Market Confidence

Under the FDR Framework, the only source of market confidence is disclosure.  With disclosure, investors can be confident in their investment decisions because they know they had access to all the useful, relevant information in an appropriate, timely manner prior to making the buy, hold or sell decision.

Recently, market confidence has been linked to the push for austerity.  This linkage has been phrased as "if we cut the deficit, it will restore market confidence."

Cutting the deficit has nothing to do with market confidence.

Cutting the deficit simply cuts one source of demand in the economy.  Unless government spending was crowding out the private sector, investors see the drop in demand as reducing the growth rate of the economy and the ability of both the private and public sector to service its debt.