Opinion

Nicholas Wapshott

No, austerity did not work

By Nicholas Wapshott
November 7, 2013

There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity — in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms — imposed indirectly by Germany through the European Union.

In Spain, unemployment remains stubbornly high at 26 percent; half of those age 25 and under are still without jobs. More than half those age 25 and under in Greece and Croatia are also unemployed. In Europe, only in Germany and Austria is youth unemployment under 10 percent. Greece and Spain lead the sorry list of European countries with more than 25 percent unemployed, and 13 more are enduring joblessness at more than 10 percent.

In Spain, where economic growth is occurring only in the export sector, there is little suggestion the economy has been genuinely fixed by this protracted austerity regime. As one analyst put it, “Domestic demand is still contracting and against that backdrop it’s hard to see a strong and sustained recovery.”

Feeble growth is not enough to create jobs and the labor regulation reforms that have accompanied austerity mean growth now has to be at somewhere between 1 and 1.5 percent before new jobs are created. To spur on job growth, labor-intensive industries like construction need to expand. Yet there is little sign of that happening.

In Britain, where the Conservative government imposed austerity measures ostensibly to ward off a sovereign debt crisis and a run on the pound — while shrinking the state sector, in accord with its neo-Thatcherite beliefs — they are popping champagne to celebrate achieving a quarterly growth rate of 0.8 percent. As late as this spring, Britain expected to fall back into recession again — a triple-dip it appears to have narrowly avoided.

But Britain’s annual growth rate of 1.5 percent has been achieved because strict austerity has been surreptitiously loosened. In a change of policy by the new bold governor of the Bank of England, Mark Carney, interest rates are being kept artificially low until unemployment falls below 7 percent.

The lackluster recovery is also being fueled by a sly government mortgage subsidy to help first-time home buyers, and encourage house builders. Yet this courts the sort of artificial boom in home prices that brought the world economy to its knees in 2008.

Overall, after five years of austerity, the euro zone, driven by Germany’s fierce adherence to fiscal continence that it has inflicted on the rest of the European Union, still leaves 11 countries in negative growth, including Italy, Portugal, Netherlands, Spain and Ireland. The only nations who enjoy more than 2 percent growth are special-case small countries: Latvia (which has the advantage of being outside the euro), Lithuania, Malta and Luxembourg. Even Germany, the traditional powerhouse of European growth and the champion of worldwide austerity, can only muster growth of 0.5 percent per annum this year.

The claims that austerity has worked seem extravagant in light of the hard figures. Some politicians facing elections are talking up signs of life in their national economies to boost business confidence — in the belief that the wish is the father of the deed.

There is a sense, too, that it is impossible for European consumers to hold their breath for so long without respite. Patience is running out with an economic experiment that, so far, has failed to provide a sound remedy. Even if an economy is persistently punished, it comes up for air eventually.

In Europe, however, five years of austerity show little signs of reward for all the punishment inflicted. Back in the aftermath of the 2008 crash, it was widely suggested that two things were likely: there would be an L-shaped recovery; and that partial recovery would be jobless. There was talk of “a new normal” where national economies would revert to an earlier, lower size and resume growth in a different and shallower trajectory.

Surely, it was thought in the spring of 2009, the world’s leaders wouldn’t be so foolhardy as to institutionalize low growth and high unemployment by applying deflationary policies as if we were suffering not from a collapse in business confidence but from too fast growth and rising prices. Yet what appeared then as unnecessary pessimism appears now to be prescient wisdom.

The figures again bear out that gloomy prognostication. The European Commission says the euro zone as a whole will decline by 0.4 percent this year, year on year, though they predict 1.1 percent next year. Output in the euro zone, however, is still about 3 percent lower than in 2008.

According to the International Monetary Fund, Britain’s economy will grow 1.4 percent this year and 1.9 the next — though it is still 2.5 percent smaller than it was in early 2008. The British employers’ organization, the Confederation of British Industry, is even more bullish. It is saying Britain’s economy will soar to 2.4 percent growth next year.

But even if the modest European recovery is sustained, it remains fickle, capable of being blown off course by temporary setbacks such as an American federal government shutdown. As the U.S. Treasury has pointed out, even the slender European recovery has taken place on the back of America’s by comparison expansive — not to say it is expansive — economic policies.

Germany’s postwar economic model has always been export-led. In the last five years Berlin has defended the very existence of the euro because it allows German exports to be priced comparatively cheaply, far cheaper than if they had continued to use the deutsche mark — which reflected the true strength of the German economy.

Added to this, in the last five years Germany has browbeaten its European partners into adopting austerity rather than allowing them to borrow and grow their way out of the Great Recession. Only Britain, outside the euro, has largely evaded Germany’s beggar-thy-neighbor policies.

It is impossible to predict the outcome of a road not taken. So it is unknown whether, if the Europeans had not reneged on the deal struck after the 2008 crash at the hurriedly convened Washington G20 summit to ensure “the action of one country does not come at the expense of others or the stability of the system as a whole,” we would now be in a more prosperous world with millions more in work.

It does, however, seem likely.

It is not hard, however, to deduce where we would be now if America had not elected Barack Obama and instead had President John McCain, and later President Mitt Romney. These Republicans — goaded by their Tea Party friends — might have imposed harsh austerity measures on America to pay down the national debt more quickly and sharply reduce the size of government.

We would still be in a deep, perhaps deepening recession. And instead of the glimmer of light the Europeans now see on the horizon, they, too, would be struggling in a slump not seen since 85 years ago — when President Herbert Hoover blithely looked on as the world economy suddenly slid into a 10-year slump.

Nicholas Wapshott is the author of Ronald Reagan and Margaret Thatcher: A Political Marriage, and Keynes Hayek: The Clash That Defined Modern Economics. Read extracts here.

 

PHOTO (TOP):  People enter a government-run employment office in Madrid, October 24, 2013. REUTERS/Sergio Perez

PHOTO (INSERT): Italian policemen attempt to stop Alcoa workers as they protest against their dismissals from employment in front of the Ministry of Employment building in Rome, September 10, 2012. REUTERS/Tony Gentile

Comments
30 comments so far | RSS Comments RSS

I FIND IT HARD TO BELIEVE THIS STORY, WE ARE ON BORROWED TIME

Posted by innismor | Report as abusive
 

Not going into debt in itself will not make you rich. The loser nations have to build export industries and the trade rules must recognize that they need to take the steps to that. Right now the rules do not allow such actions.

Also trade blocks need bankruptcy courts with fixed rules (laws). In Europe, Germany (the biggest exporter) decides each as it feels at the moment and be sure Germany wants to get paid even if it kills. If there was a proper bankruptcy court, Germany will decide not to sell to those who cannot pay. China may also think about it.

The loser nations do not seem to see the need to spend to get export type industries.

Posted by Samrch | Report as abusive
 

.

” The claims that austerity has worked seem extravagant in light of the hard figures. ”

>>>>>>>>>>> The claims that the US FED printing have worked seem ever more extravagant in light of the hard figures.

Lets look at the US

Unemployment INCREASE
Bubble in housing prices INCREASE
Bubble in stock market INCREASE
Part time workers INCREASE

Full time employment DECREASE
Earned Income DECREASE

Food stamps INCREASE
Disability INCREASE.
Student Loan Debt and failure INCREASE
Car loan and failure INCREASE
Fed Gov programs INCREASE

— The US as or by Detroit, CA etc. have shown individually State by State will in fact suffer austerity at some point, as there is no other answer.

the fools like this author prefer not only
putting off the inevitable, by ignoring austerity,
but making it worse, by printing without any immediate repercussion.

– There is nearly no one that believes austerity will
not occur in the US as the FED will have to stop printing at some point, and then imagine if they try to not only stop printing, but unwind.

. The author is either naïve or intentionally misleading. Well, I vote for both, just my
opinion, but what a maroon.

.

Posted by Alexaisback | Report as abusive
 

.

Would you rather fall off a 50 foot cliff and
risk that and possibly your children break a leg,

Or push your children in a cart to the peak of
a 100 foot cliff, and then off, where you stay behind
and are safe, but your children risk breaking
both legs and both arms.

.

this is what is occurring

Our children must pay for our deficit
Our children must pay for our healthcare
Our children must pay for our retirement and medicare

Our children who are suffering the worst unemployment
and no retirement, and student loans greater than
ever imagined in history

will somehow, be able to pay for us.

.

This author seems to recommend pushing further
up the cliff, and our children breaking
both legs and both arms. While he will remain
behind comfortable.

.

There is an obvious need to curtail spending

but there are many that would rather they benefit
while our children suffer, that is where this author
seems to be.

What a shame.

- Frankly, it is rather disgusting, but it is what it is.

.

Posted by Alexaisback | Report as abusive
 

Condemning austerity because it hasn’t brought back jobs in the last 5 years in favor of government overspending during the previous 40 years is nothing but psycho-babble.

Posted by vabonp | Report as abusive
 

Austerity is the buzz word from the world banks to “get your people under control” then we will loan you more money to gamble your country away.

Posted by 2Borknot2B | Report as abusive
 

Alexaisback, I wonder if winning WWII was worth the deficit and debt incurred. If you acknowledge that it was, then you have to back away from the Tea-Party style absolutes and deal with measured shades of gray.

Just twelve years ago the US was in a budget surplus, when Mr Bush (PBUH) pushed through tax cuts just before starting on several very expensive, unpaid-for wars on “Terror” Iraq, and Afghanistan. Realistically, a deficit incurred for noble purposes is a deficit still; although President Lyndon Johnson made sure that the Vietnam war was “pay as you go” through an income tax surcharge. So it must be acknowledged that reducing or ending deficits can come from tax increases as well as spending reductions. Mr Wapshot chooses to study those shades of gray when many economists choose other things to study instead of the actual situation.

Posted by PhilipWilliams | Report as abusive
 

.

Philip, both you and the author make a fundamental error.

” And instead of the glimmer of light the Europeans now see on the horizon, they, too, would be struggling in a slump not seen since 85 years ago ”

You are of course aware:

Greek youth unemployment currently > 57 %
Spain youth unemployment currently > 56 %
Italy youth unemployment currently > 40 %
France youth unemployment currently > 26 %

There is no glimmer of light in Europe. What will you do when 50 % of children are unemployed for 5 years, do you think they will have job skills and education and ultimately get a job, or is it more likely they are to remain on the dole for a lifetime ?

Indeed matters are progressively getting worse in Europe and the US. And no amount of spending will cure it, it is merely a bandaid for short term relief, for at some point you will have to stop the spending, and unwind the damages that were increased or exacerbated due to the spending.

Of course reducing or ending deficits can come from tax increases. There is austerity and there is tax increase; and then there is bankruptcy.

Of course at some point as France has learned, there is a limit to tax increase. You may want to read up a bit on how the wealthy in France are leaving, and the less wealthy, the truckers are farmers are protesting, and Hollande was recently forced to pull back.

So at the end of the day, when you run out of tax increases, there is austerity and then bankruptcy.

You may saddle our children with debt, you may saddle them with the burden of paying our health care. How fair is that ? And how do you expect them to pay it ?

Detroit has proven in the US there is one way out, austerity and then bankruptcy. They are not alone, and many will follow; both in the US and Europe. Greece has certainly proven that, it is inevitable in Greece.

Detroit:
•48% of Detroit children under 18 live below the federal poverty level
•43% unemployment rate for African American youth age 16-19
•Highest homeless rate (216 per 10,000) of any U.S. urban area

If you disagree, Please do explain how all of this spending has helped these children.

And then tell me when the spending will stop, what is the limit ?

And then please explain what will happen when the spending stops ?

Are these children to fall off a 50 foot cliff,

or will they fall off a 100 foot cliff ?

. When bankruptcy is declared in Detroit, and when the pensions are cut in 1/2, do you think in hindsight some might say, you know what, maybe we should have curtailed spending ?

.

Posted by Alexaisback | Report as abusive
 

..

P.S. in the US – recent data (today).

.

The Participation Rate (The labor force as a percent of the civilian noninstitutional population) fell to 62.8%, smashing the previous low (tied last month) of 63.2% dating back to 1979.

= Please remind me again, how there is light at the end of the tunnel, from all this printing and spending.

== And then please do let me know, when the spending stops, what will occur ?

..

Posted by Alexaisback | Report as abusive
 

.

I will leave you with a very simple chart,

and then a very simple quote:

CHART

http://dareconomics.wordpress.com/2013/1 1/07/around-the-globe-11-07-2013/labor-f orce-participation-rate-vs-fed-assets/#m ain

Please do look at the chart and tell me how FED
helped employment.

QUOTE:

According to Data Driven Detroit – Detroit unemployment rate for youth is 59%.

.

Posted by Alexaisback | Report as abusive
 

not one of them will ever be brought to book. And the plebs will stay the plebs. So can the plebs shutup now?

Posted by Willvp | Report as abusive
 

The difficulty with choosing countries like Spain and Greece as one’s examples is that they are precisely the countries where a significant number of people believe that they can “defeat austerity” (by which too many mean “continue to live beyond our means”) simply by rioting, demonstrating, and otherwise refusing to co-operate. The Schengen rules mean that there is nothing preventing them from working in places like Germany, should they choose to find work. They choose not to. One cannot really condemn “asuterity” on the basis of such countries.

Posted by Ian_Kemmish | Report as abusive
 

The current economic problems were caused by countries living beyond their means, not living within them. Now that they’re dependent on other peoples’ money, forcing them to go cold turkey may appear cruel but but enabling the dependency which caused their problems in the first place is the true cruelty.

Posted by ToshiroMifune | Report as abusive
 

Deficit spending, stimulus is just a short term fix and not a long term cure. Spending money you don’t have only delays the pain and leaves the problem to the next generation.

Posted by smit1610 | Report as abusive
 

“There was talk of “a new normal” where national economies would revert to an earlier, lower size and resume growth in a different and shallower trajectory.” Is it not increasingly clear that this is what is happening?

We live in an emerging reality in which fewer and fewer people are needed to do what must be done and yet there are ever more people competing for those fewer jobs. OF COURSE unemployment is rising!

The median standard of living in the world is the highest it has ever been, and so is dissatisfaction. Those parts of the world with the greatest population and least prosperity are breeding at a rate than can only insure increrasing desperation and conflict with their neighbors. “God will provide” is no substitute for a rational and sustainable economic plan.

The problem is one anyone that looks in a mirror can see. The expectations of “we, the people” have become unsustainable. In a time when individuals AND governments increasingly refuse to live within their means, is it REALLY a surprise that the future looks ever darker?

All we are doing is learing that we can hold our breath until we turn blue and no one else cares. We don’t get a trophy for just showing up. Nothing will change until we GROW UP and move back into reality.

Posted by OneOfTheSheep | Report as abusive
 

German chancellor Brüning, who introduced austerity after the 1929 stock market crash, is now credited with having caused the German depression of the 1930s which led to Hitler. His present-day successor Merkel is repeating the same mistake. Good luck with that!

Posted by pbgd | Report as abusive
 

@Ian_Kemmish – The problem is that moving from Greece or Spain to Germany is not as easy as moving from Arkansas to Alabama. Learning another language well enough to be employable in another country in the EU is not as easy as driving across a state border in the US>

While I hail the EU for finding ways to prevent the wars that devastated the world in the 20th century, I’ll admit that their economic visions are facile & the current unemployment numbers prove it. Still, I consider the current EU recession to be an improvement over the land wars of the past. For that, the Eu has been a success. As for economic utopia – I agree, the world today is a far way off.

@alexisisback – you presume that everyone has children or that they care about their progeny after they are dead. Get real!

@OOTS – your points are all well taken. In fact I agree. So now what?

Posted by euro-yank | Report as abusive
 

@euro-yank,

I really can’t answer your question because I don’t see any way to change the fact that, in the United States, we turn the education of our children over to a hopelessly unionized “system” we then pay more and more for to get less and less qualified “citizens” that question the very legitimacy of hard work, persistence, patience, achievement, and profit.

Unless and until governments everywhere put something in the water or food that stops irresponsible reproduction, population pressures on available resources, some of which are truly NOT renewable (until we are profitably mining asteroids).

No third world “leader” that is honest in telling billions of people that they and their children and their children’s children will NEVER enjoy the life they tune in to every day on TV can retain their position and influence. In “advanced societies” there is never the will to stop feeding the pigeons when the pigeons can talk.

Posted by OneOfTheSheep | Report as abusive
 

This article is absurd. Austerity did not work, because it has not been given a chance. It took decades to get into the situation they are now in. A couple years of trying to correct it will not turn that around.

Every country in the world is facing the same problem. Politicians have found that they can repeatedly be voted into office if they sell out to private interest groups. Until ALL that damage in undone, things will not get better. So much has been borrowed from the future that, until it is paid off, things will be tight.

Not solving the problems that put you into the problem in the first place is simply not an option.

Posted by Dragos111 | Report as abusive
 

Austerity not only did not work, it was never intended to work, in the sense of aiding an economic recovery. It was never anything more than a thinly veiled excuse to transfer an even larger share of public funds to our aristocracy. It’s self evident that an economy driven largely by consumption can only recover if more money is in the hands of consumers.

Posted by brianpforbes | Report as abusive
 

@OOTS – Unless you are a closet Republican – let’s meet and NOT have babies!

Posted by euro-yank | Report as abusive
 

Quote:”Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over.”

1/10th of 1 percent is “slump-busting”??

Could economists’ standards for economic recovery possibly be any lower??

I guess the 50% of all young Spaniards who are jobless should buy out the wine stores and celebrate in the streets!

Posted by UrDrighten | Report as abusive
 

@Alexaisback ~

The Fed doesn’t print money. The Fed loans dollar-denominated *credit* to the US government. US Treasury instruments serve as collateral. WE THE PEOPLE engage in labor to earn “money” which is then taxed to “pay off” the “loan”, *at interest*!

The problem is that an infinite amount of bank credit is being used to purchase a very finite -and precious- amount of labor.

In such a circumstance, no amount of bank-credit-backed government spending will ever bring long-term prosperity to the laboring masses. The banks will keep lending, and although we may have more food and material goods, we will never be able to work off the credit debt.

No amount of government austerity will ever bring long-term prosperity to the laboring masses, either. The banks will cut back on lending credit, while we labor to pay off existing loans at higher rates of taxation while going without food, housing, and medical care…and, in many cases also without jobs. We might pay off the bank, but we will be destitute doing so.

The banks have been getting “something for nothing” ever since they invented fractional reserve banking and fiat money. It’s time for the working class to do the right thing and give the banks what they gave us – nothing!

If libertarians really want liberty, they should do away with the banks, not the government!

Posted by UrDrighten | Report as abusive
 

.

A. IN the US The food-stamp program had more than 70 percent increase in recipients since 2008.— to $80 billion last year.

So tell me again how the Fed printing (said simply like the word austerity is utilized)) is working or at least can be shown to be significantly better then austerity.

B. Unemployment, Disability etc. etc. are these indications the printing is helping anything ?

C. But you argue look at housing look at the stock market, I think we all know these act in bubbles, it may maintain the status quo for a while, but it must end at some point. As well, interest rates must also rise at some point. So what will happen then ? We all know the answer.

- To write an article proclaiming that austerity does not work when 40 years in the making have not been cured in 3 years, is simply ridiculous and naïve.

- To write an article proclaiming printing works, when all evidence is to the contrary, is equally ridiculous and naïve.

= Of course the banks have been getting something for nothing, they get a whole lot of something for nothing. It is a disgrace.

Austerity and bankruptcy are ultimately the only direction. You see it in Greece, you see it in Detroit, it will happen, it is only a matter of time.

.

Posted by Alexaisback | Report as abusive
 

.

When does everyone realize AUSTERITY IS SIMPLY ANOTHER
WORD FOR RESPONSIBILITY ?

.

A few recent quotes:

* ” Refinancing struggling homeowners “only pushes the problem forward without finding long-lasting solutions because in the end, the debts only grow while the borrower’s capacity to repay doesn’t improve,” said

Carlos Baños,

chairman of AFES, an association that advises mortgage holders who have trouble paying their debts. ”

* ” Mr. Díaz said he has few good options. “I realized paying the mortgage was like having bread for today and going hungry tomorrow.” ”

————— that is the point, and soon everyone will realize it. unfortunately we have articles like this one proclaiming ” Austerity does not work” , from naïve authors.

Without austerity, which is really simply another word for responsibility, the entire thing falls a part.

—————————

. * Quotes from Spain’s Banks Boost Books by Refinancing Loans to Homeowners – Wall Street Journal – Nov 6 2013.

Posted by Alexaisback | Report as abusive
 

Why do you all take Wapshott seriously? He just looks for any hot topic and writes the most left leaning tripe he can think of about it. I seriously doubt that he actually believes what he writes. He just gets paid for it. And no, I did not read the article. I would not waste my time. But Reuters has some interesting commenters.

Posted by tmc | Report as abusive
 

@UrDrighten,

“The problem is that an infinite amount of bank credit is being used to purchase a very finite -and precious- amount of labor.” I think your world view blinds you to irrefutable fact.

When credit/money is “infinite” and labor is limited, the median price of labor goes up. That’s not happening. At present available labor here in the U.S. far exceeds demand. Oh, if you happen to have those certain skills and experience that are rapidly automating task after task, you’ll be able to name your own price. For the average job seeker, that’s not the case.

For the most part education can’t help. When you’re looking for employment,, you pretty much play with the marbles you have. In short supply is competence in math that few have plus “hands on” experience” writing software (on the front side) or initiating and monitoring programs that run automated machinery and process. For the most part, schools transfer obsolete skills on obsolete equipment with questionable proficiency.

“…no amount of…government spending will ever bring long-term prosperity to the laboring masses.” That’s true. “The banks will keep lending, and although we may have more food and material goods, we will never be able to work off the credit debt.” Entirely different problem.

If we as individuals choose to live within our means, we will not waste credit we may someday need in emergency to buy more “food and material goods” we may want but do not need. The Devil does NOT “make you do it”. Look around you. More and more grow to so-called chronological maturity having NEVER heard the word NO! No wonder we can’t say it to ourselves!

Yours is the mentality that today blames the driver who exits their running vehicle to take a whiz rather than the young antisocial opportunist that jumps in it and goes joy riding or takes it to a chop shop. Making credit available with “easy payments” forces no one to buy stuff they can’t afford and do not need with money they have yet to earn.

The quality of life in these United States AND across the world has advanced at a greater rate in the last seventy-five years than in all previous recorded history. A majority exhibit an entitlement mentality of ever-increasing dissatisfaction. Few have achieved contentment (or would recognize the path that leads there). The single possible conclusion is that, taken collectively, man is unreasonable, illogical and, above all, greedy.

Posted by OneOfTheSheep | Report as abusive
 

@euro-yank,

LOL! Thanks for the compliment, but my blushing bride of almost fifty years (whom I adore) would likely object.

We’re both only children that long ago agreed that peace, quiet, OUR stuff, and discretionary income offered a higher quality of life than rug rats. “The pill” was new, and so was the idea of choice. More than a few disapproved.

My only regret follolwing a vasectomy at age 24 was that I had waited so long. Incomparable peace of mind is mutual when abstinence is illogical.

We’ve both raced sports cars and are pilots…true partners in life. No regrets whatsoever. We have done as we pleased, and contentment (if not riches) is ours. Don’t compromise your beliefs…you, too will get there!

It took me more years than I prefer to admit to realize that neither major party has a coherent platform consistent with life’s challenges. Conservative judges have their pro-life anti-consumer tendencies. Liberal ones take their compassion to the limits of idiocy. Each conspicuously lack common sense.

Commerce forgets it needs a middle class to pay for a society worth living in, and takes undue advantage in cell phone, banking and Cable/etc. contracts. Our government unionizes and then exploits us, judging success only by the number employed by their agency and it’s budget. Our schools do the same.

As a nation our economic system relies on our “Horatio Algers” both big and small, yet our educational system only discourages them. Our underclass grows faster than our economy. Even as America remains a “work in progress, no preferable alternative is yet evident.

Posted by OneOfTheSheep | Report as abusive
 

It is very difficult to know what to say to this article.
Especially what it states about the US, kicking the can, inflating bubbles after bubbles, putting the head in the sand, etc…
Of course austerity does not work since it could only work if the true, quantitative growth returned.
But the same is true to stimulus, or “loosening”.
The “growth figures” the writer is so happy about are simple games with numbers, or the usual statistics boosting tricks politicians and economists apply to paint a rosy picture.
Most people already know and understand that the “king is without his clothes”, there is no such thing as constant quantitative growth, this illusion, dream is over.
The longer we pretend we have a solution for it, that we can fix it and growth will return, the more financial and human resources we waste until everything collapses and we have to start rebuilding.
We live in a vast natural system with very specific, strict, unbending laws, we have been cheating the system and have been found out.
There are no appeals, backdoors, protectionism in the system we exist in, either we learn and adapt or we pay the price.

Posted by ZGHerm | Report as abusive
 

Don’t be stupid. Drawing correlations between two events (e.g. QE and unemployment) in what is clearly a multivariate relationship involving issues like the global economy and government dysfunction is a sure way to drawing the wrong conclusions and making yourself look like a zealot.

Posted by VicL | Report as abusive
 

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