Austerity's toast and everyone knows it.
Who Is Defending Austerity Now?
Germany Signals Austerity Leeway in Budget-Rule Flexibility
Austerity doctrine is exposed as flimflam
Bill Gross attacks UK and EU austerity
U.K. Austerity Isn’t Working, Goldman’s O’Neill Says
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It’s not so much that all arguments for austerity have collapsed. What’s collapsed is the idea that the debt and deficit are any sort of constraint on raising demand – as MMTers have been point out for years. Plus as MMTers have also pointed out for a long time, the REAL CONSTRAINT is inflation.
ReplyDeleteAnd inflation is still very much of a constraint: e.g. inflation in the UK is above the 2% target. And in Germany it’s only slightly below 2%. So I’m wary of claiming an escape from austerity will be easy.
Also, the reasons for austerity in the Euro periphery don’t stem from the sort of moronic ideas pushed by Rogoff. The real problem there is that the periphery needs to improve its competitiveness but it cannot do it the way a monetarily sovereign country does it: devaluation. The periphery has to endure years of austerity to get its costs down – which IT IS DOING: slowly.
The real problem there is that the periphery needs to improve its competitiveness but it cannot do it the way a monetarily sovereign country does it: devaluation. The periphery has to endure years of austerity to get its costs down – which IT IS DOING: slowly.
ReplyDelete"Competitiveness" is also an issue for currency sovereigns in the age of globalization. Currency devaluation is just another race to the bottom. The real race to the bottom is in wages, and that race will end with automation and robotization, which are far more efficient and less costly after the initial investment. This is already in the works. So the actual challenges are going to be distribution in terms of effective demand as less workers are needed for production, along with an expansion of the service sector. The question is the degree to which the global economy will return to the traditional master-servant model that has long historical precedent and was only replaced in advanced countries in the last century..
And inflation is still very much of a constraint: e.g. inflation in the UK is above the 2% target. Ralph M
ReplyDeleteBecause the "stimulus" has gone to the banks instead of the general population?
So the actual challenges are going to be distribution in terms of effective demand as less workers are needed for production, ... Tom Hicky
ReplyDeleteDuh! Who could have guessed that a money system based on usury for stolen purchasing power could result in social injustice?
F.Beard,
ReplyDeleteI agree it’s daft handing out stimulus to banks and holders of government debt (i.e. QE). But I don’t see why that would be particularly inflationary. Banks are just sitting on their excess reserves aren’t they? To that extent there is no effect: no inflation and no nothing.