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Austerity Never Ended a Recession by poasterchild Austerity Never Ended a Recession by poasterchild
Please disseminate widely, thank you! This does not give permission to alter or claim credit for this re-mixed work, for which I retain all copyrights. The original illustration is in the public domain.

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:iconpsiandco:
psiandco Featured By Owner Sep 8, 2014  Student Writer
could you do one on the Bait and switch obama pulled?

1. I will offer a stimulus package.
2. to all my union buddies, backward auto-companies, and bankrupt banks...
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:icondanielaherne:
DanielAherne Featured By Owner Jun 29, 2014  Professional General Artist
So true. Using austerity to end a recession is like using petrol to extinguish a fire.
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:iconbudcharles:
BudCharles Featured By Owner Jul 25, 2013
Australia got through the 2008 crisis incredibly well, and almost immediately after the crisis began, the government put out a big stimulus package.
Meanwhile most of Europe cut spending dramatically and promptly plunged into a recession.
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:iconkraeten:
Kraeten Featured By Owner Aug 29, 2013
Iceland did much of the same. Britain and the USA have so much left to learn, pity they seem determined to instead stick their heads into the dirt.
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:iconaya-creuset:
Aya-Creuset Featured By Owner May 25, 2013  Hobbyist General Artist
I don't live in America, but I used to leave in another country, then came back to "mine". This is not bad as a general vision, I might add. As in, it is not happening only in your country.
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:iconpoasterchild:
poasterchild Featured By Owner Apr 29, 2013  Hobbyist Artist
April 28, 2013, The New York Times

The Story of Our Time

By PAUL KRUGMAN

Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.

My sense, however, is that many people still don't understand what this is all about. So this seems like a good time to offer a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts.

Let's start with what may be the most crucial thing to understand: the economy is not like an individual family.

Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.

And that's what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.

Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there's no good reason that we should pay for them with year after year of mass unemployment.

So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn't divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn't crowd out private investment; it mobilizes funds that would otherwise go unused.

Now, just to be clear, this is not a case for more government spending and larger budget deficits under all circumstances — and the claim that people like me always want bigger deficits is just false. For the economy isn't always like this — in fact, situations like the one we're in are fairly rare. By all means let's try to reduce deficits and bring down government indebtedness once normal conditions return and the economy is no longer depressed. But right now we're still dealing with the aftermath of a once-in-three-generations financial crisis. This is no time for austerity.

O.K., I've just given you a story, but why should you believe it? There are, after all, people who insist that the real problem is on the economy's supply side: that workers lack the skills they need, or that unemployment insurance has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they're wrong?

Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale "money printing" by the Fed (not a good description of actual Fed policy, but never mind) wouldn't be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.

Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes — but powerful people don't want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn't actually feeling much pain.

What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we're in.
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:iconsupreme-commissar:
Supreme-Commissar Featured By Owner Apr 25, 2013  Hobbyist General Artist
This one makes perfect sense.
:salute::flagus::salute:
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:icondrixnot:
drixnot Featured By Owner Apr 23, 2013
A better analogy is to compare wealth to the water cycle.... The weathy are the clouds and the poor are repressented by the earth. If the water pools in one place then the cycle stops. Currently we have the wealthy hording money in bank accounts and corporations also hording money... reasons do not matter. This means the poor do not have money to spend... so the wealthy and the corporations aren't making a profit and they continue to horde wealth.

A recession is nothing more than a money drought. You don't end a drought by draining the lakes.
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:iconsupreme-commissar:
Supreme-Commissar Featured By Owner Apr 25, 2013  Hobbyist General Artist
In that case, we need to send out some government planes and seed those "wealthy" clouds with some stimulus of silver iodide and dry ice so that the "poor" earth can get some relief. No one wants to live in a national desert of austerity.
:salute::flagus::salute:
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:iconmousedenton:
MouseDenton Featured By Owner Apr 25, 2013
Laws of science dictate that accumulation will cause rain. Clouds don't have the will to hang on to their "hard-earned" wealth of water, and as a result aren't driven by greed to maintain it at the cost of the ecosystem. Your 'argument' is invalid, unless you supplement the laws of science with laws by government, in which case we're ending the drought by literally making it rain.
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:iconhaze3p0:
Haze3P0 Featured By Owner Apr 23, 2013  Hobbyist General Artist
Seen how bad our country's infrastructure is, a little investment on fixing it up isn't such a bad idea.
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:icononlyonecannoli:
ONLYoneCANNOLI Featured By Owner Apr 23, 2013  Hobbyist Digital Artist
the way i am reading this, is that prosperity will come if the government hands out money. is that how to read this image?
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:iconpoasterchild:
poasterchild Featured By Owner Apr 23, 2013  Hobbyist Artist
I wouldn't use the term "hand out" as a synonym for "spend." For example, the government sells Treasury bonds to raise money, and then spends that money to build highways and bridges, which goes to workers who spend the money on consumer goods, thus increasing economic activity, which leads to more tax revenues, with which the bonds are repaid. When the private sector collapses, government spending is the only way to increase aggregate demand. Got it?
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:iconpassing37:
passing37 Featured By Owner Apr 30, 2013
Not if the financial system is unsustainable. Besides, the only ones buying government bonds these days are central banks. Then that money is given for free to rich bankers so they can make a profit at our expense.
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:icononlyonecannoli:
ONLYoneCANNOLI Featured By Owner Apr 23, 2013  Hobbyist Digital Artist
Sounds like a bunch of bolshevik to me, but thanks for explaining all that.
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:iconpoasterchild:
poasterchild Featured By Owner Apr 23, 2013  Hobbyist Artist
How did I just know you were another piece of ignorant, uneducated, ill-informed, and just stupid reactionary afterbirth? Fuck off.

:banned:
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:iconmatthew-travelmaster:
Matthew-Travelmaster Featured By Owner Apr 23, 2013  Hobbyist Writer
Wow, this Looks just great. Just asking what did the original poster Show?
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:iconpoasterchild:
poasterchild Featured By Owner Apr 23, 2013  Hobbyist Artist
Not too much re-mixing was required for this one, which is of Canadian origin from the World War I era: [link].
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