The Pain Brings No Gain, Just More of the Same
There has been much debate in regard to this concept of fiscal austerity, that massive short term cuts in discretionary domestic spending will magically spur, as the British call it, an “expansionary fiscal contraction”. Here in the United States, we call that the Ryan Plan. But we’ll get back to that in a few moments. In the UK, the economy has tanked. Again. Their economy shrank 0.3 % in the last quarter of 2011 and more than 0.2 % in the first quarter of this year. When a country’s gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth, they call that a double dip recession. That’s not good. Especially when you consider they were expecting 4%. In the Euro Zone, if not for the large, relatively instantaneous injection of nearly half a trillion euros into the European banking system, likely Spain, France, Italy and Greece would be experiencing similar numbers. These countries, including Britain, all have one thing in common. Austerity programs.