From the New York Times today:

Some thoughts on the fiscal austerity mania now sweeping Europe: is anyone thinking seriously about how this affects the rest of the world, the US included?

As he explains, it’s pretty clear that:

fiscal contraction in one country under floating exchange rates is in fact contractionary for the world as a hole.

So if, as seems clear, Germany has decided Europe should have a recession when Germany should in fact be boosting its consumption right now in the interests of creating trade balance then, as he says:

Folks, this is getting ugly. And the US needs to be thinking about how to insulate itself from European masochism.

Which seems logical. But is a step towards protectionism. And then see how everything really falls apart.

Watch for wheels falling off economies all over the world soon.

And that really will be ugly.

So we’d better change tack fast.