Western leaders weren't listening in 2006 and 2007 when genuine "thinking" economists like Krugman and Stiglitz were warning that their house of cards was about to collapse. Even self-proclaimed economists like Harper ignored them and later said no one could see the collapse of 2008 coming. No one who couldn't be bothered to listen.
And they're not listening now - on either side of the Atlantic. Genuine economists are warning this is no time for austerity crackdowns. You don't go the austerity route, they warn, until your economy is back on its feet. Premature cutbacks will only worsen the situation.
Now, it seems, the Euros are coming to realize these guys are right - austerity doesn't pay off.
"...suddenly, as investors’ fears mount that many euro area nations are about to tip into recession, even countries like creditworthy France are finding it much more expensive to borrow money in the open market. And with that development comes a dawning realization: that austerity, rather than making it easier for them to pay down their higher debts, could make it harder — and more expensive."
Ireland should have been the miners' canary. The Irish government slashed spending and benefits and all it got for it was even higher costs on government bonds. Austerity measures both undermined economic activity and increased the government's cost of borrowing. Brilliant, eh?
4 comments:
God I sure hope this is the start of them figuring that out. Pity Greece and Italy, what's happened there is truly terrifying -- let's hope they keep taking to the streets.
Look at the austerity being imposed by Greece's new far-right government.
They're getting 400 M1A1 tanks from the Americans, and two to four new frigates from the French. Hundreds of millions of euros. The Germans are very upset. Not at the huge spending when Greece is still heavily in debt, but that Germany's corporations should have gotten the contract instead.
Austerity & Fascism In Greece – The Real 1% Doctrine
They should take a leaf out of Iceland's book. In terms of OCED countries, they are on the top of the social justice index:
http://awesome.good.is/transparency/web/1111/JusticeForAll/flat.html
Not bad for a country that told the bankers to take a hike.
Iceland's president (sort of a figurehead like our governor general) took the question to the citizens of Iceland, and they told the bankers to take a hike.
Then once everyone stopped paying attention, the politicians invited the IMF and its banana republic economics back in. The vultures are back and they're setting the scene for a new banking crisis, writing off debt to major corporate debtors, but re-valuing household debt upwards.
Iceland’s New Bank Disaster
The moral of the story is to never, ever, let the IMF provide you with any sort of advice.
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