Really good links - Germany and the solution for the Eurozone crisis - Krugman in 1998 - Money and Metaphysics - Deflation - Equilibrium and institutional process - Consumer confidence - Taxes and government spending

Crispin Odey - Towards a more balanced Eurozone - "The key feature of the European “now” is not government debt nor under-capitalised banks. It is Germany with an inflationary boom under way. German growth means rapid growth of imports from the eurozone worth significant percentage points on non-German eurozone GDP and a far easier path out of recession for the European periphery than is priced into bonds and equities.
        Those with long memories would argue that the German authorities will spot where all this is heading and will do what is necessary to trample on growth. But Europe and Germany have changed. Sovereign power is not what it was. The German authorities no longer have control of their own policy. <..>
        Of course, Germany will be divided in its attitude to this boom and if it were down to the authorities, interest rates would rise and the currency strengthen. But they are going to be as unable to reach the brake pedal next year, as Ireland et al were unable to reach the accelerator this year."

Tyler Cowen - Paul Krugman's predictions from 1998

Matthew Yglesias - Money and Metaphysics

Dave Altig - Probability of deflation has fallen to the levels observed prior to the economy's summer soft patch

Arnold Kling - Equilibrium vs. institutional process - "As Boettke points out, the profession is split between economists who work out the properties of equilibrium and economists who focus on institutional processes. The latter are marginalized, although they include many Nobel Laureates, including Douglass North and Elinor Ostrom.
        The focus on properties of equilibrium attracts interventionists. You point out an undesirable property of an equilibrium, and then you propose a fix. For example, Stiglitz and Rothschild pointed out that a health insurance market could collapse because of adverse selection, so it follows that government should impose a mandate to purchase health insurance.
        The focus on institutional processes attracts libertarians. You see the benefits of the forces of competition and creative destruction. You see the adverse institutional properties of government."

Tim Duy - Curiously Weak Consumer Confidence - "Consumer confidence figures appear inconsistent with actual spending patterns. That inconsistency will be resolved by either confidence rising or falling spending growth, with more or less obvious policy implications. There will be a tendency to assume the resolution will come from decelerating spending growth. To be sure, the recent trend appears unsustainable. But I also think it is worth paying attention to the more positive household spending data."

David Andolfatto - Robert Shiller's bad idea of a tax-financed increase in government spending - "Its not that I'm against increasing (components of) G. Public works projects of the sort mentioned by Shiller (building highways and improving our schools) were advocated by sensible economists long before Keynes (as evidence of this, note that public works were implemented in the Depression well before publication of the General Theory). What I have a problem with is in using some silly theory to support the notion, for example, that taxes should be raised to finance a large public capital expenditure. Shiller has been rightly celebrated for his work in the theory of finance, and on asset price bubbles in particular. But is this not a rather odd stand to take for a professor of finance?
        Now, I'm no expert in finance myself, so maybe I should be careful in what I'm about to say. But it seems to me that a large capital expenditure should be financed with debt. The debt service could be supported by toll revenue (on bridges and roads) and user fees in general, backed by the Treasury, if needed. The use of tax finance advocated by Shiller in his balanced-budget exercise implicitly assumes (among other things) lump-sum taxes. For some thought experiments, the assumption of lump-sum taxes is innocuous enough. But this is not one of those cases. Taxes are distortionary and to the extent that they are needed to support public spending, they should be spread out over time. This is a standard principle of public finance (I think). "