Guest Post: What Austerity?

Tyler Durden's picture

Submitted by Bill Wilson, President of Americans for Limited Government.

What Austerity?

By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe.

There is only one problem. It is a lie.

First off, austerity was never really tried. Not really.

In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before.

Real “austere”. The French spent more, and they borrowed more.

The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero.

Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.”

This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.

If not France, then where?

In Italy and Spain, which have been dependent on tens of billions of cash infusions from the European Central Bank (ECB) to refinance their debts, cuts are hardly anywhere to be found either. In Spain, spending was cut by just €11 billion in 2011, a mere 2.3 percent reduction. In Italy, spending actually increased by €4.3 billion.

Both countries borrowed an additional €117 billion last year alone, raising their combined debts to €1.939 trillion. So, no austerity there. Just debt slaves.

Hollande might have been referring to the budgets of debt-strapped Ireland, Greece, and Portugal that have depended on over €290 billion of refinance loans from the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF).

But even there, the cuts are rather miniscule. In Greece, spending was cut by just €6.3 billion from 2010 levels. In Portugal, just €4.8 billion. Ireland only trimmed €2.2 billion off its 2009 levels, discounting its massive bank recapitalization in 2010 that blew up its budget by €25.7 billion.

The real point is that none of them even came close to balancing their budgets, with over €47 billion of combined deficits for 2011. More debt slaves.

Yet that is not stopping pundits like New York Times columnist and economist Paul Krugman from claiming otherwise, who said recently, “All this austerity is actually self-defeating. We’re seeing countries slash spending and drive their economies into a ditch.”

What austerity? These countries are all debt addicts. They’re not addressing the root of the problem. So, what should they do? Just borrow more?

Where’s the growth?

Oh, contraire. Although all of this government largesse and excessive borrowing is supposed to be economic stimulus by Krugman’s account, these European economies are still stuck in a ditch. We tried the same thing here.

More than $3 trillion in fiscal and monetary stimulus since the financial crisis began — all to no avail. Well, some things did happen. We lost our AAA credit rating. And the debt is now larger than the entire economy.

But leaving that aside, based on analyses like Krugman’s, one might get the idea that the sovereign debt crisis in Europe was caused not by too much borrowing, but by not enough of it.

No, Krugman, Hollande, et al., this really is a debt crisis. The government’s demand for borrowing is so voracious that it far exceeds even the financial system’s capacity to lend. The crisis has reached such critical proportions these countries cannot find a way to grow their way out of it.

Hollande’s idea of “growth” is just more government spending and waste in a new wrapper — more education funding, more pensions, more health care, and other soft socialist programs.  Because the illness is being misdiagnosed, the solutions being proposed only threaten to exacerbate the symptoms.

If France and other European countries were truly interested in growth, they’d be cutting taxes on business. Yet, Hollande wants a 75 percent levy on the “rich” and to increase social spending. Socialists like Hollande and their ilk do not wish to save the private sector — they want to soak it. Very well.

But this is a true delusion. There is no painless way to solve the systemic imbalances caused by bloated political promises made to dependent classes of citizens. The rich are not rich enough to pay for the level of government we have.

There is no easier, softer way to stop the bleeding. Spending must be cut, budgets balanced, and debts paid down. Europe is nowhere near that right now. Nobody is.

But that’s not all that must be done. To alleviate the painful transition — and make no mistake it will be painful — real fiscal reform must be accompanied by pro-growth policies.

Here in the U.S., systemic unemployment and slow growth in the private sector could be addressed on the supply side. Capital gains and corporate taxes could be eliminated to encourage investment in U.S. companies. Environmental regulations that increase the cost of energy and of doing business here could be rescinded.

We could let banks fail when they make bad investments, and restore a sound money system to ensure price stability and an end to “too big to fail”. Instead, we have outsourced our nation’s monetary policy to an international bank cartel that does not share our national interests, threatens inflation on working families, and actually endangers our future prosperity.

We are all Icelanders now

The question before us is not growth versus austerity. That is a false choice being promoted by the state-controlled media.

The real question is whether the West will submit to this established order — represented by the bank cartel and entrenched political parties — or reject it.

What the elections in Europe actually show is the absolute disgust on both the left and the right that the people have for the establishment. In France, the conservative incumbent president who represented the status quo was deposed. In Greece, both of the two major parties including the ruling Socialists were crushed, garnering just 32 percent of the popular vote.

Instead, 68 percent voted for lesser known, more radical parties that rejected the European bailout of banks that bet poorly on sovereign debt. And it’s not just in Greece and France.

When Spanish citizens wave Icelandic flags at rallies, we have a movement.  In April 2011, Icelanders defeated via referendum a bailout of British and Dutch investors who had lost funds in Icesave bank in 2008.

It was a remarkable rejection of this debt slavery that is dragging down our societies.  Little noticed by mainstream media, the example set by the people of Iceland resonates more with each passing day.  The voters of Europe on May 6 cast their vote like Icelanders, rejecting the status quo, rejecting the dictates and threats of the banking and political elites.  In a very real sense, the Iceland example has become a modern-day Lexington and Concord, a shot heard around the world fired against an encroaching tyranny.

We are not immune here in the U.S.  In fact, we are leading the movement.  From Tea Party in 2009 and 2010 to Occupy in 2011 to May 8’s overwhelming defeat of a senior establishment figure like Richard Lugar in Indiana, the people are rejecting the rotting corpse of the established order.

Some folks like their rebellion with a leftwing taste and others with a rightwing taste.  Regardless, it is still rebellion, a refusal to accept the same old tired slogans and threats.

Mouthpieces for the establishment have dubbed this trend rejectionism; an attempt at a slur.  But for tens of millions of Americans and hundreds of millions world-wide it is not a slur but a badge of honor.  It is a rejectionism of the welfare statism of the post-war period, a rejectionism of the loss of soveregnity, a rejectionism of debt slavery, a rejectionism of working to pay for others to do nothing, and a rejectionism of the purposeful destruction of national identities and culture.

Make no mistake. No less than the very sovereignty and liberty of free peoples everywhere depends on rejection of the international order that has evolved since the end of World War II.   The central banking cartel and their willing political accomplices are pushing us into an international tyranny — run on debt.

The real story of the European elections is the rise and assertiveness of rejectionism, the refusal to accept the so-called solutions from the self-appointed “experts.”  That story, no matter how hard the mainstream media and spin-doctors try to cover it up, is the one that will continue to play out around the globe, including the U.S., in the coming months.

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buryfarmer's picture

The day the EU finds out spain will need a a bailout:

slaughterer's picture



FUCK MERKEL (or maybe not!!!!!!!)

vh070's picture

Well said.  Actually, fucking is the solution.  Fuck more and spend less.  The more you fuck the less you are inclined to spend on useless goods.  Be denied your natural need and you will divert effort to acquiring useless fuck-subsitute goods, like caviar, LV and a heap of other luxuries.  I call on all men and women of the world to put out.  To your spouse, neighbour, colleague, secretary or any passing stranger.  Dispense with the preliminaries, like courtship (never foreplay).  Just say, "Wanna fucking save the world?" Give it up, brothers and sisters for the benefit of mankind.  Let's give new meaning to the phrase, "We're all fucked."

Dan The Man's picture

Sarcasty bragged about austerity that wasn't really there.  Hollandaise just threw it back in his face.  Braaaavo.

NumberNone's picture

In government austerity is defined as increasing spending by only 14% versus the originally planned 15%.  This reduced growth rate is defined as a cut and therefore austerity has been achieved. 

Xkwisetly Paneful's picture

THey just need to decimate the military and raise taxes-

oh wait they like many of their neighbors already did that and are still broke.


BooMushroom's picture

This article would be more informative if the budget "cuts" were expressed as a percent of their budgets. Clearly $2B of the US budget is nothing, but Portugal's GDP is only $208B, a mere sliver of ours.

NotApplicable's picture

Wait, the good people of Indiana ousted Dick Lugar???

*wonders what kind of dick he'll be replaced with*

nmewn's picture

Yep, and some cat in prison got forty percent against O'Barry in WV...its like the dims couldn't decide which one was worse for them.

Gotta admit somebody in prison can't screw it up much worse than it is

Meanwhile Rosie O'Donnel wants to boycott NC because the folks there said marriage is between a man & a woman...of course O'Barry will accept the dim nomination for prezbo at Bank of America NC...which seems...well, awkward, with the other Irish-American (O'Donnel) calling for a boycott on the state, one now assumes anyone who attends is a fire breathing republican bigot...or sumpin.

Not as awkward as O'Barry being against it before he was for it...but still, pretty damned weird.

Polictical update done! ;-)

CrimsonAvenger's picture

Rosie O'Donnell is boycotting NC because of Amendment One? I didn't vote for it, but if I knew it was guaranteed to keep her away I would have been awfully tempted.

nmewn's picture

lol...I think many feel the same way.

And then of course, there's Rosie's pet elephant that she has dragged into the room that everyone is desperately trying to avoid looking at or step into the "gifts" the elephant leaves behind.

Apparently she is against any form of democratic process which produces a result she doesn't agree with.

The elephants name is Tyranny ;-)

ATM's picture

I'm in Indiana and voted against that fucktard Lugar. 

I also met him once in an airport bathroom. I was standing at the pisser with no one else in the place and Old Dick walks up and stands in the stall next to me....... He tried to look over the little divider but he's such a short little fuck he couldn't get a good look at the end of my dick.

I said, "how's it hangin' Dick!" and he mumbled some incomprehensible gibberish.

NotApplicable's picture

Austerity = Borrowing money to give to everyone but you.

LetThemEatRand's picture

Dead on, NotApplicable.  There is indeed already austerity for the people, but massive public debt funded stimulus for the bankers and bondholders.  

Xkwisetly Paneful's picture

The massive funded public debt is mostly to pay for unfunded social liabilities,

so why would anyone pretend otherwise? Are they just stupid beyond what would be lawful?

They a deluded fanatic that can't see epic fail no matter how obvious it happens to be?

like in the US where including state and local it is well over $100trillion or more than the bankers could fleece in numerous lifetimes.

from Chicago to Madrid including gay Paris,

no military spending in Chicago, not much in Madrid or Paris either,

much higher taxes though in all three-and still broke as hell.

notice Illinois recent refi of their pensions was priced with corporate junk?

course not, take the once most prosperous place in the world after the Erie Canal opened and run it into the ground like a $2whore-good job.

Epic fail the world over, Oh but please, please, please look at Germany.

Sure financed by worthless IOUS from their neighbors, the  US can become Germany,

first need to start selling shit to Mexico and Canada at premium prices while accepting worthless credit in return.

Then everyone needs to move into a house half the size and sell one car-the avg poverty stricken American lives in 50% more space hoand owns a full car more than the avg working German,

when you get done with that come back for more ,

and in the meantime play pretend, big government liberal socialism really didn't bankrupt most of the free world, it is all the banksters and military.

Iwanttoknow's picture

A dick with lots of bank money.Check market watch story.

brewing's picture

"The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable"
H. L. Mencken

Poor Grogman's picture

Somthing for the sheeple to aspire to.

Great quote


Bill D. Cat's picture

His throat cutting quotes are better . Ready the black flags .

disabledvet's picture

The Greeks will take a 40 percent across the board cut to their living standard with a return to the drachma. Is that...ahem..."austere" enough for you?

Paul Atreides's picture

You forgot to mention they will be able to recover in 3-5 years instead of MAYBE getting under 120% of GDP by 2020.

oldtech's picture

Let them eat cake for 3-5 years,....   Mmmmm


BigJim's picture

 The Greeks will take a 40 percent across the board cut to their living standard with a return to the drachma. Is that...ahem..."austere" enough for you?

Will they now? And what cut to their living standard will they take if they pay back their debt instead?

ThirdWorldDude's picture

A quote from the provided link - "If we instead turn to data from the International Monetary Fund's WEO database we see, first and foremost, that budget balances are in the process of improving dramatically..."


Yeah, it says a lot about the charts' credibility!

PivotalTrades's picture

The Fed will introduce Operation 3P.. Perpetual Prosperity Print.  They will print an amount of US$ necessary to buy enough Treasuries to drive the Yield to -6% thus not only self funding but also retiring the total outstanding debt

Desert Irish's picture

Umm.....I think China might have something to say about that.

BigJim's picture

China should get rid of their USD positions yesterday. US default - either outright, or by inflation, or a mix of the two - is a matter of when, not if.

Sudden Debt's picture

3 to 5% deficits are concidered normal... But in the future..l tomorrow... Others will start to save and pay down the debt... Promise... Just not us...
And after 5 years now, this shitpile has increased just enough to become to much.

DCFusor's picture

One thing this guy gets really right is the idea of rejectionism.  The problem with it (the way these systems work) is when the new party thinks they have a "mandate".  No, you don't - we just hated the other guys and you were the only other thing on the ballot.  Hubris...

insanelysane's picture

The whole thing is being portrayed as countries having a choice.  You do have a choice.  You can either start spending what you are taking in and pay back your debt or you can keep spending as much as you can borrow until they won't let you borrow anymore at which point you start spending what you are taking in and don't bother paying back the debt.  Option 2 is what everyone is doing.

JeffB's picture

Live significantly below your income... and pay back your creditors over time.

Or Borrow as much as you can until it becomes so obvious you can't possibly pay back what you're borrowing, and then default, or partially default, and then move back to living roughly within your means

Or print fiat money to hide the defacto default/partial default to your creditors, until they stop loaning you more money and you're forced to print ever more until inflation rears it's ugly head, wiping out savers and investors, until the fiat "money" becomes useless as a means of trade or the pain becomes so great they finally stop the printing presses, or come up with some new alternative money.

There are no options without significant pain and a very significant drop in the national standard of living as "the new normal".

Almost all western nations, and many others are way in over their heads in debt. There are no options that don't entail much pain. Elections or revolutions can't change that fact.


smb12321's picture

You are so right.  My wife and I are/were consultants and have always lived below our means.  We don't constantly worry about missing a house payment, water turned off or seeing Junior return from a college we can't afford.   More than anything, it was the lack of saving of those who were foreclosed and the fact that they were living paycheck to paycheck that caused the problem.  If someone has a year of savings then there is no (1) instant hysteria, (2) rush to take a pissy job or (3) worse, calls for the "government" to "help". 

The fiat party has a LONG way to go and all those ZHers predicting a collapse within two weeks, months or years are wrong.  

bank guy in Brussels's picture

There are two things being confused here -

'Austerity' as in programmes for common people, and social benefits, being cut -

And 'austerity' as general budget reduction, which was not cut so much, because the government funds were being used to bail out banks etc.

What common people count as 'austerity' - what is putting Greece on the verge of revolution, and what overthrew Sarkozy, is the first one.

The article above is talking about the second kind of 'austerity'.

The great point of Richard Koo, and others, if that government is to go into more debt in a balance sheet recession-depression, you need to maintain incomes of common people FIRST. That is what they did in Japan, and have avoided disaster for 22 years.

But cutting common people into poverty, and still bailing out bankster banks, that is sh*te that leads to fairly quick revolution, which is what you see in Europe right now.

kennard's picture

What Greece owes the ECB was incurred through unsustainable government transfer payment/entitlement programs. That is but one example. Yours is a distinction without a difference. i would not hold up Japan as an example of how to "avoid disaster'.

LetThemEatRand's picture

"What Greece owes the ECB was incurred through unsustainable government transfer payment/entitlement programs."

Even if that is true (I could argue with you all night but what's the point), then the banks and bondholders who lent the money made a bad bet.  Why shouldn't they lose when they make a bad bet?  The Greek bailout is bailing out the banks and bondholders and the people are catching on.

kennard's picture

"The Greek bailout is bailing out the banks and bondholders and the people are catching on."

The people are "catching on" that some polticians may stop the gravy train.

The average Greek or French-person could care less about bailed out banksters.

They care about what their government will give them.

LetThemEatRand's picture

Our differences aside.  Do you agree that the banks and bondholders who made bad bets should lose their money?  Or do you feel that they should keep all of their money and even profit from their poor choices through the issuance of new public debt payable by future taxpayers?

LetThemEatRand's picture

And it is no coincidence or oversight that the MSM fails to mention your extremely valid points.  The debate we hear in the MSM about whether to cut or spend, completely misses the point that the entire Western world is spending money it does not have to give to bankers and bondholders, with the only apparent end game being to increase their wealth and to impoverish the citizens. 

BigJim's picture

You're talking a lot of sense here, LTER; what happened?

LetThemEatRand's picture

Back handed compliment, but that's better than nothing.  I give all the credit to Bank Guy from Brussels.  He sets it up quite well.

Chaffinch's picture

Thanks for explaining that so succinctly Bank Guy

PivotalTrades's picture

In Japan there was none of either.

YesWeKahn's picture

This is to game ECB and BernankFED to print more.

RECISION's picture


Meet the new Clown - same as the last...

RacerX's picture

This explains the runup in AAPL! They've cracked into -- not just an entirely new market, but SPECIES!

MIAMI (AP) — The 8-year-old twins love their iPad. They draw, play games and expand their vocabulary. Their family’s teenagers also like the hand-held computer tablets, too, but the clan’s elders show no interest.

The orangutans at Miami’s Jungle Island apparently are just like people when it comes to technology. The park is one of several zoos experimenting with computers and apes, letting its six orangutans use an iPad to communicate and as part of a mental stimulus program. Linda Jacobs, who oversees the program, hopes the devices will eventually help bridge the gap between humans and the endangered apes.

“Our young ones pick up on it. They understand it. It’s like, ‘Oh I get this,’” Jacobs said. “Our two older ones, they just are not interested. I think they just figure, ‘I’ve gotten along just fine in this world without this communication-skill here and the iPad, and I don’t need a computer.’”


Seer's picture

It's humans' desire to kill all competition.  Make all other species with opposable thumbs arthritic.

Ms. Erable's picture

AAPL gave iPads to Congress? Who knew?

Seer's picture

If only their use would make their peckers fall off so that we wouldn't have to suffer their offspring.