Friday, April 27, 2012

Has the Jury Reached Its Verdict?

The hypothesis: austerity now will increase growth rates because businesses will invest because they will be confident that interest rates (or inflation, or something) will remain low.

The counter-hypothesis: austerity now will reduce growth rates (which can go below zero) because the government will spend less and tax more, which will cause businesses to be uncertain about having enough demand for their products, and thus to hold off on investments.

The test: austerity.

The results: Austerity has reduced growth because the government is spending less and taxing more, which has left business uncertain if they will have enough demand for their products and causing them to hold off on investments.

The verdict: suck it, austerians.

No comments: