by Patrick Barron, Mises:
The debate in Europe over what policies the debt ridden countries should pursue is being falsely constructed as a choice between austerity and growth. Not only is there another, more appropriate alternative, but these two alternatives themselves are not properly defined. The misconstruction of the euro has led to unsustainable debt levels. The simplistic alternatives offered are (1) cutting spending and raising taxes–the austerity option–and (2) even more monetary stimulus–the growth option–which promises that even more credit will stimulate an economy to higher levels of production from which debt can be amortized. These alternatives emerge out of a failure to understand why the countries are in debt in the first place and why previous credit injections have failed to ignite increased production. Therefore, if the problem is not understood, the solutions offered are likely to fail.
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