Paul Krugman: The Baht and the Bubble Excuse:
One of the ways defenders of European austerity policies move the goalposts [is] by claiming that the pre-crisis peak isn’t relevant for comparison purposes, because it was inflated by a bubble…. Often, although not always, it reflects a confusion between demand and supply--saying that there was excess spending on, say, housing doesn’t mean that the economy couldn’t have been producing something else instead…. Asia from 1997 on provides a useful comparison. Southeast Asia in the mid-90s was a bubble--oh, boy, was it a bubble…. Nonetheless, by contrast with Europe’s crisis economies, the Asians fairly quickly returned to and then passed the pre-crisis peak. I will say, 15 years ago it would never have occurred to me that we would be looking back at Asia’s crisis as a success story.