Tuesday, June 19, 2012

Tales of Calamity Foretold: Euro XXIV

It appears Merkel is ready to make the same mistake one more time.

Reading what Krugman wrote in 1998, and Milton Friedman a couple of years later, it's pretty amazing how accurately they (and many other economists) predicted what would go down - even if the timelines were unclear. It's also pretty stunning how thick-headed Brussels and Berlin have been.

Just in case anyone is paying attention, it's been clear for a long time that the periphery is unlikely to be able to repay their loans as long as Berlin keeps them in severe recession, and if they don't repay, that will cost Germany and others plenty. Nonetheless, Merkel and company insist on playing fantasy economics, loaning more and more to those bad credit risks and pretending that they will get their money back.