During the Great Depression, as the Bank of England and British banks were attempting to renegotiate the terms of their loans from the USA, the British sent Sir Otto Niemeyer to Australia to prevent Australia doing the same for its loans from Britain. The injustice and unabashed hypocrisy of this – where you stood on the issue of debt repayment clearly depending on where you sat – always angered me. Had I been around in 1932, I would have supported New South Wales Premier Jack Lang’s refusal to hand over moneys from the NSW State Government owed to the Australian Commonwealth Government for its payment of interest on NSW foreign debts.
We seem to be in for more hypocrisy and hard times, as the share-owning class, having received bailouts from western taxpayers for their investments in failed and paralyzed banks, now raise a wacka wacka huna kuna against public sector debt. The plain people of Ireland, for example, will now be paying for the malfeasance and incompetence of their richer compatriots.
Two illuminating posts from Brad DeLong and Paul Krugman on our failed western political system, which seems unable to fix our failed economy, despite us knowing what should be done:
- Brad DeLong [2010-11-25]: The retreat of macroeconomic policy. Project Syndicate
- Paul Krugman [2010-11-26]: The instability of moderation. The New York Times.
And here is Barry Eichengreen on the Irish bailout:
- Barry Eichengreen [2010-12-01]: Ireland’s reparations burden. The Irish Economy blog. Originally published in Handelsblatt (in German).
Some older articles on the crisis:
- Paul Krugman : How did economists get it so wrong? The New York Times, 2009-09-06.
- J. Doyne Farmer and Duncan Foley : The economy needs agent-based modeling. Nature, 460: 685-686 (6 August 2009).
- Mark Buchanan : Economics: Meltdown modeling. Nature, 460, 680-682 (6 August 2009).
- John Kay : How Economics lost sight of the real world. Financial Times, 2009-04-21.