Will Austerity Be The Catalyst For War?

Friday, July 2, 2010
By Paul Martin

by Tyler Durden
ZeroHedge.com
07/02/2010

As always SocGen’s Dylan Grice comes out with some tremendous insights in his latest weekly piece “Double dips, siren calls and inflationary bias of policy.” While the gist of the piece is presenting a comprehensive overview of the traditional and cognitive biases toward inflationary policies and away from hard, unpopular, deflationary/austere measures, Dylan provides a chilling anecdote involving the 1980s conflict between the UK and Argentina, in which it was precisely war that pulled an extremely unpopular government, that of Maggie Thatcher, out of the gutter of public opinion, and soaring in popularity. Thatcher, who came to power oddly enough on a “mandate to smash inflation, smash the unions and downsize government”, saw her popularity immediately slide to 25% (see chart) as people realized the very real pain associated with austerity and a regime fighting run away government. A tangent in Grice’s argument is that on very rare occasions, the people of a country do end up making the decision to take on hardship, instead of kicking the can down the road (are you listening Summers?). Yet they promptly grow to regret their decision. So what was it that saved the government, and allowed the Conservatives a second term in which to complete the painful austerity project? The declaration of war by Argentina’s General Galtieri over the Falkland Islands. The result was soaring popularity for the Iron Lady, and the rest is history. Looking forward, now that all of Europe is gripped in austerity, and make no mistake – this very same austerity is coming to the US on very short notice (sorry Krugman), and popularity ratings for all political parties are crashing, has the political G-8/20 elite been focused a little too much on the Falkland war? Is war precisely the diversion that Europe and soon America hope to use in order to deflect anger from policies such as Schwarzenegger’s imposition of minimum wage salaries yesterday (yes, this is pure austerity)? And is there a Gallup or some other polling “unpopularity” threshold that the G-20 is waiting for before letting all those aircraft carriers parked next to the Persian Guld loose? Read the below excerpt from Dylan and make up your own minds.

From SocGen’s Dylan Grice

The Rest…HERE

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