Here's the former Enron advisor wailing like a banshee yesterday about draconian austerity measures in Ireland:
All that savage austerity was supposed to bring rewards; the conventional wisdom that this would happen is so strong that one often reads news reports claiming that it has, in fact, happened, that Ireland’s resolve has impressed and reassured the financial markets. But the reality is that nothing of the sort has taken place: virtuous, suffering Ireland is gaining nothing.And today? WashPost: "Ireland emerges from recession after steep economic drop"
Ireland climbed out of recession Wednesday, with the economy returning to growth in the first quarter after suffering one of the deepest downturns of any advanced industrialized economy.I’m sure this will engage Krugman's famous humility and he'll quickly admit his misjudgment.
Update (7/1) - I feel that this commenter so thoroughly counters my post that I have to give him/her props:
"First of all, it's one quarter. Second of all, the 2.7% quarterly increase comes on the immediate heels of two years of 15% contraction; it's easier for a basketball player to improve his foul shooting percentage after missing ten in a row. Third of all, non-Irish companies reaped the lion's share of the benefits. Fourth of all, the improvement was built on the slumping euro, but devalued currency isn't exactly going to be a longterm linchpin in The Irish Miracle. Neither is the higher interest that Ireland is obliged to pay on its bonds now, because investors worry that Ireland will be unable to pay its bill sin the future. Fifth of all, Ireland's unemployment rate has gone up during this recovery quarter, not down. Sixth of all, all of the above minor details are right there in the Washington Post article you've linked to. Doggone you, context!
BTW, what happened to the "two consecutive quarters of growth" rule of thumb? Even when the U.S. economy improved in the third and fourth quarters of 2009, the conservative blogosphere was quick to explain why it was a mirage and why Obama/TARP/the stimulus had nothing to do with it. But now, after one Irish report, austerity is triumphant and Krugman is ruined. Maybe so, and maybe no, but certainly not today."
Good points, all, anonymous. Let me add one other thing that bugs me: Ireland is taking on this austerity measure which - no doubt - is causing a lot of hardship on the Emerald Isle. But at least the Irish are taking their lumps. Greece, on the other hand, got wild on an overvalued Euro currency and let the country go bankrupt. Greece's "punishment"? A huge bailout by the Eurozone and an endless parade of strikes (anyway) that only further drives down the economy.
The lesson here for Greece (and AIG and GM)? Go crazy, Krugman-style. The bond vigilantes are dolts and somebody else will pay the piper if you really go bust.