S&P: Austerity is "Self-Defeating"

Discussion in 'Economy' started by BakshisMouse, Jan 14, 2012.

  1. BakshisMouse
    Offline

    BakshisMouse BANNED

    Joined:
    Jun 28, 2011
    Messages:
    702
    Thanks Received:
    69
    Trophy Points:
    0
    Ratings:
    +69
    While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

    S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas
    There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

    Also, yes, I caught this from Paul Krugman's blog.
     
  2. EdwardBaiamonte
    Offline

    EdwardBaiamonte Gold Member

    Joined:
    Nov 23, 2011
    Messages:
    27,548
    Thanks Received:
    1,130
    Trophy Points:
    205
    Ratings:
    +3,047
    Not at all, they would want a firm commitment to slowly bring the budget into balance over say 5 years with more spending cuts than tax increases.
     
  3. kiwiman127
    Offline

    kiwiman127 Comfortably Moderate Supporting Member

    Joined:
    Oct 19, 2010
    Messages:
    8,412
    Thanks Received:
    2,580
    Trophy Points:
    315
    Location:
    4th Cleanest City in the World-Minneapolis
    Ratings:
    +3,839
    The UK did their austerity thing and it seriously hurt the UK economy. By slashing the government spending dramatically, it had a negative effect on the UK economy and the UK GDP. Now many economist are predicting another recession. In order to recover from a major economic slowdown, the GDP has to grow not shrink.
     
  4. samjones
    Offline

    samjones Member

    Joined:
    Dec 7, 2011
    Messages:
    585
    Thanks Received:
    22
    Trophy Points:
    16
    Ratings:
    +22
    True - the people took to the streets.
     
  5. samjones
    Offline

    samjones Member

    Joined:
    Dec 7, 2011
    Messages:
    585
    Thanks Received:
    22
    Trophy Points:
    16
    Ratings:
    +22
    Partisan bickering, actually "hatred" put the USA in a postion to default on its debt for the first time in our historyh.
     
  6. EdwardBaiamonte
    Offline

    EdwardBaiamonte Gold Member

    Joined:
    Nov 23, 2011
    Messages:
    27,548
    Thanks Received:
    1,130
    Trophy Points:
    205
    Ratings:
    +3,047
    of course thats absurd. When you go into rehab of course it hurts but there is no alternative except further addiction.


    of course thats absurd!! When you cut government spending the economy grows because the government does not produce real companies real products or real jobs!! When you cut liberal spending the private sector has more to produce real companies, jobs and products


    and of course reducing government spending is the best way to do it
     
  7. OohPooPahDoo
    Offline

    OohPooPahDoo Gold Member

    Joined:
    May 11, 2011
    Messages:
    15,342
    Thanks Received:
    976
    Trophy Points:
    175
    Location:
    N'Awlins Mid-City
    Ratings:
    +1,320
    After Lehman Bros etc. I fail to see how anyone should care what the S&P has to say about anyone's credit rating
     
  8. kiwiman127
    Offline

    kiwiman127 Comfortably Moderate Supporting Member

    Joined:
    Oct 19, 2010
    Messages:
    8,412
    Thanks Received:
    2,580
    Trophy Points:
    315
    Location:
    4th Cleanest City in the World-Minneapolis
    Ratings:
    +3,839
    I used the UK as proof of my assertions,Spain and Ireland also prove my point.

    How Austerity Is Killing Europe

    Indeed, austerity economics has not worked in one single case in Europe in the last two years. When David Cameron’s government imposed a first round of harsh spending cuts in 2010, it utterly failed to revive the British economy as promised. To the contrary, it probably cut a budding recovery short. Unemployment and the deficit as a percent of GDP remained high. Some pro-Conservative observers I met at the time assured me that the Cameron team, led by George Osborne, the Chancellor of the Exchequer, was pragmatic and would reverse course on austerity if it wasn’t working. Yet when growth basically ground to a halt in late 2011, the Cameron team only doubled down, making further cuts. We need more of the same medicine, they told their citizens, a record number of whom are unemployed. Britian is a hair’s breadth away from outright recession only two years after its last one.

    In November, meanwhile, Spaniards voted out of office a once-popular Socialist government, in part for its failed austerity program of the past year. The Socialists had earlier presided over a boom and even built a budget surplus. But then the housing and banking crises struck and private Spanish banks ran amok. In response, in 2010 the Socialists sharply reversed an earlier stimulus policy, cut spending, and raised taxes to the tune of about 5 percent of GDP. Government debt is still not high in Spain, and interest rates have not risen the way they have in Italy. But economic growth stalled after these measures were implemented, because reduced public spending weakened the demand for goods and services, pure and simple. With Spain’s official unemployment rate now 21.5 percent, the Socialists lost the election badly—paradoxically pushing voters to elect a conservative leadership that is calling for more austerity. In Spain, recession is now inevitable.

    And then there is Ireland. The recent experience of this once booming country should be deeply embarrassing to those who advocate austerity economics. For six months early last year, its national income started growing again after a couple of years of dramatic collapse following its own financial crisis. Ireland guaranteed all the debt of its over-aggressive failing banks to appease investors and then paid for it by cutting social spending sharply. Ireland’s leaders said with almost religious authority that this painful self-discipline was necessary to right the economy, and officials in Ireland and across Europe hailed the country’s brief rebound in 2011 as proof that it works. But then the Irish economy plunged in the third quarter of 2011 at its fastest rate ever. The upturn in the economy proved only temporary under the restraints of austerity economics. It may yet nhttp://www.nybooks.com/blogs/nyrblog/2012/jan/06/europe-cutting-hope/eed another bailout.


    Myself, I'm not against cutting wasteful spending, but as proven in Europe, the spending cuts have to be made slowly.

    I rarely agree with Obama, but downsizing government by eliminating dupilcation of bureaucracy is a good start.
     
  9. Quantum Windbag
    Offline

    Quantum Windbag Gold Member

    Joined:
    May 9, 2010
    Messages:
    58,308
    Thanks Received:
    5,014
    Trophy Points:
    245
    Ratings:
    +5,221
    Umm, S&P said the reason they were downgrading the US is that the deal to cut "(F)alls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

    S&P downgrades U.S. credit rating from AAA - USATODAY.com

    Please note that you are also misrepresenting what they actually said about the Eurozone. They, like many analysts, think the Euro will collapse unless Europe officially shares all debt between various countries. They believe Europe needs develop a strong central government than can make economic and political decisions for all its members to avoid complete failure of the Euro and each country going back to its own currency.
     
  10. editec
    Offline

    editec Mr. Forgot-it-All

    Joined:
    Jun 5, 2008
    Messages:
    41,427
    Thanks Received:
    5,598
    Trophy Points:
    48
    Location:
    Maine
    Ratings:
    +5,617
    Austerity means that even less people will be able to buy stuff/

    That is NOT a formula for improve the economy.

    In that sense SP is right on the money (or right on the lack of it, really)
     

Share This Page