Tuesday 27 July 2010

Is Austerity the Road to Ruin

My latest paper for GMO: Is Austerity the Road to Ruin can be found here:

Very interesting response to this paper, I have rarely been called a moron more often.
Others have accused me of talking my book, presumably wanting QEII to drive the markets higher, frankly given the stocks we own the last thing we want is yet more speculative demand for junky stocks!


Anonymous said...

Why do I have to sign up on scribd to be able to get this piece in a readable form?

Anonymous said...

Yes - Sribd is a nightmare to use!

Anonymous said...

I agree that austerity is not a good idea. I disagree with Romer's points in relation to the current crisis, however. Financial recovery and economic recovery are not the same thing these days, because finance has lost its relationship to the real economy in my estimation.

I think that austerity in the real economy has already been imposed.

Unknown said...

I only skimmed the article. You know what? I ain't buying it. In the olden days, it used to be that profligacy was the road to ruin. Not these days, no. Turns out that austerity is now a vice.

I guess we another Great Depression to sort our thinking out.

I don't buy the argument about bees. If we have a lower income, then in one sense it doesn't matter - we're buying less stuff anyway, so we don't need as much.

As Peter Lynch wryly observed: if all the economists in the world were laid end to end, then that wouldn't be a bad thing.

A pox on economists with their fancy graphs and arguments! Economics should be a matter of just common sense. Spend less than you earn, and put money aside for a rainy day. Everything else is just tinsel.

I read recently that the average per capita public debt in the UK £200,000. The median income in 2007/8 was £18,500. That's a monstrous ratio of debt to income. MONSTROUS! And yet, apparently the solution is to SPEND MORE. SHEER LUNACY!

Gary said...

Dear Sir,
Although I disagree with some of your comments on austerity (or the lack there of), I really can't feel confident that you are incorrect.

However, as a scientist, I can tell you that your comments on global warming are total balderdash and ignorance! First there is no "consensus" of scientists. Only a small cabal of academics whose income and prestige rests on the support of governments and NGO's determined to use "global warming" as the pretext for enormous taxes and social engineering that suits their political beliefs support global warming alarmism. Unfortunately, these miscreats control the organizations (funded exclusively by the governments and NGO's who want to use fear's of global warming for their own purposes) that are seen as the authorities on climate science.
None of the "facts" you cited are facts. Most are assertions based on little or no science and a handful of "peer reviewed" articles whose accuracy have been challenged repeatedly, but futilely, because all the money and power is on the other side. For example, only one (yes one) article was used as a basis for the IPCC assertion that variations in the Sun's output has minimal effect on climate. The data used to support that single paper was distorted by the authors (an assertion made by the scientists responsible for collected that data from satelites) and the entire remainder of the scientific literature on the subject was ignored--because it did not fit the government's desired narrative to support trillions in energy taxes.
Opining that fighting the "oil and coal" lobby is difficult and ignoring the environmental and government taxation lobby's enormous resources is ludicrous. The entire academic scientific establishment is totally funded by the government. If you think that they are independant and able to publish any conclusions not acceptable to governemnt "official position" you are delusional.
Please continue to comment on markets and economic matters, but don't embarass yourself by parroting as "facts" the discredited lies of (well funded)governmental science hacks. Consensus in science (as in economics) is most often a lie that supports the policies of the people paying the scientists (or economists) wages--in this case the government.
If you want to have opinions on science, educate yourself by studying the underlying disciplines (in this case, physics) and read widely, not just the "official" science. For almost a century, the genetics taught in the USSR was "Lamarkian" (i.e. inherited acquired characteristics) rather than Darwinian evolution and Mendelian genetics. Russian biologists went along (although most knew it was bunk) because they otherwise lost their jobs. The same thing is going on now in climate "science" throughout the world. Eventually, the hoax will be exposed. However, currently, despite brave efforts by independant scientists to really examine the data and have a truly scientific debate on the limits of knowledge and alternate explainations for observed data, the government backed cabal of global warming alarmist continues to distort what is known and suppress any conflicting information in an effort to use science to support pre-determined political and social policies. Don't be a tool!

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james_lopez said...

For all new to Montier here is a brief bio-James Montier is an individual from GMO's benefit allotment group. Before that, he was the co-Head of Global Strategy at Société Générale and has been the top of the line strategist in the yearly Thomson Extel review for the majority of the most recent decade. Montier is the writer of four business sector driving books,Behavioural Finance: Insights into Irrational Minds and Markets,Behavioural Investing: A Practitioners Guide to Applying Behavioral Finance, andValue Investing: Tools and Techniques for Intelligent Investment,The Little Book of Behavioral Investing: How not to be the cause all your own problems Tools and Techniques for Intelligent Investment.

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