Austerity measures and economic recovery

[edyzmedieval]

I'm going to take the example of what's going on in Greece and the other Eastern European states, and I'm going to be a bit bold and personal by asking how do Orgahs manage the current economic downturn, and will they be affected by the lower public spending?

For some more information, check the Yahoo link...
http://news.yahoo.com/s/ap/20100525/ap_on_bi_st_ma_re/us_wall_street

I'm very pessimistic about the future, particularly regarding the fact that I'm supposed to be going to university in England hopefully but more likely I will be going back home for uni, but still, there's some economic fundamentals which I don't quite get despite the fact that I've been doing economics in high school. But still, that's not the point, what matters is that the world is in a economic "hole" and it doesn't look too pretty either for the future.

My most important questions - Will the austerity measures change anything? Or will it create a downward spiral because we're not spending enough to fuel demand?

[gaelic cowboy]

Fine here man no debt no mortgage etc young enough not to need health services yet but I see lots of friends heading to USA, Canada, Australia, UK and New Zealand in search of jobs. For the most part there getting them as evidenced on there facebook pages.

The main problem here is jobs not debt the construction industry fueled by cheap credit sucked in a lot of labour thats all gone so there mostly out of work which impacted all the people who bought houses.

Our free spending Irish goverment was guilty of expanding using all the tax from the construction industry and stamp duty on houses etc etc, were really returning to a more normal spending regime here unfortunately it took a near collapse of irish banking to cop the government on.

I don't believe that the austerity measure will be a danger the real danger is from bond markets refusing to buy or sell a countries debt hence Greece.

[Furunculus]

it is fundamentally true that western nations have used artificially low interest rates to borrow and spend beyond their means, and that this is unsustainable in the medium term let alone the long.

a nations choices are either to:
1. introduce austerity measures that will eventually allow the country to live within its means, and preserve the ability to borrow for deficit spending at non punative rates.
2. encourage rapid inflation to devalue your debt to the markets, accepting that future deficit spending will be hampered by higher interest rates imposed by the markets.
3. pretend there is nothing wrong and hope to hold of the eventual collapse as long as possible, default on debt repayment, and get crippling interest rates on future borrowing.

The first requires that you create conditions for private sector growth to take over from public sector spending, something which the uncompetive and overvalued Eurozone will struggle with.
The second is acceptable provided you don't intend to engage in any significant amount of deficit spending in the medium term, and don't mind a investment implications of a shakey currency.
The third just doesn't work.

In Britain's case, we have such a huge deficit that we will need to borrow for the forseeable future which means that we need low interest rates, therefore the market must be assured that we don't intend to inflate the value of our debt away. We also experienced a currency devaluation which has caused faster growth by British business hopefully allowing the private sector to absorb much of the public sector reductions. Whether it will be enough is another matter, and whether it matters at all given the possible collapse of our biggest trading partner is an even bigger question.

Europe has bigger problems, for political reasons it won't kick out the offending nations which means that europe is writing off £750bn in government loans to nations that can never pay off the debt, because their continued presence in overvalued currency will not permit the economic growth to permit that level of repayments.

[gaelic cowboy]

Europe has bigger problems, for political reasons it won't kick out the offending nations which means that europe is writing off £750bn in government loans to nations that can never pay off the debt, because their continued presence in overvalued currency will not permit the economic growth to permit that level of repayments.

I would go further than this they cant kick them out cos they need them to borrow the money to buy German consumer items.

Also kicking them out means they still owe Germany in Euro all the countries in question would devalue the new currency and arrange a debt default right quick. The amount of German banks, hedge funds an pension funds that could go bust would dwarf the PIIGS easy if that happened.

In a sense were in a lifeboat with PIIGS, UK, France and Germany but some of us have the flu and cant row the boat.

[Seamus Fermanagh]

At the risk of channeling a Peter Sellers character, I'd like to use a gardening analogy.


It may seem wisest to water the garden a lot to keep it green and lovely, but when you stop watering it, a lot of it will die. If you plant your garden but after planting leave it be, you will have a good deal more difficulty getting things to grow, but the ones that do will be stronger and more adapted to the real environment they must learn to thrive in. So too with government spending I think.

[Tellos Athenaios]

Except that some desirable plants won't grow without time and effort invested into them; and lots of seed develop better if watered first. Of course, weeds will grow everywhere; all the more if you don't pay attention to the state of your garden.

The real question is what you want your garden to look like? To smell like? To sound like?

[gaelic cowboy]

Ha ha continuing the gardening theme could it be the Green Shoots of Recovery we hear of so often are instead economic weeds

[edyzmedieval]

Looks like we have the green shoots of recovery but we have the red problem of debt going on us...
I fear another crisis, and if it does happen, then goodbye European Union and hello global disaster.

[Idaho]

At the risk of channeling a Peter Sellers character, I'd like to use a gardening analogy.


It may seem wisest to water the garden a lot to keep it green and lovely, but when you stop watering it, a lot of it will die. If you plant your garden but after planting leave it be, you will have a good deal more difficulty getting things to grow, but the ones that do will be stronger and more adapted to the real environment they must learn to thrive in. So too with government spending I think.

A reasonable analogy - but much of government spending is directed towards companies and consultants who are already rich. And those companies and consultants are often hand-in-glove with the politicians who make the decisions on such spending.

[Beskar]

Looks like we have the green shoots of recovery but we have the red problem of debt going on us...
I fear another crisis, and if it does happen, then goodbye European Union and hello global disaster.

The debt is the climate change of the economic roots. Unless we do something about it, it will kill the those green roots.

[Vladimir]

The debt is the climate change of the economic roots. Unless we do something about it, it will kill the those green roots.

And, like climate change, it's based on perceptions and symbolism. :laugh4:

[Crazed Rabbit]

My most important questions - Will the austerity measures change anything? Or will it create a downward spiral because we're not spending enough to fuel demand?

Government spending does not fuel an economic recovery. Instead we're seeing how reckless spending is leading to very deep cuts, and more harm than if spending had been kept reasonable all along.

CR

[Louis VI the Fat]

At the risk of channeling a Peter Sellers character, I'd like to use a gardening analogy.


It may seem wisest to water the garden a lot to keep it green and lovely, but when you stop watering it, a lot of it will die. If you plant your garden but after planting leave it be, you will have a good deal more difficulty getting things to grow, but the ones that do will be stronger and more adapted to the real environment they must learn to thrive in. So too with government spending I think.There is no real environment - it is all the work of man. A jungle is free from manmade influence, not the English garden, despite its Romantic claims to imitate nature so well:

https://img404.imageshack.us/img404/7403/englishgarden.jpg



Therefore, the only true garden is the French garden, where man, far from fearing intrusion, perfects nature. Where beauty, not growth, is the final measure. They are therefore the prettiest and most attractive in the world:


https://img89.imageshack.us/img89/9342/jardinfrancaisversaille.jpg



And I, for one, do not care if the English garden manages to have more green, for it is made of a few groups of tall trees amidst an undergrowth kept short to preserve sunlight for the taller ones.
And where plant life is nasty, brutish and short, instead of gently sheltered in winter in an orangerie.

[PanzerJaeger]

Entitlements across the Western World have grown far too big and are unsustainable. The solution is obvious.

[Seamus Fermanagh]

Entitlements across the Western World have grown far too big and are unsustainable. The solution is obvious.

Declare an end to all conflict, de-militarize, and use the savings to make lavish entitlements truly sustainable.


Now, please excuse me as I'm late for my tee-time with Kringle and Cottontail.