European Central Bank Economists Find That Austerity Works (bankrupt, 2013, credit)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Its like anything when you need to cut back then you cut back. but austerity always seemed strange name when most actually spent more than year before just cut growth in government spending. Its seems to have worked for economies that stuck to their budget of cuts as far as rising debt and promoting growth.
Its like anything when you need to cut back then you cut back. but austerity always seemed strange name when most actually spent more than year before just cut growth in government spending. Its seems to have worked for economies that stuck to their budget of cuts as far as rising debt and promoting growth.
Macroeconomics doesn't work like personal finance.
When you need to cut back, by all means cut back. Do what's right for you.
When Greece needed to grow its economy, putting 25% of their workforce out of work isn't going to do anything but make the problem worse. Greece needed spending and taxation. Get everyone spending and then government takes a SLIGHTLY larger nibble. Grinding the economy to a halt with massive unemployment helps nobody. Doesn't help the creditors. Doesn't help the Greeks. Doesn't help anyone.
Austerity began in earnest in Greece in 2010. Just look at what happened to their economy from 2010 onwards. That's proof that austerity doesn't work. Greece doesn't need MORE austerity. That's like believing that bloodletting cures disease -- and then insisting that more bloodletting is just the trick for a patient who didn't respond to the first round of bleeding.
What the bankers did to Greece falls under "you break it, you buy it."
Macroeconomics doesn't work like personal finance.
When you need to cut back, by all means cut back. Do what's right for you.
When Greece needed to grow its economy, putting 25% of their workforce out of work isn't going to do anything but make the problem worse. Greece needed spending and taxation. Get everyone spending and then government takes a SLIGHTLY larger nibble. Grinding the economy to a halt with massive unemployment helps nobody. Doesn't help the creditors. Doesn't help the Greeks. Doesn't help anyone.
Austerity began in earnest in Greece in 2010. Just look at what happened to their economy from 2010 onwards. That's proof that austerity doesn't work. Greece doesn't need MORE austerity. That's like believing that bloodletting cures disease -- and then insisting that more bloodletting is just the trick for a patient who didn't respond to the first round of bleeding.
What the bankers did to Greece falls under "you break it, you buy it."
Austerity worked in Ireland and is working in Italy, too. Poland and Finland have done well by being careful with their money.
From 2001 to 2010, Greece was spending too much money. It had too much aggregate demand and state revenue never rose to meet it. It was massive government spending and transfer payments that got them into this situation. That and ever more rigid labor markets and rules.
Raising aggregate demand works OK when you have your own currency and can monetize the resulting deficits, much like the US did. When you have to get the currency from elsewhere to plug the holes it's more like a rush from drugs that can only be sustained by more and more use. Austerity could only be avoided with more and more spending and more and more net borrowing. No reasonable lender would continue to feed money into a bottomless pit.
As it is, private lenders have already written off billions in Greek loans in the first bailout.
If Greece has spent the borrowed money wisely, a tall order given the huge sums borrowed, it would have something to show for it by now. But it didn't. It gave a 13th pension payment every year, lowered retirement ages and increased public employment and wages. None of this was investment. All of it was paying more for the same output. That's never smart.
Austerity worked in Ireland and is working in Italy, too. Poland and Finland have done well by being careful with their money.
Actually, when you correct all the data and methodological errors in Reinhart & Rogoff, their work shows that austerity has never worked anywhere. It's just a pointless dead end. "True believers" of course will never be convinced of that, no matter how preponderant the evidence for it becomes. They have their story, and they are sticking to it.
Iceland borrowed heavily from the IMF, with strings attached. The country of some 300,000 people took 2.7 billion euros from the IMF in Nov 2008, along with 3.8 billion euros from Nordic central banks. Further bailout funding came later on as well. Their version of austerity by the way was built around tax increases and capital freezes for the wealthy and protection of national health and welfare programs for the regular Magnus and Maria.
That was for it's sovereign debt. Iceland let their banks default.
Iceland didn't bail out the bankers.
That was for it's sovereign debt. Iceland let their banks default. Iceland didn't bail out the bankers.
Nobody in the world was dependent upon the continued existence of the private banks of teeny tiny Iceland. They could and did try and convict their heads of banks (and heads of state) without any worries over repercussions or blowback at all. Still, all of Iceland's 300,000 residents did benefit from bailouts by other nations of all those larger banks that made up the global financial system. Not to mention the billions of euros worth of emergency bailout assistance extended to Iceland itself by the IMF and consortiums of Nordic banks. The notion that Iceland was some sort of example and champion of austerity in action is simply a long, long way from the truth.
Actually, when you correct all the data and methodological errors in Reinhart & Rogoff, their work shows that austerity has never worked anywhere. It's just a pointless dead end. "True believers" of course will never be convinced of that, no matter how preponderant the evidence for it becomes. They have their story, and they are sticking to it.
Actually if you look at the economies of Ireland, Germany, Poland, etc. and the improving fiscal situation of Italy you would see that austerity has worked everywhere. If you look at the profligacy of Greece you can see that stimulation or pump priming doesn't.
Greece didn't get in its predicament by spending money wisely. It got there by spending like a drunken sailor.
But they never try austerity... they say they are but if you look at their budgets all they cut is the rate of spending increases, but not the spending itself.
If by 'worked' you mean prolonged high unemployment, then yes it worked. They need to have regulations and oversight over their spending ensuring efficient and effective use of public funds. The red tape needs to be eliminated to create more business friendly environment.
What a surprise -- the European Central Bank's study says austerity works. In other news, the Supreme Soviet Economic Council says that communism works. And the New Republic says that trickle-down economics works. Leprechauns also insist that "end of the rainbow economics" works. And the Yap Islanders swear up and down that big horkin' stone coin economics works.
When austerity works on something other than a spreadsheet (like, say, Greece), I'll take notice. But in the meantime it has all the hallmarks of another Peter Pan system. Great on paper. Ruinous in practice.
^^^
Quote:
Originally Posted by Major Barbara
It isn't even great on paper. The whole austerity analysis that so mesmerized EU leaders back in 2010 (Reinhart and Rogoff) has -- upon further review -- fallen apart. In part because of obvious data omissions, questionable methods of weighting, and elementary coding errors. The whole thing today is a wreck at the side of the road with EU red-facers left to explain how in the world they could so easily have fallen for all this.
^^^
Quote:
Originally Posted by burgler09
Seeing as the Europe's economy is even more of a failure than the United State's... I have a hard time taking anything they say seriously.
Well, said to all three posters!!!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
