This caught my eye because it's really quite crazy. Last year, the International Monetary Fund pushed the UK quite aggressively for an austerity budget -- and now they're warning that the UK austerity budget has resulted in just 0.2 per cent growth in the second quarter of the year, following two quarters of poor growth. Gee, you don't suppose unemployment, wage cuts and the additional costs incurred by public program cuts resulted in people having less money to spend, causing a demand problem?

So what strategy do they recommend if growth doesn't improve? Come on, you already know: tax cuts and more quantitative easing. You know, the same things that didn't work here! It's not really science with these people; it's fundamentalist religious dogma, like the conviction that Adam and Eve co-existed with dinosaurs -- that, and disaster capitalism:

In a comprehensive analysis of the state of the British economy, the economic watchdog said that, between them, families would have £35 billion less disposable income due to the Government’s attempts to tackle the deficit. In addition, a fall in the value of houses would wipe off more than a tenth of their “tangible” wealth in real terms by 2016, the IMF said in its report.

The forecast for household finances came amid a growing political row about recent slow growth. George Osborne has come under pressure from David Cameron to come up with new ways to stimulate the economy.

The IMF reiterated its support for the Government’s programme of cuts, which it said had “significantly reduced the risk” of a sovereign debt crisis. However, it warned that tax reductions might be necessary if the rate of economic growth did not improve. And although it said the Government had made the right decisions to tackle the deficit, the impact on households would be significant.

[...] As total disposable income last year was £974 billion, the IMF estimated that the cost would be roughly £35 billion annually – shared between Britain’s 26 million households.

Alongside the squeeze on savings, it said near-static house prices until 2016 would knock 12 per cent off families’ “tangible” wealth in real terms as the value of property fell in comparison to home owners’ income.

The damage to household finances would weigh on the recovery for years, it warned, as consumers had less money to spend on the high street. Due largely to the weakness of consumer spending, the IMF is predicting growth this year of 1.5 per cent — against official forecasts of 1.7 per cent.

[...] Despite its concerns, the IMF again threw its weight behind the Government’s austerity measures.
“The weakness in growth and rise in inflation raises the question whether it is time to adjust macroeconomic policies. The answer is no,” it said.

“Recovery from the financial crisis is under way, but is bumpy and incomplete … Fiscal headwinds will continue.”
Vicky Redwood, senior UK economist at Capital Economics, the research consultants, said the analysis demonstrated that “households are in for a tough five years if not more”.

“It’s payback time for the high spending of the past decade,” she said. “It’s going to be a prolonged period of nastiness for households.”

You could spread that irony with a knife. Is it time to "adjust macroeconomic policies?" Let's ask Paul Krugman, the man who quite literally wrote the book on macroeconomics - and also wrote about the planned austerity cuts for the UK back in October 2010:

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I wonder when our unions will stop coloring within the lines and seize the day with a massive general (yes, I know they're illegal) strike like this one:

Hundreds of thousands of British public sector workers went on strike Thursday to defend their pensions, causing widespread disruption to schools and state-run services.

A third of English schools were closed and another third were affected, officials said, as up to 350,000 teachers, lecturers and education staff took action against plans to make them work longer and pay more into their pensions.

Tax offices, museums and job centres were also brought to a standstill as a further 100,000 civil servants walked out on the first nationwide day of strike action since the coalition government took office last year.

However, airport operator BAA said feared delays at London Heathrow because of a walkout by immigration and customs staff failed to materialise, and ministers said only half the civil servants who could have downed tools actually did so.

Prime Minister David Cameron has insisted the labour changes are fair and inevitable, warning this week that the pension system is "in danger of going broke" faced with an ageing population.

Francis Maude, the minister who oversees the civil service, told BBC radio on Thursday: "You cannot continue to have more and more people in retirement being supported by fewer and fewer people in work. Long-term reform is needed."

But the unions say they have already accepted pension reforms over the past decade and accuse ministers of pushing through new changes without negotiation.

Let's remember: These austerity programs are because of the bankers debt, not from anything caused by workers. Why should they give up the security of a good pension because bankers don't want to cover their own losses?

Progressive economist Dean Baker says as predicted, the UK austerity program looks very much like a path to pain and stagnation, not healthy growth, and hopes our leadership wakes up in time before they end up in the same situation:

The elite media and the politicians whom they promote would love to see the United States follow the austerity path of the UK's new government. However, if this path takes the UK into dangerous economic waters, it could provide a powerful warning to the public in the United States before we make the same mistake.

The British economy looks like it is doing its part. The fourth-quarter GDP report showing that the economy went into reverse and shrank at a 2.0% annual rate is exactly the sort of warning that many of us here were expecting. Weather-related factors may have slowed growth some, but you would have to do some serious violence to the data to paint a positive picture. Of course, the austerity in the UK is just beginning. There will likely be much worse pain to come, with a real possibility that the country will experience a double-dip recession, or at least a prolonged period of stagnation.

While the UK seems to be doing its part, the key question is whether anyone in the United States is prepared to take the lesson. Prior to this episode, there was already a solid economic case that large public deficits were necessary to support the economy in the period following the collapse of an asset bubble. The point is simply that the private sector is not prepared to make up the demand gap, at least in the short term. Both short-term and long-term interest rates are pretty much as low as they can be.

Furthermore, even if weaker demand did manage to push interest rates down from current levels, it is unlikely that they would have much effect on private spending. Businesses that didn't want to invest when the 10-year treasury bond rate was 3.4% are unlikely to start expanding if the rate fell to 2.4%, especially if the lower rate is coupled with higher unemployment and weaker demand.

The same story applies to consumers. This sort of drop in interest rates is not about to kick off a consumption binge. Consumers remain heavily indebted as a result of the collapse of the housing bubble. Lower interest rates will change this picture little. Furthermore, a consumption splurge is even less likely if government cutbacks mean that more workers are unemployed or worried about losing their jobs.

There might be more hope from an increase in net exports following a turn to austerity, but this would depend on a decline in the value of the dollar and healthy growth in US trading partners. Neither of these seems like good bets at the moment.

This means that the predictable result of austerity is slower growth and higher unemployment. The UK has volunteered to be our guinea pig and test this proposition. For now, it looks like things are going just as standard economic theory predicts: the economy is slowing and unemployment is likely to rise.

Hopefully, citizens of the UK will tire of the rhetoric of austerity as a way to make politicians feel good about tightening other peoples' belts. Maybe the Liberal Democrats will break away from the coalition and force new elections.

From this side of the pond, though, the goal is simply to encourage people to pay attention.
The UK might be home to 60 million people, but from the standpoint of US economic policy, it is simply exhibit A: it is the country that did what our deficit hawks want to do in the US.

Student protests in London erupted today after Parliament voted to triple university tuition as part of a national austerity plan. Naturally, as in other countries, the working classes will be carrying the brunt of the "austerity" in lieu of the bankers who actually caused the mess, but that's only fair, right?

As thousands of students were corralled by police near Parliament, some strummed guitars and sang Beatles songs — but others hurled chunks of paving stones at police and smashed windows in a government building.

Another group ran riot through the busy shopping streets of London's West End, smashing store windows and setting fire to a giant Christmas tree in Trafalgar Square.

Police condemned the "wanton vandalism." They said 43 protesters and 12 officers had been injured, while 22 people were arrested. Police said the number of arrests would likely rise.

Home Secretary Theresa May said that "what we are seeing in London tonight, the wanton vandalism, smashing of windows, has nothing to do with peaceful protest."

The violence overshadowed the tuition vote, a crucial test for governing Conservative-Liberal Democrat coalition, and for the government's austerity plans to reduce Britain's budget deficit.

It was approved 323-302 in the House of Commons, a close vote given the government's 84-seat majority.
Many in the thousands-strong crowd outside booed and chanted "shame" when they heard the result of the vote, and pressed against metal barriers and lines of riot police penning them in.

Earlier small groups of protesters threw flares, billiard balls and paint bombs, and officers, some on horses, rushed to reinforce the security cordon.

Clearly, there's only so much people are going to take. Do you get the feeling that it's spreading? I do. Because I don't think I've ever heard of anything like this before:

A car containing Prince Charles and his wife, Camilla, was attacked last night as a wave of protest swept through central London in the wake of a Commons vote to force through a trebling of university tuition fees for students in England.

Protesters cracked windows and threw paint on the Rolls-Royce after it became separated from its police escort and was surrounded by demonstrators who had spilled into the West End after an initially peaceful demonstration outside parliament rapidly deteriorated and spread.

One, Ben Kelsey, said: "There were 400 to 500 protesters there. It was fairly obvious who was in the car. It was very well lit up. Charles and Camilla looked quite relaxed at first but when they saw how many people there were they began to get worried. A few seconds later the area was packed with police. It was complete chaos."

I haven't been a very big Lou Dobbs fan-you might say, but I received a lot of emails on this segment from last night. Lou takes Bush up on his challenge and uses simple logic to make his points against this deal.
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Dobbs:

"President Bush has put forth a challenge tonight that I simply can't ignore. The president yesterday said he wanted those who are critical and questioning of this port deal to "step up and explain why all of a sudden a Middle Eastern company is held to a different standard than a Great British company." Well, first of all, Mr. President, to equate any country to your principal partner in the coalition ignores that special relationship this country's enjoyed with the United Kingdom for decades and decades. This also is not just a British company and an Arab company, as I think you well know....read on"