ARmy Rumour SErvice

Originally Posted by geezer466

The debt is still debt however it came about... The issues are the bond markets are not willing to extend it further without 'certain guarantees'.

Ireland actually is probably one of the better examples of what can be achieved if a nation gets its head down and gets on with it. Now if it could escape the straitjacket of the Euro it could be well set on the path to fixing itself.

Iceland was a pariah amongst developed lending nations 3 years ago. They then defaulted and cancelled their debts. An exceptionally unpopular move amongst it's creditors but Iceland is now in a recovery phase. Sooner rather than later they will slowly but surely be able to attract foreign investment.

Should Ireland exit and default? Tough call as certainly the UK would be right at the centre of the fallout zone but at the end of the day the people which govern that Country must do so in the interests of its people and not those of German, French and UK banks.

You misdiagnose the cause and then present two completely contrasting examples of recovery strategies.

The Icelanders as a people assigned blame where it belonged (i.e. to the champions of viking economics) let their bloated banks fail, accepted short term the pain that meant in terms of pension and pay packets, rejected IMF advice on austerity and maintained their social provisions, rewrote their constitution to prevent it happening again and are currently considering the viability of the Krona, they were toying with joining the Euro, Canadian or American Dollar last I heard. The IMF just issued a very favorable report.

While unsurprisingly the strong fundamentals of the Irish economy make it a poster child for EU policies, no matter how misguided and counterproductive, the IMF are not so keen on Irish "recovery" at the moment, export growth is stalled at 0.5% as Ireland's export markets shrivel under belt tightening. The Irish not only bankrupted themselves buying property in a rigged market on cheap credit but converted the private debt of their busted banks into sovereign debt. Ireland getting into this condition has very little to with being in the Euro and a great deal to do with dysfunctional national governance. Getting out is very much a matter of asserting sovereignty but that takes a political will that would probably also be absent even if the Punt had been retained.

You might notice the underperforming Brits have soft defaulted by devaluing Sterling and are pumping away with QE but they are in the toilet despite the advantage of having their own fiat currency.

Speaking of underperforming Brits, in the Daily Telegraph Debt crisis live: UK slips back into recession as economy shrinks

Release of key GDP figures reveal UK has sunk into a double-dip recession, following 0.2pc contraction.
...

At wonder at what point "Debt Crisis" becomes "Growth Crisis"?

Originally Posted by alib

Speaking of underperforming Brits, in the Daily Telegraph Debt crisis live: UK slips back into recession as economy shrinks
At wonder at what point "Debt Crisis" becomes "Growth Crisis"?

It is unfortunate.
The expectation was that it would be around +0.1%, not great, but enough to stop the political and press BS.
I cannot see much scope for major improvement on the horizon either, the adjustment phase of this financial crisis needs another 2 years yet.

Pretty depressing really.

1) The government has been too focused on cuts and too little focussed on growth. The two go hand in hand.

2) Such cuts that have been made have been broad brush and not focussed on waste that can be cut out without damage to the economy.

3) Often its services that have been hit and not the bloated public sector head count.

4) For all the rhetoric about 'making UK PLC business friendly', there has been little action - for example the promised bonfire of unnecessary regulation has not materialised.

5) The government (and the opposition) have yet to be realistic in discussing the scale of pain required with us poor old voters.

6) There's still far too much spin and far too little concrete action.

Wordsmith

Originally Posted by Wordsmith

Pretty depressing really.

1) The government has been too focused on cuts and too little focussed on growth. The two go hand in hand.

2) Such cuts that have been made have been broad brush and not focussed on waste that can be cut out without damage to the economy.

3) Often its services that have been hit and not the bloated public sector head count.

4) For all the rhetoric about 'making UK PLC business friendly', there has been little action - for example the promised bonfire of unnecessary regulation has not materialised.

5) The government (and the opposition) have yet to be realistic in discussing the scale of pain required with us poor old voters.

6) There's still far too much spin and far too little concrete action.

Wordsmith

I would agree with that, but the fix is not that easy.
The spin is also important in this context, the signals the market receive are very much subject to magnification in the current climate. The minute you revise forecasts down rather than up, which you have to as forecasts are only assumptions in a range made on data 3 months ago, the market reaction is too big in proportion to the underlying data and numbers.

Originally Posted by Alsacien

Which model is that then?

The remorselessly technocratic one where human tolerance for poverty and degradation is assigned an infinite value.

Originally Posted by Wordsmith

Pretty depressing really.

1) The government has been too focused on cuts and too little focussed on growth. The two go hand in hand.

2) Such cuts that have been made have been broad brush and not focussed on waste that can be cut out without damage to the economy.

3) Often its services that have been hit and not the bloated public sector head count.

4) For all the rhetoric about 'making UK PLC business friendly', there has been little action - for example the promised bonfire of unnecessary regulation has not materialised.

5) The government (and the opposition) have yet to be realistic in discussing the scale of pain required with us poor old voters.

6) There's still far too much spin and far too little concrete action.

Wordsmith

I agree about public sector head count but, in a largely Service Economy, the 'wage earners with a disposable income' head count is a growth driver. Practically I don't see how you can cut one without the other, much as I would like to see it happen. The only real answer for the moment is more effective use/redeployment of these public employees, if that is at all possible.

Originally Posted by Wordsmith

Pretty depressing really.

1) The government has been too focused on cuts and too little focussed on growth. The two go hand in hand.

2) Such cuts that have been made have been broad brush and not focussed on waste that can be cut out without damage to the economy.

3) Often its services that have been hit and not the bloated public sector head count.

4) For all the rhetoric about 'making UK PLC business friendly', there has been little action - for example the promised bonfire of unnecessary regulation has not materialised.

5) The government (and the opposition) have yet to be realistic in discussing the scale of pain required with us poor old voters.

6) There's still far too much spin and far too little concrete action.

Wordsmith

What the europeans as a block have failed to do is urgently concentrate on growth above all else, this has so far been supported by the markets but they also supported the long credit binge that preceded it and are a dreadfully poor guide to longterm policy.

Across the pond The Fed headed by a Bush appointed scholar of the Great Depression accepted the widely held economic reality that cuts and tax increases on the edge of a recession are foolish Hooverism.

In europe we've had austerity, what is really languid governmental inaction providing a false sense of thrift and facilitating some neoliberal ideological goals favored by the right but finally only likely to make the deficit worse. As nervous Capital hoarded its resources Government did as well. Ironically this approach has been championed most loudly by the Germans who let their economy roll off a cliff in the 30s in a similar way. Even in the face of mounting evidence of failure we continue to persist in this folly.

The Septics have struggled to get 3% growth, their recovery is jobless and based on heightened worker productivity. They are not out of the woods yet, government has had to take over virtually the entire mortgage market but they have at least successfully saved large sections of their ailing rust belt. Greece singing under mounting debt after the senseless wrecking ball of austerity inflicted by EU institutions offers a useful comparison to rescued and now optimistic Michigan.

Osborne, not entirely divorced from reality, actually telegraphed most of his cuts, they have yet to hit. The UK's principal problem is not its deficit but its poorly diversified economy, a shriveled industrial base not unconnected with a persistently deferring of necessary public spending to support a societal transformation like unpromising Ireland achieved in the last couple of decades. Instead the UK public purse has been stupidly used to salve the dire social symtoms of industrial decline whilst it doubled down on finance. Meanwhile the Germans and amongst others the Irish rushed in and seized the export markets that the British should have been active in. Simply hacking at social provision in the UK out of habit was never an answer.

"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before."
Rahm Emanuel