Will Austerity Hit America?
European countries are implementing austerity measures in an attempt to control deficits and bring their financial state to a manageable level. Since the Greek “mini-crisi’ earlier this year, these measures have been put into place. The most recent action is in the UK.
Mark over at FMMF says:
I’ve said over the past few years the country to watch for Americans is not Japan, but Great Britain aka the mini U.S. While there are some differences, both have their own currency, both are running big deficits, both have oodles of debt to deal with, both have engaged in monetary debasement (i.e. quantitative easing) to ‘solve problems’, along with obviously similar banking systems and the cultural worship of the banker (at least until 3 years ago). While more ‘socialistic’ the key difference economically is the benefit of the reserve currency that the U.S. has. No such ace in the hole for the UK. Japan, on the other hand, has a much greater debt load as % of GDP, but almost all internally financed, whereas the UK relies much more on the kindness of strangers, as does the U.S. hence why a better country to follow for ‘canary in the coal mine’ reasons.
Unlike Americans who in a vague sense want to ‘cut the deficit’ but only if does not affect any program they are specifically benefiting from, the Brits recently elected leaders who vowed they would push through some tough reforms to bring down their deficit. (in the States, New Jersey might be a test case of similar measures – a governor who was elected on a mandate and is taking specific actions – whatever the effect on his popularity)
While many conservatives like myself push for austerity in the name of government cuts here in America, I think I’m in the minority in seeing that such austerity which be very, very painful. Extreme austerity where significant cuts are made would result in a near shutdown of our economy in the short term. The reason is because we’re incredibly dependent on government nowadays.
Now, with that said, I still think it’s the better approach because we’re going down the path of the unsustainable. We’re past the point where the fix will be easy or pain-free. Buckle up, America!