Jump to content
House Price Crash Forum
Sign in to follow this  
FTBagain

Europe In Deficit

Recommended Posts

Whats german growth though?

If GDP is growing by more than just over 3% (what their deficit is growing by) then in relative terms Debt:GDP is shrinking.

As ive said before, debt as such is no bad thing. Most budgets 1945-70 were in deficit, and yet because they were less than the strong levels of gdp growth they were sustainable.

The difference in the UK is the deficit is 10.5%, growth is 1.5% or so.

Balls is a moron if he thinks he can encourage actual sustainable growth through this level of borrowing.

Share this post


Link to post
Share on other sites

Nm, according to those charts, german GDP is growing at 3.6%, the deficit is 3.3%, so in govt terms at least is sustainable.

Obiviously, that ignores the private sector debt load, which may be an entirely different story, but given private credit growth the world over has collapsed, maybe not...

Share this post


Link to post
Share on other sites

Whats german growth though?

If GDP is growing by more than just over 3% (what their deficit is growing by) then in relative terms Debt:GDP is shrinking.

As ive said before, debt as such is no bad thing. Most budgets 1945-70 were in deficit, and yet because they were less than the strong levels of gdp growth they were sustainable.

The difference in the UK is the deficit is 10.5%, growth is 1.5% or so.

Balls is a moron if he thinks he can encourage actual sustainable growth through this level of borrowing.

In terms of numbers your analysis sounds correct but you forget another factor: the type of gdp growth generated.

With constant deficit financing and associated inflation, what you get is the encouragement of economic activities that are wealth destroying rather than wealth accretive. For example, you may get gdp figures boosted by huge numbers of estate agent fees while the country ruins itself spending all its capital buying and selling houses to one another. Deficits are a problem no matter what once a majority of people are clued up to the inflation game.

Edit to add: it is NOT sustainable.

Edited by _w_

Share this post


Link to post
Share on other sites

In terms of numbers your analysis sounds correct but you forget another factor: the type of gdp growth generated.

With constant deficit financing and associated inflation, what you get is the encouragement of economic activities that are wealth destroying rather than wealth accretive. For example, you may get gdp figures boosted by huge numbers of estate agent fees while the country ruins itself spending all its capital buying and selling houses to one another. Deficits are a problem no matter what once a majority of people are clued up to the inflation game.

Edit to add: it is NOT sustainable.

To be fair Germany has a huge export based economy so they could probably get by with running a deficit for quite sometime, provided that export economy keeps running ahead. The problem is they need countries like Greece to buy their goods. Sooner or later the wheels come off.

Many economists say all they (and the Chinese) need to do is rebalance their economies to increase local consumption. A bit like Ireland then. :huh: If the economists want to know where that leads just look at the deficit graph for Ireland, that is truely scary.

The whole globalist economy seems to be one huge Ponzi scheme.

Share this post


Link to post
Share on other sites

An interesting interactive graph from the BBC.

http://www.bbc.co.uk/news/business-13366011

The UK deficit is as bad as Greece's.

Even Germany is breaking the 'limits'.

As for Ireland, well see for yourselves...

Somebody, somewhere is going to default, it's inevitable. Default or revolution.

The most telling part of the graph is the Irish deficit which shows a kamikaze dive to oblivion when they bailed out the banks.

At least the Greeks and Portuguese have largely blown the money on themselves so everyone saw some benefit in the good times.

By contrast the Irish have suffered one of the biggest ponzi property bubbles of all time in which only a few really made a mint.

BTW deficits alone dont tell the whole story as economy that run huge trade supluses like Germany or Japan can normally sustain them for years. During the British Empire the UK government ran deficits well in excess of those facing the us today in percentage terms but of course the profits from controlling trade with the colonies more than made up for the government debt.

You have to say the Irish deficit is quite an achievement for such a small country in such a short time. It just goes to show how unhinged the whole global financial system has become. By contrast Britain has had to fight a couple of World Wars plus numerous minor ones and lose an Empire to get in the mess it is today.

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

In terms of numbers your analysis sounds correct but you forget another factor: the type of gdp growth generated.

With constant deficit financing and associated inflation, what you get is the encouragement of economic activities that are wealth destroying rather than wealth accretive. For example, you may get gdp figures boosted by huge numbers of estate agent fees while the country ruins itself spending all its capital buying and selling houses to one another. Deficits are a problem no matter what once a majority of people are clued up to the inflation game.

Edit to add: it is NOT sustainable.

This is what Denningers been on a lot about recently, saying there's been no 'growth' in the US economy since 1983 given where the debt has gone (ie previously on business investment, but over the past 25 years or so on consumer and govt spending) He did add the caveat that business investment isnt a guarantee of growth.

Obviously whether govt spends their bit of the deficit on infrastructure is another matter. Liebour's spending plans seemed to rest on encouraging people not to work by paying generous benefits, paying their mortgages etc

What i'm trying to say is that debt doesnt need to be speculative and inflationary. If its spent on improving productivity, it could well be deflationary, if unit output's increase more than credit 'inputs'. Ie more credit chasing even more goods, compared to speculation with more credit chasing the same amount of goods.

Share this post


Link to post
Share on other sites

This is what Denningers been on a lot about recently, saying there's been no 'growth' in the US economy since 1983 given where the debt has gone (ie previously on business investment, but over the past 25 years or so on consumer and govt spending) He did add the caveat that business investment isnt a guarantee of growth.

Obviously whether govt spends their bit of the deficit on infrastructure is another matter. Liebour's spending plans seemed to rest on encouraging people not to work by paying generous benefits, paying their mortgages etc

What i'm trying to say is that debt doesnt need to be speculative and inflationary. If its spent on improving productivity, it could well be deflationary, if unit output's increase more than credit 'inputs'. Ie more credit chasing even more goods, compared to speculation with more credit chasing the same amount of goods.

The problem with focussing on productivity is that it ignores resource costs. If your resource costs start to climb faster than your productivity gains your profits get squeezed and that debt pile starts to look a whole lot bigger...

Share this post


Link to post
Share on other sites

By contrast Britain has had to fight a couple of World Wars plus numerous minor ones and lose an Empire to get in the mess it is today.

We haven't lost an empire, not yet. Don't forget a vast portion of the world speaks English and an even larger portion runs 'British Liberal State Capitalism, version 4.0'.

The USA is to the British Empire what Constantinople was to Rome.

Share this post


Link to post
Share on other sites

This is what Denningers been on a lot about recently, saying there's been no 'growth' in the US economy since 1983 given where the debt has gone (ie previously on business investment, but over the past 25 years or so on consumer and govt spending) He did add the caveat that business investment isnt a guarantee of growth.

Obviously whether govt spends their bit of the deficit on infrastructure is another matter. Liebour's spending plans seemed to rest on encouraging people not to work by paying generous benefits, paying their mortgages etc

What i'm trying to say is that debt doesnt need to be speculative and inflationary. If its spent on improving productivity, it could well be deflationary, if unit output's increase more than credit 'inputs'. Ie more credit chasing even more goods, compared to speculation with more credit chasing the same amount of goods.

It has 'gone' on the expansion of global trade which has been largely in dollars (reserve currency). Obviously it's a bit of a p1sser if the dollar happens to also be your currency since 'you' end up with all the debt, particularly if your main creditor is running mega surpluses via a currency peg forcing you to run mega trade deficits (for the last decade or so). (EDIT to clarify I mean US issues the 'debt' but of course China holds the paper IOUs - oh dear).

Perhaps if China were to recycle these surpluses into rebuilding the US' knackered infrastructure............I suspect it's more likely this arrangement will fall apart before that happens and China's trade surpluses will evaporate, closing and at some point reversing the US trade deficit and in turn the requirement to finance them. Whether China will 'survive' that event is an open question.

Edited by Red Karma

Share this post


Link to post
Share on other sites

This is what Denningers been on a lot about recently, saying there's been no 'growth' in the US economy since 1983 given where the debt has gone (ie previously on business investment, but over the past 25 years or so on consumer and govt spending) He did add the caveat that business investment isnt a guarantee of growth.

Obviously whether govt spends their bit of the deficit on infrastructure is another matter. Liebour's spending plans seemed to rest on encouraging people not to work by paying generous benefits, paying their mortgages etc

What i'm trying to say is that debt doesnt need to be speculative and inflationary. If its spent on improving productivity, it could well be deflationary, if unit output's increase more than credit 'inputs'. Ie more credit chasing even more goods, compared to speculation with more credit chasing the same amount of goods.

As far as any one state is concerned (e.g. the UK)...

For debt to be spent on productivity, don't you have to be producing things?

Also, if improvements in productivity result in fewer jobs, doesn't that create another set of economic and social problems?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 312 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.