The Turn Against Austerity: As we wrote this morning, the bad news for Angela Merkel is that the jig is up: There's almost nobody left who is willing to go along with the German idea that the sole solution for Europe is spending discipline and "reform," whatever that means…. Nicholas Kulish…. Ryan McCarthy… also rounds up a bunch of other anti-austerity commentary…. [C]ombine it with the latest note from Richard Koo… you sense that something really is changing.
There's not a new consensus settled on yet. For example, Francois Hollande's vision of a more socially integrated Europe is obviously different than whatever caused Geert Wilders to torpedo the Netherland's austerity deal, but Germany is clearly becoming very isolated.
Richard Koo's Trip To Europe: My recent trip to Europe began with a conference held on the shores of Lake Como…. Nouriel Roubini served as moderator. The Italian business executives making up some 80% of the audience welcomed my balance sheet recession theory thanks to some powerful backup from Professor Roach, one of the very few economists to issue an early warning about the US housing bubble….
While Dr. Stark probably would not agree with that assessment, I was received at my next seminar—at the Bank of Italy—as “the man who stood up against Jürgen Stark.” The number of seminar participants greatly exceeded organizers’ expectations…. Early the next week, I conducted seminars at the ECB and Bundesbank in Frankfurt, and once again the number of participants was far greater than initially expected…. Similar scenes unfolded at seminars held by Nomura offices for investors in Frankfurt and Milan….
Germans will understand need for fiscal stimulus if issue is properly explained…. I spent an hour and a half explaining to several hundred ordinary Germans that most of the eurozone was in the midst of a balance sheet recession and that these countries desperately needed fiscal stimulus…. Many people thanked me for letting them know that there was a different way of looking at the crisis in Europe based on balance sheet recession theory. Most of the questions from the audience were quite to the point…. The experiment proved that even ordinary Germans are capable of understanding the theory of balance sheet recessions—an economic concept not found in any university textbook—if only it is explained properly.
Based on this experience, I find the argument that fiscal stimulus is impossible “because the German people would not tolerate it” completely unconvincing…