Austerity problem or something else?

Discussion in 'Economics' started by HomelyWizzard, Jun 6, 2012.

  1. Economical fact is that Europe's debt problem is caused by the 2008 financial crisis where central banks told the nations pour liquidity into their system in tunes of ~400 billion euros. Spain and other countries were all forced to participate in this. No country was immune except Island who smartly gave a finger to the central banks and defaulted.
    So, Spain's debt, on paper has doubled meanwhile the Government has been shrinking at the same time. It is sheer propaganda lie that Europe's problem is socialism and overspending. Virtually it is the flooding the nations with money and now decrying their using that money to write off bad loans and losses that money disappeared. It is not because the French had 6-weeks vacations per annum, rather it is the 2008 crash that causes the problem they are facing today.
    How they are going to get out is this mess with the German's controlling the money supply and asking cuts in every place but in Germany. Social spending has not been cut the Germany, the Turkish immigrants and other outcasts, the drecks of the society still get a very decent social safety net. All other nations go to hell! Hitler could not have dreamed this one up!
  2. achilles28


    Blame it all on the Germans? Takes two to Tango? The backward periphery got suckered into the Euro by the lure of cheap debt they wasted on lavish programs and salaries for government do-nothings, while their manufacturing sector got decimated by the Francs and Germans. They made the wrong decision. Now, they're paying the price. GIPS have overspent for years, and now they're broke. The end game to all this is a political and fiscal pact run out of Berlin. In that case, you're right. Hitler won. All these loser countries were sold rosy fantasies by their politicians. Whether or not their leaders knew the inevitability of situation, probably. Now they face a choice - abandon the euro and turn back the clock on 30 years of living standards (Great Depression). Or hand over complete sovereignty to the Germans so they can keep their precious entitlements, benefits and stay in the Euro. The Greeks are whores, and will probably do it. Iceland had the stones to tell the bankers to get fucked. Ireland is in limbo. Spain? With their week-long benders and 5 hour work day? hmm. Italy? Most of the country is unionized. Regulatory oligarchies everywhere. In a nut shell, they're pussies. The Germans will demand they hike their skirt up and bend over, and they will. Case closed.
  3. achilles28


    Btw, "austerity" is a misnomer. It's called running a balanced budget.

    That's how phucked the GIPS economies are. They can't even support themselves. They're welfare queens, essentially.
  4. how can you say "they made a wrong decision"!!!??? They had no choice! The central banks made the wrong decision (the IMF/ US Fed is to blame)!!
    Did you read my post? The FACT IS. They were forced huge sums down the nations throat with scare of the "end of the world", and when they grudgingly say OK, they are NOW being slapped for it!
    The better question to ask where the fuck is ALL that money. It was handed out to the banking system which as we well know in the US is an insatiable black fucking hole. The French already realized that, and I am glad. I am not a socialist, although I am European by birth.
    In fact I am an old Soviet block refugee. But I call it a way I see it.
    IN the US media the whole Europe story is distorted and filled with spin and bull crap. No doubt because most people have shaken their faith in the whole frigging system.
  5. Oh come on!! All these nations(GIPS) were well off before the Euro cluster fuck and the 2008 is a system(United States of Europe) that cannot be sustained with the Germans controlling the money spigots. Akin to the US before (1930's) the states had central banks and current accounts alas the FED.

    Imagine if Texas had the control of the Fed and they decided how much to print and not print? With the other states at their mercy..
    I am part German by ethnicity so you cannot even say I am anti German but this is a cluster fuck Hitler would be proud of.... domination without firing a round.....
  6. pupu


    Not to worry mates
    Surely the next QE coming our way will fix all
  7. Ed Breen

    Ed Breen

    Homely, what did they do with all the money they borrowed when times were so good? How did such bubbles in real estate develop in Ireland and Spain? You think that was all great in 2008 and could have gone on forever? What do you think brought the crises about; some random astrological event? You don't think it had anything to do with how money was being spendt before 2008? How much more real estate development could they have built by now, but for this 'random' unfortunate crises?

    Your veiw does not make any sense. All these problem countries spent borrowed money on government overhead and in their private sector on real estate malinvestment that was confused with real assets. Thet did not grow real assets (investments that have future income rights) that could ever pay the money back. Now they can't pay the money back and everyone wants to pretend that they can cure this excess debt problem with more debt, which of course outside of Alice in Wonderland, is an impossiblility.

  8. not sure,whats your problem?
  9. Jeez, the usual crap again?
    The problem, which real economists know but no one here at ET seems to grasp, is that the countries in trouble ran current account deficits internally with their other eurozone partners, whereas the ones not in trouble ran surpluses.
    Which is pretty normal; internally in the US this sort of thing goes on all the time, I'm sure, but no one bothers to measure whether Texas is running a surplus/deficit relative to the rest of the US, because the US has internal fiscal transfer mechanisms that smooth it all out, and because the states are required to be balanced whereas the Feds aren't.
    No such mechanisms exist in Europe; there isn't a first mover, as it were, who is allowed to be in deficit while everyone else has to maintain a balanced set of books. That means internal current account surpluses/deficits still count.
    Which is a huge problem. Between different entities that have different currencies, the currency acts as an automatic balance mechanism, absent of course the chronic manipulation of actors like China and India and the rest of the Asian "export-dependent" states. But no such automatic balance mechanism exists between eurozone countries, obviously.
    So, no way to balance the current account, and no way to engage in compensating fiscal transfers either. The crisis, therefore, will only end when the eurozone either splits up or legislates a true fiscal union. Right now it's in a twilight zone that is the worst of all possible economic worlds.
    This has nothing to do with "hard working fiscally responsible" Germans, or "lazy do-nothing" Greeks, nor is it because Germany is trying to take over the rest of Europe; quite the opposite, actually.
    But Germany - and France - were the first to break the deficit limits, and Germany has broken it just about every single year of the euro's existence, unlike Spain or Italy or Ireland. But Germany isn't in trouble not because it's fiscally responsible, but because it runs an internal current account surplus with the other states in the eurozone. A large part of the reason why, of course, is that because of the euro German products are underpriced within the eurozone relative to where they would be if everyone still had their own floating currencies. That's the first thing. The second is that the ECB is more or less forced to give Germany the interest rate it needs when it needs it because Germany is such a huge part of the eurozone's economy. That's why the real estate bubbles happened in Spain and Ireland: interest rates were getting set according to German needs, which led to huge bubbles in Spain and Ireland, where the need was for much higher interest rates than what the ECB could provide because of what was happening in Germany.
    Both of these reasons are why it's legitimate to point out to Germany that they have benefited enormously from the union and that therefore contributing disproportionately to solving the current mess is just payback for what they got out of it.
    Or, you get what you pay for, which is just about the most inescapable law of economics there is. The Germans are the ones trying to get prosperity on the cheap now, and that ain't gonna happen.
  10. Lucrum


    In that case I guess they should embrace even more socialism and overspending
    and all will be well.
    #10     Jun 7, 2012