In case you hadn’t heard, European government debt was downgraded over the weekend.
Not before time.
After four years of attempting government “rescues” of their respective economies by borrowing to bolster “demand”, and two years of belatedly realising that they couldn’t afford the borrowing, and the expected recovery was nowhere to be found, the mainstream rating agencies finally noticed something was wrong.
So the ratings have finally been downgraded—but not yet the economic theory on which the profligate borrowing was based. And talk still continues about , even as the causes of the economic crisis of the last few years continues to be all but ignored.
Which brings me to the Quote of the Day, from page 8 of L. Albert Hahn’s 1949 collection The Economics of Illusion:
As far as government interference itself is concerned, one should never forget that serious economic disturbances are the consequences of basic maladjustments. The effect of correcting or not correcting such maladjustments is infinitely greater than any artificial creation of demand by government in an economy that, in most sectors, is still free. Therefore an economic policy that concentrates on artificially filling up an investment or spending gap rather than on fostering adjustments – and thus creating demand in a natural way – is doomed to fail in any severe crisis.