Thursday, February 27, 2014

Real Austerity versus Obama Fairy Tale Austerity

By Mark Thornton

President Barack Obama has recently released his budget in which he calls for an “end of austerity.” This is an amazing statement from a president whose government has spent the highest percentage of GDP in history and added more to the national debt than all past presidents combined. What must he mean by austerity?
There are demonstrations around the world over austerity on an almost daily basis. It is condemned as an evil poison for tough economic times while others tout it as the elixir for economic depressions.
The president’s rejection of austerity represents the Keynesian view which completely rejects austerity in favor of the “borrow and spend” — increase aggregate demand — approach to recession. What he really is rejecting is the infinitesimal cutbacks in the rate of spending increases and the political roadblocks to new spending programs.
While the 2009-2012 budgets have been relatively flat, they are still more than 15 percent higher than in 2008 and 75 percent higher than in the previous decade. This four year leap in spending was financed with a $5 trillion increase in the national debt. No austerity here!
The type of austerity that gets the most worldwide press attention on a daily basis is that promoted by economists at the International Monetary Fund. This “austerian” approach involves cutbacks in government services and tax increases on the beleaguered public in order to, at all costs, repay the government’s corrupt creditors. This pro-bankster approach is what generates a massive amount of media attention and sometimes violent demonstrations.
Austrian School economists reject both the Keynesian stimulus approach and the IMF-style high-tax, pro-bankster approach as counterproductive. Although “Austrians” are often lumped in with “Austerians,” Austrian School economists support real austerity. Real austerity involves cutting government budgets by reducing salaries, employee benefits, and retirement benefits. It also involves selling government assets and even repudiating government debt. Instead of increasing taxes, the Austrian approach advocates decreasing taxes.
Despite all the hoopla in countries like Greece, there is no real austerity except in the countries of Eastern Europe. For example, Latvia is Europe’s most austere country and also one of the fastest growing economies. Estonia implemented an austerity policy that depended largely on cuts in government salaries. In contrast there simply is no significant austerity in most of Western Europe or the U.S. As Professor Philipp Bagus explains, “the problem of Europe (and the United States) is not too much but too little austerity — or its complete absence.”
Real austerity for individuals means living a highly restricted lifestyle. The best example is the monk who lives on a subsistence-level diet, wears simple clothing, possesses a few basic pieces of furniture, and uses only necessary utensils. His days consist of long hours of work and prayer with no leisure activities and he may not even enjoy indoor heating or plumbing.
Austerity applied to whole countries, is not necessarily so harsh or ascetic. It simply means that the government has to live within its means.


  1. cue the wailing and gnashing of teeth from our buddy Jerry.

  2. the austerity comes through by not affording higher prices with the same're only telling half the story.

    Criminal Banking Syndicates & Empty Gold Vaults

    Powell: “Certainly it is. I just came back from the developing country of Suriname, and the people in the government communicated to me that they were practically terrified by what the gold price plunge of the last year was doing to the government’s revenue. Gold is the biggest export product in that country.

    Well, Suriname is a little country. You mentioned South Africa but you could also include most of Africa. The disease and impoverishment in Africa, which is a mineral rich continent, is just overwhelming. So I’m with you -- it is a crime against humanity. On the other hand, it is a crime against humanity that is fully sanctioned by United States laws. The US may have passed laws making this legal from their perspective, but it is still an international crime because of the deaths of so many innocent people.

    I told the people of Suriname that this was effectively a declaration of economic war by the United States on their country. In fact, it’s a declaration of economic war by the United States on all developing countries that produce gold and other commodities. Certainly the United States is not the only country waging this war -- it also has allies in Europe.

    But this is an endless war between the producing class and the financial class. I am trying to do what I can to help the producing class. The end goal of course is expropriation of assets by the government.”

    Eric King: “Meaning, theft.”

    Powell: “Yes.”