In NYT Princeton Economist Paul Krugman mocks the "serious people" in DOF & Irish government who issued their crackpot unlimited guarantee of the gambling debts of banks that they did not understand and had not regulated.
According to these "geniuses":Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobodys fault but their own. But, no, the Irish government stepped in to guarantee the banks debt, turning private losses into public obligations.
Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nations creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.
Who could argue?.. there is no alternative, say the serious people: all of this is necessary to restore confidence.
Ireland, they say, must continue to inflict pain on its citizens because to do anything else would fatally undermine confidence..
..Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers sins is worse than a crime; its a mistake.