Announced austerity cuts signaled lower growth and deflated markets instead of calming them.
Evidence
This is doubly odd since the cause of the anticipated slowdown, the debt-ceiling agreement of August 1, 2011, between Republicans and Democrats in the US Senate that sought $2.1 trillion in budget cuts over a decade (austerity), was supposed to calm the markets by giving them the budget cuts that they craved. Yet this renewed commitment to austerity instead signaled lower growth due to less public spending going forward in an already weak economy, and stock markets tanked on the news. As Oliver Blanchard, the International Monetary Fund’s (IMF’s) director of research, put it with a degree of understatement, “Financial investors are schizophrenic about fiscal consolidation and growth.” — Mark Blyth, Austerity, 28
Categorization
- XREF: Blanchard’s ‘schizophrenia’ point connects directly to the core critique in Mattei’s austerity literature and to the confidence-fairy debate. — connects to: Austerity’s core claim that cuts lead to growth is dangerous nonsense — Mark Blyth, Austerity: The History of a Dangerous…, 15; Austerity logic ignores that growth, not cuts, may resolve debt — Mark Blyth, Austerity: The History of a Dangerous…, 53; Austerity became self-defeating because it worsened the deficits it claimed to fix — Mark Blyth, Austerity: The History of a Dangerous…, 516 (+2 more)
Broader Connections
- Austerity became self-defeating because it worsened the deficits it claimed to fix
#corroborates(0.85) — Mark Blyth, Austerity, 516 - Austerity logic ignores that growth, not cuts, may resolve debt
#corroborates(0.82) — Mark Blyth, Austerity, 53 - Austerity kills investment by suppressing the aggregate income that justifies new capacity.
#corroborates(0.75) — Yanis Varoufakis, Technofeudalism, 393