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Thread: Krugman demolishes the pro-austerity arguments by listing the facts.

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    Default Krugman demolishes the pro-austerity arguments by listing the facts.

    The suicidal pro-austerity mania sweeping the globe rests its entire case on six locally-specific incidents involving mainly small economies which enjoyed recovery despite a major austerity programme.

    Krugman looks at the six and spots that in all of the cases, there was a massive special, local circumstance that cannot apply to the current world.

    Fiscal Fantasies - Paul Krugman Blog - NYTimes.com

    We are one of these example, as it happens: 1987-89 - our boom was thanks to a huge devaluation rather than the McSharry cuts frenzy. Verdict: Of no relevance to current global situation.

    The rest:

    Canada 1994-1998: the austerity programme of that time took place in a boom environment, as interest rates were falling. There is no global boom and global interest rates cannot fall as they're effectively at zero. Verdict: Of no relevance to current global situation.

    Denmark 1982-86: interest rates were falling by 10 % points! I repeat for the uninformed: this cannot happen now unless we get banks to PAY you 9% to borrow money. as interest rates were falling. Verdict: Of no relevance to current global situation.

    Finland and Sweden 1992-2000: in this period the small nations (next to an oil giant, replete with free-spending vulgar millionaires) developed a huge current account surplus (12% in Finland's case). The world can only manage this if we make contact with aliens and somehow persuade them to buy lots of our stuff. Verdict: Of no relevance to current global situation.

    So there you have them: the exhaustive list of all the austerity programmes in economic history that did not coincide with massive economic collapses. Every other austerity programme ever came with a massive bust of misery and destruction of wealth and productive capacity lying idle and falling apart.

    And as Krugman shows, the handful that got lucky were all down to a stroke of locally-applicable good fortune that just cannot apply today, in this planet.
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

    You have to pity the kind of people who buy into conspiracy theories. I find the following to be the saddest words on the internet: "Re: connection between Bilderberg puppet lady gaga and viral outbreak in ukraine "

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    May I suggest you go and read this article from the Sindo.

    "The estimated cost of interest on the national debt will be approximately €5.75bn in 2011 and €7.5bn in 2013. Based on these estimates and the projections for tax revenue for the years to 2014 as set out in budget 2010, it is forecast that the proportion of tax revenue that will be accounted for by interest payments on the national debt will amount to 17.5 per cent in 2011 and 20 per cent in 2013," he said.
    Our nation will crumble as debt mountain rises - Analysis, Opinion - Independent.ie
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    We were close to touching this on another thread when it was suggested that we needed some means of flushing out the debt and resetting our economy as a n alternative to mass austerity. I would hope that the more knowledgeable amongst us could elaborate on this idea, assess its suitability as a way forward, and perhaps speculate on how it might work.
    If once the people become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.

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    So Haughy/mcsharry turned around our economy but not by cuts but by devaluation?

    To back up his case, he must show how devaluation alone has always turned around economies as messed up as our one in 1987.

    Foolish article by him.

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    Quote Originally Posted by toughbutfair View Post
    So Haughy/mcsharry turned around our economy but not by cuts but by devaluation?

    To back up his case, he must show how devaluation alone has always turned around economies as messed up as our one in 1987.

    Foolish article by him.
    Hahahaha! Somebody's being foolish and utterly wrong here: it's either the Nobel Prize-winning economist or the anonymous rightwing internet poster.

    That's a tough one!

    He doesn't have to "defend" the idea that austerity is useless: the very notion that austerity is conducive to an expansion in economic activity is itself ridiculous!

    Austerity, by its nature, is the act of reducing the availability of the means of exchange necessary for economic activity to take place.

    Let me rephrase TBF's question to highlight how silly it is:

    "Where does Krugman provide any proof that cutting down on calorie intake leads to reduced obesity?"

    See what he's missing? Krugman doesn't NEED to prove that McSharry's cuts did nothing to boost Ireland's exports, because nobody increases their purchases of Country X's products simply because Country X happens to reduce its deficit.

    The notion that foreign people in 1988 upped their buying of our exports because they liked McSharry shutting down hospitals is so ludicrous that no sane person even considers it.

    The only other possible candidate explanations for our export boom in 1988 is that our products leapt upwards in quality that year (cough), or the fact that the cost in Sterling, Deutschmark and Franc had suddenly fallen.
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

    You have to pity the kind of people who buy into conspiracy theories. I find the following to be the saddest words on the internet: "Re: connection between Bilderberg puppet lady gaga and viral outbreak in ukraine "

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    Quote Originally Posted by seenitallb4 View Post
    We were close to touching this on another thread when it was suggested that we needed some means of flushing out the debt and resetting our economy as a n alternative to mass austerity. I would hope that the more knowledgeable amongst us could elaborate on this idea, assess its suitability as a way forward, and perhaps speculate on how it might work.
    Debt forgiveness is the only solution. Its impossible for our GNP to outrun the debt interest, so growing our way out of this is not an option.

    Feargach is right highlighting the austerity issue. It will make National Income shrink further and the debt burden will increase in percentage terms to ad infinitum. Bankruptcy is the end result of this.
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    Quote Originally Posted by toughbutfair View Post
    So Haughy/mcsharry turned around our economy but not by cuts but by devaluation?

    To back up his case, he must show how devaluation alone has always turned around economies as messed up as our one in 1987.

    Foolish article by him.
    Back in 1987 out GNP was low and had a high propensity to grow. Our total debt was less than 200% of GNP.

    Today our income cannot grow and even if it did it would have to outrun the massive interest growing on 600 Billion Euro of Debt which is 500% of our income.

    The only solution is debt forgiveness.
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    Quote Originally Posted by Cassandra Syndrome View Post
    Back in 1987 out GNP was low and had a high propensity to grow. Our total debt was less than 200% of GNP.

    Today our income cannot grow and even if it did it would have to outrun the massive interest growing on 600 Billion Euro of Debt which is 500% of our income.

    The only solution is debt forgiveness.
    +1,

    That or an inevetable default.

    Same solutions, different consequences. Personally I would prefer to default on 80 billion than 150 billion.

    But renegotiating a debt reduction or restructure would be altogether better for the country as a whole.

    It would also help if we did not choose to repay the debts of a Private Merchant Bank and silly dud Banks run for the benefit of their Chief Execs. That is, in itself, a saving of almost 40 billion.

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    Quote Originally Posted by Cassandra Syndrome View Post
    Debt forgiveness is the only solution. Its impossible for our GNP to outrun the debt interest, so growing our way out of this is not an option.

    Feargach is right highlighting the austerity issue. It will make National Income shrink further and the debt burden will increase in percentage terms to ad infinitum. Bankruptcy is the end result of this.
    Is this a recent change of mind, or have you always thought this?
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

    You have to pity the kind of people who buy into conspiracy theories. I find the following to be the saddest words on the internet: "Re: connection between Bilderberg puppet lady gaga and viral outbreak in ukraine "

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    Quote Originally Posted by Cassandra Syndrome View Post
    Feargach is right highlighting the austerity issue. It will make National Income shrink further and the debt burden will increase in percentage terms to ad infinitum. Bankruptcy is the end result of this.
    But surely what is needed here is austere government spending and encouragement of sectors that create wealth to invest.

    Even if that is the approach there is a limit on how quickly you can reduce government activity as a percentage of the overall economy.

    Debt restructuring is inevitable and many debts will have to be written off. That is reality and the sooner that we come to terms with that and allow it to happen the better. It is either that or simply take measures that would allow the debt to be inflated into oblivion.

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