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What’s Austerity?
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As the EU agrees to fund another bailout deal to help Greece rise from the ashes, providing them with another $8.7 billion in financial aid, the question that begs an answer is: will this have any effect on the austerity that is being imposed on the country. Throwing good money after bad? The condition that they get the money is that the coalition government impose further spending cuts on the population in a bid to bring their house in order. Talk about a poisoned present! You can have it, just as long as you impose austerity on the population. The EU should get rid of its present motto: ‘United in Diversity’. It’s more like: ‘You can have the money, I’ll stand back and watch, sadist that I am’.
Greek Austerity
Austerity! A severe and rigid economy coupled with the reduced availability of luxuries and consumer goods, refraining from worldly pleasures. We have really brought no-frills into the 21st century, haven’t we? We don’t just have no-frills airlines or no-frills travel; we have now taken that to a higher level: the no-frills economy and the no-frills state! Oh, except for of course those that are in power. They are rarely no-frills are they!
So, is austerity the answer and what is austerity anyhow, exactly?
Austerity
The objective of austerity is to bring spending in line with income in a country. But, perhaps it is also more than that. Its main objective is also to reduce the government deficit of the country.
But, it all depends on which side of the fence that you are sitting on. You could either believe that spending will spur the country on to spending in turn and thus boost the economy in that way (which is exactly what the US has decided to do by using Quantitative Easing). But, this will (if it works, that is!) have the effect of mechanically and mathematically reducing the debt, by increasing GDP. The debt will become a smaller percentage of GDP. We all know, however, that government spending can be far from efficient at times, and that theory is only based upon the success of spending. Spend incorrectly and it will do nothing except increase debt.
Austerity means cutting spending. Cut spending and your books will show that you have reduced the debt (debt as a percentage of GDP). But, that will be a short-term gain and long-term results will not necessarily increase growth in the country.
Increase taxation and the tax burden on the population is increased at an already economically-troubled time. Ask people to pay more will bring in money, but it will look like dimes, rather than dollars!
John Maynard Keynes
John Maynard Keynes believed that governments should step in and take action when unemployment was rising and people needed help stimulating the economy. Increasing employment would mean that debt would be reduced and Gross Domestic Product-growth would get stronger. Let’s take the example of the US here. The US government may be reducing unemployment if we look at the statistics on face value today. Between May and June 2013 figures show that there were 195, 000 jobs that were created. But, there is one statistic that reveals that those jobs may not last very long or are not permanent jobs of the highest quality. Gallup showed that the Bureau of Labor Statisticsin the US wasn’t perhaps showing the true nature of those jobs that were created. Today 17.2% of the US workforce is underemployed. Admittedly, the figure is better than the 20.3% that was the peak of March 2010. But, the figure is still worrying and looks like it will remain so. The lowest figure reached was way back now in October 2012 (15.9%) and since then the number has continued to rise. That’s also despite the US’s Quantitative Easing (4) that should (so we are told) reduce unemployment and improve growth prospects. The US Bureau of Labor Statistics did also show an increase in part-time work from 28.5% to 29.3%. Some might argue that when the economy improves those part-time jobs will be transformed into full-time and permanent jobs. But, time will only tell. The figures are there to show however that at the present time people are underemployed and that’s despite the injection of $85 billion a month from the Federal Reserve.
Friedrich von Hayek
Friedrich von Hayek was of the opposite belief: that standing in the way of free-market self-regulation would lead to a worsening of the problem. He believed that governments should cut spending and taxes and then the economy would regulate itself in the direction that it wished. The long-term result would then be an economy that was more robust. The governments would reduce their deficits and the economy would be better. US debt hasn’t seen that happen to it at all. US debt has steadily increased from the pre-Reagan era of 33% of GDP to Obama’s 105%, as the country edges closer to $17 trillion debt.
Effects of Austerity
There are possible three different types of effect that might be seen following austerity measures:
Economic
- Austerity measures lead to consumption that can be classified as nothing better than depressed and there will be a fall in output of the economy.
Political
- Social unrest will be created in the country. Greece saw thousands taking to the streets only yesterday again in another round of demonstrations. There have been four different governments in four years and today the coalition government is at breaking point.
Social
- Due to austerity measures there has been a knock-on effect on everyday living of Greeks. Greece is today has the 33rd largest purchasing power parity in the world. It is the 13th economy in terms of per capita income in the EU27.
The troika of the European Union, the European Central Bank and the International Monetary Fund’s meddling in the affairs of Greece, imposing austerity in the hope that it will boost the economy seems like it will only be doomed to fail in the coming months and years. How could austerity, cuts and debt have the beneficial result of economic boom and prosperity? Even Hayek wouldn’t have believed that. It also seems impossible for anyone to attach a condition of austerity measures into the loan that is being made to Greece. The country has been bailed out so many times now in the past few years that whatever happens in Greece, they will have to do it again and again, and probably again.
$3.2 billion will come from the Eurozone rescue fund. $1.9 billion will be loaned by the European Central Bank. This will be made immediately, with another $643 million in October given from the rescue fund and the same amount in October by the European Central Bank. The international Monetary Fund will provide $2.3 billion. That makes a total of $8.7 billion.
Creditors have already warned Greece that they are behind schedule with the plans to privatize industries in the country. Only last month there was the failure of the sell-off of the gas company there, when Gazprom failed to make a bid for DEPA (the state-controlled gas supplier). DEPA has €500m of outstanding debt due to defaults on payments of bills by Greek customers. 25, 000 civil servants will have to see their salaries reduced also eventually to be redeployed or made redundant. This will add to the unemployment rate which currently stands at 27%.
Currently the situation of Greece is a combination of injecting money and austerity measures. In the event of one failing, let’s try both Keynes’ and Hayek’s theories on how to boost the economy. Greece looks so far down the road that neither looks very much like succeeding!
What do you think? Will the austerity measures combined with the bailout be the road to success?
Originally posted: What's Austerity?
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Austerity means you pay for someones elses mistakes while they continue to make the same mistake while you pay for them to continue to make them.
Austerity is the government ass fucking it's people in broad day light and saying "there is nothing you can do but take the ass pounding so that we can enslave you further"
Austerity is a measure of how much punishment a society is prepared to take, and it seems a fair amount.
Debt is a design since it returns to asset stripping operations called resources. You know the holes in the ground hydro carbons come from which europe wants and greece just gave up since socialism was never designed work. Charity and culture is a different discussion so we have a seen and unseen mental thought map problem.
Austerity in Greece means the guys who try to catch Riot Dog have been cut back to a 2 hour lunch and only get paid 4 hours on Sat. for not showing up for work.
The new 'lean and mean' Greek public sector.
"What do you think?"
I think that sound, honest money makes for good governance. I'm a hard money advocate. Most people are only familiar with a debt-based system of money. So PM's seem to scare a lot of people because PM's extinguish debt.
Bernanke and most all other Central Bankers? They just throw more fuel onto the debt fire in my opinion, because that's all they can do. That's where those bailouts come from.
"Austerity means cutting spending."
No. The Greek austerity plans was a combination of increased taxes and cut spending. It's not just cutting spending. It's both.
That might be true for Greece but in the rest of the EU austerity means raising taxes and reducing the rate of growth of spending. Sovereign debt continues to increase across all the EU member states. In order for Greece and rhe other EU member states to return to a path of economic growth, more than spending cuts is required. Serious reforms of labor laws allowing for more flexibility, reducing unnecessary and bureaucratic regulation and overhauling cradle to grave welfare programs are way over due. The banks need to restructure their debt and write off their losses instead of passing them off to the taxpayers. This will help make Europe competitive in the global marketplace. Unfortunately the politicians don't have the balls to make the tough decisions.
Hayek was right Keynes was wrong.
When does Chermanee just take over the central banking duties of Grease in their entiretey? Or for the rest of the EU for that matter...
Austerity would only help if there was a true free market to fall back on which their isn't. In effect it's just putting the finger in the dyke and passing the plate to keep the wolves at bay. Hanging the banksters is the only true solution. Unless humankind can throw off the chains of the banksters humanity just decays from here on out.
I bet even today 50%+ of Greeks still blame the "free market" and capitalism for what is happening to them, if the people had their way we'd be even further away from any kind of freedoms than ever, never mind market freedom, I sometimes think all the NWO, NSA, Zionists etc. are "intelectual dwarws" in regulating human lives compared to the average Joe Public who is quietly and subconciously aplauding the emerging Totalitarian State
it always smacks me as a bit imperialistic to discuss what other people or nations should do
that Greece is a nation is undeniable. it has an own culture, language, etc. etc. And Greeks are proud, and proud of their nation
that Greeks are generally quite skeptical about their own state/polity is also undeniable (as a core audience of ZH about the state as an institution, in general)
but any discussion about Greece should imho start with what Greeks want. and when asked, a strong majority still wants to keep Greece in the eurozone and in the EU
why? without a serious and honest discussion about this fact all is naught. and no, "they are crazy" or "they are deluded" or "they believe the propaganda" does not count, is not truthful and is not honest
and the answer lie in the options, and their consequences, as they are understood by the Greeks, who aren't stupid, nor meek, nor uneducated, nor strangers to gold, nor strangers to foreign currencies, btw
in my humble opinion, the answer lies in trust. specifically, a little more trust in the european institutions than in the Greek institutions, which are generally seen by them as bordering to the utterly untrustworthy
oh, and an understanding that the slightly more Austrian policies of the EU/ECB are definitely more sane than the Full-Blast Keynesians
meanwhile I see some "the debt!, the debt!" commentariat. to which I have only one question: who has a problem with debt in general, those who spend within their means and can decrease it, or those who spend moar, and can only add to it? Note that the Greek Republic is not a stranger to default - this is not something that would scare the wits out of them
but even to contemplate the default option Greece needs a balanced budget first
From simple observational experience I see that the more "proud" the people are of them selves the less merit they have to be so
"Ain't Too Proud To Beg"
I know you wanna leave me,
but I refuse to let you go
If I have to beg and plead for your sympathy,
I don't mind coz' you mean that much to me
Ain't too proud to beg, sweet darlin
Please don't leave me girl, don't you go
Ain't to proud to plead, baby, baby
Please don't leave me, girl, don't you go
The Temptations
I have been working as a temp for over three years now and even though the company does some hiring on a regular basis, more and more positions are being filled by temporary workers.
As long as spending requires borrowing and debt service does not include debt reduction,... austerity will be perpetual...
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Heyek never factored a banking cartel with 100% monopoly into his free market thinking. Such a cartel makes the "free market" anything but.
Keynes assumed the government would somehow control the banking cartel, not the other way around. Oh well.
so first off there is no such thing as a policy of "austerity" when it comes to State actors. there is a polity there and by definition an economic construct is but one element "of the situation." more importantly as it relates to the USA we need to take Hayak and Keynes and give 'em the old heave ho. the USA has as it usually does "done it's own thing" and it's called "moral hazard." at it's core it's really quite simple: turn over the vast resources of the State to the folks that caused the collapse in the first place and tell them to "recover this economy thing." they have done at recovering THEIR economy....spectacularly so actually. it's really hard to figure how Ye olde "pick yourself by your boot straps" ethos is going to win out however as taxes are surging and benefits are being cut. unless and until we understand this...how to say it?..."uniquely American way of solving the crisis" (spend more...give it to all the wrong people) is understood we're really just stuck in the realm of the meta physical. Free yourself America and by extension World! We are phucked!
What's austerity? Living within your means.
Is Greece living witin its means? NO. "$3.2 billion will come from the Eurozone rescue fund. $1.9 billion will be loaned by the European Central Bank. This will be made immediately, with another $643 million in October given from the rescue fund and the same amount in October by the European Central Bank. The international Monetary Fund will provide $2.3 billion. That makes a total of $8.7 billion."
More debt for Greece.
What is being passed off as austerity is a sham and a fraud. No wonder it doesn't work. Shams and frauds never work.
Austerity means you get less services from the gvernment, but still pay the same taxes or more. It's the government's wet dream: the slaves pay and pay and get nothing in return. What a scam.
But why would the government give fewer services when it can print the money to pay for those services. It's the best of all worlds!
until it isn't, but that's in the future and the government is in power NOW.
The only success that will be had with austerity is through the bankers.
Austerity means making the rich richer by manipulating markets and by taking more from those that produce.
Budget cuts will only take Europe so far. The continent must deregulate and free its markets if it is to have any hope of reversing the recession. So far, the political will to reform economies just isn't there.
http://dareconomics.wordpress.com/2013/07/10/around-the-globe-07-10-2013/
It never will be there. Politicians will never cut their own throats. Cutting budgets reduces the bureaucrats power and makes them a direct target of the anger people feel whenthe free beer runs out.
They will always put off, and print to cover the problems driving their countries into the ground.
Austerity is waking up and realizing you are a financial slave. If the govt can impose austerity on you then you are not a free man.
Absolute hogwash. The presumption in your statement is that money comes from government. Governments have no money. What you are saying is that in order to be free, you must first give government the control of a nation's cumulative wealth, and trust them to distribute it fairly. That is clearly insane.
The "imposition of austerity" as you call it is simply a winding down of government handouts. It is an "undoing" of a system of slavery. And yes it will be painful, just as the dismantling of the USSR was painful for many. If a people have become totally dependent on government distributions then they are already slaves.
Let's be clear: The Greeks who are self-sufficient and do not rely on the Greek government to print money are not slaves and never will be slaves. The Greeks who are not self-sufficient and live in the illusion of printed-money and artificially manufactured wealth are already slaves and are opposed to austerity.
A free man requires NOT A GOD DAMN THING from the govt. You have made a terrible incorrect assumption of my statement. If you get nothing from the govt you are free other wise you are a slave because they can take it away which means they can impose austerity upon you. Your argument is my argument. Now have I pulled your head out of your ass. I certainly hope I have stopped you making me look like an ass.
Like I said if the govt can impose austerity upon you (take away from you) you are not a free man!!!
My first statement required no presumtion. You presumed incorrectly.
Austerity will never be taking away government benefits. It will be taking away personal wealth via taxation, bail in and inflation.
Taking away peoples government benefits? Come on! What kind of fantasy world do both of you live in?
As Europe has already proven, government benefits can never be taken away. They will only make promises to take them away at some later date which will never, ever occur. They will tax and they will inflate, exactly the precription that Vlad Lenin laid out in destroying those terrible bourgeoisie. You know the middle class and small business owners.