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Austerity Isn't Negative - It's Essential To Good Planning And Decision-Making
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Austerity and crisis are not negative--they are the only dynamics that force smart thinking and the re-alignment of values, resources and strategic goals.
Unsurprisingly, the status quo position on austerity (real or imagined)--that it's terribly, horribly negative--is precisely backwards: austerity is the one essential positive motivator of productive strategic planning, prioritization and decision-making.
By austerity, I mean a broad-based definition: when resources are not up to the demands of the status quo. In other words, austerity is a relative term; for the household accustomed to a lifestyle that requires $15,000 a month, a cut to $10,000 a month is a drastic austerity budget, even though the $10,000 per month budget is insanely bloated to those managing on $3,000 per month.
The dynamic of austerity being required to force productive planning, prioritization and decision-making is scale-invariant: that is, it applies to every bit of the spectrum, from individuals to couples to households to small enterprises to communities to corporations to government agencies to nation-states.
For a military machine accustomed to expanding outlays and a $700+ billion annual budget, a cut of $50 billion is viewed as extreme austerity--even though it wasn't that long ago that the Pentagon budget was well under $500 billion.
An insightful article in the latest issue of Foreign Affairs describes how austerity has in the past forced the U.S. military to realign resources with goals via hardnosed, realistic, productive strategic thinking: How Budget Crises Have Improved U.S. Strategy.
When there is funding for every program and response to every potential threat, money is thrown around without regard to strategic planning, which is the process of assessing and ranking risks and threats and formulating a strategy that prioritizes resources and goals: in other words, smart planning.
the author of the essay neatly summarizes this process:
"In World War II, the paucity of the resources on hand actually forced U.S. policymakers to make tough but smart choices. A combination of austerity and crisis helped forge a core strategic concept, a new threat assessment, an appreciation of the indissoluble links between interests and values, and a calibration of priorities."
The dynamic of austerity coupled with crisis is the key driver of smart, strategic planning for individuals, households, communities, organizations, enterprises and nations; without austerity/crisis-driven assessment, prioritizing and planning, resources are squandered on impractical, low-yield distractions that have been jumbled up with key priorities by muddled, politically-expedient thinking.
If you have enough borrowing power to fund everything that every politically potent constituency wants, you are ontologically (inherently) ill-prepared for crisis. Muddled strategic planning leads to a confusion of competing priorities, none of which are integrated in a grand strategy with clear goals, priorities and planning.
Historical analogies abound; here is one. In a previous Musings (When Risk Is Separated From Gain, The System Is Doomed, Musing Report 47, 2011), I discussed Japan's muddled plan for the Midway campaign in World War II, a convoluted political marriage of competing Army and Navy plans. Rather than clarify the goal and prioritize the means to accomplish it, the Japanese high command attempted to please every key power center by combining each constituency's ideas and goals into a complex tactical plan that worked politically but which was militarily diffused and internally inconsistent. Junior officers' well-founded critiques of the plan were suppressed by top brass fearing political blowback.
The end result was a completely avoidable military catastrophe that essentially ended Japan's hope of prevailing in the war: four aircraft carriers sunk, the cream of the Navy's carrier pilot cadre lost. These losses forced a shift of strategy from expansion and victory to defense and a vain hope for a favorable settlement of hostilities.
This failure to force clear strategic thinking was the natural result of Japan's string of early victories, which generated a widespread hubris in the leadership, i.e. the belief that available resources could magically accomplish any goal conjured by central command.
This is a precise analogy to the U.S., not just militarily, but every facet of its society and economy: politically expedient, kick-the-can-down-the-road "no limits on anything" means no strategy, no priorities, no planning and ultimately, no clear thinking at the top, which then guarantees complete failure.
This perfectly captures the essence of the Affordable Care Act (ACA or ObamaCare) monstrosity: a program intended to satisfy or placate every politically powerful constituency is a muddled, complicated mess doomed to systemic failure on multiple levels.The ACA was ultimately a political plan which ignored (thanks to a complete absence of austerity) the actual resources of the nation and its bloated, inefficient, perverse-incentivized healthcare system.
Austerity and crisis are not negative--they are the only dynamics that force smart thinking and the re-alignment of values, resources and strategic goals. Trying to fund everything to please or placate every powerful constituency ends up failing everyone in catastrophic fashion.
This essay was drawn from Musings Report 51, one of the weekly reports sent exclusively to subscribers and major contributors (i.e. those who contribute $50 or more annually).
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Austerity (less) and addiction (moar) don't mix well.
<However in Orwellian speak moar is less.>
smart, strategic planning for individuals, households... and nations
NO. What nations do, they do by FORCE. They TAKE their income from people.
Nations operate on a plunder model. Individuals, businesses, etc. operate on a voluntary model. The differences are fundamental.
We use to call it balancing a budget......now we use the scarlet word Austerity.
Don 't go to the Eiffel Tower to celebrate the New Year!
http://www.youtube.com/watch?v=39X4sXc0Ubc
If people practiced austerity in their daily lives...every day of their lives, they would have saved for the future and while our governments may rob us blind in the process, if we had saved for the coming collapse, we could largely tell them to fuck themselves. Instead we have bought into the infinite growth theme that tells us to spend with abandon (for the good of the country) and worry not about those future bills as "growth" would take care of it. Instead of saving for the future, which would have required us to practice some self restraint against our programmed need for MOAR, we have bought full in. Debt is the issue and dependency and submission is the agenda. We NEED our stuff. We demand our stuff and if we don't have the money we demand more credit and if that isn't enough we demand it provided as we are entitled. Austerity is the flip side of entitlement.
"NO. What nations do, they do by FORCE. They TAKE their income from people." this is fundamentally correct. and they don't like people who aren't loyal citizens of one of them. so? do you have an army with you, which is the only way to keep other nations from annexing the territory where you live? and if you do have an army controlling a territory, aren't you a sovereign yourself?
yet your "Nations operate on a plunder model" is incorrect. and irrelevant, then even if it was this way, you still can't spend more than your plunder forever
btw, plenty of individuals and businesses who do operate on a plunder model. my favourite form for discussion - even before the barbarian horde - is the pirate company. plenty of entrepreneurship, very private(er), very anti-statist and very capitalistic. lots of hard work involved. good chaps, really, except for the business model
A addict who loses acces to his drugs will look for a substitutendrug in order to keep control.
During the war, the power came from patriotisme and wat itself which was also destroying the country. Nobody expected a free lunch because the people all joined as one.
In peacetime, to keep the people at one they need to give away gifts untill there are no more gifts. And than the addicts will look for something else.
Unfortunatly, when there are no more gifts, greed and wrath takeover and the people start looking at the other countries where the people still receive gifts.
So in a third state where the US finds itself now is that the country risks to become a invader to steal other countries assets. And when the US turns evil... god helps us all because that will turn into a global war against the US that will destroy society as we kwow it.
That third state is where the addict starts to steal and murder to get access to everything. Or... it becomes the prostitute.
Nah,
It's actually worse than that.
If we just went in, kicked ass and stole their shit, that would make sense, in a thug kind of way.
Instead, we spend hundreds of billions to kick ass so they will continue to sell oil at market price, but they have to use our fake money to do so.
See? Because if we had to use real money to buy oil, we couldn't afford any.
Trust me...It's a fake money kind of thing. Works real well if you get to make the stuff.
Kinda sucks if your stuck having to use it though.
America...We didn't invent fake money...but we made it popular world wide.
Sort of like Elvis and Rock & Roll. With guns.
all of this scarcity mentality is more propaganda and conditioning from the overlords.
the truth is, if there was a level playing field to BEGIN WITH there would be no need for austerity or an economic crisis or most wars.
Austerity got a bad name based upon the experience in Europe. However, European austerity is a false definition, namely, raising taxes and slowing the growth of government spending. There has been no real austerity outside of Greece. If there were real cuts in spending, coupled with tax cuts, the economy would perform much better. There is so much waste and duplication of services, that if the politicians had some balls they could make serious cuts without adversely affecting the economy.
"Austerity got a bad name based upon the experience in Europe. However, European austerity is a false definition, namely, raising taxes and slowing the growth of government spending. There has been no real austerity outside of Greece."
I don't think that there has been real austerity in Greece, either.
Austerity has gotten a bad name by liberals, who want to spend and spend tax payer money, so they want to paint austerity as something that doesn't work.
You got 4 red arrows for this comment? This is Zerohedge, right?
Austerity is like chemotherapy. If the patient is too weak or the dose is wrong the patient dies.
This is why Europe continues to fail.
Austerity has never been a solution or fix to anything. Austerity is a way of life. It used to be a way of life for many who survived the great depression. Austerity is the willingness to postpone consumption today for the security of survival in the future. My parents followed a life of austerity in that they saved for their retirement, for their health issues, for their vacations, for their unemployment, for everything they thought they might want or need in the future. Few practice austerity today, quite the opposite. We don't save for the future, we spend the future today. A life without austerity is a life with no future other than what luck...or God might provide. I think we are seeing what kind of future that is.
True austerity requires three things:
1. Belt tighteningto eliminate waste
2. Prioritization in order to allocate capital to those items that give the best return
3. The means to achieve the above and in particular jobs.
You can rightly deprive them of borrowed caviar but are you providing them with the means to grow their own bread?
The people to whom you wish to give other peoples' money, are the same ones that gave you the cancer (too much spending).
"This is why Europe continues to fail." - which Europe? if we are talking about austerity, plenty of different cases. you can't talk about Hungary, Sweden, Portugal and the UK as having the same monetary and budgetary policies in place
and if you are talking about stocks, then remember that Bernanke's tide does not lift all boats equally
"there is none so blind as those that will not see"
the solution is either a system reset (abolition of all fiscal and monetary policies and repudiation of odious debt) or trillions don't matter in the vastness of an infinite universe.
in the long run we are all dead so nothing matters or we should actually care about generational wealth...hmmm
Odious debt is truly the great bugbear. In the case of some nations the debt level is beyond the mathematical ability of the nation to pay it.
What is also odious is the attitude of some people who should know better. In 2012 I was arguing the point of the unsustainable debt level of nations such as Greece with an ex Finance Minister of Germany. He turned to me at one stage and simply said. "we know Greece cannot pay it back but we cannot afford to take a hit for that debt right now....we have to stretch things out."
And that is what they are doing....stretching things out all over Europe in the hope that things might come right.
Come right? For sure with idiots like Hollande, corrupt scum like Rajoy in Spain and compromised politicians like Samaras and Venizelou in Greece.
Largesse for Wall St, NSA, TSA, DHS = Austerity for Main St.
(I really do think CHS is starting "lose the plot").
This is exactly the argument that everyone uses (from austerity victims to anti-memorandum parties) to imply that there should be largesse for all instead of the few. And then they get voted to govern.
I hope you are implying austerity for all instead.
When will we see austerity for the banks, for the MIC, for multi-national corps?
When will we see austerity for the political machines that populate my in-box and mail box?
Let me guess - somewhere around the 12th of Never.
Meanwhile, let's be macho-politicians and balance the budget on the backs of the unemployed. $25 Billion seems to be the number I recall that is needed to continue the unemployment insurance for the next year, but we can't even find that amount in corporate tax loopholes to use as an offset......but $75,000,000 PER MONTH is just fine to hand to bankers.
And before you start bashing me about welfare queens, let me remind that these are people who were working....who once had jobs, who were productive, and who want to be productive again. What part of no fucking jobs is so hard to grasp? Why is it so hard to see what happens when our manufacturing base is allowed to pack up and move away, then allowed to ship their newly made goods back into the country with insufficient off-setting tarrifs?
America has been sold a bill of goods since the 80's, and the general population bought it hook, line, & sinker. Free trade my ass. Ross Perot was 100% right when he said that giant sucking we would hear after signing NAFTA into law was the sound of American jobs leaving the country. We voted ourselves into debt slavery and economic decline.
In the immortal words of POGO -- "We have met the enemy, and he is us."
I call BS. The military cannot account for SIX TRILLION of its budget since 2001. If that is smart, stategic planning, I guess I have to do me some.
Wrong on some many levels.
The people that run the military stole the money. Thanks to "prosecutorial discretion" (read shared the loot with the prosecutors), no one went to jail. The victims (us) are suffering the consequences. Why so is that so hard to understand?
Paul Krugman disagrees and he's got a Nobel Prize, so he must be right.
the language of this shit is dispicable.
austerity, what the fuck ever, another white shoe boy establishment term, like quantitative easing, change the language to hide the reality from the ignorant masses.
malinvestment is malinvestment, if you want to fix it use sound money, find the price of money from the market instead of letting central planning criminals dictate it to us. that alone will make your "austerity" redundant and give your the "re-alignment of values, resources and strategic goals." you speak of without relying on the benevolence and morality of our central planning overlords.
the ratio of complete bs articles on zh is getting worse daily.
We use complicated words......cause if we just spoke plain english......the natives would kill us.
Comment of the week! [so far].
Articles are not "right" or "wrong" They are meant to stimulate thought and discussion.
Lighten up, sell me your gold.
right or wrong is subjective anyway, im sure there are plenty of people who this resonates with and are lapping the shit up and i hope they enjoy their discussion.
im at the point now where im sick of the bullshit and only call things as i see it, im sick of seeing bs language used to manipulate people and normalize nonsense and give people the sense that we are just a few austerities away from happy days again.
thats how we have been led down the garden path in the first place.
also gold is not for sale :)
"no limits on anything" means no strategy, no priorities, no planning and ultimately, no clear thinking at the top, which then guarantees complete failure.
TPTB are putting plenty of limits on a lot of things and people, just not on themselves.
And pretty much impossible with fractional reserve banking.
Don 't go to the Eiffel Tower to celebrate the New Year!
http://www.youtube.com/watch?v=39X4sXc0Ubc
Collective hubris is human nature. This is a cycle we are doomed to repeat ad infinitum.
Prepare accordingly, live your life, love your children, and your fat bitchy wife.
Don't shove austerity up my backside while the Choomster-in-cheif takes 60million dollar vacations every two weeks and the ruling elites are spending like crackheads. Give every Mexican free healthcare and EBT plus basically free housing but I'm supposed to tighten my belt....BS.
Bad news.
The Mexicans are a positive bargain compared to the Banksters and their buddies by a couple of million to one.
Ever get a bankster to offer to mow your lawn?
Perspective.
Banksters nor Mexicans are a bargain, WE should not be paying for either of them! If the ruling elites and their puppets at the fed can just make up Disneyland type scenarios where THEY are graced with tsunamis of cash, then they need to invent something for the sheep to deter the painful and sometimes deadly condition called austerity. DON'T GIVE US THE HUNGER GAMES WHILE THEY HAVE THE LOBSTER AND CRACKED CRAB GAMES !!! If you don't get that @shovelhead, then you are a tard.
What a column of tripe!
Not one word is correct and the rest is misinformation.
Let's see how the world would be if corporations (like people) ate their peas, and big banks that made every mistake there is had to pay the price!
In a world of bailouts for the rich, austerity is a total farce. Socialized losses for the lawless fraud-cartel doesn't print faith.
Austerity is Fascism by another name in the current environment of the rich man's enrichment through businesses of fraud, deceit and decimating anyone without money.
"Gold -n- guns" are the only money and justice.
I knew when the 10YR got to 3% they would start this austerity propaganda.........THIS IS NOT GREECE ! We don't play this here in Amerika. Nice try but no cigar.
So,
Spending more than you make is a bad idea.
This message is brought to you by the letter 'B'.
As in bankrupt...broke...busted...etc.
Shovelhead writes - "This message is brought to you by the letter 'B'.
As in bankrupt...broke...busted...etc."
I would say this perfectly describes the condition of the big banks in 2008. Remind me again how it was they got so "healthy" so fast. How is it they could give themselves such outrageous compensation that was financed by the taxpayer?
Was that some kind of austerity recovery package that, in my ample ignorance, I don't quite understand?
WTF. Government acts irresponsibly, spends a country into bankrupsy, imposes austarity measures on the people and this is a "GOOD " thing. Nothing could be farther from the truth. The austarity should be placed on TPTB not the people. It was the smart and strategic planning of the gov that got us into the mess in the first place, and these same smart and strategic people will austarity our way out of the mess they made. Brilliant logic mate!
The only thing smart and strategic about thier planning is the theft and enslavement of the people.
Austerity's (Simpson Bowles') cost braking
needed by privatizers after allowing for privatizers'
profit boxes and privatized policy at everyone
else's expense.
Where a system's privatizer centric,
the only way to retain democratic
principles, if a
population knowingly thinks a
privatizer's needed, is WITH an
ombudsman, which is precisely the
opposite of what America's masters
of political puppets want.
http://www.pnhp.org/news/2012/may/cant-hold-tongues-on-obamas-health-law
Pre-Texted Simpson Bowles tantamount to a kill switch:
http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesti...
A Picture of Privatization:
The Profit Box, literally:
http://pages.citebite.com/i1y4m1t7o7pxu
Fees to the government passed to the patients
is literally a back door tax paying for privatization.
http://blackagendareport.com/content/obamacare-vs-single-payer-%E2%80%93...
http://stockcharts.com/freecharts/candleglance.html?AET,WLP,UNH,CI|D
http://financialpress.com/2011/12/09/obamacares-mlr-bomb-will-create-pri...
http://www.dailykos.com/story/2009/10/14/793112/-Schumer-Leahy-Take-on-I...
http://wendellpotter.com/2013/04/industry-pushes-high-deductible-insuran...
http://www.nomiprins.com/thoughts/2012/11/10/real-danger-of-obamacare-in...
These are not private insurer providers:
http://www.turkishweekly.net/news/157759/obamacare-39-s-health-insurance...
http://www.ritholtz.com/blog/2010/09/you-vs-corporations/
Monopoly's defined by the ability to charge prices based
on ability to pay, at will.
ObamaCare institutionalizes it, but uses taxes to
finance not socializing a sector but socializing
ONLY higher risk and cost for the purpose of carving
a profit box.
I think it's doing so with (not counting smoking) just
age still defines that. And, that's not the least bit
of a stretch argument if one considers Medicare at its
outset was (essentially still is) National Health
Insurance for unwanted customers.
So ObamaCare is what I call outskirts of Medicare.
Because it serves those paying the puppets, those
in the gauntlet during those few years pre-Medicare
eligibility face higher cost and their eligibility for
subsidy is driven by their age and its concomitant
draining of their finances. So they might as well
be on a reservation, if this were about production of
products from land. If subsidized, it's of course
"On Exchange." Many even from the upper middle
class will find themselves in this position.
But those who would buy coverage
only when they're sick are thieves, and those who
think they're getting a good deal with low cost
blue tier policies are giving the carriers a 60%
medical loss ratio (40% operational profit.)
With tax support, the toughies, the pre-Medicare
crowd, is still giving what had been a healthy
industry wide average of a 15% operational profit.
It leaves a non-health-dynamic
system not centered on patients', nurses', or doctors'
interests.
It ends exclusions.
For that many see it as the glass being
half full (I see it as the glass being
half empty.)
http://pages.citebite.com/f9g6i1b7rfvh
http://pages.citebite.com/d9u6v1v6jspj
Collecting on medically bankrupted persons will not end
(but their cost will be, as it always has, be passed to
everyone else by way of their premiums. Only the insurers
are above the cost cloud, just as with the TBTF banks.)
http://minnesota.publicradio.org/display/web/2012/08/01/accretive-rahm-e...
The insurers naturally wanted what the
banks have. But of course they'll never have
all of it. The latter creates the adversity
but then uses it as the next investment,
while the bailout of the prior bubble
they created induces the inflation somewhere
else.
So for the past 5 years tier ratio
liquidity's been irrelevant while
delinquencty inventory's been thoroughly
manipulated, with the bankers themselves
the prime buyers after the Fed's purchased
their mortgage backed securities not at
market value.
Other commodities are now known manipulated.
The process is a long standing formula.
Imagine a producer and refiner of commodity X who's
also controller of a major bank.
He lends as much as he can to as many
would be competitors of himself as he
can, with everyone around him thinking
gee he must be out to lunch enabling
all his own competitors.
He then floods the market with product.
He then calls the loans.
Voila. Sharecroppers.
Profit Box:
Canada Post
Exists Under The Thumb Of
The Office Of The Ombudsman
Of Canada Post--Simple
Enough, Eh?
Where privatization exists absent
democratic process (essentially
feudalism,) it becomes a Ponzi
scheme where it's a net loser to
a given economic system.
Markets Can Be Process Informed
(Generally Need It--Perfect Info/Entry
Implies 0 Profit (Recall From 1st Week
101?))
What's Relevant Today Is
Privatizing Whole Markets Under Market Pretenses.
That's The Logical Extreme Of Puppets
Privatizing Profits And Socializing (ONLY)
Cost (And Risk.) That's The Very Opposite
Of Why One Would Privatize From State
Control, Namely, Of Course, To Increase Competition.
Yes, the failure of the Japanese at Midway is clear evidence that Obama Care (ACA) is DOOMED.
Folks, before you read this (stupid) article, please notice the "CLOWN ALERT" klaxon...it is traveling through time to your ears from Admiral Nagumo's luxury yacht cum Aircraft carrier.
Of course, more ridiculous than comparing WWII to the ACA is the misunderstanding by this clown that an economy and a family budget offer helpful comparisons. They don't. A cursory review of very disparate economic views from the disgraced Kenneth Rogoff to Stanley Fisher to Ben Bernanke…all neo-classical mainstream economists, will see agreement on such an approach. And YES! Paul Krugman is also of the same mind.
Tora Tora Tora! Translation: This idiotic article will dive bomb your IQ! Read no further!
The NWO definition of austerity is cutting back social services so the money can be directed into the bankrupt coffers of the TBTJ banksters. That is certainly the definition in Europe. Appears pretty negative to me though I realize that the author is choosing to define it other than the NWO meaning. However, it appears to me that the owners in Europe are trying to spin austerity in a positive light. I suspect that when the hammer comes down in the USSA, and I see it this coming year, we will have the same definition of austerity, which may include a 30% bail-in cut (for starters).
I plan....
to make YOU pay for MY spending....
(Government official)
Because, of course, your fireman and NHS personel should pay the public to do their jobs. Derp Derp Derp
Is that what passes for common sense these days in the UK?
My son suggested I read a copy of "Austerity: The History of a Dangerous Idea" by Mark Blyth that he brought with him while on vacation a couple of weeks ago. He practices austerity and borrowed a copy from the library. Although I was ready to hate it, it turned out to be a good read. I am personally a fan of austerity and try to practice it as much as possible and do believe that western governments spend way too much. One take away from the book is the question of "what if everyone what practicing austerity simultaneously"? Some people have to spend to have an economy. Another point was that we got the Global Financial Crisis not necessarily because our governments spent too much, but because our financial system screwed up. It wasn't a bunch of liberal Krugman in-your-face bullshit.