The US can afford a default of Greece just as little as the EU can. Stupid votes in the Senate aren't going to change that.Quote:
Originally Posted by RandBlade
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The US can afford a default of Greece just as little as the EU can. Stupid votes in the Senate aren't going to change that.Quote:
Originally Posted by RandBlade
You send so much time looking at the mote in Britain's eye, that you don't pay any regard to the plank in the eurozones.Quote:
Originally Posted by Hazir
The UK entered this crisis with a debt-GDP ratio of about 40% and even under Labour's plans it was going to peak out at 75% - but the government now isn't following Labour's plans so it won't be so bad.
Greece currently has a debt-GDP ratio of about 130% and even under the optimistic restructuring plans with the bailout would exceed 150%
The other eurozone PIIGS nations are around about 100% of GDP too.
The idea that the UK is at all worse off than the eurozone is laughable. The UK has weathered this crisis and is now sensibly paying down its deficit.
LOL, who do you think you're fooling? "paying off" you don't even bloody know what your sovereign debt actually is, and the known debt is already on a par with the worst :)
Uhm, the point is that your economy is tied to the rest of the eurozone's, for better or worse (in this case worse). The entire eurozone's competitiveness and growth is going to be seriously stunted for the foreseeable future due to both structural issues and the current sovereign debt crises.Quote:
Originally Posted by Hazir
I have no doubt that continuing issues in the eurozone will drag on UK exports, which will hamper a serious recovery. But given that the UK has an independent monetary policy and a fairly reasonable and fiscally responsible government, I find it likely that their problems will be less pronounced than the eurozone's, which is being dragged down by serious economic imbalances that can't be fixed by austerity regimes.Quote:
The total fuck up the UK economy is is 'the mess' I have been talking about all the time. Randblade just never quite got that. That they can't pull themselves out of that mess as long as 'we' in the eurozone have this little crisis is also a certainty.
(emphasis added)Quote:
Your assertion about the EMU members I won't take with a grain of salt because it will need a full kilo; there is no uniformity in they way how these countries run their business. That also means there is no one solution, some countries don't need any solution at all.
That's the point. There is zero uniformity in how different economies in the eurozone function, and that seriously undermines the single monetary policy. The huge difference in the German model compared to, say, the Greek or Portuguese model is what's tearing the euro apart. I think that what was previously couched as 'suggestions' about debt-to-GDP limits, deficit size, economic reforms, labor markets, etc. is now going to have to be enforced and standardized across the entire eurozone. The Greeks enjoyed comfort and cheap borrowing costs on the euro that they never would have had on their own, but now the underlying structural issues with the Greek economy is dragging down the rest of the euro (despite its relatively small size in comparison to big players that were more careful).
My guess is that the eurozone isn't going to fall apart - instead there will be much more centralization and tighter control of member economies. It's not the end of the world, but it is a major shift in the power and role of the EMU in individual economies, and will require far more wrangling than a UK budget cut.
There's no question there will be an adjustment as in all of the rich countries. I doubt it will lead to long-term stagnant growth as what's looking likely for the eurozone right now. Obviously this is all WAGs since so many factors will contribute to a recovery. But establishing singular political will for reforms is far easier in one country (even in a coalition government) than in the entire EMU.Quote:
Thinking that the UK can weather its crisis without much of an adjustment is laughable.
I agree with you on this one. The vote doesn't mean anything - it just is essentially an advisory note to the IMF rep that means we can choose to block the IMF bailout if we feel it's necessary. Given the impact on eurozone economies I find it unlikely the US will actually carry out the threat.Quote:
Originally Posted by Hazir
The economy of the UK is not going anywhere independent of the Eurozone or the rest of the EU. The rest of your comment is a bunch of hogwash. You clearly have no idea what you're talking about. FYI, the rest of the EU is not just Greece.Quote:
Originally Posted by wiggin
The UK had up to a week ago one of the most fiscally irresponsable governments in the world. The new government hasn't got a clue even about how bad it actually is. What you find 'likely' counts for shit, because you don't know what you're talking about. The UK is closer to California and Greece than to any other major EU country, with the added 'benefit' of having a teetering banking sector that's too big for the country and a currency that might collapse any moment. For example if the George Osborne is going to come out with the real numbers rather than the cooked ones. George in Athens can tell him how much fun that is.Quote:
I have no doubt that continuing issues in the eurozone will drag on UK exports, which will hamper a serious recovery. But given that the UK has an independent monetary policy and a fairly reasonable and fiscally responsible government, I find it likely that their problems will be less pronounced than the eurozone's, which is being dragged down by serious economic imbalances that can't be fixed by austerity regimes.
(emphasis added)
THAT is totally irrelevant to the question on how competitive a country is, which was the point where you felt you needed to bud in by putting your foot in your mouth. As for what is putting a huge stress on the eurozone at the moment; that would be the unrealistic positive ratings Greece got when it was building up its debts. If those ratings would have been a bit closer to realistic then Greece would never have been in a position to run up its present debts.Quote:
That's the point. There is zero uniformity in how different economies in the eurozone function, and that seriously undermines the single monetary policy. The huge difference in the German model compared to, say, the Greek or Portuguese model is what's tearing the euro apart. I think that what was previously couched as 'suggestions' about debt-to-GDP limits, deficit size, economic reforms, labor markets, etc. is now going to have to be enforced and standardized across the entire eurozone. The Greeks enjoyed comfort and cheap borrowing costs on the euro that they never would have had on their own, but now the underlying structural issues with the Greek economy is dragging down the rest of the euro (despite its relatively small size in comparison to big players that were more careful).
I never said something to the opposite. And does it really matter when it's really the markets forcing these adjustments?Quote:
My guess is that the eurozone isn't going to fall apart - instead there will be much more centralization and tighter control of member economies. It's not the end of the world, but it is a major shift in the power and role of the EMU in individual economies, and will require far more wrangling than a UK budget cut.
Obviously NOT, the events, the adjustments are driven by market demands, not by policy choices.Quote:
There's no question there will be an adjustment as in all of the rich countries. I doubt it will lead to long-term stagnant growth as what's looking likely for the eurozone right now. Obviously this is all WAGs since so many factors will contribute to a recovery. But establishing singular political will for reforms is far easier in one country (even in a coalition government) than in the entire EMU.
The impact on the US economy would be just as severe.Quote:
I agree with you on this one. The vote doesn't mean anything - it just is essentially an advisory note to the IMF rep that means we can choose to block the IMF bailout if we feel it's necessary. Given the impact on eurozone economies I find it unlikely the US will actually carry out the threat.
I don't have time to respond to much, but one quick question: What do you think is California's debt-to-GDP ratio? I find it interesting that you lump Greece with California. Methinks it's you who doesn't know what he's talking about.
:) Short memory indeed. Which state was paying with IOU's recently ? Or in more direct words, it doesn't fucking matter what your debt ratio is if you can't pay your debt.Quote:
Originally Posted by wiggin
They can't monetize their debt or change fiscal policy, so they paid with IOUs instead.
The point is that California's problems have nothing to do with Greece's problems. They could pay off their entire debt in a year if need be; the issue is that they have a dysfunctional political system that hamstrings the fiscal policy of the government. Economically, though, they're doing fine. They don't have an overwhelming structural deficit or a problem securing debt.
Exactly like Greece, where one of their main problems is that they don't have a functional tax collector. They could be out of trouble tomorrow if they had the resolve to tackle tax dodging.
The economy of the UK is not totally independent of the Eurozone or the EU of course. Then again neither is America's. We trade a heck of a lot more than they do with the rest of the EU, and follow the same standards etc on a lot of issues, but it would be hogwash to pretend now we're as integrated as the Eurozone.Quote:
Originally Posted by Hazir
Like it or lump it, this eurozone crisis has finally ensured a "2-speed Europe" has to come to pass. The Eurozone can't and won't wait for the rest of the EU to join before continuing deeper integration.
Which polled its worst electoral result since 1931 as a result and is now out of power for a minimum of 5 years, most likely 10 at least. Isn't democracy grand :)Quote:
The UK had up to a week ago one of the most fiscally irresponsable governments in the world.
Indeed the problem is worse than Labour admitted, we all already knew that. PFI, unfunded pensions etc - there's plenty of "off balance-sheet" debts that need servicing. But that's no shock.Quote:
The new government hasn't got a clue even about how bad it actually is. What you find 'likely' counts for shit, because you don't know what you're talking about. The UK is closer to California and Greece than to any other major EU country, with the added 'benefit' of having a teetering banking sector that's too big for the country and a currency that might collapse any moment. For example if the George Osborne is going to come out with the real numbers rather than the cooked ones. George in Athens can tell him how much fun that is.
Nor is the new government going to brush it under the carpet. The new government is already publicising skeletons - and it makes both political and economic sense to do so. Politically getting all the skeletons out in the open ensures they get pinned on Labour, rightly. Economically it is succeeding too as what the government needs is not deception, but credibility. By appearing both credible and serious at wanting and being able to tackle the problem it ensures that the gilt rates improve . . . which makes it easier to service the problem in the first place. Greece has suffered a malevolent circle of being untrusted, punished by the markets, finding it harder, getting punished more etc - we are doing the opposite. Providing trust, accountability and responsibility is already making the task easier. The markets have responded positively to George and co. publicising openly Labour's "crazy spending".
Even the Civil Service has come out this week and said they so opposed much of Labour's final spending that they enacted the "Nuclear Option" of getting minister's to sign off that they were spending the money against advice. But publicising all this isn't mere point-scoring, accepting you have a problem is always the first step to tackling it. :up:
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Greece is well past the point of needing just a functional tax collector. Even if the dodging stopped tomorrow, they still have to service a debt well over 100% of GDP. Interest alone must be providing more spending as a percentage of GDP than California owes total as a percentage!
I actually don't disagree with your last post all that much. Besides the fact that I think that honesty in the long run usually pays, but it carries the risk of severe punishment in the short term.
The question is if you can get through the short-term or not. It is very early days yet, but after the first few days the markets are saying yes: honesty pays.
If Greece had been honest about its state of its economy 5 years ago and tried to fix it then, I don't doubt the problem would be nowhere near as bad as it is now. Ditto if the UK had continued under Brown-style leadership for another 5 we'd be a hell of a lot deeper in the hole.
By the way thanks for saying you "don't disagree with (my) last post all that much." :)
Its refreshing to see someone write something like that here after/during a big discussion. Especially when we've been on this sort-of topic for about 9 years now ;)
For Wiggin; you were right I shouldn't have logged in the UK with California and Greece. Where California and Greece are considered high-default risks, the UK still hasn't sunk quite so low. Yet at least.
Greek loans are rated as junk
UK loans are rated AAA
What was the rating of Greek loans a few months ago? :o
Haha, maybe not the best time to quote ratings, isn't it?
So where did Victoria Beckham get into this topic?Quote:
Obviously this is all WAGs since so many factors will contribute to a recovery.
Sorry, couldn't resist
A- in October which is nothing remotely like AAA.Quote:
Originally Posted by Loki
Well Randblade, a couple of days ago I read a neat little piece about a product designed in 2009 (that's after the shit hit the fan) to deal with the fall out of bad loans that got an AAA rating as little as six months ago. A week ago it was downgraded to junkstatus. I don't really recall if Lehman's ever got to the point that its ratings were downgraded at all. I think we can savely say that the rating agencies were a bit off on that too.Quote:
Originally Posted by RandBlade
I don't quite know what these rating people do, but appearantly they're not even good with short term projections. Using them as a guideline for long term plans seems like utter folly to me. I don't think the world would be much worse off if they were closed down tomorrow. Their illusion of certainty has popped, now that we know the magic doesn't work, we might as well forget about it alltogether.
Indeed rating agencies are not the be-all and end-all, but the point is there is a massive difference between the UK and Greece with them.
The difference is; Greece has more or less normal loans of short duration, the UK has loans with an unexceptionally long duration. This is what keeps the UK out of the wind, it can't be pushed around quite as much because - so far - it doesn't need huge amounts of money right here and right now. Greece needed it yesterday.
Rating agencies are a waste of time, it should be made illegal to base official policies on their ratings. They should continue as a service to private investors who don't have the means to evalutate creditworthiness of opposite parties.
What would you base official policies on instead?
The CDS market is a more efficient alternative, this again has a major difference between the two nations. :)
http://247wallst.com/2010/05/19/merk...hort-the-euro/
(Agreed on the ratings agencies, Hazir.)Quote:
“A failure of the euro means a failure of Europe,” German Chancellor Angela Merkel said today, according to Dow Jones. This is after she banned naked shorting in some financial stocks and supported curbs on speculation in the euro and certain sovereign debt issued by Eurozone members.
Merkel has yet to get approval for her nation’s contributions to the nearly $1 trillion bailout fund for weaker European countries from the lower house of the German parliament. Her comments may be designed to move the approval along. But, her enthusiasm for helping Greece has been consistently questioned. German public opinion is against the move. Some German leaders have even asked large banks in the country to contribute to the bailout. That might be to protect the bank’s own interests, or to show multilateral support from several corners of the financial industry in Europe’s largest nation.Observers continue question Merkel’s motives. It could be argued that the collapse of the Eurozone partnership would strengthen Germany’s financial system because it could go back to its own currency, but the country would then have to deal with significant fallout, some of which is not obvious.
A collapse of the euro would mean a weakening of several economies, all of which import German goods. But, the bailout carries that risk as well. The austerity measures being adopted by Greece, Spain, and Portugal along with new taxes being implemented in the nations could be regressive. The actions may eventually hamper GDP growth, in which case Germany’s exports would suffer as well.
Some financial experts believe that Merkel is acting in the interest of German banks which hold billions of dollars in sovereign paper in Eurozone paper. Defaults could swamp the balance sheets of those banks.
But, the real reasons behind Merkel actions may be more complex and sinister. There is a great deal of evidence that some of Germany’s large banks have bet against both the euro and sovereign debt in the weakest nations in the region. If so, these banks, like other speculators, probably made billions of dollars on such deals.
Merkel may have to deal with the accusation, probably an accurate one, that Germany allowed its banks to take sides against the euro as the government helped drive its value down. How would it look if Germany then left the Eurozone and its banks became, under a set of circumstances helped by Merkel, rich in the process?
The latest latest news is that people are now betting on the authorities going to act to support the (external) value of the euro. Why anybody would be crazy enough to do that at a time that the euro is just about at the right level to give a boost to growth in a huge chunk of the eurozone is beyond me.Quote:
Originally Posted by GGT
This is all looking as crazy as the UK's situation leading up to Black Wednesday. Worse even
it's amusin seeing people passing the buck. This crisis is not the fault of speculators, rating agencies or the banks. The buck lies firmly with the respective governments past and present. Including Germany etc
Well, I have this feeling Germany is cooking up a very nasty surprise for 'the markets'. That surprise being that the new target isn't going to be a 3% deficit but a 0% deficit. That would create a huge fall out in demand for capital.Quote:
Originally Posted by RandBlade
And are Germany going to start following that rule themselves? France?
It's not as if the 3 percent 'rule' has been followed anyway.
Again, you are totally unaware of what's really happening; the Germans already have changed their constitution to the effect that their government will be forced to have a less than 0,35% deficit in the near future. Your inability to follow the news coming from other countries really impairs your ability to evalutate international events.Quote:
Originally Posted by RandBlade
A change they can change back or ignore. I am not remotely unaware of what's really happening, what's "really happening" is that Germany's current budget deficit is 3.3% with the forecast that it could hit 6% this year. Those are the sole facts, the rest is just words.Quote:
Originally Posted by Hazir
Immaterial claims about what they will have in the future mean less than what they're actually doing now. So Germany is running a 0.4% deficit in the future and there's a major crash - as bad or worse than the last couple of years, very possible - you're saying they simply won't go below -0.5%? I call that bullshit, you call it a fact, that's the difference between us.
Lets not forget either the German constitutional requirement in the Maastricht Treaty for "no bailouts". How's that going again? Or the 3% limit they've long insisted on which they're currently in breach of!
You're inability to go beyond "treaties", "constitutions" and other words really clouds your ability to evaluate international events that really occur.
No, the German Constitution can't be changed back as easily as the UK's constitution. Starting 2016 they can't run deficits of the level they are running now or even before the crisis. Then party time is over for the markets, because billions of safe German bonds will no longer be available.
There also is no rule forbidding bailouts, there only is a clause preventing liability. You really don't understand anything about laws.
No, I understand about laws. I also understand you can't legislate away reality.
You pointedly ignored my question. So there's a major crash when an 'OK' deficit of 0.4% happens, tax receipts plummet and benefits go up and the so-called law means that the deficit won't worsen? Really?
You're a fool if you believe that IMO. This whole crisis is caused by people thinking they can pass one more law and reality goes away :rolleyes:
EDIT: And if you think Germany can insist on this "law" across the EU and it will actually happen . . . then you're seriously misguided.
Yes, some "experts" are saying this will be worse than the crash of '87.Quote:
Originally Posted by RandBlade
The speculators, traders, and rating agencies didn't cause the crisis. They just make it worse in volatility, which spooks enough retail investors that they just want out. The banks share some blame as well as governments, because of all the leverage and risk exposure they have...with enough interconnected debt that the domino effect will hit everyone, everywhere.
Put your helmets on, it's gonna get bumpy. :mad:
What's more galling; the present crisis has made it clear that they aren't gambling with their own money but with your and my money.Quote:
Originally Posted by GGT
What happens during recessions, when revenues fall? :confused:Quote:
Originally Posted by Hazir
Well the Prime Minister today had a meeting with Chancellor Merkel and afterwards said that there was "no chance" of the UK supporting any treaty passing powers from Westminster to Brussels, or the UK supporting the eurozone.
I didn't realise (though it makes sense) that if the eurozone nations wanted a new treaty co-ordinating (ie passing to Brussels) some of their powers, it requires the approval of all nations including those outside the eurozone. Britain could theoretically veto a treaty which has no impact on herself, not that it would happen.
I've asked that question twice Loki without reply. Maybe its third time lucky ...
Recessions are not considered a sufficient reason to run a higher deficit. I doubt really if recessions are going to be our biggest headache if 3/5th of Europe's states no longer borrow money.Quote:
Originally Posted by Loki
Randblade, it's not so difficult to circumvent the treaty route; the member countries of the eurozone can also change their national legislation without any treaty being necessary. Also, the Brits may want to think about using any veto in matters that don't really concern them, they will find themselves outvoted in things that matter to them that can be decided by QMV all the time if they do.
I doubt we'll reach a point where 3/5ths of Europe's states don't borrow money. Nor have you answered the question as to what the states will do, if a government has a neutral budget then a crash happens in the economy then the country will automatically go into deficit! Either you'll have a position where the governments will have to dramatically slash spending (lets see what the unions etc have to say about that) potentially sending the state deeper into recession, or they will have to dramatically raise taxes . . . harming the economy and sending it deeper into recession. Either way the government loses all its popularity.
If you expect such a level of maturity and counter-Keynesian economics from Europe's states you have no evidence of anything ever to back that up. It won't happen, its never happened.
You're so funny, now you're even against programs that are extremely conservative in their economical outlook :D
So let's say you have a recession and tax revenue falls by 20%. Do you increase taxes by enough to get rid of that shortfall?Quote:
Originally Posted by Hazir
Base budgets on realized revenue instead of predicted revenue (I use predicted because projected is too optimistic a term for the way future revenue is calculated). Yes, I'm a skipping record but it's the only way to realistically reduce deficit spending.Quote:
Originally Posted by Loki