"I feel stupid," someone said the other day. "I consider myself well-informed, but I have no idea what the term 'austerity economics' really means."

Actually it's not that complicated, and most of the lesson plan can be found in today's headlines.

We'll explain austerity to you in six steps, and we promise it it won't take more than 900 words. Since adults read an average of 250-300 words per minute - and we know all of you are above average - our little course shouldn't take more than three minutes.

It's certainly worth knowing. Despite its many failures, "austerity economics" keeps remaking - and unmaking - the global economy. The only disagreement at this weekend's Republican debate was over which candidate would push austerity more aggressively. And austerity dominated the political agenda last year - "Deficit Commission," anyone? - until Occupy came along.

Merriam-Webster named "austerity" the "Word of the Year" for 2010. But like the monster from a 1950's science-fiction movie, it just keeps on growing. This week alone the name was invoked in government houses from Athens to Lagos.

What is this creature called "austerity," and why does it still hold so much power? If you've got three minutes, let's get started.

1. What is it?

The Longman Dictionary of Contemporary English defines "austerity" as "when a government has a deliberate policy of trying to reduce the amount of money it spends."

Wikipedia calls it "a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided," adding that it's "sometimes coupled with increases in taxes to pay back creditors to reduce debt."

Got that? Austerity backers want government to spend less on benefits and public services, and to pay back its creditors more quickly. Higher taxes aren't part of the plan and they're strictly optional.

2. What's austerity supposed to accomplish?

Austerity advocates don't just see lower deficits and reduced debt as tools to promote long-term economic health. They consider them ends in themselves - sometimes even as moral values.

Many austerity advocates see government spending as inherently evil. That goes for all government spending, including police, teachers, nurses, and firefighters.

Sure, some of them will admit there can be necessary evils or useful evils - usually weapons procurement or law enforcement. But spending is always evil.

Other people aren't philosophically opposed to government spending, but have been convinced that it has become unaffordable today.

3. What's the theory behind austerity economics?

To answer that, it's important to understand that the economics profession has been systematically taken over by well-funded conservative academics. They've created elaborate theoretical constructs to prove that government spending is economically destructive.

These include theories like 'Barro-Ricardo equivalence,' which says people won't spend money when they know their government's incurring debts they'll have to pay someday. Conservative economists like Robert Barro insist this is true even in times of widespread unemployement, like now, and argue against stimulus spending to create jobs.

Oddly, they find this theory more compelling than the idea that people aren't spending money because they don't have jobs.

Then there's supply-side economics, which argues that the best way to grow the economy is by cutting taxes. That means smaller government. Supply-siders also rely on the "Laffer curve," which says people will stop investing, producing, and creating jobs if taxes are too high.

Austerity advocates also argue that international markets will lose confidence in governments if they don't curb spending and will charge them higher interest. So they even push cuts in Social Security, which doesn't even add to the deficit, because macroeconomists consider it 'government spending.'

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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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It's a little (pardon the pun) depressing to read that our economic policy in the face of this "balance sheet recession" is exactly the wrong one. Japanese economist Richard Koo has been sounding the alarm for a while, citing Japan's economic collapse after following the International Monetary Fund's advice to cut their deficit:

Hearing comparisons between the US and Japan? Confused about deleveraging, private saving, and government spending? Look no further – Richard C. Koo explains it all in his testimony before the Committee on Financial Services U.S. House of Representatives.

The first point Koo makes is that ordinary recessions – which tend to come up every so often – and full-fledged depressions are “two different diseases requiring totally different treatments.”

What’s the difference? In a depression, the private sector is focused solely on getting rid of debt. Who cares? Just take an example: a family makes $1000 and saves $100. Normally that $100 is lent by the family’s bank to a borrower who can invest and use that money. But in today’s world, where everyone is trying to get rid of debt, no one wants to borrow that $100.

This is just what happened during the Great Depression, and also what happened to Japan in the 1990s. But Japan was smart: the government borrowed and spent $100 instead, keeping the money flowing. Even though it increased the government’s debt by 460 trillion yen, it sustained over 2,000 trillion yen – “making it a huge bargain,” the understated Koo points out. On the other hand, cutting spending and government deficits will have the opposite, devastating effect.

His testimony is here and it's the clearest argument yet for the administration to stop pushing this deficit nonsense.

The market, of course, is very, very happy. I wonder what the IMF terms were?

BRUSSELS — Global markets rallied Monday, reversing the steep declines of recent days, after European leaders agreed to provide a huge rescue package of nearly $1 trillion to combat the debt crisis that has engulfed Europe, and central banks began injecting cash into the financial system.

In an extraordinary meeting that lasted into the early hours of Monday morning, finance ministers from the European Union agreed on a deal that would provide $560 billion in new loans and $76 billion under an existing lending program to countries facing instability. Elena Salgado, the Spanish finance minister, who announced the deal, also said the International Monetary Fund was prepared to give up to $321 billion separately.

Officials were hoping the size of the program — a total of $957 billion — would signal a “shock and awe” commitment to such troubled countries as Greece, Portugal and Spain, in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008.

On top of the unprecedented sum, the European Central Bank reversed its position of just a few days ago and said it would buy government and corporate debt. And the world’s leading central banks, including the U.S. Federal Reserve, announced a joint intervention to make more dollars available for interbank lending.

Central bank purchases of euro-zone government bonds began Monday, although the E.C.B. did not immediately release details.

LA Weekly: "[Ray Bradbury's] fear in 1953 that television would kill books has, he says, been partially confirmed by television’s effect on substance in the news."
And Barry Bonds has been indicted...

And very good news: the International Monetary Fund has read their email and is finally moving ahead with debt relief for Liberia.

And don't forget there's a Democratic Debate Open Thread going on tonight, too.

The U.S. Family Network, a public advocacy group that operated in the 1990s with close ties to Rep. Tom DeLay and claimed to be a nationwide grass-roots organization, was funded almost entirely by corporations linked to embattled lobbyist Jack Abramoff, according to tax records and former associates of the group.---- The former president of the U.S. Family Network said Buckham told him that Russians contributed $1 million to the group in 1998 specifically to influence DeLay's vote on legislation the International Monetary Fund needed to finance a bailout of the collapsing Russian economy...read on"

Jane has a new treatment on the film ready to go.