Austerity measures have they ever saved an economy?

To understand how to unravel this balled-up knot we need to understand where the money that we propose the government should be spending comes from...here is a quick 101.Companies spend money on people and buy goods which are sold on at a PROFIT!
The money spent on people in the form of salaries is where we people get our income from (real revenue). Companies generate their income from their assets and either draw out there profit or reinvest them in the company (real revenue).So far so good, except then Mr Taxman comes in and says let me have 35% of your income (incorrectly referred to as revenue). The government does not earn this income whether you're in favour of austerity or not it is simply not a real revenue generator, it get's it's income directly from Joe Public and Public Ltd.Now here's the rub, if the government get's $35 from Joe Public it is purely because Joe Public earned $100, leaving Joe with $65. If Mr Taxman then spend $70 it means that Joe Public will have to pay that back over time in increased taxes.
Therefore austerity=sanity. Those who like to pummel the rich do not understand that it is after all the rich that have provided the means for growth in any economy.Also, how does increased government spending help Mr Broke when he is going to end up paying for the spending in the long run. If he doesn't pay by direct taxation (let's remember tax rate in US has been as low as 1% in early 1900's and as high as 70% in 1970's) then he will pay by losing his job because his boss is trying to make a profit and pay Mr Taxman at the same time.Austrian school of economics is the best way to go...let's limit government where possible and get into the habit of spending what taxes have been collected rather than 100% more spending than what we have available. Calling Taxes Revenue is the easiest way to court disaster as taxes are not revenue they are taxes, so increased spending=increased taxes (now or later but inevitable).Von Mises, Hayek & Galambos have the way to go...it's the reason the US is the biggest economy in the world...Laissez-faire economics!

Now now don't get your knickers in a jumble! Ad hominem is the first sign of unintelligence...Everyone seems to think capitalism is the enemy...I find that utterly bizarre...does no one recognise the horrors of communism...not as an old fashion bugger bear but as a big brother thief of other peoples property.I might well be an asshole, but at least I'm a realistic one.

Hey jar that's otherwise known as communism...a system which has shown to FAIL dismally wherever it is found. In those places where it still exists (say China), even the leadership there have recognised that it does not work and have 'ammened' the marxian policies to accommodate for capitalism.Capitalism isn't the prettiest girl at the ball by no means, but she is by far the sanest, in a truly capital society there is potential for huge degrees of disparity, but I personally welcome this as I certainly don't want to have to share what I have slaved 40 years to achieve with someone who quite frankly couldn't be bothered to leave the couch.Oh, you might say that's a straw man, but I live in the uk and as any uk citizen can tell you, we're a bit sick to the back teeth of having to pay taxes to a government who then doles our cash out to people who simple stay at home and booze or shoot up all day. A substantial proportion of these folks are 3rd generation sponges.I'm quite happy to help people who have lost there jobs or cannot work for some reason but just doling out cash that doesn't belong to you is immoral and does not work. If I were told my income was going to be shared out equally with all the other people in my town I certainly won't be incentivised to work until midnight on a software project. The only reason why capitalism works is BECAUSE you get to keep what you earn.I work for myself and my family and for no one else...if that makes me a selfish laissez-faire rapist, then colour my red put a stamp on my forehead and i will wear it with pride.But please note in your communist society you have no right to any of your own property which effectively makes the poor even poorer.

Austrian economics, unlike communism has never been tested in practice anywhere at any time. The closest we have been to Austrian economics is in the early US years. As I said before this is the reason for the US being such a phenomenal success story.Then regarding Austrian school being math lite...it's not because they're scared of it but that they realise the futility of conventional approaches. As any economist can vouch for, in the current conventional sense we have very limited powers of prediction in economics, so all the math under the sun is still giving us next to zero predictability, as the model is broken, unless you accept boom and bust economics to be intentional.If your science lacks the ability to accurately predict future events based on known inputs then the science is not working in terms of the third and fourth steps in the scientific method. By all means crank away at your algorithms and differential equations but the Austrian knows that 'ceterus' is very seldomly 'paribus' and so works toward a science that can carry out step four successfully. This has been referred to as Volitional Science.The MAN who owns the marketplace earns a portion of the market not as a result of fiat but as a result of being a voluntary participant in the market of marketplaces for the purpose of making a profit. As such he makes it his business to ensure all his customers are happy in there separate stalls, as he would not want to lose their business.This is not how the government operates, this is more aptly comparable to Vinny dropping in at your stall to see if everythings 'OK', "don't worry" he says, "I'll make sure no one rips you off, but you will need to pay for this". Try saying no to Vinny and see what happens, ditto with the Gov.As mentioned before limited Gov has utility as long as it is 'limited' to the bare essentials, including national defence, education, law & order (incl. protection of property) & limited monetary control. But as soon as all the other business that the Gov does is farmed out to capitalists the sooner profit can drive efficiency, innovation, excellence and the sensitivity to public opinion (customer is king), but when the bureaucracy decides to take part in the marketplace then we have the biggest monopoly of all to contend with.As far as my math is concerned, it's spot on (maybe crashfrog has whiplash...), read the post again. $100 - $35 = $65, but if gov spends $70 the $35 is debt which Joe will have to pay back in the future. If you've had any accounting training you will know you cannot simply ignore the -$35.I know you are itching to add the $70 to the $65 that Joe has but if you sit quietly in dark room and think about it you will see that that $70 which the government spends is to buy goods and pay services that DO NOT GENERATE INCOME, it simply transfers ownership of other peoples money (entropy). Therefore for each $100 deficit that the government spends within industry = potential $35 in taxes which equates to a net deficit 0f $65. So if the government budgeted to overspend taxes by $100bn then joe public effectively has his future tax burden increased by $65bn.That means he gets to shift his problem on to his children because the only reason why we have deficits is because politician are loath to increase the credit side of the balance sheet in the form of taxes to meet the debit side of expenses in fear of foregoing future elections, needless to say we can't even fire them for negligence. National debt cannot be written off, it will be paid come what may...which usually involves human tragedy.If we insist on having a government then we must equally insist that the government remains in surplus, and keeps taxes to a minimum. Progressive taxes will force intelligent entrepreneurs to go WITH their money to a country that WILL appreciate them for being...yes...RICH.If you don't like that it's probably because you have let the collectivism of christianity warp your sense of reality, believe or not we're all in it for ourselves, and only those fortunate few that have made it are capable when they are inclined, and inclined only when they're capable of being so, to be generous for the sake of charity, and I laud them for it (Bill Gates etal).

You probably won't like my response because it's not going to placate you...sorry, but if you don't adapt you die...your business that is. I'm sorry that you haven't diversified or made other inroads to increasing your busniesses success, but let's consider the opposite. Let's say you had, and you started as a small grocer but through being more adaptive to the EVER CHANGING market place you managed to secure a good 10% of the grocery industry in your state.Now Joe Grocer starts pointing at you and demanding that you fork over more than him, just because you were more able to adapt than he was. "Up yours jack" or 'joe' as it goes, "there's no way you are going to pin entitlement on me, I've worked bloody hard night and day to get my business turning over $1bn a year", you might say, "I'm sorry you haven't but should I be expected to bare the brunt of your inability?", if you think that's fair then Russia or China is your preferred model.Marx said..."from each according to his ability, to each according to his need", in other words, if I am more capable than you then I am obliged to hand over my earning to you because your needs outweigh mine. THAT, folks is a recipe for confiscation of property and we all know how that worked out in Russia and China, both are now cow-towing to their capitalist opponents by introducing capitalism into their NON Laissez-faire economies...and guess what?, ever since they made this move their economies are beginning to thrive.WHY?, because every man wants to keep what he earns, and no man really wants to share his earnings with total strangers.

While I'd have to agree with you that infrastructure does make the process workable it is with the caveat mentioned before and that is that true austrian models have never existed, therefore we've had an opportunity to demonstrate that infrastructure building is not only possible in austrian terms but highly cost effective and innovative.However while the bureaucracy machine decides on which proprietary organisation will be contracted to do this function it needn't be there to be begin with as profit engines carry out the work anyway, most of them doing the work very inefficiently as governments are push-over customers (no proprietary interest). So this work can take place anyway but without employing department of roads etc. politicians getting a slice of the cake.Take roads for instance, if you paid a lot less tax you might have to pay towards using say private roads. If the road is not up to scratch or becomes too expensive then market democracy comes into play and either innovation or sanction rectify the problem. So you will either catch the train, plain or use another route, or build another road, but what you won't get is endless public works...where roads are held up for years at a time.When the gov contracts they always do so without proprietary interest, so the politician may reprimand the contractors for taking too long or doing a shoddy job, but that's only when they even recognise the problem, most of the time they clock in get their salary and go home. If a proprietary interest is involved any hold up, wastage or negligence gets punished immediately. So instead of spending $5mil on a road you spend $2.5mil. How many toll roads have you driven on that suffer the same problems?Inefficiency is not an indictment that I level lightly, I don't take pleasure in pummelling the government, but as a businessman I can guarantee that the best way to improve anyones' productivity is to make it contingent on proprietary reward (interest). If you offer the right incentives then people will do their very best, otherwise they will always seek the path of least resistance.I admit it's scary to contemplate, but it genuinely works. Everywhere you find capitalism you find freedom, and to the extent you find capitalism you find the same degree of freedom. Controls are necessary but they need not be wielded by bureaucrats who most often than not are grossly unqualified to make the decisions they make so readily. Capitalism sprung out of feudalism as a reaction to not being allowed the chance to thrive, it is the natural bedmate of the enlightenment values, Thomas Paine was it's best advocate, but sadly his dream has not yet come to fruition.On a side note, if in america you keep saying 'In god we trust', then god needs to be taxed more than everyone else. The churches are sitting on tons of untaxed income.

read post properly...both are now cow-towing to their capitalist opponents by introducing capitalism into their NON Laissez-faire economies...and guess what?, ever since they made this move their economies are beginning to thrive.

Absolute shinona, there are billions of poor africans, but that doesn't seem to have brought about much growth in any country in this continent... The lower classes might fuel production by consumption but they certainly are not primary producer's as they don't have funds to begin with they first have to work (produce products) for a rich businessman to allow for him to spend (income earned from production)...etc. The fact that you know so little about business demonstrates why you have such contempt for the intellectually fit...you more than likely inhabit the the ranks of the 'please feel sorry for me'. If Johnny rich gets a tax cut and then just sits on it then he's not a very good businessman...a good business man knows that if he reinvests his profits then he stands to make more money...hang on wait...what happens when he reinvests his income...oh that's right YOU get a chance to get a job.Maybe he buys a new machine which allows more widgets to be made, so now he can increase his output at a lower price allowing for him to drop his selling price to allow for lower earners to buy his product thereby increasing overall market share. Everyone knows how this works as most products start out being much more expensive than where the end up...computer's, mobile phones etc. Yep...pretty much...it may be better said...piddles it up the wall. It certainly doesn't demonstrate any kind responsible investment. As said before...it cannot be proven as bad or worse if it's never been tested...please feel free to correct me...i.e. please tell where this experiment has run...let alone where it has failed.

I said a good business man...I'd go straight to Goldman Sachs rather than going via the govt.Before that machine came to be in the warehouse it had to be built...presumably by a company that employs people. If you knew anything about business, which you clearly think you do...you would be able to work out that an increase in market share or increase in turnover as a result in purchasing a machine (for example!) invariably = more staff to run machines and deal with increased orders...usually considerably more. I never professed to be, however your statement implies that you seem to think you are, or perhaps that you think you are qualified to adjudicate. I'm happy to concede that I am not certain about any of my opnions, but the best I can do is apply reason and logic to my arguments...it seems though that you have all the answers, which sounds eerily like the theists I'm accustomed to debating. As per above you seem to have one up on me in the cock-sure department, but if you're really interested it's because austrian economics actually functions very well as a conduit to or extension of evolution principles. Where neoclassic economics relies on the gentle nudge of the all-knowing force austrian economics allows for failure as means of strengthening it's ability for success.I don't need any more convincing that you think I'm not getting the points right, which is precisely how I would expect someone who thinks they know it all to perceive of the outcome of a highly subjective debate between two amateur armchair economists. If you're so sure you're right and I'm wrong give yourself a pat on the back you deserve it...hell if it helps your self esteem I will too...well done for trying.Neoclassical economics applies the same tribal authoritarian approach that has consistently failed throughout history in the form of monarchy and religion and continues to threaten us in the form of Religion and Regulation today, compared with Laissez-faire approach of Austrianism and Atheism, a breath of free air presaged and promoted by the fathers of the enlightenment.Your cock-sure attitude and ad hominem attack both lead me to believe that perhaps you have deep seated inadequacy issues...I'm discussing economics here mate, that's all, don't take it so personally...obviously you're not used to having discussions with people who have differing opinions to you, perhaps I should ask you why you are here, you're an atheist and a conformist disciple of neoclassical economics, no more convincing required from you...I get it, I promise.

That's because you don't need an army of bureaucrats to do it...the $600 question is a very good one for demonstrating how inefficient the government is...first you have an army of bureaucrats charged with responsibility to collect taxes...1st point of erosion (say 15%), then once it's in the system it'll will need to get shuffled around to the right government body (say 10%), then the govt might employ an agency to source subcontractors (10%) etc. etc. etc. so that once that hammer is purchased $600 has been eaten up for minimal profit.However if the entire $600 was to be used to buy hammers then the hammer man might make enough profit to justify lowering his prices to extend market share. The key here is the word PROFIT. I'm not disputing that the govt spreads money into the economy by paying people and companies but it does so via a very inefficient not for profit route which means that at each change of hands the added value that would otherwise be generated by all the various transaction leading up the the purchase of the product is lost when the govt steps in and does it.

Low risk? Not according to Standard and Poor's. Who said that you should? I never did, I happened to be referring to a good business man for the sake of argument. But let's say we are talking about a bad business man, well he will see his jack without a mirror but without the govt rushing in to bail him out. Austrian economics is strictly against govt bail outs, if your kid keeps sticking his hand in the cooky jar and never has to deal with any consequences he will continue to do so...but I suppose collectivists are in favour of sharing the burdens of stupidity. Just as I said before, you obviously know it all. If you think I'm wrong then I must be right mate, because you've missed nuance and clear explanation at every level of this discussion. Logic tells me that if you spend more than you collect, you end up bending over a barrel with a big hairy creditor smiling gleefully behind you. You're welcome to use whatever passes for logic in your household as will I, and since mine has served my very well thus far I will continue to apply it vigorously. Good for you...I never doubted your prowess for one minute, she must be proud. You certainly seem to know what you are, as do I...

If the govt does not make profit then no value was added to begin with = lost (as in...was never there to begin with compared with added value from proprietary enterprise + profit passed on to prop ent plus profit etc.)This then generates growth.

to be continued...i must go to bed.

Now CONCENTRATE...lost as compared with a system that does have profit...see.System with added value = Proprietary interest system. (Non Govt.)
Proprietary interest system - (MINUS) added value = Non Proprietary System (Govt.)So to get from a system with added value to a system without added value, you loose the added value...lost as in not there anymore.That should make it clear...if it doesn't then I can't help you.