Ireland's Bailout Is Ending, But Its People Will Suffer From Austerity For Years To Come - by Alan Pyke

Ireland will become the first bailed-out European country to officially conclude its financial rescue program this weekend, but the hardship brought about by the massive spending cuts imposed by the European authorities that lent Ireland that money will take years to fade.

The $92.9 billion loan package came with austerity requirements that forced the Irish government to cut about $41.2 billion in spending — an amount equal to about one-fifth of the country’s entire annual economic output, the New York Times notes. “New taxes were introduced. Salaries for public employees were cut by around 20 percent, and reductions in unemployment and welfare benefits followed,” the author writes, in a program that amounted to nearly $14,000 in cuts per person nationwide. Another $3.4 billion in austerity measures are on tap for 2014 in order to keep the financial markets happy enough to keep buying Ireland’s debt without bailout assistance.

After all of that, unemployment is still at 12.8 percent for the whole country and 28 percent for young people. The vast majority of the unemployed have been out of work for more than a year. Homelessness has spiked by 20 percent since 2010. One study found that two-thirds of Ireland’s families can’t pay their bills or buy the basic necessities of life. Small business loans are defaulting at a very high rate. Children are more likely to live in a household where neither parent works in Ireland than anywhere else in Europe. More than 18 percent of all homeowners in the country have missed a mortgage payment in 2013.

Economic pain from austerity has become the norm in much of Europe. Unemployment has remained at record highs for months across the 17-member Euro currency zone and is projected to remain at or near record levels throughout 2014. An economist at the European Commission, one of the major governing bodies in charge of issuing bailouts, recently published research demonstrating that the Commission’s austerity programs have exacerbated economic hardship to a far greater degree than the group previously thought.

That work reflects the broad consensus among economists that austerity does more harm than good.

The country earned praise from American conservatives for adopting supply side economic policies, primarily massive tax cuts. For years, Ireland grew very rapidly and conservatives held up the so-called “Celtic Tiger” as proof that their ideas work. But Ireland’s growth proved to be a mirage rather than a durable system — the country had made itself a corporate tax haven without building a sustainable system for core economic growth and employment — and the country went bankrupt in 2010.

The ensuing bailout is coming to a technical end this weekend, but austerity will continue to cast long shadows over the average Irish person’s economic wellbeing for years to come.

Read more: Ireland's Bailout Is Ending, But Its People Will Suffer From Austerity For Years To Come

Supply-side economics does not work

US Political environment: Obama bashing seems to be the only thing US right-wingers can come up with. In the 9 months that the Republican majority in Congress has been in power they themselves have not come up with anything constructive or bi-partisan on the economy, job creation, alternative energy ,or the environment, apart from presenting some "rehashed" existing conservative programs.

US economy: the Anglo-Saxon controlled financial and popular press - Wall Street Journal, Fox News - the Sun - the Telegraph etc - most of them owned by Rupert Murdoch and his cohorts - now blame Europe for all the economic problems the US is experiencing. Basically these "pundits" are feeding the people a lot of delusions and hogwash, instead of constructive and factual journalism. But as the saying goes; "keep telling a lie and eventually people will start to believe it". This they do very well.

The Problem: the worlds economic&problems should really be pinned on supply-side economics. The supply-side theory popularized by Republican Icon Ronald Reagan and British Iron Lady Margaret Thatcher, held that cutting taxes would lead to a great thrust of economic energy - and a rush of revenue into federal accounts that would replace the drain from the tax cuts themselves. Not true. The facts show that revenues as a percentage of the nation's gross domestic product declined from 19.6 percent when Reagan was inaugurated to 18.3 percent when he left Washington. Even among the influential and multi-partisan American Economics Association, which has close to 18,000 members, not more than about 10 call themselves supply-side economists.

In American universities there is no major department that is called "supply-side", and there is no supply-side economist at any major US university department. This is significant, because  academia in the 70s was dominated by conservative economic theory, and conservative economists normally welcome all ideas that make the case against government intervention. The fact that conservatives scrutinized supply-side theory and rejected it wholesale shows that supply-side economics has very little credibility.

Following Clintons inauguration Republican predictions forecast that his tax hike included in the 1993 deficit-reduction package would bring on an economic Armageddon? ( sounds familiar?) Looking back it would seem that the 21 million jobs added to payrolls during the Clinton era showed they were very wrong on that prediction.

Supply-side economics has not worked and never will, but conservative politicians are at it again. Unfortunately, this time the risks are far greater, and again, it won't work.

EU-Digest

Asia Times Online : Bubbles, risk, crunch and war - by Cyrus Bina and Fernando Dachevsky

For the complete report from the Asia Times Online click on this link

Bubbles, risk, crunch and war - by Cyrus Bina and Fernando Dachevsky

Cyrus Bina, distinguished research professor of economics at the University of Minnesota and author of The Economics of the Oil Crisis, discusses with Argentinean journalist Fernando Dachevsky the "unique and universal" economic crisis confronting the world, from its underlying causes to the "practical joke" solutions offered to the oil crisis by President George W Bush and Republican presidential candidate John McCain.

The fallacy of supply-side economics and the myth of self-correcting markets, therefore, culminated in idealism of benign neglect and the straight-jacket practice of neo-liberal ideology. The resultant speculative bubbles in the US real estate, mortgage institutions, collateralized debt market, asset-backed commercial paper market, and debt-obligation insurance market sequentially burst in the face of US authorities, before they hit the public and surpassed the boundaries of the United States - via the transnational channels.

The European Union is now trying to deal with the aftereffect of the US financial debacle. European banks attempted to write down more than US$200 billion of debt obligation, following the US mortgage defaults, thus revealing the tiny tip of the liquidity crisis in view of tight credit market. To date, the write-downs for a few major banks in Germany and Switzerland are some $23 billion, and they certainly will increase by the time the dust settles.

New Statesman - US Economy : Supply Side Economics - Cooking the books - by Johann Hari

For the complete report from the New Statesman click on this link

World Economy : Supply Side Economics - Cooking the books - by Johann Hari

In the mid-1970s, a group of men who were untrained in economics - and, as it happens, borderline-insane - emerged in Washington DC and invented a whole new approach to economics. In the past, it had been thought that if you wanted to cut taxes, you had to ploddingly pay for it by either cutting spending or increasing borrowing. No more. This new group preached something called "supply-side economics", which claimed that you could cut taxes, increase public spending, and hold down borrowing and inflation, all at the same time. It's easy, they said: if you cut taxes, the economy will grow even faster - and make up the difference.

The story of the supply-siders' strange rise begins when three grey-suited men met in a swish Washington hotel in the gloomy aftermath of Watergate to turn this untested idea into a governing philosophy. They were the economic consultant Arthur Laffer, the journalist Jude Wanniski and Gerald Ford's chief of staff - a man called Dick Cheney. The core principle is that economic performance hinges almost entirely on how much incentive investors and entrepreneurs have to attain more wealth, and this incentive in turn hinges almost entirely on their tax rate." It was an economic recipe for tax cuts for the rich.

Almost everyone else saw the idea as preposterous. George Bush Sr dismissed it as "voodoo economics". But a string of eccentrics, with no serious knowledge of economics, began to preach the gospel - and they were swiftly employed by Ronald Reagan's burgeoning presidential campaign. Most of these men were, it turned out, mad.