Europe’s problem is Austerity?

[ilia25]

I don't think so. I think the Med Countries, greece, italy, etc. are the problem. They over-borrowed, in part due to the free-flowing capital vis a vis credit default swaps, which our banks cooked up after we gutted Glass-Steagall. It was easy money, and they over borrowed.

Germany, France, UK are still major players and having to carry the water for other EU member states who acted irresponsibly, albeit with some German, French, UK (and US) banks doing the lending willy-nilly.

Blame to go around. But restore Glass-Steagall seems like the no-brainer first step on the road to fixing the mess.

They never really "over borrowed". Their ability to service their debt was only undermined when the austerity was forced on them by ECB and Germany.

They most certainly did over borrow. Wall Street firms helped Greece hide its debts. Then when there was a change in government, all the hidden debt was discovered and disclosed to the world.

And what they disclosed was still less of a debt than Japan had for years.

It's not about the debt levels, it's about ECB and forced austerity.

 

[Koios]

Europe’s problem is Austerity?

I don't think so. I think the Med Countries, greece, italy, etc. are the problem. They over-borrowed, in part due to the free-flowing capital vis a vis credit default swaps, which our banks cooked up after we gutted Glass-Steagall. It was easy money, and they over borrowed.

Germany, France, UK are still major players and having to carry the water for other EU member states who acted irresponsibly, albeit with some German, French, UK (and US) banks doing the lending willy-nilly.

Blame to go around. But restore Glass-Steagall seems like the no-brainer first step on the road to fixing the mess.

They never really "over borrowed". Their ability to service their debt was only undermined when the austerity was forced on them by ECB and Germany.

Not how it worked. Derivatives that had so many hidden traps, even the folks selling them could never fully understand what they were selling, is what happened to Greece and others, including many cities and counties in the US. They get a package that they think lowers the cost of servicing the debt, making their budgets look rosy as all get out allowing new projects to get underway ... then the bottom drops out of the market and mortgage-backed securities, and the interest and payments required to service the debt skyrockets. So austerity is their only option, because they have to pay loans and have less for running their country, which shrinks their economy, making revenue worse still, and it begins spiraling downward. (debt crisis) Ergo, Germany and France helping out.

 

[ilia25]

Well, it's a good thing that our central banksters would never ever buy up federal debt to float their spendthrift irresponsibility.

Oh, wait.....

Yes, wait. It is because Fed is ready to buy the US debt, the US will never default. And that is why the US can borrow at low rates despite the huge deficits.

We spend less on servicing our 16 trillions of debt in 2012 than we did in 2009, when our debt was only 10 trillion.

Yeah...They'll never default, even if it means that they will have to start printing up these:

That will not happen either. In fact, Fed will not have to print a single dollar to that end -- the fact that it can is enough to keep the rates low.

 

[Oddball]

Yes, wait. It is because Fed is ready to buy the US debt, the US will never default. And that is why the US can borrow at low rates despite the huge deficits.

We spend less on servicing our 16 trillions of debt in 2012 than we did in 2009, when our debt was only 10 trillion.

Yeah...They'll never default, even if it means that they will have to start printing up these:

That will not happen either. In fact, Fed will not have to print a single dollar to that end -- the fact that it can is enough to keep the rates low.

Nah...Hyperinflation could never happen here!

 

[ilia25]

I don't think so. I think the Med Countries, greece, italy, etc. are the problem. They over-borrowed, in part due to the free-flowing capital vis a vis credit default swaps, which our banks cooked up after we gutted Glass-Steagall. It was easy money, and they over borrowed.

Germany, France, UK are still major players and having to carry the water for other EU member states who acted irresponsibly, albeit with some German, French, UK (and US) banks doing the lending willy-nilly.

Blame to go around. But restore Glass-Steagall seems like the no-brainer first step on the road to fixing the mess.

They never really "over borrowed". Their ability to service their debt was only undermined when the austerity was forced on them by ECB and Germany.

Not how it worked. Derivatives that had so many hidden traps, even the folks selling them could never fully understand what they were selling, is what happened to Greece and others, including many cities and counties in the US.

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

 

[Oddball]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

 

[usmcstinger]

It is absolutely incredible that they are still blaming all the problems in Europe on the austerity measures and not on the debt. Austerity measures are a result of too much spending accumulating into a huge deficit that grew into too much debt. What are they supposed to do if not raise taxes and make cuts? They can’t keep spending and borrowing at the interest rates being offered. They think things will get better but they are mistaken because they think eventually we can just go back to spending enormous amounts of money with low taxes and borrowing to cover the difference. That and they obviously are not taking into consideration the fact that the US will be the next credit bubble to bust and it is going to be so big that it will certainly set of a chain reaction unlike any ever seen. We thought all the previous credit bursts were bad just wait until this one hits.


Euro zone falls into second recession since 2009 | Reuters

Evidently France has seen the light and has moved to the right. Does Obama think he can get a different result by using Keynesian Economics? This system has never had a longterm positive effect. Germany veered right a few years ago and has the strongest economy in Europe.
Francois Hollande lurches Right in historic U-Turn to save French economy - Telegraph
http://www.telegraph.co.uk/finance/...-historic-U-Turn-to-save-French-economy.htmln THIS LINK NEEDS TO BE READ.

 

[ilia25]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

Aside from the fact that there is no such thing as "an unfettered market", keeping the rates low is bad because?...

 

[Koios]

They never really "over borrowed". Their ability to service their debt was only undermined when the austerity was forced on them by ECB and Germany.

Not how it worked. Derivatives that had so many hidden traps, even the folks selling them could never fully understand what they were selling, is what happened to Greece and others, including many cities and counties in the US.

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

It did, in towns and counties, in the US. Thankfully no states. But we ain't Greece. We're the world's largest economy. And there's a real big drop off to #s 2 an 3 (China, Japan). So we have some incredible borrowing power, along with a world that'll cover our mistakes, since in country-speak, we're too big to fail. We get a bug-bite and the world itches. So we get a lot of slack.

 

[GoneBezerk]

Liberals spend all the money, then blame not having money on being poor.

 

[Koios]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

You really shouldn't use words like "ignoramus." You cannot imagine how ironic it is.

Just take my word on that. I've got your back.

 

[ilia25]

Not how it worked. Derivatives that had so many hidden traps, even the folks selling them could never fully understand what they were selling, is what happened to Greece and others, including many cities and counties in the US.

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

It did, in towns and counties, in the US. Thankfully no states. But we ain't Greece. We're the world's largest economy.

Yes, but our government debt is 16 trillions, not 400 billions that Greece owes. And Japan's debt is 13 trillions.

The ability to service debt is determined by ratio of the debt to income, not by the absolute size of the debt.

And there's a real big drop off to #s 2 an 3 (China, Japan).

And yet Japan seems to have even more borrowing power than US -- at least it pays lower interest, while having worse debt to GDP ratio. Why?

So we have some incredible borrowing power

Yes, but why? Why would size matter?

And if it does, why Spain borrows at 5% while having 70% debt to GDP ratio, but smaller Canada pays close to 0% interest while having 83% ratio?

 

[Koios]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

It did, in towns and counties, in the US. Thankfully no states. But we ain't Greece. We're the world's largest economy.

Yes, but our government debt is 16 trillions, not 400 billions that Greece owes. And Japan's debt is 13 trillions.

The ability to service debt is determined by ratio of the debt to income, not by the absolute size of the debt.

And there's a real big drop off to #s 2 an 3 (China, Japan).

And yet Japan seems to have even more borrowing power than US -- at least it pays lower interest, while having worse debt to GDP ratio. Why?

So we have some incredible borrowing power

Yes, but why? Why size matters?

1. Debt vs GDP is in play. Also full faith and credit. Who'd ya rather bet on: Greece or the US?

2. Japan is a country of considerable integrity, and highly regarded. Plus no GOP/Tea Party nincumpoops in Japan playing chicken with potential default.

3. Our size matters because as go we, so goes the world economy. We're global in our impact. Japan, too, has tremendous impact, albeit, most so in Asia. Ergo, Asian Currency Crisis a while back, which hurt us little and in some ways helped.

 

[kiwiman127]

Why tread into austerity when there is already a weak economy?
Cutting spending and raising taxes slows down growth and Europe is a great case example of what happens, another recession.
Recently, 350 economist wrote a letter to Congress, below is their reasoning to why not to go with austerity measures when the economy is already shaky.

"Yet too many in Washington are fixated on cutting public spending to balance the budget, not on how to put people back to work and get our economy going. There is no theory of economics that explains how we can deflate our way to recovery. Businesses are not basing investment decisions on how much Congress cuts the debt in 2023. As Great Britain, Ireland, Spain and Greece have shown, inflicting austerity on a weak economy leads to deeper recession, rising unemployment and increasing misery.

In a deep recession, deficit reduction is a moving target. If you cut spending and consumer purchasing power in an already depressed economy, unemployment rises and revenues fall — and the goal of a smaller deficit keeps receding like a mirage in a desert. When private purchasing power is depressed by the aftermath of a financial collapse, only public investment can make up the gap."
Jobs and Growth, Not Austerity - Campaign for America's Future

Learn from Europe.

Other articles:
A deficit of common sense
Fiscal austerity: A deficit of common sense | The Economist

Excessive austerity doesn’t pay, IMF economists show
Austerity | Economics Intelligence

Relax austerity to boost growth, urges Capital Economics
Relax austerity to boost growth, urges Capital Economics - Telegraph

 

[ilia25]

It did, in towns and counties, in the US. Thankfully no states. But we ain't Greece. We're the world's largest economy.

Yes, but our government debt is 16 trillions, not 400 billions that Greece owes. And Japan's debt is 13 trillions.

The ability to service debt is determined by ratio of the debt to income, not by the absolute size of the debt.



And yet Japan seems to have even more borrowing power than US -- at least it pays lower interest, while having worse debt to GDP ratio. Why?

So we have some incredible borrowing power

Yes, but why? Why size matters?

1. Debt vs GDP is in play. Also full faith and credit. Who'd ya rather bet on: Greece or the US?

How about Spain vs US? Or Ireland vs Canada?

Greece had integrity problems, but Ireland never did. Its GDP do debt ratio is almost the same as that of Belgium. So why it was Ireland that had to ask for a bailout, and not Canada or Belgium?

3. Our size matters because as go we, so goes the world economy. We're global in our impact.

Again, why does it matter? If anything it makes things worse for the US or Japan, as no one is going to bail them out either.

Even if you look only at US historically -- we are in a much worse fiscal situation than before the crisis hit in 2008. Why then our borrowing rates are now lower than ever before?


All I'm trying to say is that your model cannot explain a lot of things. Maybe you should think about it.

 

[Koios]

Yes, but our government debt is 16 trillions, not 400 billions that Greece owes. And Japan's debt is 13 trillions.

The ability to service debt is determined by ratio of the debt to income, not by the absolute size of the debt.



And yet Japan seems to have even more borrowing power than US -- at least it pays lower interest, while having worse debt to GDP ratio. Why?



Yes, but why? Why size matters?

1. Debt vs GDP is in play. Also full faith and credit. Who'd ya rather bet on: Greece or the US?

How about Spain vs US? Or Ireland vs Canada?

Greece had integrity problems, but Ireland never did. Its GDP do debt ratio is almost the same as that of Belgium. So why it had to ask for a bailout?

3. Our size matters because as go we, so goes the world economy. We're global in our impact.

Again, why does it matter? If anything it makes things worse for the US or Japan, as no one is going to bail them out either.

Even if you look only at US historically -- we are in a much worse fiscal situation than before the crisis hit in 2008. Why then our borrowing rates are now lower than ever before?

It's feeling circular and a cold beer and dinner out awaits. So I'll go with the easy answer: certs me. You win.

Have a good night.

 

[ilia25]

1. Debt vs GDP is in play. Also full faith and credit. Who'd ya rather bet on: Greece or the US?

How about Spain vs US? Or Ireland vs Canada?

Greece had integrity problems, but Ireland never did. Its GDP do debt ratio is almost the same as that of Belgium. So why it had to ask for a bailout?

3. Our size matters because as go we, so goes the world economy. We're global in our impact.

Again, why does it matter? If anything it makes things worse for the US or Japan, as no one is going to bail them out either.

Even if you look only at US historically -- we are in a much worse fiscal situation than before the crisis hit in 2008. Why then our borrowing rates are now lower than ever before?

It's feeling circular and a cold beer and dinner out awaits. So I'll go with the easy answer: certs me. You win.

Have a good night.

You too. Enjoy your beer responsibly

 

[Oddball]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

You really shouldn't use words like "ignoramus." You cannot imagine how ironic it is.

Just take my word on that. I've got your back.

You don't even have your own back, ignoramus.

 

[Oddball]

Then why the same thing didn't happen to the US? Why the US are not paying down its debt, are not engaging in austerity and yet they can borrow at the rates lower than inflation?

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

Aside from the fact that there is no such thing as "an unfettered market", keeping the rates low is bad because?...

Keeping them artificially low tends to inflate value bubbles, which always burst and negatively impact the overall economy....Housing bubble, tech bubble....

And just because there is no unfettered market doesn't change the fact that the interest rates would be quite significantly higher if the Fed wasn't keeping them artificially low.

 

[ilia25]

Because the issuer of our commercial script is keeping the interest rates artificially below what an unfettered market would set them, you ignoramus.

Aside from the fact that there is no such thing as "an unfettered market", keeping the rates low is bad because?...

Keeping them artificially low tends to inflate value bubbles, which always burst and negatively impact the overall economy....Housing bubble, tech bubble....

Well, there is no bubble now. What we have instead is underperforming economy and high unemployment. Which means we need stimulus in form of low rates.

And just because there is no unfettered market doesn't change the fact that the interest rates would be quite significantly higher if the Fed wasn't keeping them artificially low.

And what if I tell you that the short-term rates have *always* been set by the Fed? That is how the Fed implements its monetary policy, by setting the short term interest rates!


What many people don't get is that it is not a coincidence that the US can borrow at low rates. There is a reason for that, and it is the same reason that makes the government borrowing so much money in the first place. Both things -- huge deficits and low borrowing rates -- are caused by the economic depression we are living in.