The European economy on the brink again.. hits U.S markets.

[ShcShc11 0]

http://www.guardian.co.uk/commentisfree/cifamerica/2012/apr/24/european-turmoil-american-collateral

Germany's Angela Merkel wants to continue her disastrous policy of "cut the budget" and austerity measures ignoring the basics of zero-bound depression economics.


"The reality of the eurozone's troubles should lend support to President Barack Obama's campaign against GOP presidential nominee presumptive Mitt Romney and congressional Republicans. It provides a demonstration that austerity is self-defeating, that fiscal stimulus is needed in a deeply depressed economy, that recovery from a financial crisis is a slow and halting process, and that by grasping the nettle immediately, the Obama administration has succeeded in stabilizing its financial sector – while the Europeans have made a hash of it.

Yet politics, especially in America, is never so easy. As with his recent campaign stop in which he blamed Obama for a factory closing which actually occurred during the Bush administration, Romney will blame Obama for every problem – no matter how tortured or fraudulent the logic. It would be a great irony if Obama, who has been far more supportive of expansionary fiscal policy than any European leader, is hurt by the blowback from austerity in the eurozone. But this is what can happen when voters are in a foul mood and opponents are unencumbered by the truth."


Cheers! Shc

[JasonYergin 0]

Someone always gets blamed. It's usually the figure head, I mean president!!

_________________________________

...Don't Get Elimated!!

[beowulf 1]

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that fiscal stimulus is needed in a deeply depressed economy, that recovery from a financial crisis is a slow and halting process, and that by grasping the nettle immediately, the Obama administration has succeeded in stabilizing its financial sector

All he did was kick the can down the road by adding to the US debt. That won't continue to work forever. So the US strategy is only temporary and also serves to increase inflation.

[lawrocket 3]

Austerity sucks in the short term. Much like the surgery to repair an anal fissure is both painful and debilitating in the short term, it is also meant to restore efficient function in the long term.

One of the problems with how Austerity is being handled, in my opinion, is that austerity is beng accompanied by tax increases. That's the recipe for real disaster, since austerity means the government is doing less and tax increases mean that the private sector is less able to step in to offer those goods and services that the government offered previously.

The zero bound policy is itself mysterious. Here in the US, lowering interest rates is a fine way to lower the burden of debt servicing. Stimulating the economy? IT can have some effect.

Nevertheless, one can look at where economies are struggling the most. It's where austerity is needed. And austerity is needed where government is largest.

Austerity IS an economic shock. We can't do it when times are good, nor can we do it when times are bad. When is a good time for it in the short term?

My wife is hotter than your wife.

[StreetScooby 5]

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zero-bound depression economics.

Keynesian economics doesn't work...

We are all engines of karma

[beowulf 1]

Try telling that to Ben Bernanke!

[kallend 2,027]

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zero-bound depression economics.

Keynesian economics doesn't work...

Seems to work better than "Voodoo Economics" (C) 1980, George H.W. Bush

...

The only sure way to survive a canopy collision is not to have one.

[mnealtx 0]

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zero-bound depression economics.

Keynesian economics doesn't work...

Seems to work better than "Voodoo Economics" (C) 1980, George H.W. Bush

102% of Bush's spending in 41% of the time.

I guess you have a different metric of "working better".

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[airdvr 210]

Merkel lecturing us on economics...that's some funny shit right there.

Please don't dent the planet.

Destinations by Roxanne

[beowulf 1]

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zero-bound depression economics.

Keynesian economics doesn't work...

Seems to work better than "Voodoo Economics" (C) 1980, George H.W. Bush

Not really that much difference between what Obama is doing then Bush. Obama has done everything possible to save the big banks and businesses with all the bailouts.

[mpohl 1]

The average worker in Europe is still much better off than it's American counterpart. Heck, even Mexicans are fleeing the USofA (go search today's NYT article) in record numbers!!!

Maybe our billionaires are not doing that well, and esp In France w/ Hollande promising a 75% for everyone making more than Euro 1M. I think that's great!!!!

What's the connection between me and someone making 1M Euros per year? About negative 900,000!!!!!

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http://www.guardian.co.uk/commentisfree/cifamerica/2012/apr/24/european-turmoil-american-collateral

Germany's Angela Merkel wants to continue her disastrous policy of "cut the budget" and austerity measures ignoring the basics of zero-bound depression economics.


"The reality of the eurozone's troubles should lend support to President Barack Obama's campaign against GOP presidential nominee presumptive Mitt Romney and congressional Republicans. It provides a demonstration that austerity is self-defeating, that fiscal stimulus is needed in a deeply depressed economy, that recovery from a financial crisis is a slow and halting process, and that by grasping the nettle immediately, the Obama administration has succeeded in stabilizing its financial sector – while the Europeans have made a hash of it.

Yet politics, especially in America, is never so easy. As with his recent campaign stop in which he blamed Obama for a factory closing which actually occurred during the Bush administration, Romney will blame Obama for every problem – no matter how tortured or fraudulent the logic. It would be a great irony if Obama, who has been far more supportive of expansionary fiscal policy than any European leader, is hurt by the blowback from austerity in the eurozone. But this is what can happen when voters are in a foul mood and opponents are unencumbered by the truth."


Cheers! Shc

[ShcShc11 0]

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zero-bound depression economics.

Keynesian economics doesn't work...

When the Japanese fell into deep financial problems (relating to its banks) back in the 1990s, Milton Friedman agreed with Ben Bernanke's conclusions from his 1999 essay.

This isin't Keynesian- this is common sense economics. Reagan and Thatcher did a great job with stagflation recession under its times, but America's Great Recession is similar to the Japanese economic crisis of the 90s.


http://www.princeton.edu/~pkrugman/bernanke_paralysis.pdf

Based on the last few years, 1 euro of budget cut and austerity brings approximately 0.3-0.4 even in the short run and much much less in the mid-run/long-run.


Merkel is by no means evil and I understand she has a tough job to do trying to lead Europe. She is however leading them in the wrong direction and Europe is essentially committing Economic-Suicide.

U.K missed its budget target.
Spain missed its budget target.
Italy did too...
and its not just the PIIGS.
Finland too.
France too.


Cheers! Shc

[brenthutch 444]

Speaking of unencumbered by the truth.....

"the Obama administration has succeeded in stabilizing its financial sector"

Actually it was the Bush administration that bailed out the financial sector. Obama gave us the trillion dollar stimulus that kept unemployment below 8%

"he blamed Obama for a factory closing which actually occurred during the Bush administration"

And Obama takes credit for all of the oil produced by leases approved by the Bush administration.

Nobody said that austerity was going to be easy. It is always easier to spend money you don’t have and get other people to pay for it. It hurts when the credit cards are cut up.

“Socialists are happy until they run out of other people's money.”
― Margaret Thatcher

[kallend 2,027]

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zero-bound depression economics.

Keynesian economics doesn't work...

Seems to work better than "Voodoo Economics" (C) 1980, George H.W. Bush

102% of Bush's spending in 41% of the time.

I guess you have a different metric of "working better".

Reagan/Bush's Voodoo Economics led to the greatest recession since the 1930s.

...

The only sure way to survive a canopy collision is not to have one.

[ShcShc11 0]

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Speaking of unencumbered by the truth.....

"the Obama administration has succeeded in stabilizing its financial sector"

Actually it was the Bush administration that bailed out the financial sector. Obama gave us the trillion dollar stimulus that kept unemployment below 8%

Both Republicans and Democrats cooperated at a time when Capitalism were on the fringe in 2008.
Bush-Paulson TARP 1
and Obama-Geithner Summers TARP 2.

The Obama stimulus package is 780B$ and considered much less when you substract any inter-state transfers (States that did the cuts). About 350-400B$ were actual stimulus and even then, a lot of it were in dubious tax cuts.

It is economic insanity to think that approx 350-400B$ can plug a 2.5 Trillion $ hole created by the Financial Crisis.

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Nobody said that austerity was going to be easy. It is always easier to spend money you don’t have and get other people to pay for it. It hurts when the credit cards are cut up.

I suggest you to go look at the U.K.
Cameron's motto is: "Austerity is a tough and brave choice". No, its just economic stupidity. The U.K keeps missing its target and they are wondering why the market have little to no confidence in the U.K.

Associating credit cards to Government debt is simply Orwellian. Debt can be bad, but not all debt is.


Cheers! Shc

[DougH 270]

So when is the right time to fix Europe's debt problem. Their debt problem is a real problem, how and when do you fix it?

Countries like Greece fleeced the rest of the Euro zone by borrowing money they had no chance to ever pay back even in good economic times.

They fueled an orgy of public spending at the expense of the bond holders and the rest of the euro zone.

Now they are crying that austerity is destroying their country. Tough shit, for years they were living in a debt funded fantasy world!

"The restraining order says you're only allowed to touch me in freefall"
=P

[DougH 270]

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Associating credit cards to Government debt is simply Orwellian. Debt can be bad, but not all debt is.

Sure. Debt that fuels growth is good, that is called leverage.

Debt that does not fuel sufficient growth to cover the future interest and principal payments is bad.

Greece didn't use debt their borrowing to leverage their economic growth. They used it to fill a pig slop troth of socialist spending so that they could pander to the people instead of fixing their lack luster economy.

"The restraining order says you're only allowed to touch me in freefall"
=P

[ShcShc11 0]

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So when is the right time to fix Europe's debt problem. Their debt problem is a real problem, how and when do you fix it?

Countries like Greece fleeced the rest of the Euro zone by borrowing money they had no chance to ever pay back even in good economic times.

They fueled an orgy of public spending at the expense of the bond holders and the rest of the euro zone.

Now they are crying that austerity is destroying their country. Tough shit, for years they were living in a debt funded fantasy world!

Greece deserves what it gets. No question about it. Its the unfortunate truth for them. But this isin't about Greece- its about the Eurozone.

Countries such as Spain were responsible of their budget and had a favourable Debt/GDP ratio in comparison to other countries (yes, even Germany). If you look at the GIIPS debt chart, it was falling dramatically in 2007. So this whole morality chart should be debunked. This isin't about "you've been bad, you should be punished". Its about "how do we fix the economy so that the U.S won't get sucked into Europe's dumb economic policies"?

Major American banks such as Citi and BoA still holds a good chunk of the Eurozone and we really should hope that EU gets out of its turmoil else there is a strong possibility of a financial collapse in the U.S due to collaterals and repos. If you want, I can dig up the numbers and charts of Citi's reliance on the Eurozone.

The first lesson of economics is: Economics doesn't care about morality. If you want to save the Eurozone, then it has to gain growth and regain market confidence. A 6-7% 10 years Italian bond is unsustainable - it reached that height because the austerity measures brought Italy's growth lower than projected.

Later on, I can go on a little more about the ECB (European Central Bank)'s policies since 2010 and what it did.

anyway..
Two distinct solutions are there for the Euro:
-Break-up the Euro in the same way the world broke up with the gold standard in the 1930s

-Get Married: Currency union is not possible without political union. A United States of Europe would need to be created where transfer-unions happen between states/provinces.

Also,
See the U.K chart below in regards to how effective its austerity policies were since Cameron's Government came to power. The U.K is now in a Depression worse than the 1930s Great Depression.


Cheers! Shc

[lawrocket 3]

[Reply]"Austerity is a tough and brave choice". No, its just economic stupidity

[mnealtx 0]

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zero-bound depression economics.

Keynesian economics doesn't work...

Seems to work better than "Voodoo Economics" (C) 1980, George H.W. Bush

102% of Bush's spending in 41% of the time.

I guess you have a different metric of "working better".

Reagan/Bush's Voodoo Economics led to the greatest recession since the 1930s.

You keep telling yourself whatever myth gets you through the day, perfesser. The rest of us will look at 30 years of expansion and laugh at you.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[kelpdiver 2]

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Reagan/Bush's Voodoo Economics led to the greatest recession since the 1930s.

You keep telling yourself whatever myth gets you through the day, perfesser. The rest of us will look at 30 years of expansion and laugh at you.

Kallend - are you referring to 1994? Or 2008? Seems uncharitable to attribute this last one to Reagan and Bush I - in between their departure and the 2008 crash we saw a giant boom, a balanced budget, a recession, and another boom. Blame Bush II if you like, but the other 2 can't be held accountable for it.

Mnealtx - what 30 year expansion are you referring to? I could see mid 80s-2000 as a good 15 year period.

[kallend 2,027]

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Reagan/Bush's Voodoo Economics led to the greatest recession since the 1930s.

You keep telling yourself whatever myth gets you through the day, perfesser. The rest of us will look at 30 years of expansion and laugh at you.

Kallend - are you referring to 1994? Or 2008? Seems uncharitable to attribute this last one to Reagan and Bush I - in between their departure and the 2008 crash we saw a giant boom, a balanced budget, a recession, and another boom. Blame Bush II if you like, but the other 2 can't be held accountable for it.

Mnealtx - what 30 year expansion are you referring to? I could see mid 80s-2000 as a good 15 year period.

2007 (December) - the consequence of Bush II's version of Voodoo Economics.

www.bloomberg.com/apps/news?pid=newsarchive&sid=aNivTjr852TI

...

The only sure way to survive a canopy collision is not to have one.

[Marinus 0]

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-Get Married: Currency union is not possible without political union. A United States of Europe would need to be created where transfer-unions happen between states/provinces.

And since the Euro is in acute trouble, this should be done on a very short term. I'm curious: do you really believe this is a possibility? Because any European can tell you it's not an option at all.

[ShcShc11 0]

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What about when austerity becomes the tough thing that they'll have to accepte bravely because there is no choice? It seems that Greece, Italy, Ireland, Portugal, etc. Are in positions now where they can limit the catastrophe by acting now versus facing catastrophe by acting later.

This is the problem with the austerity concept. "A dollar today does not equal a dollar cut later.

Think of the U.S and WWII. America accumulated a massif debt and thereafter had 20 years of good-times. It is much easier to pay back during the good-times than try to cut it now in a zero-bound economy.

A dollar cut is equivalent to only 0.30$ in savings in the short-term and has negative GDP output in the long-term.

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Eventually, there will be no more lenders. When that happens there simply is no money to spend and austerity is forced. Then there is a massive shock. Instantaneous. It ripples. And boom!

What about when austerity is forced?

This is already happening BECAUSE of austerity. When Italy reached 7% 10-years bond, it had no lenders. Same thing with Ireland. And the recent Spanish bond sells went badly.

So your scenario has still been happening when they were cutting their budgets.

Why are the Italian/Spanish bonds higher? Lack of growth, missed revenue projections and Germany's constant threat to "cut them off".


Spain is at 23% unemployment... Can't go any worse than that. And Spain in 2007 had a lower debt/GDP than Germany,.


Cheers! :)
Shc

[ShcShc11 0]

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-Get Married: Currency union is not possible without political union. A United States of Europe would need to be created where transfer-unions happen between states/provinces.

And since the Euro is in acute trouble, this should be done on a very short term. I'm curious: do you really believe this is a possibility? Because any European can tell you it's not an option at all.

No, I do not think EU will go into a political union. Germany is adamant to stay away from it. Sakorzy from France is against it too.

However, that is one of the real solution that would keep the euro money possible and functional from an economic viewpoint.

The Euro in today's state cannot exist without country-to-country inter-transfers (in the same way U.S Federal Government does inter-transfers to States in economic trouble).


Cheers! :)
Shc