Greece! Spain! Italy! Portugal! France! Everyone! Listen Up:
…few dead pensioners, closed hospitals and lost jobs later:
“Economists were wrong about Austerity!”
No! Really? Why is “our leadership” this kind of incompetent?
Christine Madeleine Odette Lagarde (French: [kʁistin madlɛn ɔdɛt laɡaʁd]; née Lallouette, IPA: [laluɛt]; born 1 January 1956) is a French lawyer and politician serving as Managing Director (MD) and Chairwoman of the International Monetary Fund (IMF) since 2011.
Lagarde joined Baker & McKenzie, a large Chicago-based international law firm, in 1981.
IMF’s lending program for distressed European countries was “a very massive plan, totally unexpected, totally counter-treaty, because it wasn’t scheduled in the treaty that we should do a bailout program, as we did.” She also said, “we had essentially a trillion dollars on the table to confront any market attack that would target any country, whether it’s Greece, Spain, Portugal, or anybody within the eurozone.” With respect to the French economy, she stated that besides short-term stimulus efforts: “we must, very decisively, cut our deficit and reduce our debt.”
Liberte, Fraternite, Austerite
… will get right-wing radicals elected.
Christine at her time at the IMF was pretty much pro Austerity: Latest News: (2013) “OOOPS! We were wrong”
and: HOW ON EARTH is the President of the ECB Elected?
Who the fuck is the European Council?
“In a rare volte-face, the International Monetary Fund this week admitted that it grossly underestimated the impact of the austerity regime it advised Europeans to adopt.
A paper authored by IMF chief economist Olivier Blanchard found that every dollar that governments cut from their budgets actually reduced economic output by $1.50.
The IMF forecast originally that economic activity would be reduced by only $0.50 for every $1.00 fiscal spending cut.
Now this is not the IMF’s official position, mind you. But Blanchard, as chief economist, makes the IMF look shame-faced. Indirectly, at least.
Predictably, this has given considerable ammunition to critics of the bitter austerity prescription that has characterised European governments’ fiscal policies.
Economics is known as the dismal science.
But for the IMF’s critics, this egregious forecasting error — upon which so much policy advice was built — is more than a crime.
It’s a mistake.”
and Kennedy once said: “An Error becomes a mistake – if you refuse to correct it”
Will they correct it?
“The fact is that economics is much more of an art than a science.”
And money is much more a “religion” a system of “believe” than you can imagine.
“Econometricians can factor in x amount of data into a model to show outcome y.
Like actors, who are only as good as their scripts, economists are only as good as the data they input.
Go forth and multiply
How did the IMF get it so wrong? Multipliers. Specifically, the wrong ones.
Although the 18th-century physiocrat, Quesnay, formulated the basis of multipliers in economics, John Maynard Keynes is generally credited with the conceptual modernisation and application of the “multiplier effect”.
Briefly, every dollar that’s spent increases aggregate demand, as that same dollar is spent again and again and again.
It’s this fiscal multiplier that the IMF employed to measure the likely effect of budgetary spending cuts.
To understand multipliers, here’s a brain teaser for you. Imagine we’re in the 19th-century equivalent of Fawlty Towers.
His Lordship arrives at a hotel and requests a room.
“Certainly, m’lord,” replies the manager.
But the man wants to see the room first. He puts his coat in the cloakroom and goes upstairs to take a shufty.
While he’s gone, the manager steals £5 from his wallet.
He then runs down the street and pays off the, er, lady of the night, to whom he owes five quid.
Said lady then hoofs off to the butcher’s to pay off her £5 worth of sausages. The butcher, in turn, heads over to the baker, where his account is in arrears to the tune of a fiver. The baker pays his £5 to the milkman. And the milkman heads to the hotel to pay the manager the £5 he owes on the room he rented there the last time he met up with the shady lady.
Then the manager replaces the £5 he stole from the toff’s wallet.
His Lordship decides the room is not at all like Hampton Court Palace and leaves.
So, goods were produced.
Services were rendered.
Debts were paid.
There were economic outputs.
GDP — in theory — increased.
And all due to one lousy £5 note.
That’s a multiplier for you.
One more thing: in all instances, credit was extended.
You could consider the aristocrat the government.
Or a bank.
Except, unlike governments, banks don’t give away money; they rent it out.
Meanwhile, back at the IMF…
Blanchard calculated that the IMF utilised a multiplier of 0.5.
In reality, it should have been 1.5. In the IMF’s defence, Blanchard argues that the Fund underestimated the extraordinary financial circumstances of the European economies.
In other words, the IMF was too optimistic about the impact of austerity measures upon GDP, and did not expect the effect upon unemployment would be so severe.
Sorry in short – the whole IMF staff should get fired! Christine Madeleine Odette Lagarde should go to jail!
She and her advisors ruined the Greek and Spain economy and were about to ruin that of Portugal and Italy and France, driving many people to the brink of economic existance.
While allowing right wing nationalism to grow like a mushroom – not enough wrong doing for you?
Greece now officially hates Germany.
Thanks a lot.
It is what always happens when people do not have a mind of their own and do not do their own research and rely on “advisors” from McKinsey or god knows from where. those “experts” are none.
Unfortunately: i predict – the incompetent financial advisory IMF/ECB’s biggest crime is yet to come.
this is how incompetent our leadership is – it relies on experts that pretend to be experts – for the money
Portugal is way better off than Greece!
GO FUCK YOURSELF IMF ECB AND MCKINSEY!
“Beliefs-driven business cycles”
“Over the years, different generations of economists have entertained the idea that beliefs, and beliefs alone, could be powerful enough to set the economy on a path to expansions and recessions solely determined by expectations of rosy times being eventually fulfilled, or otherwise.”