WARNING- Euro Zone Automatic Fiscal Stabilizers Deactivated!
March 30, 2011 at 13:14 PM EDT
I now believe that system risk in the euro zone is being grossly under discounted. The implied assumption for the major currency regions is that during a slowdown the automatic fiscal stabilizers- falling government ‘revenues’ and increased transfer payments- will kick in to increase deficit spending, and thereby add the income and savings to catch the [...]