DC Tom Posted May 14, 2012 Posted May 14, 2012 Europe's austerity measures have largely been focused on government sector debt. In France their Govt debt to GDP is 82% about 18% lower than the U.S.. In Greece we are talking about a society where 40% of the jobs were government. Ther debt to GDP is 165% https://www.cia.gov/library/publications/the-world-factbook/fields/2186.html. The problem with the prevailing school of economics is they often ignore private sector debt and solely focus on public sector debt. In fact Greece private sector debt to GDP is only 124% to GDP. So while Greece has huge government debts it's private sector is better off than the U.S. private sector. In Ireland the private sector debt to GDP is an astonishing 341% to GDP. http://www.rte.ie/news/2012/0214/debt-business.html That in no way contradicts what I posted. Or supports it. In fact, your reply is pretty much irrelevant to what I posted.
BiggieScooby Posted May 14, 2012 Author Posted May 14, 2012 You stupid schit. Greece has very little private sector. You are an idiot that makes up crap. Enjoy your life. If you get what you deserve, you'll be eating out of garbage cans soon. As a college educated finance and business major and business owner there will be no dining out at the local McDonalds dumpster. How does citing the CIA.GOV website and legit news sites change the facts? I wish you well in your dumpster diving 3rd. And as the say dont let the lid lock you in. That in no way contradicts what I posted. Or supports it. In fact, your reply is pretty much irrelevant to what I posted. I was agreeing with what you posted. You are one of the smarter guys on here Tom.
MARCELL DAREUS POWER Posted May 14, 2012 Posted May 14, 2012 (edited) ...which won't work either, since either the higher tax revenues will stifle private sector growth anyway, or the increased government spending will be with borrowed money, resulting not in growth but inflation. Europe's finding this out the hard way - you can't grow your way out of debt. You can only spend less than you bring in and pay it down. if the govt stops spending the economy will contract. companies that subsidize the govt will go under or suffer severe loss. and if they borrow from the fed, inflation occurs, and the economy will eventually contract. if the private sector simply stops borrowing, ie banks stop giving out loans, people stop going into debt, the economy will contract... you cant have money without perpetual debt. federal deposits are much smaller than the loans out there, this is why a run on the banks is dangerous, because the money is not really there... if money is not loaned out, usually at a 9-1 ratio( before the recession is was as high as 50-1 or 100-1), the money supply severely contracts. without credit there is no economy, with credit and interest, economies over time collapse... Edited May 14, 2012 by MARCELL DAREUS POWER
GG Posted May 14, 2012 Posted May 14, 2012 My point is the key element hampering our economy is private sector debt deleveraging. We haven't seen private sector debt to GDP levels this high since the eve of the Great Depression. We are now at 250% of debt to GDP down from 301%. We are still at an unsustainable level of private sector debt. It's been 5 years since this began. If it takes 5 years to bring debt down 50% we are looking at a period of low growth no growth similar to what Japan endured starting in 1990 to the present day. Both Presidents can promise growth, but my contention is this won't happen via the private sector taking on more debt since we are record levels of private sector debt. So the only way to growth is via stimulus, something that will require higher govt tax revenues and/or higher government spending. So we are in a massive delevering in the private sector, yet the levels are still at record levels? Is the % change of GDP due to the denominator or the numerator? What's the highest component of private sector debt? What is the debt relative to private assets? What's the net debt position of private sector debt? What's the expected default profile of the private sector debt? How does it compare to historic periods?
IDBillzFan Posted May 14, 2012 Posted May 14, 2012 I was agreeing with what you posted. You are one of the smarter guys on here Tom. Just to clarify; agreeing with someone you perceive to be smart does not, by default, make you smart. Nor, by the way, does being "a college educated finance and business major." You probably think it does, but that would be a mistake.
Adam Posted May 14, 2012 Posted May 14, 2012 Canard? Seriously how do you ignore the fact that private sector debt is 250% vs. the public sector debt of 100%? We are experiencing the fastest contraction of private sector debt in human history. The private sector is collapsing. My question to right wingers was how do you offset this? The economy has two sources of money; public sector & private sector. The private sector can create money by lending to businesses and individuals and the other is the government by running a deficit. What caused the huge private sector bubble was private sector to private sector lending which created a speculative boom, funded by speculation on rising asset prices. If the government sector attempts to run a surplus aka if the government sector tries to cut its spending this will be contractive to our economy. Government deficit cutting has sent massive ripple effects further hurting our economy. In 2009 the U.S. private sector debt was 301% of GDP. Right now its at roughly 250%. The recession will likely end in 5 to 10 years when private sector debt approaches 100% of GDP. There are 2 options here: do nothing and continue to sink, or put money to work to grow the economy. Why would you pose a question to wingnuts- on either side?
Bigfatbillsfan Posted May 14, 2012 Posted May 14, 2012 I hate to interupt the intellectual beat down Tom is currently administering, but the whole premise of this thread is idiotic on its face. We're pretending two types of debt are analagous when they are not. Most private debt is in some form of investment. Whether you take out a loan for a car and pay it off on time, take a bank loan to pay off your house on time, take a loan to build a business, student loans, etc. This debt is a way of financing something tangible. The private debt most similar to Government debt credit card. Specifically, the kind you run up going out to eat and taking vacations, or paying your monthly bills. Government takes a big loan to pay its bills when they come due, not so it can have the utility of its investment up front and pay for it in installments as its being used. Most private sector debt right now is in the form of credit card and mortgage. Neither one is really that much of an investment. A mortgage is certainly better than credit card debt. (usually) But when you really think about it inflation and repairs usually offset the investment on your mortgage. Credit card debt is, for the most part, needless. ...which won't work either, since either the higher tax revenues will stifle private sector growth anyway, or the increased government spending will be with borrowed money, resulting not in growth but inflation. Europe's finding this out the hard way - you can't grow your way out of debt. You can only spend less than you bring in and pay it down. Then why has austerity been such a failure in Europe?
meazza Posted May 14, 2012 Posted May 14, 2012 Then why has austerity been such a failure in Europe? What austerity exactly?
Bigfatbillsfan Posted May 14, 2012 Posted May 14, 2012 What austerity exactly? The austerity imposed on Greece, Spain, and Ireland.
ieatcrayonz Posted May 14, 2012 Posted May 14, 2012 Just to clarify; agreeing with someone you perceive to be smart does not, by default, make you smart. Nor, by the way, does being "a college educated finance and business major." You probably think it does, but that would be a mistake. Don't let comments like this get to you Scoobs. I remember once posting about going to one of the best High Schools in Indiana and everyone wrote if off like it was nothing.
meazza Posted May 14, 2012 Posted May 14, 2012 The austerity imposed on Greece, Spain, and Ireland. Obviously. Of course you could easily equate the austerity in the periphery like a fat girl claiming she's on a diet while sleepwalking to finish a tub of ice cream. Saying you're practicing austerity and doing so are two completely different things. Not to mention the cost of the riots probably hasn't helped in the overall budget.
DC Tom Posted May 14, 2012 Posted May 14, 2012 The austerity imposed on Greece, Spain, and Ireland. The austerity imposed by the EU for all of...what, six months now? You're an idiot.
BiggieScooby Posted May 15, 2012 Author Posted May 15, 2012 So we are in a massive delevering in the private sector, yet the levels are still at record levels? Is the % change of GDP due to the denominator or the numerator? What's the highest component of private sector debt? What is the debt relative to private assets? What's the net debt position of private sector debt? What's the expected default profile of the private sector debt? How does it compare to historic periods? GG in short the answer to your question is yes, we are still at record levels of private debt with respect to GDP. The attached charts highlight the changes in U.S. Sector debt relative to GDP from 1950 to 2011. The sectors are broken down as follows: finance, business, household, & government. The second attachment is combine private sector debt to gdp from 1920 to 2010. The last time we saw anything like this was 1932. We experienced 13 straight years of declining private debt relative to GDP. In 1932 we were at roughly 240% private debt to GDP, whearas in 2008 we were at 301%. Considering our private sector debt has come down to roughly 235% Q2 2012 estimate we are looking at another 135% decline before we get to sustainable private sector GDP growth levels. The goal of QE2 was to dump liquidity into the markets. Whearas the European Central bank has a strict policy against "printing" money to avoid the inflation Europe experienced post WWI, our Federal Reserve decided to play chicken with inflation by dropping interest rates to near record lows, and pumping liquidity in the market. There is a delicate balance that must happen happen when you do this because you run the risk of hyper-inflation.
/dev/null Posted May 15, 2012 Posted May 15, 2012 The austerity imposed by the EU for all of...what, six months now? You're an idiot. Of course it's the 6 month old austerity is to blame. It couldn't possibly those 6 decades of handouts and freebies Hey did you hear Howard Stern is going to be on America's got talent and Kim might be pregnant. OMFG, where's the remote?
BiggieScooby Posted May 15, 2012 Author Posted May 15, 2012 (edited) Of course it's the 6 month old austerity is to blame. It couldn't possibly those 6 decades of handouts and freebies Hey did you hear Howard Stern is going to be on America's got talent and Kim might be pregnant. OMFG, where's the remote? Europe is sinking thanks not to social welfare but deflation with respect to private sector debt. As Paul Krugman points out "you have no idea what you're talking about." Stop regurgitating the right wing talking points and do some reading. http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html Edited May 15, 2012 by BiggieScooby
Jauronimo Posted May 15, 2012 Posted May 15, 2012 Europe is sinking thanks not to social welfare but deflation with respect to private sector debt. As Paul Krugman points out "you have no idea what you're talking about." Stop regurgitating the right wing talking points and do some reading. http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html Citing Krugman will get you almost as far as referencing Mickey Mouse. He may have been an economist back in the day, but at this point hes just pushing his politics. I suggest you get a second opinion.
/dev/null Posted May 15, 2012 Posted May 15, 2012 As Paul Krugman points out "you have no idea what you're talking about." Stop regurgitating the right wing talking points and do some reading. http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html Citing Paul Krugman and then telling somebody else to stop with talking points Priceless
IDBillzFan Posted May 15, 2012 Posted May 15, 2012 Europe is sinking thanks not to social welfare but deflation with respect to private sector debt. As Paul Krugman points out "you have no idea what you're talking about." Stop regurgitating the right wing talking points and do some reading. http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html Krugman? Oh., man. What's next? A Keith Olbermann quote?
John Adams Posted May 15, 2012 Posted May 15, 2012 I'd like to hear the responses to the argument, not just attacking the arguer. This is one of the better threads going.
DC Tom Posted May 15, 2012 Posted May 15, 2012 Citing Paul Krugman and then telling somebody else to stop with talking points Priceless Although I'm not a fan of Krugman (who's always seemed to me to have the general attitude that winning a Nobel Prize exempted him from ever having to think again, ever), he does raise some interesting points concerning the exposure of such governments to additional currency risk via not being able to manage the value of the Euro directly. Though I think a better comparison might have been to some of the non-Euro Eastern European or Balkan states - Hungary, I know, had a severe economic crisis six or seven years ago (caused by lots of reasons, including a glut in the nickel markets and pegging their currency to the dollar); comparing Greece to them would probably be more informative than comparing Greece to Germany. But that would also require some original thinking, which, like I said, Krugman seems to avoid on the grounds of "I'm a Nobel Laureate, so !@#$ you."
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