Anyway, I think talking austerity in the midst of a liquidity-trap, demand recession is very counterproductive.
Counterproductive in what way? Increasing employment? Reducing debt? Increasing wages/hours worked? Spurring “growth” (which may or may not actually result in economic improvements)? Clearing mal-investments from the system? Clearing bad debt from the system? Removing price bubbles (which are everywhere, and large)? Undoing the affects of those price bubbles?
We are at the tail end of a massive debt-supercycle. The political class, and their macro-economic enablers, know that they cannot allow this debt to be cleared organically. To do so would spur an unprecedented demand for lampposts and rope. They cannot print their way out, because the resulting spike in liquid, globally traded commodities (without a corresponding rise in wages) would crush the private sector. Their only “solution” is to keep doing what they are doing (a mixture of cheap money, asset purchases, and expanding government spending), in the hopes that economic growth suddenly appears and saves the day.
“Austerity” is a joke. To clear the economic distortions from the system would require a level of real austerity that can simply never happen politically. People may talk about austerity, but I don’t think they have any idea what that word really means.
There are so many problems with his theories one hardly knows where to begin. For starters IF there is a multiplier effect it cuts both ways, something that Keynsians conveniently omit.
Essentially in a perfect world without government interference there should normally be 100% employment over the long haul. Of course there might be some debate over “voluntary” unemployment. A skilled professional for example, finding that in the short term there isn't an opening for his line of work, may voluntarily not take up employment beneath his skill levels.