The great Paul Krugman, economist and New York Times star columnist, goes to Europe, sees the colossal damage going on there and pronounces, "What would it really take to save Europe's single currency? The answer, almost surely, would have to involve both large purchases of government bonds by the central bank, and a declared willingness by that central bank to accept a somewhat higher rate of inflation."
Get that? "Somewhat higher rate of inflation." Krugman is scornful of the German effort to promote fiscal austerity. Has he forgotten how the modern era came apart after World War I when the Weimar Republic suffered catastrophic inflation? Among other things it led to was a triumph of Hitler.
Krugman doesn't back his prescription with much and doesn't hold out much hope for it, either.
He says, "Even with these policies, much of Europe would face the prospect of years of very high unemployment. But at least there would be a visible route to recovery."
We already have had attempted solutions tied to bonds and bail-outs. It hasn't done much at all. As for inflation, in these days when the Supreme Court, the President and Mr. Romney all have trouble recognizing whether something is a "tax" or not, the most notorious hidden tax of all is inflation. It takes from the earning power of citizens without the politicians having to vote for it. It brings in more government revenue in the short term, but making the all-important cost of government borrowing much higher.
It is being reported in the same New York Times that young people are no longer as enthused by the "Hope and Change" president as they were. Small wonder. Student loan breaks or not, they are graduating into a failing economy that seems to lack opportunities for them.
Won't someone--maybe one of those well-funded super-PACs--use some of their advertising budget to explain why not paying one's bills can lead to bankruptcy for nations as well as individuals? And that spending money you don't have is just a way of putting off the inevitable?
Gov. Scott Walker showed in Wisconsin that even modest retrenchment by government can salvage a budget. Short term pain happens, but it turns out to be mild. The alternative is long term and protracted pain.
