Austerity is failing Greece and Ireland

[mame]

The Confidence Fairy has Taken a Leave of Absence

Was it only last June when Alan Reynolds was holding Ireland up as a role model, not just for troubled European economies, but for the United States? Yes, it was:

“The Irish approach to tackling the recent recession,” investment adviser Michael Johnston said, “was vastly different than the strategies implemented by the U.S. and much of the rest of the developed world. Most governments cranked the printing presses into high gear and began injecting round after round of capital into the global economy. Ireland went the opposite direction, imposing draconian budget cuts and reeling in government spending.”
The Irish approach worked in 1987-89 — and it’s working now.
This is a lesson that Washington should learn sooner rather than later.
​

Um[the following chart is Ireland's 10 year bond rates]:

Meanwhile, Greek austerity is failing even to do much to reduce the deficit, because the economy is shrinking. The usually discreet Calculated Risk sums it up:

More austerity coming – the beatings will continue until morale improves!
​

Even Business Insider seems to be getting it. Contractionary policies, it turns out, are contractionary. And don’t tell anyone, but this means that Keynesian economics is right

Hm, more evidence pointing towards the failure of Austerity... What a surprise.

Also, it doesn't surprise me that the Cato institute is responsible for for trumpeting such an obvious failure as success...

 

[Ernst]

Yes.. I was listening to Al-Jazeera and you are right. What will the EU do?

Germany seems to be the most solid country if I understand the news.

Will The EU share the wealth?

 

[mame]

Yes.. I was listening to Al-Jazeera and you are right. What will the EU do?

Germany seems to be the most solid country if I understand the news.

Will The EU share the wealth?

depends on how badly the EU wants these countries to continue to use the euro. They(Greece) could create their own currency and print it ala the Federal Reserve... The other option, Austerity, is a bad move for countries in debt(and is a bad move anyway... because it's essentially dropping wages and by extension, quality of living and more importantly demand... It's also a bad move politically for obvious reasons).

Greece, for example, lost revenue and posted a higher than expected deficit. It's now even more expensive for them to borrow, and their people will suffer from a lower quality of living overall. Austerity is meant to instill confidence, and spur growth by making labor cheaper. If you believed in this premise, you'd expect for revenue to remain at least close to the same(offsetting loses from the masses and gains from the top taxed) and then grow, right? Interest rates would remain low, and eventually employment will pick up, and then the trickle down will raise everyone's wages again!

...Except the part where Austerity hurts demand, which hurts profits, which hurts investment... lower revenue then leads to higher deficits which leads to a higher interest rate on loans. Those loans then become even harder to pay off and your economy is now growing even slower than before, congratulations.

 

[Ernst]

You are correct.

How do we see life on the planet? I still believe in the Garden but I believe the "Plantation" is more in line with what economic interests are seeing.

I'm not sure what the solution is but I don't see culture surviving as we have known it.
My thought range from a Logan's run type of concept to a Soilent Green type of concept.
My imagination sees a mass killing of a majority of the worlds population to solve the problem of poverty.
It was Hitler's final solution so we must realize that it would be on the table even today.

If you like, what future do you see in 100 years and 1000 years?


On a side note the "Real IRA" has been active in the media again..

 

[mame]

what future do you see in 100 years and 1000 years?

Good question, I believe the next decade will be pivotal for the U.S. but I dont know what to expect, honestly. Hopefully we dont end up with President Paul "I hate poor people" Ryan and a republican majority licking it's chops at the dismantling of the New Deal(because that's what they'd do)... But that's just me.

 

[Ernst]

Good question, I believe the next decade will be pivotal for the U.S. but I dont know what to expect, honestly. Hopefully we dont end up with President Paul "I hate poor people" Ryan and a republican majority licking it's chops at the dismantling of the New Deal(because that's what they'd do)... But that's just me.

It is refreshing to read a forward think opinion.

I think there is a Gravity that warps our "time-space" and that is Interest on debt.
What a leash on the dog we are.

Instead of the planet being able to adapt it looks like a struggle to adopt.

I like life.. I vote for the Garden.

I have not scanned the news today. It was an emotional day around here yesterday and i am not sure who to love.

I'll take time this evening to see what the progress is but the IRA was shocking to me.. They had a huge up-swing in their standard of living and I'm sure it feels cold to revisit decline again.

I did get to see Scotland ( Lucas? ) in 1981 so I have a general understanding of the different money and bank issues.
Does Ireland have banks too?
I remember having a bar patron speak on my behalf when I presented the wrong money in a pub.. I wouldn't have had a penny for a pint with out that moment of compassion. The barkeep wouldn't have taken the script.

 

[medicineman]

It seems that austerity is the new mantra for the republican party, as long as it doesn't involve them or their loved ones. Poverty is good for everyone but their crowd and their backers. If they can make all the rest of the country poor, and cut all benefits, then the money can be coralled and split up among the elites. Seem as though that is the republican mantra.

 

[NoDrama]

The only way to pay it all off is to default. Tell those bankers to pound sand! Iceland did exactly that and they are in a real recovery!

 

[mame]

The only way to pay it all off is to default. Tell those bankers to pound sand! Iceland did exactly that and they are in a real recovery!

Considering that's not likely, what would you suggest (that could actually gain political support in the U.S.)? It seems this next election could decide whether or not the U.S. heads into a full blown austerity program, complete with the dismantling of the welfare state... Given the evidence against such policies effectiveness unfolding before our eyes (Greece, Ireland and I believe Portugal) could you support the right in their march towards Austerity?

 

[budsmoker87]

what's with the term "austerity"??

it's just the same thing that happened in the US...and elsewhere, around the globe....


the banks claim they're broke...go to the gov't, and gov't has its citizens bail out the bank. why? the bank can lend our money out at leverage....and then have countless other financial SCHEMES that can be summed down to "collection of interest ontop of interest...re-loaned debt...

so we don't need to call it "austerity" (if we live in america)....and we need to acknowledge that these aren't your ordinary banks. they're "investment banks" but what they invest is debt (a dollar) into more debt...at huuuge leveraged ratios of 10:1...


on another note, the government needs to stop subsidizing oil companies...(exxon mobile expected to pull in 10 billion 1st quarter?!) and then taxing $0.50 on every gallon sold. these oil companies are in the back-pockets of ALL these politicians.


..saw a figure on fox or something, that oil company lobbying in 2010 topped $147 million...


...let's think of that in a more accurate, clear, straight-forward way: various senators, congressmen, legislators, etc recieved $147 million in bribe money...LOL



can we say mafia?

 

[mame]

Naturally, PK is all over this so I'll continue to update this thread:

UK, Not OK

The bad GDP number for the UK isn’t a surprise — in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it’s doubleplusungood: zero growth over the past 6 months, with every reason to be worried on the downside looking forward, as Cameron’s austerity bites deeper.

Jonathan Portes gets to the nub of it:

On fiscal policy, the message is that we should listen to economists, not credit rating agencies. Most mainstream economists argued that the impact of the government’s fiscal consolidation on confidence and consumer demand would be negative; so it has proved.
…
Meanwhile, the argument that fiscal overkill was necessary to appease the credit rating agencies has again been disproved by market reaction – or the lack of it – to the Standard & Poor’s outlook warning last week in America, where US Treasury yields hardly budged.
​

In short, there is no confidence fairy; and S&P can call invisible bond vigilantes from the vasty deep, but they won’t actually come when called.

Portes hits, in particular, on a point I’ve tried to make a number of times, here and more recently here: right now, we’re living in a world in which basic economics points to conclusions utterly at odds with what Very Serious People are supposed to believe, in which radical outsiders base their views on standard economics while orthodox types turn to heterodox, highly dubious speculations.

Econ 101, buttressed if you like by fancier New Keynesian models, says that contractionary fiscal policy is, well, contractionary. Yet much of the world of movers and shakers bought into the exotic notion that expectational effects — the confidence fairy — would make contractionary policy expansionary. And they clung to this belief even as the supposed historical evidence in favor of expansionary austerity was thoroughly debunked.

And now we’re watching Econ 101 in the process of being confirmed. I wish I thought this would change anyone’s mind.

mhmmmmm, who would've thought...

 

[NoDrama]

Considering that's not likely, what would you suggest (that could actually gain political support in the U.S.)? It seems this next election could decide whether or not the U.S. heads into a full blown austerity program, complete with the dismantling of the welfare state... Given the evidence against such policies effectiveness unfolding before our eyes (Greece, Ireland and I believe Portugal) could you support the right in their march towards Austerity?

I know exactly what they will do, they will continue printing money.

 

[mame]

I know exactly what they will do, they will continue printing money.

I think Bernanke will be holding a news conference in the near future, he still has a few tricks up his sleeve... Dont ask me what, IDK. Mr. Bernanke believes the Fed “retains considerable power” to reduce unemployment but he hasn't said what it is he'll do next(seems likely he is going to do something just in time for the 2012 elections, surprise surprise).

 

[NoDrama]

Its today, the FOMC meeting convenes at noon, Bernanke to discuss how much money they will keep printing and how low they will keep interest rates. If he says something else you can just about bet Great Depression 2 will begin.

 

[beardo]

I think Bernanke will be holding a news conference in the near future, he still has a few tricks up his sleeve... Dont ask me what, IDK. Mr. Bernanke believes the Fed “retains considerable power” to reduce unemployment but he hasn't said what it is he'll do next(seems likely he is going to do something just in time for the 2012 elections, surprise surprise).

Do you mean near future as in= today?

 

[mame]

Do you mean near future as in= today?

Amazing! I knew it was coming soon... didn't know it was today. It's like christmas(lol)! oh and June 12th will be too. NCAA 12 ya'know.

 

[NoDrama]

Its not the usual, it is the very first press conference EVER with a Fed Chair, but yeah its just about to start. What Bernanke says will CERTAINLY affect ALL markets in the whole world, keep your ears open.

 

[mame]

http://norris.blogs.nytimes.com/2011/04/27/live-blogging-bernankes-news-conference-2/?hp
live blogging.

 

[Ernst]

Cutting the food stamp program while cutting taxes for the wealthy is American austerity.

 

[mame]

Bernanke says there will be no QE3, QE2 will end on schedule. He tiptoed around questions about unemployment but at the same time assured us that inflation is low and that gas prices will go down eventually. He said that over the long term the deficit needs to be dealt with and when asked about cuts hurting growth in the short term, he said the last cuts ($38B) haven't slowed growth but if cuts do hurt growth they'll take it into account(whew!). He says that the fed will tighten monetary policy at the right time, blah blah.

meh.