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In addition to the economic truth that tax cuts and growth do not have much of a relationship, what we’ve learned over the past few years is that austerity during a depression is a bonkers idea. And here’s some more evidence of that today.
Britain’s latest numbers show a bigger drop of GDP than expected.
Britain’s economy was even weaker than expected at the end of last year, underlining the country’s struggle to avoid another recession.
GDP fell 0.3% in the fourth quarter, more than the 0.2% drop previously estimated by the Office for National Statistics. The downgrade was mainly prompted by weakness in the country’s dominant services sector.
Economists had not been expecting any change to the 0.2% fall, and the news that Britain’s economy went into the new year in an even worse state will raise fears it could notch up a technical recession – defined as two consecutive quarters of contraction.
If Britain is headed on the road to recession, Spain is already there, the consequence of more wrongheaded austerity policies.
Spain’s economy is suffering its second recession since 2009, the Bank of Spain said, a development that obstructs the government’s efforts to reorder public finances as it prepares the budget for this year.
“The most recent information for the start of 2012 confirms the prolongation of the contraction in output,” the Madrid-based central bank said in its monthly bulletin today.
Spain’s gross domestic product declined 0.3 percent in the fourth quarter of last year, less than two years after emerging from the last recession. Prime Minister Mariano Rajoy will present his 2012 budget on March 30, amid growing pressure from investors and European peers to rein in the deficit, which was 8.5 percent of GDP last year.
When Atrios writes about all this he always adds the line “Fortunately there’s a policy for that.” And we really shouldn’t stop the mockery, nor should we forget this moment. Textbooks should be written about this. When European nations had the opportunity to put to the test conservative notions about the economy, they installed them. They substituted austerity for stimulus as the reaction to a depressed economy. And the result was a MORE depressed economy. This should be brought up in every conversation on economics approximately every 2.3 minutes.
And it’s still happening, by the way. Spanish PM Rajoy’s new budget promises to be “very austere.”
Nobody has learned a thing.
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They haven’t learned a thing? I’m getting so cynical that I think a few have learned a lot–about ripping off the masses in a most efficient and effective manner and they are applying their methodology over and over and getting rewarded with riches beyond imagination. I’d relish being shown I’m wrong.
Here’re a couple more articles (hope neither is a dupe):
The Deathbed of Civilization
Amid Debt Crisis, Athens Falls Apart
As Greece struggles to master its devastating debt problem, decades of mismanagment have taken their toll on the country’s once-proud capital. Athens has degenerated into a hotbed of chaos and crime, where tensions between Greeks and immigrants have led to attacks on foreigners by the far-right. LINK
Spain edges toward economic abyss amid Europe woes This is from the AP LINK.
These people aren’t stupid.
The bankers are a criminal conspiracy that has figured out how to literally take over the “free world.”
What we see in Europe is the near term plan for America. Worldwide revolution is the only solution, and OWS is the vehicle for that. It ain’t gonna be pretty, whatever happens.
I’m planning to participate in May Day festivities with Occupy, despite the fact police departments seem to think there’s nothing wrong with Occupy that kicking the shit out of some of its participants won’t cure.
I have not been active with them since their Los Angeles City Hall encampment was busted up by the cops a few months ago. I need to re-establish that connection. You’re right — Occupy presents an alternative vision to crypto-fascism and needs to be nurtured.
“The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences….”–from Tragedy and Hope: A History of the World in Our Time by Dr. Carroll Quigley
One can learn a lot about how the world really works from Bill Clinton’s old Georgetown Prof, Dr. Quigley.
Folks, you can have some austerity now, or a lot of austerity later.
In a debt driven recession there are only two paths… forgiveness of debt (bankruptcy) or paying it off over a loooong period of time.
Iceland ripped the bandaid off quickly and recovered quickly. Greece is not coming back anytime soon.
Meanwhile Japan is an object lesson for us. At over 200% Debt to GDP, when the time comes it pays 2% like us, interest payments will consume all tax revenue. As in, nothing for anyone. Now that’s some serious austerity, and it’s looking more likely all the time.
It’s time for the Too Big To Fail Looting Operation to experience some “austerity.”
Time to cut off their welfare check. NOW!
GLASS STEAGALL NOW! It is to them what water was to the Wicked Witch of the West.
Once the financial cabal figured out that a cratered economy can not only be created by extracting wealth and stealing it but that the resulting desperation and wealth disparity deleverages the average person and increases the control of the wealthy, the die was cast. No comic book writer would dare invent supervillains to match the banksters. It would seem too incredible.
Or we can do like Mowgli and hide in the jungle and watch…don’t think the PTB know how to play nicely with one another. Hard on us = worse for them in the long run.
Nobody has learned a thing.
*heh* Iceland has…! ;-)
If the textbooks should say anything, it’s that all the evidence suggested this would happen, and the so-called elites did it anyway.
Hell of a report Mr. Dayen, thanks.
Ya couple this with Kevin G’s report of the 7, and the NDAA info n ya get where this is all headed.
N that’s how empires collapse.
Greed.
The British govt should have borrowed and spent .4% more in order to “avoid recession”.
For those who have ever tried to lose weight, you know that you accomplish that outside of your comfort zone.
While removing debt based GDP lowers GDP (what a concept!)
Debt based GDP leads to inflation (see also gas prices).
The question is when do you want your pain? In the present or the future?
I believe that a society can be just while experiencing economic growth, and also during economic decline; similarly, society can also be unjust during growth, as well as in decline.
If austerity was accompanied by criminal actions against the criminal elites as well as shared suffering, that would be the optimum; especially for the environment.