Monday, July 13, 2015

Jazz Shaw of Hot Air: Economic Simpleton

     Over at Hot Air, Jazz Shaw assures us that Germany's demands are only fair, as they are a Greek creditor.  In short, this isn't a coup, but instead parent simply taking control of a situation made worse by an errant child.

     But for an article that deals with a very complex international economic situation, his piece is completely devoid of any data.  So, let's provide some context to point out how completely wrong his analysis is.

     To start, you might want to go to the website, which has a ton of economic information on literally every country in the world.  Let's start by looking at what the Greeks have already done, starting with government spending.  By the way -- I'll use pictures to make it easier.

Greece has already cut government spending by about 23% since 2009.  That is called austerity, Jazz.  Let's see what kind of effect it has had on the economy, starting with total GDP:
Total GDP at constant prices has decreased about 25%.  That means there has been NO GROWTH.  For the economically challenged, NO GROWTH IS BAD.  Let's look at this from another perspective -- the GDP growth rate:
The Greek economy had three straight years of contraction.  Again -- THIS IS BAD.
And, as a result, unemployment is very high:


Both long-term and standard unemployment metrics are at depression levels.  Again, THIS IS BAD.

And, let's take a look at the debt/GDP ratio:

The purpose of austerity is to cut spending.  This will make the bond vigilantes happy and also encourage consumer spending, thereby growing the economy, allowing it to increase at rate sufficient to lower the debt/gdp ratio.  There's just one problem: as the chart above shows, it doesn't work as advertised.  Not even close.  In fact -- the EXACT OPPOSITE HAPPENS.
     And, ask yourself this question: how many creditors negotiating with a bankrupt debtor don't take some kind of haircut on their loans?  Answer from the real world: quite literally, none.
     There is no reason to believe anyone at Hot Air has the background or capabilities to seriously discuss international or domestic economics.  They embarrass themselves on a regular basis with their articles.  But this latest piece is especially bad due to its complete omission of any data.  And that is the real crime here: their readers think they're getting meaningful analysis.  But, instead, they're getting noting of substance.