Wednesday, December 14, 2011

Happy Holidays: All Signs Point to Chaos, MSN Money Report Says

The bitter pill of austerity can't last, either here in the U.S. nor in Euroland, says this analysis from MSN Money.  Instead, so goes the argument, all this austerity leads to one consequence: Social unrest which in turn leads to a broader chaos and political upheaval,




Here are some relevant portions from the article (in particular citing some academic work in the area):
"Jacopo Ponticelli and Hans-Joachim Voth of Universitat Pompeu Fabra in Barcelona, have studied the social impact of government budget cuts in Europe since 1919. They found that "austerity has tended to go hand in hand with politically motivated violence and social instability" and revealed a strong link between the severity of budget austerity and the level of popular discontent.
They used this data to create a chaos metric representing the sum of events including assassinations, attempted revolutions, strikes, riots and demonstrations that occur per year.
The evidence finds that the deeper the budget cuts, the more severe the chaos. And deeper budget cuts certainly lie in Europe's future -- and eventually, the United States', too. We've had only a taste of these events thus far; Europe has seen most of them.
Demonstrations against the official response to the eurozone debt crisis -- including dramatic public-sector layoffs, retirement age increases and emergency property taxes tied to electric bills, among other things -- have helped topple the governments of Portugal and Ireland, brought new leadership into power in Spain and resulted in the installation of unelected technocrats in Greece and Italy.
Why? Because history hinges on protests like these -- protests spurred by economic weakness made worse by budget austerity, higher taxes and lost benefits.


Bread riots, combined with corruption, massive government debt and increased taxation, resulted in the French Revolution and the loss of King Louis XVI's head. American patriots fought for independence after the imposition of harsh new taxes on things like tea. And Adolf Hitler's rise to power was birthed by the turmoil and hardship created by the Great Depression, the gold standard's tight money and Germany's insistence on austerity to pay its World War I debts."


http://money.msn.com/investing/why-all-signs-point-to-chaos-mirhaydari.aspx

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