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Guest Post: Why Austerity Is Triggering a Crisis

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

We have created an economy with an extremely high cost-basis, and as a result it is brittle, fragile and vulnerable to cuts as modest as 4%.

 
In economies dependent on ever-rising consumption, austerity had a negative connotation even before its politically charged meaning commandeered the public debate. When the entire Status Quo depends on discretionary consumption not just for "growth" but for its survival, austerity is welcomed with approximately the same enthusiasm Superman reserves for Kryptonite.
 
This is of course a contradiction: an economy based not just on consumption of all net income but debt-based consumption is an economy devoid of savings, i.e. capital to invest in productive assets.
 
An economy without capital is lacking a key component of classic capitalism.
 
"Austerity" also suggests a preference for simplicity and productive work, another contradiction sociologist Daniel Bell explored in his 1988 book, The Cultural Contradictions of Capitalism: the narcissistic consumption promoted by Neoliberal Capitalism erodes not just the work ethic that powers productive capitalism but also the ethic to save and invest that is the foundation (along with credit and transparent markets) of capitalism.
 
(I have explored narcissism and the cultural contradictions of capitalism in Narcissism, Consumerism and the End of Growth (October 19, 2012) which also mentions Christopher Lasch's 1979 book The Culture of Narcissism: American Life in an Age of Diminishing Expectations.)
 
No wonder austerity is the equivalent of Kryptonite to the global consumption-dependent Status Quo. But there is another dynamic behind the panic and fear austerity has provoked, a dynamic I have characterized as The Rising Wedge Model of Breakdown, which builds on the well-known Ratchet Effect:
 
 
The Ratchet Effect is visible in organizations of all scales, from households to sprawling bureaucracies. The core of the Ratchet Effect is the ease with which the cost basis of an organization rises and the extreme resistance to any reduction in funding.
 
The psychology of this resistance is easy to understand: everyone hired in the expansion will fight to keep their job, regardless of the needs of the organization or the larger society. Every individual, department and division will fight with the fierceness of a cornered animal to retain their share of the budget, for their self-interest trumps the interests of the larger organization or society.
 
Since each "ratchet" will fight with desperate energy to resist being cut while those attempting to do the cutting are simply following directives, the group that has pulled out all the stops to resist cuts will typically win bureaucratic battles.
 
Broad-based cuts trigger Internecine Warfare Between Protected Fiefdoms as entrenched vested interests battle to shift the cuts to some politically less favored fiefdom. Bureaucracies facing cuts quickly shift resources to protecting their budget, leaving their mission on auto-control. (The Lifecycle of Bureaucracy December 2, 2010)
 
These dynamics create a rising wedge in which "minimum" costs continue to rise over time even if modest cuts are imposed from time to time. The eventual consequence is a cost basis that is so high that even a modest reduction collapses the organization.
 
In other words, incremental reductions and reforms have become impossible. The organization has become so brittle that any structural reform triggers a breakdown.
 
I have characterized this mechanism as The Seductive Illusion of Incremental Change (May 13, 2008)
 
 
We can use a household example to illustrate The Rising Wedge Model of Breakdown. Like many households, the Wedge Household responded to rising income and home equity in the bubble years by moving up to a larger home. Now the monthly payment on the Wedge McMansion is $4,000, as property taxes have soared. Healthcare costs have also skyrocketed, consuming over $1,000 a month of the family budget.
 
In response to declining real wages, the Wedge Household cut travel and dining out and cancelled cable/satellite TV channels. Unfortunately, these represent a relatively tiny percentage of the annual household budget, and the family's savings have been drained maintaining their high cost-basis lifestyle.
 
When the primary wage earner takes a 10% pay cut, the household's minimum cost basis is so high that the family has no choice but to cut one or another essential of middle class life: either the Wedges lose their health insurance or they default on their mortgage.
 
Their financial health has lost all resiliency; it is now fragile and brittle. (Brittleness January 29, 2007)
 
This is a direct analogy for the nation's budget; a 10% reduction will trigger breakdown in the nation's brittle systems. Indeed, as I suggested in Can 4% of Homeowners Sink the Entire Market? (February 21, 2007), even a 4% reduction could have an outsized impact on 64% of the economy. This is the Pareto Distribution in action: just as the vital 20% wields outsized influence over the 80%, the 20% of the 20% (4%) exerts outsized influence over 80% of the 80% (64%).
 
The loss of resilience and cost sensitivity has consequences. We have created an economy with an extremely high cost-basis, and as a result it is brittle, fragile and vulnerable to even modest "austerity." 
 

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Mon, 01/07/2013 - 11:27 | 3129440 IridiumRebel
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Collapse if you do and collapse if you don't.

Mon, 01/07/2013 - 11:38 | 3129475 Manthong
Manthong's picture

Well, here’s an option..

I need a drink and it’s not even noon.

Why Paul Krugman should be President Obama's pick for US treasury secretary
Not only is he the world's best-known economist, Krugman has the intellect and integrity to resist Wall Street's calls for austerity  
Mark Weisbrot ,  guardian.co.uk
http://www.guardian.co.uk/commentisfree/2013/jan/05/paul-krugman-obama-treasury-secretary

Mon, 01/07/2013 - 11:46 | 3129507 Leopold B. Scotch
Leopold B. Scotch's picture

The only thing that's going to solve my funk is some more junk.  I ain't going without my junk.  Uncle Ben got's the junk.

Mon, 01/07/2013 - 11:53 | 3129535 Snakeeyes
Snakeeyes's picture

This is such BS. It assumes that the government is the only investor and private enterprise is dead (or dying). Which may be true. But spending is out of control in US and Europe and entitlements keep escalating.

KABOOM either way.

 

http://confoundedinterest.wordpress.com/2013/01/01/fiscal-abyss-bill-pas...

Mon, 01/07/2013 - 12:40 | 3129693 AssFire
AssFire's picture

* U.S. Tax revenue: $2,170,000,000,000 ...

* Fed budget: $3,820,000,000,000

* New debt: $ 1,650,000,000,000

* National debt: $14,271,000,000,000

* Recent budget cuts: $ 38,500,000,000

 

Let's now remove 8 zeros and pretend it's a household budget:

*Annual family income: $21,700

*Money the family spent: $38,200

*New debt on the credit card: $16,500

*Outstanding balance on the credit card: $142,710

* Total budget cuts so far: $38.50

This country has not seen shit as far as austerity goes.

 

Mon, 01/07/2013 - 13:26 | 3129836 HardlyZero
HardlyZero's picture

(edit) * Total budget cuts so far: $385.00

But the lack of awareness of zeros is very informative too...it shows how 10x the problem is = the problem...its a problem of magnitudes.  and the numbers are so large we don't even keep track of the zeroes any more !!!

Mon, 01/07/2013 - 15:10 | 3130182 Leopold B. Scotch
Leopold B. Scotch's picture

You forgot the "progressive fix" line items. 

Here, fixed:

Total U.S. Revenue     $2,170,000,000,000
Federal Budget     $3,820,000,000,000
New Debt     $1,650,000,000,000
National Debt     $14,271,000,000,000
Recent Budget Cuts     $38,500,000,000
U.S. GDP     $15,000,000,000,000
    
Annual Family Income     $21,700
Money Family Spent     $38,200
New Debt on Credit Card     $16,500
Oustanding Balance on Card     $142,710
Cuts in Spending for 2013     $385
Total "Fair Share of GDP"      $150,000
Allocated "Fair Share" annual amt      $15,000
Any shortfals?    Tax existing capital.

There.  Austerity?  Austerity for what?

Mon, 01/07/2013 - 14:41 | 3130102 smlbizman
smlbizman's picture

are we talking actual budget cuts? or are these, thee ole' was gonna spend 100mil, but now i am only going to spend 70mil?...see i can cut spending

Mon, 01/07/2013 - 12:53 | 3129739 Anusocracy
Anusocracy's picture

Government growing as a percentage of the economy equates to a growing morbidity of the economy.

If government applies austerity mainly to the private sector, the economy will be damaged even more, with less possibility of recovery.

If government shrinks itself meaningfully, the private sector will respond positively.

Of course government is not going to sacrifice itself for you.

Mon, 01/07/2013 - 11:56 | 3129543 CPL
CPL's picture

Get the funk outta here!

 

Cue bassline.

Mon, 01/07/2013 - 12:08 | 3129585 stocktivity
stocktivity's picture

" debt-based consumption is an economy devoid of savings, i.e. capital to invest in productive assets."

 

Bullshit Charles! That's the old thinking....now the money is printed out of thin air to invest. Get out of your cave.

Mon, 01/07/2013 - 11:44 | 3129502 Winston Churchill
Winston Churchill's picture

Best choice as Bernie Maddoff is currently unavailable for some reason.

Mon, 01/07/2013 - 12:04 | 3129569 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Time for the Return of the Raj!

Mon, 01/07/2013 - 12:04 | 3129570 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Time for the Return of the Raj!

Mon, 01/07/2013 - 11:59 | 3129554 SilverMoneyBags
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Krugman, the guy who advocated for 91% tax rates, is the world's best economist? Did they start selling THC Kool-aid in Colorado yet?

Mon, 01/07/2013 - 13:28 | 3129846 HardlyZero
HardlyZero's picture

Not "best"..."best-known".   They take no resposibility in the article for showing intelligence...just the "fax" /sarc.

They probably copied and faxed the article from some blog too.

Mon, 01/07/2013 - 12:00 | 3129557 Meatballs
Meatballs's picture

Stiglitz would be a far better choice than Krugman. Neither will happen, yet another Wall St. goon in the wings I have no doubt.

Mon, 01/07/2013 - 12:06 | 3129577 Mr Lennon Hendrix
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Give a junkyard dog a Nobel and he would be more qualified than both.

Mon, 01/07/2013 - 12:12 | 3129599 Freddie
Freddie's picture

The Guardian is a leftist retard trade unionist paper.   Evil idiot Krugman is really pushing the $1 trillion platinum coin to Obama. 

Mon, 01/07/2013 - 12:48 | 3129725 donsluck
donsluck's picture

Your comment is 90% insults and 10% innuendo. Worthless.

Mon, 01/07/2013 - 15:27 | 3130307 Banjo
Banjo's picture

@Freddie you are the epitomie of "Tabula rasa"

Not many neurons firing up there are there :)

Mon, 01/07/2013 - 11:46 | 3129509 Zap Powerz
Zap Powerz's picture

We had some good times while it lasted!

Mon, 01/07/2013 - 12:00 | 3129558 reload
reload's picture

Welcome poverty!..Welcome misery, welcome houselessness, welcome hunger, rags, tempest, and beggary! Mutual confidence will sustain us to the end!

Mon, 01/07/2013 - 12:05 | 3129573 Salon
Salon's picture

Wow! We sure did!

Thats why governments will always push credit expansions beyond the ability of the underlying economy to support it. The bad effects from the contraction can be blamed on the last guy in office.

Mon, 01/07/2013 - 13:46 | 3129906 razu kazu
Mon, 01/07/2013 - 11:27 | 3129443 The Axe
The Axe's picture

E-TRADE crash   system hacked

Mon, 01/07/2013 - 12:02 | 3129552 CPL
CPL's picture

It's worse actually.  They canned their IT staff.  So...No not a hack.  

 

The inevidible machine breaking and taking down one system after another in a middle tier shit storm.  Plus all the techs they laid off are telling managers to FUCK OFF while the business is burning to the ground.

 

So if you are with eTrade.  There is no longer an "E" watching your money or your backs.  Amazing how stupid it's become.  A CEO is more important than the service provided now.

Mon, 01/07/2013 - 14:33 | 3130080 pavman
pavman's picture

A CEO is more important than the service provided now.

And things have changed how since when?  In my experience, no one in upper management gets info from the foot soldiers because middle management screens out good and bad information.  Personally, I think the best thing a corp can do is axe as many middle management layers as possible to streamline an organization.  But there's some sort of political pressure to axe the foot soldiers instead.  Like a manager can do the job of a foot soldier.  Sha.  Oh well, they get what they pay for and they stew in their own stupid decisions.  I know that if that happened to me, I'd want a premium if they wanted my skillset back.  A large premium.  Say... 150%.  Glad I don't have an E-Trade account today.

Mon, 01/07/2013 - 11:29 | 3129446 Cursive
Cursive's picture

 

When I was a child, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things.

 

The world has a shortage of modesty and maturity.  We are, collectively, a pack of spoiled children, looking for the next instant of gratification.

Mon, 01/07/2013 - 11:34 | 3129452 BlueCollaredOne
BlueCollaredOne's picture

Yea, well, you know, that's just like, your opinion man.  

Mon, 01/07/2013 - 11:48 | 3129514 Leopold B. Scotch
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I just tweeted that and upped it to my facebook.

Mon, 01/07/2013 - 11:30 | 3129449 So Close
So Close's picture

Billy Joel... Glass houses anyone?

Mon, 01/07/2013 - 11:31 | 3129454 Chupacabra-322
Chupacabra-322's picture

Why?  Because the Banksters have hijacked the world's Goverments and Criminal Politicians through blackmail, racketering, murder, drugs, espionage, human trafficing, PsyOp, Flase Flags and funding/arming of terror organizations which they claim to be protecting us from. 

And that's just for starters. 

Mon, 01/07/2013 - 11:54 | 3129538 Cognitive Dissonance
Cognitive Dissonance's picture

Because they hate our freedom.

The real question is always a basic question. Who really is "our" enemy. Most often it is our own government.

Mon, 01/07/2013 - 12:08 | 3129586 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Our enemy is our culture - this god forsaken culture.

Mon, 01/07/2013 - 12:25 | 3129640 Spastica Rex
Mon, 01/07/2013 - 13:05 | 3129773 Cognitive Dissonance
Cognitive Dissonance's picture

This seems to be a horse and cart question. Does our culture produce the government or vice versa? I suspect neither, that instead it is a symbiotic relationship, a closed loop positive feedback mass insanity.

Mon, 01/07/2013 - 13:09 | 3129785 Anusocracy
Anusocracy's picture

The enemy is a belief system in someone else's head.

Mon, 01/07/2013 - 13:32 | 3129855 HardlyZero
HardlyZero's picture

Rick Santelli says "all children left behind" and that rings true.  The destruction of the future can occur in so many ways, fiat being one.

Mon, 01/07/2013 - 14:19 | 3130023 Pegasus Muse
Pegasus Muse's picture

CULTURAL MARXISM: The Corruption of America  (1hr 39min)

A James Jaeger Film featuring RON PAUL, Congressman/Presidential Candidate; PAT BUCHANAN, Author/Political Analyst; G. EDWARD GRIFFIN, Author/Producer; EDWIN VIEIRA, Author/Constitutional Attorney and TED BAEHR, Founder of MovieGuide and Christian Film & TV Commission --

CULTURAL MARXISM explores the love affair with collectivist ideologies that has lead to ever bigger government and the welfare-warfare state. Find out how the Frankfurt School, a Marxist splinter group, established itself at Columbia University and began "the long march through the institutions." The idea was, and still is, to infiltrate every corner of Western culture and pervert traditional Christian values with "political correctness" and Marxist ideologies. The ultimate goal is to destroy American free-enterprise capitalism by undermining its economic engine, the Middle Class, and the basic building block of society: the Family Unit

http://www.youtube.com/watch?v=gIdBuK7_g3M&list=PLVCYZiC20h35tqdAc78DYKeMIwHrFSwwb 

Mon, 01/07/2013 - 15:04 | 3130214 A Nanny Moose
A Nanny Moose's picture

It's Tradition.

 

 

Mon, 01/07/2013 - 11:43 | 3129464 Dr. Engali
Dr. Engali's picture

Is there some austerity going on some place that I am unaware of? It seems to me that they are spending what they can as fast as they can. Shit Obama says..raises for all federal workers deserve it....free student loans for everybody....don't like your mortgage payment? Stop paying it. Free phones ....free health care....free "food" ...Don't worry uncle sugar will take care of you....now go back to sleep little sheep.

Mon, 01/07/2013 - 11:48 | 3129515 Zap Powerz
Zap Powerz's picture

Austerity:  A nearly unmeasureable, insignificant decrease in the size of the increase in spending.

Mon, 01/07/2013 - 12:02 | 3129559 hapless
hapless's picture

Or, a formerly exponential growth in spending that has temporarily been made linear.

 

Mon, 01/07/2013 - 12:14 | 3129608 CrimsonAvenger
CrimsonAvenger's picture

Austerity: a slightly lower rate of increase than the balls-out growth that both parties want.

Mon, 01/07/2013 - 12:26 | 3129645 Spastica Rex
Spastica Rex's picture

You and the Mrs. Dr. are inivted to our house for dinner any time!

Mon, 01/07/2013 - 13:20 | 3129690 socalbeach
socalbeach's picture

Am I the only one who thinks one Charles Hugh Smith article per week is more than enough? (edit: guess not, just saw the Steve in G. post below.)

Mon, 01/07/2013 - 11:34 | 3129465 buzzsaw99
buzzsaw99's picture

...i.e. capital to invest in productive assets.

Productive assets, that's a laugher! Name one.

Mon, 01/07/2013 - 11:43 | 3129497 Jim in MN
Jim in MN's picture

Shaniqua.   She works it good.

Mon, 01/07/2013 - 11:46 | 3129511 buzzsaw99
buzzsaw99's picture

Bang Dae-Ho

Mon, 01/07/2013 - 11:35 | 3129467 Steve in Greensboro
Steve in Greensboro's picture

With the "guest posts", please give the name of the "guest" before the jump, so I don't waste my time clicking through to something by Chuck-You Smith.  Or it this what they call "click-whoring"?

Mon, 01/07/2013 - 11:37 | 3129470 NEOSERF
NEOSERF's picture

Krugman has a comment about how the IMF has now decided austerity into the teeth of recession may not be a good idea and is more severe than thought.  Duhhh...The sad truth is that economies and their supposed growth ARE very fragile and the true (and maybe fatal) failing of ecomomics in the last 20 years has been the utter lack of understanding of this.  To allow spending to get as out of control as it is because of some economic growth resiliency quotient in a PhDs calculation was where it all went wrong.  And at this point Economics is useless...the genie is out of the bottle, $16T much less $35T cannot be put back in, demographics are getting worse.  The game now is simple, inflate your way faster than your neighbors and SLOWLY cut back on the rate of growth of the debt so that everyone else collapses before you do.  End of story..short of a world war that doesn't actually destroy the world but somehow destroys everyone's debt (read computer money evaporating all at once), the decay of Rome is in full swing and will not be turned around.

Mon, 01/07/2013 - 11:50 | 3129523 Zap Powerz
Zap Powerz's picture

The reason our economy is struggling is because we dont listen to the one man that can single handedly fix it.  Paul Krugman.

At least that is what he is always saying and he writes in the NYT so it must be true.

Mon, 01/07/2013 - 14:48 | 3130132 pavman
pavman's picture

ROFL!

Mon, 01/07/2013 - 12:12 | 3129600 Salon
Salon's picture

Inflating away the obligations and hoping that people dont notice the lower quality of life ( shittier medical care, robusta beans in your favorite coffee brand for example) is the only answer.

But it must be done slowly enough and hidden well so that inflationary expectations don't take hold and ruin the plan.

Ben has to tread carefully. Inflate fast enough to avoid the deflationary monster, but slowly enough to avoid igniting inflationary expectations.

Mon, 01/07/2013 - 12:24 | 3129637 Ghordius
Ghordius's picture

"...how the IMF has now decided austerity into the teeth of recession..."

without getting into the Krugman discussion I beg to differ on this "now". I'm following the IMF since decades, it's "modus operandi" has never changed, imho

without wanting to defend the IMF or it's shareholders (guess who is the biggest one), it's approach has always been the same - what most people would apply to the brother-in-law that calls because his finances are belly-up: cut, cut, cut more expenditures, until you heal

Mon, 01/07/2013 - 11:36 | 3129471 Cognitive Dissonance
Cognitive Dissonance's picture

I'm gonna BTFD until it kills me.

/sarc

Mon, 01/07/2013 - 11:38 | 3129478 nobusiness
nobusiness's picture

So out of control debt spending is Good.  and reducing the growth of that out of control spending (not stopping it, no one has called for that) is the cause of disaster.

 

Brilliant!!!

Jerk!

 

Mon, 01/07/2013 - 11:38 | 3129479 Dark Meadowlark
Dark Meadowlark's picture

Austerity is a joke and a failure of a policy when implemented. Take a look over to Europe for example. Their debt/deficits have gone UP not down with austerity. IN U.S. we want GROWTH! Not genocidal killer austerity. TAX Wallstreet, soak em'! Make them pay for the crisis of their own creation!

Mon, 01/07/2013 - 11:43 | 3129496 SilverMoneyBags
SilverMoneyBags's picture

In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided.If the debts are going up, then there is no austerity.

Mon, 01/07/2013 - 12:00 | 3129546 HardlyZero
HardlyZero's picture

Yes, but if the debts increase slower and eventually "top out" then that is the goal of increased austerity (the annual debts are the annual defecits).  As austerity increases the debt will eventually be forced downward and the debt may actually decrease.  The annual defecits will need to also decrease until they become negative.  The problem is that just 'talking' about the subject of austerity is verboten.  There will be no reductions, only increases....etc.

Mon, 01/07/2013 - 11:52 | 3129528 Zap Powerz
Zap Powerz's picture

And after we do that, and the economy still isnt doing well (but you personally feel better), then what?

Mon, 01/07/2013 - 11:59 | 3129553 HardlyZero
HardlyZero's picture

After there is no more "free market economy" the only alternative is nationalize all industry, businesses, and banks.

Mon, 01/07/2013 - 12:28 | 3129652 Ghordius
Ghordius's picture

yes, do take a look to Europe. "Their debt/deficits have gone UP, not down, with austerity"

debt is still rising, yes. moderately. but deficits are going down, down, down, particularly in the eurozone

Mon, 01/07/2013 - 11:39 | 3129483 GubbermintWorker
GubbermintWorker's picture

What, me worry?

Mon, 01/07/2013 - 11:41 | 3129491 SilverMoneyBags
SilverMoneyBags's picture

Except that austerity is needed to balance the scales of our budget. If they do not reduce the rate of growth of the deficits, whenever interest rates reverse (which they will do eventually) then the interest will consume everything and be more of a negative impact than any reduction in spending.

Mon, 01/07/2013 - 13:16 | 3129805 linrom
linrom's picture

That's the goal of austerity--making room for interest payments.

Mon, 01/07/2013 - 11:42 | 3129492 Jim in MN
Jim in MN's picture

Let's also recall (oh ye students of the kleptocracy) that the continuous support for bankrupt institutions, AKA criminal fraud, AKA Japanification, probably costs us a cool 1% of GDP growth per year and dampens all real returns on 'regular' assets to more or less zero. As attested to by Bill Gross and many others.

Thus the economy is EXTRA SUPER VULNERABLE to 'austerity' because the rampant corruption is sucking the vitals out of savings and investment, not to mention the legitimacy of democratic institutions and the rule of law.

Etc. etc. etc....always the next boot to drop....states, pension funds, insurance companies....every green shoot will be grazed by the criminal global elites.  Austerity is just another distraction and another middle class screw job.

Mon, 01/07/2013 - 11:45 | 3129505 SilverMoneyBags
SilverMoneyBags's picture

How is it a screw job? Austerity is supposed to decrease the debt, if it does not, then its not called austerity. Public sector workers have been living fat and their labor costs are overvalued. If you make $60K for 30 years and retire and are upset you have a reduction in your pension, well, then screw you because you made enough salary each year to save.

Mon, 01/07/2013 - 13:01 | 3129760 Jim in MN
Jim in MN's picture

First, wage deflation isn't exactly a prescription for economic growth, despite your resentment of security guards and park rangers.  So remember that when your little business folds due to 'no one having any money.'  Only when real disposable income per capita recovers will we see sustained economic growth.  That means wages primarily (employment is just the precondition).

Second, it will be a middle class screw job because every lobbyist in DC will be figuring out how to 'save' the poor and the rich from any impacts.  So don't complain when new fees are put on your freeways, etc. to make up for the 'reduced government spending'.

The point is to be normal...as in rein in the excesses of the past 30+ years in terms of interest rates, tax rates etc.  Certainly there will be some pain and cuts in even worthwhile public programs...anyone who's been reading my stuff here knows I am all for reducing one's own sacred cow as a condition for being taken seriously (what's yours by the way or are you gutless?)...but the economy is more poorly positioned to do even that because of the bailouts, GAAP fraud, etc. 

So let's at least get the order straight.  The corruption is hindering the deficit reduction.  Blame the global elite and their pets in DC, not the public employees, whose wages are already falling anyway.  You are being suckered.

Mon, 01/07/2013 - 16:56 | 3130647 RKDS
RKDS's picture

Great post.  That is exactly what I keep trying (but, sadly, failing) to get people to understand.

Mon, 01/07/2013 - 11:42 | 3129493 Sudden Debt
Sudden Debt's picture

but... what if you can just print money to pay for it all?

Mon, 01/07/2013 - 12:13 | 3129607 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Indeed....

Mon, 01/07/2013 - 11:45 | 3129501 Sudden Debt
Sudden Debt's picture

Obama's TOP NOTCH austerity model:
The next president will do it... in 10 years or so...

if it works..l ALL HEIL OBAMA!

if it doesn't.... that's why Obama should have a 3rd term...

OUR SOLUTIONS ARE ALWAYS THAT OTHERS WILL SOLVE IT FOR US!!
It's a economic model these days!
It's called: "The others theory"

Mon, 01/07/2013 - 11:45 | 3129504 AccreditedEYE
AccreditedEYE's picture

It's as simple as: BUY. THE. Friggin. DIP. Just BUY it.

Mon, 01/07/2013 - 12:14 | 3129609 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I've been buying the dip in silver, does that count?

Mon, 01/07/2013 - 13:40 | 3129871 AccreditedEYE
AccreditedEYE's picture

Of course my man. Buy any dip as long as it's "each" and "every"... stuff only goes up. The past 4 years have shown us this can't NOT work.

Mon, 01/07/2013 - 11:50 | 3129521 Inthemix96
Inthemix96's picture

Well then, that settles it.

The next time I see paul krugman, I am going to kick that fuckers head in.  In fact I will go as far to say I will strangle the cunt with his intestines.

Keep an eye on cnbc for 96, (probably wont happen mind, seeing as I am in England)

Mores the fucking pity

Mon, 01/07/2013 - 12:05 | 3129575 reload
reload's picture

Plenty of good intestinal strangulation candidates in the UK surely.

Mon, 01/07/2013 - 12:42 | 3129709 Inthemix96
Inthemix96's picture

Plenty my good man.

Over here we seem to be infested with peodophiles in all major positions of power and influence.  The one who cracks me up the most is the right "honourable" Nick Clegg.  Google this cunt.  Never has a more willing candidate for "Most Waste Of A Human Skin" walked this green and pleasant earth, and he does deserve to be strangled with not just intestines, but his mother should be ashamed she didnt do it with his umbilical cord.

But no-one deserves strangling more, very fucking slowly than krugman, no-one.

Cunt.

Mon, 01/07/2013 - 11:56 | 3129534 Quinvarius
Quinvarius's picture

The whole system is designed to never have to go through austerity.  Austerity kills the system.  Our fiat is not gold backed.  There is no reason for austerity and no benefit from going through it.  It is a needless way to pillage the public.  If you cannot rely on savings to get you through austerity because your fiat is being devalued, then the whole goal of it is pointless.

The only way to keep the system going is the opposite of austerity.  Do not confuse this system with a real functioning economy or monetary system.  If you start thinking crazy thoughts like paper debt should be paid through real labor and goods and real pain, you will lose.  I am not trying to sound like a Keynesian.  This system is fucking stupid.  But like monopoly, it has rules.  Your money will always lose value, even if it is because someone else will print it for themselves to avoid pain.  Therefore, austerity just means no savings, no job, and no chance.  

Mon, 01/07/2013 - 12:06 | 3129572 Dr. Engali
Dr. Engali's picture

You are right. I try explaining this fact to people who want the spending to stop and they just can't grasp it.  The system can not continue unless there is never ending exponential growth of debt. Once the growth of debt stops the system dies. Is a sick twisted paracitic joke of an economy.

Mon, 01/07/2013 - 12:42 | 3129712 pods
pods's picture

Funny how you stated the obvious fact (to all who know about our real money system) in two lines,  while CHS seemed to miss that in his whole article complete with graphs, bold, etc.

My eyes glaze over and I lose interest when people try to make things complicated that are actually very simple (so if he did say it I apologize).

pods

Mon, 01/07/2013 - 12:46 | 3129713 Ghordius
Ghordius's picture

I disagree with both of you. you are not making a distinction between "the economy" and the financial system

this current financial system, perhaps. the economy, no

only because in a fiat currency system you can trade some of your future for your present does not mean that you are forced to do so

plenty of countries that reduced slowly their debts attest to this, so your convictions don't apply even to fiat, imho

----------

edit: now even pods joined in. ok, to spice it up, let's ramp up the arrogance volume: this is the opinion of most europeans "at the helm"

but what do europeans know about currencies and their limitations, you might say? it's not like they have any experience /s

Mon, 01/07/2013 - 12:54 | 3129730 Dr. Engali
Dr. Engali's picture

I suggesst you take a look at this:

 

http://www.google.com/imgres?hl=en&sa=X&tbo=d&rls=com.microsoft:en-us:IE...

 

 

The bulk economy  has been finacialized and revloves around skimming from the system where ever possible. Without the debt based fiat system this "economy" wouldn't exist.

Mon, 01/07/2013 - 13:06 | 3129757 Ghordius
Ghordius's picture

I'm looking at the US debt since 1968. at that time it was payable in gold, to foreigners. now that was a problem

the question is not IF the next trillion is going to be added, the question is WHEN

of course the dollar will die, eventually, fiat is mortal, but so is my dearest friend, who is seriously old and smokes, eats all the rubbish his girlfriend cooks AND all the rubbish his wife cooks, drives too fast (seriously, a sportscar to the max on unlimited-speed roads without speed governor), sleeps too little and has a few other very, very dangerous habits

a big deficit is like lighting the candle on the other end, too

it's all a very, very big time preference issue, like those the Austrian School addresses so well

but let's put it in a different way: how did the US pay most of the WWII debt back? magic? or just thrift? or - dreadful music on - TAXES?

nobody forces the US to spend more it gathers in taxes. it's all a question of political will

sorry if this goes against the grain, but I see an incredible propaganda effort in explaing that the current US-UK model cannot be changed, ever

even in those who see it as "doomed". I don't see the evidence, for that

only empty concepts like "it has been financialized" and "we wish for a big ball of fire" and "don't question, don't argue, it is the way it is"

Mon, 01/07/2013 - 13:09 | 3129778 Dr. Engali
Dr. Engali's picture

The U.S paid off its debts through the combination of growth and inflation. If it wasn't for the fact we were the only manufacturing game in town that debt would still be lingering today.

Mon, 01/07/2013 - 13:19 | 3129815 Ghordius
Ghordius's picture

in the fifties? you forget the very, very high taxes, particularly for the very rich, but also that inflation was not the same beast as nowadays, with a dollar convertible to gold (for foreigners only, though)

US-based MegaCorporations still play the near-only manufacturing game in town, they just shifted their machines elsewhere. you just forgot to tax them since decades, leaving the load on the small and medium US entities that aren't multinational

Hell, Apple alone has two Ts it does not even know what to do with, in "cash" - one freaking company

Mon, 01/07/2013 - 13:37 | 3129849 Dr. Engali
Dr. Engali's picture

Please don't fall for the old tax rate lie from the 50's. there is an enormous difference between tax rates and effective tax rates. As far as the mega corps go... The bulk of their manufacturing is not in the continental U. S. a big difference when it comes to tax revenue. Not only is there no revenue from the corp. there is none from the labor or from the supporting businesses that build around the factory in the local community.

Mon, 01/07/2013 - 13:41 | 3129890 Ghordius
Ghordius's picture

of course there is an enormous difference, on this I agree - in part only

let's put it in a different way: what would happen if the US would "reset" it's taxcode to the Ike/Nixon levels?

Mon, 01/07/2013 - 13:53 | 3129921 Quinvarius
Quinvarius's picture

There is a long and storied history of monetary and banking screwups wreaking havoc on economies and societies.  We live in this "current" financial system where the rules are what they are.  If you want austerity, on a debt based fiat system, with this much debt, you will kill it and the economy.  The economy and the financial system are not separable.  Remember 2008, the Great Depression, no??? 

It is clear you like to argue.  But you don't have a grasp on the situation or how the the debt based fiat system works at all. 

Mon, 01/07/2013 - 15:09 | 3130226 Ghordius
Ghordius's picture

If I remember correctly the US "Austrian School" is vehemently against your "mainstream view" regarding the  Great Depression and it's causes

they usually point to the previous slump, 1919 if I remember correctly (though financialization was less advanced then)

I also object on this preposition of "debt based fiat...", are you making a substantial difference between plain vanilla fiat and "debt based"?

Mon, 01/07/2013 - 18:51 | 3130996 Quinvarius
Quinvarius's picture

Absolutely no one in the Austrian school will tell you the Great Depression was not a financial/monetary/banking crisis.  It is a proof that banking and the economy depend on each other.

There are several differences between fiat you loan into existance and fiat you just print. 

Mon, 01/07/2013 - 14:02 | 3129963 pods
pods's picture

The economy depends on a currency for commerce.  That currency is created by loaning it into existence.  With interest attached.

You can show as many countries as you wish that pay off debt, but those countries will also show the aggregate debt rising.  

Government austerity is a problem because government deficit spending helps to grow the debt supply, which doubles as the money supply.

Governments tend to deficit spend when private debt creation falls off.  If the aggregate debt rolls over too much, a deflationary spiral of default will happen, and since the money supply is the debt supply, defaulted debt reduces the money supply, which will reduce the ability to service debt, which leads to default.......

A closed loop implosion of the money supply.

We faced that in 2008.  The government stepped in to alleviate the problem.  Now the FED.gov is responsible for creating the needed debt for the sytem to continue.  But the public has not deleveraged enough to take up the reins and create debt at the pace required.

And btw, we are NOT functioning in a FIAT money system. We are functioning in a debt backed money system.  And debt requires interest. Which is compounded.  Which is an exponential function, etc.  

pods

Mon, 01/07/2013 - 15:12 | 3130245 Ghordius
Ghordius's picture

pods, pls don't be mad at me, but I'm in hurry and it's - sorry - a huge amount of propaganda, to say it simply

where did this interest go? the FED? what happens then if you nationalize it? the banking system? the same...

x...x

Mon, 01/07/2013 - 13:05 | 3129770 michael_engineer
michael_engineer's picture

And if resource constraints force austerity regardless of economic opinions, then what?

Mon, 01/07/2013 - 13:11 | 3129791 Ghordius
Ghordius's picture

resource constraints? oh, they make themselves visible only in acts that require resources, for example wars

then you have a humble president that imbarks on a war that is supposed to cost max 60bn, and then at the end costs a couple of Ts

which of course makes the next humble war a difficult proposition

Mon, 01/07/2013 - 11:53 | 3129536 Future Jim
Future Jim's picture

"the narcissistic consumption promoted by Neoliberal Capitalism"

I call BS.

In "Neoliberal Capitalism" (a.k.a. the free market) there is no such thing as a free lunch.

Mon, 01/07/2013 - 13:26 | 3129837 Ghordius
Ghordius's picture

and why do you call "Neoliberal Capitalism" "the free market"? Is there no other "free market option" except the NeoLiberal one?

which leads me to ask how you define NeoLiberal policies

Mon, 01/07/2013 - 11:57 | 3129544 orangegeek
orangegeek's picture

WTI Oil still showing retracement in a bearish market.

 

http://bullandbearmash.com/chart/wti-oil-daily-closes-up-marginally/

 

Oil shortage when the economy is stalled.  Interesting perspective from the MSM.

Mon, 01/07/2013 - 11:57 | 3129547 Zap Powerz
Zap Powerz's picture

I would just like to say that I do not think central planning of a complex system like the US economy is a very efficient approach.

Less central planning.  More individual freedom.

But lets be realistic here.  Central planning isnt about success or efficiency.  Its about power and control.

We have "Top Men" planning our lives for us and then they get pissed off when we decided to do something else.  So then they plan our lives even more.  And we rebel even more.

This all ends when the Top Men are gone or the rebellious ones are gone.  The two cannot coexist.

Mon, 01/07/2013 - 12:13 | 3129604 adr
adr's picture

MMMMM, they're thinking of making sure all the rebellious ones are gone. Stalin starved millions of Ukrainians while they were looking at fields full of grain.

Mon, 01/07/2013 - 12:34 | 3129678 Bad Attitude
Bad Attitude's picture

Those Top Men/central planners want to be the ones who survive. That is why the push to disarm everyone else who might resist. As Dear Leader's hero, Mao, observed: "Political power grows out of the barrel of a gun."
Or, to put it another way, "Free men own guns, but slaves do not."

Mon, 01/07/2013 - 12:01 | 3129561 SilverMoneyBags
SilverMoneyBags's picture

If austerity actually happened and the economy took a hit, then prices would further deflate and offset any decrease the public sector workers would receive. Considering they have been living like fat cats for the past 20 years while the private sectors slaves away to fund government workers pensions, they should just really STFU and take their medicine. After all we all have to chip in our "fair share" right?

Mon, 01/07/2013 - 12:02 | 3129563 Freddie
Freddie's picture

Life is good.  It "don't" matter if you live in a cardboard box as long as you have the new iPhone 6.

Mon, 01/07/2013 - 12:06 | 3129576 s2man
s2man's picture

Or, mearly explain the current system as unsustainable:

http://www.bullionbullscanada.com/canadian-commentary/26040-time-to-talk...

Mon, 01/07/2013 - 12:09 | 3129587 Everybodys All ...
Everybodys All American's picture

Yeah we just got 6 trillion in austerity from Obama the last four years.

Mon, 01/07/2013 - 12:18 | 3129617 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

And a few trillion from Bush too. Where is this "rational consumer" when we need him?

Mon, 01/07/2013 - 12:11 | 3129596 adr
adr's picture

Good Job Charles, I hope you figured out the Ratchet Effect a long time ago. I became aware of it as a Freshman in college in 1995 when I wrote a paper on how the internet would destroy the world. Public Capitalism is a from of socialism, it can not work, just like socialism can never work.

It is actually the effect of Wall Street. A publicly traded corporation is forced to continue growth at all costs. This leads from focused business to wild expansion into diversification. The original core business is lost in the pursuit of ever higher stock returns. Business in effect ceases to exist and doesn't even matter. The most important person in the building becomes the CFO and his ability to fudge corporate accounting is the most sought after skill-set. Capital expenditures are not made to grow the business, but rather to maximize tax deductions. Employees are not vital members of a team, but useful rats turning the cogs.

The business of operating Walmart now exceeds 50% of the revenue from a sale. I have been told this by buyers at Walmart. Operating costs are so high that it is impossible to sell any product to Walmart and expect to make a decent profit, they simply can't afford to buy at a higher price. There are exceptions to the high margin practice in the electronics area, however the greater the focus on the low margin goods leads the push for higher margins on everything else. When a store is asking for 80% off MSRP as a wholesale price, it doesn't leave much room for you to make money.

We can also look at Nike as a prime example. What kind of company is Nike? You might answer "Sporting Goods". Well Nike really isn't a sporting goods company anymore. They are a marketing agency that places there logo on just about anything and takes a fee for doing so. Does Nike manufacture a single product anymore? The answer is no. Nike products are made in Asian factories alongside Adidas, Reebok, and just about every other shoe. Their baseball products were so piss poor, the pros wouldn't even touch them. Nike ended up buying professional gloves from Japan and having people sew Nike labels on them to give to pro players. Tiger Woods doesn't use Nike golf clubs, he uses custom made clubs manufactured by a small company that custom manufactures Titleists for pro golfers.

The ratchet effect or the rising wedge, leads to nothing but a scam economy. It becomes impossible to run a profitable business, so all business resorts to lies, coverups, and scams to hide the fact that the system itself if unsustainable. The game ended in 2008, we all got to see the truth for a very short time. Then the fraud machine went into overdrive to hide the truth from the people. We even got a fake president to buy off the weak minded. We have gone so far beyond the peak fraud that caused the 2008 crisis, it is unbelievable that it could actually happen.

It is the last defense of a group of people that would be hopelessly lost if the world returned to sound money and sound business. Can you really tell me that any Fortune 500 CEO could actually run a successful small business? They wouldn't know the first thing about cash flow, purchasing, inventory management, etc. They would actually not posses a single useful skill. That is why they defend this bullshit system to the death.

Mon, 01/07/2013 - 12:24 | 3129638 Salon
Salon's picture

That is not the fault of capitalism. You are wrong.

All austrians have acknowledged the imperfection of man, however market discipline always corrects these excesses and malinvestments eventually.

Depressions and bankruptcies are painful but it is the only way to enforce discipline and separate fools from their malinvested capital. Then people are more careful again and dont just believe the next press release from the CFO

By aborting the natural cleansing process we now have a monstrosity that is essentially bankrupt but we have to hide it in more devious ways. We are continuing the malinvestment and suffering low growth because of it.

Corporate excesses occur every few generations and are corrected by the market. Free market capitalism does work if we would ever try it.

But people were afraid to let it do its cleansing of the system and collapse all the banks. Hence here we are in a fascist corporate state now.

Mon, 01/07/2013 - 12:16 | 3129610 Salon
Salon's picture

LMFAO!

There is no austerity! We have become a land of girlly men.

The last time we had such huge deficits the free world was at risk from the Nazi war machine.

We are such pussies now. We run up war level deficits for what?

Mon, 01/07/2013 - 12:18 | 3129616 Stuck on Zero
Stuck on Zero's picture

Those are least capable of fighting for their jobs in a Socialist state are those who have the least time to do so i.e. people who are producing something.

 

Mon, 01/07/2013 - 12:21 | 3129629 mess nonster
mess nonster's picture

100 years ago we, the Financial Elite, brought forth on this continent a new Central Bank, conceived in iniquity, and dedicated to the proposition that all men are mindless sheep, ready to be slaughtered.

Now we are engaged in a great economic crisis, testing whether that Central Bank, or any Central Bank, so conceived and so dedicated, can long endure. We are met in a secret conclave, under the shadow of a giant owl. We have come to sacrifice several children as an offering to those whom we worship that our Bank might live. It is altogether fitting and proper that we should do this.

But, in a larger sense, our dark rituals are worthless. The brave men, living and dead, who struggle against our evil plans, have destroyed us, far above our poor power to add or detract. The world will little note, nor long remember our identity, but it can never forget how we were defeated. It is for us the Elite, rather, to be sacrificed here to the unfinished work which they who fought us have thus far so nobly advanced. It is rather for us to recognize the great task remaining before us—that we should attempt to destroy these heros, and bring them down into the general ruin- to this we give the last full measure of devotion—that we here highly resolve that those who oppose our tyranny may have died in vain—that this nation, under our financial power, shall be utterly reduced to bondage—and that government of the people, by the people, for the people, shall utterly perish from the earth.

Mon, 01/07/2013 - 12:45 | 3129716 toomanyfakecons...
toomanyfakeconservatives's picture

Conceived in inequity. I'm not the spelling police, but yes, inequity is the very foundation of central banking.

Mon, 01/07/2013 - 12:30 | 3129658 QQQBall
QQQBall's picture

Work hard, invest, live well below your means and if you must, borrow when interest rates are high.

Mon, 01/07/2013 - 12:32 | 3129667 q99x2
q99x2's picture

The US also make money on killing Arabs in the Mid-East and Blacks in Africa. And, there's no shortage of killing to be done.

Mon, 01/07/2013 - 12:39 | 3129701 Hayabusa
Hayabusa's picture

Krugman?  Comon all, haven't you figured it out yet?  Krugman and the rest of the cronies are NO smarter than the rest of us out here.  They are not leaders, they do not love/care for you, they only wish to preserve the status quo any way they can, for as long as they can while protecting the banksters, special interests, etc.  You'd better start asking yourself what electing leader(s) has done for you.  I've come to the conclusion I don't need anyone to lead me, period... unless I wish to follow them into hell while they are concurrently promising heaven.  Some of you need to grow up and quit depending on others to do your dirty work.

Mon, 01/07/2013 - 12:45 | 3129718 JR
JR's picture

“If we signed over to the money-lenders all of America we would still owe them two more Americas (plus their usury, of course!).

“However, they are too cunning to take title to everything. They will instead level you with some ‘illusion of ownership’ so you and you children will continue to work and pay the bankers more of your earnings on ever-increasing debts. The ‘establishment’ has captured our people with their ungodly system of usury and debts as certainly as if they had marched in with uniformed army.” – Sheldon Emry, Billions for the Bankers Debts for the People: The Real Story of the Money-Control Over America, 2001

Think this over deeply. This is about economic power and justice. This is about people working for a living and saving for a future and supporting a nation that will protect those values… that will protect their property rights… that will protect their jobs and their futures.

They paid the taxes, they provided their loyalty to the union, and it is being undermined. This is not about race; it is not about religion; it is about justice. This applies whether it be a Muslim nation, a German nation or an American nation.

The central planners’ goals are the goals of Communism – to reduce the power of the people and place it in the hands of a universal state that will take care of everything. BUT WHEN YOU LOOK AT THE STATE, IT’S MAO, IT’S STALIN, IT’S BERNANKE. THEY ARE THE SLAVE MASTERS.

Karl Marx would have turned all of the people over to a dream, to a proletariat paradise, to a Utopian state. But it turns out it’s not a state; it’s another employer and this one with an army.

The Crime: The value of a dollar issued in 1800 went below its original purchasing power once, to $.93; its purchasing power was $2.04 in 1913 when the Federal Reserve took control of the U.S. monetary system.  By 2005, the dollar’s purchasing power had dropped to $0.08. The tool of stealth that steals the wealth is inflation, the recipients of the power and the wealth are the owners of the Federal Reserve System.

Mon, 01/07/2013 - 12:56 | 3129746 Vince Clortho
Vince Clortho's picture

Austerity?  Where?

In a counterfeit money economy, austerity is unnecessary.

The Fed is printing 85 Billion/month to keep this carnival floating.  And they can bump that up at any point.  And they soon will.

Party on.

Mon, 01/07/2013 - 12:59 | 3129753 busted by the b...
busted by the bailout's picture

Such nonsense.

"Why Austerity Is Triggering a Crisis"

What austerity is he talking about?  What crisis?  The new Russell 2000 high?  Continued job gains? House price increases?  Record low mortgage rates?  There is no crisis being "triggered"; at most it should be "may be" or "could be", but no that isn't scary enough.  And there is 100% certainty of it, no chance for other outcomes.  What a crock. 

His analyses have more holes than Swiss cheese.

I thought government spending was bad, so how can austerity also be bad?  I guess this guy is a Keynesian, not a free marketeer.

 

Mon, 01/07/2013 - 13:32 | 3129854 JR
JR's picture

But it’s true. If Americans stop the borrowing, stop the spending, stop the debt, the Fed ponzi collapses. Without borrowing to keep dollars circulating in this debt-based synthetic monetary system, we starve.

And it’s happening now. The empty store fronts are multiplying as fast as the empty house fronts. Are you going to believe Helen Solis of the BLS and the rigged markets or your “lyin’ eyes”?

Bernanke is stealing from Peter to keep the Russell in positive territory; this is hardly evidence that we are not in crisis.  Bernanke is paddling as fast as he can to divert the deflationary drain, because, this time, deflation may mean total collapse of western civilization.

Devastating deflation, the crack-up boom and breakdown of the whole monetary system, if it occurs, is caused by the inflation the central bankers and government run up. “The boom can last only as long as the credit expansion progresses at an ever-accelerated pace,” said Mises in Human Action.  “The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.  But it could not last forever even if inflation and credit expansion were to go on endlessly.  It would then encounter the barriers which prevent the boundless expansion of circulation credit.”

Mon, 01/07/2013 - 17:47 | 3130785 busted by the b...
busted by the bailout's picture

 I don't see many empty storefornts in my area and it hasn't changed in recent months.  What has changed is  houses for sale are disappearing and prices are going up.

You are talkiing about the ongoing recession since 2008.   CHS appear to be taking about a new crisis being triggered; I don't see that and I think he is full of beans.

I'm not a proponent of QE to infinity, but I don't think it has brought forth a collapse of the entire economy either.  We were close to that in 2008 BEFORE QE.

As for stopping the spending and tanking the economy, that has been true for decades.  In an economy that is 70% driven by consumer purchases, of course stopping spending is going to slam the economy.  But Ben and QE didn't cause this.  "They" are merely trying to keep air in the balloon that popped in 2008, until the economy heals sufficiently that they don't need to do it anymore.

Is an economy dependent on every increasing credit bad?  Not if the demographics are favorable, but in a world of slower population growth, yes, it is bad because it is unsustainable, imo. 

So what is your cure?  It took us decades to "evolve" into this kind of financial / debt driven economy; how are we going to change it now, and into what?  Criticizing the current policy is easy; replacing it with another without causing the very collapse you describe is difficult, imo.

 

 

Mon, 01/07/2013 - 13:00 | 3129756 busted by the b...
busted by the bailout's picture

Such nonsense.

"Why Austerity Is Triggering a Crisis"

What austerity is he talking about?  What crisis?  The new Russell 2000 high?  Continued job gains? House price increases?  Record low mortgage rates?  There is no crisis being "triggered"; at most it should be "may be" or "could be", but no that isn't scary enough.  And there is 100% certainty of it, no chance for other outcomes.  What a crock. 

His analyses have more holes than Swiss cheese.

I thought government spending was bad, so how can austerity also be bad?  I guess this guy is a Keynesian, not a free marketeer.

 

Mon, 01/07/2013 - 13:18 | 3129811 CharlesFilson
CharlesFilson's picture

Makes me wonder if maybe Milton Friedman's negative income tax would be a reasonable policy. As much as I am against government spending, perhaps putting a safety net in place (that is less complex than the one we currently have) would reduce the 'fight for your life' reaction to austerity.

The current safety net is complex and a fertile field for waste and feifdoms...maybe a very simple negative income tax equasion would also reduce the opportunity for politicians and citizens alike to game the system.

 

Mon, 01/07/2013 - 13:35 | 3129867 proLiberty
proLiberty's picture

"Austerity" in the upsidedown, inside-out world of Keynes means printing less money to pay for social spending.  Total "austerity" would be having a balanced budget.   That would mean the end of the world to the Welfare-Warfare Leviathan State.

 

Mon, 01/07/2013 - 14:09 | 3129905 AgAu_man
AgAu_man's picture

If trees and leaves were like our economies, trees would keep growing and few leaves would be allowed to fall... And then only small ones.

"This is The (Kondratieff) Winter of Our Discontent." Hope to see you in Spring.

Mon, 01/07/2013 - 14:08 | 3129985 falak pema
falak pema's picture

the high cost basis is huge malfeasance and cheating; you can forget all the other arguments.

Tue, 01/08/2013 - 11:45 | 3132958 Neo1
Neo1's picture

Use federal reserve notes and incur an Irrecusable obligation. The puzzle is complete!!!

A Banksters defeatism (realization of defeat) nightmare, Being forced to Return to Real Money=United States Note=Lawful Money, Use the Remedy within the Federal Reserve Act. Redeemed 12USC411, Refusal Penalty 12USC501a http://savingtosuitorsclub.net  Stop being a Slave!!!!!! This is Tax Free Money!!!!!!  http://stormthunder.com/

Convincing Congress to Abolish the Fed  http://www.silverbearcafe.com/

Wed, 01/09/2013 - 05:18 | 3135643 lmile61
lmile61's picture

May be the main motive would be malfeasance and cheating!!! ecommerce web development

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