Crying Wolf: The F-Word is Like a Prescription Drug.

Martin Wolf of the Financial Times recently referenced a paper that made the case that fiscal contraction will actually stoke consumer confidence and induce consumer spending that is necessary towards achieving a healthy recovery. Cut spending and taxes, so the argument goes.

That’s a very interesting idea. Wolf went on to propose some reasons, however, that that idea won’t work in this environment. Perhaps the main reason: consumers are still in deleveraging mode, unwilling to spend much. Duly noted.