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Stiglitz says European austerity plans are a ‘suicide pact’

Via: The Telegraph

Imposing austerity measures as countries slow towards recession is a   fundamentally flawed response, said Mr Stiglitz, who won the Nobel prize in   2001 for his work on how markets work inefficiently.

“The answer, even though they see over and over again that austerity leads to   collapse of the economy, the answer over and over [from politicians] is more   austerity,” said Mr Stiglitz to the Asian Financial Forum, a gathering of   over 2,000 finance professionals, businessmen and government officials in   Hong Kong.

“It reminds me of medieval medicine,” he said. “It is like blood-letting,   where you took blood out of a patient because the theory was that there were   bad humours.

“And very often, when you took the blood out, the patient got sicker. The   response then was more blood-letting until the patient very nearly died.   What is happening in Europe is a mutual suicide pact,” he said.

Keynesian economics, which require governments to help sustain demand,  suggests that austerity measures should be imposed when an economy is booming, not waning.

http://www.telegraph.co.uk/finance/financialcrisis/9019819/Stiglitz-says-European-austerity-plans-are-a-suicide-pact.html

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January 18, 2012 Posted by | Uncategorized | , , , , , | Leave a comment