Guest Post: Why Austerity Is Triggering a Crisis

Monday, January 7, 2013
By Paul Martin

by Charles Hugh-Smith
ZeroHedge.com
01/07/2013

In economies dependent on ever-rising consumption, austerity had a negative connotation even before its politically charged meaning commandeered the public debate. When the entire Status Quo depends on discretionary consumption not just for “growth” but for its survival, austerity is welcomed with approximately the same enthusiasm Superman reserves for Kryptonite. This is of course a contradiction: an economy based not just on consumption of all net income but debt-based consumption is an economy devoid of savings, i.e. capital to invest in productive assets. An economy without capital is lacking a key component of classic capitalism. The loss of resilience and cost sensitivity has consequences. We have created an economy with an extremely high cost-basis, and as a result it is brittle, fragile and vulnerable to even modest “austerity.”

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