Is Austerity a “Recipe for Disaster”?

posted by Nima

December 26, 2010 · Posted in General Economics 

Let’s say you are stranded on an island for a week and you climb trees every day to pick up and eat coconuts, and also set aside one coconut a day.

Then over the course of the next week you don’t climb trees at all and just eat 7 out of 7 coconuts that you have stored up.

So the next week you have none left. So now you need to do with fewer coconuts during that week (=austerity) and climb some trees again (=work) to get some more.

Is it a recipe for disaster for that week to have no coconuts left to consume? Maybe it is. But the question is meaningless …

Is there anything you can do about it other than consume less and work more (= generate savings) again?

When you jump off a cliff, is the existence of gravity a recipe for disaster? Sure it is. Is there anything else you can do other than take the fall?

When you are shot in the foot and the infection is about to creep up your leg, is that a recipe for disaster? You bet it is. Is there an option to keep your leg without amputating the foot?

Unfortunately, in any of those cases, you’re SOL, my friend … and you need to accept reality in case you care to try and make the best of it.

The good news is … falling off a cliff is a lot worse than restoring discipline and prudence in your financial dealings. =)

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Comments

5 Responses to “Is Austerity a “Recipe for Disaster”?”

  1. The Arthurian on December 26th, 2010 5:12 am

    The coconut analysis is different when money is involved. There is then more to the story than industriousness and gluttony. There is the chance that there is too much money, or too little, or that people use credit for money, which creates cost problems for the entire economy.

  2. Nima on December 26th, 2010 5:25 am

    So when money is involved, you won’t have to consume less and work more after draining your entire savings account? That would be magical indeed … =)

  3. The Arthurian on December 26th, 2010 1:22 pm

    AWK!!… Hey, I like to “subscribe to comments” so I don’t miss the replies. But I don’t know how to do that on your blog. How can I do that? Thanks.

    Happy holidays.
    Art

  4. nima on December 27th, 2010 1:40 am

    Happy Holidays!

    I just installed a plugin that allows you to subscribe to comments.

  5. The Arthurian on December 27th, 2010 11:11 am

    EXXcellent!! Thanks, Nima.

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