Today, I thought I would provide some background to the Euro crisis to advance some understanding of why the conservatives in Europe are advocating highly destructive solutions to their crisis. So I went back to some notes that I have accumulated over the years to try to put the sort of nonsensical fiscal rules that are now being proposed by very influential German economists into some sort of context. What you will see is that the context doesn’t in any way help to justify the rules. They are crazy by any reasonable assessment. But at least you will see them in a wider context. I hope.

The ECB is embarking on a major construction project to erect new building at the east end of Frankfurt, which will be completed on current plans by the end of 2013. It will replace the old wholesale market which supplied fruit and vegetables to Frankfurt and surrounds. One suspects the health of the citizens was better served in this former land use. I wonder what they will do with the new building when the Eurozone collapses. Perhaps it could be a nice retirement village for the executives who will be looking for something to do.

Another day passes and lots more reading done. Some of it interesting but a significant amount of it tedious even enraging. I hum my mantras as I read to stay calm. But among the things I read there were some stand outs – not all of which I will have time to write about today. But this news report – Estonia Wants Stricter Euro Budget Rules – came in overnight, which caught my eye. Further examination, revealed how skewed policy priorities have become over the course of this economic crisis. The most costly things for an economy are ignored and aspirations that will impose future costs are promoted. Driving this policy agenda (madness) are the false messages that the IMF continually put out which spread a mélange of lies and non-sequiturs across the policy debate. I came up with a fiscal consolidation plan myself today as a result. I will disclose it later.

New York Times columnist and Nobel Prize winner Paul Krugman occasionally brushes up against an understanding of how the macroeconomy works. Some people actually have said to me that he does get it but chooses for political purposes not to disclose a full understanding of the basic principles of Modern Monetary Theory (MMT). Well in his most recent column – We’re Not Greece – published May 13, 2010, I think you can conclude that when left to his own devices he doesn’t have a clue about what is really happening in the macroeconomy. So today, we are exposing his mainstream (neo-classical) keynesian nakedness – he is now naked and without clothes.