The Banking and Strategy Initiative

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Debt Deal: Backloading the austerity, the spending is still intact

Spending on U.S. healthcare as a percentage of...

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(Bloomberg) The debt deal would reduce government outlays by $21 billion in the fiscal year that begins Oct. 1 and by $42 billion in the following year, according to an analysis by the Congressional Budget Office.

However public sector unemployment has already been triggered and cannot be stopped from growing as the government cannot afford its own programs..

 Job-creation efforts already have been hampered by cutbacks in the public sector. Since May 2010, total government employment has dropped by 916,000 jobs, according to Labor Department data.

Add to that the latesdt Chicago PMI highlighted at 58 has been falling from near 70 hree quarters ago and the increase in housing starts in June could not even cover the dip in May, the increasing state debt and keeping the GDP positive becomes the challenge despite the new deal.

But, proligate spending was definitely not the answer in tha we have already pent the extra we need to retrieve

Creditors have welcomed the austerity measures. The yield on the U.K.’s 10-year bond has fallen to 2.8 percent from 3.85 percent on May 12, 2010, when the coalition government was formed, today.

George Magnus, senior economic adviser to UBS Investment Bank in London, said the fiscal retrenchment has established the government’s credibility.

But the economy has grown at 0.2% and 0.5% in the last two quarters in the UK. Trust me, austerity means biting the bullet and becoming unemployed for most still in a job as 17% of the USA is unemployed adding part employed and tired of looking adults to the 9% unemployment rate.

Once again, consumption spending is fairly strong and world beaters like Apple and Amazon have grown in the mainland economy. The ones that are growing have historically provided lesser jobs at the outbreak and paid lesser taxes, which is just the incentive to win. The economy therefore will have to digest the job losses at Cisco and others, and the 20,000 odd banking jobs being lost in the USA even as jobs being dull in Asia still means banks and larger corporations are hiring. That imbalance does not have prior lessons from previous depressions for anyone and the US will have to chart its own course believing in Progress and Change.

Especially there is no leading correlation nor any significant positive correlation between the housing supply and the jobs problems even over the next 10 years and we have known for ears that we will discuss cutting social security one day.

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One comment on “Debt Deal: Backloading the austerity, the spending is still intact

  1. Randell Schrom
    September 14, 2011

    Hi, Nice website. Some truly wonderful posts on this site, thank you for contribution.


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