Austerity Comes to America

Zero Hedge covers the cracks appearing in the economic landscape that are giving credence to the "austerity" crowd -

...a new study produced by National League of Cities, the U.S. Conference of Mayors and the National Association of Counties titled simply enough: "Local Governments Cutting Jobs and Services: Job losses projected to approach 500,000", showed local governments moved to cut the equivalent of 8.6 percent of their workforces from 2009 to 2011.

As a result of local government cutbacks, almost 500,000 people will lose their jobs, and the total will likely rise. The summary of the report attached below, is particularly grim: "Over the next two years, local tax bases will likely suffer from depressed property values, hard-hit household incomes and declining consumer spending. Further, reported state budget shortfalls for 2010 to 2012 exceeding $400 billion will pose a significant threat to funding for local government programs.

And in the dollar going belly up predictions...

The $38 billion in 2 Year Bonds just auctioned off at a 0.665% high yield, the lowest yield for a 2 Year primary issue. The bid to cover came in at 3.33, compared to 3.45 previously, and 3.15 average. Indirect participation plunged to 32.8%,compared to 41.41% previously. As the directs took down "just" 13.5%, the Primary Dealers ended up taking down a majority of the $38 billion bond auction, or 53.7%. The recycling of cheap Fed money has now fully arrived, and with an Discount Window to 2 year arb of 0.4% (0.66% - 0.25%), it shows just how bad things must be for the PDs. (Emphasis mine)

The Real Effect
As we covered in our States Belly Up series and examined in June, the term "austerity" is about to re-enter the American lexicon in a very big way. Of course, when dealing with complex and convoluted issues, we need to take definitions of our words and ideas into account. For instance, the term cool can mean -

1. moderately cold; neither warm nor cold: a rather cool evening.
2. socially adept: It's not cool to arrive at a party too early.

Now that we realize the variances in terminology, it would be prudent to familiarize ourselves with exactly what the term austerity will mean for you in the future. Definition:

1. the state or quality of being austere
2. reduced availability of luxuries and consumer goods, esp when brought about by government policy

For simplicity's sake, we shall examine definition two. Given the above definition, one would infer that when an individual, specifically when a politician is discussing austerity, that he is referring to a curtailing of government spending. However, what is important is not the definition of the word per se, but more importantly it is the subject of the austerity which then goes on to define the word.

For instance, government policy could dictate that austerity would mean that teachers in the Detroit school system take a 5% pay cut. This is the definition of the word as described in our example above and coincidentally is the type of austerity that I recommend as it cuts the amount of the government's expenditures thereby lowering the demand placed on taxpayers.

On the flip side, austerity could (incorrectly) be defined as cuts in the living standards of the populace in order to support the largess that the bureaucrats have grown accustomed to. In our Detroit example, instead of the the teachers taking a pay cut, the taxpayers are expected to foot the bill via a property tax increase.

Further, this concept of austerity becomes particularly devious when combined with the concept of "social responsibility" creating the conditions of fascism. In this situation, subjects of austerity are selectively chosen at the exclusion of others. For example, the Detroit school board in dealing with it's proposed 5% pay cut for teachers invokes social responsibility, in order to strong arm the populace into tolerating their own austerity in the aforementioned form of a property tax increase. We can also see this in play in the 2008 concept of "To Big to Fail" in which fraudulently "sound" institutions bankrupted and then utilized the long brutal arm of government to delay the inevitable.

This logic also applies over large geographical areas as well as the elite define national austerity. For instance, much of the increase in energy prices is due to "peak oil" and "green" government policies which drives up the cost of commodities. In addition, the Fed's current "Zero Interest Rate Policy" or ZIRP could also be viewed as an austerity measure over time. (To holders of long term treasury debt).

Irregardless of the specific subject of austerity, from government's perspective, the one who will always pay is the taxpayer. The bourgeoisie view the populace at large as a resource to be harvested and culled as needed in order that they can continue to "do God's work." To the career politician, the only job is convincing the subjects to go along with the haircut and indeed this is exactly how we have arrived at the abysmal conditions that we are subject to today.

It is to this end that we see the hyper increase of scanners, trackers, cages and measuring devices invading every nook, cranny and orifice of our being while slowly being removed from the realm of the elite. They argue that their work is special and sensitive while we cannot be trusted to our own devices lest we accidentally hurt ourselves. It is these concepts implemented in baby steps over time that you end up with tyranny.