However, in his latest article "Fiscal ruin of the Western world beckons", Evans-Pritchard has delivered a real turkey, showing a worrying low understanding of basic macroeconomics.
It's clear that something is very wrong from the start of this article. I quote:
For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.
Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.
This illustrates the fallacy of the conventional IMF approach to macroeconomics. As long as public spending and services are cut enough, the deficit will be eliminated and then everything will be OK.
Whereas in fact, in the current economic situation, the deficit is the key thing keeping the Irish economy from being in an even worse state. The emergency budgets have depressed demand for goods and services, depressing tax receipts and making the deficit wider - leading to calls for another emergency budget. And so on, presumably until the last Irish civil servant has left the building, and the country is in a state of anarchy.
Ireland is of course in more of a bind than the UK for two reasons: (1) it took a larger economic hit from the credit crunch (and hence has a bigger deficit as a proportion of GDP) and (2) it's in the Euro so it can't set its own interest rates and can't use quantitative easing to stimulate the economy (although as previously noted in this blog, it is still far from clear whether QE actually works or not).
Rather than engaging in an endless cycle economic self-harm to satisfy the IMF and footloose international capital, Ireland's best way out of the crisis would have been withdrawal from the Euro (and if necessary from the EU), and a combination of deficit spending to plug the cyclical gap and tax increases to plug the structural deficit. I'm amazed that there hasn't been a revolution in Ireland, given the cuts to public spending and benefits which have taken place. If Ireland was in South America the government would have already fallen. Maybe it's time to arm the workers out there.
Nomura's Richard Koo, who is referenced disparagingly by Pritchard, seems to have the right idea when he calls for a huge deficit spending boost to counter the recession. I have yet to read his book The Holy Grail of Macroeconomics (about Japan's "lost 20 years") but it is one of the next things on my list.
Of course it is essential that once growth resumes, countries run surpluses instead of deficits, to reduce the burden of debt interest - and this is where New Labour went badly wrong, because they had a structural deficit - but to call for huge spending reductions now is insanity. It would just turn the worst recession since 1929 into the worst depression OF ALL TIME and probably lead to the complete collapse of Western democracy and its replacement with fascist states under the control of people like the BNP.
Is that really what Ambrose Evans-Pritchard wants to see?