Bill Mitchell — The intergenerational consequences if austerity will be massive

Conclusion

What the hysteresis literature – both theoretical and applied – teaches us is that governments should do everything within their capacity to avoid recessions.

Not only does a strategy of early policy intervention avoid massive short-run income losses and the sharp rise in unemployment that accompany recession, but the longer term damage to the supply capacity of the economy and the deterioration in the quality of the labour force can also be avoided.

A national, currency-issuing government can always provide sufficient aggregate spending in a relatively short period of time to offset a collapse in non-government spending, which, if otherwise ignored, would lead to these damaging short-run and long-run consequences.

The “waiting for the market to work” approach is vastly inferior and not only ruins the lives of individuals who are forced to disproportionately endure the costs of the economic downturn, but, also undermines future prosperity for their children and later generations.

Bill Mitchell – billy blog
The intergenerational consequences if austerity will be massive
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

"Austeresis" - Defining a New Term

commentary by Roger Erickson

This term combines archaic economics and modern systems engineering.

It recognizes that the austerity path taken to quickly gut a nation, as in the Greek Disaster, will rarely, if ever, be the same path taken during the course of recovery ... if recovery even occurs.

Austerity plus hysteresis => Austeresis.

Of course, the whole purpose of agile, adaptive, social species and advanced human cultures has been to introduce enough options to take any path we select, between any economic states we want to occupy. Note, however, the selection requirement. How about YOU getting a whole lot more selective about whom you vote for, what and how you read, and what policies you support?

So while Austeresis is a frequent, real phenomenon, it is an entirely voluntary phenomenon coincidental to mass psychosis, a condition otherwise known as persistent, pernicious orthodoxy in a changing world.