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Austerity Cutbacks Are An Economic 'disaster', Nobel Prize Winner Joseph Stiglitz Warns

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http://www.telegraph.co.uk/finance/economics/7987704/Austerity-cutbacks-are-an-economic-disaster-Nobel-Prize-winner-Joseph-Stiglitz-warns.html

The European Union risks prolonging the global economic downturn if its largest members insist on using austerity measures to cut their budget deficits, a leading economist has warned.

Joseph Stiglitz, who won the Nobel Prize for Economics in 2001, said the use of deep spending cuts was a "disaster" adding that Europe was heading towards more economic difficulties if politicians cut back spending rather than calm down the financial markets.

"If that (austerity) happens I think it is likely that the economic downturn will last far longer and human suffering will be all the greater," he warned on Tuesday.

Mr Stiglitz said historical evidence showed that increased state spending helped economies emerge from recession. He added that the example of Ireland showed that austerity leads to declining output, rising unemployment and high bond spreads, instead of renewed investment.

"I feel sorry for the Irish people who have to suffer from this policy... but it doesn't have global or European consequences. If the UK, Germany or other countries do it, then it is going to have systemic consequences for Europe and the whole world."

Mr Stiglitz added that policymakers should not be too concerned whether the global economy was on track to a double dip.

"From the perspective of the world, or workers, there is very little difference between growth of a quarter point of a percent and a decline of a quarter point of a percent," he said. "What workers care about is if growth will be strong enough to reduce the high level of unemployment in the US or Europe."

I'm guessing that Stiglitz isn't in the Austrian school.

I love the fact he says there's evidence of countries spending there way out of recession yet the article fails to produce said evidence, maybe the full interview does. However we do get the evidence of austerity not working with the example of Ireland. The fact that the Irish might be bankrupt due to it's banks and cannot afford more deficit spending by it's govt appears lost on this Noble winner. Is there a basic IQ test administered before these awards are given out?

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http://www.telegraph...litz-warns.html

I'm guessing that Stiglitz isn't in the Austrian school.

I love the fact he says there's evidence of countries spending there way out of recession yet the article fails to produce said evidence, maybe the full interview does. However we do get the evidence of austerity not working with the example of Ireland. The fact that the Irish might be bankrupt due to it's banks and cannot afford more deficit spending by it's govt appears lost on this Noble winner. Is there a basic IQ test administered before these awards are given out?

he beleives positive figures in a made up equation = happiness.

reality is not part of his £1m$ income world.

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I'm guessing that Stiglitz isn't in the Austrian school.

I love the fact he says there's evidence of countries spending there way out of recession yet the article fails to produce said evidence, maybe the full interview does. However we do get the evidence of austerity not working with the example of Ireland. The fact that the Irish might be bankrupt due to it's banks and cannot afford more deficit spending by it's govt appears lost on this Noble winner. Is there a basic IQ test administered before these awards are given out?

Well, despite some pretty heavy duty austerity measures, Ireland has been downgraded; the stated aim of the measures has failed. Leaving the Euro, devaluing and/or defaulting would have been preferable.

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Well, despite some pretty heavy duty austerity measures, Ireland has been downgraded; the stated aim of the measures has failed. Leaving the Euro, devaluing and/or defaulting would have been preferable.

Of course the stated aim has failed, the same as the stated aim of stimulus has failed, neither can or will prevent default, however austerity is likely preferable because it brings you closer to the stated aim sooner. Austerity has two advantages, firstly, as i said, it brings default and therefore recovery sooner which means it forces less malinvestment, thus making for a quicker recovery out the other side because there is more left for the recovery, you havent bought forward as much demand to be defaulted on going into it

Edited by Tamara De Lempicka

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You all sing the same tune, yet there is zero evidence whatsoever for your view points. Money has to get to the bottom of the system somehow to restart it. Economies don't start at the top in the markets, they start at the very bottom. The people at the top are only interested in circular investing activities they're happy with the status quo, without state spending how does the money get to the bottom where it's needed?

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You all sing the same tune, yet there is zero evidence whatsoever for your view points. Money has to get to the bottom of the system somehow to restart it. Economies don't start at the top in the markets, they start at the very bottom. The people at the top are only interested in circular investing activities they're happy with the status quo, without state spending how does the money get to the bottom where it's needed?

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

http://lynncoins.com/fiat-money-france5.htm

And, first, in the economic department. From the early reluctant and careful issues of paper we saw, as an immediate result, improvement and activity in business. Then arose the clamor for more paper money. At first, new issues were made with great difficulty; but, the dyke once broken, the current of irredeemable currency poured through; and, the breach thus enlarging, this currency was soon swollen beyond control. It was urged on by speculators for a rise in values; by demagogues who persuaded the mob that a nation, by its simple fiat, could stamp real value to any amount upon valueless objects. As a natural consequence a great debtor class grew rapidly, and this class gave its influence to depreciate more and more the currency in which its debts were to be paid.[85]

The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away.

Manufactures at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce. From time to time there was a revival of hope caused by an apparent revival of business; but this revival of business was at last seen to be caused more and more by the desire of far-seeing and cunning men of affairs to exchange paper money for objects of permanent value. As to the people at large, the classes living on fixed incomes and small salaries felt the pressure first, as soon as the purchasing power of their fixed incomes was reduced. Soon the great class living on wages felt it even more sadly.

Prices of the necessities of life increased: merchants were obliged to increase them, not only to cover depreciation of their merchandise, but also to cover their risk of loss from fluctuation; and, while the prices of products thus rose, wages, which had at first gone up, under the general stimulus, lagged behind. Under the universal doubt and discouragement, commerce and manufactures were checked or destroyed. As a consequence the demand for labor was diminished; laboring men were thrown out of employment, and, under the operation of the simplest law of supply and demand, the price of labor—the daily wages of the laboring class—went down until, at a time when prices of food, clothing and various articles of consumption were enormous, wages were nearly as low as at the time preceding the first issue of irredeemable currency.

When Money Dies - The nightmare of the Weimar collapse

Both examples of what happens when money goes to the bottom you get hyperinflation.

Please cite two examples in history where giving money to poor didn't result in the above.

I think it's fair to say many on here are some what Austrian in their viewpoint, ie we've had a credit led expansion funded by debt, therefore more debt isn't going to solve the problem no matter who you give the money too.

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Both examples of what happens when money goes to the bottom you get hyperinflation.

Please cite two examples in history where giving money to poor didn't result in the above.

I think it's fair to say many on here are some what Austrian in their viewpoint, ie we've had a credit led expansion funded by debt, therefore more debt isn't going to solve the problem no matter who you give the money too.

Well, in both the UK and US in the 1950-70 period, a redistributive tax regime did not have this effect.

The problem as I see it is that people at the lower rungs of society have too much debt to service. Austerity - which seems to mean that the government gives less to the poor - is going to make this worse.

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Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

http://lynncoins.com/fiat-money-france5.htm

When Money Dies - The nightmare of the Weimar collapse

Both examples of what happens when money goes to the bottom you get hyperinflation.

Please cite two examples in history where giving money to poor didn't result in the above.

I think it's fair to say many on here are some what Austrian in their viewpoint, ie we've had a credit led expansion funded by debt, therefore more debt isn't going to solve the problem no matter who you give the money too.

1. I have no problem with stimulus whatsoever as long as it is paid by Mr Stiglitz those in his camp. I am sure they will be happy to do that as it ends 'misery'.

2. I don't see hyperinflaton is likely yet (think this word is abused) - I have finished the book and to get hyperinflation you really needs political instability that goes with it as well.

But double digit per annum inflation - yes, you would get that. In fact, I think we are now in the post-inflation cold turkey described in the paragraph you quoted. IT is just not fun when the inflation stops and those activities that are based on inflation (Err.... property?) will end in tears (except that monetary inflation is continuing, especially in asia). An economy intrinsic value is not changed much by inflation, the problem with inflation is that it distributes resources unfairly and when too many people are upset about the unfairness, something ugly can happen,.

So, we can either

(1) inflate the money supply at far greater speed than real values (as Mr Stilglitz wanted) and then everybody pays or

(2) we can share the burden (debtor pays half, savers pays half), or

(3) we can get the debtors pays so that they will never do it again for a long time.

Edited by easybetman

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Its amazing how these people just blindly assume that money printing, spending, borrowing, stimulating, and market manipulation, can just keep on going forever.

The bond market is now just a "money hose". No real demand for bonds, other than that of central banks printing and buying their own, and each others.

This can't keep going forever.

Edited by worst time buyer

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Well, in both the UK and US in the 1950-70 period, a redistributive tax regime did not have this effect.

The problem as I see it is that people at the lower rungs of society have too much debt to service. Austerity - which seems to mean that the government gives less to the poor - is going to make this worse.

Yes, that is the problem. But what was the cause? Perhaps not that many who are in the situation can say that they run up the debt due to no fault of their own?

come back to moral hazards/perverse incentive things....

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You all sing the same tune, yet there is zero evidence whatsoever for your view points. Money has to get to the bottom of the system somehow to restart it. Economies don't start at the top in the markets, they start at the very bottom. The people at the top are only interested in circular investing activities they're happy with the status quo, without state spending how does the money get to the bottom where it's needed?

money isnt the problem.

Only wealth can provide a standard of living.

things we grow, mine and make.

consume too much and there will be those that go without.

Money ADDS to the problem in that people BUY the wealth with it....and it is lent to them in exchange for wealth....Wealth cant be leveraged, but debt based on wealth, and people BELEIVING they have it, when they dont, IS a problem....for the RICH.

This is who we seen being protected by the issuance of money in exchange for more worthless money...the Soverign Debt Crisis...coming soon to a World near you.

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Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

http://lynncoins.com/fiat-money-france5.htm

When Money Dies - The nightmare of the Weimar collapse

Both examples of what happens when money goes to the bottom you get hyperinflation.

Please cite two examples in history where giving money to poor didn't result in the above.

I think it's fair to say many on here are some what Austrian in their viewpoint, ie we've had a credit led expansion funded by debt, therefore more debt isn't going to solve the problem no matter who you give the money too.

Hilarious!! You honestly expect me and others here to accept your continual propoganda on the basis of a 200 year old example? Even then the outcome was skewed by the wealthy elites, even more so during the Weimar example. I am not suggesting that any country simply prints it's way out of debt, although some reasonable level of inflation I think is necessary in the medium term. No the money needed has to come from those that already have it, by instigating laws which curtail certain types of investing, forcing investors to seek more real world alternatives. There is more than enough money already in the markets, but it has to be redirected back to the reality of "bricks & mortar" so to speak. Of course the wealthy will fight to the death to avoid this as it is more high risk, because they are happy with the way things are, shuffling money around investing in financial creations that keep the money away from the real world.

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Hilarious!! You honestly expect me and others here to accept your continual propoganda on the basis of a 200 year old example? Even then the outcome was skewed by the wealthy elites, even more so during the Weimar example. I am not suggesting that any country simply prints it's way out of debt, although some reasonable level of inflation I think is necessary in the medium term. No the money needed has to come from those that already have it, by instigating laws which curtail certain types of investing, forcing investors to seek more real world alternatives. There is more than enough money already in the markets, but it has to be redirected back to the reality of "bricks & mortar" so to speak. Of course the wealthy will fight to the death to avoid this as it is more high risk, because they are happy with the way things are, shuffling money around investing in financial creations that keep the money away from the real world.

Im sure 30 to 1 leverage at banks means there is plenty of cash to go round. Wasnt Lehmans leveraged 50:1 or 60:1?

Leverage, for those that dont know, is made up money in the minds of private banks. It is where they make their profits, It is where bonuses are earned. Sadly, it is, just the same, entirely made up and based on hope.

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Hilarious!! You honestly expect me and others here to accept your continual propoganda on the basis of a 200 year old example? Even then the outcome was skewed by the wealthy elites, even more so during the Weimar example. I am not suggesting that any country simply prints it's way out of debt, although some reasonable level of inflation I think is necessary in the medium term. No the money needed has to come from those that already have it, by instigating laws which curtail certain types of investing, forcing investors to seek more real world alternatives. There is more than enough money already in the markets, but it has to be redirected back to the reality of "bricks & mortar" so to speak. Of course the wealthy will fight to the death to avoid this as it is more high risk, because they are happy with the way things are, shuffling money around investing in financial creations that keep the money away from the real world.

Slight correction - Weimar republic existed in the 1920. Not 200 years ago.

Inflation is not necessary - it is simply a political choice. Probably should call for a referendum if inflation is the preferred solution here. As above, it is a question of who pays.

As for redirection, the problem is that we tax labour too highly and capital too lightly (on the view that labour can't run, so tough luck.). Say if both choices are avaialble to me - would I want to work hard & risk my money against the big boys in the rmarket and then get taxed away at up to maximum of around 70% (50% rate & employer NI and VAT) or, do I want to speculate and pay tax from 0% (within capital gain limit etc). It is even better if I can do that speculating other people money (bankers).

Again..the moral hazard, perverse incentive thing.

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Im sure 30 to 1 leverage at banks means there is plenty of cash to go round. Wasnt Lehmans leveraged 50:1 or 60:1?

Leverage, for those that dont know, is made up money in the minds of private banks. It is where they make their profits, It is where bonuses are earned. Sadly, it is, just the same, entirely made up and based on hope.

Exactly! That kind of investing has to stop as it helps only those chasing their own tails. Overleveraging is symptomatic of the kind of non real world investing. Overleveraging at those levels could not occur if there were laws against certain types of investment.

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Slight correction - Weimar republic existed in the 1920. Not 200 years ago.

Inflation is not necessary - it is simply a political choice. Probably should call for a referendum if inflation is the preferred solution here. As above, it is a question of who pays.

As for redirection, the problem is that we tax labour too highly and capital too lightly (on the view that labour can't run, so tough luck.). Say if both choices are avaialble to me - would I want to work hard & risk my money against the big boys in the rmarket and then get taxed away at up to maximum of around 70% (50% rate & employer NI and VAT) or, do I want to speculate and pay tax from 0% (within capital gain limit etc). It is even better if I can do that speculating other people money (bankers).

Again..the moral hazard, perverse incentive thing.

The 200 year old example was the French Republic!

Anyway you are right, labour is taxed too highly and capital far too lightly. Severe taxation on certain types of investments is a valid option.

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Exactly! That kind of investing has to stop as it helps only those chasing their own tails. Overleveraging is symptomatic of the kind of non real world investing. Overleveraging at those levels could not occur if there were laws against certain types of investment.

So what do we do...we appoint a banker to the Ministry and appoint an Investment banker to head our big retail bank.

We deserve to die.

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Well, in both the UK and US in the 1950-70 period, a redistributive tax regime did not have this effect.

The problem as I see it is that people at the lower rungs of society have too much debt to service. Austerity - which seems to mean that the government gives less to the poor - is going to make this worse.

I'm coming round to this way of thinking too. The personal balance sheets of those most worse off being driven to the brink, while the wealth and assets of "elites" and corporations is protected.

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So what do we do...we appoint a banker to the Ministry and appoint an Investment banker to head our big retail bank.

We deserve to die.

Well, perhaps the 1 in 6 of the population who actually voted Conservative do..

Besides, you can rest assured that foxes are experts in the management of hen houses.

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So what do we do...we appoint a banker to the Ministry and appoint an Investment banker to head our big retail bank.

We deserve to die.

Yes the whole system is so entrenched in the underhand, it will take a massive sea change of opinion to change things in the medium term. That did begin to happen in the USA though during the banking crisis, another catastrophe is all it will take, and austerity measures will bring us ever closer to that in a very dangerous way.

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I'm coming round to this way of thinking too. The personal balance sheets of those most worse off being driven to the brink, while the wealth and assets of "elites" and corporations is protected.

Of course..the rich are rich, mainly because, they are rich.

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  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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