Will austerity destroy England?

[Failzero]

Yes ,especially if inacted prior to a harsh Winter ...

 

[francoHFW]

Spain, Greece, Ireland. and Iceland's banks invested in Pub Toxic assets and had building boom and busts too.. Greece also has rich who pay bribes instead of taxes.
The austerity Pubs and their equivalent, the tories, (both the most savage capitalist flag waving a-holes in the modern world) got in is a great way to get the dupes to elect you, but a terrible way to produce the jobs jobs jobs they promised. They BOTH suq, and so do their voters, be they a-holes or dupes, their constituency. Fact, dittoheads...

 

[francoHFW]

QED bump

 

[Bern80]

SPAIN took on too much debt and are therefore collapsing? Seriously, some cursory research would prove the folly of that claim.

Umm, no I think it says France up there bud.

But France is in much better shape than Spain, Bud. What is causing Spain to collapse?

Well here's just one person's opinion in a brief search I did. Not surprisingly, government spending comes up a few times.

9 Reasons Why Spain Is A Dead Economy Walking

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren't working they can't pay taxes and they can't provide for their families.

#2) In an effort to stimulate the economy, Spain's socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition.

#3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

#4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating. These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can't afford to pay more interest on their debt.

#5) There are 1.6 million unsold properties in Spain. That is six times the level per capita in the United States. Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

#6) The new "green economy" in Spain has been a total flop. Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a "green economy" would result in a flood of "green jobs". But that simply did not happen. In fact, a leaked internal assessment produced by the government of Spain reveals that the "green economy" has been an absolute economic nightmare for that nation. Energy prices have skyrocketed in Spain and the new "green economy" in that nation has actually lost more than two jobs for every job that it has created. But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

#7) Spain's national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy. If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues. But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default. The truth is that the Spanish government is caught in a "no win" situation.

#8) But even now the IMF is projecting that the Spanish economy is going nowhere fast. The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent. As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain's economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

#9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily. In fact, there is likely to be some very serious social unrest before all of this is said and done. On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. But that was only an appetizer. Spain's two main unions are calling for a major one day general strike to protest the government's planned reforms of the country's labor market. The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain. In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain's socialist government will be forced to call early elections.

Though interestingly, in reference to the title of the thread, while the author blames the Spanish government for a lot of the problem he essentially admits that things are so bad that most any austerity measure will indeed hurt the country a lot. He concludes things are so bad for Spain then no matter what the 'fix' ends up being it's gonna hurt people pretty bad. Which is why America can not afford to get to that point.

 

[Bern80]

Spain had a left-wing prime minister and a budget surplus and low debt before the financial crisis. Italy had a right-wing prime minister and a low budget deficit (but high debt) before the crisis. Both countries are in trouble right now, despite being in a very different situation than Greece or even England.

Spain's in trouble almost exclusively because people have decided that Spain is in trouble. There is very little balance sheet problem in Spain relative to other nations - what's killing them is primarily the national equivalent of bank panic.

I get the sneaking suspicion that much of the industrialized world's economic woes are manufactured. Seems to be a screwup in the book keeping coupled with insatiable greed.

Yep. Debt that just keeps going up and up and up is really no big deal at all.

 

[8537]

Not sure why we're trusting theeconomiccollapse blogger to have a rational opinion, but...

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren't working they can't pay taxes and they can't provide for their families.

Cart, meet horse. Spain had high unemployment during the last part of last decade, and that's a surprise to...who, exactly? Of course the numbers have gotten worse because capital has fled the country faster than Franco supporters.

#2) In an effort to stimulate the economy, Spain's socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition

This makes no sense. Spain has a lower level of debt than most other European countries and far less than the US.

#3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

Total public and PRIVATE debt? How did that creep in? Oh, I know how -because their public debt is low and it doesn't fit the meme. The US is well over 300% of GDP. Most other countries are higher than Spain. Big scary number, no meaningful context.

#4) The Spanish government has accumulated way more debt than it can possibly handle,

How did one arrive at that conclusion?

#7) Spain's national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy.

No, Spain's exterior image is onerous. Which has caused a crisis of confidence.

 

[Bern80]

Not sure why we're trusting theeconomiccollapse blogger to have a rational opinion, but...

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren't working they can't pay taxes and they can't provide for their families.

Cart, meet horse. Spain had high unemployment during the last part of last decade, and that's a surprise to...who, exactly? Of course the numbers have gotten worse because capital has fled the country faster than Franco supporters.

#2) In an effort to stimulate the economy, Spain's socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition

This makes no sense. Spain has a lower level of debt than most other European countries and far less than the US.


Total public and PRIVATE debt? How did that creep in? Oh, I know how -because their public debt is low and it doesn't fit the meme. The US is well over 300% of GDP. Most other countries are higher than Spain. Big scary number, no meaningful context.

#4) The Spanish government has accumulated way more debt than it can possibly handle,

How did one arrive at that conclusion?

#7) Spain's national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy.

No, Spain's exterior image is onerous. Which has caused a crisis of confidence.

I guess before proceeding further, regardless of whether we agree on the context, is there anything faulty with the numbers presented?

 

[8537]

Not sure why we're trusting theeconomiccollapse blogger to have a rational opinion, but...

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren't working they can't pay taxes and they can't provide for their families.

Cart, meet horse. Spain had high unemployment during the last part of last decade, and that's a surprise to...who, exactly? Of course the numbers have gotten worse because capital has fled the country faster than Franco supporters.



This makes no sense. Spain has a lower level of debt than most other European countries and far less than the US.


Total public and PRIVATE debt? How did that creep in? Oh, I know how -because their public debt is low and it doesn't fit the meme. The US is well over 300% of GDP. Most other countries are higher than Spain. Big scary number, no meaningful context.


How did one arrive at that conclusion?

#7) Spain's national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy.

No, Spain's exterior image is onerous. Which has caused a crisis of confidence.

I guess before proceeding further, regardless of whether we agree on the context, is there anything faulty with the numbers presented?

Well, I didn't go over each number and fact check it but the problem isn't the figures presented, it's the interpretation thereof. For example, statements such as "#3) The total of all public and private debt in Spain has now reached 270 percent of GDP." are just plain silly. It would be the same basic thing as me saying "There's a massive heatwave in Vermont this week!" and backing up that assertion with a weather report stating the high temperature was 81 degrees. Ireland's external debt was something like 600% of GDP before the recession even started.

and statements such as this: "#4) The Spanish government has accumulated way more debt than it can possibly handle," also are meaningless. Before the bank run on Spanish debt, they certainly did not have "more than they can handle" The run caused the perceived inability to pay, not vice-versa.

 

[Bern80]

Well, I didn't go over each number and fact check it but the problem isn't the figures presented, it's the interpretation thereof. For example, statements such as "#3) The total of all public and private debt in Spain has now reached 270 percent of GDP." are just plain silly. It would be the same basic thing as me saying "There's a massive heatwave in Vermont this week!" and backing up that assertion with a weather report stating the high temperature was 81 degrees. Ireland's external debt was something like 600% of GDP before the recession even started.

I think the issue is the way the figures are looked at. Some people look at GDP as just the that, Gross Domestic Product. The value of all goods and services produced. But GDP can be and is looked at another way; The value of something can't be determined until someone buys it. If someone buys a widget for $50 than the value of the widget is $50. That $50 payment is essentially income to some business or person, so GDP can also be looked at as the total income of a nation. Soooo, if a nation like Ireland really had a debt 6 times it's national income. Or even more simplified if YOU owed 6 times what you take in a year, you really don't think that constitutes a bit of a problem?

and statements such as this: "#4) The Spanish government has accumulated way more debt than it can possibly handle," also are meaningless. Before the bank run on Spanish debt, they certainly did not have "more than they can handle" The run caused the perceived inability to pay, not vice-versa.

I agree it's vague. So let's see if we can agree on what 'more than you can handle means'. I would say characteristic such debt growing instead of shrinking would 'not handling your debt'. What do you think? How much debt would be too much debt?

 

[8537]

I think the issue is the way the figures are looked at. Some people look at GDP as just the that, Gross Domestic Product. The value of all goods and services produced. But GDP can be and is looked at another way; The value of something can't be determined until someone buys it. If someone buys a widget for $50 than the value of the widget is $50. That $50 payment is essentially income to some business or person, so GDP can also be looked at as the total income of a nation. Soooo, if a nation like Ireland really had a debt 6 times it's national income. Or even more simplified if YOU owed 6 times what you take in a year, you really don't think that constitutes a bit of a problem?

Yes, that's a problem... for Ireland! 600% of GDP in external debt is a big problem. Spain is far less than half of that amount, less than the US or England or Japan or....The list goes on.

I agree it's vague. So let's see if we can agree on what 'more than you can handle means'. I would say characteristic such debt growing instead of shrinking would 'not handling your debt'. What do you think? How much debt would be too much debt?

This is a more complicated discussion If you're talking about total public and private debt, it's even more complicated because it depends on whether the debt is internal or external. Strictly in terms of public debt, I'd agree that we should attempt to maintain debt levels at or below some portion of total income - and over the past 50 years, that's typically been about 60% or so. Seems reasonable enough.

On the other hand, the debt level obviously needs to change when national income declines because you're carving a smaller pie. To counterbalance a shrinking economy, I would support extending that debt percentage much higher. The hard part, politically, is bringing the debt level back in line during the expansion period.

 

[Polk]

The part of Keynes's writings people always forget is that he called for running a surplus during the boom.