America Continues To Recover

In the article, "That Old-Time Economics," published by the New York Times, the issue discussed is that America has yet to make a full recovery from the 2008 financial crisis, yet Europe still has an adjusted gross domestic product per capita that's lower than it was back in 2007.

The argument lies within the fact that Europe has done away with the basic textbook models of economics in favor of "alternative approaches that were innovative, exciting, and completely wrong."

The supporting evidence includes the divergence in economic ideals in Europe and America, the actions of European policy makers, and the European Central Bank. In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. In Europe, by contrast, policy makers were ready and eager to throw textbook economics out the window in favor of new approaches. The European Commission, headquartered here in Brussels, eagerly seized upon supposed evidence for "expansionary austerity", rejecting the conventional case for deficit spending in favor of the claim that slashing spending in a depressed economy actually creates jobs, because it boosts confidence.

The claims of how the issue affects the economy are that the European Central Bank took inflation warnings to heart and raised interest rates in 2011 even though unemployment was still very high, and European policy makers listening to economists that supported them and their policy ideals.
Raising Interest rates when unemployment is already high is contrary to the standards upheld by the Phillips curve. Because of this, Europe remains in a state of depression.

We put faith in macroeconomic models, so it is quite ridiculous to think that the European Central Bank will follow such alternative methods that economics doesn't support. According to the business cycle, America's real gross domestic product should fluctuate over time. Therefore, I believe it is still natural for America to be attempting to enter an expansionary period.



http://www.nytimes.com/2015/04/17/opinion/paul-krugman-that-old-time-economics.html?ref=topics&_r=0