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Notes to myself, possibly of interest to others.
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Thursday, September 30, 2010

Austerity - The origin and effect of a dangerous idea

Video thanks to Barry Ritholtz.  Good in the beginning, great at the end, looses it just a bit in the middle. Still, recommended. 5 min...

Cilff Notes version: Pre-crisis, everyone - individuals, banks, business levered up. Some saw the bubble, others not. When the crash came, everyone got hurt, including individuals in the lower 40% of income pool - the middle and lower classes. Government, by huge spending, stopped the economy from totally crashing. Comes austerity: We all must pay the piper because of our evil ways. When applied to government it's not so clear. If government embraces austerity, it slashes services and programs. These are used by the lower 40%, not by business or the rich. So the lower 40 get whacked twice. Not only do you get no growth, due to no demand creation in the economy, you get potential class warfare. Austerity, esp. by governments - now - is a bad idea.

Yes, Keynesian spending may never get paid back because the next administration may abandon fiscal prudence, as Bush did, but the danger of not having government spend, especially at this particular point in our economic journey,is much greater than just decades of slow growth.

WatsonMedia presents Mark Blyth on Austerity from The Global Conversation on Vimeo.

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