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c1ue
07-07-10, 01:19 PM
http://www.economicpopulist.org/content/austerity-and-class-war



Worldwide Austerity

It isn't just American politicians that suddenly care about budget deficits. European politicians (http://www.nytimes.com/2010/06/28/business/global/28summit.html?ref=business) do to.

The United States, however, joined other countries at the summit meeting, which was met by protests and several hundred arrests, by endorsing a goal of cutting government deficits in half by 2013 and stabilizing the ratio of public debt to gross domestic product by 2016.
The ECB is about to cut off credit despite the fact that Spain's banking system (http://www.economicpopulist.org/content/spanish-banks-staring-down-barrel-insolvency) is hanging on by a thread. A failure of Spain's banking system would have catastrophic results.
http://img46.imageshack.us/img46/1204/m3euro.jpg
The politicians never gave deficits a care when they were busy bailing out the multinational banks and hedge fund assets so important to the world's wealthy. By coincidence, the G20 couldn't agree to a global bank tax.

Now that the bankers have been saved, and the wealthy have been taken care of, the bill must be paid for those bailouts. That means the working class must endure (http://www.inthesetimes.com/working/entry/6131/global_labor_congress_pushes_back_against_austerit y/) lower pay, higher taxes, and fewer government services.

From an economic perspective, austerity makes no sense if your objective is to boost the economy. Food stamps and unemployment extensions have the most bang for the buck, while tax cuts that benefit the wealthy have the least. Yet the Senate Republicans want to do the most inefficient of the two.
http://img820.imageshack.us/img820/693/stimulus.jpg
Whether someone agrees with Keynesian economics or not, only a moron would deny that cutting wages, and services, while increasing regressive taxes in middle of a depression won't hurt economic growth. What's more, indicators are increasingly pointing towards deflation and a double-dip.
http://img64.imageshack.us/img64/5295/ecri.jpg

The Economic Cycle Research Institute(ECRI) Weekly Indicators is now equal to the early recession levels, and dropping. Even in the Federal Reserve there is a recognition that the economic and monetary indicators point to deep trouble (http://www.telegraph.co.uk/finance/economics/7852945/Ben-Bernanke-needs-fresh-monetary-blitz-as-US-recovery-falters.html).

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed's balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.
"We're heading towards a double-dip recession," said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. "The party is over from fiscal support. These hard-money men are fighting the last war: they don't recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again."
http://img215.imageshack.us/img215/264/sgsm3.gif

It's no longer a joke - we are staring into the face of deflation (http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plunges-at-1930s-pace-as-Obama-eyes-fresh-stimulus.html). Austerity at this time would ensure it happens.

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
"Itís frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said...
"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesnít act, a double-dip recession is a virtual certainty," he said.
Leading this double-dip is the housing sector (http://www.economist.com/node/16438759).
What most people fail to remember from the Long Depression is that deflation isn't a scary thing to certain upper-class segments of society. Deflation is preferable to other alternatives.

The Senate Republicans who filibustered the unemployment extensions are right to be concerned about the deficits. They are alarming and unsustainable. They aren't evil for being concerned.

The problem is that the Republicans want the working class to pay the price for something the wealthy benefited from. It's called class warfare, and you are losing.


Not wrong about austerity, but quite wrong in ascribing it all to the Republicans.

Thread split because of 2 entirely different issues.