How Gold Is Mined: Jun 27, 2013

Sam Ro | May 31, 2013, 10:33 AM | 996 |

As the debt crisis blew up around the world, many economists and politicians have argued for austerity in their efforts to reduce deficits and scale back debt.

While many continue to debate the economic effectiveness of austerity, the social impact seems to be more clear.

In a new piece for Project Syndicate, Robert Shiller discusses the impact of austerity on morale. He addresses and criticizes those who believe austerity is somehow good for social morale:

Austerity, according to some of its promoters, is supposed to improve morale. British Prime Minister David Cameron, an austerity advocate, says he believes that his program reduces “welfare dependency,” restores “rigor,” and encourages the “the doers, the creators, the life-affirmers.” Likewise, US Congressman Paul Ryan says that his program is part of a plan to promote “creativity and entrepreneurial spirit.”

Some kinds of austerity programs may indeed boost morale. Monks find their life’s meaning in a most austere environment, and military boot camps are thought to build character. But the kind of fiscal austerity that is being practiced now has the immediate effect of rendering people jobless and filling their lives with nothing but a sense of rejection and exclusion.

Shiller maintains his position that the best way to dig out of the world's economic woes is through fiscal stimulus, which wouldn't harm morale.

"For morale, we need a social compact that finds a purpose for everyone, a way to show oneself to be part of society by being a worker of some sort," he writes. "And for that we need fiscal stimulus – ideally, the debt-friendly stimulus that raises taxes and expenditures equally."

Shiller expands on all of this. Read his whole piece at Project Syndicate.

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Markets in Asia were mixed in overnight trading. The Japanese Nikkei 225 rose 1.4%, the Hong Kong Hang Seng fell 0.4%, and the Shanghai Composite declined 0.7%. European markets are in the red across the board, led by Italy, currently down 1.0%. In the United States, futures point to a negative open.Despite the gains in the the Nikkei during Friday's trading session in Japan, the index has taken a sharp turn lower in after-hours futures trading and is already down 1.8% from Friday's close. The Japanese stock market has had an extremely volatile last few trading sessions after the Nikkei posted a shock 7.3% single-day decline last Wednesday.The sharp decline in the South African rand against the U.S. dollar continues today as part of a broader sell-off in emerging market currencies. The exchange rate is currently 10.13 rand per dollar, up 1% from yesterday. Worries over a tapering of monetary stimulus by the Federal Reserve are slowing inflows into emerging markets, causing currencies and asset values to decline. The rand is one of the biggest losers because its moves against the dollar are more accentuated than those of others – in part because the currency is more easily "bullied" by traders.Japan's consumer price index fell 0.7% in April from the previous year, in line with consensus estimates, after posting a 0.9% decline in March. Excluding food and energy, prices fell 0.6%, beating expectations for a 0.7% drop and marking an improvement from April's 0.8% decline in prices. Morgan Stanley economist Takeshi Yamaguchi writes that the core index – the one excluding food and energy – "will likely take until Jan-Mar 2014 to turn to positive gains."German retail sales fell 0.4% in April after contracting 0.1% in March. Economists were expecting sales to increase 0.2%. The release follows worse-than-expected unemployment data earlier this week.Italian unemployment rose to an all-time high of 12% in April from 11.9% in March. Economists were expecting a significant decline in the unemployment rate to 11.6%. Unemployment across the eurozone rose to a record 12.2%.In the week ended May 29, global equity funds recorded $2.8 billion in outflows, marking only the second week of redemptions in 2013. Bond funds took in $1.4 billion, commodity funds lost $1.0 billion, and money market funds expanded by $8.5 billion.Personal income was unchanged in April, falling short of economists' expectation for a 0.1% gain. Spending unexpectedly fell by 0.2%, which was worse than the unchanged level expected.Chicago PMI survey results for the month of May are released at 9:45 AM. Economists predict the index rose to 50.0 from 49.0 in April, suggesting that the contraction in regional manufacturing has come to a halt (any reading below 50 indicates contraction, whereas a reading above 50 indicates expansion).Out at 9:55 AM is the final reading from the University of Michigan's May consumer confidence survey. Economists predict the headline index will match the flash estimate of 83.7 published earlier this month, up from 76.4 in April. Follow the data LIVE on Business Insider >

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