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Are We About to Repeat the Mistakes of 1937?
- Thread starter Free Thinker
- Start date
Euro Zone Country With Lowest Debt Says Austerity Works
Published: Tuesday, 2 Oct 2012
Having a national debt of just 6 percent of gross domestic product (GDP), a budget surplus and economic growth of nearly eight percent in 2011 may sound like an unrealistic economic situation for a euro zone member state these days, but it is Estoniaâs economic reality.
What is Estoniaâs recipe for success while its euro zone friends are fighting recession? Itâs the countryâs willingness to take the bitter medicine of austerity, Jürgen Ligi, Estonia's finance minister told CNBC.
When Estoniaâs economy contracted by 18 percent in 2008-2009 following the global economic crisis, the Estonian population showed willingness to take on the hard measures needed, Ligi said in an exclusive interview.
Civil servants in Estonia took a 10 percent pay cut and ministers saw 20 percent shaved from their salaries.
The government raised the pension age, cut job protection and made it harder to claim health benefits, according to the European federation of Public Service Unions.
And, unlike in other parts of Europe, these measures went through without nationwide strikes, social unrest, or the toppling of the government. Instead, Estonians âunderstood they had to give up something,â the finance minister said.
http://www.cnbc.com/id/49086123/Euro_Zone_Country_With_Lowest_Debt_Says_Austerity_Works
Published: Tuesday, 2 Oct 2012
Having a national debt of just 6 percent of gross domestic product (GDP), a budget surplus and economic growth of nearly eight percent in 2011 may sound like an unrealistic economic situation for a euro zone member state these days, but it is Estoniaâs economic reality.
What is Estoniaâs recipe for success while its euro zone friends are fighting recession? Itâs the countryâs willingness to take the bitter medicine of austerity, Jürgen Ligi, Estonia's finance minister told CNBC.
When Estoniaâs economy contracted by 18 percent in 2008-2009 following the global economic crisis, the Estonian population showed willingness to take on the hard measures needed, Ligi said in an exclusive interview.
Civil servants in Estonia took a 10 percent pay cut and ministers saw 20 percent shaved from their salaries.
The government raised the pension age, cut job protection and made it harder to claim health benefits, according to the European federation of Public Service Unions.
And, unlike in other parts of Europe, these measures went through without nationwide strikes, social unrest, or the toppling of the government. Instead, Estonians âunderstood they had to give up something,â the finance minister said.
http://www.cnbc.com/id/49086123/Euro_Zone_Country_With_Lowest_Debt_Says_Austerity_Works
Quote from Ricter:
It's not, one variable is not enough.
This is true. However, the chart you posted is simply 'cuts' as a % of GDP. Aside from Greece (which didn't have a choice) they are trivial, at best. Are they still running deficits, if so, then the cuts obviously aren't deep enough. If they are designed to erase the deficit at some point in the future, why are you and the phony economists you quote, judging them NOW? Max also mentioned increased taxes, which in ALL cases, are anti-growth. So you have meaningless, arbitrary cuts and higher taxes, who the fuck thinks that will work (increase economic growth), whether it is technically 'austerity' or not?
Quote from PiggyBank:
This is true. However, the chart you posted is simply 'cuts' as a % of GDP. Aside from Greece (which didn't have a choice) they are trivial, at best. Are they still running deficits, if so, then the cuts obviously aren't deep enough. If they are designed to erase the deficit at some point in the future, why are you and the phony economists you quote, judging them NOW? Max also mentioned increased taxes, which in ALL cases, are anti-growth. So you have meaningless, arbitrary cuts and higher taxes, who the fuck thinks that will work (increase economic growth), whether it is technically 'austerity' or not?
Great points. Basically once a credit bubble bursts and every artificial means to stimulate growth fails, the "playbook" is worthless. The monetary systems which are in place were designed to fail, there is no way around this...which is why nothing the left OR right presents as a solution has a chance in hell of working.
The article I posted did focus on taxes. Even so, cuts as a percent of GDP is important, because operations must continue, all targets are moving targets. Looking at this measurement of spending is still more telling where GDP is falling. But Max came back with the chart on spending (his bogeyman), and two things on that, 1) it doesn't look quite like the chart that was posted in the original 'myth of European austerity article, and 2) check the rebuttal in WaPo, where I drew the second chart from. This has been dealt with. European governments are in a doom loop, where spending cuts lower GDP, which lowers revenue, which makes debt to GDP worse.Quote from PiggyBank:
This is true. However, the chart you posted is simply 'cuts' as a % of GDP. Aside from Greece (which didn't have a choice) they are trivial, at best. Are they still running deficits, if so, then the cuts obviously aren't deep enough. If they are designed to erase the deficit at some point in the future, why are you and the phony economists you quote, judging them NOW? Max also mentioned increased taxes, which in ALL cases, are anti-growth. So you have meaningless, arbitrary cuts and higher taxes, who the fuck thinks that will work (increase economic growth), whether it is technically 'austerity' or not?
Quote from denner:
Great points. Basically once a credit bubble bursts and every artificial means to stimulate growth fails, the "playbook" is worthless. The monetary systems which are in place were designed to fail, there is no way around this...which is why nothing the left OR right presents as a solution has a chance in hell of working.
I dunno, imo this could work: If we can get fed spending down to the point where we are not running a deficit, or a relatively small deficit, we have achieved stability, at least temporarily. On it's own, that won't necessarily spur economic growth. BUT if we can also cut costs to the private sector through tax reductions, we are increasing the potential for growth. The banks aren't lending so instead of credit based growth, it will have to be savings based, a good thing. This is basically Romney's plan. Of course this is over-simplified and we have a few wildcards. namely major entitlements and i would throw QE in there. Something has to be done about these programs, and the right choices are political losers.. so we can't expect either candidate (especially not ocommie) or Congress to make them.. in our lifetimes, something will have to be done.
Quote from PiggyBank:
I dunno, imo this could work: If we can get fed spending down to the point where we are not running a deficit, or a relatively small deficit, we have achieved stability, at least temporarily. On it's own, that won't necessarily spur economic growth. BUT if we can also cut costs to the private sector through tax reductions, we are increasing the potential for growth. The banks aren't lending so instead of credit based growth, it will have to be savings based, a good thing. This is basically Romney's plan. Of course this is over-simplified and we have a few wildcards. namely major entitlements and i would throw QE in there. Something has to be done about these programs, and the right choices are political losers.. so we can't expect either candidate (especially not ocommie) or Congress to make them.. in our lifetimes, something will have to be done.
Good Post. Just one point, with interest rates so damn low, it's tough to bring yourself to actually put money in a savings account or CD. I'm getting less than half of one percent on a couple of big chunks and just can't find anything that I like to move the $$ to.
I have been more risky in my business ventures, not less, due to this phenomenon. One venture which is still keeping me away from home would never have been funded by me a few years ago, but now I almost figure What the Hell, I'm getting 20 bps on XX dollars, why not go for it. Not my normal modus operandi.
Quote from Ricter:
The article I posted did focus on taxes. Even so, cuts as a percent of GDP is important, because operations must continue, all targets are moving targets. Looking at this measurement of spending is still more telling where GDP is falling. But Max came back with the chart on spending (his bogeyman), and two things on that, 1) it doesn't look quite like the chart that was posted in the original 'myth of European austerity article, and 2) check the rebuttal in WaPo, where I drew the second chart from. This has been dealt with. European governments are in a doom loop, where spending cuts lower GDP, which lowers revenue, which makes debt to GDP worse.
1) operations must continue? I'm sure there are some that have to, but all, that is your opinion. What did we and other nations do when these programs didn't exist.
2) every nation on Max's chart showed higher spending. If GDP fell in any of those same countries (on Max's chart) then they couldn't possibly have made ANY spending cuts.. or a chart is wrong.
3) I think it's ok if debt to GDP increases AS LONG AS the deficit is eliminated. You aren't any more credit unworthy and you aren't piling on more debt. An increase in growth will achieve a surplus which can be used to pay down the debt.
4) taxes are counter productive to the private sector. so higher taxes are more detrimental.
Quote from mrbill:
Good Post. Just one point, with interest rates so damn low, it's tough to bring yourself to actually put money in a savings account or CD. I'm getting less than half of one percent on a couple of big chunks and just can't find anything that I like to move the $$ to.
I have been more risky in my business ventures, not less, due to this phenomenon. One venture which is still keeping me away from home would never have been funded by me a few years ago, but now I almost figure What the Hell, I'm getting 20 bps on XX dollars, why not go for it. Not my normal modus operandi.
I didn't mean savings as in - investment into interest bearing funds. I meant reinvestment into a company. If corporate and individual tax rates (for small bus) are lowered then those 'savings' can now be used to fund expansion, instead of being financed by loans. It doesn't mean they will but that potential would exist.