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For massive corruption, you totally miss the picture. Look at the other way like banks such as Deutsche Bank and the likes which commit massive fraud and lend to countries very well knowing they can't pay back, make tons of money out of them and when those loans can't be paid they push austerity measures on people to the point were they commit suicide. Some banks which by the way were helped by european taxpayers. Deutsche bank alone has more than $75TRILLION in derivatives (unsecured loans). Basically they don't even have the money that they loan.
So Deutsche Bank alone has more than $75 Trillion in derivatives. Care to share the source of this information?
The people who call themselves "Keynesians" are nothing of the sort. Keynes said that during boom times, governments should put back surpluses into a "rainy day account". Then during lean economic times, government should use that previous surplus to pump liquidity into the economy. Makes sense to me.
The bastardized version of Keynesian economics people like Krugman champion today is to always run deficits and then during an economic bust to run even bigger deficits.
Austerity works for me in my personal life. Not that I'm a pauper, but I am generous with what I put away in savings and have practically zero debt. Immigrants do the same thing; that's how they get ahead. Rich people from established families do the same thing too, that's how they keep getting richer.
If it works for people in their personal lives, why shouldn't it work for nations?
Read, "The Millionaire Mind."
Deficit spending is justified to bypass a temporary lack in demand. It was justified during the economic crisis in 2008 and 2009. But only those measures which are fast-acting. For example give incentives that companies kept their employees to maintain the consumption of private households. Or incentives for buying cars to kept the car production somewhat stable. But even those are problematic, because after those incentives run out the demand for cars will fall below the long-term trend.
At the moment the global demand is somewhat sluggish, especially in Europe. But this is unavoidable, because in most European countries the public pile of debts is too high. Deficit spending is ok to soften a recession, but not to constantly boost the economy.
The reasons for the problems in Finland are not a lack of demand. As far as I know the main reasons for the economic problems in Finland are the demise of Nokia, the basically problems of the wood and paper industry, that's more a global phenomenon. And most recently the ecnomic difficulties with Russia. All those problems can't be solved by deficit spendings. Deficit spendings doesn't lead to a new Nokia and they can't solve the problems of the wood and paper industry. The economic problems with Russia are probably not of a temporary kind.
Finland needs probably structural reforms, maybe the job market has to become more flexible. Maybe Finland needs lower production costs to become more competitive and attract more investments. At the beginning of this millennium Germany was also in a chronic crisis. The reason for this was an inflexible job market and way too generous social benefits that makes working unattractive. If Germany had to try to oppose this crisis with deficit spending, Germany were doomed.
In 2008 the public deficit of Finland stood at 32.7% of GDP, in 2014 it stood at 59.3%. Nearly 30%-points in just 6 years. That's surely the result of deficit spending. It doesn't have solved the problems.
I don't demonize deficit spending, but in my opinion the possible applications are very limited. Small amounts of deficit spending are ok if the overall pile of debt is manageable and if the annual deficit is below the nominal growth of GDP.
I don't know wheter my description of the problems in Finland are correct, Ariete knows surely better what the problems of the economy in Finland are.
I don't think income distribution is connected to monetary policy; yes the US is more unequal but that has nothing to do with austerity or no austerity. As for Greece, its debt is so huge perhaps it can't practically borrow for a stimulus. But I was referring to Finland; with a debt to GDP ratio of 53% and great credit rating. It can afford to borrow to boost the economy.
Any evidence of that? Especially without being able to devalue its currency, I suspect it may stay trapped in stagnation. As for Greece, its GDP declined so much its current account balance is worth relative to GDP.
Constantly deficit spending will increase the overall pile of debt. To make the pile of debt manageable more inflaton is needed to devalue the debt mountain. But this increased inflation will hurt especially those who have to spend almost all their incomes for consumption. It's also usual that the income growth of low income earners is below average. More inflation will increase the income inequality. A higher rate of inflaton is often welcomed by Anglo-American economists. It makes the debt mountain more manageable and leads to a slower increase of the unit labor costs. But it has negative effects on the real income distribution.
The debt to GDP ratio and the annual deficts for Finland and the UK:
2007: 34.0% +5.1% vs. 43.6% -3.0%
2008: 32.7% +4.2% vs. 51.8% -5.1%
2009: 41.7% -2.5% vs. 65.8% -10.8%
2010: 47.1% -2.6% vs. 76.4% -9.7%
2011: 48.5% -1.0% vs. 81.8% -7.6%
2012: 52.9% -2.1% vs. 85.8% -8,3%
2013: 55.8% -2.5% vs. 87.3% -5.7%
2014: 59.3% -3.2% vs. 89.4% -5.7%
The economy in the UK growth much faster than the ecnomy in Finland, because of massive deficit spending in the UK. But that is not sustainable in the long run. The economic growth in the UK will be reduced in the future, because they have to curb their expenses.
Deficit spending is justified to bypass a temporary lack of demand. Constantly deficit spending just leads to straw fires. The real reasons for the sluggish economy are just whitewashed. The Finnish economy seems to have structural deficits (demise of Nokia, problems with the wood and paper industry, economic problems with Russia). Those can't be solved by more deficit spending. With deficit spending you can boost the economy for a limited period, but it doesn't solve the structural deficits. The British government is happy that they are able to boost the economy with deficit spending. But they don't see the structural deficits of the British economy.
Borrow money to boost the economy is only useful to bypass a temporary lack of demand. If Finland tries to battle the sluggish economy with more deficit spending, they will be doomed in the future.
"The number of Britons living in poverty has more than doubled over the past 30 years, a report has revealed. About one in three UK families now live below the breadline, despite the British economy doubling in size over the same period.
The UK’s largest ever study into poverty in the country has urged the government to take measures to tackle growing levels of poverty. The Poverty and Social Exclusion in the United Kingdom (PSE) project, led by the University of Bristol, has revealed the wealth gap between the haves and the have-nots in the UK is widening still further.
Almost 18 million people are unable to afford adequate housing, while one in three do not have the money to heat their homes in winter."
This still doesn't change the fact that the UK is doing relatively well economically, its not in recession, its growing, not as fast as some countries but compared to a lot of Europe its doing well. The fact that the richest and middle earners are creaming a bigger portion of the wealth is a different matter altogether to the state of the national economy.
This still doesn't change the fact that the UK is doing relatively well economically, its not in recession, its growing, not as fast as some countries but compared to a lot of Europe its doing well. The fact that the richest and middle earners are creaming a bigger portion of the wealth is a different matter altogether to the state of the national economy.
Yes the GDP growth is very impressive. But this growth is bought from future generations. Without the deficit spending and the current account deficits, this growth wouldn't be possible. Maybe it will turn out well for UK. I don't know. I am skeptical about this kind of economic growth. Of course I do not hope that the UK will get into difficulties, because it would be a severe strain for the European economy.
COULD DEUTSCHE BANK BE THE NEXT LEHMAN?
"How exposed is Deutsche Bank?
The trouble for Deutsche Bank is that it’s conventional retail banking operations are not a significant profit center. To maintain margins, Deutsche Bank has been forced into riskier asset classes than it’s peers.
Deutsche Bank is sitting on more than $75 Trillion in derivatives bets — an amount that is twenty times greater than German GDP. Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.
With that kind of exposure, relatively small moves can precipitate catastrophic losses. Again, we must note that Greece just missed it’s payment to the IMF – and further defaults are most certainly not beyond the realm of possibility."
This still doesn't change the fact that the UK is doing relatively well economically, its not in recession, its growing, not as fast as some countries but compared to a lot of Europe its doing well. The fact that the richest and middle earners are creaming a bigger portion of the wealth is a different matter altogether to the state of the national economy.
You probably listen to all the BS from the mass media:
Here are some facts:
I don't know wheter my description of the problems in Finland are correct, Ariete knows surely better what the problems of the economy in Finland are.
You gave a good skinny about the problems. Also the aging of the population is a problem, as the posst WWII baby-boom started and ended earlier in Finland before most of Europe. These people born in 1944-1948, the largest cohorts ever, have retired during this financial crisis.
60% of the exports of Finland goes to the EU, and the economy is slow on the continent. Of the 10 largest companies of Finland there's Nokia, Neste Oil (oil/petrol refinery), 2 grocery/restaurant chains (hampered by the sanctions against Russia), 2 paper refineries, KONE (world's largest elevator manufacturer), 1 metal/steel industry, and 2 financial services companies. These areas are in trouble globally.
If you look at the 11-20 list, you find 2 more financial services, 2 more paper mills, 2 more oil refineries, a shipyard, an electronics company, an engineering company and a bank. The problem is that the powerhouses of the economy are restricted to too few areas. The electronics and medicine industries which are big sectors as a whole in exports, are small shattered companies and not big players.
Here's the total labour costs of Europe, and even if it could be lowered for Finland, it's not dramatically high:
(eurostat)
The only difference is, Britain controls their currency(same with the US) and they can print money. That's not the case with Greece.
They pretty much hosed themselves and gave up sovereignty when they joined the Eurozone. Same with the peripheral countries(Portugal, Spain, Italy, Ireland).
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