Austerity Good or Bad?

Source: Austerity Good or Bad? by Martin Armstrong, Armstrong Economics

I highly respect Mr. Armstrong and look forward to his posts.  My concern with his view on austerity is as follows:

He treats austerity as if it were something to be avoided.  Here are my thoughts on austerity.  No one that was responsible, in any way, for running their country into the ground deserves any sympathy or special treatment from anyone.  If a person worked in a company that spent itself into oblivion, there would be no pensions forthcoming either.  Public sector workers and, in general, transfer recipients should be no different.  And, people lose money on investments every day.  There is no reason why sovereign debts cannot be repudiated or restructured.  Mr. Armstrong’s “solution” is to inject what is essentially a new currency into the system.  All sovereign debt is to be replaced by a limited-use currency for investment only (as I understand it).  Why should people that did not invest into worthless government debt be punished?  Answer, they shouldn’t.  By having to compete for future investments with people that made poor choices, this is exactly the outcome.  I do agree that governments should not be “hunting down the rich”.  Repudiation or massive restructuring will accomplish the same.

As for the rioters, they are mostly people on the public teat and do not want to see the special privileges they have carved out for themselves taken away.  If you are the one paying their bills, you certainly are not going to be rioting.  If you are unemployed, hang tight while the creditors and the transfer recipients are hollowed out.  When the dust settles your economy will be so stinking competitive, you will have multiple job offers.

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