Paul Krugman: The Downgrade Doom Loop


The Downgrade Doom Loop, by Paul Krugman, in NY Times: It’s not the whole story, but something like this threatens to develop:
1. US debt is downgraded, sparking demands for more ill-advised fiscal austerity
2. Fears that this austerity will depress the economy send stocks down
3. Politicians and pundits declare that worries about US solvency are the culprit, even though interest rates have actually plunged
4. This leads to calls for even more ill-advised austerity, which sends us back to #2

Behold the power of a stupid narrative, which seems impervious to evidence.

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