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On August 27 2014 09:42 Nyxisto wrote:Show nested quote +On August 27 2014 09:37 WhiteDog wrote:On August 27 2014 09:06 Nyxisto wrote:On August 27 2014 09:01 aksfjh wrote:On August 27 2014 08:53 Nyxisto wrote:On August 27 2014 08:18 IgnE wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Can you elaborate on this supposed connection between "not creating enough well paying jobs" and a "bloated public sector" that leads to "lack of private investment?" I think de-industrialization in Europe and the shift to consumer oriented economies that tend to run permanent deficits plays a big role I guess. (apart from Italy). The service sector isn't very productive, public or private for that matter. I also don't think the US is doing 'fine'. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare. The state of mind of some rightish people in europe, such as Nyxisto, and Germany at large (but a big part of France as well) is that the debt gdp ratio is not only an economic indicator, it is a moral indicator, that tells a lot about the "responsibility" and "discipline" of the country - the "management". I find it ridiculous that you always come up with this. The EU isn't the Ussr, nobody is forcing anybody to anything. You're making it sound like Germans are whipping Greek citizens through the streets. Just because Germany did it with bailout money stipulations instead of tanks doesn't mean it's any different. Yeah, Merkel is literally Hitler. Quality comment. All European countries are democracies. The victim logic is ridiculous. Spain,Portugal and Italy which have been hit very hard by the recession unquestionably, are not electing right or left-wing radicals. So saying that germany and european far right forced policies on greek and made moral judgement on southern countries rather than economic analysis is litterally saying Merkel is Hitler. Wow that escalated quickly. I was referring to aksfjh's comment, not yours. Show nested quote +
About the désindustrialisation of europe : the euro is largely to blame for it, aggravating the specialisations of countries within the EU rather than helping industries in need, it favored more competitive industries, and with no fiscal redistribution and european policies, let weaker industries die out, impossible to sell their goods with heavy competition and a money way too high.
The de-industrialization actually started quite some time before the Euro, especially in the UK, and it was widely celebrated in the UK as a "step forward" and often compared as a progress over for example, Germany's still industrialized economy. In hindsight I think that didn't turn out to well.
It's funny to hear a markets-based, fiscal conservative talk about deindustrialization as a major structural problem, when it is a result of the very things you seem to be advocating. Under austerity measures companies are forced to lay off workers when demand drops, and industries collapse. Every great industrial country built their infrastructure on the backs of some combination of very cheap labor, protectionism, and government subsidies/forced construction, going back to the very dawn of the industrial revolution.
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On August 27 2014 10:07 IgnE wrote:Show nested quote +On August 27 2014 09:42 Nyxisto wrote:On August 27 2014 09:37 WhiteDog wrote:On August 27 2014 09:06 Nyxisto wrote:On August 27 2014 09:01 aksfjh wrote:On August 27 2014 08:53 Nyxisto wrote:On August 27 2014 08:18 IgnE wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:
[quote]
They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that.
Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Can you elaborate on this supposed connection between "not creating enough well paying jobs" and a "bloated public sector" that leads to "lack of private investment?" I think de-industrialization in Europe and the shift to consumer oriented economies that tend to run permanent deficits plays a big role I guess. (apart from Italy). The service sector isn't very productive, public or private for that matter. I also don't think the US is doing 'fine'. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare. The state of mind of some rightish people in europe, such as Nyxisto, and Germany at large (but a big part of France as well) is that the debt gdp ratio is not only an economic indicator, it is a moral indicator, that tells a lot about the "responsibility" and "discipline" of the country - the "management". I find it ridiculous that you always come up with this. The EU isn't the Ussr, nobody is forcing anybody to anything. You're making it sound like Germans are whipping Greek citizens through the streets. Just because Germany did it with bailout money stipulations instead of tanks doesn't mean it's any different. Yeah, Merkel is literally Hitler. Quality comment. All European countries are democracies. The victim logic is ridiculous. Spain,Portugal and Italy which have been hit very hard by the recession unquestionably, are not electing right or left-wing radicals. So saying that germany and european far right forced policies on greek and made moral judgement on southern countries rather than economic analysis is litterally saying Merkel is Hitler. Wow that escalated quickly. I was referring to aksfjh's comment, not yours.
About the désindustrialisation of europe : the euro is largely to blame for it, aggravating the specialisations of countries within the EU rather than helping industries in need, it favored more competitive industries, and with no fiscal redistribution and european policies, let weaker industries die out, impossible to sell their goods with heavy competition and a money way too high.
The de-industrialization actually started quite some time before the Euro, especially in the UK, and it was widely celebrated in the UK as a "step forward" and often compared as a progress over for example, Germany's still industrialized economy. In hindsight I think that didn't turn out to well. It's funny to hear a markets-based, fiscal conservative talk about deindustrialization as a major structural problem, when it is a result of the very things you seem to be advocating. Under austerity measures companies are forced to lay off workers when demand drops, and industries collapse. Every great industrial country built their infrastructure on the backs of some combination of very cheap labor, protectionism, and government subsidies/forced construction, going back to the very dawn of the industrial revolution.
As I said before de-industrialization already started before European countries were under "austerity rule", and they also happened and happen in countries that aren't even part of the currency union. I also think keeping an eye on the public debt is really far away from advocating austerity. I'm not advocating that some magical 60% line exists, I just think that as soon as public debt reaches extreme heights, say 120%-130% or whatever, really bad shit seems to happen.
I also think there's a too strong emphasis on monetary policy with WhiteDog's argumentation. Classical tools have become so ineffective that zero percent interest rates are pretty much the norm. Now QE seems to be the only kind of thing that actually does anything, and I guess in five years the ECB will start handing out money to everybody personally.
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Yeah man capitalism is broken. QE is the final stop gap.
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I'm not sure that Germany + Tanks = Hitler.
Aksfjh was saying that Germany used force to shape the Greek economy in a certain way. And that force is force whether it's a fist or the threat of bankruptcy.
On August 27 2014 09:42 Nyxisto wrote:Show nested quote +
About the désindustrialisation of europe : the euro is largely to blame for it, aggravating the specialisations of countries within the EU rather than helping industries in need, it favored more competitive industries, and with no fiscal redistribution and european policies, let weaker industries die out, impossible to sell their goods with heavy competition and a money way too high.
The de-industrialization actually started quite some time before the Euro, especially in the UK, and it was widely celebrated in the UK as a "step forward" and often compared as a progress over for example, Germany's still industrialized economy. In hindsight I think that didn't turn out to well.
Remember that what the U.K. replaced industry with was, in the main, financial services and that went very well.... for a tiny portion of the population.
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On August 27 2014 09:06 Nyxisto wrote:Show nested quote +On August 27 2014 09:01 aksfjh wrote:On August 27 2014 08:53 Nyxisto wrote:On August 27 2014 08:18 IgnE wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Can you elaborate on this supposed connection between "not creating enough well paying jobs" and a "bloated public sector" that leads to "lack of private investment?" I think de-industrialization in Europe and the shift to consumer oriented economies that tend to run permanent deficits plays a big role I guess. (apart from Italy). The service sector isn't very productive, public or private for that matter. I also don't think the US is doing 'fine'. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare. The state of mind of some rightish people in europe, such as Nyxisto, and Germany at large (but a big part of France as well) is that the debt gdp ratio is not only an economic indicator, it is a moral indicator, that tells a lot about the "responsibility" and "discipline" of the country - the "management". I find it ridiculous that you always come up with this. The EU isn't the Ussr, nobody is forcing anybody to anything. You're making it sound like Germans are whipping Greek citizens through the streets. Just because Germany did it with bailout money stipulations instead of tanks doesn't mean it's any different. Yeah, Merkel is literally Hitler. Quality comment. All European countries are democracies. The victim logic is ridiculous. Spain,Portugal and Italy which have been hit very hard by the recession unquestionably, are not electing right or left-wing radicals.
I was making a comparison to the USSR, like you did... You know, strong arm tactics to force a political environment they are comfortable with and that benefits them...
As I said before de-industrialization already started before European countries were under "austerity rule", and they also happened and happen in countries that aren't even part of the currency union. I also think keeping an eye on the public debt is really far away from advocating austerity. I'm not advocating that some magical 60% line exists, I just think that as soon as public debt reaches extreme heights, say 120%-130% or whatever, really bad shit seems to happen.
You contradict yourself in the same sentence. O_o
I also think there's a too strong emphasis on monetary policy with WhiteDog's argumentation. Classical tools have become so ineffective that zero percent interest rates are pretty much the norm. Now QE seems to be the only kind of thing that actually does anything, and I guess in five years the ECB will start handing out money to everybody personally.
Classical tools work. IS/LM is still functional, and everything points to fiscal multipliers being well above 1 for most middle and lower class spending/tax programs.
On August 27 2014 10:29 Dapper_Cad wrote:Show nested quote +On August 27 2014 09:42 Nyxisto wrote:
About the désindustrialisation of europe : the euro is largely to blame for it, aggravating the specialisations of countries within the EU rather than helping industries in need, it favored more competitive industries, and with no fiscal redistribution and european policies, let weaker industries die out, impossible to sell their goods with heavy competition and a money way too high.
The de-industrialization actually started quite some time before the Euro, especially in the UK, and it was widely celebrated in the UK as a "step forward" and often compared as a progress over for example, Germany's still industrialized economy. In hindsight I think that didn't turn out to well. Remember that what the U.K. replaced industry with was, in the main, financial services and that went very well.... for a tiny portion of the population.
As far as I've heard, the UK is basically 2 different economies. London and everybody else.
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On August 27 2014 08:05 Nyxisto wrote:Show nested quote +On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term.
Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described.
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On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable.
Here is a chart of the US gdp
http://research.stlouisfed.org/fred2/series/GDP/
Here is a chart of the US budget deficit
http://research.stlouisfed.org/fred2/series/FYFSD/
Here is a chart of US employment
http://research.stlouisfed.org/fred2/series/UNRATE
Here is a chart of US labor participation
http://research.stlouisfed.org/fred2/series/CIVPART
As you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit.
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On August 27 2014 10:07 IgnE wrote:Show nested quote +On August 27 2014 09:42 Nyxisto wrote:On August 27 2014 09:37 WhiteDog wrote:On August 27 2014 09:06 Nyxisto wrote:On August 27 2014 09:01 aksfjh wrote:On August 27 2014 08:53 Nyxisto wrote:On August 27 2014 08:18 IgnE wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:
[quote]
They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that.
Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Can you elaborate on this supposed connection between "not creating enough well paying jobs" and a "bloated public sector" that leads to "lack of private investment?" I think de-industrialization in Europe and the shift to consumer oriented economies that tend to run permanent deficits plays a big role I guess. (apart from Italy). The service sector isn't very productive, public or private for that matter. I also don't think the US is doing 'fine'. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare. The state of mind of some rightish people in europe, such as Nyxisto, and Germany at large (but a big part of France as well) is that the debt gdp ratio is not only an economic indicator, it is a moral indicator, that tells a lot about the "responsibility" and "discipline" of the country - the "management". I find it ridiculous that you always come up with this. The EU isn't the Ussr, nobody is forcing anybody to anything. You're making it sound like Germans are whipping Greek citizens through the streets. Just because Germany did it with bailout money stipulations instead of tanks doesn't mean it's any different. Yeah, Merkel is literally Hitler. Quality comment. All European countries are democracies. The victim logic is ridiculous. Spain,Portugal and Italy which have been hit very hard by the recession unquestionably, are not electing right or left-wing radicals. So saying that germany and european far right forced policies on greek and made moral judgement on southern countries rather than economic analysis is litterally saying Merkel is Hitler. Wow that escalated quickly. I was referring to aksfjh's comment, not yours.
About the désindustrialisation of europe : the euro is largely to blame for it, aggravating the specialisations of countries within the EU rather than helping industries in need, it favored more competitive industries, and with no fiscal redistribution and european policies, let weaker industries die out, impossible to sell their goods with heavy competition and a money way too high.
The de-industrialization actually started quite some time before the Euro, especially in the UK, and it was widely celebrated in the UK as a "step forward" and often compared as a progress over for example, Germany's still industrialized economy. In hindsight I think that didn't turn out to well. It's funny to hear a markets-based, fiscal conservative talk about deindustrialization as a major structural problem, when it is a result of the very things you seem to be advocating. Under austerity measures companies are forced to lay off workers when demand drops, and industries collapse. Every great industrial country built their infrastructure on the backs of some combination of very cheap labor, protectionism, and government subsidies/forced construction, going back to the very dawn of the industrial revolution.
Agreed. Literally there was 1 country that industrialized under lazzie faire economics and it was Britain, and they did it because no one else was industrializing, and they still had to break apart the Indian textile industries via colonialism.
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On August 27 2014 10:52 Sub40APM wrote:Show nested quote +On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable. Here is a chart of the US gdp http://research.stlouisfed.org/fred2/series/GDP/Here is a chart of the US budget deficit http://research.stlouisfed.org/fred2/series/FYFSD/Here is a chart of US employment http://research.stlouisfed.org/fred2/series/UNRATEHere is a chart of US labor participation http://research.stlouisfed.org/fred2/series/CIVPARTAs you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit.
As a historical note, Reagan himself said that his biggest regret was the deficit. I don't think anyone claims that deficits didn't rise during his tenure. The most I've heard argued that is that "Reaganomics" lead to an economy that was able lower deficits in the 90s.
Just as a political aside- I'm not here to debate the truth value of that last statement.
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On August 27 2014 10:44 Sub40APM wrote:Show nested quote +On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described.
Although Germany was indeed the first country to break the Maastricht criteria, the public debt never really reached crazy heights, I think the debt ratio never exceeded 80%. Spain had low public debt because they had insane tax revenue from their then to burst housing bubble.
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On August 27 2014 11:08 Introvert wrote:Show nested quote +On August 27 2014 10:52 Sub40APM wrote:On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable. Here is a chart of the US gdp http://research.stlouisfed.org/fred2/series/GDP/Here is a chart of the US budget deficit http://research.stlouisfed.org/fred2/series/FYFSD/Here is a chart of US employment http://research.stlouisfed.org/fred2/series/UNRATEHere is a chart of US labor participation http://research.stlouisfed.org/fred2/series/CIVPARTAs you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit. As a historical note, Reagan himself said that his biggest regret was the deficit. I don't think anyone claims that deficits didn't rise during his tenure. The most I've heard argued that is that "Reaganomics" lead to an economy that was able lower deficits in the 90s. Just as a political aside- I'm not here to debate the truth value of that last statement.
Well sure hed say that, what else is he going to say, "I presided over the longest period of ever growing budget deficits in the history of the Republic, the only thing that abridged it was my former Vice President's tax increases and some Arkansas Hillbillies presidency"
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On August 27 2014 11:13 Nyxisto wrote:Show nested quote +On August 27 2014 10:44 Sub40APM wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described. Although Germany was indeed the first country to break the Maastricht criteria, the public debt never really reached crazy heights, I think the debt ratio never exceeded 80%. Spain had low public debt because they had insane tax revenue from their then to burst housing bubble.
Ya but in 2005 having an 80% debt/GDP was unprecedented in the world outside of Japan. As youve said, Germany repeatedly blew through the 'stability pact' and yet neither the mechanisms you claim caused the debt nor the mechanism the high debt should have caused, an ever increase in interest rates, were present.
So again, the relationship between debt and GDP of countries that control the monetary process is at best poorly understand. We can though clearly say that a direct correlation between debt-gdp-recession is not linear.
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On August 27 2014 11:08 Introvert wrote:Show nested quote +On August 27 2014 10:52 Sub40APM wrote:On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable. Here is a chart of the US gdp http://research.stlouisfed.org/fred2/series/GDP/Here is a chart of the US budget deficit http://research.stlouisfed.org/fred2/series/FYFSD/Here is a chart of US employment http://research.stlouisfed.org/fred2/series/UNRATEHere is a chart of US labor participation http://research.stlouisfed.org/fred2/series/CIVPARTAs you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit. As a historical note, Reagan himself said that his biggest regret was the deficit. I don't think anyone claims that deficits didn't rise during his tenure. The most I've heard argued that is that "Reaganomics" lead to an economy that was able lower deficits in the 90s. Just as a political aside- I'm not here to debate the truth value of that last statement.
The nicest thing that can be said about Reagan is that he didn't even understand what policies his executives were implementing.
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On August 27 2014 11:15 Sub40APM wrote:Show nested quote +On August 27 2014 11:08 Introvert wrote:On August 27 2014 10:52 Sub40APM wrote:On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable. Here is a chart of the US gdp http://research.stlouisfed.org/fred2/series/GDP/Here is a chart of the US budget deficit http://research.stlouisfed.org/fred2/series/FYFSD/Here is a chart of US employment http://research.stlouisfed.org/fred2/series/UNRATEHere is a chart of US labor participation http://research.stlouisfed.org/fred2/series/CIVPARTAs you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit. As a historical note, Reagan himself said that his biggest regret was the deficit. I don't think anyone claims that deficits didn't rise during his tenure. The most I've heard argued that is that "Reaganomics" lead to an economy that was able lower deficits in the 90s. Just as a political aside- I'm not here to debate the truth value of that last statement. Well sure hed say that, what else is he going to say, "I presided over the longest period of ever growing budget deficits in the history of the Republic, the only thing that abridged it was my former Vice President's tax increases and some Arkansas Hillbillies presidency"
I'm not aware that Reagan himself ever made the second argument, sorry for not clearly differentiating the two. He said the deficit was his biggest regret- others on the right have said that his policies led to its longer term reduction.
On August 27 2014 11:19 IgnE wrote:Show nested quote +On August 27 2014 11:08 Introvert wrote:On August 27 2014 10:52 Sub40APM wrote:On August 27 2014 08:53 Nyxisto wrote:
. Sure the economic growth is stable and the unemployment is relatively low, but I just don't think it's sustainable given the decade long deficit budget that the US has been running. Also I'd say that economic growth or employment is a pretty weak indicator for actual standard of living. I'd rather be unemployed in Europe than working three Jobs in the US without healthcare.
I -- and the bond market -- agree with you that the US recover has been tepid, which is why the Fed is maintaining QE and why the specter of deflation haunts all of the developed world. But the statement "decade long budget deficit is unsustainable" is actually debatable. Here is a chart of the US gdp http://research.stlouisfed.org/fred2/series/GDP/Here is a chart of the US budget deficit http://research.stlouisfed.org/fred2/series/FYFSD/Here is a chart of US employment http://research.stlouisfed.org/fred2/series/UNRATEHere is a chart of US labor participation http://research.stlouisfed.org/fred2/series/CIVPARTAs you can see, basically since the 1980s -- and despite the claims of Republican liars who worship St. Reagan the 'deficit fixer', the US has run a budget deficit. And the rate of employment, GDP growth and civilian participation in the labor market is not particularly correlated to the budget deficit. As a historical note, Reagan himself said that his biggest regret was the deficit. I don't think anyone claims that deficits didn't rise during his tenure. The most I've heard argued that is that "Reaganomics" lead to an economy that was able lower deficits in the 90s. Just as a political aside- I'm not here to debate the truth value of that last statement. The nicest thing that can be said about Reagan is that he didn't even understand what policies his executives were implementing.
I was just trying to clear up a little bit of the political side- I'm not here to address that. Comment duly noted 
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On August 27 2014 11:18 Sub40APM wrote:Show nested quote +On August 27 2014 11:13 Nyxisto wrote:On August 27 2014 10:44 Sub40APM wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described. Although Germany was indeed the first country to break the Maastricht criteria, the public debt never really reached crazy heights, I think the debt ratio never exceeded 80%. Spain had low public debt because they had insane tax revenue from their then to burst housing bubble. Ya but in 2005 having an 80% debt/GDP was unprecedented in the world outside of Japan. As youve said, Germany repeatedly blew through the 'stability pact' and yet neither the mechanisms you claim caused the debt nor the mechanism the high debt should have caused, an ever increase in interest rates, did not happen either. So again, the relationship between debt and GDP of countries that control the monetary process is at best poorly understand. We can though clearly say that a direct correlation between debt-gdp-recession is not linear.
I agree. But with the current single currency situation in Europe it seems like having insane amounts of debt is something countries should probably avoid. I also don't think going back to national currencies is going to help very much. You can't run a country on real estate, horse betting and finance, no matter what currency you're paying in.
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On August 27 2014 11:33 Nyxisto wrote:Show nested quote +On August 27 2014 11:18 Sub40APM wrote:On August 27 2014 11:13 Nyxisto wrote:On August 27 2014 10:44 Sub40APM wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described. Although Germany was indeed the first country to break the Maastricht criteria, the public debt never really reached crazy heights, I think the debt ratio never exceeded 80%. Spain had low public debt because they had insane tax revenue from their then to burst housing bubble. Ya but in 2005 having an 80% debt/GDP was unprecedented in the world outside of Japan. As youve said, Germany repeatedly blew through the 'stability pact' and yet neither the mechanisms you claim caused the debt nor the mechanism the high debt should have caused, an ever increase in interest rates, did not happen either. So again, the relationship between debt and GDP of countries that control the monetary process is at best poorly understand. We can though clearly say that a direct correlation between debt-gdp-recession is not linear. I agree. But with the current single currency situation in Europe it seems like having insane amounts of debt is something countries should probably avoid. I also don't think going back to national currencies is going to help very much. You can't run a country on real estate, horse betting and finance, no matter what currency you're paying in.
Londongradbad sends its greetings, Komrade.
The current high debts were caused by the automatic stabilizers and increase in recession, the way other single-monetary systems deal with the issue like this -- ie individual countries -- is through internal migration. So all young Spaniards and Greeks should move to Germany and all German retirees should move to Spain.
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One thing to keep in mind: why would you believe the stats? Sure, I imagine they try to keep them close, but it's a not-well hidden secret that most Fed stats have been "regressed" to irrelevance to the economy. CPI is the most well understood to be managed to political ends, but a lot of the other ones are getting pretty questionable. It's the same pool of people that end up working for all of the big Banks and Finance companies, which are most definitely not paragons of truth.
And then there's the "behind the headlines" realities. US Employment is still in bad shape. Job additions are almost all in low-paying, part-time work. There's some structural reasons why this will be favored in the future, but policies are set to favor lower wage jobs for the future. This is part of the problem of a "debt hangover".
Which is I think the one concept that people don't really like to acknowledge. The problem with "bad debt" goes a lot further than just the original project and the lender. Large & massive asset bubbles cause massively dislocated industries across the economy. I obviously know USA stats better, but here's an example. Into the early 2000s, the "average" new residential construction, rose rapidly. This produced a whole lot Men working in construction (for pretty good wages), but the sector was running very rapidly. So when the crash happened, the amount of completed structures dropped in half, from the previous 6 year average. (Roughly)
The entire growth in the housing sector was fueled by an ever increasing amount of debt. Yet those companies employed a lot of other people than just builders, along with the entire Real Estate industry, Title companies, mortgage companies and a lot of other smaller jobs. Huge numbers of jobs that only existed because of the real estate bubble. A huge portion of those service sector jobs don't *exist* without the real estate bubble, which was intentionally fueled by WAY too easy of lending standards (which is probably the only thing the banks can't be blamed for; it was forced on them) and the Fed driving interest rates very low.
Then, because of the rapidly appreciating housing values, a huge chunk of consumer spending was built off "cashing out equity" in a home. Which leads to a society that's convinced itself to obliterate its net worth with debt, buying things that weren't really important in the first place.
This is why real estate bubbles are so brutal. Negative interest rates won't "solve" the problem; it just causes a new & different one. Interest rates are too low (2% should bring back a bit more proper valuation to everything, near 0% causes all sorts of nasty problems, not the least of which is brutalizing people that actually save money), but it simply takes a lot of time to work through the problems. Most of the economy has to rebalance itself. The "time" part is what the Central Banks and the Governments simply can't absorb.
Even if there is little they can actually do about it. So, rather than "saving" the Banks, and then making them never cause this problem again, they've taken to shoving money at people. If that money went to settling debts, that'd have at least helped the rebalance happen faster, but that's not really what's happened. But they've managed to inflate a massive Equity bubble, which pretty much created the "1%" meme. If you have a large amount of Equity assets, you're getting the most of the bubble. (Though it "helps" pension funds, which is actually the biggest danger for individual US States, but that's a separate issue)
That's the basic problem. The problem Europe faces is that each country has its own set of problems. It's not just 1 problem but 28+ problems. This is part of the reason that "Debt to GDP" ratio is important, but it's really more of a proxy that news people go to for thinking about the "quality" of the underlying economies. Then there's the issue of where Taxes come from, which ones are highly income dependent (great during "good times", brutal during "bad times") and the "quality" of regulation.
As Spain was pointed out, by the "numbers" the country was in great shape. Then the reality of the massive speculative bubble became clear and now the country is doing terribly. Just because the cancer isn't easily seen, doesn't mean it isn't killing the host. And cleaning up those problems are going to take a while.
I should probably throw out a note about regulations: there are good & useful ones, but most regulations fall in the "annoying" to "actively causing problems for the economy" categories. During a good economy, a modern State is given to passing regulations that don't do much until something blows up. Then you have entire books of regulations that aren't "helping". Each country has these, and they're all different. The EU just, because of its structure, increases the number and applies them to everyone. So there is always a set of regulations that need to be scrapped. And there's always a set of regulations that need to be enforced. Then there's the regulations that are actually needed. (Massively lowering derivative leverage, anyone?)
In the end, maybe a better understanding to what happened: modern countries are a Fat guy that suddenly finds he needs to do a lot more physical activity because of a job change. He has to do the work to change himself, get leaner and shed the useless fat that slows him down. But that's not going to happen when he's over-eating junk food while attempting to get into shape. It feels good, but it's not solving the problem, just delaying the solution.
And that's just the problem before China goes through a contraction. 2015 is going to be terrible.
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On August 27 2014 13:22 Taf the Ghost wrote:
It's the same pool of people that end up working for all of the big Banks and Finance companies, which are most definitely not paragons of truth.
A huge portion of those service sector jobs don't *exist* without the real estate bubble, which was intentionally fueled by WAY too easy of lending standards (which is probably the only thing the banks can't be blamed for; it was forced on them) and the Fed driving interest rates very low.
While I agree with many of the premises in your post, don't you see a tension between those two sentences, spaced far apart from each other? The banks had it forced on them . . . by who again?
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On August 27 2014 11:33 Nyxisto wrote:Show nested quote +On August 27 2014 11:18 Sub40APM wrote:On August 27 2014 11:13 Nyxisto wrote:On August 27 2014 10:44 Sub40APM wrote:On August 27 2014 08:05 Nyxisto wrote:On August 27 2014 07:45 WhiteDog wrote:On August 27 2014 06:56 Sub40APM wrote:On August 27 2014 06:42 Nyxisto wrote:
Because the deficit does not include most of the federal borrowing,it's an imaginary, meaningless number. Greece is also running a primary surplus, it's completely meaningless. I don't exactly understand why modern economics has come to the conclusion that debt is a meaningless concept, but in reality countries that have a lot of it don't seem to perform very well. They dont perform that badly either. the US is growing faster than the EU. Japan has been facing a high debt for the last 20 years and the prescription that debt-fear-mongers keep alerting you to: skyrocketing interest rates and then hyperinflation has not occurs. You are right, Greece, a country that has no control over its monetary policy, is struggling, as have all countries that borrowed in foreign currencies. But what is happening in most developed world countries is not that. Just stating 'this pushes the problem to our grandkids!' doesnt answer the question of through what mechanism will these problems surface and why they havent already began to surface due to both high debt and the rationality of the market (ie, if France is going to collapse and you are a rational Frenchmen then you would start selling your French assets which would then speed up the collapse). I seriously think that this post from Nyxisto is what is wrong about Europe : for him (and Germany's/Europe's nuts policy makers), the indicator that shows that Greece is in deep shit is its debt gdp ratio, and not its unemployment, poverty rate or private investment. I think it is all connected. I don't know how you just want to ignore the debt, as there's a pretty strong correlation in Europe between public debt and the general economic state of the countries. It probably isn't a coincidence that the countries with the highest public debt also are the countries that are suffering the most atm in Europe. The high debt is just a symptom of decade long mismanagement, including not creating enough well paying jobs, a bloated public sector and thus a lack in private investment and countries that rely on public consumption to make up for it. And I don't think continuing this by funding it through the ECB or more debt is going to help long-term. Actually, Spain had much lower debt/GDP throughout the entire 2000s before the crisis hit. What it also had was a massive trade deficit with Germany, but if we were examining the world in 2007, Spanish and French posters would be screaming at Germans for running an unsafe debt/GDP ratio...yet mysteriously despite having such a high debt load the Germans seem to be doing okay. So perhaps high debt is not just synonymous with the symptoms you have described. Although Germany was indeed the first country to break the Maastricht criteria, the public debt never really reached crazy heights, I think the debt ratio never exceeded 80%. Spain had low public debt because they had insane tax revenue from their then to burst housing bubble. Ya but in 2005 having an 80% debt/GDP was unprecedented in the world outside of Japan. As youve said, Germany repeatedly blew through the 'stability pact' and yet neither the mechanisms you claim caused the debt nor the mechanism the high debt should have caused, an ever increase in interest rates, did not happen either. So again, the relationship between debt and GDP of countries that control the monetary process is at best poorly understand. We can though clearly say that a direct correlation between debt-gdp-recession is not linear. I agree. But with the current single currency situation in Europe it seems like having insane amounts of debt is something countries should probably avoid. I also don't think going back to national currencies is going to help very much. You can't run a country on real estate, horse betting and finance, no matter what currency you're paying in.
Here we are : the problem is that with the euro you virtually force a country to labell its debt in a foreign money. The interest rate are lowered, for obvious reasons, but more than that you increase loan between member of the euro zone because there are no exchange rate risk. Germans can now lend money to Spanish to no end, with no or almost doubt on the fact that they will be getting their money back.
Here is the risk with our debt ratio : an euro that favor debt to a point where a massive contracting of public debt from one country would not change the interest rate by 0.1 % (creating a possible scenario of "clandestine passenger" of the debt), but that make it impossible for a country to pay back on their terms. No way for a government to push for inflation or devaluation in order to reduce its debt and restore its' competitivity - because the guy who can do it is a douche that no one elected who stay in a tower in the middle of "Bankfurt", with all his bankers friends who really dislike inflation and never did any econ because who need econ when you're a banker ? You just need math.
Monetary policy has limits, obviously, but a good monetary policy, that can for exemple accept a short term 2-4 % inflation (and not systematically below 2 %) in order to help the country is a necessity. With the douche we have it is like you're in danger of drowning and a guy in a boat right next to you, with all the possible equipment needed to help you a little to keep at the very least your head out of the water, tells you that it is better to stay under water because you'll learn to swim.
On August 27 2014 13:22 Taf the Ghost wrote:One thing to keep in mind: why would you believe the stats? Sure, I imagine they try to keep them close, but it's a not-well hidden secret that most Fed stats have been "regressed" to irrelevance to the economy. CPI is the most well understood to be managed to political ends, but a lot of the other ones are getting pretty questionable. It's the same pool of people that end up working for all of the big Banks and Finance companies, which are most definitely not paragons of truth. And then there's the "behind the headlines" realities. US Employment is still in bad shape. Job additions are almost all in low-paying, part-time work. There's some structural reasons why this will be favored in the future, but policies are set to favor lower wage jobs for the future. This is part of the problem of a "debt hangover". Which is I think the one concept that people don't really like to acknowledge. The problem with "bad debt" goes a lot further than just the original project and the lender. Large & massive asset bubbles cause massively dislocated industries across the economy. I obviously know USA stats better, but here's an example. Into the early 2000s, the "average" new residential construction, rose rapidly. This produced a whole lot Men working in construction (for pretty good wages), but the sector was running very rapidly. So when the crash happened, the amount of completed structures dropped in half, from the previous 6 year average. (Roughly) The entire growth in the housing sector was fueled by an ever increasing amount of debt. Yet those companies employed a lot of other people than just builders, along with the entire Real Estate industry, Title companies, mortgage companies and a lot of other smaller jobs. Huge numbers of jobs that only existed because of the real estate bubble. A huge portion of those service sector jobs don't *exist* without the real estate bubble, which was intentionally fueled by WAY too easy of lending standards (which is probably the only thing the banks can't be blamed for; it was forced on them) and the Fed driving interest rates very low. Then, because of the rapidly appreciating housing values, a huge chunk of consumer spending was built off "cashing out equity" in a home. Which leads to a society that's convinced itself to obliterate its net worth with debt, buying things that weren't really important in the first place. This is why real estate bubbles are so brutal. Negative interest rates won't "solve" the problem; it just causes a new & different one. Interest rates are too low (2% should bring back a bit more proper valuation to everything, near 0% causes all sorts of nasty problems, not the least of which is brutalizing people that actually save money), but it simply takes a lot of time to work through the problems. Most of the economy has to rebalance itself. The "time" part is what the Central Banks and the Governments simply can't absorb. Even if there is little they can actually do about it. So, rather than "saving" the Banks, and then making them never cause this problem again, they've taken to shoving money at people. If that money went to settling debts, that'd have at least helped the rebalance happen faster, but that's not really what's happened. But they've managed to inflate a massive Equity bubble, which pretty much created the "1%" meme. If you have a large amount of Equity assets, you're getting the most of the bubble. (Though it "helps" pension funds, which is actually the biggest danger for individual US States, but that's a separate issue) That's the basic problem. The problem Europe faces is that each country has its own set of problems. It's not just 1 problem but 28+ problems. This is part of the reason that "Debt to GDP" ratio is important, but it's really more of a proxy that news people go to for thinking about the "quality" of the underlying economies. Then there's the issue of where Taxes come from, which ones are highly income dependent (great during "good times", brutal during "bad times") and the "quality" of regulation. As Spain was pointed out, by the "numbers" the country was in great shape. Then the reality of the massive speculative bubble became clear and now the country is doing terribly. Just because the cancer isn't easily seen, doesn't mean it isn't killing the host. And cleaning up those problems are going to take a while. I should probably throw out a note about regulations: there are good & useful ones, but most regulations fall in the "annoying" to "actively causing problems for the economy" categories. During a good economy, a modern State is given to passing regulations that don't do much until something blows up. Then you have entire books of regulations that aren't "helping". Each country has these, and they're all different. The EU just, because of its structure, increases the number and applies them to everyone. So there is always a set of regulations that need to be scrapped. And there's always a set of regulations that need to be enforced. Then there's the regulations that are actually needed. (Massively lowering derivative leverage, anyone?) In the end, maybe a better understanding to what happened: modern countries are a Fat guy that suddenly finds he needs to do a lot more physical activity because of a job change. He has to do the work to change himself, get leaner and shed the useless fat that slows him down. But that's not going to happen when he's over-eating junk food while attempting to get into shape. It feels good, but it's not solving the problem, just delaying the solution. And that's just the problem before China goes through a contraction. 2015 is going to be terrible.
The problem does not come from the stats, but from the analysis. You see stats in themselves don't mean much : look Germany with a -0.2 % GDP growth this semester, and everybody saying it is nothing but a fluke. Everybody consider it a power house with a bad growth compared to anything else outside of Europe.
The stats never say anything, in themselves, and people just give analysis of those stats, analysis that are not necessarily right. About the stats well they are flawed - like all stats in social sciences - but what is important is that the methodology is respected, in order to analyse the trend and the evolutions : the GDP in itself is very flawed, but an increase in GDP is a good thing (better than a decrease at least), even if it is difficult to agree on what exactly increased and what makes it a good thing.
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The EURO-rules were completely ignored because they were generally seen as too strict before the crisis and they were weakened in 2005 to accomodate Germany and France. After 2008 they have become god and they were written into several manifests from 2011 to 2013 including punishment for countries with too high deficit or debt, severely limiting the worst off countries' ability take stimulating actions against the crisis (would increase deficit and/or debt).
It seems like an extreme example of procyclic economic policy: In the good times, laissez-fair and in the bad times, ultra-strict economic policies.
Now that is not the complete story:
I know danish politicians were terrified after meeting the greek parliamentarians in 2008. They claimed the parliamentarians had absolutely no respect for how grave the situation was for their country and they were being extremely irresponsible with their suggestions. I guess they found out later, but the fact remains that irresponsibiliy in governments is difficult to handle in EU and that is problematic for the EURO-zone.
From a political standpoint it is responsible policy to better be able to keep national governments economically responsible.
Possible solutions: Increase monetary measures to create growth, which seems to point more and more towards a need for a slightly higher inflation (what many economists have been suggesting). Remove countries from the EURO or completely remove it (that would be politically impossible since too much prestige is invested in it). Improve the room for the worst hit countries to stimulate the economy (would be harder to politically control governments).
It is a crappy situation where everyone is trying to solve several very different economic situations in certain countries by EU-political means used on all. It doesn't seem to work, for obvious reasons...
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EPT
