Liberty, Equality, Austerity, by Paul Krugman, in NY Times: Sigh. France cuts growth targets, unveils austerity plan. We’re told that it is doing so because it expects slower growth — which the austerity will make even slower.
But France faces soaring interest rates, right? No:
At this point the entire advanced world is doing exactly what basic macroeconomics says it shouldn’t be doing: slashing spending in the face of high unemployment, slow growth, and a liquidity trap. It’s a global 1937. And if the result is another recession, the witch-doctors will just demand more bleeding.