Things are getting pretty freaky around here in Spain. We've got some horrible (freedom-wise) laws passed recently and we're all angry about them. They've been trying to for several years, and now that people is tired of fighting these stupid laws back they can pass them. This basically means that Google would need to pay to index newspapers.
As an American I watch Europe pretty closely, and I've seen some things that are worrisome such as increasing amounts of fascism (anti-freedom / anti-privacy)... but, things seem to be getting pretty freaky almost everywhere, freedom seems to be on the retreat globally.
For Spain, speaking sociologically, how long can an advanced country have 30%-35% real unemployment, before there are severely destabilizing effects that tumble out of that (culturally, politically and so on). Greece is facing a similar context and similar extreme unemployment problems. I would think it dramatically increases the risk of getting dangerous politicians that start making fantastical promises, with voters increasingly willing to buy into them.
There has been a near total collapse across Europe of the system of promises that were made, that support the premise of the modern welfare state. Only a few countries have been spared (either partially or totally), such as Norway, Sweden, Finland, etc. France's economy for example is smaller than it was in 2004 inflation adjusted. GDP for the whole of Europe is still below 2007 levels. Even Finland's per capita GDP hasn't increased since 1990 inflation adjusted. How long can such stagnation continue before there are severe consequences.
> As an American I watch Europe pretty closely, and I've seen some things that are worrisome such as increasing amounts of fascism (anti-freedom / anti-privacy)...
As a European who watches the US, I hope the irony of your statement has not escaped you.
The NSA, the Can-Spam act, the TSA, Guantanamo Bay, how Obama gave a kill order on a US citizen without due process, how the hardline christian right and hardline libertarians across the pond would make most of our local extreme right wing clowns look like socialists, how some major libertarian voices in financial news are regularly cheerleading whacky anti-Europeans, the list could go on ad nauseam.
> Even Finland's per capita GDP hasn't increased since 1990 inflation adjusted. How long can such stagnation continue before there are severe consequences.
Doesn't sound so dire... The main reason that inflation-adjusted income has increased in the average US family unit since the 1970s is that it went from one bread earner to two. (See e.g. Elizabeth Warren's research on debt or her books, for instance The Two Income Trap, for the gory details.) I'm not seeing pitchforks.
In more seriousness, this is not meant to be a contest. The point is that things aren't as bad on the continent as you might read in Anglo-Saxon news outlets.
There's some uneasiness and some distress, sure. Here, like on the other side of the pond, the main cause of it at the end of the day is economic woes, most of which stem from bailing out the well connected instead of having let the financial system collapse -- for better or worse.
The most important take away, imho, is that we're at peace. Consider... Since the fall of Rome, we had been almost constantly at war with each other. Whereas besides the Balkans in the 1990s, and the ongoing skirmishes in Crimea, there has been no war here since WW2. That's the longest period of peace between Europe's major powers in history. And thankfully, no ending of this streak is on anyone's radar.
"As a European who watches the US, I hope the irony of your statement has not escaped you."
There's no irony in fact. I didn't claim the US condition was X Y or Z.
There's nothing ironic about a heart disease patient pointing out the condition of another heart disease patient. Nor does pointing such out, imply that the observer is lacking of heart disease.
Your reach is a failure of the application of logic. Just because I note that Europe has X problem, that does not mean I automatically think the US is lacking in X problem. Your response was emotional, the classic need to point out another's flaws because your flaws were pointed out. I get that.
I don't get my European news from Fox or CNN. And I pay close attention to the economic data coming from just about every country in Europe. I'd argue I'm likely better versed on the economics of most every country in Europe than most Europeans.
Well... it was emotional indeed, but to my credit your own post could just as well have been understood (no offense meant) as an "everything is perfect over here at home, but hey look at how things are over there!" kind of statement. Which, admittedly, rubbed me the wrong way, knowing all too well how frequent that type of statement is in Anglo-Saxon news outlets -- particularly in the economic sphere.
> As a European who watches the US, I hope the irony of your statement has not escaped you.
To be fair, he did say freedom seems to be on the retreat globally. The US and the EU are both guilty of this, though I'd argue that torture and illegal detention are a bit worse in that respect than banning newspapers from the internet (or maybe not, now that I've formulated it like that).
The EU does have the edge that these movements away from freedom are somewhat balanced by other movements towards guaranteeing freedom (like the user data protection directive).
I don't know where you get the "30%-35% real unemployment" figures, that to me seems absurd given that European economies are known to have large underground economies in the region of 15% of GDP... and in the case of Spain somewhat larger[0]. Albeit, unofficial, the number of jobs created by a shadow economy of €253bn is too large to ignore. Now, 25% of GDP is underground economy, and 25% unemployment seem to have something in common, don't you think? The problem to me seems to be a budget balance issue: how can Governments pay for services that a large number of the population uses, but doesn't pay. This, in my opinion is what is causing a collapse: lack of funds to pay for services, and obligations (debt), and loose cost/investment policies.
> how can Governments pay for services that a large number of the population uses, but doesn't pay
What do you mean by "large number of the population"? Most of the wasted money that Spain, Portugal and Greece pay are the interest on the loans they had to take to bail out the banks.
Including having billions sitting around waiting for the banks to fail. Of course the banks say they don't need it, but the interest is almost nil, so they all took loans from that money to borrow to the economy with giant profits. Those loans provided by the international institutions are simply wealth redistribution, from the poorer southern countries to the richer countries.
> Most of the wasted money that Spain, Portugal and Greece pay are the interest on the loans they had to take to bail out the banks.
I don't know how you draw that conclusion. What source are you using? Interest expenditure in Spain is around 3.5% of GDP, just look at the Eurostat numbers. Then, mixing Spain's and Portugal's economic situation with Greece's is just comparing apple and oranges, as both suffer crisis for completely different reasons.
3.5% of GDP is a large part of the cuts being applied now. The main disagreement is that when the richer countries ignored the deficit limits to increase investment in their economies had no sanctions, while the smaller countries are forced into signing treaties that forbid public investment, in economies that are highly dependant on the public sector. Germany also benefits from being in the common market by having a larger market for their goods, but denies borrowing money for the entire EU as a whole, benefiting selfishly from their lower interest rates. They get the benefits of the EU with no downsides.
> If no loans where provided the savings of millions of people would of been wiped out, literary.
The amount of money in low risk investments and deposits it's a small fraction of the bailout. Not just that, the European Central Bank guarantees 100k€ for each person, no questions asked. It's the investment banking that creates massive losses.
So now, to you, 3.5% is "Most of the wasted money"... 3.5% is no economic pressure compared to the cost of running oversized Government structures. Back in the 80's when cost of capital for these Governments was in the 10%-15% no one really complained.
Can you cite the source where "countries ignored the deficit limits to increase investment" and "while the smaller countries are forced into signing treaties that forbid public investment". I'm fascinated by this opinion, a source would be useful, and the name and date of the agreement too.
Again, can you provide a source for the use of capital injections as you seem to know "The amount of money in low risk investments and deposits it's a small fraction of the bailout". How small is that fraction, where can I see that split?
I've got a sense that you are quoting political propaganda, but no hard evidence. But if you want to argue with no substance, and say that 2+2=78, I'm not here to for that.
> countries ignored the deficit limits to increase investment
EU finance ministers reject the European Commission’s recommendation to initiate sanctions proceedings against France and Germany for flouting the Stability and Growth Pact’s rules.
http://ec.europa.eu/economy_finance/economic_governance/time...
This treaty defines goals that in practice leave no budget for public investment. In the last years Portugal's debt ballooned to 125% of GDP due to all the austerity implemented. Getting this to lower to the standards of the treaty in such short time forces any government to cut spending in essential public services, sell at discount prices natural monopolies such as electricity and water distribution and raise taxes (50%+ total rate for freelancers).
As for the last one, at least in Portugal the biggest amount of money was spend covering for BPN's losses, a small bank with a market share of 2% that required upwards of 5 billion euros of taxpayer's money. Another giant money sink was BPP, an investment bank.
- I'm still waiting for the specific examples, the europa.eu link doesn't show any information you mention. Again I quote you "countries ignored the deficit limits to increase investment", none of that is mentioned in the website you refer to.
- The "European Fiscal Compact" doesn't forbid public investment. Feel free to point me to the clause in question.
- And finally:
> a small bank with a market share of 2% that required upwards of 5 billion euros of taxpayer's money
What has market share got to do with the size of the capital requirements? Lehman Brother had 0% US retail banking market share, and yet the capital requirement was well above many of the largest retail US banks. You are mixing two completely independent variables! You are mixing capital structure with a vanity metric which is market share... it's mind boggling.
The specific example are right there, Germany and France were the first countries to break the treaty and they got away scott-free.
The Compact doesn't forbid public investment per-se, but the goals it sets, combined with the current situation of some countries makes any policy other than maximum austerity unfeasable. If we can't even decide how to pay our own loans, the government turns into a bunch of bureaucrats with no real power, might as well be annexed by the loan sharks.
Market Share in commercial bank should provide a metric to the size of the bank in relation to the entire financial system. It's the whole base of the "too big to fail" ethos.
This is getting ridiculous, you are digging yourself into a hole.
No, in the specific link there is no mention of "ignored the deficit limits to increase investment in their economies had no sanctions". Your words, not mine.
Ok, so we can agree that "smaller countries are forced into signing treaties that forbid public investment" is a false statement.
Again, you are mixing the vanity metric of market share with capital structure. What do you define as "market share"? Is it volume of deposits, assets on the balance sheets, assets under management, number of employees, number of clients? What market share are you referring too? Your "market share" argument is like saying that your javascript doesn't work because your company doesn't have enough Facebook likes... Haven't you ever heard of the Basel Accords?! I can't believe I'm reading your comments on Hacker News.
Before I give up on this conversation: "Too big to fail" does not refer to market size. It refers to the entities that systemically affect risk with one another, and it includes institutions that are non-depository in the financial system... unlike the Portuguese banks you mentioned. It's really frustrating to read comments like yours on Hacker News, based on loose buzz words, but empty in substance.
> The problem to me seems to be a budget balance issue: how can Governments pay for services that a large number of the population uses, but doesn't pay.
If the population doesn't pay, who does?
The way taxes work, is that the population pays the taxes to the government, and the government in return pays for/provides certain services. Taxation is basically just like insurance, coupled with some sort of progressive redistribution or wealth.
Like in most countries, including the US, budget deficit is paid with debt, and increase in taxes. That is the problem. The solution here is to uncover the underground economy, make them pay taxes (at reasonable rates), although this is no silver bullet.
thats printing plus taxing..and over doing the printing part? why not print as much as one would ordinarily tax? saves the trouble of employing 100s of 1000s of people to do the tax paperwork.. and inflation is in effect a wealth tax anyway...
