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Eddie_George

Austerity Works

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All the drama coming out of Washington in the last few weeks has obscured some seriously good news: federal government spending is falling. And not at a trickle: think the White Cliffs of Dover. Not since the economic boom following 1945 have Americans seen such a rapid decline in the government’s claim on the nation’s resources — falling by a welcome $94 billion over two years. You need to go back to the end of the Korean war to find a time when US government spending has actually declined over two years. If Republicans in the House stick to the sequester and future caps already built into current budget law, federal spending will stay at this low level for years to come.

Screen-Shot-2013-10-24-at-18.48.03-620x396.png

http://www.spectator.co.uk/features/9063861/austerity-works/

Edited by Eddie_George

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I'm not sure what this is saying apart from "if you cut government spending, then government spending will fall". If the outcome is that poorer people are even worse off, and richer people are even better off, then that's hardly a resounding success. I'm not saying I know what the outcome is - just that saying something has 'worked' because of a tautology is a bit odd.

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I'm not sure what this is saying apart from "if you cut government spending, then government spending will fall". If the outcome is that poorer people are even worse off, and richer people are even better off, then that's hardly a resounding success. I'm not saying I know what the outcome is - just that saying something has 'worked' because of a tautology is a bit odd.

And Economists wonder why their field has such a poor reputation..

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I'm not sure what this is saying apart from "if you cut government spending, then government spending will fall". If the outcome is that poorer people are even worse off, and richer people are even better off, then that's hardly a resounding success. I'm not saying I know what the outcome is - just that saying something has 'worked' because of a tautology is a bit odd.

The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

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The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

And, benefit traps aside, richer people might be better off in the long term if they didn't keep extracting all the wealth from everyone else.

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He didn't see the problem, so (whether right or wrong) he's not in a great position to offer critique on the solution..

The best sound bite being:

It's really not a housing economy.. this is an economy that is driven by good economic policies, by good monetary policy, good trade policy and it's working beautifully

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Then there's all the off balance sheet stuff.

It's like saying inflation is low by only including the items in the index that have low rates of inflation - they're so blatant.

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The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

Well, up until the 1970s they did.

Strangely enough, though, several decades of savagely pro-corporate, anti-worker government, of which Laffer was a part - now means that poorer Americans can work 60 hour weeks and still need food stamps.

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The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

Amusing.

Offshore the jobs they used to do and crush the wages of whatever else is left vs the cost of living, then blame the poor for needing handouts as a result of the aforesaid policies. You really couldn't make it up.....

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The only way the writer of that article could have written it is by completely ignoring reality, because that is exactly what he has done in it. The U.S. gov has been stimulating and reflating its economy at a rate of nigh on $100 billion a month via QE for the past few years. You'll also note that this directly coincides with the fall in the share of gov spending to GDP. That isn't because gov spending has declined, it hasn't (apart from some modest falls due to military withdrawals from Iraq and Afganistan), but because the U.S. economy has been growing at ~2% a year for the last 3 years.

The problem is that while the U.S. economy has been reflated the internal and external economic imbalances have just been papered over, because tackling them would mean going against the vested interests of the world's economic elites. They are doing very well currently thank you - so absolutely no need to change the system that enriches them.

Now contrast that with the nations that actually have undertaken significant austerity. Greece - 25% of its economy destroyed in 5 years of austerity. Portugal - 6% destroyed in 3 years of austerity. Spain - 3% destroyed in 2 years of austerity. Only a lunatic would claim that austerity has been a success.

Que laffer of laffer curve fame........

Edited by alexw

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The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

That assumes there is a relationship between effort and reward in the current set up.

In reality the current setup does not reward hard work- it rewards speculation and the ownership of land or financial assets. Most people's houses have earned more money than they did by working in the past twenty years.

Leveraging up to purchase a string of BTL's and renting them out has been the way to make money in our society- hard work is a mugs game.

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The poorer people might be better off in the long term if they rely less on hand outs and more on working hard.

So let say some shelf stacker's worked twice a hard. That would mean they could sack half of them and with more unemployed people wanting jobs they could drop the wages of the shelf stacker's telling them there's plenty of people who will do your job if you don't want it.

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Now contrast that with the nations that actually have undertaken significant austerity. Greece - 25% of its economy destroyed in 5 years of austerity. Portugal - 6% destroyed in 3 years of austerity. Spain - 3% destroyed in 2 years of austerity. Only a lunatic would claim that austerity has been a success.

how can you destroy something what has never existed? and why would you call it the economy?

based on your great ideas perhaps we just need to borrow or print a few hundred billions every year and just employ more policemen, nurses and public servants. double their income. recession resolved. economy booming again.

seriously ??? after all what happened in Greece ???

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how can you destroy something what has never existed? and why would you call it the economy?

based on your great ideas perhaps we just need to borrow or print a few hundred billions every year and just employ more policemen, nurses and public servants. double their income. recession resolved. economy booming again.

seriously ??? after all what happened in Greece ???

Only you would make the claim that something does not exist. The factories, the wealth creating businesses that have all gone bankrupt in the past 5 years, they have never existed?? I'm not sure where you've dredged this lunatic idea from, but here's a graph of greek industrial production. You know, that thing that you claim doesn't exist -

GRCPROINDQISMEI_Max_630_378.png

The fall it depicts almost exactly matches the 25% of the greek economy that has been destroyed. Their economy is now producing approximately the same industrial output as it was in 1980, which is two decades before it joined the euro currency.

And point 2 - every year since fractional reserve banking came into existence (couple hundred years ago) money has been printed into existence. What is the difference between now and the past several hundred years of exactly the same thing?

Edited by alexw

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So let say some shelf stacker's worked twice a hard. That would mean they could sack half of them and with more unemployed people wanting jobs they could drop the wages of the shelf stacker's telling them there's plenty of people who will do your job if you don't want it.

One of the posties I work with runs the whole of his round. He also hopes more mail arrives earlier in the week so there will be less later on in the week supposedly. I would try and explain some of the things you pointed out but it would be totally lost on him, he also moans to our Union rep about his round being too long on busier days (he cannot get it done in time even when running it)

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Only you would make the claim that something does not exist. The factories, the wealth creating businesses that have all gone bankrupt in the past 5 years, they have never existed?? I'm not sure where you've dredged this lunatic idea from, but here's a graph of greek industrial production. You know, that thing that you claim doesn't exist -

The fall it depicts almost exactly matches the 25% of the greek economy that has been destroyed. Their economy is now producing approximately the same industrial output as it was in 1980, which is two decades before it joined the euro currency.

And point 2 - every year since fractional reserve banking came into existence (couple hundred years ago) money has been printed into existence. What is the difference between now and the past several hundred years of exactly the same thing?

if the 25% of the Greek economy is based on unsustainable borrowing then it can not be called the economy and it does not exist

you seem to argue that the austerity is some kind of a choice. that you can just ignore your debt and that there will be always a bigger fool to borrow you even more. but one day the game stops ...

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if the 25% of the Greek economy is based on unsustainable borrowing then it can not be called the economy and it does not exist

you seem to argue that the austerity is some kind of a choice. that you can just ignore your debt and that there will be always a bigger fool to borrow you even more. but one day the game stops ...

Nonsense.

You are trying to say that all the new economic activity that arose during the 1980's and 1990's (20-30 years ago) that's now been destroyed, was built on unsustainable debt. That is a completely non-credible and nonsensical argument. Austerity doesn't just clear out miss-allocated capital it destroys, as is clearly evident in greece, productive capital also.

Indeed it's done it in greece on a massive scale. They've not only had the frothy ~8% that built up during 2000-10 boom destroyed but another ~17% of their economy on top. Worse still there's no end in sight either, and greece's economy is expected to shrink another 5% next year taking the grand total to 30% of it's economy destroyed. How's that for austerity success!

Edited by alexw

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Nonsense.

You are trying to say that all the new economic activity that arose during the 1980's and 1990's (20-30 years ago) that's now been destroyed, was built on unsustainable debt. That is a completely non-credible and nonsensical argument. Austerity doesn't just clear out miss-allocated capital it destroys, as is clearly evident in greece, productive capital also.

Indeed it's done it in greece on a massive scale. They've not only had the frothy ~8% that built up during 2000-10 boom destroyed but another ~17% of their economy on top. Worse still there's no end in sight either, and greece's economy is expected to shrink another 5% next year taking the grand total to 30% of it's economy destroyed. How's that for austerity success!

again. austerity is not a choice. it is a situation when you run out of money

and surprise surprise states with reasonable deficits do not have austerities "destroying" their economies

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again. austerity is not a choice. it is a situation when you run out of money

As demonstrated by the pay and bonus restraint in our corporate board rooms...

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As demonstrated by the pay and bonus restraint in our corporate board rooms...

agreed. no public employee (NHS, BBC, councils, quangos, etc ...) should earn more than Prime Minister

but there is no austerity in UK yet, so we can not really blame anybody ... laugh.gif

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