Is the end nigh for the Euro? [vol. 2]
Discussion
Gargamel said:
My fellow doom mongers, surely things have come to a pretty pass when the mighty Germany shows a 0.6pc economic contraction...
and yet, where is our absolute certainty of the Euro collapse going, are we defeated in our forecasts? has the last two and a half years meant nothing to you all.
I predict it will all be over by, say autumn.
This isn't over.
Germany or the euro zone (or both)contracting 0.6?and yet, where is our absolute certainty of the Euro collapse going, are we defeated in our forecasts? has the last two and a half years meant nothing to you all.
I predict it will all be over by, say autumn.
This isn't over.
I read it as eurozone contracting 0.6
Over by the autumn, 2020?
As for what's going on now with the strength of the euro it's just the markets making money whilst they can the best way they can IMHO,
If its "over" by 2020 does that infer the start of a pan european depression? If so what is this bit here and now called? I had hoped we were midwayish through our own "Lost decade" but perhaps its not really started then? I without scare mongering fear civil unrest if there is any further degradation of prospects or increased austerity across southern Europe or indeed here.
I also cannot see the Germans pushing money south for another 10yrs its to long we are now talking about life changing periods of time affecting as we have seen in Greece three or more generations....Not good news.
I also cannot see the Germans pushing money south for another 10yrs its to long we are now talking about life changing periods of time affecting as we have seen in Greece three or more generations....Not good news.
Gary11 said:
If its "over" by 2020 does that infer the start of a pan european depression? If so what is this bit here and now called? I had hoped we were midwayish through our own "Lost decade" but perhaps its not really started then? I without scare mongering fear civil unrest if there is any further degradation of prospects or increased austerity across southern Europe or indeed here.
I also cannot see the Germans pushing money south for another 10yrs its to long we are now talking about life changing periods of time affecting as we have seen in Greece three or more generations....Not good news.
The view of the other side of the pond. Longish article, cannot link to it.I also cannot see the Germans pushing money south for another 10yrs its to long we are now talking about life changing periods of time affecting as we have seen in Greece three or more generations....Not good news.
Barron's Cover | SATURDAY, FEBRUARY 16, 2013
Next Stop, Greece
Special Report--Debt Crisis: If we fail to rein in spending and increase taxes -- starting now -- the U.S. in 22 years could be in worse shape than Greece is today.
In his State of the Union speech last Tuesday, President Obama concluded that "the State of our Union is stronger." The big question is: stronger than what?
Federal debt is a record $12.2 trillion, or 76% of the nation's annual output of goods and services. While that's still well below Greece's 153%, we're headed steadily in the wrong direction.
According to estimates by the Congressional Budget Office, adjusted by Barron's to account for recent tax increases and other factors, if the U.S. doesn't raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035.
These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession -- very likely a depression -- sometime in the next two to three decades. The unemployment rate could easily surge to 20%.
The CBO has been issuing warnings about the looming risk of a debt crisis for nearly three years. So far, those warnings have gone unheeded, probably because the crisis seems so far away. But as the CBO keeps pointing out, the longer this particular can gets kicked down the road, the greater the risk that entitlements promised to tens of millions of the old and poor won't be delivered. It could also lead to a fiscal crisis on an unprecedented scale.
This problem can't be solved by asking the rich to pay a little more, despite what the president says. In fact, Barron's calculates that immediately increasing the marginal tax rate to 50% on the top 1% of the country's earners would bring in $500 billion over the next 10 years. This would barely dent the country's debt load, which would then be $20 trillion, and do little to forestall a financial crisis.
Getting the national debt under control will require tax increases for everyone, as well as budget cuts, particularly in entitlement spending, which is beginning to run out of control as the baby boomers hit retirement age. Fixing that now is not an easy task, given that Congress can't even reach a compromise on the current budget deficit (see "A Dangerous Game of Chicken").
The warnings are growing louder. In a July 2010 "Issue Brief" with the ominous title, "Federal Debt and the Risk of a Fiscal Crisis," the CBO cited similar crises in Argentina, Ireland, and Greece as useful comparisons with the one that could hit the U.S. And as recently as last June, the CBO referred to a fiscal crisis in its "Long-Term Budget Outlook," which projected future budgets over decades.
According to the first Brief, a "review of fiscal crises in Argentina, Ireland, and Greece in the past decade reveals instructive common features and differences."
One difference, of course, is that these economies are much smaller and weaker than the powerhouse U.S.'s. So America would presumably cope better with the shock. But one advantage of being small is that it makes you a candidate for bailouts from larger economies. In contrast, the U.S. will be both too big to fail and too big to bail, a potentially toxic combination that could infect all the world's economies.
A key similarity: Argentina, Ireland, and Greece have all been plagued by soaring debt. The U.S. is not there yet. But the CBO warned of the danger that "the surge in debt relative to the country's output would pose a clear threat of a fiscal crisis during the next two decades."
SKEPTICS MIGHT WONDER just how it is possible to make a valid prediction over more than a quarter-century, when it's hard enough to forecast what will happen next year.
Answer: The CBO projections in this chart are not predictions, but scenarios plausible enough to be taken seriously. They show that if certain trends are allowed to continue, the U.S. economy would be under siege.
One key driver of this crisis scenario is inevitable: the aging of the baby boomers. As the chart shows, the rise in the share of the population 65 and over -- the age of eligibility for Medicare -- has just begun. Born from 1946 through 1964, the boomers will range in age from 49 to 67 this year. As they continue to age, the over-65 portion of the population, now 14.1%, will gradually climb, exceeding 20% for the first time in 2029, when the youngest boomers, born in 1964, will be turning 65.
Not coincidentally, around 2029 the ratio of U.S. government debt to annual economic output, or gross domestic product, will begin to exceed its peak of 112.7%, set in 1945, the final year of World War II. The difference, however, is that, with a major war concluded, the expectation then was that U.S. indebtedness would decline. Indeed, by 1955, the ratio had plummeted to 55.5%. In 2029, in contrast, the expectation will be for indebtedness to continue to explode.
The connection between the baby-boomer time bomb and the rising debt-to-GDP ratio reveals that the next 10 years, for all their potential difficulty, are actually the relative calm before the coming storm. And yet the 10-year outlook has framed the current discussion of the debt in Washington. Clearly mindful of this, the CBO's report on the 10-year outlook, released early this month, cautioned that "projections for the period covered in this report do not fully reflect long-term budget pressures," which include "the aging of the population, the rising health-care costs, and…Social Security…."
The CBO added that, "Unless the laws governing those programs are changed -- or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two -- debt will rise sharply, relative to GDP, after 2023."
JUST HOW SHARPLY is what the three lines in the chart on this page are meant to approximate. They are based on the Congressional Budget Office's fairly optimistic projections for long-term economic growth, as well as the assumption that "other spending," aside from entitlements, will continue rising at its long-term pace. The CBO's 10-year projection assumes that GDP growth will hit 3.4% by 2014, and accelerate to an annual average of 3.6% from 2015 to 2018.
What about Barron's other assumptions? In his State of the Union address, the president claimed that efforts to tame debt and deficits had already progressed "more than halfway." In his view, then, all that remains to be done is to duplicate what has been done so far. Our assumptions easily accommodate that; in fact, the second and third scenarios, which factor in tax increases, exceed what has been done so far by a wide margin. Yet in all three cases, the long-term trajectory is still daunting.
Barron's calculated these projections by imposing substantial downward revisions on the long-term projections that the CBO published last June. For example, the agency estimated debt-to-GDP at 250% by 2043 in its June 2012 projections. The three new projections Barron's made reduce that ratio to 211%, 203%, and 193%. (For a full explanation of our methodology, see the memo at the end of this story.)
THE ASSUMPTIONS UNDERLYING each projection build on the one before. The top line (blue) incorporates factors that have already reduced the debt, and which fit under the heading of progress already made. They include the end of the payroll-tax holiday early this year; the rise in the marginal rate to 39.6% from 35% on incomes for joint-earners of $450,000 annually and for single-filers of $400,000, and the recent slowdown in the growth of health-care spending, which some regard as temporary, but that the CBO assumes will persist.
The top line also includes the benefit of another factor that the president now opposes: the planned imposition on March 1 of automatic cuts specified in the Budget Control Act of 2011, otherwise known as sequestration. These reductions have been scored by the CBO as worth nearly $1.8 trillion in savings over the next 10 years, a figure that includes a reduction in the cost of debt-servicing. The president wants them replaced by other cuts that he believes would work better.
The second line (green) adds another assumption. It would immediately raise the marginal rate on the top earners to 50% from 39.6%. Obama hasn't proposed such a drastic hike, but our calculations should more than satisfy any lingering view that "millionaires and billionaires" alone could solve the entire problem by paying their "fair share." Remember that most of these rich folks also pay income taxes in their home states.
Assuming that this hike wouldn't alter behavior in such a way as to reduce the tax take -- and ignoring the fact that revenue from the alternative minimum tax would fall as a result -- the additional revenue over 10 years would be a little more than $500 billion. Even throwing in assumed additional savings in debt-servicing costs, the debt reduction wouldn't be huge in proportionate terms. To appreciate the magnitudes involved, the national debt by 2023 would be in the range of $20 trillion, give or take. It shouldn't be surprising that even aggressive tax hikes on the top 1% won't save the day. While the rich do earn a lot, they aren't that numerous.
To raise even more revenue, try rolling back the Bush tax cuts for the other 99%. That would have a 10-year value of three-quarters of a trillion, and even more once we assume reduced debt-servicing costs. That's a big number on its own, but not in relation to our soaring debt. As the third (red) line in the chart shows, the upward trajectory of debt-to-GDP wouldn't be materially altered by such a rollback.
One lesson in this exercise: Unless President Obama proposes drastic spending cuts, his vision for America requires imposing crippling taxes on the very people whose continued prosperity he so strongly champions -- the lower 99%. Even a 25% tax hike on this broad group wouldn't be enough to solve the budget problem unless it was combined with sharp cuts in spending.
Once this becomes clear, things could get ugly. "If the United States encountered a fiscal crisis," observed the CBO in its July 2010 Issue Brief, "the abrupt rise in interest rates would reflect investors' fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation."
Add to that nightmare scenario the risk that Uncle Sam would have to renege on promises made to people over 65.
To avoid such scenarios, we need to start right now -- a plea the Congressional Budget Office has been repeating over the years. In its recent report on the 10-year outlook, the agency observed: "Deciding now what policy changes to make to resolve that long-term imbalance would allow for gradual implementation, which would give households, businesses, and state and local governments time to plan and adjust their behavior."
And not making a decision won't make those storm clouds go away.
Downwardly Revising CBO Projections for Debt as a Share of Nominal Gross Domestic Product
The two main sources for the projections generated by Barron's: the June 2012 Congressional Budget Office report, "The 2012 Long-Term Budget Outlook," which runs numbers going out several decades; and the February 2013 CBO report, "The Budget and Economic Outlook: Fiscal Years 2013-2023."
In all cases, since all figures are essentially back-of-the-envelope approximations, the method followed was to generate estimates that erred on the side of minimizing future estimates of debt to nominal.
The commonly accepted way to measure debt relative to a country's output is to begin with federal debt held by the public (which excludes debt in the government's "trust funds"), and then calculate it as a percentage of current dollar gross domestic product. That's the measure used by the CBO.
In its June 2012 report, the CBO made two long-term projections of debt/GDP, one keying off its "baseline scenario," which is "based on the assumption that current laws generally remain unchanged," the other off its "alternative fiscal scenario," which is based on "current policies" as opposed to "current laws." Barron's chose the more realistic "alternative fiscal scenario."
Those data showed that, by 2043, the debt/GDP ratio would rise to 250% -- a figure so high that CBO analysts decided to stop at that figure and not release figures showing it would rise even further from there, even though it clearly would. On its way to that 250%, the ratio would reach 97% by 2023.
But that 97% was already in need of downward revision. That's because, in the February 2013 10-year projection, the alternative fiscal scenario project the ratio at 87% by 2013 vs. a baseline projection of 77%.
The difference between that 77% and 87% came assuming that "automatic spending reductions established by the Budget Control Act of 2011 (Public Law 112-25) will take effect at the beginning of March, that sharp reductions in Medicare's payment rates for physicians' services will occur at the beginning of January 2014, and that certain tax provisions that have regularly been extended but are set to expire…will expire as scheduled" (pp. 7-8). In other words, by dropping those three assumptions, the 87% figure was generated.
But Barron's wanted to assume that the Budget Control Act of 2011 would take effect at the beginning of March. Figures in Table 1-7 of the Feb. 2013 report (pp. 32-33) showed that of the total dollar value of these three factors, the Budget Control Act accounted for half. Since it accounted for half, that meant the extra 10 percentage points should be cut in half, which meant the 87% CBO projection should scaled down to 82%.
Accordingly, the new alternative fiscal scenario adjusted for the Budget Control Act showed that the debt-GDP ratio would reach 82% by 2023 rather than 97% in the June 2012 projection. Using that downward revision as "anchor," it was calculated that all subsequent figures have to be downwardly revised not by just the difference of 15 percentage points, but proportionately by 82/97 or by 0.845.
Thus, for example, where the June 2012 projection showed debt/GDP at 199% by 2037, that got downwardly revised to 168% (199 x 0.845). Where the June 2012 projection showed debt/GDP at 250% by 2043, that got downwardly revised to 211% (250 x .845).
That data series generated the top (blue) line tracing the trajectory of the debt/GDP ratio. A similar method was followed for the other two lines.
Estimates from the U.S. Treasury for the total tax consequences over 10 years of the Bush tax cuts, combined with estimates from the Joint Committee on Taxation of rescinding the Bush tax cuts for the bottom 99%, were the sources for generating figures used in the second and third trajectories.
Raising the top rate from 35% to 39.6% on the top 1% yielded extra income over 10 years of $240 billion, which came to $52.6 billion for each percentage point of hike ($240/4.6). So raising it by another 10.6 percentage points meant extra revenue of nearly $555 billion. Adding a standard 17% for savings on the cost of debt servicing brings the total reduction of the debt by 2023 to nearly $645 billion.
Since nominal GDP is projected by the CBO at $25.910 trillion by 2023 (Feb. 2013 report, Table 1-1, p. 9), that means every percentage point is worth $259 billion. If we divide $645 billion by $259 billion, we get 2.49 percentage points, which we round up to 3 percentage points.
That means adding the assumption of a tax hike on the top 1% from 39.6% to 50% subtracts another 3 percentage points from the 82% figure we already projected for 2023. We therefore have a new 2023 figure of 79% to compare to the 97% in the June 2012 report.
Again using that 79% as "anchor," it was calculated that all subsequent figures have to be downwardly revised not by just the difference of 18 percentage points, but proportionately by 79/97 or by 0.814.
Thus, for example, where the June 2012 projection showed debt/GDP at 199% by 2037, that got downwardly revised to 162% (199 x 0.814). Where the June 2012 projection showed debt/GDP at 250% by 2043, that got downwardly revised to 203% (250 x .814).
For the third projection, we added the assumption that the Bush tax cuts get immediately rolled back for the bottom 99%, estimated to be worth $762 billion over 10 years. Again adding the extra 17% for the reduced cost of servicing the debt, we get a total debt reduction of $892 billion.
Again, since nominal GDP is projected by the CBO at $25.910 trillion by 2023 (Feb. 2013 report, Table 1-1, p. 9), that means every percentage point is worth $259 billion. If we divide $892 billion by $259 billion, we get 3.44 percentage points, which we round up to 4 percentage points.
That means adding the assumption of rolling back the Bush tax cuts on the bottom 99% subtracts another 4 percentage points from the 82% figure we already projected for 2023. We therefore have a new 2023 figure of 79% to compare to the 97% in the June 2012 report.
Again using that 79% as "anchor," it was calculated that all subsequent figures have to be downwardly revised not by just the difference of 18 percentage points, but proportionately by 75/97 or by 0.773
Thus, for example, where the June 2012 projection showed debt/GDP at 199% by 2037, that got downwardly revised to 154% (199 x 0.773). Where the June 2012 projection showed debt/GDP at 250% by 2043, that got downwardly revised to 193% (250 x 0.773).
The CBO will update its long-term projections in June of this year. These estimates by Barron's are our best guess of what those projections will look like.
Thanks for that Mermaid, a very interesting and sobering read.
Not dissimilar in places to this article I happened to read earlier today, for which a similar length warning applies. I'll paste some of the thought provoking sections and link at the end to the whole.
Is there anybody in charge on either side of the Atlantic who has the remotest understanding of what is happening with the economy? Or even a glimmering of what would be required to bring about its recovery?
If there is, then it is the best kept secret in public life. Judging by the pronouncements and policy decisions of a Left-of-centre administration in Washington and a Right-of-centre government here, this total absence of comprehension seems to be common to those of all political persuasions in positions of power: it is the universal blind spot of the governing class. The ability to perceive reality is apparently confined to those who are either in official opposition (in the US), or belong to dissident factions within the party which holds office (in Britain). For those of us who believed that the Anglosphere was the last redoubt of economic literacy – struggling to speak sense in a world drowning in European gibberish – this has been a trying week.
Barack Obama delivered a State of the Union address which made scarcely any mention of the national deficit and what measures might be required to reduce it – which is to say, the need to cut government expenditure. Instead, he announced even larger and more ambitious federal spending programmes. He made it absolutely clear that the mission of his presidency was to redistribute wealth rather than to address the urgent question of why America is failing to create more of it. (His only nod in the direction of the need to stimulate growth was to express a new-found enthusiasm for free trade with Europe which, considering his previous position on this, was a sign of desperation.)
His party’s view of the spending question is, indeed, ingeniously delusional. The Democrat leader in the House of Representatives, Nancy Pelosi, has said, “It is almost a false argument to say we have a spending problem.” (I love that “almost”.) Her party whip, Steny Hoyer, asserted that the country does not have a spending problem at all – it simply has a “paying-for problem”. (Imagine your teenage child explaining that he needs an advance on his allowance, not because he has spent too much money but because, for some peculiar reason, he just can’t pay for everything he has bought.)
In spite of being the most ostentatiously cosmopolitan and internationally confident president in a generation – in famous contrast to the parochial, down-home figure of his immediate predecessor – Mr Obama seems unaware of, or at least unwilling to acknowledge, the hard lessons of European social democracy: that if you expend all your political efforts on redistributing wealth, you inevitably end up penalising the creators of it. So, pretty soon, you run out of new wealth and you are forced to ration and recycle the shrinking pot of what is left. And the absence of wealth creation means that it is not only the sum total of capital that diminishes, but the innovativeness and optimism of the society at large. It is not just wealth that fails to grow but creativity, ambition and personal fulfilment.
In Britain, and to a lesser extent in Europe, there is some serious thought being given to escaping from this morass. It is now pretty much accepted, except by outright lunatics like Herman Van Rompuy and François Hollande, that this is the major political dilemma of our time. But for some bizarre reason, the United States is determined to relive our history of the past 40 years. Maybe the unsinkable entrepreneurial spirit of a nation of immigrants will survive even this. They say that America is an optimistic country because that’s where the optimists went. Well, good luck with that. In the meantime, however, we have to cope with our own state of denial at home.
http://www.telegraph.co.uk/finance/financialcrisis...
Not dissimilar in places to this article I happened to read earlier today, for which a similar length warning applies. I'll paste some of the thought provoking sections and link at the end to the whole.
Is there anybody in charge on either side of the Atlantic who has the remotest understanding of what is happening with the economy? Or even a glimmering of what would be required to bring about its recovery?
If there is, then it is the best kept secret in public life. Judging by the pronouncements and policy decisions of a Left-of-centre administration in Washington and a Right-of-centre government here, this total absence of comprehension seems to be common to those of all political persuasions in positions of power: it is the universal blind spot of the governing class. The ability to perceive reality is apparently confined to those who are either in official opposition (in the US), or belong to dissident factions within the party which holds office (in Britain). For those of us who believed that the Anglosphere was the last redoubt of economic literacy – struggling to speak sense in a world drowning in European gibberish – this has been a trying week.
Barack Obama delivered a State of the Union address which made scarcely any mention of the national deficit and what measures might be required to reduce it – which is to say, the need to cut government expenditure. Instead, he announced even larger and more ambitious federal spending programmes. He made it absolutely clear that the mission of his presidency was to redistribute wealth rather than to address the urgent question of why America is failing to create more of it. (His only nod in the direction of the need to stimulate growth was to express a new-found enthusiasm for free trade with Europe which, considering his previous position on this, was a sign of desperation.)
His party’s view of the spending question is, indeed, ingeniously delusional. The Democrat leader in the House of Representatives, Nancy Pelosi, has said, “It is almost a false argument to say we have a spending problem.” (I love that “almost”.) Her party whip, Steny Hoyer, asserted that the country does not have a spending problem at all – it simply has a “paying-for problem”. (Imagine your teenage child explaining that he needs an advance on his allowance, not because he has spent too much money but because, for some peculiar reason, he just can’t pay for everything he has bought.)
In spite of being the most ostentatiously cosmopolitan and internationally confident president in a generation – in famous contrast to the parochial, down-home figure of his immediate predecessor – Mr Obama seems unaware of, or at least unwilling to acknowledge, the hard lessons of European social democracy: that if you expend all your political efforts on redistributing wealth, you inevitably end up penalising the creators of it. So, pretty soon, you run out of new wealth and you are forced to ration and recycle the shrinking pot of what is left. And the absence of wealth creation means that it is not only the sum total of capital that diminishes, but the innovativeness and optimism of the society at large. It is not just wealth that fails to grow but creativity, ambition and personal fulfilment.
In Britain, and to a lesser extent in Europe, there is some serious thought being given to escaping from this morass. It is now pretty much accepted, except by outright lunatics like Herman Van Rompuy and François Hollande, that this is the major political dilemma of our time. But for some bizarre reason, the United States is determined to relive our history of the past 40 years. Maybe the unsinkable entrepreneurial spirit of a nation of immigrants will survive even this. They say that America is an optimistic country because that’s where the optimists went. Well, good luck with that. In the meantime, however, we have to cope with our own state of denial at home.
http://www.telegraph.co.uk/finance/financialcrisis...
turbobloke said:
" Mr Obama seems unaware of, or at least unwilling to acknowledge, the hard lessons of European social democracy: that if you expend all your political efforts on redistributing wealth, you inevitably end up penalising the creators of it. So, pretty soon, you run out of new wealth and you are forced to ration and recycle the shrinking pot of what is left. And the absence of wealth creation means that it is not only the sum total of capital that diminishes, but the innovativeness and optimism of the society at large. It is not just wealth that fails to grow but creativity, ambition and personal fulfilment. "
turbobloke, thanks for that link.I agree the smaller the wealth gap engineered by Government, the lesser the motivation. And in any event, how long before the Government of the people decides it wants to sequester the wealth of the people. I do not rule it out for the situation is desperate.
Mermaid said:
turbobloke said:
" Mr Obama seems unaware of, or at least unwilling to acknowledge, the hard lessons of European social democracy: that if you expend all your political efforts on redistributing wealth, you inevitably end up penalising the creators of it. So, pretty soon, you run out of new wealth and you are forced to ration and recycle the shrinking pot of what is left. And the absence of wealth creation means that it is not only the sum total of capital that diminishes, but the innovativeness and optimism of the society at large. It is not just wealth that fails to grow but creativity, ambition and personal fulfilment. "
turbobloke, thanks for that link.I agree the smaller the wealth gap engineered by Government, the lesser the motivation. And in any event, how long before the Government of the people decides it wants to sequester the wealth of the people. I do not rule it out for the situation is desperate.
The Ostrich effect (for that is what the ravings of Holland and others in the EU and Obams who is cheerfully enjoying being President whilst the USA heads into deep do do has become IMO) in modern politicians is remarkable in its acceptability within supposedly economically aware democracies. The slightest examination of the consequences of such a lunatic "policy" shows it for exactly what it is. Rubbish. And complete and utter nonsense because no country can continue to live beyond its means not even or perhaps particularly the no longer AAA rated US of A.
Clearly this madness can only end in one way. It is simply a question of when. there is no solution, indeed there are no politicians in the western World looking for a solution in any of this. Politicians are simply taking everything they can get out of politics which as Tony Blair has demonstrated is about £10,000,000 a year currently. On which Tony Blair is, naturally, avoiding tax.
The timing of the impending disaster is the difficult judgement to make. There can be no doubt that the collapse is coming and that, when it comes, it will make the Great depression of the 1930;s look like a minor event. At that time millions of individuals went bust and became unemployed and starving. This time whole countries are collapsing and I hesitate to judge how bad thins could get.
I do agree with you that your comment
"I agree the smaller the wealth gap engineered by Government, the lesser the motivation. And in any event, how long before the Government of the people decides it wants to sequester the wealth of the people. I do not rule it out for the situation is desperate."
is absolutely spot on.
Whatever froth and nonsense the likes of Hollande and Von Rumpy can inculcate through political pressure the facts of the situation speak for themselves. The countries who are insolvent will fail and the will be horrendous mayhem in consequence across the world. I agree with you sequestration of the wealth of the people may well be one of the political attempts to counter this event.
Since western world politicians are already fiddling expenses gamblers and self serving toadies to boot I cannot see ant other result.
Mermaid said:
turbobloke said:
" Mr Obama seems unaware of, or at least unwilling to acknowledge, the hard lessons of European social democracy: that if you expend all your political efforts on redistributing wealth, you inevitably end up penalising the creators of it. So, pretty soon, you run out of new wealth and you are forced to ration and recycle the shrinking pot of what is left. And the absence of wealth creation means that it is not only the sum total of capital that diminishes, but the innovativeness and optimism of the society at large. It is not just wealth that fails to grow but creativity, ambition and personal fulfilment. "
turbobloke, thanks for that link.I agree the smaller the wealth gap engineered by Government, the lesser the motivation. And in any event, how long before the Government of the people decides it wants to sequester the wealth of the people. I do not rule it out for the situation is desperate.
Demographic pressures amplify left/right bickering. The left blame capitalistic failures driven by greed and corruption. The right bemoans government interference in efficient markets and inefficiency of state-delivered services. Yawn.
The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
Quick, everyone...this man is talking sense....burn him!
More seriously, I agree with you.
The three key challenges we face are;
1 The level of existing debt - this doesn't worry me, really. The mechanisms are all in place for writing down UK gilts through perpetualisation or cancellation of QE owned gilts, one of the reasons for GBP weakness and successfully used by us before.
2 The level of spending - this is more of a challenge and plays to 100thidiot's point above. We really need to get a grip on this, and it seems to me that the best way is to define what %age if GDP you are willing to spend, and then spend within it. It is simple, understandable and just like household economics. Infrastructure and capital spending is on top of the %age.
3 The aging population - les of a problem for us than many due to our immigration policies...all those Polish care workers pay tax which helps to pay for the residents pensions. To my mind, the elephant in the room are the unfunded liabilities - PFI, public sector pensions etc, and these will, eventually, take a cut through selective default and benefit haircuts.
Overall, I think we are getting there, but there are many difficult choices to come in the services government can afford to provide and the level of benefits it can afford to give.
Spain is not looking good.
The translation is sketchy but the numbers are all there.
Debt exceeding €882 Billion at the end of 2012
Debt Grew by €146 Billion in one year
Debt-to-GDP highest since 1910
Interest rates at record highs
And the final quote still transcends the language barrier ok
The translation is sketchy but the numbers are all there.
Debt exceeding €882 Billion at the end of 2012
Debt Grew by €146 Billion in one year
Debt-to-GDP highest since 1910
Interest rates at record highs
And the final quote still transcends the language barrier ok
Intermoney Chief Economist said:
is a dynamic that eventually leads to non-payment
HundredthIdiot said:
Demographic pressures amplify left/right bickering. The left blame capitalistic failures driven by greed and corruption. The right bemoans government interference in efficient markets and inefficiency of state-delivered services. Yawn.
The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
I think the true demographic now lies north and south in regard of the Euro,there clearly is no way out Spain is the worry Greece being the scapegoat.The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
Gary11 said:
HundredthIdiot said:
Demographic pressures amplify left/right bickering. The left blame capitalistic failures driven by greed and corruption. The right bemoans government interference in efficient markets and inefficiency of state-delivered services. Yawn.
The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
I think the true demographic now lies north and south in regard of the Euro,there clearly is no way out Spain is the worry Greece being the scapegoat.The underlying malaise must be structural. Is it an East/West thing? Are savings and debt equivalent? Whose savings do the debts represent?
At the end of the day, most people just want a productive working life and an old age free from dire poverty. If that is not achievable for the vast majority then we have a major problem.
The dishonesty and abuse of power of the EU politicians in order to hold the mechanism together when in the case of Spain, Greece, Portugal and all the other failing Euro states, collapse is inevitable in the end, is utterly reprehensible. But it is working at the moment and for that reason the Euro is holding up currently.
This can only end in a massive and spreading series of collapses within the EU. Once one state admits or effects failure the rest of the failing states will be forced by the markets to follow. There will be horrendous costs to the EU taxpayers and appalling poverty and disruption to the failing states. But, as the EU politicians have demonstrated that is not their concern. They will be happy because they personal plan to have escaped will have been enacted by then, taking the millions they have made out of EU politics with them, invested in a stable currency, and have moved onto the world stage that modern politics provides for former failed leaders.
The figures in the article quote on Spain by ArtDir speak for themselves. There is no future in this nonsense for any of the failing states. Their insolvency will ramp up steadily until the crunch comes, which it will.
Got this link in an email from iii this morning http://pro.moneyweek.com/myk-eob/LMYKP208/ It's frustratingly slow but could be worth forwarding on to some of your non-believer friends.
Andrew[MG] said:
Got this link in an email from iii this morning http://pro.moneyweek.com/myk-eob/LMYKP208/ It's frustratingly slow but could be worth forwarding on to some of your non-believer friends.
Is that the "Super Scary Monstrous Buy PMs or else?!" presentation?Andrew[MG] said:
Art0ir said:
Is that the "Super Scary Monstrous Buy PMs or else?!" presentation?
I left it running and it hasn't got to the "Buy our great book/pdf/video/advice for only £99.99" yetMoneyweek have predicted 300 of the last 0 depressions.
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