Re: Re: The idiocy of austerity measures. And happy new year!

#114355
Anonymous
Participant

@GarySFBCN wrote:

Gems from John Lanchester:

In the October edition of its regular World Economic Outlook, the IMF studied the question and announced that governments had been basing their calculations on the effects of austerity using a multiplier of 0.5. So for every £1 billion removed from government spending, GDP would contract by £500 million. The IMF looked at the relevant historical data, and concluded that the real multiplier for austerity-related cuts was higher, in the range of 0.9 to 1.7. So that same package of £1 billion in fact removes as much as £1.7 billion of output. This was a jaw-dropping thing to discover, not just because it was surprising in itself, and because it explained the surprising-to-governments economic damage being done by austerity packages, but also because the people saying so were the IMF. . .

. . .The fact that the people in charge of recommending huge cuts in public spending don’t, at this basic level, fully understand the economic effect of those cuts, is surprising only if you’re unfamiliar with just how little certainty there is in the world of macroeconomics.

If the objective is to deflate a bloated government, precision austerity that is heavily monitored works. If the objective is to shore-up the economy and increase employment, austerity is idiocy.

Full text of review here:

http://www.lrb.co.uk/2012/12/21/john-lanchester/lets-call-it-failure

Happy New Year all – which is pronounced ‘twenty thirteen’ here in the US.

He pin points some nice things about how politics works and that reductions in government spending is in reality only lowering the levels of how it grows. Exactly what critics critized both parties in the US when they brought up some scams about those supposed cuts.

1. GDP Is a faulty way of measuring of how well off a nation is. Governments likes it because it means lots of extra tax revenues which gives them more room to spend it unwisely. That tenner would be a penny after a few transactions. The broken window fallacy explains this together studies on how useless government spending is compared to private spending.

2. IMF can not be trusted which have been proved time and time again. They have been one of the biggest culprit in where we are today. They are only there to secure the FEDesters and few other vested interests. Iceland did almost the opposite of their “demands” and they are way better off than for example Ireland. Look at who owns the IMF and the world bank and who funds it and you will understand it’s motives. They love bailouts of their loving owners on the tax payers salaries. Idebted people work harder and complain less to a certrain level.

3. There are lots of studies that shows that every unit that the government spends it’s done very badly. There is one area where the government actually doesn’t waste that much and that is on infrastructure. Take point 1 in account and one of the best way to make the economy better is to limit the involvement of the government.

4. That the government becomes poorer doesn’t mean that the population becomes less wealthy rather the opposite some might argue.

5. Growth in the way we have seen in the last couple of decades will never be seen again because it’s been based on mortgaging future generations and basicly stealing value from poorer nations. Those poorer nations have gotten smarter and future generations will not put up with it anymore… mostly because they can see that the government loaning more money will be spent unwisely. Real honest growth can only occur by a nations private sector becoming more effective in producing stuff either through knowledge/technical breakthroughs. The whole western world will not be able to freeride anymore.

6. The UK and a few other countries can survive a while longer by printing more money but as soon as they stop or the populace gets tired of endless inflation they are back to square one again. It’s in reality just transfering wealth from the poorer to the banksters. Here you can talk about the multiplier effect when it comes to how banks drive on inflation. The closer you are are in the chain to the banks or the governments the less you will be robbed. Idebting other nations by wars and non fair trade and forcing them to hand over valuable commodities for stupid FIAT-currency won’t work forever. External debt levels per GDP together with debt level per GDP can be used to figure who will be worse off. http://www.usdebtclock.org/world-debt-clock.html.

Austarity will ofcourse in the shorter term limit growth but it’s only because it lowers how much future generations will be mortaged. It will further down the road lead to real growth which leads to a more prosperous society in general.