
Follow us @ twitter.com twitter.com Welcome to Capital Account. So what is this austerity we keep hearing all about. Well, this isn't word of the day, but let's look at a quick definition: noun, plural aus·ter·i·ties. 1. austere quality; severity of manner, life, etc.; sternness. 2. Usually, austerities. ascetic practices: austerities of monastery life. Hmm...sounds pretty awful. I wouldn't want to live in a monastery or live a "stern" lifestyle. But does cutting back on government spending equate to "austerity?" Well, maybe in the short-run for those whose incomes drop as a result, but what about longer term, what does austerity mean? There seems to be this popular notion among mainstream economists that there are periods, like the one we are in today, where the private sector, willy nilly, just stops spending. This is otherwise known as a "crisis in aggregate demand," and the solution, according to people like Paul Krugman, is for the government to step in and spend money. But why is the private sector not spending. Again, mainline economists point to something called "the paradox of thrift," in order to explain away this...well...paradox! They believe that people, responding to negative future expectations about growth, income and security, choose to save an ever greater amount of their ever declining income. By doing what is in their own best interests, as the theory goes, the whole of humanity drives itself and its economy to a grinding halt and back into the stone <b>...</b>
Capital Account
Lauren Lyster
Demetri Kofinas
Mike Shedlock
Mish
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