Now they tell us: Budget-cutting Euro zone enters recession again

The people pushing for austerity don't care if austerity actually works. They just use it to counter people who push for higher taxes or for cuts in profitable (to private enterprise) programs.

 

Well it is counter-intuitive for most people. They know if their family is in debt they have to cut spending. I understand that government spending offsets losses in private sector spending to smooth the flow of money through the system, but I confess, I don't see how the national debt will ever return to manageable. Inflation and future growth I guess.

It is a little different for the dollar in that, for now, it's the world's currency. We can print them and pay for imports with little worry about the effect on the domestic money supply since they spread throughout the whole world.

I need a little Northside explanation of how the future of economics might work. I'm always worried about the unconstrained growth model since I see humans as eventually exceeding the carrying capacity of the planet. Nobody ever proposes 'stasis', using technological advances to improve the quality of life while keeping the population stable.

 

Is it austerity that keeps on failing, or is the problem that the countries which now need more austerity were spending beyond their means previously?

 

Ireland was a capitalist balanced budget factory until their banks blew up. Whoda thunk it but financiers causing mass panic can actually sink a nation (though for some reason Merkel and the markets are all "oh, Ireland is a special child, they didn't fail because they spent too much, they were just woefully incompetent at reining in the excesses of their financial sector like other "free-market havens".)

 

You are welcome. I would educate you further if I had the time, but it has already been shown that you do not understand basic economics. Try to stick to the law, although I doubt that you are successful there, either.

http://en.wikipedia.org/wiki/Economy_of_Spain#2008.E2.80.932012_financial_crisis

Spain continued on the path of economic growth when the ruling party changed in 2004, maintaining robust GDP growth during the first term of prime minister José Luis Rodríguez Zapatero, even though some fundamental problems in the Spanish economy were now becoming clearly evident. Among these, according to the Financial Times, was Spain's rapidly growing trade deficit, which had reached a staggering 10% of the country's GDP by the summer of 2008,[27] the "loss of competitiveness against its main trading partners" and, also, as a part of the latter, an inflation rate which had been traditionally higher than the one of its European partners, back then especially affected by house price increases of 150% from 1998 and a growing family indebtedness (115%) chiefly related to the Spanish Real Estate boom and rocketing oil prices.[28]
In 2011 the deficit reached 8.5%. In 2012 that percentage is expected to lower to 5.3% due to a set of tough reforms in the autonomous regions and central government, they begin to meet the objectives. Despite the difficulties, it is expected that the deficit will reach 3.3% in 2013.[3]
The Spanish government official GDP growth forecast for 2008 in April was 2.3%. This figure was successively revised down by the Spanish Ministry of Economy to 1.6.[29] This figure looked better than those of most other developed countries. In reality, this rate effectively represented stagnant GDP per person due to Spain's high population growth, because of a high rate of immigration. Retrospective studies by most independent forecasters estimate that the rate had actually dropped to 0.8% instead,[30] far below the strong 3% plus GDP annual growth rates during the 1997-2007 decade. Then, during the third quarter of 2008 the national GDP contracted for the first time in 15 years and, in February 2009, it was confirmed that Spain, along other European economies, had officially entered recession.[31]

 

And plenty of people in this country believe if you let the big banks fail, nothing bad will happen in this country.

 

This is hilarious.

An ambulance chaser trying to explain economics to a University of Chicago MBA.

 

Theoretically, Spain had until recently a lower debt-to-GDP ratio than Germany.

Spoiler

That takes into account some accounting tricks, but really Spain's biggest pressing concern is the marginal rate it pays on its' debt here and now, not the one it paid in the past on its' debt.

It's more the fact that the banks and provinces are falling apart thanks to a domestic real estate bubble gone wrong and self-reinforcing panic that is causing this whole thing. Rajoy deciding austerity is the cure is mostly due to the fact that in Spain, it is much harder to recap the banks properly.

 

Real estate bubble is correct.

 

Fixed it for ya.

 

Congrats on leaving the ambulance chaser part intact.

 

Looks like I hit a nerve lol

 

There's a lot of work being down on zero-growth models, though not by very reputable economists. The general consensus among academic macroeconomists is that people who nay-say that the economy is growing are Malthusians who will be disproven yet again through growth by technological innovation. There's kinda a stickiness to the old models, though that might change a bit with a new generation of economists. Already there's a lot of open questioning about the validity of GDP as a catch-all metric for everything, and looking to include environmental costs, but it's not exactly an open revolution about growth. Growth is very much still a very positive thing as far as mainstream economists are concerned.

The Keynesian schools of thought love to bring in externalities, resource costs and imperfections of the market to try to rein the market in a bit, but as for a fundamental rethink of the concept of growth---I think we're far away from that.

There's some work on steady-state economics that might be interesting---though I stress again that this is sadly far out of mainstream discussions. Also, steady-state economics is economic growth insofar as there is population growth. How to deal with that seems to me to be beyond the scope of just economics.

http://www.eebweb.arizona.edu/courses/ecol206/DalyHermanSteady-StateEconomics.pdf

 

walk us through what banks blowing up entails

 

Are there any specifics you want? I had the chairman hiding millions in loans from his own bank as the funny top of free market capitalism gone right, but there might be details about "oh, yeah, we made bad lending decisions" that might be of interest. If only financial moguls on the other side of the sea were so kind and considerate as to include this admission while they were f**king the economy.

 

ATW, Absolutely nothing you posted refutes the fundamental truth in that chart. Some of us are business/finance majors too so we know the difference between "trade deficit" and "budget deficit", and the difference between "GDP" and "GDP growth forecast".

All your post says is that the Spanish economy became unsustainable due largely to a real estate bubble. Was it not rampant bank speculation in mortgage-related derivative instruments that led to the bursting of real estate bubbles worldwide, starting in the USA? Was it not runaway commodities speculation that resulted in the oil price shock of 2008?

How does any of that change the fact that the bankers are primarily responsible for the worldwide economic crisis, and that they're now trying to deleverage by passing on the costs of their asset devaluations to the lower classes?

In the end, they don't care if austerity results in major deflation and economic ruin, as long as the end-product is that it helps them balance their books. They pretend to care about government debt, but it is really their own assets that they're concerned about, and they're raking helpless governments like Greece over the coals for it.