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More Austerity

The BBC reports that UK loses top AAA credit rating for first time since 1978:

Chancellor George Osborne said the decision was “a stark reminder of the debt problems facing our country”.

“Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it,” he added. “We will go on delivering the plan that has cut the deficit by a quarter.”

As the UK slips into its third recession since the global meltdown, Messrs Cameron and Osborne will triple down on their austerity program which will continue the downward spiral of the British economy. This is because their only other option would be to actually follow the policies that helped to end the Great Depression, i.e. increase government spending to make up for the shortage of private sector demand. It doesn’t seem to occur to Mr Osborne that public spending on the Olympics helped the economy to grow, and when that spending stopped so did the growth.

2 comments

1 Steve Bates { 02.24.13 at 10:42 am }

“Austerity right now is a really, really bad idea.” – Paul Krugman, “Spending Cuts and Monetary Policy”

The global economy and I are both attempting to regain positions we recently held before foolishness not entirely of our own making took us down. I seem to be doing a bit better than the global economy…

2 Bryan { 02.24.13 at 9:22 pm }

The Fed keeps dumping money into banks that won’t lend to anyone, and the cost of credit hasn’t really dropped in parallel with the Prime Rate, but the interest paid on savings accounts has.

If everyone tries to cut at the same time, there is no one boosting the economy, and no reason for business to hire. Meanwhile food and energy costs go up to reduce discretionary spending even more.

The policies aren’t rational, they’re religious.