There are some things that Krugman is not saying, however, and I think they bear mentioning. First, we forget that the banks in Europe, plus the European Central Bank, were all-too-anxious to lend billions to Greece even when it was obvious that the Greek government was irresponsible and that Greece has some of the worst government employee unions in the world.
(I know, I know. Public employee unions are great because they encourage spending, and everyone knows that spending creates prosperity, so the unions in Greece simply were spreading wealth.)
Yet, the average Greek must face a grim future because the banks need to be saved. Yes, the bankers of the world most fear a series of world-wide runs, and so the Greeks must pay back the loans, or at least pay back a lot of the loans.
By the way, one of the features of "austerity" programs is raising taxes and tax rates. Not that Krugman mentions this point; all he says is that it is bad that governments are spending less, and that the road to prosperity is paved with government paper.
I am among those who believe that default is best, and that Greece would be wise to leave the euro. Now, where I believe Krugman is wrong is when he thinks that Greece, if it went back to the Drachma, could inflate itself into recovery. He does seem to believe that the USA definitely could do that:
...the main point is that America does have an alternative: we have our own currency, and we can borrow long-term at historically low interest rates, so we don’t need to enter a downward spiral of austerity and economic contraction.Yes, the USA can borrow and print itself into economic recovery and beyond. Or so says Paul Krugman.