Marshall Auerback explains the inevitability and longer run salvation that is a Greek default.

Click link to read full article.

Dean Baker breaks down how British austerity policies have contributed to anemic growth that’s even weaker than the U.S.

To recap, austerity in the middle of an economic downturn or extremely weak growth makes both the economic situation worse and the deficit situation worse. How?

All spending = all income.

All deficits = all surpluses

These are basic accounting identities; there’s no way around them.

If the government sector pulls back demand by reducing spending during a time when the private sector is already not spending (high unemployment, household indebtedness), then of course growth will decline, as the data shows in the article. Those in the U.S. in both parties who want to reduce deficits and debt and spending are also basically calling to reduce income and growth. At present time, deficits should be the least of our concerns.

Let’s end with another accounting identity:

Private sector surplus = government deficit plus the foreign trade balance

Thoughts?

I think this is a good sign that provides perspective to broaden the debate about the changes in Hungary. Both the Polish Prime Minister Donald Tusk and the main opposition party leader in Poland, Jarosław Kaczyński, have written to the EU President Jose Baroso that the criticism of Hungary’s recent economic and financial laws have been too harsh, while cautioning that the recent talk of Hungary rolling back democracy is exaggerated. 

Before any Hungarian critics get upset with me, let me add that I too am concerned about the recent moves Orban’s government has made regarding freedom of speech and media censorship. I too would be mad.

Yet I think it’s important to note that the Orban government was elected democratically with a clear mandate from the people in 2010. Orban was not a newcomer to Hungarian politics, this is not like it was going to be a mystery what his attitudes and ideas were going to be. Therefore, he has more legitimacy to impose these measures than the awful farce that was forced on the Greek and Italian people this past Autumn. 

Specifically, both Papandreou and Berlosconi, two incompetent yet democratically elected leaders, dared to use seek referendum and electoral support for the austerity “aid” packages that were being floated around at the time, so that the Greek and Italian people might show actual support for austerity plans that would further crush their standard of living and increase unemployment. Instead, the elites of the EU Troika helped get both leaders ousted and replaced by unelected puppets.

If the Hungarian people are truly outraged about these new laws, they have an opportunity to vote against Orban and his Fidesz party in the next election. Maybe they will, but we’ll have to wait and see.

Regardless, the show of support for Hungary by Polish leaders helps show how complicated the situation is, which is not what the Western media and the EU would like us to see. They wish for us to see things only in black and white, that all of Orban’s policies are wrong and only EU dictates are right.

In my opinion, obviously as just an outsider, I think I’d largely agree with most of Orban’s economic and financial reforms, such as changing the mortgage exchange rates and reasserting control over the Hungarian Central bank, while I would hope that the new media laws are reversed. But that is for the Hungarian people, not Brussels, to decide.

Thoughts?