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Bill Black: The New York Times Thinks Bleeding Cyprus is “Strong Medicine”

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Yves here. I’m overdue for a post on the propagandizing against Cyprus. Black describes one element of this barrage.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posed from Benzinga

I’m announcing the New York Times award for incompetence in macroeconomic reporting (IMR, pronounced like “screamer”). I suggest that the paper offer as a prize to awardees a two hour lunch with Krugman in which he provides a remedial economics lecture. My premise is that it is impossible to be a NYT reporter and fail to know that the paper has a Nobel Laureate in economics who writes a regular column for the paper and frequently discusses making economic downturns worse by inflicting self-destructive austerity. Even the most casual reader of Paul Krugman’s columns would know that opposition to austerity has long been the dominant view among economists and that over the last five years events here and in Europe have again confirmed that view.

I do not, of course, insist that any NYT reporter agree with Krugman and the dominant view of economists. The dominant view of economists and finance scholars on a wide range of issues has proved disastrously wrong. The views of austerians, however, have proven consistently wrong. Their predictions have routinely failed by massive margins. They are ideologues whose real goal is to dramatically reduce governmental spending on some of the most popular and beneficial programs, particularly the safety net.

What I do expect out of NYT reporters is critical thinking and refusing to accept as a purported “fact” that austerity in response to a Great Recession is a rational policy. They should certainly not present such an assertion as a fact. If they wish to argue in favor of austerity they should alert their readers that it is a minority view among economists and admit that its proponents have consistently been proven wrong – and then argue why they believe this time will be different.

(Importantly, the predictive track record of economists and finance experts who held the dominant view that markets were so “efficient” that material “accounting control fraud” and hyper-inflated bubbles were impossible had a terrible predictive record over the last quarter-century before this crisis. White-collar criminologists had a far superior predictive and explanatory record about control fraud and hyper-inflated bubbles.)

What we get out of NYT reporters – as a typical practice – in reporting on Eurozone austerity is the opposite approach. They may acknowledge that austerity has proven self-destructive – but they normally do so in an overall presentation that implicitly asserts that austerity must be desirable because it is so harmful. This passes for logic among theoclassical economists. The usual austerity metaphor is to “medicine.” Medicine may taste terrible and cause one brief pain, but only the most childish would fail to take their medicine because it briefly makes our lips curl in distaste.

The economic truth, however, proved repeatedly during this crisis, is that austerity is to “medicine” as bleeding a patient was to “health care.” It violates the Hippocratic Oath’s central precept that the physician must “do no harm.” The bubbles cracked in 2006, and the Eurozone has been inflicting austerity on its population for over five years. No one serious, and honest, in their reporting can use the medicine metaphor.

As I explained in a recent article, austerity has inflicted a gratuitous second recession on the Eurozone in general – and the periphery is the epicenter of an über-Depression in which unemployment rates are far higher than the largest European economies suffered during the Great Depression. Indeed, unemployment in France and the U.K. today is broadly comparable to the average unemployment level these Nations suffered from 1930-1938. Austerity is the most self-destructive economic policy since the Great Depression and it is causing immense suffering and waste.

My first nominee for the IMR award is an article by James Kanter dated April 3, 2013 and entitled “I.M.F. and Europe Set Tough Terms for Cyprus Bailout.”

The article begins by using IMF code for austerity.

“This is a challenging program that will require great efforts from the Cypriot population,” Christine Lagarde, the managing director of the I.M.F., said in a statement issued by the fund, which is based in Washington.

It is worth making special note that Kanter’s article about the imposition of austerity never uses the word “austerity” – repeatedly substituting euphemisms (“great efforts”) for a word that is justly reviled by hundreds of millions of citizens of the Eurozone. The reporter’s refusal to call austerity “austerity” is a “tell.”

A reader of Krugman’s columns (or our columns or the columns of any decent blog site that discusses macroeconomics) would know that recent IMF studies have confirmed the harm produced by austerity and the greater than anticipated (by the IMF) benefits of fiscal stimulus as a response to the Great Recession. But a reader of Kanter’s column would learn none of these critical facts. Instead, they would get another dose of the “medicine” metaphor.

Though it has not yet been made public, officials say the agreement includes budget cuts, the privatization of state-owned assets and other conditions Cyprus must meet.

It was another dose of strong medicine for Cyprus, which agreed last month to restructure an outsize banking sector by forcing huge losses on bondholders and big depositors in the country’s two biggest lenders.

The first paragraph describes, but refuses to name, the infliction of austerity and the second paragraph says this represents more “strong medicine.” These passages foreshadow the single most bizarre aspect of the IMR article – the author reports that his latest euphemism for austerity (“the deal”) will harm Cyprus’ economy and people.

Before the deal, the Cypriot economy was expected to shrink 3.5 percent this year, with unemployment hitting nearly 14 percent. Now, under the strict bailout measures, some experts predicted the economy could contract 5 percent or more, sending unemployment even higher.

Exactly, when one is anemic we bleed you. It makes you even sicker, but theoclassical economics has only one patent “medicine” that it markets as a cure-all for every problem – crush government spending, particularly those programs that work, and make crony capitalists wealthy by selling national assets to them at fire sale prices.

Oh, and “the deal” inflicted on Cyprus was voluntary in the sense that “Big Mario” gives you the choice of paying him back with the “vig” or having him use a baseball bat on your knees.

An inquiring reporter might wonder why the IMF was insisting on imposing austerity when it knew that doing so would further harm Cyprus. Instead, Kanter treats assertions that are logically self-contradictory as facts.

In an apparent show of unity on Wednesday, Ms. Lagarde jointly issued a statement with Olli Rehn, the European commissioner for economic and monetary affairs, pledging to “stand by Cyprus and the Cypriot people in helping to restore financial stability, fiscal sustainability and growth to the country and its people.”

So, a reader would learn that the EU’s and the IMF’s method of “helping to restore financial stability, fiscal sustainability and growth” to Cyprus is to adopt policies that they have repeatedly shown will produce recurrent financial instability, fiscal crises, draconian cuts in vital public services, and negative growth. How is the reader to interpret the fact that Kanter has just admitted that economists know that austerity will do the opposite of what the IMF and EU leaders claimed and that the IMF and EU’s track record in predicting that austerity will produce these results is pathetic? Kanter does not even acknowledge a contradiction between these two passages in his article that require resolution if the reader is to make any sense of Kanter’s claim that the (never-to-be-named) austerity is a “dose of strong medicine” for what ails Cyprus.

I can speed up Krugman’s remedial lunch with Kanter by bringing to Kanter’s attention what any reader of the NYT interested in austerity would know through reading even a single Krugman column.

Consider how things were supposed to be working at this point. When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence.

But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.

Meanwhile, austerity hasn’t even achieved the minimal goal of reducing debt burdens. Instead, countries pursuing harsh austerity have seen the ratio of debt to G.D.P. rise, because the shrinkage in their economies has outpaced any reduction in the rate of borrowing. And because austerity policies haven’t been offset by expansionary policies elsewhere, the European economy as a whole — which never had much of a recovery from the slump of 2008-9 — is back in recession, with unemployment marching ever higher.

Those are economic realities. How have the EU and the IMF responded to their endemic predictive failures and the IMF’s studies that show that austerity is even more harmful than IMF economists had believed? Krugman is most devastating in calling them to task for their lack of intellectual integrity.

Thus in January 2011 Olli Rehn, a vice president of the European Commission, praised the austerity programs of Greece, Spain and Portugal and predicted that the Greek program in particular would yield ‘lasting returns.’ Since then unemployment has soared in all three countries — but sure enough, in December 2012 Mr. Rehn published an op-ed article with the headline “Europe must stay the austerity course.”

Oh, and Mr. Rehn’s response to studies showing that the adverse effects of austerity are much bigger than expected was to send a letter to finance minsters and the I.M.F. declaring that such studies were harmful, because they were threatening to erode confidence.

Again, I am not calling for NYT reporters to become Krugman clones. I’m arguing that it is inexcusable not to take advantage of his expertise as a resource and that he writes well enough that reading his columns should be a regular practice of any reporter writing about the eurozone crisis. We want reporters to exercise critical thinking and independence. We want them to ask the embarrassing questions of the European leaders who have created the über-Depression. We want that not because we wish to see them embarrassed (they are incapable of embarrassment) but because asking the tough questions ferrets out the analytical flaws and exposes the false statements about the data.

Instead of tough questions, however, we get Kanter’s bizarre invocation of the latest avatar of the confidence fairy.

Over the course of the negotiations, the spotlight fell on whether the monetary fund was being too forceful in pressing for the country to quickly reduce its debt and impose losses on bank shareholders and big depositors. The approach strained relations with the European Commission, which had concerns about the confidence-sapping effects that such aggressive measures might have on other countries.

The EC’s grave concern is not the millions of unemployed Europeans, the brain drain in the periphery as university graduates promptly emigrate, or the massive increase in income and wealth inequality – no, they are worried about imposing losses on the one percent. We are being warned that if the one percent suffers substantial losses the wealthy will lose confidence in (what/who?) and they will cause yet another economic crisis through some unidentified process Kanter does not explain.

Perhaps we should start with baby steps in reportage. Here is a tutorial on the questions to explore in a column the next time an EU leader with a track record of being wrong about everything makes a statement like this: “Ms. Lagarde said Cyprus needed to make substantial spending cuts ‘to put debt on a firmly downward path,’ including in areas like social welfare programs.”

A Nation is not like a household (even a Nation that has made the terrible mistake of giving up a sovereign currency and adopting the euro). If a Nation cuts spending on “social welfare programs” when they are most needed during a severe economic contraction two results are certain. It will increase the misery inflicted by the recession or depression. It will also slow its recovery from the economic crisis compared to what would have been the result had it maintained, or preferably, increased spending. When a Nation cuts its social spending during a serious contraction it makes the problem of inadequate demand worse. The result is that the contraction is likely to deepen and any recovery is often halted and reversed.

As a recession deepens tax revenues fall sharply and GDP falls. The ratio of debt to GDP frequently increases due to austerity – the opposite of what the austerians promise. This is what Krugman explained in the third paragraph of the excerpt from his column quoted above. So, when Lagarde or Rehn claim that austerity puts “debt on a firmly downward path” ask why anyone would take comfort from that claim given that austerity also puts the GDP “on a firmly downward path.” The resultant debt-to-GDP ratio often rises due to austerity. (If the ECB fails to block the bond vigilantes the result can be a sovereign debt death spiral in which austerity not only increases the debt-to-GDP ratio but even the absolute amount of debt and the interest expense of that debt.)

Reporters who uncritically accept the austerians’ medicine metaphor have aided and abetted Prime Minister Merkel, Rehn, Mario Draghi (and his predecessor), Prime Minister Cameron, and Lagarde’s creation of the gratuitous über-Depression. The cost of these self-destructive policies, embraced in President Obama’s proposed budget, is measured in the trillions of dollars of lost GDP and many millions of jobs. We cannot afford to continue this insanity. Reporters need to become part of the solution. All they need to do so is to adopt the finest standards of professionalism and begin to ask tough questions and kick the analytical tires. Reporters (appropriately) kick the tires when they talk to us (UMKC economics), and we have a superb track record of predictive accuracy and analytical rigor. The austerians cannot survive having their claims subjected to normal scientific and logic tests.

Has the NYT ever had Krugman spend two hours educating its financial reporters about austerity and the euro’s design defects? That would be one of the best investments it could ever make in raising the quality of its reportage on these issues.

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40 comments

  1. OpenThePodBayDoorHAL

    Fer chrissakes we’re already gulping down full servings of “strong medicine” in the form of zero interest rates, we’re told the banks are so unbelievably fragile that they shouldn’t be asked to obey any pesky laws, if they want to launder *hundreds of billions* for drug cartels we should just let them be…and now they’re paving the way for outright confiscations on top of it all?
    WAR: Much too important to be left to the generals
    MONEY: much too important to be left to the bankers

    1. nonclassical

      sir,

      reading “Hot Money” by Naylor, or “Treasure Islands” by Shaxson, we do see documentation of “money laundering”, and if one follows the name Alan “Buzzy Krongard” through banking-CIA annals, we find much more…yet it is not government driving “austerity” in U.S.-it is those who wish to “Shock Doctrine”-
      “Confessions of An Economic HIt Man” PROFIT from taxpayer provided infrastructure, turned over to them for free, or a pittance…

      200 years of U.S. resource extraction-exploitation has now warped (as Black, Hudson-Klein-Perkins note) into taxpayer infrastructure extraction-exploitation

  2. Pearlene Ramey

    Whilst the corporations would like to see this whole thing dissappear, there still is the appeals process ahead. It is fab that Mr. Smith is supporting the environment and I enjoyed listening to his perspective as well as Mr. White’s. Let’s keep the pressure on, shall we?

  3. Andrew

    Thanks for this. The logic (if that’s the right word) of the NYT and similar austerity-celebrating news outlets is truly outrageous and astounding.

    Next we’ll hear about how it’s an innovative move to start employing children. After all, they’re a tremendous waste, sucking up all these resources on school and healthcare, and producing absolutely nothing! How inefficient! Let some new programs put them to work so they can help out their families and the nation!! Austerity all the way!

    1. RepubAnon

      No, no – they’d never justify child labor in such a way, as it would be immoral. Instead, they’ll call it “practical education via a corporate-school partnership” and charge the children. I believe they’re currently test-marketing this idea as “unpaid internships.”

      1. nonclassical

        …the “move” is from “public school” to “charter schools” (intermediate step), prior to “internet school”-get rid of messy teacher driven historical documentation, for historical revisionism…

        while win-win-win driving out teacher union, pension, etc, etc..

    2. LucyLulu

      The logic is quite simple to follow. If austerity isn’t producing the desired result, well then, the austerity is insufficient.

      One must keep beating the workers until morale improves.

  4. from Mexico

    Bill Black said:

    …the periphery is the epicenter of an über-Depression in which unemployment rates are far higher than the largest European economies suffered during the Great Depression. Indeed, unemployment in France and the U.K. today is broadly comparable to the average unemployment level these Nations suffered from 1930-1938. Austerity is the most self-destructive economic policy since the Great Depression and it is causing immense suffering and waste.

    I’m always interested in the intersection of sex, money, food and power. And one of the best insights into the fabric woven by the interworkings of these four phenomena is male prostitution. When times are hard, it’s quite common for hard-pressed working class males, who fall on the straight end of the Kinsey scale, to swing the other way. That is, of course, if the price is right.

    I have a friend who just got back to Mexico from a long trip in Europe. He said the working class boys in Paris and Madrid are wild, and will do anything for a buck. It sounds like a repeat of 1920s and 1930s Germany, where a combination of economic liberalism, which ground the German working class into the dirt, and cultural liberalism — Berlin’s libertine culture — produced some interesting opportunities for aristocratic gay men.

    A couple of days ago I watched the movie made after Christopher Isherwood’s Christopher and His Kind: 1929-1939. Isherwood was a British aristocrat who went to live in Berlin in 1929. His reason? “Because of the boys,” declares Isherwood in the following clip. “For me, Berlin meant boys.”

    http://www.youtube.com/watch?feature=player_detailpage&v=9hjidIaTYiE#t=20s

    The movie is fascinating and insightful because it treats of the interplay between the classes — a British aristocrat and German working-class boys. It treats of what some working class people must and will do in order to get the money to survive. It also treats of the rise of Nazism, and why Nazism was able to win over so many working-class Germans.

    Immediately upon arriving Berlin, Isherwood’s friend Wystan Auden takes Isherwood to a gay bar — the Cosy Corner. Isherwood wanders throught the bar like a kid in a candy store, agog at the abundance of attractive young men and overt sexuality. I suppose these were things absolutely taboo in England of the time. Auden’s tells Isherwood everything anyone needs to know of the economic situaiton of the time. In the following clip, Auden tells Isherwood:

    They won’t, they won’t bite, unless you want them to. They’re very accomodating if you have the cash. But it won’t break the bank. The exchange rate is still very much in our favor.

    http://www.youtube.com/watch?v=9hjidIaTYiE&feature=player_detailpage#t=450s

    I have a German friend here in Mexico. He tells me that after what France, the UK and the US did to Germany after WWI it would have been impossible for Germany to follow a moderate course, that it was going to swing to one of two extremes: either communism or Nazism. This movie bears testimony to that conclusion.

    It’s amazing that, with austerity, places like Paris and Madrid may replace Thailand to become the new hot spots for sex tourism.

    1. AbyNormal

      Mexico, I’m Rich…just received ‘Buried Mirror’.
      Thank You for the recommendation.

      Muchas Gracias ST
      Recognize yourself in he and she who are not like you and me. Fuentes

    2. from Mexico

      Fuente’s evolution from his earlier works to his later works like The Buried Mirror is quite marked.

      There’s a very informative and insightful customer review on Amazon of one of Fuente’s early books, La Muerte de Artemio Cruz, first published in 1962:

      http://www.amazon.com/muerte-Artemio-Cruz-Spanish-Edition/product-reviews/9708120472/ref=cm_cr_pr_btm_link_2?ie=UTF8&pageNumber=2&showViewpoints=0

      In La Muerte the reviewer claims that Fuentes joins a long line of propagandists beginning with Octavio Paz, Samuel Ramos and José Vasconcelos who propagated the “cosmic race” myth. The reviewer quotes Dorris Sommer’s definition of what became Mexico’s national myth after the 1910 Revolution:

      Unity, in positivist rhetoric, was not so much a political or economic concept as it was biological. Since growth meant modernization and Europeanization, the most extreme ideologues (like Argentina’s Domingo F. Sarmiento) advocated a combined policy of white immigration and Indian or Black removal, while others…[as the Mexican ideologues] settled for redeeming the “primitive” races through miscegenation and ideological whitening.

      On one level, the reviewer continues, La Muerte is revolutionary in that it condemns Mexico’s existing political structure. The leading protagonist of the novel, Artemio Cruz, had risen to power and influence like almost everyone at the time (1962) had: “by brokering government concessions to foreigners.”

      But Cruz was a mestizo, a person of mixed Spanish, Indian and African heritage. And, as the reviewer asks: “Why make a pelado or mestizo of African descent the villian?” “Had racism subsided in Mexico by 1920 as to allow a visibly black person to rise ‘freely’ from rags to riches? How many visibily black Mexicans can be found as tycoons in the Mexico of the first half of the twentieth century, as Carlos Fuentes has declared? Would it not have been more true to life to have made the antihero a criollo?” (criollo is a person of pure Spanish, European blood, untainted by black or Indian blood).

      By the time Fuentes published A New Time for Mexico in 1994, however, the demonization of blacks and Indians had disappeared from Fuentes’ work. And in fact, he seems to have woken up to who it was who had really screwed Mexico and sold it out to the transnational capitalists: Mexico’s elite class of Ivy Leaguers.

      1. from Mexico

        Speaking of Mexico’s “most obvious problems,” Fuentes explains:

        The first is the narrowness of the governing group, ever smaller and self-involved. Many of its graduates are of Ivy League and eastern universities (Harvard, Yale, MIT). For them, the economy unfolds on a blackboard, never in real life…

        Even after taking into account the executive branch’s lack of controls, its internal agenda, the tradition of secrecy, and the deluded complicity of Washington, a bitter doubt remains in Mexico. If the devaluation of the peso was not done in time, why was it also done so badly? What happened to the technicians, the economists, the boys at the blackboard? Why did they not negotiate with the U.S. government before the devaluation, so that credit could be obtained at less risk to our national sovereignty? Why was it all done so late, so ineptly? In the last days of January 1995, when the illusion of a rescue loan was fading, our supplicant diplomats returned home with empty hands, equipped only with nails to scratch ourselves with.

    3. RepubAnon

      I’d be interested in seeing a “compare and contrast” article on Germany’s finances resulting from post-World War 1 reparations and today’s austerity programs. Greece’s Golden Dawn party’s popularity seems inversely proportional to the unemployment rate, and directly proportional to the desperation of Greece’s middle class. Perhaps this correlation should be examined to establish possible causality.

  5. Jim Haygood

    ‘I suggest that the paper offer as a prize to awardees a two hour lunch with Krugman in which he provides a remedial economics lecture.’

    Second prize is a four-hour, four-martini lunch with Kurgman. So that you can get an earful of what he REALLY thinks.

  6. from Mexico

    Bill Black said:

    Exactly, when one is anemic we bleed you. It makes you even sicker, but theoclassical economics has only one patent “medicine” that it markets as a cure-all for every problem – crush government spending, particularly those programs that work, and make crony capitalists wealthy by selling national assets to them at fire sale prices.

    It is important, however, to point out that one must be anemic before the bleeding can begin. The first step in the neoliberal prcess, therefore, is to make one anemic.

    This is why I felt Michael Hudon’s post yesterday was important. It explained how Margaret Thatcher first induced the anemia, so that the real blood letting could begin:

    http://www.nakedcapitalism.com/2013/04/michael-hudson-thatchers-legacy-of-failed-privatizations.html

  7. someofparts

    So, if I “impose losses” on the local convenience store to reduce my debt and inspire confidence in my creditors, will the NYT reward me with a tongue-bath?

  8. Dr Duh

    Proof once again that if you have even moderate expertise in a subject area the New York Times will be revealed as propaganda.

    I don’t have time to dig into Kanter to see if he is a candidate for SHAME treatment, but I will give him the benefit of the doubt and assume that like most journalists, he is merely ignorant and lazy.

    In my personal experience in working in financial journalism, most journalists are drawn to journalism because of their interest in ‘horse race’, i.e., electoral politics. Few have the requisite interest in economics, very few have relevant industry experience, even fewer have the relevant academic training or skills required to see beyond the ‘spin’. Couple that with the ‘stenographic tradition’ of seeking quotes to report ‘both’ sides rather than providing analysis, the overwhelming pressures of an audience demanding titillation/entertainment and limited resources and you get the steaming pile of garbage that gets thrown on my doorstep every Sunday.

    My technique is to preface each article with, “The elite would like me to believe that…”

    1. nonclassical

      ..don’t mistake “lazy and ignorant” for water carrying, both up, and down the “hill”…

  9. Laughing_Fascist

    James Kanter must want to crawl in a hole and die after seeing Black’s excoriation. Unless he is attending a “Derivatives are Fab” luncheon seminar on Wallstreet today in which case he is getting a big “attaboy!” from attendees.

    Too much boot licking though re Krugman. Please stop doing that Mr. Black. You are way above the need to fawn over Krugman (even if he has austerity right). Krugman is a mere hack for the Dem party rendering him completely impotent as an economist.

    1. Chris-Engel

      I think in this case it’s fair to intellectually fellate Krugman, at least on the topic of austerity.

      He has consistently fought against it in very public, confrontational ways with levels of exposure Dr. Black just doesn’t reach.

      Proper journalism puts any and all austerity stories in context by pointing out the mounds of evidence from Europe on its failures in even reducing Debt/GDP load. These are things Krugman has helped bring to the forefront of American policy thinkers.

      1. Me

        I don’t agree with Krugman on a lot but appreciate that he speaks out against austerity like he does. It is interesting in that when Krugman is there the arguments by the pro-austerity crowd just melt away. Just think if they were insane enough to let Hudson, Smith or Keen on one of the Meet the Press type of programs, the capitalist version of Pravda. They (the millionair, intellectually lazy journalists, the owners of the media, the crook politicians and Wall Street) maintain their ideological control because they shut out the voices that would dismantle their arguments in short order. Given that, I appreciate Krugman greatly. At least the people who watch the programs he apprears on know that there is more than one way to think of the insanity that is austerity. That alone makes him valuable.

    2. Yves Smith Post author

      Black has beaten up on Krugman a LOT. So this is merely him being fair-minded.

  10. Min

    “So, when Lagarde or Rehn claim that austerity puts “debt on a firmly downward path” ask why anyone would take comfort from that claim given that austerity also puts the GDP “on a firmly downward path.”

    Hear, hear!

    I understand when innumerate laymen hear that the debt/GDP ratio or the deficit/GDP ratio is too high, they think about reducing the debt or the GDP. They implicitly focus on the numerator, taking the denominator to be constant.

    What has puzzled me — unfortunately for some years now –, is why some economists do the same. And why other economists, en masse, do not scold them for doing so.

    Maybe we should start talking about GDP/debt ratios and GDP/deficit ratios. Then when laymen hear about them being too low, they would think about increasing the GDP.

  11. Elisabeth Spenser

    Third Prize could be 10 minutes with Billy Ray Valentine– he who explained pork belly futures and the commodities market so clearly that even those of us who know nothing about high finance and economics were able to understand:

    http://www.youtube.com/watch?v=uI4fVgVVpiw

    I have no doubt that in his unique way, Billy Ray could explain austerity and its destructiveness to even the most clueless of incompetent reporters.

  12. Kathryn M. Tominey

    Way to go Bill. Why Obama is not making use of Dr. Black is a mystery. Good credentials – articulate – cogent thinking. Whats not to like.

    1. Chris-Engel

      He’s a free thinker who criticizes the Democrats and doens’t have a Wall Street resumé…

      what makes you think Obama would go for Dr. Black? misses on all the neo-liberal criteria used for other advisors!

  13. The Dork of Cork.

    Yee guys don’t get the Euro.

    It seeks to push resources upwards – like the banks have always done.
    Indeed in the 1600s they began to do this on a national level.
    Now through the mechanism of the Euro they can dump the nation state experiment and shoot higher
    Germany can get Cypriot fuel not burned to sell finished goods to trade deficit UK ,US & pegged China.

    They value BMWs more then people.
    Its as simple as that.

    just as they valued Sheep more then people in the Scotland & Ireland of the 1600s.
    These are the self same banks I am afraid.
    History is repeating itself.

  14. The Dork of Cork.

    “The EC’s grave concern is not the millions of unemployed Europeans, the brain drain in the periphery as university graduates promptly emigrate, or the massive increase in income and wealth inequality”

    The EC is not a nation , its a union.
    Just like the UK …..get it ?

    There was a massive drop in the productivity of the highlands but it did not matter.
    The 1% could not extract a yield from the more productive Cattle based economy as it was very labour intensive.

    They needed to fill the glens with labour light sheep – with the workforce mostly gone they could increase profits for the 1% via this cash crop.

  15. washunate

    “What I do expect out of NYT reporters is critical thinking”

    I’m fascinated how far my personal sense of the corporate media has fallen. 15 years ago I might have sympathized with this line of thought, but today, I have completely given up on them. I simply have no expectation that the corporate media is a place for critical thinking.

    We’re in the midst of the greatest breakdown of the rule of law and bailing out of failed criminal enterprises most of us alive have ever known, and I have zero expectation that the corporate media will discuss it with seriousness or honesty.

    I wonder how much that sentiment is broadly felt.

    1. jake chase

      Nothing in the NY Times would surprise me except truth. I have not read any newspaper in twenty years and do not believe I have missed anything except propaganda and ball scores.

      The mystery to me is why anybody reads them. Who cares what Andrew Ross Sorkin claims to think about anything?

  16. allcoppedout

    I actually read the NYT – more than I can say of UK nonnewspapers.
    Do we have an accurate description of what austerity is? It’s clearly a weapon associated with rich looting forays, always found at the scene.

  17. ian

    I can kindof understand the point of austerity proponents. Simply financing consumption and crossing our fingers that things get better seems idiotic. It buys you time, but to do – what? Go back to what we were doing before the crash? As if we hadn’t learned anything?
    When will we know it is time to remove the artificial supports and how will we do it? Unless folks like Krugman are prepared to argue that the fed can just keep doing what they are doing now forever, they should be prepared to answer this question. Up until now, it seems like we are simply being told not to worry about it.
    I’m not saying I am for austerity, just that money we spend actually gets to the people who need it (not just big banks), that it does something other than finance consumption and that there is an exit strategy.
    This is a political problem, not an economic one. A lot of the folks who are for austerity are not bad people, or idiots. They have some legitimate concerns that haven’t really been addressed.

    1. Nathanael

      The Fed *can* keep doing what they are doing now forever.

      However, you do have an important point: without *putting the criminal bankers in prison* and *establishing new banks which people trust* and *restoring a regulatory system*, we’ll never get back to “health”.

      If we did that, there would be no problem with the Fed printing money and handing it out. You have another important point:

      “just that money we spend actually gets to the people who need it (not just big banks)”

      This is crucial. The money needs to get to the people who need it.

      Now here’s your error:
      “that it does something other than finance consumption”

      There’s absolutely nothing wrong with financing consumption. We SHOULD finance consumption. Handing out food stamps to everyone…. is financing consumption. And it’s a good idea.

      We shouldn’t be financing the fifth private airplane for a banking billionaire. Financing consumption among the poor? THAT IS WHAT MONEY IS FOR.

      “A lot of the folks who are for austerity are not bad people, or idiots…”
      Most of the folks *in power* who are for austerity ARE bad people AND idiots. They support “austerity”, but ALSO support funnelling money to the rich and powerful bankers. This is both evil and stupid.

      The folks *not in power* who are for austerity are just misguided. Austerity is simply and plainly bad when we have unemployment and poverty.

      When we have dealt with those problems we can consider austerity. :-) Or, if you prefer, we should have austerity for those who are already rich, but not for those who are poor.

      “This is a political problem, not an economic one”

      Truer words were never spoken. The problem is that there are people — grasping, greedy, powerful people — whose political agenda is contrary to the political agenda of the rest of us. Their agenda is basically to make everyone else poor.

      1. ian

        “Most of the folks *in power* who are for austerity ARE bad people AND idiots.”

        I agree with you completely. Unfortunately, the people who voted them in _aren’t_ necessarily bad people or idiots. *These* are the people you have to convince. Being dismissive of these people is not helpful.

      2. ian

        “The Fed *can* keep doing what they are doing now forever.”

        The problem isn’t whether it is true or not, the problem is perception. Most people would instinctively say the fed _can’t_ do this.

        “just that money we spend actually gets to the people who need it (not just big banks)”

        Now here’s your error:
        “that it does something other than finance consumption”

        Again – perception. Most people who were raised on the virtues of thrift would instinctively disagree with this. They would liken it to someone who lost his job living large on credit cards. I, personally, have problems with this. It just seems wrong – there _has_ to be some vision beyond just doing what you have always been doing and doing it with borrowed money. So far, I just haven’t seen it. I’m not saying it is easy.

        “They support “austerity”, but ALSO support funnelling money to the rich and powerful bankers. This is both evil and stupid.”

        And yet, we get someone like Obama, who professes to be for ‘the little guy’ and the banksters and the 1% have never had it so good.

        “This is a political problem, not an economic one”

        A moral case could (easily) have been made. Something along the lines of “these are your fellow citizens, what happened to them could have happened to you. They need a hand up right now. We appreciate the fact that you are sacrificing through your tax dollars to help them. This is what you do in your church when a member gets in trouble. etc..” Instead we got either nothing or a lot of economic gobbledygook. This called for moral suasion, not ‘leading from behind’. Instead we got political games.

        I’m sorry – I just get pissed off when I think about how this handled.

        “Truer words were never spoken. The problem is that there are people — grasping, greedy, powerful people — whose political agenda is contrary to the political agenda of the rest of us. Their agenda is basically to make everyone else poor.”

        Just as there were people who worked very hard for whatever they saved who deserved a little more respect than what they got.

        You know, I look at people like Krugman and think they are absolutely useless. They preach to an adoring choir. They need to spend less time on the Times Op-ed page and more time talking to the small businessman in the midwest – patiently and respectfully.

    2. washunate

      Well said. I see this disconnect a lot from some of the more vocal MMT perspectives that the amount of spending is what matters.

      How the money gets spent is what matters, which is a fundamental problem of political leadership, not a technical matter of monetary policy.

      Any politician who won’t investigate financial fraud and war crimes is just going to give the next trillion dollars to banks and defense contractors and prison companies and fill in the blank just like the last several trillion dollars have been squandered.

  18. Moneta

    We know that austerity shrinks the economy but the general population also sees how capital is getting misallocated and wants it to stop. It essentially thinks that government spending is the ultimate problem.

    IMO, many want austerity because they think it will stop government from spending more money inefficiently.

    Many don’t seem to grasp that with austerity leaders usually cut the safety net and keep on funding the stuff that the average Joe does not want.

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