Can fiscal austerity work with tight money?

posted by
January 10, 2013
Free Advice
by Robert P. Murphy  
Posted in Commentary

"[S]uppose a new president (perhaps a fan of this blog) takes office in a small country and (a) cuts government spending by 30% in one year and income taxes by 15%, in absolute terms, and (b) abolishes the central bank and ties its currency to gold. A large budget deficit is transformed in one year into a modest surplus. Further suppose that my wacky Austrian views happen to be right -- and Lars/Scott Sumner are utterly wrong. What happens?" (01/09/13)  

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