Europe's Fauxterity In Three Simple Charts

Tyler Durden's picture

Now that the absolutely irrelevant debate over the applicability of the 90% debt/GDP Reinhart and Rogoff hard cutoff for sovereign growth is supposedly over due to an excel mistake of the type that JPMorgan did at least once to misrepresent its VaR both internally and to public shareholders (which to a large group of supposedly people is equivalent to supporting the notion that a record debt global conflagration can only be resolved with even more debt), perhaps the debate can shift to another question: why despite all the bickering and complaints, Europe never actually engaged in austerity, in spending or debt cuts, and that the primary reason the people's plight in the periphery worsened in the past three years is nothing more or less than gross political and governing incompetence?

Exhibit 1: the only two countries in Europe that have actually reduced government spending are Iceland and Hungary (and Ireland has done a good job of keeping spending flat). To everyone else: please complain about austerity louder - maybe it can mask the fact that you never actually implemented any in the first place.

Exhibit 2: change in public debt. No comment necessary

Exhibit 3: Has the surge in debt resulted in any increase in growth? Yes. If by yes one means no of course.


Finally, here is why the R&R defintion is completely meaningless - debt is fungible, and in a ZIRP world in which all debt is backstopped by central banks, not just sovereign, the true metric is consoldated debt to GDP, not just government. That chart, as Morgan Stanley reminded us some time ago, shows that 90% is a completely irrelevant metric.


But wait, there's much more!

When one adds contingent, off-balance sheet liabilities that are not represented by currently funded debt, including healthcare, pension and various other soon-to-be-debt-funded guarantees, things get simply ridiculous:

So don't worry, and spend, spend, spend (on credit of course), not because someone made and excel error, but because it's not like there is any hope of any of these trillions and trillions in current and future obligations will ever be honored and/or funded.

Inspired by Sean Corrigan of Diapason

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lolmao500's picture

Yet the Krugmanites, Obama and Bernanke worshippers will still claim that austerity is the cause of Europe's depression.


knukles's picture

Political and economic incompetence?  Ah-hem...

Why is it any of them goodie two shoes don't recall that Yuurp had already turned south (LOL, pun not intended!) Before Austerity had even Been Implemented!
When they was just Talkin' about it?
Yack, yack, yack, yack, yack....

Nobody remembers?
I know.

Get lost Knuks.


bank guy in Brussels's picture

Deceptive ZH word game above on the concept of 'austerity'

Tyler is being a little disingenuous here, and being quite misleading

Two extremely DIFFERENT meanings of 'austerity'

austerity (a) - lower gov't spending overall - This is NOT what is meant in almost any article about Europe, although this is what Tyler keeps pretending it means

austerity (b) - ravaging, life-destroying cuts in worker incomes, worker pensions, or minimal benefits for a decent life, while government debt and budgets are  loaded up and increased to pay interest to banks and banksters - THAT is the MEANING of 'austerity' as millions of Europeans know it and suffer it

And austerity (b) is the reason why anti-euro parties are forming and surging, and while the euro-zone is going to explode into pieces before too long

Tyler would be more helpful not playng this word game on ZH, always pretending Europe is talking about austerity (a) and not the life-destroying austerity (b)

ronaldawg's picture

"Plus big problem is timing the language to scientific advance. 

Smith:  'Yes'

It is a beautiful thing the destruction of words.  You haven't seen the dictionary 10th edition yet.  It's that thick.  The 11th edition will be that thick (motions half). 

Smith:  That's when the revolution will be complete when the language is perfect."


Austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies can include spending cuts, tax increases, or a mixture of the two.

Your definitions are Double Plus good.

Seer's picture

Why even make it This complicated?

That which cannot continue forever won't.

Perpetual growth...  We can play around with all sort of charts, label things this and that, but in the end it comes down to whether there are resources available in which to sustain our way of living.

What is being killed is what would be killed by Mother Nature's own hands.  We humans just pretend as though we have ANY control over this at all (clearly, given our TOTAL all-in investment in the perpetual growth meme, we have given ourselves ZERO control at keeping ourselves from plummeting off the cliff).

All the "money/debt" stuff actually Does link to real resources.  It behooves people to reduce their dependencies: if Wall Street doesn't do it Mother Nature WILL.  The world is pretty much stuck in a recession and the price of oil is STILL around $90/bbl!

shovelhead's picture

Everybody loves to party hard but nobody likes the hangover.

The bartender doesn't give a shit...He gets paid anyway.

Vampyroteuthis infernalis's picture

bank guy, that is what Tyler is getting at. More money is being spent. It is being spent on banksters and their endless bailouts along with their gov't cronies. Cronie capitalism at its worst. Little dude doesn't count. 

Diplodicus Rex's picture

Bank Guy,

Whilst we're in the vein of getting our definitions correct and hence a clearer understanding of this issue lets talk about what perpetual government debt actually is. The word perpetual in this context means that it will never be paid off. This much is mathematically certain. So, a loan which is taken out with the express intention of not paying it back is simple theft and fraud. Period. Now, who are the beneficiaries of this theft? Certainly the banks for a start. However there is another group of people who benefit from this fraud and that is all of the government workers, benefit recipients and public pension recipients. These receive the benefit of the fraud directly since their salaries/benefits are paid by the government with stolen money. Indirectly, the rest of the pupulation benefit as a secondary effect because the primary recipients spend the money on stuff that the rest produce, whether it be goods or services. In effect the entire population benefits from the fraud, just some much more than others.

Now what might the other definitions of austerity be. How about stopping the theft and fraud? How about telling the truth and spending what one can afford to spend? Seems reasonable on the surface. However, lets look again at all those government workers who must now lose their faux jobs and their faux pensions because they believed the lie they were sold. Now that they're buying less goods and services then the rest of the economy plummets and the private sector unemployent also takes a hike. Doesn't the situation now look very similar to the faux austerity you described above?


It reminds me of the old adage about the bloke who goes to the doctor and says, "Doctor, Doctor, my brother thinks he's a chicken". The Doctor gives the man a bottle of pills and says "Give these to your brother and he'll be fine in the morning". However, the man retorts "But Doctor. You don't understand.......We need the eggs "

If you're looking for a pain-free way out, I'm afraid it doesn't exist. At some point (in the near future) the truth will be forced upon us all, collectively and there will be a return to living within ones means. That will be catastrophic to the whole population for the reasons stated above. However, once again, the pain will not be spread evenly. The first wave will hit government workers square in the face. The remainder a short while later. Those who have seen this coming may suffer slightly less because of varying degrees of preparation.

Whilst I'm not disagreeing with your analogy above I sense an argument that if the bank theft wasn't going on then the population would be fine. Unfortunately that is not the case. The population is conducting its own theft (via government debt), albeit, for the most part, unknowingly.

Dudeskis's picture

I would argue that (a) and (b) are one in the same.  The "European" economic and political model assures that a citizen's life, income, pension, healthcare, and other benefits are largely affected by if not solely dependant on government spending.

This austerity is a society beeing weaned off a terminally poisonous teet.

The Dancer's picture

And the answer is...every institution by it's very nature will be corrupted sooner or later, usually sooner, like's the human condition...on every continent too....every church, every school, every government, every bank, every politician...shall I continue...nah

TBT or not TBT's picture

Evil is incorruptible, so there is always that you can count on.

Debugas's picture

austerity is the cause but not the only cause.

we need stimulus but not the type of stimulus we have seen so far

lolmao500's picture

The only stimulus I will consider is a stimulus that includes politicians, medias and banksters heads on pikes.

New_Meat's picture

but that covers so few, how 'bout shutting off all of the SNAP/EBT programz?  That would stimulate some shit, don't cha' know.

- Ned

ronaldawg's picture

I prefer tar and feathers - Ye ole' school.

Dudeskis's picture

Gun and ammo sales are already stimulated beyond supply.  Shut off the SNAP/EBT and bullets will be trading higher than their weight in gold.

Seer's picture

"we need stimulus but not the type of stimulus we have seen so far"

So, you're just going to leave us hanging on the edge of the cliff?  Do we have to buy your book to find out what "type" will be the magic bullet?


Pool Shark's picture



Sung to the tune of "Tomorrow" from Little Orphan Annie:

Our budget should be elastic,

never pay with cash when you have plastic.

I'll borrow; I'll borrow,

I'll mortgage tomorrow,

and payback another day...


Colonel Walter E Kurtz's picture

Yes they increased spending, but each would have probably increased it twice as much, so it is a cut!

I think I am starting to get the hang of this gubmint thing. Where do I sign up for a job in the public servant sector!


New_Meat's picture

O6W: you sir have hit the X.

Your next step is to explain to all of us the basis of "Baseline Budgeting".

- Ned

nmewn's picture

Oooh oooh can I take this?

The process of federal government accounting where there is NEVER an actual cut in overall spending. Any "cut" broadcast over the government airwaves (formerly known as MSM) is only a reduction in the growth of the federal budget.

The spending YOY is actually greater than the previous year...always.

So the statist strawman premise remains, if only one child can be saved from a future of complete debt enslavement to "the man", it will still be worth it ;-)

Atomizer's picture

How much of that is subsidized through IMF SDR's? Just asking.. Heeheee

New_Meat's picture

"Europe's Fauxterity"

Hmmm, Elizabeth Warren must be advising the Troika, how else could that happen?

- Ned

nmewn's picture

Not to worry, she's only running on 1/32nd brain power ;-)

optionsman's picture

true austerity would mean a step towards markets with free price discovery. unpossible......

debtor of last resort's picture

Would you eat what lies in the sand, just in front of you, while looking at the smiling ape on top of the rock?

syntaxterror's picture

The era of being able to honestly generate interest on savings has come to an end. Due to socialist fucktards in Europe and in 'Merika, those days are over. ZIRP is here to stay forever to keep the Free Shit Army and the Sovereign Debtserfs in business.


Seer's picture

"The era of being able to honestly generate interest on savings has come to an end."

Principal and interest could NEVER be paid off in total, therefore somewhere the equation is faulty.  Close scrutiny of this could only but conclude that it is anything but an honest system.

Welcome out of ignorance. THAT is the only thing that has changed.

Really, making money off of money, could anything be MORE make-believe?  When the party was going well the illusion was strong.

Exponential functions only survive on paper..

piliage's picture

Hmm. This is only true if none of the loans made increase productivity. If a bank made a loan to a company to buy a new piece of equipment that generated 20% more productivity, then paying off a loan at 4% is very do-able. In fact, this is the historical way earnings and wages were able to rise. Of course, this is back when banks actually acted like banks...

TBT or not TBT's picture

You are talking about capex. The "capital" part of capitalism. Don't be silly. With the demagogues running wild capex doesn't happen. Regime uncertainty they call that. Bold and persistent experimentation by the government on behalf of the People. It's what made the Great Depression "great".

Atomizer's picture

Why not have a giant paper shredder party and just declare collateral damage?



The Dancer's picture

I expect a big pow wow soon...similar to Bretton they can all "strut and fret their hour upon the stage"...bla,bla...

New_Meat's picture

some of the anti-1%-erz would consider such a so-called "pow-wow" a target rich environment..  Those around here will bleet and contribute nothing toward PROGRESSS!

- Ned

W T F II's picture

Not All..but some, Yes.

Seer's picture

There's insufficent natural capital available to do a big, global Happy Dance.

W T F II's picture

What if...they ended it all and came out with a "New Order", not the kook-fringe NWO, but a REAL ONE...?? It may not be far away.

Methinks some BIG S#!T is coming out of the blue...SOOoon.. (as in "kick-the-can" soon..!!) These folks have been obfuscating the #s for the masses to consume the BS. They are not idiots. Take Merkel. A PhD engineer does not know math..?? Of course she does. As such, she KNOWS this is all s#!t...ABSOLUTELY KNOWS IT...!! But, outside of Greece, NO sovereign default in the 'modern era' (and there have been around 50+ since WW II) is EVER pre-announced. In fact, it is the opposite. "Denial Until D-Day" is ALWAYS the way.

Like "The Dancer" alludes to above

Seer's picture

I agree with the essence of what you're saying, but I just don't think that there's enough traction.  Usually big "solutions" occur at the bottom, say following big wars, or while things are going up.

There's a LOT that goes into all of this.  Here's a great read (historically) on Bretton Woods:

The United States, Europe and Bretton Woods II

It concludes:

Bretton Woods was ultimately about the United States trading access to its economic might for political and military deference. The reality of American economic might remains. The question, then, is simple: What will the Europeans bring to the table with which to bargain?

Euro is getting stomped.  Soviets are at Europe's back door (well, Germany seems to be equally as threatening).

There's not even enough left at the table to keep Bretton Woods I going, let alone step up to a Bretton Woods II.  I think that any opportunity was completely lost when the US went on its "spreading democracy in the ME" rampage.  There are no longer any allies with any real wealth-producing abilities to team up with the hold back the Russians and Chinese.  And... well, the Russians and Chinese aren't really wanting to help fund the US's military...

TBT or not TBT's picture

Russia and china are demographic deathbed economies, and will flail dangerously as they go down. Europe's decline has been slow but relentless, with again, demographic decline, aging grinding ther prospects to dust. The USA is in better shape stategically, and demographically, hn any of these crisis ridden messes.

CDNX fan's picture

I love the OUTRAGE in Stockman's book "The Great Deformation"...he was "one of 'em" until he found the Light but he sure nails it with "the Chinese printing press" and the "Wall Street Casinos". How do you Yanks feel knowing you paid for their stupid fucking sub-prime trades and then they turn around and trash the gold/silver markets with an avalanche of naked shorts? I would NEVER enter a card game with thieves like this EVER. Deck is stacked; your drink is spiked; they have cameras everywhere; and they have two Romanian thugs waiting at the door to roll you in case you get lucky and win a hand. Fuck that.

williambanzai7's picture

Is it already time for Guy Fauxterity Day?

New_Meat's picture

WB7, I'd presumed that you had the Contract for all of the publicity flyers.  Not so?

Dang, are they going with the lowest bidder v. the most effective at a good price?

Fucking MBAz are screwing up the entire world, as henchmen for bankstaz, n'est ce pas?

- Ned

q99x2's picture

The dam has burst. The flood waters are raging down the mountain side towards the city.

There are rumors of nukes and financial collapse as bankster terrorists prepare to physically attack the citizens of sovereign nations.

The sequence of events are constellating according to time. Simulation fails to consider the nuances of liabilities and willingness of the human to accept.

Everything is ok and when it is realized it is not the end shall have already taken place.

Don't worry. Be happy.

Monedas's picture

Socialist governments can't say no to anything .... except lower taxes, less regulation and military !

yogibear's picture

The paper game isn't working out Bernanke, Evans, Dudley and Yellen.

Bernanke's holding it back until Yellen takes the helm.