Comment Re:Spending cuts one way or another (Score 1) 431
Austerity is a strange word, it sounds sterile, it has strange connotations. The correct term is spending cuts.
You cut spending if you cannot afford what you are spending on and when you cannot borrow to spend either and in case of chronic offenders the sooner the creditors realize what they are dealing with the healthier for everybody. It's healthier for the spender, who has to come to terms of the impossible situation he is in and it is healthier for the creditor, who will avoid losing even more money. It is healthier for the overall economy not to have welfare State system in the first place, to have people consume based on what they produce and not based on what can be taken from somebody else without any form of repayment.
Another way to view it is that a loan time-shifts your earnings. Money that you would've made in the future is shifted in time to the present. The catch being that that money (plus some interest - payment for the time-shift) will be unavailable in the future. Basically how a cash advance works - you get your paycheck now 3 weeks after your previous pacheck, but you won't get your next one for 5 weeks instead of 4 weeks. You've time-shifted your paycheck one week earlier.
In other words, "austerity" is self-imposed the moment you take a loan. It is not the people demanding you repay the loan who are imposing austerity on you. You imposed it on yourself the moment you decided to get the loan.
I've tried to explain this to dozens of people, and only about a quarter seem to get it. The snapshot value of your bank account or your credit card balance at any point in time is not what matters. Heck, the time-average value of those two is not what matters either. What matters is their first derivative - the rate of change of those values. How much money you earn per month, how much you spend per month. Once you realize this, you understand that there's nothing to be gained by paying your bills one day before the due date (except for a negligible amount of interest). Whether you pay it the first day of the month or the last day of the month, the amount you pay per month is identical. And taking out a cash advance because you're "short of money" is actually more harmful to you in the long term (increases your expenses per month) than belt-tightening to get by until your regular paycheck arrives.