Europe’s problem is Austerity?

[Koios]

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?



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

Made it safely to dinner and back. One beer, it seems, is not over my limit. But thanks for having my back on that.

Meanwhile, why size matters:

Consider China, and its willingness to up the amount we're borrowing from them: With the US being its #1 customer, by a huge margin, and thus vital to China's continuing growth, which is slowing now that other, even lower-cost producers, are entering the market, what would the impact on China be if it allowed us to slip into economic disaster, or even a significant slump? Pretty devistating to China; yeah?

So they'll do everything they can to keep us afloat, economically. Other countries will, too, since the world's #1 economy, to them, equals: Their best customer, and vital to their success in making and selling stuff.

Does that bring it into focus?

 

[miami_thomas]

Europe has the same problem as we do=DEBT. They're being forced to CUT.

The left doesn't understand or doesn't care.

No, the crisis hit many European country because they could not borrow in their own currency. Same thing could never happen to the US.

"Same thing could never happen to the US" = lack of education.

It can and most likely will happen in the US. Further there is talk of going away from the dollar as the world's reserve currency and replacing it with the IMF's SDRs. There was already a report given that suggests that the IMF should start creating more SDRs to replace the dollar. Also other countries like the OPEC countries are starting to trade in their own dollars because the US is continually printing its money devaluing it so there is a huge move to get away from the dollar. A lot of people believe what you say, but they are dead wrong. It is not a question of if but rather when it will happen. One thing we have learned in history is that credit bubbles always burst and ours will to. The funny thing is the previous two world reserve currencies only lasted about as long as ours has now lasted.

 

[Oddball]

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.

I guess you didn't get the memo that Baghdad Ben Bernanke is now buying up mortgage-backed securities, to the tune of $40 billion a month, in an attempt to reinflate the housing bubble, huh?....No trouble brewing there.

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.

What you don't get, or outright refuse to acknowledge (my bet is on the latter), is the reason that they can borrow at such low rates is that the banksters at the Fed are still keeping rates artificially low, which is exactly the root cause of the housing bubble in the first place.

 

[LogikAndReazon]

Lets hope those crafty European socialists are smart enough to tax and spend their way to prosperity............LOl

 

[miami_thomas]

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?

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.

Interest rates in the US will eventually go up and when it does we are in big, big trouble.

 

[g5000]

No, the crisis hit many European country because they could not borrow in their own currency. Same thing could never happen to the US.

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.

That is because the entire world economy is on thin ice. We are the best of a bad lot, and so the Fed can get away with artificially keeping interest rates near zero.

This cannot last forever. In fact, the longer interest rates are artificially repressed, the more and more short term becomes the rollover of our debt, and this will blow up in our faces when interest rates rise again.

.

 

[Katzndogz]

The poor countries thought that by joining the EU they would have a pipeline to the whole of the EU to support the generous programs they dreamed up.

 

[miami_thomas]

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

Currently our government is pumping just over a trillion dollars of borrowed money into the economy and we are not growing hardly at all. We cannot keep this going because eventually our interest rates ill go up.

 

[miami_thomas]

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

Currently our government is pumping just over a trillion dollars of borrowed money into the economy and we are not growing hardly at all. We cannot keep this going because eventually our interest rates will go up.

 

[Koios]

Lets hope those crafty European socialists are smart enough to tax and spend their way to prosperity............LOl

Those that have, are. Look at Germany, France or the Nordic Model countries. They're remarkably stable, prosperous and have higher middle class standards of living than we do, despite the US being the richest country on earth, by a mile.

But other EU member countries are struggling, because they borrowed and spent. Remind you of anyone? Hmmm?

 

[SniperFire]

They just need to put more people on food stamps to get their economies rockin again!

 

[miami_thomas]

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.

Interest rates can only stay low as long as people are willing to buy the treasuries at those low rates. Eventually the rates will go back up.

 

[miami_thomas]

Lets hope those crafty European socialists are smart enough to tax and spend their way to prosperity............LOl

Those that have, are. Look at Germany, France or the Nordic Model countries. They're remarkably stable, prosperous and have higher middle class standards of living than we do, despite the US being the richest country on earth, by a mile.

But other EU member countries are struggling, because they borrowed and spent. Remind you of anyone? Hmmm?

This is not accurate. France is in financial trouble as it most other countries in Europe and even Germany is starting to slow down. You also should no our poor have bigger houses, more cars, more TVs, etc... that European middle class.

 

[g5000]

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.

There certainly is a bubble. A huge bond bubble.

.

 

[miami_thomas]

It is amazing how many Americans think the US is the titanic and that it will never sink. I blame this on our education system and how they don’t show the history of past failures just so they can continue to sell social programs.

 

[Koios]

This is not accurate. France is in financial trouble as it most other countries in Europe and even Germany is starting to slow down. You also should no our poor have bigger houses, more cars, more TVs, etc... that European middle class.

Remarkable overstatement. They are far from in trouble, and climbing out of the global economic downturn as well or better than most.

Here; educate yourself: France Economy Profile 2012

And what is France? Fifth or sixth largest economy, with relatively low population, and geographic area that's a friggin' postage stamp?

Not too shabby.

 

[LogikAndReazon]

Europe needs more federal, state, and govt civil servants to move their countries FORWARD !!!!!!

 

[GoneBezerk]

Socialism has been allowed to creep througout Europe because Europeans going back to the Dark Ages are used to being ruled by a ruling class and getting what they can in little communities.

Americans were Europeans that escaped that bullshit to strike out on their own to make a living without being owned by some ruling class.

Slowly the US has had immigrants from other countries that have brought their backwards mentality here and we've allowed the Federal Govt to grow too big to where there are Americans that have figured out they can live off the public trough. These idiots point to Europeans paying out the nose in taxes and still getting a small apartment for life, so they want that here.

 

[Koios]

Socialism has been allowed to creep througout Europe because Europeans going back to the Dark Ages are used to being ruled by a ruling class and getting what they can in little communities.

Americans were Europeans that escaped that bullshit to strike out on their own to make a living without being owned by some ruling class.

Slowly the US has had immigrants from other countries that have brought their backwards mentality here and we've allowed the Federal Govt to grow too big to where there are Americans that have figured out they can live off the public trough. These idiots point to Europeans paying out the nose in taxes and still getting a small apartment for life, so they want that here.

Not without military (vital) assisitance from France. And through most of the Revolutionary war, Franklin and Jefferson spent their time in Paris wooing the French into lending us more money, while Adams headed up to the Hague to get loans from them, not because we had a modicum of credit worthiness, but because our progressive ideas appealed greatly to their liberal ideology.

Imagine that.

 

[LogikAndReazon]

Socialism has been allowed to creep througout Europe because Europeans going back to the Dark Ages are used to being ruled by a ruling class and getting what they can in little communities.

Americans were Europeans that escaped that bullshit to strike out on their own to make a living without being owned by some ruling class.

Slowly the US has had immigrants from other countries that have brought their backwards mentality here and we've allowed the Federal Govt to grow too big to where there are Americans that have figured out they can live off the public trough. These idiots point to Europeans paying out the nose in taxes and still getting a small apartment for life, so they want that here.

Not without military (vital) assisitance from France. And through most of the Revolutionary war, Franklin and Jefferson spent their time in Paris wooing the French into lending us more money, while Adams headed up to the Hague to get loans from them, not because we had a modicum of credit worthiness, but because our progressive ideas appealed greatly to their liberal ideology.

Imagine that.

And here every non neo-communist progressive was thinking it was because the French loathed the Brits......................