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Classical economic liberalism assumes that bad policies will be punished immediately by bad outcomes. Over the past 25 years, bond-market vigilantes have argued that all-seeing, forward-looking financial markets will always anticipate the future consequences of populist policies and impose risk premia. In these cases, populist economics always produced cycles of inflation, currency depreciation and instability, because global financial markets and other outsiders were skeptical from the start.Critics outside Germany saw only a deeply immoral polity pursuing a project that was doomed to fail. They were right about the immorality, of course; but they were wrong about the imminence of the project's economic collapse.In 1939, the Cambridge University economist Claude Guillebaud published "The Economic Recovery of Germany," which argued that the German economy was quite robust and would not collapse from overstrain or overheating in the event of a military conflict. The record of populist economics in Europe is neither particularly bad nor particularly outstanding.
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