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Category: Really, really bad calls, Taxes and Policy, Video

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7 Responses to “Mark Blyth: Austerity – The History of a Dangerous Idea”

  1. Willy2 says:

    Interesting, thought provoking video. Although he makes a good case against austerity and how to avoid it, he also changes a number of facts to fit his narrative. He creates his own straw men. And that’s where he looses a significant amount of credibility.

    E.g. Germany, indeed cut spending in the late 1920s but it was – AFAIK – during the german economic boom which is precisely what Mr. Blyth proposes. But then Germany’s creditor (the US) got hit financially and was forced to call in the loans. That was austerity forced upon Germany.

    Yes, Britain in 1926 revalued pound sterling and pegged pound sterling to gold. To defend sterling british interest rates were raised. It caused deflation in Britain as Britain became less competitive and caused labor unrest (General strike of 1926). But surprisingly it actually was beneficial for Britain because as a result the debt build-up was MUCH smaller than in the US in the 1920s. The beneficial part of the story is that British GDP in the early 1930s contracted “only” 8% whereas US GDP contracted some 23%. (Remember the video with Hugh Hendry ?) So, what seemed to be harmful to Britain in 1926 was actual (relatively) beneficial for Britain in the early 1930s.
    France in the late 1920s followed the same strategy as Britain did and that’s why the french depression was actually less deep than the one e.g. in the US.

    • Willy2 says:

      - In that regard England & France did the right thing in the 1920s, curbing speculation.
      they followed mr. Blyth’s & Keynes advice. Apply deficit spending in a recession & reduce spending in better times.
      - Why is Blyth always picking on Europe ? Because the US has done the same thing Blyth proposes: “Devalue the currency”. Benny B.(Bernanke) has tried to devalue the USD by “printing money”\monetizing debt, as well. But is spite all of those efforts the USD has gone higher since mid 2011. I guess Mr. Market is stronger than Benny B.’s efforts. In that regard the credibility of the FED has gone down to ZERO.

  2. Willy2 says:

    From 1950 to about 1980/1981 the average US worker enjoyed healthy wage increases every year. Since 1980 the purchasing power of the average US wage has been shrinking every year. AUSTERITY, anyone ?? Do we hear Mr. Blyth talk about that kind of austerity ??

    And that’s precisely why from 1950 up to 1981 US interest rates went up and why after 1981 interest rates – on average – have come down every year. (soucre: Gary Shilling). Those falling interest rates have blown a bubble in financial assets. (E.g. T bonds). Now that bubble is deflating it’s simply Mr. Market & Mr. Margin are imposing austerity on the world economy.

  3. RW says:

    It is possible to argue with Blyth’s interpretation but his recitation of the historical facts themselves is accurate, well documented and on point; e.g., http://www.amazon.com/Austerity-History-Dangerous-Mark-Blyth/dp/019982830X/

    Begin from there and avoid the weeds.

  4. Pantmaker says:

    Very entertaining fellow, though he lost me in the first 30 seconds with his anecdotal personal success as a reason to support bloated welfare states. Listen, sometimes countries can successfully manage deficits and debt, and sometimes they spin wildy out of control. People will argue about the timing and magnitude of reigning in debt until the end days and serve up piles of blame on those with opposing views.

  5. ancientone says:

    Every politician in America should be forced to sit down and watch this.

  6. This was not an academic lecture. It has candidacy for a “Just for Laughs” episode. It is easy for a pundit to engage in monday-morning-quarterbacking and play the shoulda-woulda-coulda game. But just as most common criminals are not known for their triple-digit IQs, a plethora of nations who fell victim to harsh austerity got there for one reason: nobody would lend them money anymore (at sustainable terms). Just as stupid people do stupid things, so also do inept administrations.

    It is easy for Blyth to say Argentina, Portugal, Ireland, Greece, etc etc should have held back their austerity ’til the next big growth cycle but that gets rather tricky when one can’t fund next quarter’s deficit. I am confident the relevant IMF team warned each victim two to three years ahead how things were going to unfold if their advice went unheeded. Of course there was no entertainment value in Blyth addressing this aspect…