Niall Ferguson: Young should welcome austerity

There is absolutely nothing to stop the majority of the people on this planet from writing off all this debt and starting again…absolutely zero.

Less than 1% of the global population would be negatively affected by same.

It is this semi-mystical need on the part of those in positions of influence to appease the world of finance that is the real reason why democracy is being hollowed out to such an extent that if things continue in the current vein, it will eventually be discarded…and what will replace it may not be to everyones liking.

The real question is why our leaders feel so beholden to their masters in the markets and elsewhere? What is it that forces them to elevate concerns for financiers above concerns for their own electorates?

There is no logic to any of it…

Austerity increases youth unemployment
young should welcome unemployment
slow hand clap for Ferguson

Thats just the chosen policy.

Austerity could equally increase youth employment if governments sacked the over 50s instead of the under 25s.

Are you serious?
Write off the debts of the people who borrowed beyond their means to buy ‘assets’?
Would you have them retain ownership of those assets as well?

Because you have become dependant on them.
You need more money than you make.
You have decided to live beyond your means and not only do you want your debts ‘written off’ but you want to continue to live beyond your means.

These finance people act as a conduit for Eastern savers to invest their pensions/savings.
So lots of Mr Chengs and Mrs Yakamotos and Mr Stereo-Thai-pes have been working in a factory for 50 years and are part of the pension scheme.
They have a much lower standard of living than you (because they give you their savings, see?) and you suggest that no one would lose out if all the debt disappeared?

Magnificent point. What hold do Denis O’Brien, Dermot Desmond, Micheal Smurfitt, Tony O’Reilly et al have on successive Irish governments? The planning fiasco of the 80’s showed how little was needed to bribe a politician to fuck over his community and neighbours. Can it really be that national politicians will fuck over a whole country for the price of a McMansion in Kildare? Even Charlie & Bertie, the two most corrupt fucks ever to disgrace their office slated away what, a few million or so of unexplained political donations for personal use? Where’s their sense of perspective? If I was going to fuck a country over so that my name would be listed with the likes of Diarmaid McMurrough and Oliver Cromwell in centuries to come, I’d be doing it for more than the price of a lifetime of season tickets in Man Utd.

At least when politicians in Africa, Asia & Central America fuck over their countries, they steal literally everything that isn’t nailed down when they flee on the collapse of their regimes.

It’s the euro baby, the euro.

Your position assumes that no alternative is possible as well as implying that there is somehow an element of morality wrapped up in the notion of these debts being repaid etc… its a form of quasi-religious reasoning.

Rather than identifying the fact that a minority of Asian savers may lose out temporarily under such a reset, how about examining why it is that somebody in India or China is forced to work 12 to 14 hour factory days for 50 years simply to avoid starvation for themselves and their family in the first place?

Despite what they would have us believe, the world is not an organically developed/developing financial/economic eco-system. The economic and financial elements are mere contructs…as evidenced perfectly by events of the past four years in particular.

To maintain the majority of inhabitants of the globe in a state of relative (or absolute) poverty out of little more than a moralistic need on the part of wealthy Europeans and others who feel that it is their right to benefit from the folly of their neighbours is not sound thinking IMO.

When it is only a tiny number of people who would lose out by writing it all off anyway what say democracy to this question?

As it stands the system perpetuates misery…plus it is also is broke…we need a new one…

…and the following question still stands and will soon become the burning issue of the day IMO

I’m not sure if your post is a piss-take, clueless or entirely unhinged!

No. My post points out that your fantastical notion of writing off debts places the burden on some of the poorest people on the planet.
If thats ‘quasi-religious’ then, yeah, paint my arse blue and call me Jesus.

Its a rare sight to see someone take an simplistic analogy, irrelevant to the main point of the argument, produce a counter-argument and run with it. Fair fucks to ya.

You think?
Theres a whole area of study that looks into this kind of thing.
‘History’, I think its called.

I assume you mean the bankers.
The bankers only manage and distribute the money. Its not their money.
It belongs to ordinary people all over the world. Its not a tiny number.
Its a huge, gigantic number of people. All with pensions, savings, hopes and aspirations
If you think they are going to be peaceably fucked over to keep Irish consultants on 100k+ salaries, youre fucking deluded pal.

What would you do if you went to the bank and were told that your savings bond was empty because some Puerto Ricans wanted better street lights?
You’d tell em to go live in the dark; which is what austerity is telling you.
Its a big ‘Go Fuck Yourself’ from the rest of the world.

Because they are keeping you afloat.
Without them youre broke; instant 20% drop in everything.
The politicos are trying desperately to avoid this situation, the civil chaos and the personal loss you will undoubtedly feel.
Thats why.

You havent answered my question.
So you write off the debts of the people who borrowed beyond their means to buy ‘assets’.
Would you have them retain ownership of those assets?

The poor people of the planet have no skin in the game…non whatsoever…and its simply not true to imply that they do

I dont understand this. ‘Savings’ as they are understood the third world tend not to take the form of savings in the west. In many instances they exist in the form of jewellery, gold, land etc (and if they have such savings they are the rich - the rest simply dont have any). I dont think its accurate to say that writing off debts owed to bondholders/financiers in London or Frankfurt will necessarily impact in any way on someone living in the Indian “darkness”…and if it does (which I dont really accept) the extension of that would be, to my mind, further evidence that the whole system is a crock of shit pyramid scheme.

You’ve lost me here altogether.

Your assumptions about my motivations are wrong here. Im merely pointing out that “austerity” is bullshit on the basis that it is itself a defence of the system as it stands. And it is the system that has placed your Irish consultants on 100K plus because they are apparently worth it.

There is a lot of disenchantment on this site with what is perceived to be the failings of individuals who, to use the standard narrative, have gamed the system for their own ends, and in doing so have destroyed an otherwise worthy way of life. The feeling seems to be that if only good people could obtain positions of influence then all would be rosy.

However, there is very little analysis of why exactly it is that said system of life tends to consistently reward scumbags, cheats and liars. And I can certainly cite a broadstroke history reference in defence of that particular point.

And there is less analysis of the fact that said worthy way of life is predicated on the misery of those living beyond the borders of first world countries. You say their savings will be wiped out. I say they have fuckall saved (and therefore to lose) to begin with…

And my response to that is that without their meddling in the first instance, we wouldnt be in a position whereby we would be relying on them “to keep us afloat”.

Who the fuck are they to be holding sovereigns to ransom anyway? What percentage of the population of the globe do they represent? Theres more of us than there are of them…so essentially, fuck em…why not do whats best for the (vast) majority?

While this isnt really relevant to the point I was trying to make initially, my view is that under the current set of assumptions, of course they should not be allowed retain ownership of the assets (assuming the debt had been assumed in a lawful and proper manner).

However, my initial point referred to the fact that “austerity” is a sop to the world of finance which IMO caused the “crisis” to begin with, rather than being medicine for the presumed guilty. In Europe, this is (IMO) heralding the end of the democratic model under which most of us have lived our lives. What is happening in Greece is frightening and IMO is a snapshot of a beginning of what we can expect to see played out in other countries (maybe inclusive of Ireland) over the coming years.

Are we really going to sacrifice the fabric of European life in order to appease the financiers? As I stated above, IMO, not only is that madness in European political and societal terms but it would essentially be an exercise in defence of a system which maintains the majority of people of the globe in poverty.

Is it really that impossible to conceive of another way of doing things?

Debt is a construct/concept.

Do you really think that a decade of “austerity” (the real stuff as opposed to what has thus far been imposed in Ireland) is actually possible in real terms without an accompanying social catastrophe of one form or another?

Which is the preferred option between such a catastrophe and a realignment of some sort of the prevailing debt-soaked financial/economic system?

Or do you really believe that its all somehow going to be paid back?

Does the economy exist to serve the needs of humanity or the other way around?

The question, though, is do you think some sort of unknown realignment is possible without a social catastrophe either?

Is it better the catastrophe you know and can probably predict (and so mitigate) the worst effects?

We had two shot-in-the-dark world firsts - the bank guarantee and NAMA. Both are looking like disasters. To cope with the fallout of their shot-in-the-dark, Iceland has instituted capital controls and reinflated their property bubble. This, to me, is not progress. We would need to make sure that a new paradigm would be real progress and not some autarkichal step back to the middle ages.

I also don’t think you can separate savings from debt. Pensions (whether being drawn down already or not), small savings, large savings, investments, trust funds (not all tax dodges), endowments etc. All would be wiped out by a debt jubilee. As mentioned above, holders of assets, particularly those holding indebted assets would be the primary beneficiaries. The sort of gearing that a debt jubilee would mostly benefit is something that the rich already are. They would benefit most.

Fair points all Yogan and obviously I dont have an answer to the question posed in your first line.

Nontheless, its more likely that “events” will overtake and dictate long before lofty notions get any sort of look in.

Hopefully it wont take some sort of big war scenario to force the (inevitable) reset.


Suppose I borrow ten grand off you, representing your life’s savings. It’s all you’ve got to feed your family with, but you don’t need it right this minute and I’ve convinced you that I will repay you handsomely with interest.

When you come looking for it, I tell you “debt is a construct/concept – do you really believe it is somehow going to be paid back? Does the economy exist to serve the needs of humanity or the other way around?”.

What would you do? Would you say “Yeah, you’re right, it’s just a concept. Forget about it so.”

… or would you punch my fuckin’ lights out, auction off my organs, and sell my children into slavery?

You are so behind the curve…

You did not lend the 10K. You repo’ed a pool of bonds for the 10K. The bonds were supposed to be worth 11k but it turns out they are now really only worth 5K…

So do you want to liquidate now and lose 5K? Or does the government underwrite a 5k bond to make up the difference with austerity the cost of covering the bond?

Pretty much all the current debt could be shunted onto the central banks balance sheet and then made disappear. The only real cost would be the cost of the coupon as the debt was allowed to run out over a decade or two. The problem with this is currencies only work as long as people believe they have some trading value. Magic away $7 trillion of debt and people might start asking awkward questions about modern currencies. So they try to drag out the process as long as possible to hind the fact that the cost of trillions of dollars worth of consumption over the last decade or two is made to slowly disappear through accounting slights of hand. Time will fix the financial mess. It always does. Its the political mess that tends to be intractable and which causes all the grief.

I know little about this stuff … but that sounds like gobbledygook.

He’s basically right. Governments can’t inflate too quickly because the savers (i.e. old people, the only ones that bother to vote) won’t vote for them any more. So, softly softly is the way they’re doing it, so the oldies don’t notice their savings are being gradually depleted and whittled away.

We’re still living in the shadows of that dratted man Keynes.

But hang on. How does the government do that? By lowering interest rates, yes? Lower rates stimulate the economy, and the increase in money chasing goods causes the necessary inflation. But how does this apply to Ireland? We don’t have control over interest rates. The only interest rates we know about are the ones we are paying on our loans, which are substantially higher than the ECB base rate. And there’s no increase in the local money supply because it’s disappearing into the black holes of the banks who still aren’t lending. So we have the austerity but no stimulus and no inflation. To go down the route you are talking about, someone would have to agree to whittle away German pensions to defray Irish debt. How’s that going to work? (I said, and I admit, I know little about this … but not zero!).

It does not apply so much to Ireland because Ireland is irrelevant in the bigger scheme of thing. But it most definitely applies to Germany, France, Italy etc in the bigger scheme of things. Ireland was not so much fucked financially by the unsustainable ramp up of expenditure during the bubble years but by the bank guarantee and the debts of its failed banking system being thrown onto the national debt. In the interim a large chunk of this has been shunted onto the balance sheet of the ECB’s and the Irish Central Bank. I think this months numbers are 120B and 35B. So if the Irish government play their hand adroitly during any mayhem after a collapse of the euro they could end up defacto jettisoning most of this debt. A 20% write down, a 1 to 1 conversion into the new currency before a deprecation of 30% in said currency and a balloon payback schedule in very long bonds. That sort of thing. Thats how you make 100B of debt effectively go away. This is how they did it several time with South American sovereign debt back in the 80’s.

As for who owes what? The debt financed past consumption. So that money is gone. So creating new money to fill any holes left by the deficit will not cause inflation. Not if handled correctly. As long as leverage is strictly controlled the only new money added to the financial system is the money paid in interest on the bonds. So its a zero sum game as long as that money displaces other government expenditure. And the German pension money? Any holes filled with bubble bonds will have a lower yield but as the money will be paid out over an extended period of time there should be little stress on the system.

So from a purely financial point of view some kind of mutualized eurobonds, which effectively make the debts go away, makes perfects sense. Its the politics which make it impossible. First because it will not fix the underlying reasons which caused the problem in the first place. Secondly the electorates in the well behaved countries will not sanction paying for the spendthrifts. And thirdly, none of the major players will sign off on the complete loss of sovereignty necessary to make eurobonds work.

Keynesian policy hasn’t been around in any meaningful form since the late 70s, its Neo liberalism that is the problem.

Neo liberalism has delivered rising income inequality, unfettered privatisation that delivers power into the hands of corporations and debases the power of the vote and the deregulation of banks through fractional reserve banking in a system that is predicated on getting people into debt and charging them for it.

Unfortunately were all doomed to follow this system, society precedes the individual, you can’t simply go your own way. We can only hope that a government for the people can deliver some type of reform though I doubt it .I suggest you click on the links to learn more