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Can someone explain to me how Austerity works in economics. I understand the concept but not the implemetation and how it actually saves an economy
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Jul 15, 2015 23:02
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| # ? Apr 27, 2024 12:47 |
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LeoMarr posted:Can someone explain to me how Austerity works in economics. I understand the concept but not the implemetation and how it actually saves an economy That's because it doesn't work, nor does it save the economy. Keynes 101.
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Jul 15, 2015 23:02
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LeoMarr posted:Can someone explain to me how Austerity works in economics. I understand the concept but not the implemetation and how it actually saves an economy It doesn't. Hth. In all seriousness, it just doesn't. Every place austerity was tried post recession recovered more slowly than places that had neutral of stimulus policies. Austerity in the face of a recession involves putting a lot of people out of their jobs in the middle of an unemployment crisis to somehow fix the Economy. It is stupid.
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Jul 15, 2015 23:06
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Caros posted:It doesn't. Hth. Okay but whats the end goal, How is it Supposed to fix the economy if it works? I knoe it doesnt, but I want to know what the people behind austerity claim to know.
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Jul 15, 2015 23:10
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LeoMarr posted:Okay but whats the end goal, How is it Supposed to fix the economy if it works? I knoe it doesnt, but I want to know what the people behind austerity claim to know. It's supposed to increase investor confidence in the government, which will lead these people to invest in the country (Krugman's "confidence fairy").
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Jul 15, 2015 23:14
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Starving a horse will make it run faster, pull harder.
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Jul 15, 2015 23:15
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It comes from the idea that, contrary to what naive people might believe, every cent of government spending is actually thrown into a black hole and has no impact on the overall society. Therefore, if you cut government spending, you can get a government's debt in control with no unpredictable consequences, because we've decided for ideological reasons that government spending has no positive impact on the economy, and therefore the removal of government spending will have no negative impact. The real answer is that austerity's goal has nothing to do with improving an economy, and everything to do with hysterically focusing on month-to-month debt servicing, at any expense, in order to give investors time to de-leverage themselves from the country in question.
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Jul 15, 2015 23:16
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It's a kneejerk reaction to a complex problem, and as in most situations kneejerk reactions end up making things worse. The proponents of austerity (at best) believe that they're helping solve the problem of a deficit by reducing government spending. Immediately this might look good because less spending might mean less debt, right? At worst, they have an agenda and are pushing austerity because they want to reduce the role of government as a whole and taking away its funding is an easy way to do that. Of course, it never works because laying off tons of people in the name of austerity sends the economy into a greater tailspin, making recovery that much more difficult. Mercury_Storm fucked around with this message at 23:20 on Jul 15, 2015 |
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Jul 15, 2015 23:16
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but wont the country be in perpetual debt if they are following austerity
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Jul 15, 2015 23:19
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LeoMarr posted:but wont the country be in perpetual debt if they are following austerity Congrats, you're smarter than anyone who works for the IMF, the ECB, or the German government.
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Jul 15, 2015 23:20
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LeoMarr posted:Can someone explain to me how Austerity works in economics. I understand the concept but not the implemetation and how it actually saves an economy
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Jul 15, 2015 23:20
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Badger of Basra posted:Congrats, you're smarter than anyone who works for the IMF, the ECB, or the German government.
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Jul 15, 2015 23:21
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Heavy neutrino posted:
Can you expand on on this? What does "focusing on month-to-month debt servicing" mean? How does it connect to giving investors time to deleverage?
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Jul 15, 2015 23:21
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LeoMarr posted:but wont the country be in perpetual debt if they are following austerity you are trying to find a plausible explanation for how austerity fixes economies when none exists. the reason austerity policies are able to be implemented is simply that the economic experts who know enough to question them do not have enough influence to oppose pro-austerity governments and ngos.
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Jul 15, 2015 23:25
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KiteAuraan posted:That's because it doesn't work, nor does it save the economy. Keynes 101. Actually Keynes did defend it, during times of prosperity, so that you could lessen the debt.
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Jul 15, 2015 23:26
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could austeriry work if they cut some spending but left other spending unchanged or larger
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Jul 15, 2015 23:27
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Crowsbeak posted:Actually Keynes did defend it, during times of prosperity, so that you could lessen the debt. Keynes was arguing that you should raise taxes in times of prosperity, though. I don't think austerity proponents would approve of that.
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Jul 15, 2015 23:29
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LeoMarr posted:could austeriry work if they cut some spending but left other spending unchanged or larger Reminder you are asking people who have literally no clue what they are talking about.
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Jul 15, 2015 23:29
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LeoMarr posted:could austeriry work if they cut some spending but left other spending unchanged or larger
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Jul 15, 2015 23:30
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economics hasn't predicted gently caress-all ever.
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Jul 15, 2015 23:30
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LeoMarr posted:could austeriry work if they cut some spending but left other spending unchanged or larger thats not austerity, thats just adjusting your budget. whether it works or not depends on whats being cut and whats being increased. the current austerity policies being promoted are based on the idea that cutting government spending in a recession is inherently beneficial, and that is just outright false.
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Jul 15, 2015 23:30
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Base Camp Blanket posted:Can you expand on on this? What does "focusing on month-to-month debt servicing" mean? How does it connect to giving investors time to deleverage? Well what they end up doing is cannibalizing methods the government has to actually get revenue for an immediate return. A common example I see happen a lot is a city contracting out its parking meters to a private company. The city gets an instant lump sum it can use to pay back its debts, but it doesn't see any returns from the parking meters for the term of the contract. It doesn't sound awful at first, especially if your city is worried about defaulting, but you're now bringing in less money in the long run so your debt is just going to climb back up (all else being equal). This also means that people invested in this hypothetical city have more time to pack up and leave. It surely isn't going to fool anyone who knows a goddamn thing about economics, so the only investors who are going to have more "confidence" in the city's economy are the people looking to pick its bones clean with the aforementioned contracts. Everyone else is just hoping they don't default before they can pull all their money out and put it elsewhere.
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Jul 15, 2015 23:31
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1. More money for us 2. gently caress you
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Jul 15, 2015 23:32
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tsa posted:Reminder you are asking people who have literally no clue what they are talking about. if you see a mistake feel free to correct it
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Jul 15, 2015 23:32
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Is it fair to say that austerity is another of the many loving tendrils of libertarianism that infest certain economic circles where those espousing them have never actually been in, close to, or experienced with the situations they are trying to 'assist' (quotation marks the size of the loving moon) others out of?
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Jul 15, 2015 23:33
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so the real point of austerity is to cut the loaners lossess by recovering what they can in the short run and giving themselves time to pull out
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Jul 15, 2015 23:39
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Why did austerity work so well in Germany?
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Jul 15, 2015 23:42
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If you have to ask, you can't afford it.
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Jul 15, 2015 23:44
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LeoMarr posted:so the real point of austerity is to cut the loaners lossess by recovering what they can in the short run and giving themselves time to pull out that is sometimes the case, but there can be other motives too. for example, over here in britain the government are currently using an austerity policy as an excuse to sell off government assets at well below market rate to politically connected individuals and organisations example: http://www.bbc.co.uk/news/business-30527392 (bear in mind the £180m is from the governments own report- most estimates put the number higher) Gum fucked around with this message at 23:48 on Jul 15, 2015 |
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Jul 15, 2015 23:44
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Samuel Clemens posted:Keynes was arguing that you should raise taxes in times of prosperity, though. I don't think austerity proponents would approve of that. It is technically a form of austerity. Its just not something that any of them would ever support being that it requires actual brains.
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Jul 15, 2015 23:45
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Miltank posted:Why did austerity work so well in Germany? A few economists have pointed out that Germany has not in any recent memory fully repaid a major nation-level debt. There's always been some debt forgiveness to go along with reforms. There's also the argument that the crushing debt payments to the country (and the austerity that went with it) after world war 1 were a major destabilizing factor that helped Hitler rise to power. BabelFish fucked around with this message at 23:52 on Jul 15, 2015 |
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Jul 15, 2015 23:45
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Crowsbeak posted:It is technically a form of austerity. Its just not something that any of them would ever support being that it requires actual brains. Yeah, that's what I mean. Austerity proponents can't even adhere to their own ideology.
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Jul 15, 2015 23:49
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There's essentially no way to not Austere when your economy is a bubble like Greece's was. It's no different than housing prices needing to return to reality back in 08. Keynes works best on functional economies going through a rough patch, but Greece doesn't actually have a functioning economy. Basically the difference between putting gasoline in your engine vs. dumping it into a burning fire. tsa fucked around with this message at 23:52 on Jul 15, 2015 |
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Jul 15, 2015 23:49
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LeoMarr posted:so the real point of austerity is to cut the loaners lossess by recovering what they can in the short run and giving themselves time to pull out If I was being charitable, I'd say that's just how it works out rather than the intention. On its face, it's a calculated risk. If you default, that stirs up an economic shitstorm, so throw out some austerity measures to cut down on your debt and hope your economy recovers enough to offset what you just did. The reality is, you're betting your economy on the craps table. At best, your economy takes all the longer to recover, and at worst your economy is hosed up beyond repair and everyone who depends on it is hosed too.
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Jul 15, 2015 23:57
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LeoMarr posted:Can someone explain to me how Austerity works in economics. I understand the concept but not the implemetation and how it actually saves an economy If you make a formula mistake on your excel spread sheet while doing research, it works very well.
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Jul 15, 2015 23:59
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GhostofJohnMuir posted:If you make a formula mistake on your excel spread sheet while doing research, it works very well. i wanted to bring that up myself but i couldnt remember the name of the study
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Jul 16, 2015 00:02
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Miltank posted:Why did austerity work so well in Germany? Net exporters can generally afford to run budget surpluses, but the same cannot be said for net importers. German capitalism was also far healthier at the time of the Great Recession as a consequence of its entry into the Eurozone before, where the shared currency gave it an enormous leg-up in terms of its rate of profit over many of the other Euro countries.
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Jul 16, 2015 00:05
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so austerity doesnt work and its obvious so why are they signing agreements to continue austerity for longer if it obviously wont work.
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Jul 16, 2015 00:18
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LeoMarr posted:so austerity doesnt work and its obvious Because tossing still-beating hearts into a bonfire has gone out of style.
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Jul 16, 2015 00:19
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| # ? Apr 27, 2024 12:47 |
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LeoMarr posted:could austeriry work if they cut some spending but left other spending unchanged or larger Have you tried kill all the poor? Or what about raise VAT and kill all the poor.
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Jul 16, 2015 00:22
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