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

There Is One Problem With Europe's So-Called Austerity

Recommended Posts

http://www.zerohedge.com/news/2015-06-16/there-one-problem-europes-so-called-austerity

The one most recurring laments coming out of peripheral European countries which boast near record youth unemployment, in most cases around the 50% area, is that the only reason why there is no growth is due to "evil austerity", imposed upon them by Germany and other frugal Northern Europe overseerers, who do not permit the rampant issuance of debt to fund domestic spending and fiscual stimulus programs.

There is one problem with that: the peripheral European countries are not only issuing debt at a pace that is well greater than the "pre-austerity" period...

20150616_Austerity_0.jpg

... as Italian ANSA just confirmed:

Italy's public debt hit a new record high of 2.1945 trillion euros in April, up 10 billion euros on the previous high set in March, the Bank of Italy said on Monday.
The data was used as ammunition by opposition parties against Premier Matteo Renzi's government. "
Even though interest rates are down, the debt keeps going up vertiginously and it is threatening the stability of the public finances and of Italian people's savings,
" said Elvira Savino, an MP for Silvio Berlusconi's centre-right Forza Italia.
"
Renzi has not just abandoned the young, condemning them to unemployment, but he is also jeopardizing the future of the next generations
". Economy Minister Pier Carlo Padoan rubbished the criticism, saying it was normal for the debt to increase while Italy is running a budget deficit. "
This thing about the debt record is really boring
," he said.

Worse, the so-called structural reforms that these countries are implementing so they can escape from the dreaded austerity have resulted in debt to GDP ratios that, drumroll, have never been higher!

debt%20GDP%20ratios%202014%20update%20pi

In the meantime, without any reform and without any actual changes, the bad debt keeps accumulating and as Italy's Banking Association reported earlier today, bad loans, aka NPLs, in the country's financial system rose by 15% from a year ago and hit a record high of €191.5 billion in April, up from the €189.5 billion reported in March, and a total of 10% of all Italian bank assets. One can imagine what the real, unadjusted number is if the reported one rose by €25 billion in one year.

Revealing the illusory wealth?

Share this post


Link to post
Share on other sites

Austerity policies make growth and debt repayment unachievable. Then they argue the solution is more debt and more austerity. Austerity is merely a tool to enable asset striping.

More debt as an austerity measure.. if there is an oxymoron...

Share this post


Link to post
Share on other sites

Revealing the illusory wealth?

The less you spend, the more you save, the greater the sums you owe.....who would have thought......these sums just don't add up. Edited by winkie

Share this post


Link to post
Share on other sites

More debt as an austerity measure.. if there is an oxymoron...

Cutting spending at the ZLB in a recession/depression increases debt faster than by running higher employment/increasing gdp.

Nothing at all startling about this. Exactly Osbornes mistake too. But EZ members cannot devalue which makes it worse still & ECB has only just commenced QE which was also 5 years too late.

Zero edge trolling as usual.

Share this post


Link to post
Share on other sites

The principle is easy to understand, but the scale of this surprises me. Even though I understand the mechanism, seeing the numbers in stark reality is an eye opener

UK national debt approximately doubled from 1993 - 2007, but then again from 2007 - 2011. So much quicker even though the ££ amount involved is so much more.

From the graphs above, Spanish debt doubled from 1993 - 2003, then stayed flat and doubled again from 2008 - 2012. So much quicker even though the €€ amount involved is so much more.

Share this post


Link to post
Share on other sites

Cutting spending at the ZLB in a recession/depression increases debt faster than by running higher employment/increasing gdp.

Nothing at all startling about this. Exactly Osbornes mistake too. But EZ members cannot devalue which makes it worse still & ECB has only just commenced QE which was also 5 years too late.

Zero edge trolling as usual.

Not sure who is trolling, I was just remarking on basic semantics. And it is startling. Other than that, if you think bureaucrats maxing out on sustaining/growing their parasitic organism and spreading wrong incentives around i.e. confiscatory taxation is the way forward, show me an example of where it has worked out. (Those debts will need to be paid back one or another way at the expense of the productive private sector.) Examples to the contrary abound though, a recent one on the topic here:

http://globaleconomicanalysis.blogspot.co.uk/2015/06/lessons-from-carolina-paying-people-to.html

And yes, right, lay off or cut wages of useless government agencies so that the folk concerned can look for some more productive use of their time. All you seem to suggest that these species have a divine right to fleece those that do something productive and, on top of that, suggest that it's more productive reallocation of the economic resources?

Share this post


Link to post
Share on other sites

Not sure who is trolling, I was just remarking on basic semantics. And it is startling. Other than that, if you think bureaucrats maxing out on sustaining/growing their parasitic organism and spreading wrong incentives around i.e. confiscatory taxation is the way forward, show me an example of where it has worked out. (Those debts will need to be paid back one or another way at the expense of the productive private sector.) Examples to the contrary abound though, a recent one on the topic here:

http://globaleconomicanalysis.blogspot.co.uk/2015/06/lessons-from-carolina-paying-people-to.html

And yes, right, lay off or cut wages of useless government agencies so that the folk concerned can look for some more productive use of their time. All you seem to suggest that these species have a divine right to fleece those that do something productive and, on top of that, suggest that it's more productive reallocation of the economic resources?

Keynesianism should only ever be considered as a short-term fix to ameliorate the worst excesses of the free market. Long-term, it suppresses price discovery, encourages malinvestment, and both postpones and compounds the eventual unwinding. Sadly, the central bank mafia, conditioned by two generations of fairytale economics, is intellectually bankrupt and knows no other way of working. Bubble thinking is what they grew up with and all they have to fall back on.

Share this post


Link to post
Share on other sites

Keynesianism should only ever be considered as a short-term fix to ameliorate the worst excesses of the free market. Long-term, it suppresses price discovery, encourages malinvestment, and both postpones and compounds the eventual unwinding. Sadly, the central bank mafia, conditioned by two generations of fairytale economics, is intellectually bankrupt and knows no other way of working. Bubble thinking is what they grew up with and all they have to fall back on.

And that is the principal problem of interventionism... initial ideals or targets may sound great, but left in the hands of corruption prone or inept individuals the end results are always dire... the road to hell is paved with good intentions.

Share this post


Link to post
Share on other sites
(Those debts will need to be paid back one or another way at the expense of the productive private sector.)

A fair chunk of those debts were incurred to bail out parts of the 'productive' private sector that brought down the economy, and another chunk incurred trying to deal with the social fallout caused by that crash.

As far as I can tell every serious economic crisis of the past hundred years originated not from out of control public spending but from out of control private speculation- sure public spending rose in the aftermath but the origin was a failure of private 'wealth creators' to reign in their leveraged speculation.

Let's not overlook the fact that it was socialism that saved the system in 2008- massive transfers of the people's money into private institutions- so it's a bit rich to now argue that the private sector was the victim here- it was the public sector that was looted to save the capitalists, and the public sector that took on the burden of cleaning up their mess.

It's entirely mistaken to imagine that the private sector exists in opposition to the public sector- as 2008 proved our 'wealth creators' are avid supporters of socialism when they themselves are the beneficiaries of it- it's when socialists want to transfer money to smelly poor people that they suddenly remember their deep ideological opposition to the notion of wealth redistribution.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   29 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

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.