastrous results.

That’s all true, and I’m glad to see it in the WSJ. But it’s presented as a startling insight, one that runs contrary to what everyone thinks. And that’s amazing and depressing.

I mean, this was obvious from the very beginning. Here’s what I wrote in February 2010:

The biggest trouble spot isn’t Greece, it’s Spain — which was running budget surpluses just a few years ago. True, Spain is running big deficits now — but that’s because of its economic collapse. And underlying that collapse is the real problem with the euro: one-size-fits-all monetary policy, which offers no relief to countries that suffer adverse shocks.

There are two things that are frustrating about the fiscalization of our discourse. First, it’s taking place even though many, probably most good economists have been arguing strenuously for a more sophisticated view. Second, many of the people insisting that deficits are the big issue probably don’t even realize that they’re taking a questionable position — it’s just part of what everyone thinks they know.

Against conventional wisdom, the gods themselves …

Sometimes (actually, often) it feels like I’m in one of those nightmares where you’re shouting, but nobody can hear you. And you wouldn’t really expect that to happen when you’re doing your shouting from a pretty prominent platform.