We couldn’t resist giving a bit of UK airing to this chart, from Paul Krugman’s NYT blog of yesterday entitled “Britain’s Paul Ryan”. It shows the divergent paths of the US and UK economies since the financial crash. They ran more or less in parallel until about Q3 of 2010, since when…it’s enough to bring tears to our eyes.
It was just over a year ago (11th August 2011) that British Chancellor George Osborne posed this question to the House of Commons:
“Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year?”
As we pointed out, it wasn’t correct at the time.. and it sure ain’t right now. US economic activity may be pretty lacklustre, but at least our transatlantic friends don’t ‘enjoy’ the benefits of the UK coalition government’s austerity policy. George Osborne promised once “to speak truth unto power and wealth”… maybe the folks at the Olympic Stadium took him at his word last night!
Yeah, we should just bump up our government deficits to a trillion a year, and everything will be fine.
The US will suffer for its deficits (government and trade) in due course, and you stimulus junkies will watch in horror at the consequences.
I won’t reveal the consequences today, but let’s just say their days as provider of the world’s reserve currencies are numbered.
THERE IS NO FREE LUNCH.
My reading of that from an absolute layperson’s perspective is that stimulus is working slowing but surely in the US but austerity is not. Lessons for Ireland’s austerity approach here then??? (I’m Irish & despairing at our continuing down the austerity line)