Austerity Is 'Complete Horsesh*t': Ivy League Prof Dismantles the Conservative Lie
http://www.alternet.org/economy/austerity-complete-horsesht-ivy-league-prof-dismantles-conservative-lie
And this is why Brown University professor Mark Blyths book Austerity: The History of a Dangerous Idea, released in paperback last month, remains such necessary reading. Simultaneously functioning as an economics explainer, a merciless polemic, and a penetrating history, Blyths book offers a clear insight into austeritys lineage, its theories, its champions and its failures. Recently, Salon spoke over the phone with Blyth about the book as well as the U.S. economy and the future of Europe. Our conversation is below and has been edited for clarity and length.
So, first off, I have to say that the book was a much funnier, feistier read than Id expected, considering the subject.
[Laughs] I try to find the humor in death and gloom, yes.
In the introduction, you say austerity is an offensive canard. Can you tell me what you meant by that?
Canard, trope, truism, call it what you will. Its one of those wonderful well, it stands to reason that, common-sense sort of tropes. The problem is, it fails because its not a common-sense argument. If there is a single insight that deserves the title of the key insight of macroeconomics, its the one that the whole is different from the sum of its parts. While it makes sense for anyone, family or firm or even state, to try and reduce its debts in order to grow better, if everybody tries it at the same time it becomes self-defeating. You need income from which to save, so if everybody tries to save at once nobodys generating any income and therefore the project becomes self-defeating
The common sense is, well, the more you cut the more youll be rewarded. No, I say the more you cut the more debt you end up with. Thats what I mean by being a canard, a trope. its one of those common-sensical things that seems to be true but just look at the evidence and youll find that the reverse is actually true.
Why is it something that you find offensive? What is it about austerity that you take personally?
Part of it is because what I think the financial crisis is best seen as and were still dealing with the aftermath of it, whether we like it or not is that theres a class-specific put option. Let me explain what I mean by this: A put option is a contract thats very common in finance where essentially someone is selling insurance and the other person is taking the income for payments. At some point, they get to basically cash in the put. One way to think about this is, Europes been expanding up to the borders of Russia and theres a country called Ukraine, and, essentially, that means that Europe is writing a put option, which Ukraine has now decided to cash in. Which is why, basically, Europes now on the hook for all the crap that is Ukraine. Thats a put option contract.