The Austerity Movement Is Crumbling … The big news in economics last week was the paper by a UMASS Grad Student showing that economists Kenneth Rogoff and Carmen Reinhart had made an Excel spreadsheet blunder in their famous paper arguing that as debt-to-GDP goes above 90%, growth slows dramatically. It's easy and tempting to overstate the influence of Reinhart and Rogoff. Even if they had never existed, there would have still been an austerity movement. The "90%" paper just provided a nice science-like sounding datapoint for austerity advocates to point do. – Business Insider
Dominant Social Theme: An austerity paper that never mattered to begin with.
Free-Market Analysis: Ironically, at the same time that the influential website Business Insider is running an article by editor Henry Blodget (see other article, this issue) blasting austerity, it is also the recipient of a more acute analysis by Joe Weisenthal.
Blodget argues that flaws in a foundational paper supporting austerity, written by Rogoff and Reinhart (see excerpt above), have not only doomed the policy but have given Keynesians ammunition to argue for pump-priming.
Weisenthal pretty much takes our position – remarkable to find in a fairly mainstream electronic newspaper – that the Rogoff/Reinhart paper merely provided justification for policies that Eurocrats (and certain US leaders) wanted to impose anyway.
He doesn't use our terminology – directed history and dominant social themes – but he comes to similar conclusions. Just read the above excerpt. He basically says it: "It's easy and tempting to overstate the influence of Reinhart and Rogoff. Even if they had never existed, there would have still been an austerity movement."
The point is that the next time Olli Rehn, or George Osborne, or Paul Ryan declares, sententiously, that we must have austerity because serious economists (i.e., not Krugman and friends) tell us that debt is a terrible thing, people in the audience will snicker — which they should have been doing all along, but now it has become socially acceptable.
The FT has a new story up about bond investor Bill Gross, and how he's attacking the UK austerity movement.
"The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not," Mr Gross told the Financial Times in an interview … His comments come as economists debate the effect of statistical errors in widely cited academic research by Kenneth Rogoff and Carmen Reinhart on the case for fiscal austerity.
With governments in the developed world struggling to boost economic growth, the International Monetary Fund has also argued that Germany, the US and the UK are tightening their belts too fast.
For one thing, it's interesting that Gross is now slamming austerity. Also it's interesting that the paragraph about Excel-gate is just dropped in there, as one of those perfunctory things that you now have to include when talking about debt and deficits.
As this article points out, the paper was never more than an excuse to implement a policy that was pre-determined. The larger ramifications (as we have reported on them) are pernicious and calculated. The BRICS are being brought up by a combination of trade and easy money. The West is being crushed by recession, higher taxes, invidious regulation and fiat-monetary strangulation.
It has to with evening out the world's economies, presumably in pursuit of the economic internationalism that globalists seek. They are the ones implementing these policies and the elaborations of economists are merely a kind of "window dressing."
What IS interesting, and not pointed out anywhere that we can see, is that the violent nature of the pushback to austerity seems to be causing a rethink among the Brussels Eurocrats that were wedded to its implementation in the first place.
Add the retreat from austerity to the overwhelming problems with the euro, a realignment of plans in Cyprus and continued civil unrest throughout the PIGS and you begin to see a pattern that we have long suggested would emerge: The EU meme itself, and certainly the euro, is in trouble.
Those dedicated to a rejuvenation of imperial Europe are having a tough go. The toppling of austerity, if it occurs, will be one more blow.
Do we see the Internet Reformation at work here?