Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.

Where We Is: Austerity Edition

by ATinNM Tue Sep 20th, 2011 at 12:26:50 PM EST

As clear as I can make it.

The world is in a classic Positive Feedback Loop in the Negative Direction causing cascade failure across the global economy.   Increasing a causal factor comprising the Feedback Loop will only drive the economy further in the Negative Direction.

So says Theory.


In practice, micro-economic activity (aka. The Real Economy) is contracting so removing government activity (21%, give or take in the US) from the economy can only further contract micro-economic activity.  

Putting it simply: if you are in a hole, continuing to dig ain't gonna get you out of the hole and, in fact, will only make the hole deeper.

For those suffering from Neo-Classical Economic brain rot, which includes most economic policy advisers ...

The fantasy "new businesses will emerge from the capital pried from Federal, state, and local governments" ignores the reduction in spending will be affective in months causing further cascade failures of marginal businesses directly or indirectly based on government spending, throwing those people employed by those businesses out of work.  This increase in unemployment - and the resulting non-buying of goods and services cuz they ain't got no money - will occur at the same time as the people directly employed by governments are thrown out of work, lowering their purchases of goods and services cuz they ain't got no money.

So, any new businesses¹ will have a reduced total potential customer base relative to the pre-Austerity number, increasing the risk of those businesses, increasing the percentage of new businesses going belly-up, meaning the affect of new businesses in reducing unemployment will be swamped by the increase of unemployment by the imposition of Austerity.

¹ tho' I note the pesky details of what new businesses, founded with what money, in what markets, selling what products or services, and to whom, exactly, are grandly ignored by Neo-Classical Economists.

Display:
We're not in Kansas any more, TinMan.

(apologies. Couldn't help myself.)

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Tue Sep 20th, 2011 at 01:27:46 PM EST
Do the people with brain rot actually care?

They've been ranting on about 'reform' for more than a couple of decades - 'reform' meaning creating a shitty psychotic society where winners win and losers are either eaten or die - and now, as if by magic, the self-engineered pistol shot to the foot financial 'crisis' has given them the perfect excuse to force 'reform' on everyone who earns less than they do.

Someone more cynical than I am might wonder if the two might perhaps be connected.

How lucky for them that they inexplicably find themselves with the immense political leverage needed to force through their program against the rest of the population, which seems to live in a political location somewhere between uneducated indifference and active and violent dissent.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Sep 20th, 2011 at 01:44:00 PM EST
They may care - and who cares?  A diagnosis of Neo-Capitalist/neoliberal brain rot¹ means sufferers of the disease are incapable of observing Reality and drawing conclusions outside Neo-Capitalism/neoliberalism.

As long as economic policy is made by these people the further into the hole we must go.  

¹ and a h/t to Jake


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Sep 20th, 2011 at 02:07:20 PM EST
[ Parent ]
A Rotted Brain example not so much to back you up as to cause Head On Keyboard Disorder. From an e-mail quoting an e-mail (but these guys are hotshit analysts, watch out):

From 1948 until 1980, men who considered themselves to be `in the labor force' (working or wanting work) equaled roughly 98% of the male population ages 20-64. [Wow. What a quaint concept. If you could work, you wanted work.] From 1980 to 2005, this proportion fell steadily, from 98% to 92%. Then, in six years, it fell again by half this margin, to 89%. As for male employment, it averaged 94% of the population age 20-64, until the 1975 recession. Today, it's 81%. Let's assume that the old labor force ratio of 98% could, in fact, work. That means that male unemployment - including those who have given up on the idea of gainful employment - is over 17%, and is roughly tied with the levels of mid-2009.

"For women, society evolved from predominantly `homemaker' employment to a point, about a decade ago, where women in the labor force equaled about 82% of the female population aged 20-64. The women in the labor force have dropped from 82% to 78% in ten years, with most of that drop in the past two years; that's 5% of the female workforce that's simply given up in two years. Using the prior peak of 82%, as the roster who would want to work, the current 71.6% who are working implies that female unemployment is roughly 13%, and is much higher than it was two years ago.

"Combine the results, and we get a figure of 15% unemployment, give or take, relative to past peak labor-force levels, if we include those who have given up hope. Add in the usual U-6 vs U-3 comparison (including those who are part-time and want full-time work), and we're at about 20% true unemployment.

"The good news, is that if our natural "labor force" is 98% of the men and 82% of the women, and if `full employment' puts 95% of them in jobs, we have about 25 million new jobs that could be created. If we get out of the private sector's way, and allow employers to hire who they want, doing work that both parties agree to do, for pay that both parties find acceptable. I.e., enlightenment in Washington (and Sacramento) could unleash a tsunami of new employment.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Sep 20th, 2011 at 03:07:08 PM EST
[ Parent ]
Well - story telling and parables are all these people do.

They're allergic to any real understanding of cause and effect.

So if you start from the Fundamental Tenet of Faith ("Private Sector All Good, Public Sector All Bad') and work back, you'll always get the answer you first thought of.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Sep 20th, 2011 at 05:15:42 PM EST
[ Parent ]
If we get out of the private sector's way

Presuming, from their analysis, that they are speaking for the financial sector and for the financial sector's nominees in government, if THEY got out of the way and let the non-financial sector and government do the jobs they once knew how to do we COULD solve our problems to a very large degree. Were the existing financial sector, along with those who own it, just to disappear-- POOF! --
the needed financial institutions could readily be created and on firmer foundations. What is preventing any solution is the continuing, resolute attempts to save the unsalvageable existing financial system AND those who benefit from it. It is they who need to be thrown into the volcano, as it were.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 21st, 2011 at 12:36:33 AM EST
[ Parent ]
analyst:
From 1948 until 1980, men who considered themselves to be `in the labor force' (working or wanting work) equaled roughly 98% of the male population ages 20-64. [Wow. What a quaint concept. If you could work, you wanted work.]

Also coinciding with a period when, if you wabted to work, you could. Hey, maybe that isn't a coincidence?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Sep 21st, 2011 at 10:24:44 AM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Thu Sep 22nd, 2011 at 05:07:18 AM EST
[ Parent ]
Yes, quoting somebody else: "Rob Arnott, founder of Research Affiliates".

Was the typo in "Maudlin" deliberate? :)

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 22nd, 2011 at 06:08:56 AM EST
[ Parent ]
If we get out of the private sector's way

This nonsense again & repeated.  Yes the private sector is needed for a functioning economy.

However:

and one begins to wonder when, exactly, "freeing the private sector" improves the employment rate?  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Sep 22nd, 2011 at 11:26:06 AM EST
[ Parent ]
When it has been fully and properly done. You don't appear to realize all the stuff government does to prevent the economy reaching nirvana equilibrium.

If only humans could live in the State of Nature. All would then be for the best in the best of all possible worlds.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 22nd, 2011 at 11:29:54 AM EST
[ Parent ]
Ah, yes.  The famous Neo-Classical equilibrium where a non-linear dynamic system magically becomes linear and static.

For reasons never fully explained .... or even addressed.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Sep 22nd, 2011 at 01:04:04 PM EST
[ Parent ]
Hope springs eternal in the human breast:
Man never is, but always To be Blest.  -  Alexander Pope

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 22nd, 2011 at 11:16:39 PM EST
[ Parent ]
Now we know. Pope was an early economist.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 22nd, 2011 at 11:17:20 PM EST
[ Parent ]
analyst:
From 1948 until 1980, men who considered themselves to be `in the labor force' (working or wanting work) equaled roughly 98% of the male population ages 20-64.

Combined with the graph we can see that when Top Marginal Tax Rate goes below 70% proportion in the labor force goes down. Guess the rich becomes lazy if they can keep all that money, but with a proper whip in the form of high marginal tax rates tehy are forced to bring their skills to the market.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Sep 23rd, 2011 at 04:35:31 AM EST
[ Parent ]
European Tribune - Comments - Where We Is: Austerity Edition
¹ tho' I note the pesky details of what new businesses, founded with what money, in what markets, selling what products or services, and to whom, exactly, are grandly ignored by Neo-Classical Economists.

Haven't you heard of "the magic of the markets"? Serious people living in the "real world" engage in magical thinking with religious certainty...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 23rd, 2011 at 09:04:11 AM EST
Say's law: supply creates its own demand.

If you build it, they will come.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Sep 23rd, 2011 at 09:06:12 AM EST
[ Parent ]
OTH, you can only consume what you produce.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 23rd, 2011 at 09:24:39 AM EST
[ Parent ]
Interesting to consider that WW2 was not only a Keynesian stimulus, the command economy focussed on war created a large volume of pent-up demand for consumer goods.

So in a way, for a while, if you built it, they would come...

by Metatone (metatone [a|t] gmail (dot) com) on Fri Sep 23rd, 2011 at 09:29:40 AM EST
[ Parent ]
Thneed
I'm being quite useful.  This thing is a Thneed.
A Thneed's a Fine-Something-That-All-People-Need!
It's a shirt.  It's a sock.  It's a glove.  It's a hat.
But it has OTHER uses.  Yes, far beyond that.
You can use it for carpets.  For pillows!  For sheets!
Or curtains!  Or covers for bicycle seats!"

Thneeds

Economists have no technical term for thneed; they assume that all "demand" in the economy is equivalent, as long as it's backed with money. Yet surely it would be helpful to differentiate. One can imagine an axis running from needs to thneeds. On one end are such things as food, shelter, basic transportation, and health care. On the other end are Coca-Cola, iPods, and Hummers. (Significantly, needs are generic, while thneeds are typically branded.)


It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Sep 23rd, 2011 at 10:13:00 AM EST
[ Parent ]
Is that Dr. Seuss?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Sep 23rd, 2011 at 11:01:47 AM EST
[ Parent ]
Indeed.

Thneeds

The Once-ler makes thneeds by cutting down truffula trees.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 23rd, 2011 at 11:39:05 AM EST
[ Parent ]
So, some economists have made the jump from 1690¹ to 1943 and discovered Maslow's Hierarchy of Needs.

Wow

Now if they could only dimly glimpse the fact a person who doesn't have any money can't spend it ...

¹ First publication date of Locke's An Essay Concerning Human Understanding

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Sep 23rd, 2011 at 12:09:31 PM EST
[ Parent ]
I wonder how can the concept of constraint be so easily missed. Only freeing a constraint will give you any tangible result. Clearly, we are not capital constraint today -the world is awash in capital. So adding more capital at the cost of hampering the other factors is obviously silly.

Multidimensional linear optimisation under constraint will give you an optimum on the edge of the set of constraints, but not always on the same edge!
And that's before you even throw in non-linearity and second round factors.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sat Sep 24th, 2011 at 03:37:39 AM EST
"Eureca"

http://www.latribune.fr/actualites/economie/international/20110928trib000652367/le-plan-secret-allem and-pour-sauver-la-grece-.html

Finnish version of this article tells that EU is planning to finish Greece off and privatise their public wealth.
Greeks must be mad if they accept this IMF style robbery.

by kjr63 on Wed Sep 28th, 2011 at 06:39:10 AM EST
Apparently Germany (and France?) offered Greece a 50% debt reduction and Venizelos refused.

Reuters: Greek lawmakers take bitter medicine, protests flare

Venizelos, a former defence minister known for his oratory and intellect, said signs of participation in a bond swap plan, a crucial part of Greece's efforts to cut costs tied to its 350-billion-euro debt mountain, were encouraging.

Greece hopes 90 percent of creditors holding shorter-dated bonds will switch them with papers of longer maturity and take a "haircut", or loss, of 21 percent on the paper, as outlined in a new bailout scheme agreed among Greece, private bondholders, and the EU and IMF in July.

German and French government advisers recommended Greece be allowed to write off around 50 percent of its debt, but Venizelos rejected the idea.

(h/t talos)

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 28th, 2011 at 06:46:59 AM EST
[ Parent ]
I don't trust a bit to these "news." And anyway, Greece is a small fish in this euro disaster. They are planning billions of bank bailouts and without a real central bank. We are ruled by complete morons. How can such a mouse like Greece "threaten" the whole world?
This is absolutely ridiculous.

Greece is heaven sent to neoliberals. Now they can steal public sector everywhere and keep their private sector ponzi scheme going on.
Slavery is exactly what "the middle classes" deserve.

by kjr63 on Wed Sep 28th, 2011 at 05:50:20 PM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]