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   IMF: "Did we say austerity would help Greece? We meant hurt Greece, badly. Sorry for the confusion"

04 Jan 2013 09:08 AM   |   8209 clicks   |   Washington Post
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NewportBarGuy    [TotalFark]  
I think that's 13,783rd time the Republican Economic Model has been blown out of the water.

04 Jan 2013 12:59 AM
Grand_Moff_Joseph    [TotalFark]  
In other words, Krugman was right again?

04 Jan 2013 01:01 AM
whither_apophis     
Oh that wasn't their goal? The IMF does that to every other country they deal with, they have it down to an art.

04 Jan 2013 01:41 AM
Speaker2Animals     

Grand_Moff_Joseph: In other words, Krugman was right again?


Allow me to repeat that.

Grand_Moff_Joseph: In other words, Krugman was right again?


Suck on it austerians. Suck on it.

04 Jan 2013 01:48 AM
ecmoRandomNumbers    [TotalFark]  
I'm so shocked. So shocked and surprised.

And I'm not an economist. You can't UN-spend yourself to prosperity. Christ of crutches... everybody saw this.

04 Jan 2013 02:28 AM
CPT Ethanolic     
...because it did not fully understand how government austerity efforts would undermine economic growth.

  So, in other words, the head economist at the  International Monetary Fund knows less about economics than I do?

04 Jan 2013 05:12 AM
stratagos     
I'm still unclear where the Fark Economist Posse thinks Greece should have gotten funds - they were (and are) spending more than they take in. Is the magical Euro fairy just going to sprinkle money into the treasury?

Of *course* the economy slows when you take a huge chunk of money out of it, duh. Same thing will happen in the US eventually - whether spending is tightened / taxes increased now or in fifty years, there comes a point where you can't keep spending an extra trillion bucks a year.

Difference of course being people will still loan us cash, because we're still good for it - and people won't loan to Greece, because they're not

04 Jan 2013 06:49 AM
Bontesla     

Speaker2Animals: Grand_Moff_Joseph: In other words, Krugman was right again?

Allow me to repeat that.

Grand_Moff_Joseph: In other words, Krugman was right again?

Suck on it austerians. Suck on it.


This!

04 Jan 2013 08:00 AM
Irving Maimway    [TotalFark]  

NewportBarGuy: I think that's 13,783rd time the Republican Economic Model has been blown out of the water.


Grand_Moff_Joseph: In other words, Krugman was right again?


whither_apophis: Oh that wasn't their goal? The IMF does that to every other country they deal with, they have it down to an art.


ecmoRandomNumbers: And I'm not an economist. You can't UN-spend yourself to prosperity. Christ of crutches... everybody saw this.


THIS THIS THIS THIS

stratagos: I'm still unclear where the Fark Economist Posse thinks Greece should have gotten funds - they were (and are) spending more than they take in. Is the magical Euro fairy just going to sprinkle money into the treasury?

Of *course* the economy slows when you take a huge chunk of money out of it, duh. Same thing will happen in the US eventually - whether spending is tightened / taxes increased now or in fifty years, there comes a point where you can't keep spending an extra trillion bucks a year.


But haven't Fark IndependentsTM been telling us all year that we're going to end up like Greece? I had said you couldn't compare us because unlike Greece we issue our own currency but was told that was not the case at all and I was really confused and uneducated.

04 Jan 2013 08:19 AM
GAT_00     
No shiat dumbass.  You can't deliver a bodyblow to an economic engine without consequences.  But hey, good job killing Greece and the Euro with your bullshiat.

If fiscal multipliers are small, countries can cut spending faster or raise more in taxes without much short-term damage.

So you still believe it works, you're just willing to acknowledge that every time it has been tried, the resulting GDP loss offset the spending cuts, leaving the country no better off and the people worse off.

04 Jan 2013 08:22 AM
Elzar     
Typical liberal farking lies  - austerity is actually working in Greece, but no one wants to see it through properly to its happy ending. A little financial pain and the libs start whining... Greece just hasn't lowered their taxes and cut spending far enough... I mean have you actually seen how many restaraunts and coffee shops they have over there? Half of the people unemployed are on the doles because they like to sip their lattes in some trendy bistro rather then put their back into a little honest work.

04 Jan 2013 08:30 AM
quickdraw     

Grand_Moff_Joseph: In other words, Krugman was right again?


Yep Krugman and my dad - who is also an economist. Hes in his 70s and whenever the news is on he gets this look on his face of total disbelief. Like all academics hes sure if he could just explain it to them the right way then at least they could do the right thing if they wanted to.

So he writes journal articles and blog posts and walks around muttering a lot.

04 Jan 2013 08:32 AM
Barfmaker    [TotalFark]  

Elzar: Typical liberal farking lies  - austerity is actually working in Greece, but no one wants to see it through properly to its happy ending. A little financial pain and the libs start whining... Greece just hasn't lowered their taxes and cut spending far enough... I mean have you actually seen how many restaraunts and coffee shops they have over there? Half of the people unemployed are on the doles because they like to sip their lattes in some trendy bistro rather then put their back into a little honest work.


poes-law.jpg

04 Jan 2013 08:53 AM
Carth     
So you mean drastically cutting spending during a recession to balance a budget hurts the economy?! Who would have guess.

04 Jan 2013 09:09 AM
vudukungfu     
Those pigs still enforce Blasphemy laws. Right on par with the Yemenis and Pakis.

04 Jan 2013 09:14 AM
Dadoody     
Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE.

Many politicians and commentators such as Paul Krugman claim that Europe's problem is austerity, i.e., there is insufficient government spending. The common argument goes like this: Due to a reduction of government spending, there is insufficient demand in the economy leading to unemployment. The unemployment makes things even worse as aggregate demand falls even more, causing a fall in government revenues and an increase in government deficits. European governments pressured by Germany (which did not learn from the supposedly fateful policies of Chancellor Heinrich Brüning) then reduce government spending even further, lowering demand by laying off public employees and cutting back on government transfers. This reduces demand even more in a never ending downward spiral of misery. What can be done to break out of the spiral? The answer given by commentators is simply to end austerity, boost government spending and aggregate demand. Paul Krugman even argues in favor for a preparation against an alien invasion, which would induce government to spend more. So the story goes. But is it true?

First of all, is there really austerity in the eurozone? One would think that a person is austere when she saves, i.e., if she spends less than she earns. Well, there exists not one country in the eurozone that is austere. They all spend more than they receive in revenues.

In fact, government deficits are extremely high, at unsustainable levels, as can been seen in the following chart that portrays government deficits in percentage of GDP. Note that the figures for 2012 are what governments wish for.

images.mises.orgView Full Size


The absolute figures of government deficits in billion euros are even more impressive.

images.mises.orgView Full Size


A good picture of "austerity" is also to compare government expenditures and revenues (relation of public expenditures and revenues in percentage).

images.mises.orgView Full Size


Imagine that a person you know spends 12 percent more in 2008 than her income, spends 31 percent more than her income the next year, spends 25 percent more than her income in 2010, and 26 percent more than her income in 2011. Would you regard this person as austere? And would you regard this behavior as sustainable? This is what the Spanish government has done. It shows itself incapable of changing this course. Perversely, this "austerity" is then made responsible for a shrinking Spanish economy and high unemployment.

Unfortunately, austerity is the necessary condition for recovery in Spain, the eurozone, and elsewhere. The reduction of government spending makes real resources available for the private sector that formerly had been absorbed by the state. Reducing government spending makes profitable new private investment projects and saves old ones from bankruptcy.

Take the following example. Tom wants to open a restaurant. He makes the following calculations. He estimates the restaurant's revenues at $10,000 per month. The expected costs are the following: $4,000 for rent; $1,000 for utilities; $2,000 for food; and $4,000 for wages. With expected revenues of $10,000 and costs of $11,000 Tom will not start his business.

Let's now assume that the government is more austere, i.e., it reduces government spending. Let's assume that the government closes a consumer-protection agency and sells the agency's building on the market. As a consequence, there is a tendency for housing prices and rents to fall. The same is true for wages. The laid-off bureaucrats search for new jobs, exerting downward pressure on wage rates. Further, the agency does not consume utilities anymore, leading toward a tendency of cheaper utilities. Tom may now rent space for his restaurant in the former agency for $3,000 as rents are coming down. His expected utility bill falls to $500, and hiring some of the former bureaucrats as dishwashers and waiters reduces his wage expenditures to $3,000. Now with expected revenue at $10,000 and costs at $8,500 the expected profits amounts to $1,500 and Tom can start his business.

As the government has reduced spending it can even reduce tax rates, which may increase Tom's after-tax profits. Thanks to austerity the government could also reduce its deficit. The money formerly used to finance the government deficit can now be lent to Tom for an initial investment to make the former agency's rooms suitable for a restaurant. Indeed, one of the main problems in countries such as Spain these days is that the real savings of the people are soaked up and channeled to the government via the banking system. Loans are practically unavailable for private companies, because banks use their funds to buy government bonds in order to finance the public deficit.

In the end, the question amounts to the following: Who shall determine what is produced and how? The government that uses resources for its own purposes (such as a "consumer-protection" agency, welfare programs, or wars), or entrepreneurs in a competitive process and as agents of consumers, trying to satisfy consumer wants with ever better and cheaper products (like Tom, who uses part of the resources formerly used in the government agency for his restaurant).

If you think the second option is better, austerity is the way to go. More austerity and less government spending mean fewer resources for the public sector (fewer "agencies") and more resources for the private sector, which uses them to satisfy consumer wants (more restaurants). Austerity is the solution to the problems in Europe and in the United States, as it fosters sustainable growth and reduces government deficits.

Lower GDP?

But does austerity not at least temporarily reduce GDP and lead to a downward spiral of economic activity?

Unfortunately, GDP is a quite misleading figure. GDP is defined as the market value of all final goods and services produced in a country in a given period.

There are two minor reasons why a lower GDP may not always be a bad sign.

The first reason relates to the treatment of government expenditures. Let us imagine a government bureaucrat who licenses businesses. When he denies a license for an investment project that never comes into being, how much wealth is destroyed? Is it the expected revenues of the project or its expected profits? What if the bureaucrat has unknowingly prevented an innovation that could save the economy billions of dollars per year? It is hard to say how much wealth destruction is caused by the bureaucrat. We could just arbitrarily take his salary of $50,000 per year and subtract it from private production. GDP would be lower.

Now hold your breath. In practice, the opposite is done. Government expenditures count positively in GDP. The wealth destroying activity of the bureaucrat raises GDP by $50,000. This implies that if the government licensing agency is closed and the bureaucrat is laid off, then the immediate effect of this austerity is a fall in GDP by $50,000. Yet, this fall in GDP is a good sign for private production and the satisfaction of consumer wants.

Second, if the structure of production is distorted after an artificial boom, the restructuring also entails a temporary fall in GDP. Indeed, one could only maintain GDP if production remained unchanged. If Spain or the United States had continued to use their boom structure of production, they would have continued to build the amount of housing they did in 2007. The restructuring requires a shrinking of the housing sector, i.e., a reduced use of factors of production in this sector. Factors of production must be transferred to those sectors where they are most urgently demanded by consumers. The restructuring is not instantaneous but organized by entrepreneurs in a competitive process that is burdensome and takes time. In this transition period, when jobs are destroyed in the overblown sectors, GDP tends to fall. This fall in GDP is just a sign that the necessary restructuring is underway. The alternative would be to produce the amount of housing of 2007. If GDP did not fall sharply, it would mean that the wealth-destroying boom was continuing as it did in the years 2005-2007.

Conclusion

Public austerity is a necessary condition for private flourishing and a rapid recovery. The problem of Europe (and the United States) is not too much but too little austerity - or its complete absence. A fall of GDP can be an indicator that the necessary and healthy restructuring of the economy is underway.

04 Jan 2013 09:14 AM
stratagos     

Irving Maimway: NewportBarGuy: I think that's 13,783rd time the Republican Economic Model has been blown out of the water.

Grand_Moff_Joseph: In other words, Krugman was right again?

whither_apophis: Oh that wasn't their goal? The IMF does that to every other country they deal with, they have it down to an art.

ecmoRandomNumbers: And I'm not an economist. You can't UN-spend yourself to prosperity. Christ of crutches... everybody saw this.

THIS THIS THIS THIS

stratagos: I'm still unclear where the Fark Economist Posse thinks Greece should have gotten funds - they were (and are) spending more than they take in. Is the magical Euro fairy just going to sprinkle money into the treasury?

Of *course* the economy slows when you take a huge chunk of money out of it, duh. Same thing will happen in the US eventually - whether spending is tightened / taxes increased now or in fifty years, there comes a point where you can't keep spending an extra trillion bucks a year.

But haven't Fark IndependentsTM been telling us all year that we're going to end up like Greece? I had said you couldn't compare us because unlike Greece we issue our own currency but was told that was not the case at all and I was really confused and uneducated.


Couldn't tell you; I'm not a Fark Independent.

Acknowledging that being in the Euro both allowed Greece to borrow unpayable debts and removed their ability to just run the printing presses, when you have an option between sharp cuts mandated by the IMF or even sharper cuts when no one will loan to you, what do you do?

04 Jan 2013 09:16 AM
CujoQuarrel     

Carth: So you mean drastically cutting spending during a recession to balance a budget hurts the economy?! Who would have guess.


Well, cutting spending because you have no money and no one will loan it to you

04 Jan 2013 09:16 AM
Hobodeluxe     

Elzar: Typical liberal farking lies  - austerity is actually working in Greece, but no one wants to see it through properly to its happy ending. A little financial pain and the libs start whining... Greece just hasn't lowered their taxes and cut spending far enough... I mean have you actually seen how many restaraunts and coffee shops they have over there? Half of the people unemployed are on the doles because they like to sip their lattes in some trendy bistro rather then put their back into a little honest work.


most of the "honest work" is gone. moved to third world countries by the global capitalists who run the world.

04 Jan 2013 09:18 AM
david_gaithersburg     
A - Its a blog
B - Its a WAPO blog
C - Fail

04 Jan 2013 09:19 AM
imontheinternet    [TotalFark]  
Wait... so, slashing budgets and firing everybody during hard economic times is a bad thing now?  Well, color me f*cking surprised.  I was told that self-inflicted recessions were what economies craved.

04 Jan 2013 09:22 AM
Cdr.Murdock     
I'm surprised the overall influence of Greek Euro zone membership was for the most part, overlooked here.


Once a country's monetary policy is de coupled from it's political process they loose all control over their economy. Greece can't print truckloads of Drachmas like they used to in the past (like the US government is doing now) to stabilize their debt & their economy, so they're forced to take bail outs from other Euro zone nations or the ECB & IMF.

It took another 75 years, but German finally took over Europe, however reluctantly.

If Germany was NOT part of the Euro zone their currency would have strengthened to the point where German exports would be cost prohibitive and that production would shift to countries with weaker currencies & cheaper production costs.

But Greece, Portugal, Spain & Italy can't weaken their currency. They all belong to the common Euro. So, while the industrious & notoriously penny pinching Germans (much to their credit ha ha a pun, Germans don't like to buy things on credit) have a strengthening economy, the other countries in the Euro zone are kinda stuck.

IHMO, the Euro zone & it's common currency are uncharted waters in the field of Macroeconomics. Never in modern times have 17 countries come together to use a common currency without a common political structure. To pin Greek's issues on austerity alone (and I'm not an austerity advocate, per se, I think austerity means raising taxes on those who have the means, while taking a look at what's necessary spending & what isn't) is a little simplistic. What we're seeing in Greece is a totally new animal.

Another issues in Greece is it's almost considered your patriotic duty to dodge any and all takes. As the IRS says, there's a difference between Tax avoidance & tax EVASION. I do everything I can in the course of running my business to reduce the tax I pay, but I do everything by the book & the letter of the law. This is not the case in Greece. Rampant corruption and tax evasion have had serious negative repercussions on the Greek economy.

/lecture over.

04 Jan 2013 09:35 AM
hasty ambush    [TotalFark]  

NewportBarGuy: I think that's 13,783rd time the Republican Economic Model has been blown out of the water.


Yup, because massive government spending has been so successful in Japan. Well if by successful you mean continuing recessions and a National debt exceeding 200% of their GDP then yes successful.

04 Jan 2013 09:36 AM
Omis     

Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE.

Many politicians and commentators such as Paul Krugman claim that Europe's problem is austerity, i.e., there is insufficient government spending. The common argument goes like this: Due to a reduction of government spending, there is insufficient demand in the economy leading to unemployment. The unemployment makes things even worse as aggregate demand falls even more, causing a fall in government revenues and an increase in government deficits. European governments pressured by Germany (which did not learn from the supposedly fateful policies of Chancellor Heinrich Brüning) then reduce government spending even further, lowering demand by laying off public employees and cutting back on government transfers. This reduces demand even more in a never ending downward spiral of misery. What can be done to break out of the spiral? The answer given by commentators is simply to end austerity, boost government spending and aggregate demand. Paul Krugman even argues in favor for a preparation against an alien invasion, which would induce government to spend more. So the story goes. But is it true?

First of all, is there really austerity in the eurozone? One would think that a person is austere when she saves, i.e., if she spends less than she earns. Well, there exists not one country in the eurozone that is austere. They all spend more than they receive in revenues.

In fact, government deficits are extremely high, at unsustainable levels, as can been seen in the following chart that portrays government deficits in percentage of GDP. Note that the figures for 2012 are what governments wish for.



The absolute figures of government deficits in billion euros are even more impressive.



A good picture of "austerity" is also to compare government expenditures and revenues (relation of public expenditures and revenues in percentage).



Imagine that a person you know spends 12 percent more in 2008 than her income, spends 31 percent more than her income the next year, spends 25 percent more than her income in 2010, and 26 percent more than her income in 2011. Would you regard this person as austere? And would you regard this behavior as sustainable? This is what the Spanish government has done. It shows itself incapable of changing this course. Perversely, this "austerity" is then made responsible for a shrinking Spanish economy and high unemployment.

Unfortunately, austerity is the necessary condition for recovery in Spain, the eurozone, and elsewhere. The reduction of government spending makes real resources available for the private sector that formerly had been absorbed by the state. Reducing government spending makes profitable new private investment projects and saves old ones from bankruptcy.

Take the following example. Tom wants to open a restaurant. He makes the following calculations. He estimates the restaurant's revenues at $10,000 per month. The expected costs are the following: $4,000 for rent; $1,000 for utilities; $2,000 for food; and $4,000 for wages. With expected revenues of $10,000 and costs of $11,000 Tom will not start his business.

Let's now assume that the government is more austere, i.e., it reduces government spending. Let's assume that the government closes a consumer-protection agency and sells the agency's building on the market. As a consequence, there is a tendency for housing prices and rents to fall. The same is true for wages. The laid-off bureaucrats search for new jobs, exerting downward pressure on wage rates. Further, the agency does not consume utilities anymore, leading toward a tendency of cheaper utilities. Tom may now rent space for his restaurant in the former agency for $3,000 as rents are coming down. His expected utility bill falls to $500, and hiring some of the former bureaucrats as dishwashers and waiters reduces his wage expenditures to $3,000. Now with expected revenue at $10,000 and costs at $8,500 the expected profits amounts to $1,500 and Tom can start his business.

As the government has reduced spending it can even reduce tax rates, which may increase Tom's after-tax profits. Thanks to austerity the government could also reduce its deficit. The money formerly used to finance the government deficit can now be lent to Tom for an initial investment to make the former agency's rooms suitable for a restaurant. Indeed, one of the main problems in countries such as Spain these days is that the real savings of the people are soaked up and channeled to the government via the banking system. Loans are practically unavailable for private companies, because banks use their funds to buy government bonds in order to finance the public deficit.

In the end, the question amounts to the following: Who shall determine what is produced and how? The government that uses resources for its own purposes (such as a "consumer-protection" agency, welfare programs, or wars), or entrepreneurs in a competitive process and as agents of consumers, trying to satisfy consumer wants with ever better and cheaper products (like Tom, who uses part of the resources formerly used in the government agency for his restaurant).

If you think the second option is better, austerity is the way to go. More austerity and less government spending mean fewer resources for the public sector (fewer "agencies") and more resources for the private sector, which uses them to satisfy consumer wants (more restaurants). Austerity is the solution to the problems in Europe and in the United States, as it fosters sustainable growth and reduces government deficits.

Lower GDP?

But does austerity not at least temporarily reduce GDP and lead to a downward spiral of economic activity?

Unfortunately, GDP is a quite misleading figure. GDP is defined as the market value of all final goods and services produced in a country in a given period.

There are two minor reasons why a lower GDP may not always be a bad sign.

The first reason relates to the treatment of government expenditures. Let us imagine a government bureaucrat who licenses businesses. When he denies a license for an investment project that never comes into being, how much wealth is destroyed? Is it the expected revenues of the project or its expected profits? What if the bureaucrat has unknowingly prevented an innovation that could save the economy billions of dollars per year? It is hard to say how much wealth destruction is caused by the bureaucrat. We could just arbitrarily take his salary of $50,000 per year and subtract it from private production. GDP would be lower.

Now hold your breath. In practice, the opposite is done. Government expenditures count positively in GDP. The wealth destroying activity of the bureaucrat raises GDP by $50,000. This implies that if the government licensing agency is closed and the bureaucrat is laid off, then the immediate effect of this austerity is a fall in GDP by $50,000. Yet, this fall in GDP is a good sign for private production and the satisfaction of consumer wants.

Second, if the structure of production is distorted after an artificial boom, the restructuring also entails a temporary fall in GDP. Indeed, one could only maintain GDP if production remained unchanged. If Spain or the United States had continued to use their boom structure of production, they would have continued to build the amount of housing they did in 2007. The restructuring requires a shrinking of the housing sector, i.e., a reduced use of factors of production in this sector. Factors of production must be transferred to those sectors where they are most urgently demanded by consumers. The restructuring is not instantaneous but organized by entrepreneurs in a competitive process that is burdensome and takes time. In this transition period, when jobs are destroyed in the overblown sectors, GDP tends to fall. This fall in GDP is just a sign that the necessary restructuring is underway. The alternative would be to produce the amount of housing of 2007. If GDP did not fall sharply, it would mean that the wealth-destroying boom was continuing as it did in the years 2005-2007.

Conclusion

Public austerity is a necessary condition for private flourishing and a rapid recovery. The problem of Europe (and the United States) is not too much but too little austerity - or its complete absence. A fall of GDP can be an indicator that the necessary and healthy restructuring of the economy is underway.


I wonder what the private sector does with all that money it makes when it takes the resources away the public sector? Oh that's right it goes out of the country into tax havens.

04 Jan 2013 09:38 AM
Coming on a Bicycle     

stratagos: I'm still unclear where the Fark Economist Posse thinks Greece should have gotten funds - they were (and are) spending more than they take in. Is the magical Euro fairy just going to sprinkle money into the treasury?


Eh yeah it does. If you allow it to be printed. But if the Northern countries (of which I am a member) call your bluff on this and say: not gonna happen we like our pensions and savings, then this is the result.

04 Jan 2013 09:38 AM
Massa Damnata     

Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE.



Were you trying to impress in a FARK thread???

i1206.photobucket.comView Full Size

04 Jan 2013 09:39 AM
doczoidberg     

Elzar: Typical liberal farking lies  - austerity is actually working in Greece, but no one wants to see it through properly to its happy ending. A little financial pain and the libs start whining... Greece just hasn't lowered their taxes and cut spending far enough... I mean have you actually seen how many restaraunts and coffee shops they have over there? Half of the people unemployed are on the doles because they like to sip their lattes in some trendy bistro rather then put their back into a little honest work.



Libs, libs, ibs, libs....

04 Jan 2013 09:41 AM
Tyrone Slothrop     

Dadoody: Unfortunately, austerity is the necessary condition for recovery in Spain, the eurozone, and elsewhere. The reduction of government spending makes real resources available for the private sector that formerly had been absorbed by the state. Reducing government spending makes profitable new private investment projects and saves old ones from bankruptcy.


All evidence to the contrary.

04 Jan 2013 09:43 AM
Carth     

hasty ambush: NewportBarGuy: I think that's 13,783rd time the Republican Economic Model has been blown out of the water.

Yup, because massive government spending has been so successful in Japan. Well if by successful you mean continuing recessions and a National debt exceeding 200% of their GDP then yes successful.


You mean Japan the country that recently topped the healthiest country list with the highest life expectancy, Japan the third largest economy in the world with an unemployment rate of 4.1%... that Japan?

04 Jan 2013 09:46 AM
MyRandomName     
When will liberals understand... nobody is willingly lending to Greece, they can't control their spending. WHen nobody will give you a dollar, austerity is the ONLY option. I'm sure all the liberals on fark will take a nice collection out to send money themselves to Greece, it is a grand investment.

Likewise, remember how you on the left keep claiming it will take a few years to see the true effects of the Stimulus? Stimulus spending has always had short term benefits with longer term negatives. Austerity measures are the opposite, short term effects with longer term benefits. It has been less than a year since Greece actually reduced spending by a measurable degree. Less than a year. Yet you are all calling it a failure based on one year. Based on this rationale ACA and the Stimulus were also failures. They have produced little growth , little coverage, and shown no true benefit.

Austerity has worked in the past. 1930s Australia recovered faster from the worldwide depression than the US. Estonia has higher growth rates. Sweden/Canada both implemented mild austerity measures within the last decade, decreasing spending relative to GDP.

Austerity didn't get Greece into the mess. Spending got Greece into the mess. An easily avoidable tax burden by the populace got Greece into the mess. Not austerity. Austerity is literally the only option that Greece would have if in isolation. Nobody wants to lend to them. The EU is being pressured into continuing to fund money to Greece, and yet Greece still misuses the funds being given it. There are no other options. Germany is tired of it, the EU is tired of it.

It takes more than a year. Calling it a failure is about as stupid a position as one can take after a single year.

04 Jan 2013 09:47 AM
MyRandomName     

GAT_00: No shiat dumbass.  You can't deliver a bodyblow to an economic engine without consequences.  But hey, good job killing Greece and the Euro with your bullshiat.

If fiscal multipliers are small, countries can cut spending faster or raise more in taxes without much short-term damage.

So you still believe it works, you're just willing to acknowledge that every time it has been tried, the resulting GDP loss offset the spending cuts, leaving the country no better off and the people worse off.


Yes, looking at single year turns in GDP is the height of good economic policy...

God damn people, austerity measures are not meant as a 1 year fix. This is beyond stupid.

04 Jan 2013 09:49 AM
imontheinternet    [TotalFark]  

Carth: You mean Japan the country that recently topped the healthiest country list with the highest life expectancy, Japan the third largest economy in the world with an unemployment rate of 4.1%... that Japan?


Japan is proof-positive that debt-to-GDP isn't the end-all, be-all economic indicator that Austrians claim it is.  Greece's debt-to-GDP is right around 150%.  The difference is that Japan has a strong economy and control of its currency, so its interest rates stay low and its debt stays manageable, even over 200%.

04 Jan 2013 09:49 AM
CujoQuarrel     
1) They don't have any money in the bank
2) People won't loan them anymore money since it's a pretty good bet they won't ever pay it back


Therefor you get austerity forced on them by the fact they can't spend money they don't have

Pretty damn simple.

04 Jan 2013 09:52 AM
Carth     

CujoQuarrel: 1) They don't have any money in the bank
2) People won't loan them anymore money since it's a pretty good bet they won't ever pay it back


Therefor you get austerity forced on them by the fact they can't spend money they don't have

Pretty damn simple.


10 year greek bonds are down to 11% (from nearly 40% back in March). I think if they raised rates again people would loan them money.

04 Jan 2013 09:55 AM
wingnut396     

Cdr.Murdock: So, while the industrious & notoriously penny pinching Germans (much to their credit ha ha a pun, Germans don't like to buy things on credit)


You know who else is stereotyped as being notoriously penny pinching...

04 Jan 2013 09:56 AM
wingnut396     

Elzar: Typical liberal farking lies  - austerity is actually working in Greece, but no one wants to see it through properly to its happy ending. A little financial pain and the libs start whining... Greece just hasn't lowered their taxes and cut spending far enough... I mean have you actually seen how many restaraunts and coffee shops they have over there? Half of the people unemployed are on the doles because they like to sip their lattes in some trendy bistro rather then put their back into a little honest work.


I agree they need to cut spending and cut taxes. But you left out a big part of the plan. They need to increase defense spending and build 11 new warships. That will totally pay for itself I hear.

/And they really need a hit of the spice weasel
//BAM!

04 Jan 2013 09:58 AM
JonnyG     
This is all a bunch of lies. It is simple as pie to solve the world's financial problems. It just won't be seen as "fair". So, here we go on this pathway to chaos, knowing the solution is right there, but that the people who call the shots don't want to see it happen. Mostly because they'll lose their control, but also because they stand to lose their money. The super rich are the reason the global economy is failing. How is an economy expected to thrive when you keep taking and hoarding more money?

04 Jan 2013 10:00 AM
Insaniteus     
You know what happened the last time Europe tried austerity to fix its economies? THE DARK AGES! Which you probably know was a 1000-year depression. It was caused by ending all of the Roman tax-and-spend programs and was replaced by a 0% tax on the rich, with all taxes paid by the poor peasants. The peasants were in constant debt and became economic slaves to the wealthy land-owners who offered slave wages. There was no competition or capitalism, because there was no incentive for the wealthy to give up or risk anything.

So how did they escape? The Black Death. It killed 1/4 of Europe, and the surviving poor consolidated wealth. There were fewer workers, so land owners had to offer incentives to peasants to stay and not move to some other guy's fief. The increased wages and inheritance savings birthed a merchant economy, which led to a mercantile middle class. This surge of capitalism and spending created the Renaissance, and the Dark Ages were over.


So, in conclusion: Austerity bad, wealth in the hands of the poor good. Supply-side conservative ideology bad, Demand-side economics good.

04 Jan 2013 10:00 AM
MyRandomName     
To put it more succinctly. France and england are not a booming economy yet after raising taxes on the rich a year ago, needless to say taxing the rich doesn't work.

This is the same argument you liberals are making of greece. Reduced spending started less than a year ago by any significant measure.

Most countries in europe have increased spending, just like the united states... yet still in an economic quagmire.

04 Jan 2013 10:02 AM
CreativeFarkHandle     

Speaker2Animals: Grand_Moff_Joseph: In other words, Krugman was right again?

Allow me to repeat that.

Grand_Moff_Joseph: In other words, Krugman was right again?

Suck on it austerians. Suck on it.


You know who else was austerian?

04 Jan 2013 10:03 AM
bitterdust     

Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE


Your giant wall of text was based upon an invalid assumption.

Austerity as you propose it makes sense with one critical point you missed:

In order for what you say to be true, Greece must first default on its current liabilities

If the Greeks had simply defaulted, they could have avoided all this mess and been free to restart their economy at ground zero and build it back up, however, by attempting to remain in the Eurozone and attached to the Euro, they find themselves between a rock and a hard place.

The Greek economy is fubar because the markets were distorted by a multitude of problems, from unearned credit via their affiliation with the Euro, to improper tax collecting and over employment in the public sector. These structural problems are unsustainable and rather then torturing themselves they should have made a clean cut from the past, defaulted on their loans and reset their economy. As it is now, the proposed austerity you are so gung ho about is simply one more market distortion stacked upon a litany of others

04 Jan 2013 10:03 AM
tricycleracer     

Dadoody: Copy & Paste Derp


SuperPAC money is still paying for posts, huh?

04 Jan 2013 10:05 AM
Greywar     

Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE.

----snip----

[images.mises. ...


Id be far more impressed if you hadn't simply cut and pasted a talking point. Seriously do you even think for yourself? Are you even aware that Greece spends about the same on a per person level as the average EU country? Are you even aware that their deficit is primarily related to a failure to collect taxes, especially on the wealthy? Are you even aware That the "austerity" measures have crushed their GDP? Making it even harder to recover?

If the IMF had wanted to fix Greece it would have done so by forcing Greece to get real tax reform, maybe execute a few tax evaders as a example. This austerity BS? It was all for show, and to allow them to try and foist more of the eventual pain onto the Greece citizens, rather then on the wealthy. And they've managed to transfer pain from companies, onto the citizens of the EU. Its disgusting, and your mindless copy and paste drivel is an insult to anyone who uses their brains.

Come back when you can back yourself up with your own individual facts, not copy and pasted drivel.

04 Jan 2013 10:06 AM
Greywar     

bitterdust: Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE

Your giant wall of text was based upon an invalid assumption.

Austerity as you propose it makes sense with one critical point you missed:

In order for what you say to be true, Greece must first default on its current liabilities


What? And make businesses whom had made poor investment choices actually experience true risk? Thats insanity! (Sarcasm here for the sarcasm impaired)

04 Jan 2013 10:09 AM
CujoQuarrel     

Carth: CujoQuarrel: 1) They don't have any money in the bank
2) People won't loan them anymore money since it's a pretty good bet they won't ever pay it back


Therefor you get austerity forced on them by the fact they can't spend money they don't have

Pretty damn simple.

10 year greek bonds are down to 11% (from nearly 40% back in March). I think if they raised rates again people would loan them money.


Someone might. It sure won't be any of mine.
If they can find some suckers investors for their bonds then they'll prob stagger on a few more years.
Then crash

04 Jan 2013 10:09 AM
randomjsa     
The demonstrated failure of liberal ideas is NEVER to stop doing them. Don't you understand by now!?

04 Jan 2013 10:10 AM
cameroncrazy1984    [TotalFark]  

randomjsa: The demonstrated failure of liberal ideas is NEVER to stop doing them. Don't you understand by now!?


Well this makes even less sense than usual.

04 Jan 2013 10:11 AM
squeez cheez     
What I find entertaining is that the 'experts' explain with absolute certainty how they were wrong before, but are now right. Keep believing, folks!

04 Jan 2013 10:12 AM
FlippityFlap     
Dadoody sure can write fast. He wrote it all himself, off the top of head in 5 minutes. He's not a paid shill, oh no. He's just a concerned citizen.

04 Jan 2013 10:13 AM
Blink     

Dadoody: Here's a little secret: THERE NEVER WAS REAL AUSTERITY IN GREECE.



There is a flawed assumption in your reasoning. Pretty much everything you wrote boils down to "spend within your means" -- which makes perfect sense. But you assume that private companies having more money equates to benefits for all (cheaper/better projects).

There's been 100's (1000's?) of examples throughout history of private companies that don't behave well, hurt the environment, mistreat their workers (child labor, anyone?), intentionally lie, price gouge, monopolize, etc, etc, etc. The notion that capitalism will eventually weed out these many many bad apples is heinously naive.

Government's job (if done correctly) is to level the playing field. Austerity will result in the playing field being far more uneven. I'm not saying that the solution is to continue government overspending -- as you said, that doesn't make sense -- but we need to remove ourselves from the notion that putting money in the hands of the richest corporations will somehow solve all our problems. It won't.

What really needs to happen in government is that spending related to leveling the playing field needs to either stay the same or increase (education, safety regulations, scientific research, labor laws, etc). Everything else should be cut (corporate welfare, tax breaks for the wealthy, etc). Rich people and rich corporations don't need government assistance -- they can and will take care of themselves. The fact that soooo much of our governmental spending is tied to them is really the core of nearly every problem we're experiencing right now.

04 Jan 2013 10:15 AM
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