Self-fulfilling austerity

Self-fulfilling austerity

by digby

Consumer confidence has dropped to a three year low. Fed Chairman Bernanke spoke this morning and said this:

"Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation, including the recent downgrade of the U.S. long-term credit rating by one of the major rating agencies and the controversy concerning the raising of the U.S. federal debt ceiling," Bernanke said.

"It is difficult to judge by how much these developments have affected economic activity thus far, but there seems little doubt that they have hurt household and business confidence and that they pose ongoing risks to growth," he added.

Perhaps he's right. Everyone's always talking about a lack of "confidence" and "uncertainty" as being the reasons growth is so sluggish. How about the fact that more than 10% of the nation's workers can't find enough work? And how about the fact that at the same time, "consumers" (otherwise known as citizens) are being pounded, day after day, with the notion that the nation's debt is so crippling that they are going to have to basically live like animals if they suffer the least little setback? Does it occur to anyone that these non-stop discussions of a "debt crisis", at a time of great financial insecurity in the present, are a self-fulfilling prophesy?

I'm not arguing for happy talk. But the entire public conversation over the past year has been dominated by this hand wringing and fear mongering over the deficit, with endless rending of garments over the need for "sacrifice" as if our financial doom was imminent. Why would any person of average means take a financial risk at a time like this? Our leaders all seem to believe that collapse is imminent unless every last person relinquishes their financial security in some measurable way, so common sense dictates that people hunker down and hope the storm passes them by.

Confidence? You'd be a fool to have confidence in the future. According to all of our most sagacious national commentators, the best case scenario is that our political leaders get past their minor differences on the scope of the cutting and come together to destroy the safety net. If they don't, well ... apparently it will be very, very bad.

Uncertainty? Average people don't have uncertainty. As far as they are concerned they're screwed no matter what happens. Our leadership demands that people buy into the silly notion that giving up their personal financial security is a patriotic duty and that high unemployment and underwater mortgages are niggling little problems that will be solved by putting more of their "skin in the game."

But the rubes aren't buying it. They're frozen, hoping against hope that this is all a bad dream and they'll wake up in a country with sane leaders who aren't inexplicably obsessed with inflicting increasing amounts of pain on its people while lying prostrate before the filthy rich, babbling incoherently about austerity. And who can blame them? If you listen to our elite leadership, the American Dream is a ridiculous artifact of another time. It's every man for himself.


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