Austerity and more austerity

This week’s The Economist has an article on austerity which has turned out to be worse that some people expected.

I see this article as a part of the debate/conflict over austerity vs stimulus. I also think the economic crisis is a result of our depleting the topsoil and using up the most easily accessible energy and mineral resources.  As the easiest resources are used the costs of additional resources increases and this has to force painful adjustments in the economy.

If this analysis is correct then it is likely a great deal more austerity will be forced upon us regardless of what we do.  Austerity has had a greater negative impact on our economy than a lot of people expected and more and more observers are saying  the economic crisis will continue for some time.

The austerity – stimulus debate will probably continue so long as people believe a return to economic growth is just around the corner.

Limiting our thinking to just these two choices presents  us with  a dilemma.  Stimulus will continue to use up resources and bring forward the timing of a major economic collapse.  Austerity on the other hand is forcing suffering on many people.

Which side a person takes probably depends upon how one is affected by inflation as stimulus generally causes inflation and austerity generally leads to deflation .

Those people who have savings in the financial system are likely to lose some of their purchasing power from inflation and therefore want austerity.  Those people who are borrowers, including governments, are likely to benefit from inflation.  Governments tend to prefer inflation as it reduces their debt load (at the expense of bond holders) but they also have to convince people to continue to loan to them.

The essay “LETS go market: Dealing with the economic crisis”  on this weblog attempts to show how we might deal with the current economic crisis.  Even
so just thinking about the problem leaves me feeling down because I think the outcome will be a few people doing very well and a lot of people experiencing a lot of suffering.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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