Junior G-man posted:

Mark Blyth probably explains this better than anyone here will:

https://www.youtube.com/watch?v=JQuHSQXxsjM

Hal_2005 posted:

Austerity, a fancy way of saying your country spent too much. And now they can not find new loans which can be used to generate more growth.

When your government spends too much, or your liabilities grow faster than your assets and the asset generating cash flows the leders will no longer support you rolling over your current account deficit. As this contra account balance becomes every more skewed towards an impossible resolution, bond investors be they pension funds or endowments will demand shorter repayment terms and higher bond yields. To meet this, the government can either agree to manage their cash outflows better or: they can seek methods to generate more tax revenue. The most common of which is tax private enterprise and consumption more to 'goal seek' to the solvency ratios require for their target Government Interest rate.

Should a government be particularly inept, or it is impossible to tax your population any more than they can bear (because its likely a bear market), we will see the central bank step in and debase the currency, so that consumption and other independent cash outflows for a country (like personal consumption/lending) have a smaller effect on the country's foreign reserves. Which makes it easier for the government to pay back its creditors, if there is more plenty of foreign currencies for meeting the governments outflows.

I should note, every currency has a "cost" associated with it. Thats what FX is all about.

When you have a currency union, your central bank can no longer devalue the currency to make domestic consumption weaker and temper cash outflows so this forces governments to admit they have a spending problem.

In the case of Greece, Venezuela, and 80% of Asia, domestic retirees and populists are easy to sway and motivate. Particularly when they are told they are being 'overpaid' by foreign counterparties, and domestic politicians have very little interest in admitting they mismanaged the country finances. So we see a reluctance to address those large cash outflow burdens and thus we have the mystical term of "austerity". Which is, as I said above, a fancy way of saying your country spent too much, and your existing population have little interest in adjusting to a way of life that better suits their country's real GDP and real US dollar adjusted wage.

Sooner or later if your country has a current account deficit the piper will need to be paid. You can't debase a currency beyond the lower bound of 0, nor can you underpay the cost of capital by keeping rates at negative yield for more than 10 years before bad things happen. Like Japan and most of the AFPAC trade union.

Hope that helps. Current answers were lacking.

Note:
Privatization is NOT austerity. You only suggest the spinout of crown corporations when you conclude that government crowns are 1.) a part of the problem which led to a reluctance to build sustainable cash positive industries or 2.) those entities (SOE's) show a willingness to champion reforms in wage, pension and capital reinvestment that will take most of the populist ire away from government's attempts to fix the trade and union laws.

Should austerity not be attempted, and a central bank can no longer defend the currency then we will see bank runs and a flight from the currency. Like Ukraine and Argentina before their govt. revolts. When the bank runs out of reserves to defend their FX, bonds are dumped in masse and yields skyrocket, leading to a liquidity shortange and bank holiday. At this point the IMF and World Bank usually step in, to prevent a failed country forming, however should the risk be too great for even them, the country as a whole needs to abandon their currency regime and the government must abdicate their role as the manager of the trust to the country's real estate laws. A longwinded way of saying: My Government just filed for Chapter 11. At this point, all holders of government treasuries are repudated or written off; what we call a "hair cut", and the Central Bank and newly formed Govt. can issue new debt having no new leins. At the expense of everyone who used the "old" monetary regieme. Which usually means all wage earners, banks, pensions, endowments, and businesses (including universities).

IAMNOTADOCTOR posted:

No in deed, that's why in my humble opinion the question if austerity did more or less than the loans is not a productive question. But reading back on it I didn't really clarify anything with that, apologies.

The position that is mine and that I am willing to defend is that austerity can be an effective means to prevent sovereign default. The effectiveness and desirably of austerity over a default differs on a case by case basis.

Reducing austerity and people defending it to complete idiocy in snappy one liners does not really contribute to the discussion in my opinion.

Disclaimer, I'm more than willing to be proven wrong as this is not my area of expertise, but so far the more thought out and data driven post have been from post's defending aspect's of austerity.

Junior G-man posted:

Mark Blyth probably explains this better than anyone here will:

https://www.youtube.com/watch?v=JQuHSQXxsjM

asdf32 posted:

If a government has borrowed too much money then it needs to save more money. It's that simple. The household analogy is useful there.

asdf32 posted:

Austerity in the sense of not spending too much money works well for every country that isn't in a debt crisis.

KingFisher posted:

The IMF says greek didn't do what was asked of it, let alone more:
http://blog-imfdirect.imf.org/2015/07/09/greece-past-critiques-and-the-path-forward/

Critique 3: Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression:
*Given the dismal productivity growth record of Greece before the program, a number of structural reforms were seen as necessary, ranging from a reform of the tax administration, to reduced barriers to entry in many professions, to reforms of pensions, to reforms of collective bargaining, to reforms of the judicial system, etc.
*Many of these reforms were either not implemented, or not implemented on a sufficient scale. Efforts to improve tax collection and the payment culture failed completely. There was fierce resistance to open closed sectors and professions. Only 5 of 12 planned IMF reviews under the current program were completed, and only one has been completed since mid-2013, because of the failure to implement reforms.

"IMF" in 2012 posted:

.
Earlier this week, the International Monetary Fund made a striking admission in its new World Economic Outlook. The IMF's chief economist, Olivier Blanchard, explained that recent efforts among wealthy countries to shrink their deficits — through tax hikes and spending cuts — have been causing far more economic damage than experts had assumed.

quote:

So, instead, Blanchard did something more subtle. He studied the IMF's previous economic forecasts. If a country is already struggling for other reasons, the forecasters are likely to have taken that into account. And what Blanchard found was surprising: IMF forecasts have been consistently too optimistic for countries that pursued large austerity programs. This suggests that tax hikes and spending cuts have been doing more damage to those economies than policymakers expected. (Conversely, countries that engaged in stimulus, such as Germany and Austria, did better than expected.)

IAMNOTADOCTOR posted:

Germany, Netherlands, arguably UK, Ireland, Iceland and Latvia . I know that Iceland is retrospectively often presented as the alternative to austerity but that is not true, if you look at the coverage in 2009-2011 the same groups that now point to Iceland as the shining example of non-austerity options for greece called Iceland a hopeless bitch made IMF follower of austerity. (hyperbole, but not too much)
https://www.wsws.org/en/articles/2009/07/icel-j14.html

(World Socialist Website) https://www.wsws.org/en/articles/2009/07/icel-j14.html


What wikipedia has to say on the Iceland success:
I've heard people claim that the Icelandic austerity was more severe then the greek, but I dont have figures to back up that claim. What i can tell you is that the spending deficit decreased annually by 3% of the GDP.

Depends on who you talk to,

Simple Definition of Austerity: Austerity involves policies to reduce government spending and or higher taxes in order to try and reduce government budget deficits.

This is something most countries have done and is easily recognizable as "sometimes pretty sensible". If we go back to greece, I dont think Pohl or others would argue that austerity in this sense and thereby a decrease in the defecit of greek spending after 1995 would have been a bad idea. As far as I know there is no discussion what so ever that the greek crisis is in large part the result of a government overspending borrowed money. Austerity =/= austrian economics.

quote:

Simple Definition of Austerity: Austerity involves policies to reduce government spending and or higher taxes in order to try and reduce government budget deficits. (This is really simplistic, but we can work with it in this context)

This is something most countries have done and is easily recognizable as "sometimes pretty sensible". If we go back to greece, I dont think Pohl or others would argue that austerity in this sense and thereby a decrease in the defecit of greek spending after 1995 would have been a bad idea. As far as I know there is no discussion what so ever that the greek crisis is in large part the result of a government overspending borrowed money. Austerity =/= austrian economics.

OwlFancier posted:

Not sure Greece caused the recession because I have it on good authority that was the Labour Party.

Also, it's a bit weird to blame something on excessive borrowing rather than excessive lending.

It's sort of the bank's job to figure out whether it should lend you money or not.

KingFisher posted:

By placing the blame on the banks you are removing all agency from the greek, you are making my argument for me, that basically they would take any money given to them regardless of their ability to repay it.

You see this is far more infantilizing then my household narrative screed above don't you?
I mean I know you can't personally behave this way and max out your credit card every month because you know the *banks* wouldn't have given you that credit limit if you couldn't afford it.

It just proves the greek are unfit to rule themselves, or be left alone with matches.

ColoradoCleric posted:

Man if you're going to bitch about austerity then you're really barking up the wrong tree trying to defend greece. The anti austerity arguments really work better on countries than can devalue their own currency.

KingFisher posted:

Also, I find it extremely telling that none of you have come up with an answer yet for who *forced* the greek to take those loans.

ColoradoCleric posted:

Are we just going to ignore the fact that Greece has deep structural issues on that make it spend more money than it takes in?

IAMNOTADOCTOR posted:

Eeeh, i fixed the spelling 10 minutes after posting (2 hours before your post, were you painting it on a chapel wall?) and that's pretty much it. But good arguments put forth, well done, why on earth did i not think about lol, thank you for the discussion.

Lets pretend you are arguing in good faith but just grumpy: the world socialist website is relevant because it indicates that what is now put forth by some of the left leaning publications as a shining example of not doing austerity (Iceland), used to be a shining example of the horrors of austerity by the same or similar left leaning publications. I thought it would be most illustrative if i used the most left leaning publication, i could find others for you but seeing as your posting is lol and it is not the most important part of my argument it dont really feel the necessity.

How is the default and/or nationalization of the iceland banks opposed to also implementing austerity? Are you absolutely sure you know what the definition of austerity is? I'll restate a workable and commonly accepted definition here just to be clear for you:


Claiming Iceland did not implement austerity is silly, both the IMF and the Iceland government clearly mention the burden of austerity and the troubles they went to go to a budget surplus. Here's an excerpt from the MFA paper, emphasis mine:

Source :http://www.mfa.is/media/MFA_pdf/Fact-Sheet---No-1,-2013.pdf


At this point i think there are three options for this discussion to continue, all of witch need some effort from your part:

1. You agree that iceland is an example of austerity working, but that it isn't going to work in country x for reasons a,b,c,.
2. You agree that austerity was implemented in iceland, and that it is doing fine now, but that the economic recovery was despite the austerity as indicated by ...
3. Make a nice paint drawing of me wasting my time while you type lol whatever.

quote:

Due to the devaluation of the króna
,Icelandic households and companies have experienced a great
increase in their debt through the widespread inflation
indexing of mortgages and use of loans in foreign
currencies.
•
Major debt restructuring has taken place
for individuals and firms. A form
alised process has been introduced
for writing down mortgages to 110% of the value of
mortgaged assets, subject to a certain ceiling and
meeting criteria on debt service capacity, which should
help most households with negative equity and debt
service diff
iculties.
•
The government increased the interest payment rebate
from 2009
-
2011 in addition to a special supplementary
interest rate subsidy and access
has been granted to third-pillar private pension savings. Total after-tax effect of pension withdrawals amounts
to over 2.5% of GDP for 2009-2012, with further pay-outs in 2013. • Corporate debt restructuring proceeded slower than
anticipated at first , in part due to the complicated nature of the problems facing the corporate sector and the
need for clarity on some loan agreements widely used before the crisis – including the legality of foreign
currency indexation of loans. • Restructuring of SME debt has been catalysed through a voluntary framework between the government, banks
and social partners.

IAMNOTADOCTOR posted:

Edit: missed your edit, ignore any percieved snark above

paragon1 posted:

People often mention Italy and Spain as being similar to Greece when these sort of debates kick up. Would anyone care to share if there is any validity to that comparison, and if there is, how those countries' situations do and do not differ from Greece's?

paragon1 posted:

my understanding is that they were referring to recent events, so the past five years or so?

IAMNOTADOCTOR posted:

I hope you know that you are the only one who uses your definition of austerity? It's like debating communism and defining communism as the implementation of famine causing policies. Austerity is not always bad simply because it is a very basic and core economic concept that can be implemented in a social way (iceland for instance preferentially taxed the wealthy, as did ireland) or in the GOP kind of way as posted above. Equally important is the time of implementing austerity: keynes was not opposed to austerity during a boom, and I am not opposed to austerity during a sovereign debt crisis. To put it bluntly, you can use it right and you can use it wrong but the wrongness is not a key characteristic.

People itt, including you in my humble opinion, really need to accept the commonly accepted definition of austerity or that they've made up their own in which cases debate and discussion is pointless. I cant debate the merits of a program with you that is defined as : you'll know it when you see it. Especially when all the papers in support or opposed to our austerity use the commonly accepted definition. Basically, let everyone know when your making up your own new rules because at that point discussion in pointless.

quote:

At the core of austerity measures are cuts in state expenditure. The outcomes (reduced benefits, wages, pensions and state services) have been severe for the more disadvantaged in society, who have experienced a
significant fall in living standards and growing insecurity. There are profound differences –of geography and generation, gender and ‘race’ as well as class – in how austerity is experienced. These inequalities are increasingly taking on a spatial dimension, with the socialzoning of cities and the disparities between regions becoming more pronounced . The south-east of England is becoming increasingly distinct, though is itself the locale of deep and growing inequalities.

asdf32 posted:

Nice graph.

Friendly reminder: austerity means decreasing the deficit. For those who still don't get it but post in this thread.

quote:

2.
Much of this work is by those who are concerned with the cuts to the welfare state. In the light of benefit, health and social services cuts ,they are exploring the impact on the poor –who are bearing the brunt of the cost of bailing out the bankers. For example, there is research on the growing stigmatisation of benefit claimants (Baumberg et al,2012); on the growth of pay-day loans (Packman,2014); and on howthe banking crisis has allowed the Conservative
-Lib Dem coalition government to pick up Thatcher’s agenda in ways even she never dared – to roll back further the boundariesof the state.

quote:

Nobody is going to assess austerity as a successful policy if it leaves the enacting nation in perpetual crisis. The fact that it also produces human misery serves to promote its adherents from "misguided" to "possibly evil."

IAMNOTADOCTOR posted:

Equally important is the time of implementing austerity: keynes was not opposed to austerity during a boom, and I am not opposed to austerity during a sovereign debt crisis. To put it bluntly, you can use it right and you can use it wrong but the wrongness is not a key characteristic.

quote:

Equally important is the time of implementing austerity: keynes was not opposed to austerity during a boom, and I am not opposed to austerity during a sovereign debt crisis.

Blowdryer posted:

https://youtu.be/B6vV8_uQmxs

Another lecture on the topic because the first by Mark Blyth, linked earlier in the thread was good.

Junior G-man posted:

No it wouldn't have.

Austerity only works if it's executed by a bunch of unicorns with MBAs.

OwlFancier posted:

Shooting all the bankers for the past twenty years would have prevented the debt crisis.

a shameful boehner posted:

edit:





Look at these poor, woebegotten six figure earners. Won't someone think of the beachhouses!!

Radbot posted:

Institute mandatory minimum wage jobs for all Americans, for a period of 6mos-3 years depending on random chance... BUT the trick is you just have to keep checking every week to see if you still have to keep that job, we don't tell you in advance. Because it's not just about the job, it's about the desperate feeling of never being able to get out.

Typo posted:

no offense dude but you probably shouldn't talk this way to people irl even if you do on the internet, it's a good way to lose friends and friends are awfully important even if they are assholes sometimes.

down with slavery posted:

wow you're almost as much of an rear end in a top hat as he is

like the definition of a bad person who is a leech on society and does jack poo poo to earn it and yet here you are defending him

is it really that hard to accept that there are some lovely people in this world and you might have found one?

down with slavery posted:

OwlFancier posted:

Your friend sounds like a pretty massive rear end in a top hat from the way you've described him. You haven't listed any redeeming qualities.

VitalSigns posted:

Wait, you're friends with a banker and he's still alive?

What kind of person are you, you monster.

down with slavery posted:

Oh and another pro tip, if you don't want to debate and discuss things, don't bring them up in debate and discussion. This isn't your point scoring echo chamber.

down with slavery posted:

I already told you, you think 1%ers earn what they deserve, and had the balls to post it. Unless you wanna address that I guess we're done because I'm some kind of monster in your eyes who has the gall to actually challenge your lovely posts/opinions.

down with slavery posted:

Ahh yes, challenging a fellow leftist to examine their beliefs is equivalent to arguing they should be killed.

- a reasonable D&D poster


bahahahahaha

keep those personal attacks coming

I'm an "angry person" because I think income inequality exists and should be dealt with. Truly a nuanced position you've stumbled across.

IAMNOTADOCTOR posted: