As an expat Canadian now living and working in Germany, I don't really see any sign of a slowdown. The auto industry is going flat out and the joke is "Euro crisis, What Euro crisis?" To be honest though, we are starting to see an influx of Greeks, Spaniards and Italians coming into Germany looking for jobs. While this is good news for the Germans in that they're attracting the best and brightest, it is disasterous for the rest of Europe as the talent they need to recover is now gone, and gone for a long time. Hopefully the rest of Europe will come to realize the need for sensible policies so as to prevent themselves from going over the edge of a cliff.
Worrying indeed. It would be interesting to see the latest quarter GDP figures from across Euroland. My impression is that Germany is holding well (as Expat Canuck said above). Britain and France also do not seem in big trouble (again this is just anecdotal from my recent trips). Not sure the same could be said about Spain and Italy though. Europe needs a coordinated response to this crisis, and that is not happening... yet....
And it was just a few short years ago that Europe was talking about the Euro replacing the USD as the global standard.
Just imagine what would happen to the US, if our economy worked like that of the Eurozone. Imagine, for example, that different states set their own government funded entitlement programs and their own affinity for government as the main employer of the work force, and then expected to be supported by other states with less generous policies. And imagine further that the work force was disinclined to move to states that had the jobs. It would never work.
I don't see any evidence of the structural reforms needed to have a viable common currency. Does anyone else? How can individual countries continue year after year with deficit spending, resulting in sharply increasing debt over time, and expect other countries to pay that off out of the goodness of their hearts?
The way this worked in the past was that each country could establish its own monetary policy, e.g devaluing their currency to "pay" the bills accumulating from overly generous entitlements, and they would move on. The real wealth would obviously decrease, in comparison to other countries, but at least they weren't asking taxpayers from other countries to fund their largesse.
Sorry, but I've never understood how this experiment was supposed to work, nor why so many countries were so eager to join in, even dating back to the signing of the Maastricht Treaty.
Are we not already "led" by Germany because the country makes substantial exports (sales of automobiles and light and heavy engineering) and is looked to as the source of bail out money by nations at the periphery of Europe from the Mediterranean to the Atlantic seaboard.
In effect, yes, but European countries such as Spain, Italy and even France want to have their cake and eat it. If they want German money, they should surrender fiscal policy (or some of it) to the paymaster of the European Union i.e. Germany. They are still resisting this though.
It's the same story with European defence. Europe needs money and heavy investment to have a truly independent defence policy, yet it's not prepared to let Germany have a normal army. Britain and France on their own cannot mount the necessary investment, and they can't expect Germany to fund a common European defence policy without having a major say/part in/of it. Another European paradox....
The US has one of the highest deficits in the world:
and also one of the highest public debts (as %age of GDP):
Sure, NOW, and how is anyone surprised? This administration's bailout frenzy should have scrared the pants off anyone.
Check out this, to see the egregious nature of it. Starting in 2009. And not abating.
Like I said previously, the apologists like to bamboozle people into believing that if deficit spending stays steady, things are okay. But that's absurd. It means that year after year, you're spending ridiculous amounts more than you take in, putting the country deeper and deeper in DEBT.
What is brining several of the Eurozone countries down? This exact same attitude. The difference there being, those deficit-prone Eurozone countries expect the taxpayers of the more responsible countries to bail THEM out. That's what can't work. Our individual states are unable to operate independently that way.
It was actually the previous administration that got us into this problem, and it was also them that pleaded for the first almost trillion dollar bailout. Let's not forget that.
It's a well understood economic rule that you must spend yourself out of a recession, and this one was a doozy. Unfortunately, the previous administration had already spent the money.
The first gargantuan bailout was indeed in the last budget of the previous administration. However, let's not assume that the previous administration would have made that sort of government largesse the "new normal." Which is what it has become. Now, we seem to congratulate ourselves if deficit spending is not increasing beyond $1.5T, for heaven's sake. How twisted is that?
Furthermore, the events that precipitated the crisis, the housing bubble burst, was caused by a fairly small (well, less than 20 percent anyway) default of reckless government guaranteed home loans to people unable to repay them. That was also not your typical Republican social program, by any stretch of anyone's imagination.
Lastly, a "well known economic fact"? When people say, "It's a well known fact," that's when I brace for the unsubstantiated leap of faith.
Stimulus spending is an adrenaline shot. It takes money out of the real economy and puts it in the hands of politicians. You can't keep injecting adrenaline and expect the patient to recover.
Bert22306 said "Just imagine what would happen to the US, if our economy worked like that of the Eurozone. Imagine, for example, that different states set their own government funded entitlement programs and their own affinity for government as the main employer of the work force, and then expected to be supported by other states with less generous policies. And imagine further that the work force was disinclined to move to states that had the jobs"
It seems to me this IS happening in the US today. States have great leeway in funding education and other social programs. Federal government funding of each state varies greatly compared to the revenue that is received from that state at the federal level. And many people may want to move to where the jobs are, but are under water on their mortgages and so they are trapped where they are until the housing market improves.
"Federal government funding of each state varies greatly compared to the revenue that is received from that state at the federal level. "
That is the key any1, a common currency implies a mechanism for fiscal tranfers from one part to the other. This is not formalised in the case of the Eurozone and that's what must happen now, otherwise the Euro is doomed.
And of course there is no deficit spending in the US.. In Europe goverments are broke, but also a lot of the general population is broke or deeply in debt..in student loans, housing loans, and credit card loans... Not to mention that anybody who has had any serious disease for 40% of the population could mean loosing everything.. Yup.. the US is doing much better..
Much of my extended family lives in Italy and they are all professionals, i.e. engineers, scientists, professors, accountants, programmers, and businessmen, so I have quite a bit of inside information into the day-to-day culture.
Italy has always been a wonderful country, great food, great wine, great cars, magnificant houses, outstanding scenery and art, and lots of free time to enjoy it.
But prior to 1990, almost no one used credit for anything. They saved for what they wanted, and purchased with cash. And they all (rich and poor alike) enjoyed a marvelous lifestyle.
Then credit happened. Yes, the lifestyle improved slightly, but not for the basics; food, housing, and transportation. They took expensive vacations and bought BMW's. They ran up a huge amount of dept for stuff they didn't really need. And look what happened. Now they have to pay it all off, with money they don't really have.
There's a lesson here somewhere...
I think it's a smoke screen actually. The problems emerged when banks started gambling depositers money in the stock market buying and selling financial instruments they understood very little about. It's an agency problem at heart.
If and engineer dreamed up something as daft as a credit default swap and mortgage backed securities, while thinking they could eliminate risk from subprime lending, then they really should not be allowed to engineer anything at all.....
I would think that the personal credit card has had a major negative influence on economies around the world. Of course, I'd also say that it has had a major positive influence. I'm not sure we have any economic metaphors that aren't double edged swords.
Credit allows consumers to buy things that they couldn't or shouldn't afford. The purchase of those things makes opportunity for companies that build and sell those things, which increases jobs & disposable income which allows people that spend beyond their means to spend even farther beyond their means...
If more people were responsible with their credit and if the card companies weren't so predatory and exploitative, then I'd say on balance, personal credit cards have been a good thing.
The problems are far mor structural than that. Credit cards are certain,y part of the problem, but the nature of the economies are more to blame. This includes a paralyzed governmental structure.
A major problem in the EU is that these countries really don't like each other, and don't trust each other. Neither do they trust the EU government, which has little power anyway.
In addition, the fear Germany has of debt. Is making it almost impossible for them to agree on the correct steps, because the voting public, and therefor the politicians, refuse to do anything that will burden them with the EU's woes. Interestingly, as has been
Listed out by some, whatever Germany is doi g seems to benefit Germany itself. Ironic, huh?
"I think there is a case to be examined around whether much of the financial woes in the western hemisphere can be traced back to the creation and widespread use of the personal credit card."
I'd say, PERHAPS, but only in the sense that politicians are behaving more like irresponsible credit hard holders.
I just don't see anything mysterious about most of the problems that the Eurozone is facing, or even the US, to a greater extent. You cannot mandate wealth by government edict. You cannot promise generous benefits and generous, early, government-funded pensions, by edict. Just as you can't just use the credit card to buy everything you want, without understanding the constraints.
Chronic deficit spending is the irresponsible credit card holder. Ever increasing social programs are created by chronic deficit spending.
Feeling proud that the deficit one year is no greater than the deficit the previous year is ridiculous. A ploy used by devious politicians to bamboozle the hopelessly clueless.
Sooner or later, you have to pay the piper.
As has been pointed out, Germany is doing just fine. This is a crisis affecting Southern European nations and Ireland.
The origin of the problem was the financial industry was recklessly irresponsible. If engineers behaved like that they would be in prison.
This is why I feel that Obama and most of the congress are criminals. They never did anything right for the poor middle-class but they have done so many things to protect the upper class. For instance, why should a CEO be awareded with tens of millions of bonus while those cleaning the garbage bin can be chopped off at the instant of lesser profit. The income gap in corporate America keeps growing without an end in sight. Capitalism is a common excuse, or scape-goat. At the end, it is all down to greed, especially those in the politics, bankings, financials ...
Because they are the people who put the Politicians in power in the first place. Politicians can't turn against their Godfathers....
America's forefathers had a lot of sense (uniquely so among their peers in the world I must add) but the system they set in place was slowly highjacked by special interests. I submit that the establishment of the Federal Reserve Bank, the introduction of income tax, and the special interests role in US politics, were all fundamentally anti-constitutional.
The problem is that politicians are not the representatives that they are supposed to be. The fact that congress has increased their salary to over 400K shows that the corruption has created careers instead of a few among our ranks that will go represent us for a while. I don't see any way to go back to the government the founders of the country envisioned.
Yes and no. No question that politicians seem most interested in responding to the wishes of those who give them the highest contributions. But the other side of that coin is, perhaps even worse is the politician who thinks he is supposed to be our "leader," irrespective of what the constituents think. As in, "fuehrer" (look it up, that's what it means).
Our so-called "leaders" are in fact supposed to be our REPRESENTATIVES. As such, doing what lobbyists and other "special interests" advocate for is not entirely wrong. It's the way the system is supposed to work. We don't "hire" these people because we think they are geniuses or messiahs.
The justification of special interest groups and lobbys on the grounds of "representativity" is one of the biggest CONS American people have been sold. It's fundamentally anti-democratic and anti-constitutional I would add for it gives people, groups and institutions with deeper pockets a greater influence on Government, often at the expense of those who have less. The one-man one-vote principle is eroded and we are back to the feudal system under more sanitised and modern guises of course (money and media replacing land and hereditary privileges).
Sorry, KB, we thoroughly disagree on this one. I do agree that the contributions to polticians should either be forbidden or severely limited, but aside from that, there are NO ALTERNATIVES to lobbies and other interest groups getting to speak with politicians. By the way, in case this helps your political leanings, labor unions are part of that equation too.
To deny this would be to pretend that politicians and their staffs of devotees know all there is to know about what their constituents do. And they obviously cannot. They are typically clueless about most of the details of what happens in their districts. So something has to be in place to educate them, to present points of view they may not have heard clearly articulated before.
Also, there is no one man one vote principle in the US. The one man one vote principle applies to the House of Representatives only. The Senate, the Executive, and the Judiciary, DO NOT operate on a one man one vote principle. E.g., two senators per state can hardly be described as representing one vote for each citizen. A one man one vote principle would put minority parties and minority interests at too great a disadvantage.
IMO, one of the biggest problems I'm seeing in politics these days is that people expect their politicans to tell them what to do, instead of the other way around.
@Bert22306, that's what I meant by the role of lobbies and special interest groups. It's the way they fund political parties and politicians, the way they wine and dine politicians, often in secret, in order to influence their policies, all under the cloak of "representativity"!
Of course, I do not mind lobbies expressing views to influence policy, but let that be in the open and keep money out of it by all means. Special interests and lobbies should be summoned to parliament, not the other way round.
PS. And yes, I include trade unions in this too.
China has significant problems of their own which will haunt them so eBay, just as happened to the high flying Japanese when we all thought they would take over the world financially.
No matter how badly an economy is run, when good times are here, it always looks good. When times turn bad however, that's when really badly, and highly corrupt, economies have problems.