Monday, February 13, 2012

"Austerity Measures"

So Greece has been rioting again, as the parliament passed a set of "austerity measures" designed to combat their rampant budget deficit.

This headline from The Daily Beast is instructive, and typical of the way it gets written up:
Greece Riots: Have Greeks Had Enough of Austerity?
This is why it has been such a marketing disaster to call these rounds of budget cuts "austerity measures".

Austerity implies that the relevant aspect of these cuts is a kind of severity, a harshness of measures designed to achieve a strong outcome. More tellingly, it implies a choice. Austerity describes an action you take to limit your intake of something to more humble, and less pleasant, levels.

And who wants that?! Nobody. I've had enough of this austerity! Let's go back to the days of plenty.

The message that needs to be gotten into the heads of the marginal Greek voter is the following: riot all you want, but those days ain't coming back. Not if Greece defaults. Not if Greece raises taxes. Not if Greece prints money.

If it were me, I'd call these 'The New Normal Cuts'. That ought to indicate the correct mindset. Get used to it, because this is how it's going to be. I'd also settle for the "There's No More Money, Because It's All Been Spent Cuts". It's been spent, and borrowed, and spent again. And now there's nothing left, and no private investor with two braincells to rub together is going to lend the Greek government money again any time soon.

Because this is the problem - you can default on the debt, but it doesn't make the deficit go away. And once you default, you've got very little chance of being able to finance that deficit with borrowing at any reasonable rate. So sooner or later, the pensions and the government wages will get cut, by hook or by crook. The only other option is printing money to close the budget deficit, which is the triumph of imbeciles who think that money illusion is a fast track to prosperity. Sadly, it doesn't take much experience of hyperinflation to realise that this isn't actually the case. Ask Zimbabwe how it's working out.

These aren't the austerity cuts. These are the reality cuts. Which is why the headline is so inane:
Greece Riots: Have Greeks Had Enough of Reality?
You bet they have. Unfortunately, to paraphrase Tolstoy, you may not be interested in fiscal reality, but fiscal reality is interested in you.

No comments:

Post a Comment