The intellectual excuse that lead to economic policies that have been followed in the U.S. and the EU in recent years is a book from economists Carmen Reinhardt and Ken Rogoff. In this book the authors argue that once a country has more government debt than 90% of GDP economic growth is sharply reduced.
This has been an important part of the reason for deep cuts in social services, cuts in wages and cuts in social security in Greece, Spain, Ireland, Portugal and more countries. Simultaneously, the same countries, and ultimately, European taxpayers have acquired large amounts of private debt, without getting anything in return through the so-called saving of the banks. This is perhaps the biggest robbery of tax payers ever.
One has to weep
What really is a laughable matter is that Reinhardt and Rogoff had made a tiny mistake in the spreadsheet. This small error meant that the result of the research was completely wrong. There are, in other words no longer any intellectually defence for the cuts and the robbery the inhabitants in the EU are exposed to.
To steal a bit from Bloomberg:
The paper, “Growth in a Time of Debt,” concluded that countries with public debt in excess of 90 percent of gross domestic product suffered measurably slower economic growth. It has been cited by U.S. House Budget Committee Chairman Paul Ryan and European Union Economic and Monetary Affairs Commissioner Olli Rehn in defense of efforts to drive down budget deficits.
All in all tears more than laughs are appropriate. For the banks and the bank owners have received their unfair share. And therefore Paul Krugman is right here:
If true, this is embarrassing and worse for R-R. But the really guilty parties here are all the people who seized on a disputed research result, knowing nothing about the research, because it said what they wanted to hear.
Lesson: never trust anyone who say that we need to take money from ordinary people and give them to people who already have the most.