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Spain Approves $19Bn-Euro Austerity Plan

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http://news.bbc.co.uk/1/hi/business/10134734.stm

The Spanish government has approved a 15bn-euro ($19bn; £13bn) austerity plan to rein in the public deficit and ease fears of a Greek-style debt crisis.

The programme is intended to reduce a deficit of 11% of GDP to 6% by 2011.

The plan, unveiled last week by PM Jose Luis Rodriguez Zapatero, will involve a 5% cut to public sector salaries.

Many Spaniards fear the effect the cuts will have on the economy, where the unemployment rate exceeds 20% - twice the eurozone average.

I wonder if they have factored in the GDP deflater effect of these cuts?

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5% cut in public sector salaries eh?

What do we need?

Under 15k - nothing

15k to 30k - 5% cut

30k to 50k - 10% cut

50k to 100k - 20% cut

over 100k - total cut - no-one in the public sector should earn over 100k.

It's what's happening in the private sector. I know a chap who was a FD for a big company who found himself re-shuffled into redundancy when he was 50. That was 2 years ago. He's just managed to get another job - at 30k a year less.

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Europe is going with the 1930's depression plan of trying to cut and tighten their belts out of the crisis.

better than the german plan of hyperinflation.

my pappy used to say to me....if you cant afford it, son, you cant have it.

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better than the german plan of hyperinflation.

my pappy used to say to me....if you cant afford it, son, you cant have it.

The German hyperinflation was in the mid 20's.. they tried the same old plan of cutting their way to prosperity during the great depression. Which led to a severe deflation and fall of the Weimar republic.

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The German hyperinflation was in the mid 20's.. they tried the same old plan of cutting their way to prosperity during the great depression. Which led to a severe deflation and fall of the Weimar republic.

didnt work, whichever decade it occured in.

wealth creation is all.

money becomes meaningless when it has no wealth to back it up.

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http://news.bbc.co.uk/1/hi/business/10134734.stm

I wonder if they have factored in the GDP deflater effect of these cuts?

No they haven't. Zapatero has called the end of the recession 6 times during the last 2 years, so this time when he says growth will pick up he must be right. It's the law of averages see! In fact he's so confident of growth picking up, he's about to increase income tax as well. Happy days indeed.

Edit: Just checked and they reckon the cuts will reduce GDP by 0.5%

Edited by LiveAndLetBuy

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Europe is going with the 1930's depression plan of trying to cut and tighten their belts out of the crisis.

Your post seems to allude that there is another potential choice - what do you think that is, considering what the markets are doing to countries and currencies at the moment?

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Your post seems to allude that there is another potential choice - what do you think that is, considering what the markets are doing to countries and currencies at the moment?

The only sensible way out is default. aa3 trumpeting of QE is madness.

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The only sensible way out is default. aa3 trumpeting of QE is madness.

Isn't QE the same as a partial default.

Let's say that the UK's net wealth is 1 trillion bananas and the money supply is 1 trillion Pounds so each Pound is worth one banana.

If the money supply is increased to 2 trillion Pounds, each Pound is now only worth half a banana.

The effect of QE in this example (with numbers attached purely for exposition) is equivalent to a partial default on Gilts except that the pain is borne by all holders of Sterling rather than just Gilt holders.

To my mind, this is a sneaky way to implicitly default rather than doing so explicitly.

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Isn't QE the same as a partial default.

Let's say that the UK's net wealth is 1 trillion bananas and the money supply is 1 trillion Pounds so each Pound is worth one banana.

If the money supply is increased to 2 trillion Pounds, each Pound is now only worth half a banana.

The effect of QE in this example (with numbers attached purely for exposition) is equivalent to a partial default on Gilts except that the pain is borne by all holders of Sterling rather than just Gilt holders.

To my mind, this is a sneaky way to implicitly default rather than doing so explicitly.

But, it's happened to the tune of 200 bill here, and the investors don't seem to be particularly worried. Since they must know that they've lost about 1/8 of a banana, why aren't they more upset about it?

Peter.

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But, it's happened to the tune of 200 bill here, and the investors don't seem to be particularly worried. Since they must know that they've lost about 1/8 of a banana, why aren't they more upset about it?

Peter.

They are. They have penalized the Pound versus the Dollar to the Tune of 1/4 of a banana.

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Isn't QE the same as a partial default.

Let's say that the UK's net wealth is 1 trillion bananas and the money supply is 1 trillion Pounds so each Pound is worth one banana.

If the money supply is increased to 2 trillion Pounds, each Pound is now only worth half a banana.

The effect of QE in this example (with numbers attached purely for exposition) is equivalent to a partial default on Gilts except that the pain is borne by all holders of Sterling rather than just Gilt holders.

To my mind, this is a sneaky way to implicitly default rather than doing so explicitly.

No. Capitalism and debt-based money can only survive by darwinism. The weak should flounder by default.

QE causes the strong to pay. It's absolute lunacy to have a debt-based system that won't allow default.

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No. Capitalism and debt-based money can only survive by darwinism. The weak should flounder by default.

QE causes the strong to pay. It's absolute lunacy to have a debt-based system that won't allow default.

I agree.

I was talking about the effects of what is happening.

You and I agree on what should be happening but isn't.

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Isn't QE the same as a partial default.

Let's say that the UK's net wealth is 1 trillion bananas and the money supply is 1 trillion Pounds so each Pound is worth one banana.

If the money supply is increased to 2 trillion Pounds, each Pound is now only worth half a banana.

The effect of QE in this example (with numbers attached purely for exposition) is equivalent to a partial default on Gilts except that the pain is borne by all holders of Sterling rather than just Gilt holders.

To my mind, this is a sneaky way to implicitly default rather than doing so explicitly.

true...ONLY if the extra 2trn go out into the marketplace.

if, as it is being used, to supply cash so banks can meet their liabilities, then no.

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Isn't QE the same as a partial default.

Let's say that the UK's net wealth is 1 trillion bananas and the money supply is 1 trillion Pounds so each Pound is worth one banana.

If the money supply is increased to 2 trillion Pounds, each Pound is now only worth half a banana.

The effect of QE in this example (with numbers attached purely for exposition) is equivalent to a partial default on Gilts except that the pain is borne by all holders of Sterling rather than just Gilt holders.

To my mind, this is a sneaky way to implicitly default rather than doing so explicitly.

They are. They have penalized the Pound versus the Dollar to the Tune of 1/4 of a banana.

Exactly - it's probably a more graceful haircut than an outright chop too.

There is no easy way out of this mess, but surely thoughts must turn to damage control and reform now?

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Exactly - it's probably a more graceful haircut than an outright chop too.

There is no easy way out of this mess, but surely thoughts must turn to damage control and reform now?

My view is a very simple but unpopular one.

The reason that we are in this mess is because many people, businesses and governments were lent money which they had no reasonable expectation of being able to repay from income.

Everything else (from CDOs to derivatives to hedge funds to shorting etc etc) is just noise. They facilitated the problems and allowed them to be perpetuated longer than they would otherwise have been but are not the root cause of the problem.

By choosing to address the noise rather than the signal, governments and monetary authorities are hoping to absolve themselves from blame and to gain enough time to prevent collapse.

The single best preventative medicine that could be prescribed to-day is a set of robust, prudent lending standards. With them in place, the potential impact of the noise would automatically reduce by a massive amount.

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haven't heard it called 'noise' before but I think it's a very apt description.they can muck around with banning shorts,naked CDS etc etc but it's not gonna stop the sell off.how can it?

they can even ban fractional reserve lending,move to a gold standard or full reserve,bubbles will still happen because it's human nature to be reckless and think you're indestructable,especially when the bulk of the old people who remmebr the last time we learned this lesson have died.it's not a coincidence that this has occurred 70/80 years after the last depression.is it?

life is full of cycles be they related to kondratiev,armstrongs Pi cycle or sunspots.

dont forget raleigh

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haven't heard it called 'noise' before but I think it's a very apt description.they can muck around with banning shorts,naked CDS etc etc but it's not gonna stop the sell off.how can it?

they can even ban fractional reserve lending,move to a gold standard or full reserve,bubbles will still happen because it's human nature to be reckless and think you're indestructable,especially when the bulk of the old people who remmebr the last time we learned this lesson have died.it's not a coincidence that this has occurred 70/80 years after the last depression.is it?

life is full of cycles be they related to kondratiev,armstrongs Pi cycle or sunspots.

Bubbles will always occur, agreed. However, when you pour credit into the equation, the bubbles get so big that their destruction presents systemic risk. A popped bubble which just punishes the foolish is one thing. A popped bubble which leaves everyone to pour their wealth into the black hole left behind, is another.

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Let it crash and burn. The real capital is still there.

That's the other option. I take it you don't have much cash deposited with banks then?

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Let it crash and burn. The real capital is still there.

Sounds a bit harsh but what you're proposing is 1000 times better than any of the alternatives....count me in!

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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