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Economyths 1 (not the book)

November 21, 2011

So I'm stuck in hospital, and want to do something useful with my time for Occupy Sheffield.

It has become increasingly clear over the last two years that simple to understand economic information is very difficult to find. I recently read an absolutely fantastic kindle book by Mehdi Hasan called The Debt Delusion. It's brilliant, cheap, short and very easy to understand, and you should all buy it now!

I'm going to pull out some quotes and stuff for people to use on site. But seriously, everyone should buy this book.

Okay, the first delusion Hasan confronts is that of government debt being in any way comparable to private debt. Deficit hawks like to compare household and government budgets, because we understand household budgets, but they're very different.

In essence, the differences arise from income. Most households have a fixed income, so when they get into debt, the only way out is to reduce spending. Government income is tax revenue, and that varies depending on how much money is circulating. The more people are buying, the more money the government gets.

I'll type out two quotes here, one from the book, and one from an article Hasan refers to.

"There are two possible explainations for [David] Cameron's reference to a 'maxed out' credit card. The first is that our Prime Minister is well aware of how … irrelevant this particular analogy is, but sees it as a useful propaganda device. If that is the case, he should be ashamed of himself for deliberately and repeatedly misleading the British public on an issue of such significance.
"The second explaination, however, is that Cameron is convinced that the economy of the UK is akin to a credit card held by an ordinary individual. If that is the case, then it is difficult to disagree with the verdict of economist and academic David Blanchflower: 'Cameron is an economic simpleton.'" (Mehdi Hasan, The Debt Delusion, 2011)

"The economy can [only] avoid taking a hit from government cuts … if private spending rises to fill the gap – and although you rarely hear the austerians admitting this, the only way that can happen is if people take on more [private] debt." Paul Krugman (Nobel Prize-winning economist), 'Austerity Games, Here and There', New York Times, 30 March 2011.

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