IMF Chief Economist apologizes for not recognizing how much damage austerity...

[Atreus21]

In a household your income and spending are all basically independent while in a larger economy this is not true. In a national economy my spending is your income and vice versa. In a house if dad cuts back his spending mom's income doesn't go down. In a country this isn't true.

This is one of the reasons that the negative feedback effects from budget cuts in a depressed economy have been self defeating. Countries that all cut their budgets are actually ending up worse off debt wise than ones who didn't.

I still don't quite understand, so I'll just say what I think in layman's terms.

It seems to me when you're deep in debt you have two options to get money to pay it off: Reducing your expenditures below your income or increasing your income above your expenditures. If it's true on a small scale, I don't understand how it's not true on the larger scale. If this statement is true, then it follows that if increasing income isn't an option, your only recourse is to cut your spending.

Is that not the case?

 

[Atreus21]

Actually it appears that cost cutting and austerity are making the debt to GDP situation even worse, their budget cuts have been self defeating.

It's funny how people see the failure of austerity and conclude that the reason it's failing is because they haven't been austere enough. It would be funny if it weren't causing massive, real pain to people.

In fairness, keynesians have the same argument when stimulus doesn't work.

 

[Throckmorton]

In fairness, keynesians have the same argument when stimulus doesn't work.

That's a false equivalency. Stimulus does work to the extent that it's done. We know that the stimulus saved jobs and and resulted in economic activity. Local government gets money from the feds to buy a bus, where do you think the bus comes from? Workers build it.

Austerity also works to the extent that it's done... And the work it does is worsening the economy. You lay off a government worker, he can't spend money at the local shops, he can't get his car fixed at the mechanic down the street. And what is the benefit? That's what the IMF chief is admitting, that austerity failed.

 

[Jhhnn]

Looks like your having too much fun wetting yourself in your fantasy, So just because Conservatives have views which are different to yours, they are automatically wrong and deserve insults? Love the hypocrisy

Views different from my own? What kind of view do you get with your head up your ass, anyway?

Perhaps you'd care to address the points, rather than engage in denial... probably not- it'd be completely out of character.

 

[Incorruptible]

Views different from my own? What kind of view do you get with your head up your ass, anyway?

Perhaps you'd care to address the points, rather than engage in denial... probably not- it'd be completely out of character.

That's exactly what you did though, you insult people and get very angry when they talk about big government not working and other things you dont believe. Its a lot more fun for me to just laugh at you

 

[Matt1970]

We threw over $1 Trillion at the problem initially in the name of propping up the economy and was told by all the economists at the time it was going to work. Every budget since then it's always the same ole' "we have to keep spending at this level to keep the eceonomy going" because the economists say we must.

Well now it's over 4 years later and $6 Trillion deeper in the hole in the name of proping up this economy. Lets just keep trusting the economists.

 

[Jhhnn]

That's exactly what you did though, you insult people and get very angry when they talk about big government not working and other things you dont believe. Its a lot more fun for me to just laugh at you

Inept deflection, as expected.

 

[Incorruptible]

We threw over $1 Trillion at the problem initially in the name of propping up the economy and was told by all the economists at the time it was going to work. Every budget since then it's always the same ole' "we have to keep spending at this level to keep the eceonomy going" because the economists say we must.

Well now it's over 4 years later and $6 Trillion deeper in the hole in the name of proping up this economy. Lets just keep trusting the economists.

Exactly, I have been saying this from the start but the idiots dont listen

 

[fskimospy]

In fairness, keynesians have the same argument when stimulus doesn't work.

Stimulus has worked though, while austerity has literally made the problem worse. More austerity would lead to even worse outcomes.

Its kind of like an error of direction or degree. If you thought you were driving at 60 but you were really going 30 you're going to be late. If you're driving the wrong way you won't get there at all.

 

[silverpig]

I still don't quite understand, so I'll just say what I think in layman's terms.

It seems to me when you're deep in debt you have two options to get money to pay it off: Reducing your expenditures below your income or increasing your income above your expenditures. If it's true on a small scale, I don't understand how it's not true on the larger scale. If this statement is true, then it follows that if increasing income isn't an option, your only recourse is to cut your spending.

Is that not the case?

That is not the case.

First off, when you go spend $200 on a set of monster cables, it's $200 out of your house that you never get back. When the government spends money, it gets a good chunk of it back through taxes. It taxes the business it bought the bus from, it gets taxes from the income of the workers who built the bus, it gets taxes from the fuel used, etc.

Imagine if there were two people in your household who worked and contributed to the bills: you as an electrician, and your son who works at Best Buy. He works in the home theater department, and when you buy your monster cables, part of the sale goes to pay his wages, which come back in to your house.

Now, times are tough and your hours are getting cut back, so you are starting to put things on your credit card, and decide to cut back on spending. You go from monster cables to rca cables, Best Buy's ht department lays off your son, and you have less coming in each month, but at least you cut back on your spending.

Obviously this example doesn't fully work, but the idea is there. If you cut spending, you also cut your tax base, meaning you also cut revenue. You also increase expenses in the end because you now have a bunch of unemployed people you have to pay to do nothing.

 

[fskimospy]

I still don't quite understand, so I'll just say what I think in layman's terms.

It seems to me when you're deep in debt you have two options to get money to pay it off: Reducing your expenditures below your income or increasing your income above your expenditures. If it's true on a small scale, I don't understand how it's not true on the larger scale. If this statement is true, then it follows that if increasing income isn't an option, your only recourse is to cut your spending.

Is that not the case?

No it is not the case.

First, our income is always increasing (or most times at least). Also our GDP increases. The real number to watch is not debt, but debt to GDP ratio as that represents our true ability to handle our debt load.

Second, you are again comparing an enclosed entity to a country. Again, this is inaccurate. Think about it this way, what if your business was somehow tied to your wife's income (as incomes are intertwined in a national economy). What if you deciding to cut spending by a dollar decreased her income by two dollars? Was cutting spending beneficial or harmful to your ability to pay down debt?

That's the difference.

 

[Matt1970]

Stimulus has worked though, while austerity has literally made the problem worse. More austerity would lead to even worse outcomes.

Its kind of like an error of direction or degree. If you thought you were driving at 60 but you were really going 30 you're going to be late. If you're driving the wrong way you won't get there at all.

Has it really worked? We were told $1 Trillion would do the job. We are now at $6 Trillion.

People are also using countries the size of NY City (8 Million) to compare the damaging effects of Austerity. Nice comparison. Just ignore the States here in the US with much higher populations, some over 20 Million, that have had to cut their budgets by as much as 10% and the damaging effects were minimal.

 

[OrByte]

We threw over $1 Trillion at the problem initially in the name of propping up the economy and was told by all the economists at the time it was going to work. Every budget since then it's always the same ole' "we have to keep spending at this level to keep the eceonomy going" because the economists say we must.

Well now it's over 4 years later and $6 Trillion deeper in the hole in the name of proping up this economy. Lets just keep trusting the economists.

gosh that is sooo wrong...rewriting history at its best!!!

no wonder you are on the losing side of every argument that you put forth...you use the same failed logic and "facts" that the right wing media machine feeds you and waaay too many people

its time to fvcking get a clue man.

 

[OrByte]

Has it really worked? We were told $1 Trillion would do the job. We are now at $6 Trillion.

People are also using countries the size of NY City (8 Million) to compare the damaging effects of Austerity. Nice comparison. Just ignore the States here in the US with much higher populations, some over 20 Million, that have had to cut their budgets by as much as 10% and the damaging effects were minimal.

your "$1 trillion" fact is wrong.

 

[Matt1970]

That is not the case.

First off, when you go spend $200 on a set of monster cables, it's $200 out of your house that you never get back. When the government spends money, it gets a good chunk of it back through taxes. It taxes the business it bought the bus from, it gets taxes from the income of the workers who built the bus, it gets taxes from the fuel used, etc.

The problem is the government borrows $200 and then will be lucky to get $100 of it back in taxes. Now you have $100 in debt that will probably never get paid back that we have to pay interest on. The proof of that is the $16 Trillion Monster everyone keeps ignoring.

 

[piasabird]

For years my church (LDS) has been emphasizing people to stay away from credit. There is this quote about interest never sleeping and never taking a holiday and that it will bury you if you ignore it. I find that some bank being able to fluctuate their rates for credit cards almost at a whim, to be criminal.

At the same time my church also advocates post secondary education (College and occupational training).

I cant say I always paid enough attention but in the last 10 years I have been paying down all my credit cards and my education loans. I would rather spend money on food than on interest.

Quote by President J. Reuben Clark

"Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours; it never has short crops nor droughts; it never pays taxes; it buys no food; it wears no clothes; it is unhoused and without home and so has no repairs, no replacements, no shingling, plumbing, painting, or whitewashing; it has neither wife, children, father, mother, nor kinfolk to watch over and care for; it has no expense of living; it has neither weddings nor births nor deaths; it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you." (in Conference Report, Apr., 1938, p. 103.)

 

[Matt1970]

your "$1 trillion" fact is wrong.

The Obama Stimulus plus the Bush/Obama bailouts is right at $1 Trillion.

 

[Matt1970]

gosh that is sooo wrong...rewriting history at its best!!!

no wonder you are on the losing side of every argument that you put forth...you use the same failed logic and "facts" that the right wing media machine feeds you and waaay too many people

its time to fvcking get a clue man.

Really? What numbers do I have wrong? We all know what the Stimulus and Bailouts costs. I can get video or transcripts of congress debating every budget and spending measure since and a common theme is people mentioning how damaging austerity would be at this time.

 

[chucky2]

$1T? It's more than that. Count every budget (when there was actually a budget) and then every $ deficit spent over that was effectively stimulus. We're into the multi-Trillions in stimulus. If this is what the economy looks like under stimulus, I shudder to think what would happen if the Pols at Fed and State were made to actually fund their liabilities and have spending remain within yearly budgets or tax receipts, whichever lower.

$1T...if we could be so lucky...

Chuck

 

[lotus503]

I still don't quite understand, so I'll just say what I think in layman's terms.

It seems to me when you're deep in debt you have two options to get money to pay it off: Reducing your expenditures below your income or increasing your income above your expenditures. If it's true on a small scale, I don't understand how it's not true on the larger scale. If this statement is true, then it follows that if increasing income isn't an option, your only recourse is to cut your spending.

Is that not the case?

To a degree you are correct, but unlike a household budget, macro economies and spending also have a substantial productivity component.


In addition the United States save for a few of years has always run a deficit. Its not that a spending reduction isn't at some point an important component to debt reduction its that timing and circumstances matter most, reduced spending is essentially contracting the money supply and we all saw how well that worked out in the great depression.

this is not a case where the simple solution is the one that works. economies of scale have cause and effect that extend way beyond a kitchen table budget considerations.

In addition if I am a family and owe %100 of my income to debt payments then a 1% or 2% swing is not going to matter all that much, for economies of scale its the difference between good planning or bad planning.

so do you cut spending now and have adverse effects on income and/or productivity now? or do you wait for more favorable condition for your desired outcome?

See Spain

 

[lotus503]

$1T? It's more than that. Count every budget (when there was actually a budget) and then every $ deficit spent over that was effectively stimulus. We're into the multi-Trillions in stimulus. If this is what the economy looks like under stimulus, I shudder to think what would happen if the Pols at Fed and State were made to actually fund their liabilities and have spending remain within yearly budgets or tax receipts, whichever lower.

$1T...if we could be so lucky...

Chuck

You should shudder to think of that, it would be the end of our economy as we know it.

 

[Moonbeam]

For years my church (LDS) has been emphasizing people to stay away from credit. There is this quote about interest never sleeping and never taking a holiday and that it will bury you if you ignore it. I find that some bank being able to fluctuate their rates for credit cards almost at a whim, to be criminal.

At the same time my church also advocates post secondary education (College and occupational training).

I cant say I always paid enough attention but in the last 10 years I have been paying down all my credit cards and my education loans. I would rather spend money on food than on interest.

Quote by President J. Reuben Clark

"Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours; it never has short crops nor droughts; it never pays taxes; it buys no food; it wears no clothes; it is unhoused and without home and so has no repairs, no replacements, no shingling, plumbing, painting, or whitewashing; it has neither wife, children, father, mother, nor kinfolk to watch over and care for; it has no expense of living; it has neither weddings nor births nor deaths; it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you." (in Conference Report, Apr., 1938, p. 103.)

Wasn't the idea of the education a better job that would allow you to buy better food and pay off your loans in any ratio you wish?

 

[Doc Savage Fan]

Let's put this in context. Here's the "austerity" that didn't work.

Austerity isn't the problem...it's out-of-control debt that's caused the problem.

Progressives are very good at twisting words to suit their agenda. Countries spending their way to prosperity is blatant delusion when they're already up to their ears in debt. But for some strange reason nobody will give them the money to spend their way to prosperity...how odd is that?

 

[chucky2]

You should shudder to think of that, it would be the end of our economy as we know it.

Like I said in the other thread, laissez les bon temps roulez!

 

[Darwin333]

Its hard to find an excuse for the banks, when they used lobbists to deregulate their own sector. Obviously they wasnt adult enough to be without regulation and they need even more than before.

Oh its much worse than that, they purposely committed thousands upon thousands counts of criminal fraud. While deregulation played a key role, specifically the repeal of Glass-Stegal, much more importantly the regulators allowed banks to break black letter law and still are. A combination of reinstating Glass-Stegal and simply enforcing black letter law would go a long way to prevent this crap and at least punish those responsible.