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LuckyOne

At Least Trichet Understands .......

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Something that drove me nuts during the election campaign was the assumption by Labour that it knows better what to do with money than individuals do. This was expemplified by the assertation that lowering NI would "take money out of the economy" rather than leaving it in a different pocket (the private sector rather than the public sector)

Good to see good old JCT siding with those who are concerned about the long term impact of deficits on the economy. Obama and friends (Krugman), Labour and friends (Blanchflower), Japan and the Greek unions seem to be the only ones who are not yet facing up to the reality that borrowing to finance structural consumption is a bad idea.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=at22UMsQnbIQ&pos=1

European Central Bank President Jean- Claude Trichet pressed governments to trim their budget deficits, saying such action would boost economic growth by improving confidence of consumers and investors.

“We are in a period where we have to manage budgets very tightly,” Trichet told journalists in Aix-en-Provence, France. “I have no problem with austerity, rigor. I call this good budgetary management.”

The comments reinforce plans set out by Group of 20 leaders last month in Toronto, where the countries representing 85 percent of the world economy responded to plans by European governments to tackle the region’s sovereign debt crisis by slashing budget deficits.

Advanced G-20 economies pledged June 27 to halve deficits by 2013 and start to stabilize their debt-to-output ratios by 2016. While President Barack Obama is pushing his counterparts to focus on spurring growth, leaders in the U.K. Germany, Spain and Italy are already tightening spending to bolster investor confidence.

Economists at Goldman Sachs Inc. and BNP Paribas SA have trimmed their growth forecasts, partly in response to the spending cuts and tax increases already announced. Trichet said today that deficit reduction won’t choke growth and a failure to stem budget gaps would be equally risky for the recovery.

“Confidence is key for growth, and if you cannot have confidence in the sustainability of the fiscal policies then you have no growth because you have no confidence,” he said. “The two things are complimentary.”

Trichet urged European governments to boost growth through structural changes and to publish results of stress tests on banks as part of their efforts to boost confidence in the financial system.

“Industrialized countries as a whole, on both sides of the Atlantic and Japan have to reinforce their capacity to adapt to an environment which is changing rapidly -- to embark on structural reforms,” he said.

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The State can guarantee the money will be spent if they have it.

They can only hope individuals will if they have it.

At any rate, I agree with Trichet, GDP is overrated and sooo yesterday.

True.

Individuals (as individuals or as owners of businesses) are better at understanding when to spend and when to repair balance sheets than governments.

The fact that the state's balance sheet was such a mess after a such a long period of a economic plenty is our real problem as the late realisation of the need for repair is coming at a time of economic weakness which will make the effects worse.

Where were Krugman, Blanchflower et al at the time of the boom? Their current arguments would be credibile if they were screaming and shouting for the build up of fiscal reserves during the boom that could be spent during the bust.

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Beware Frenchmen bearing Greek gifts.

Or something

I think what JCT mostly understands is that he's in trouble - Merkel's losing control, the Frensch banks have been caught washing their smalls through Trichet's ECB, and Christian Wulff is a very different kind of jackalope (one unlikely to put up with the Parisien nonsense much longer).

In my view, the circus continues - but there's a new troupe of clowns jostling for the main stage.

Edited by ParticleMan

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The State can guarantee the money will be spent if they have it.

They can only hope individuals will if they have it.

At any rate, I agree with Trichet, GDP is overrated and sooo yesterday.

It is another stock versus flow argument.

Good news with respect to flows are often used to mask terrible positions with respect to stock.

Slowly but surely, the world is beginning to understand that stocks matter at least as much as flows.

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"I think what JCT mostly understands is that he's in trouble."

I agree with that but I don't think he understands why or how, which is why euro interest rates are where they are.

Why are euro interest rate 2x the uk and 3x the usa?

Before all the euro QE and the euro land debt crisis when it was just an anglo-saxon profligacy thing .... errr .... weell .... arguable ...?

But now?

And before the euro problems were apparent to the rest of us and we could only sense them because only Trichet had the data ..... why let the euro accumulate 30% against sterling and whatever against the dollar?

Ze Jermans and French do not understand those Anglos-Saxon things, international money markets.

(Not all Jermans of course or French, but maybe a few, more than seldom, perhaps even often, possibly even every last farking one of 'em but by no means all)

Edited by indirectapproach

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  • 144 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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