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European Austerity Do Your Counterproductive Dance!

EuropeanAusterity

In 2009 Europe shared in the fiscal joy that was the crash of all crashes. The answer that the European Union, the bonds market, and the banks saw as the remedy for said fiscal crash was to slash government spending. This slashing approach to the Grand Recession was supposed to trim the budget in the attempt to minimize the debt and to reassure jittery bond market holders.

This approach to an economic downturn is commonly referred to as Austerity. Austerity is from the Latin word “austērus” or Greek “austērós” meaning “harsh, rough, and bitter”. While austerity was supposed to deliver stability, lower the debt, and revive the market of the European economy, what it actually delivered was severe and unconsciousable economic pain.

What Austerity delivered was a further shrinking of the European economy; it lowered governmental tax revenues, and was counter-productive in terms of addressing the depression. In fact, there has never been a major economy that grew by cutting; it is the fallacy that appears to never die. As you shrink an economy (which has its foundation in government) so do you shrink governmental revenue and thus stagnate the economy further! Can you say “Economy 101”?

Here is an attempt at a analogy; your company has just suffered a great economic loss and your answer is to address this loss is to cut your personnel, cut your inventory, reduce advertising, and to cut the services you offer. How exactly will this fix the problem of economic abyss?  If you get shrink the means in which you can make income; how do you recover?  The answer is you DON’T! Read more…

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