- 24-04-2012, 13:32 #3941
- 24-04-2012, 13:40 #3942
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.That's the most foul, cruel, and bad-tempered rodent you ever set eyes on!
- 25-04-2012, 10:19 #3943
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.
...That's the most foul, cruel, and bad-tempered rodent you ever set eyes on!
- 25-04-2012, 10:36 #3944
- 25-04-2012, 10:43 #3945
- Join Date
- Jan 2010
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.
- 25-04-2012, 10:53 #3946
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.
- 25-04-2012, 10:54 #3947
- 25-04-2012, 10:59 #3948
- 25-04-2012, 12:03 #3949
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 EmanuelThat's the most foul, cruel, and bad-tempered rodent you ever set eyes on!
- 25-04-2012, 12:46 #3950
- Join Date
- Jan 2010
If we looked at the macro-economic across the whole of the EU (and not just the eurozone), you'd have to say that the problems are a result of a debt fuelled boom and an expansion of public services beyond the point that the economy can support.
The solution for both of those is growth in the private sector. This means those heavily indebted people can get either better paid jobs or more overtime to get out of the debt trap. It also means that as jobs are cut in the public sector, there will be jobs in the private sector to replace them.
The problem with generating growth is that it often comes about as a result of less government. Less government means smaller state sectors and less regulation. This creates two problems:
- There is a large part of the electorate who are addicted to the benefit culture, yet who don't realise that they're indirectly paying for these benefits through their taxes. (Child benefit for middle and high earners in the UK is a classic example). Any political party trying to cut back benefits will therefore face an electoral backlash.
- Governments seem ever more addicted to interfering with every detail of peoples lives. They have to learn that it is better to delegate many of the activities they see as the remit of government to private sector organisations or charities. This would result in a smaller state sector - and less of a burden on wealth/growth producing firms.
For growth to occur it first seems to me that we need a cultural/psychological change to 'smaller government' with less of a benefits culture and with many functions stripped back to core activities. Until this sea change in attitude occurs we are just going to tinker around the edges without getting to the core of the problem.