Duvinrouge says many ‘socialists’ have got pleasure from seeing Krugman expose the prejudices and flaws in those advocating austerity as a solution to the crisis. He is right that austerity won’t work and is mainly being pursued for ideological purposes. However, he is wrong to believe that Keynesian fiscal stimulus can solve the crisis. He is wrong because he misdiagnoses the crisis and misunderstands the nature of value.
For Keynesians like Krugman, the problem is a lack of demand because the private sector is not investing. Without a surge in exports they argue that it is the government’s job to take up the slack and restore effective monetary demand. This would have some merit if the problem was just a lack of demand due to producers not investing and instead hoarding their money. But this ignores the mountain of debt and the reasons why there is so much debt.