Fiscal ruin of the Western world beckons

#1
Thanks Ambrose, that has really cheered me up. :(

But if idiot Governments keep piling on the debt, it will happen.

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. "


"Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc. "


http://www.telegraph.co.uk/finance/...Fiscal-ruin-of-the-Western-world-beckons.html
 
#3
Blogg said:
Thanks Ambrose, that has really cheered me up. :(

But if idiot Governments keep piling on the debt, it will happen.

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. "


"Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc. "


http://www.telegraph.co.uk/finance/...Fiscal-ruin-of-the-Western-world-beckons.html
I read that article with a degree of scepticism as Mr Pritchard has a reputation of being Dr Gloom personified. However, a cursory glance at the Irish news websites revealed that he might not be too far from the truth.

In the UK, we are slightly shielded from that which is affecting Eire because sterling has already plunged against the Euro by some 25% (which is why Eire shoppers are crossing the border to shop in NI). Our imports are, therefore, more expensive and that has choked off consumer demand whilst boosting our exports. Had we been part of the Eurozone, I think we would have been deeper in the brown and smelly stuff than we already are.

I understand that Germany is also doing badly because its export business has been wrecked by the strong Euro - but I would welcome comments from anyone living in Germany. Is it as bad there as the press makes out?

I'm off to buy tinned food, gold, shotguns and ammo...

Litotes
 

Alsacien

MIA
Moderator
#5
Litotes said:
Blogg said:
Thanks Ambrose, that has really cheered me up. :(

But if idiot Governments keep piling on the debt, it will happen.

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. "


"Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc. "


http://www.telegraph.co.uk/finance/...Fiscal-ruin-of-the-Western-world-beckons.html
I read that article with a degree of scepticism as Mr Pritchard has a reputation of being Dr Gloom personified. However, a cursory glance at the Irish news websites revealed that he might not be too far from the truth.

In the UK, we are slightly shielded from that which is affecting Eire because sterling has already plunged against the Euro by some 25% (which is why Eire shoppers are crossing the border to shop in NI). Our imports are, therefore, more expensive and that has choked off consumer demand whilst boosting our exports. Had we been part of the Eurozone, I think we would have been deeper in the brown and smelly stuff than we already are.

I understand that Germany is also doing badly because its export business has been wrecked by the strong Euro - but I would welcome comments from anyone living in Germany. Is it as bad there as the press makes out?

I'm off to buy tinned food, gold, shotguns and ammo...

Litotes
Absolutely not a crisis going on, caution is the word on the street. The issues there are were already issues before the financial world went tits up.
Skyscrapers and shopping centers are still getting built, and my books are full with financial industry work for the next couple of years.

There is a certain amount of self-fulfilling prophecy from the doom merchants which needs to be balanced.

Substance and balance here:
http://www.imf.org/external/np/ms/2009/060809.htm
 
#6
Doom merchants need not apply: job has already been done for them.

Irish budget has planned €74 billion expenditure this year and total projected Revenue of €53 billion revenue.

A gap of €21 billion per annum is equal to 11 per cent of GDP.

Given the cr@p rating of Ireland debt funding for that is wholly and entirely unrealistic and the matter is way beyond party politics. The markets, World Bank, OECD and IMF have spoken.

So something has to be done and that is higher taxation and very substantial cuts in government expenditure. There is no other option.
 
#7
Litotes said:
Blogg said:
Thanks Ambrose, that has really cheered me up. :(

But if idiot Governments keep piling on the debt, it will happen.

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. "


"Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb", said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc. "


http://www.telegraph.co.uk/finance/...Fiscal-ruin-of-the-Western-world-beckons.html
I read that article with a degree of scepticism as Mr Pritchard has a reputation of being Dr Gloom personified. However, a cursory glance at the Irish news websites revealed that he might not be too far from the truth.

In the UK, we are slightly shielded from that which is affecting Eire because sterling has already plunged against the Euro by some 25% (which is why Eire shoppers are crossing the border to shop in NI). Our imports are, therefore, more expensive and that has choked off consumer demand whilst boosting our exports. Had we been part of the Eurozone, I think we would have been deeper in the brown and smelly stuff than we already are.

I understand that Germany is also doing badly because its export business has been wrecked by the strong Euro - but I would welcome comments from anyone living in Germany. Is it as bad there as the press makes out?

I'm off to buy tinned food, gold, shotguns and ammo...

Litotes
At this end of the Reich everything seems depressingly normal, there is plenty of news about companies facing hard times and NRW has been badly effected, however consumer spending has not dropped as expected, most shops seem quite satisfied (not Quelle or Karstadt!).

I already have loads of ammo, bullets, cases, primers and powder. :D
 

Alsacien

MIA
Moderator
#8
Well the Irish economy has always been a bit of a basket case, with the notable exception of the last few years riding the EU wave and world growth.

http://www.ecb.europa.eu/stats/keyind/html/sdds.en.html provides combined stats from Eurostat and ECB for the whole zone and is reliable data. They tend to be a bit PC when it comes to picking on one country and its data, which may be good and bad I'm not sure.
2010-11 will be a crunch time in the EU, but everything is comparative to what happens in the US and Asia, so nobody knows for sure.
 

Biped

LE
Book Reviewer
#11
See my sigblock.

Labour will not change the process and stop spending. If anything, they've got this bent idea that MORe government spending will fix the problem!!

When Call-Me-Dave gets into power, he's going to do very little in terms of cutting government expenditure, because he knows he's not Thatcher, and if he puts a large number of Labour's people (civil servants) on the dole to cut costs, he'll be a one-hit PM like Broon, only not as hated.

Dave is going to plump for the long haul, and gradually reduce public expenditure over (he hopes) 3 terms to minimise the pain and get the books remotely tidy. It's going to take 5 terms before we are in the black at least.

If Western nations can dump this lunatic idea that MORE government spending is going to fix all ills, then perhaps the West will not sink into a cesspit of its own making.
 
#15
An interesting article, Rocketeer, and thanks for pointing me to it. I normally avoid MSN articles because they always seem to be "stating the bleeding obvious" when talking finance but, perhaps, this global problem needs to be explained in "Janet and John" terms! Even I understood the article.... I think!

The major problem now is that we have to escape from looking in the rear mirror. The car crash is past us, and we have to move on. That takes strategic leadership at a high level, and I do not think our current leadership is up to it. Messrs Brown, Darling and the Treasury appear to be frozen to the telly watching the slow motion replays of that car crash and arguing about which juggernaut, car or pedestrian caused it.

Just to be fair, I do not think that Mr Cameron and his sidekicks have a plan either, beyond gaining power. And that frightens the sh*t out of me!

I note that, despite these articles promising the end of the world as we know it, the price of gold is drifting downwards and is c$925/oz. If we were about to go down the pan, surely gold would be stronger than it is?

Thank you to the German based posters for their comments. I suspect that it is the same in the UK for most people; if you have a job, income and prospects, all of this is background noise. Life continues as before, except that Zavvi and Woolworths have vanished from the High Street and you have to walk a bit further to buy that CD. However, if you used to work for JCB, LLoyds-TSB, RBS or Corus, life will be pretty grim on the dole.

I am not even going to try and imagine what life must be like in, say, Zimbabwe.

Litotes
 
#16
Here is an evil cesspit already full to the brim and just waiting to overflow.

Sordid reality behind Dubai's gilded facade

.".........we cruise the baked streets past the filthy, crumbling apartment blocks where the Bangladeshi slave labourers live or die, 10 or 12 to a room, and then into the hideous bling of downtown Dubai, a vast architectural experiment conducted by, seemingly, Albert Speer and Victoria Beckham."

http://www.timesonline.co.uk/tol/news/world/middle_east/article6716543.ece
 
#17
Biped said:
See my sigblock.

Labour will not change the process and stop spending. If anything, they've got this bent idea that MORe government spending will fix the problem!!

When Call-Me-Dave gets into power, he's going to do very little in terms of cutting government expenditure, because he knows he's not Thatcher, and if he puts a large number of Labour's people (civil servants) on the dole to cut costs, he'll be a one-hit PM like Broon, only not as hated.

Dave is going to plump for the long haul, and gradually reduce public expenditure over (he hopes) 3 terms to minimise the pain and get the books remotely tidy. It's going to take 5 terms before we are in the black at least.

If Western nations can dump this lunatic idea that MORE government spending is going to fix all ills, then perhaps the West will not sink into a cesspit of its own making.
That's one option. The other option is to carry out the drastic changes as soon as he gets into office. People are aware that Labour have screwed the economy and cuts are needed to put it right - and this option would provide the rest of his term to 'make friends' with the public.
 
#18
Litotes said:
The car crash is past us, and we have to move on.
The car crash has just begun, I'm afraid. This is the end of the beginning. The true extent of the carnage has yet to materialise. This is all happening in slow motion.

Litotes said:
I note that, despite these articles promising the end of the world as we know it, the price of gold is drifting downwards and is c$925/oz. If we were about to go down the pan, surely gold would be stronger than it is?

Litotes
Gold is holding up pretty well considering the deflationary and deleveraging environment we find ourselves in. At some point inflation will rear its head and gold will perform its role well -- as a wealth preserver. However, short-term I expect it to drop to mid 800s, though gold is not following its typical summer patterns for various reasons, so it may not. Of course, it's possible that gold could drop to sub 600 in the coming months, though I'd say there's only a 20 pc chance of that happening.

There are so many unknowns, and no-one really knows (bar a few at the very top possibly) what is going to happen. Talk of green shoots is codswallop. The only way green shoots will materialise is if a new bubble is created, like what happened after the dot com bust. However, if policy makers do manage this seemingly impossible task, then we'd be setting ourselves up for an even greater crisis down the line -- a greater bubble bursting.

The real problems will begin if and when the bond vigilantes strike, causing a bonds crisis. Either interest rates will have to rise sharply or governments will have to monetise trillions of more debt. Of course, when interest rates rise, that pain will be felt hugely by over leveraged consumers, with loan repayments rising exponentially. The only thing that has kept consumer spending ticking over in the UK and USA are the virtual zero pc interest rates. When the pendulum swings the other way, the recession will deepen.

I'm sick of thinking about this. I'm sick of thinking full-stop. No kidding, I'm really tempted to open a greasy spoon cafe and to contemplate only the perfect frying times for bacon, sausage, egg and black pudding. And with the continuing collapse in commercial real estate, commercial property rents will soon be a bargain.
 

Alsacien

MIA
Moderator
#19
Also fuel prices are low (20% down compared to Jan 2008), at least in the EU countries I transit.
Basel 3 will come in at some point giving me work for 5 more years modding systems - at which point the small hotel in Provence to go with the diving business looks good - except no bugger will be able to afford a holiday, and certainly not a Brit who will have to pay for it in Euros..... :cry:
 
#20
Contrarian said:
Litotes said:
The car crash is past us, and we have to move on.
The car crash has just begun, I'm afraid. This is the end of the beginning. The true extent of the carnage has yet to materialise. This is all happening in slow motion.
I am not certain that I agree with you there (note the uncertainty...) although I share some of your misgivings.

The crash has happened and of that there can be little doubt. We now have a massive carambolage of wrecks and bodies littering the highway, but we still have vehicles (countries, companies, organisations, people) piling into the rear of the crash site. Out of control, without vision, without funds, call it what you will, but the net effect is that they are heading for the pile-up. I think you are watching that and thinking that it is the end of the world.

I am trying to think ahead of the crowd to what happens next? Is this the end of the world as we know it?

We've had the shock of, inter alia, the collapse of Lehmans, and whilst we are surrounded by the wreckage, I do not think that the world has collapsed, and nor will it. There are signs that the average person in the street has started spending again. Businesses are trying to borrow money (they aren't succeeding but they are trying...). People are going out. They are entertaining. Others are looking at the house for sale down the road and thinking that they could afford that. They are driving around.
Admittedly, all at a much lower level than two years ago, but they are spending.

Now, what could derail this improvement? A sharp rise in oil prices? A sharp fall in the value of sterling (much the same thing)? A sharp rise in taxes? A collapse in confidence?

I think the latter is more likely, especially if the incoming government hits us with a massive tax increase (and it will), but I don't see that for now. I can see people picking up the pieces and trying to make money. It will take time but we are on our way out of this mess, although there is always the chance that we will be derailed!

That is not to say that it won't take a long time. The last recession started in 1989 and bottomed out in 1992, but it wasn't until 1995/96 that unemployment started falling. Those green shoots will take a long time to flourish.

BTW, I used the German word (carambolage) for a multiple pile-up because I don't think any English word suits! I have no doubt that someone will pop up and explain that it was an Italian word before the Germans half-inched it! :D

Litotes
 

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