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Thursday, November 15, 2012

Euro zone falls into second recession since 2009 | Reuters

Euro zone falls into second recession since 2009 | Reuters: ""We are now getting into a double dip recession which is entirely self-made," said Paul De Grauwe, an economist with the London School of Economics. "It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else," he said."

On the face of it, this is a stupid thing to say.  What is the cause of the austerity?  No capacity for more debt.  The previous "growth" was fueled by debt, and now the tank has run dry.  The interest payments are due, the debt is maturing and must be repaid, and the actual growth in the output of goods and services has not been commensurate with the cash required.  So they raise tax rates on an ever-narrowing base, growing their welfare commitments and shrinking government revenue.

They are getting, all in one hit, the austerity they should have had all along.

Note to governments:  borrowing for consumption never ends well...

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