It's an illustration of precisely what I'm saying. Spending cuts lead to an economic contraction and job losses. That means that more people will be unemployed and drawing unemployment benefits, even if those benefits are also cut, as they were.
So they increased spending, particularly on social programs like unemployment, and that somehow supports the contention that cutting spending doesn't work?
They cut spending in the budget, and the unanticipated (by them at least) consequence of that was more unemployment and a larger outlay/bigger deficit.
Not sure, but you'd certainly have a substantial portion of the population starving or living on the streets.
The point being, you can't claim that austerity has been "attempted and failed" when you've still spending massively on social programs.
The boom and bust cycle, also known as the market cycle, have been demonstrated to be there for centuries by economists using places where data is available or can be inferred. What is more is before the invention of central banking (some of that government interference you dislike so much) those boom and bust cycles were much, much worse. In fact, one of the main reasons for central banking is to smooth growth so that the booms aren't as big and as inflationary while the busts aren't as deep and as long. In short, the quoted bit is absolutely provably completely wrong as anyone who has taken an econ 101 class knows.
An austerity program is still that even if it's not as crushingly severe as you'd like. And an austerity program that "works" while leaving a fifth of the people destitute could hardly be claimed a success.
It decreases total economic activity. Let's say the US government decides to go into austerity and as such it decides to cut 25% across the board. That means the defense department gets cut and orders for everything from ships to plane to spots for soldiers get eliminated from the budget plus it cuts back on purchases of durable and nondurable goods. Of course, it will also have to lay people off and since those people are laid off they're not buying goods on the economy which decreases economic activity. There is a well known and proven ripple effect when there is less economic activity in an economy and as far as economists are conserned it doesn't matter if we're talking about public or private buyers because it doesn't matter if the government is buying materials & labor to build roads (or what not) or if private employers are buying materials and labor to build something else; they're all in competition and generate some new activity. BTW if you honestly don't know about this then WTH did you neg rep me for saying "I hope he was being obtuse but you never know". Seriously, this is extremely back stuff just like the origin of the boom and bust cycle was extremely basic stuff but for some reason we don't teach economics in school any more so there are a lot of people who just truly never learned this stuff or who got fed misinformation from professional liars (like Rush Limbaugh or what not).
BTW I would say that countries which are about to default have no choice but to cut spending or do what it takes to get a buyer of last resort (usually a government in some form) to back stop them. That would be why Ireland has no choice to cut but most other countries (I.E. ones not close to default) can successfully use Keynes economic observations to smooth out down cycles. Of course, the big problem is most governments don't follow Keynes's advice to cut back on the good times or to save up a large emergency fund during the good times to help pay for programs during the bad. Authoritarian countries such as China have shown the disappline for this but democracies all to often don't bother to save in the good times to help smooth out the bottom during the bad much less cut back spending during the good times. Edit: but for those who claim the government is not productive or can't increase economic activity during down sides, sorry, but you're provably wrong. That was Bush's who claim for deficit spending after 9/11, that is how China's stimulus worked so damn well though they literally spent it on infrastructure and nothing else while we gave half of it away as tax breaks which help in the medium and long term but not the short term, and why Reagan pumped so much money into military spending in the early 80's to help improve employment during the deep 1980-1982 recession.
So what happens if a country like Ireland simply decides to invlidate its current debt? Sure, nobody elese will want to buy any future Irish debt, but if they simply wipe the slate clean and get spending under control, what's the downside? Fuck, I'd be perfectly okay with wiping out US debt just to fuck with China, but that's just me.
Well, yeah. That's the case now. But a couple of years ago when the crisis broke, we still had the leverage to save ourselves, and chose not to. LOL at our finance minister saying that we had "turned the corner" this time last year. Fortunately, he'll be joining the unemployment register too soon.
Sure, a country can just tell crediters to fuck off but that usually has drastic long term consequences because no one, and I mean no one, wants to loan them money for decades to come. Heck, just a default in scheduled debt payments (not being able to pay on time but still paying) is enough to severely crash whole regional economies as investors lose confidence and abandon an economy in mass. See the Asian economic crisis of the late 1990's, the Latin American crisis of the early 00's, or the Russian default crisis also of the late 90's. None of those was actually a country repudiating debt but instead having difficulty paying debts on the agreed payment schedules mostly because they borrowed money in dollars, owed creditors money back in dollars, but then economic crisis made the value of the local currencies fall dramatically so that they were very temperarially unable to buy enough US dollars to make a short term debt payment. One of the big reasons d'estate of the IMF is to help provide emergency liquidity for cases like this provided countries agree and implement austarity programs to help restore market confidence. Of course, many people (including some very highly respected economists) have repeatedly said that the IMF's terms are normally much harsher then absolutely necessary thus causing an unnecessarily large economic contraction (I.E. they force tax increases which are bigger then needed and they force spending cuts which are bigger then needed) but honestly it's very hard to measure how much is needed since we're dealing with irrational market behaviors (mass panic and capital flight; see Keynes vs Hayak's bull & bear spirits debate; I.E. the Austrian school traditionally assumed all people were rational economic actors while Keynes documented very clear cases of irrational behavior due to irrational exuberance or irrational mass panic).
Did you cut so much that you're no longer borrowing money? If your problem--as YOU stated it--is that Ireland can no longer borrow money, has it taken steps to eliminate the need to do so? It sounds like you haven't and the only entity that will bail you out is the European Central Bank, which will probably give you all the money you need...provided you sign IOUs to Brussels... You're bankrupt because your country has made commitments it cannot uphold. Simple as that. You can TRY to increase revenues by raising taxes, but (1) that's going to reduce your competitiveness, and (2) it's liable to backfire during a recession and simply make things worse. When you're over-committed, it's time to forgo some commitments.
The entire point is that the attempt to do that has backfired. Simple to say. Reality is more complex.
Paladin, yes, right now they're having a problem borrowing on the short term credit markets to roll over their debt. I suspect the problem is the same as it was during the Asian, Latin American, and Greece debt crisis which was a combination of bad long term planning and organized attacks on a currency on speculators because they can make so much money shorting a country's currency or sovereign debt. On one hand people can say it's not the speculators' fault because the governments acted poorly but on the other hand you do have predatory speculators who figure out they can make tens of billions of dollars if they push a country into a spot shortage so they deliberately set out to do just that. Without such a push those countries would have likely stayed on the ledge instead of falling off the edge which is why a lot of countries (China, Malaysia, South Korea, Thailand, most of Latin America, Russia, etc...) have either curb such speculative behavior or outlawed it completely.
I wouldn't say that as Ireland has not yet missed a debt payment. What it has had happened is that the cost of borrowing suddenly shot up in the last week making it much more difficult to finance debt and making it much more expensive to roll over debt (which is a routine government function done all the time). What the Irish government has done is say the current trends are making it much, much more expensive and difficult for it but that it can still make all of it's debt payments on time but who knows for how long? That's why it is now asking the EU and the IMF for assistance because they don't know how long they can hold out. Now if they default then I'd say, yes, the whole thing has gone wrong and the attempt has backfired but we're not there yet. Just uncomfortably close.
Reality is not as simple as your world view. For instance, in reality Ireland is paying it's debts and has not defaulted on squat. http://www.bloomberg.com/news/2010-...ations-on-time-commentary-by-john-bruton.html What has happened is there has been a huge number of shorts (and short like bets) made against Ireland so the market has gotten jittery and the cost of borrowing short and long term has dramatically shot up in the last week. http://www.ft.com/cms/s/0/1b579e6a-d14a-11df-8422-00144feabdc0.html#axzz14u4pZmn7 It should be pointed out that the main reason Ireland is running a deficit right now is because of the economic crisis. In the 90's and 00's Ireland deregulated it's banks, had a low interest rate environment, and private for profit Irish banks got huge into international banking especially speculating on risky property loans in the US and in parts of Europe. They just seemed to love those new mortgage backed securities Wall St was pumping out and as a result most of them went bust and needed a bailout to prevent a total collapse of Ireland's banking system (sound familiar Americans?). The extreme cost of those banking bailouts for a country as small as Ireland is what has spiked their national debt (See Financial Times article) in the last two years or so.
If I see "deregulation" used to represent "targeted easing of certain regulations" one more fucking time, I'm gonna punch a kitten.
Yep, times of economic stress do tend to make the implications of bad policy more pronounced. As the saying goes, Ireland is paying the piper - if the only economic conditions possible in the universe were economic growth with the occasional boom, a lot of economic theories would become more viable, and a lot of economic policies would be more sustainable. But crashes happen, amidst the bus cycles. So Boo Hoo for the P.I.I.G.S. While we're at it, boo hoo for California. And New York. And we can blame Bush. And Haliburton. And Wall Street bankers, and America's fat cats. And of course most importantly those evil speculators and short sellers.
California? It has zero problems paying it's debts on time and it's total amount borrowed as a percentage of GDP is quite low. I'm even more astounded that folks here seem to keep bringing it up when their supposed right wing paragons of virtue, like Texas, are running deficits much higher in absolute terms then California plus have much smaller economies then California meaning that their deficit is much higher as a percentage of GDP. Texas has far worse problems then California ever had. Of course that is just an objective fact and you only get objective facts by reading factually based news so no surprise these facts aren't widely known here.
