Here's an excerpt from Brad Delong, yesterday, writing something that stands common sense on its head: that cutting the deficit doesn't .... well cut the deficit :

Indeed, in less than a year, if current forecasts are correct, Britain’s Cameron-Osborne Depression will not merely be the worst depression in Britain since the Great Depression, but probably the worst depression in Britain…ever.

The failure of expansionary austerity in Britain should give all of its advocates around the world reason to reflect on and rethink their policy calculations. Britain is a highly open economy with a flexible exchange rate and some room for further monetary easing. There is no risk or default premium baked into British interest rates to indicate that fear of political-economic chaos down the road is discouraging investment.

There is an argument – not necessarily true, but an argument nonetheless – that, while in office from 1997 to May 2010, the Labour governments of Tony Blair and Gordon Brown overshot long-term sustainable government spending as a share of GDP. Their actions stand in contrast to countries that reduced their debt-to-GDP levels in the 2000’s, and to the United States, where the problem was not excessive spending but insufficient taxation under the Bush administration.

Yet, if one takes this view seriously, Britain, with a ten-year nominal interest rate of less than 2.1% per year, should already be in a boom. If there was ever a place where expansionary austerity should work well – where private investment and exports should stand up as government purchases stood down, confirming its advocates’ view of the world – it is Britain today.

( My emphasis.Flavius)

But Britain today is not that place. And if expansionary austerity is not working in Britain, how well can it possibly work in countries that are less open, that can’t use the exchange-rate channel to boost exports, and that lack the long-term confidence that investors and businesses have in Britain?

Policymakers elsewhere in the world take note: starving yourself is not the road to health, and pushing unemployment higher is not a formula for market confidence

For nearly all of life's problems, there's an answer that's simple, easy-to-understand and ....... wrong.