A Post-EU World?

[caesar novus]

Is the UK Telegraph finance section a respectable source, or just a posher version of a sensationalist rag? Anyway their intnl business editor projects an imminent replay of 1930 themes in http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8802462/Protectionism-beckons-as-leaders-push-world-into-Depression.html

Forsees an alliance of countries driven away from the austerity axis of Germany/Japan/China. Centered in the Americas, but would include at least UK and Korea:

 

China's "grotesque and destructive" policies of over-investment (50pc of GDP) and under-consumption (36pc of GDP) are unprecedented in history

full wrath is reserved for the "fallacious and malignant policies" of Angela Merkel and Wolfgang Schauble in Germany. They are enforcing a Gold Standard outcome on the whole eurozone. "Suffused with self-righteousness, they insist that the imbalances must be put right only by deficit-country deflation."

The self-correction mechanism is jammed. China holds down the yuan against the dollar through a dirty peg. Germany and its satellites hold down the D-mark against Club Med covertly through the mechanism of EMU.

The risk

[Virgil61]

Isn't its nickname the Torygraph?

 

I suspect the article is just a dust up for attention, positing an extreme view to make a point perhaps. It takes as over-dramatic a view of the contraction in gov't spending as the right's meltdown over the national debt here in the U.S.

 

One trick used to scare everyone is the total debt $ when the correct tool is debt ratio (% of debt to gdp). Fourteen Trillion followed by a dramatic ticker adding debt per second makes people crap their pants here in a way that say calling it a debt ratio of 1 to 1 doesn't.

 

The debt here and abroad is manageable--revenue from 5 years of 3+% growth has been projected to pay down much of the American debt (almost half is from one off spending from the mortgage crisis; Tarp, other bail outs, the bump in spending to boost the economy a couple of years back) but that sort of sane talk among economists gets lost in the political battles.

 

But governments often over-correct in response to pressures which I think is happening in some European countries. A longer range plan is discarded for one with more tangible immediate results, unfortunately one of those results might be an economic downturn because the plug was pulled too early. This article is a response to that reaction, just as, if not more extreme.

 

As for China they've got a rendezvous with the market. The low-wages that are responsible for the economic rise of its economy are coming to an end and there is a contraction in the work force as this generation ages (the next generational cohort is something like 15% smaller in number). They're working like crazy to keep their currency down but it will eventually have to float like everyone else. Once it does their products will be more expensive and the export market will lose clients.

[Viggen]

...If you look at the shit that is happening in Club Med + Ireland + Iceland than you see it has not so much to do with trade imbalance...

 

Greece was never supppose to join they Euro anyway, they simply lied about their finances before they joined...

Spain allowed a property bubble that rivaled that from the USA, if you have in some regions a third of your water needs used for golf course than you know something is wrong...

Irelands and Icelands banks were having a ball on the world stage gambling realizing that you can win high but loose even higher..

Italy is ruled by a clown and for way too long the population there was applauding

 

whats the alternative, making more debt?

Unlike the USA that has the historical advantage of just printing more money if needed, the rest of the world has not that option

[Bryaxis Hecatee]

Don't forget that the other issue is that a few non state peoples in so called ranking agencies play both side of the games, giving "opinions" that change the market in ways that benefit other departements of their groups, like when Goldman Sacks organized the debt raising by the Greeks, taking options against a default and now making their best for this default to happen so they may make billions.

Are there troubles with some countries economies ? Yes, sure. With some banks ? Indeed there are. But one can also see that the only country which did not make any crisis decisions, Belgium (by lack of governement...) is also the one which has had the most growth of the european union those last few years. And while our inflation can be rated rather high (somewhere around 3% I think) it's mostly due to one factor, namely the rise in fossile fuels (either oil or gaz).

The crisis of those affected banks and states is mainly due to a bunch of guys and computing programs with no interest other than money and their own little personnal job doing everything to achieve their goal without any thought about the society and the people they live with, and governements doing their best to satisfy the ego of those so-called "traders", be they human or virtual.

And while it is in my opinion a good thing to see the EU get more centralization (at least if it goes toward more Federalism and not more inter-state management), it shall be the only good thing to come out of this mess.

[Melvadius]

Neither the current UK Government nor the large sections of Murdock run press that support them have any interest in what the reality of the actual UK debt to GDP ratio is. The debt total is the excuse they are using to point blame at the previous government and institue a series of policies that would not get off first base otherwise.

[GhostOfClayton]

It has given Mr Cameron just the excuse he needs to dismantle the UK's national infrastructure, with no promise that we'll get it back when things get better.

[caesar novus]

I suspect the article is just a dust up for attention, positing an extreme view to make a point perhaps. It takes as over-dramatic a view of the contraction in gov't spending as the right's meltdown over the national debt here in the U.S.

I think they are onto something about both the Eurocrats and Maocrats being behind the curve, obsessed about inflation, and hurting private sector growth which is needed to increase the tax base. The historical ascendancy of England and the anglo world was their ability to collect a lot of tax relatively painlessly, thru breadth rather than strangulating rates. I hear that's why the Normans invaded England - no special resource, but that is where the easy money and good economy was. Canada, Australia, and the US economies have thrived on this now-threatened heritage, although the US got overall economic ascendancy thru a quirk from it's civil war. The rural hick south stopped attending congress, so the north rammed all kinds of pro-growth modern financial measures into law.

 

With Euroville lacking (or not supporting) a Hank Paulson or the sainted Ben Bernanke, the slow response to Greece is just activating bond vigilantes who raise Greek bond rates unsustainably. And bless the Diogenes-like hearts of those vigilantes, as rare shiners of light. The problem of Greek contagion thru foreign financial connections could be solved easier without such vindictive attitudes towards economic growth. Go ahead with public drawing and quartering of finance wrongdoers - just don't kill the financial institutions that keep the west above a Paraguay or Bolivia level of economy.

 

Anyway I bet the article IS exaggerated and not even aimed at the normal readership, but trying to get a message to policy makers. I see a similar thing as moderator of a tablet forum, where at a certain stage of major product cycles we are bombarded by alarmist posts by very articulate and knowledgable people who seem to be trying to influence final product designs. Maybe they indirectly do a service, but as joe-reader you feel "used" and want to take a shower after the Nth such post.

 

The debt here and abroad is manageable--revenue from 5 years of 3+% growth has been projected to pay down much of the American debt (almost half is from one off spending from the mortgage crisis; Tarp, other bail outs, the bump in spending to boost the economy a couple of years back) but that sort of sane talk among economists gets lost in the political battles.

That's the foreseeable problem - the well played game theory of politics is preventing further remedies such as somehow got thru US three years ago. If I correctly understand "The Dictator's Handbook" about modern democracies http://www.booktv.org/Program/12846/After+Words+Bruce+Bueno+de+Mesquita+Alastair+Smith+The+Dictators+Handbook+Why+Bad+Behavior+is+Almost+Always+Good+Politics+hosted+by+Anne+Gearan+Associated+Press+National+Security+Editor.aspx they mostly rely on only about 20% of a nations swing vote for actual support. So instead of "leading" they will "follow" a certain yobbo herd, maybe to prop up dying industries and suffocate vital entrepreneurial sprouts - for instance by counterproductive ways of taxing the "rich" http://www.economist.com/node/21530104 . Maybe the only adult in the room is Ben Bernanke, exempt from "The Dictator's Handbook". I was so happy when I heard of his original appointment (from another hiker encountered in the Aussie bush of all places).

[Ursus]

China's "grotesque and destructive" policies of over-investment (50pc of GDP) and under-consumption (36pc of GDP) are unprecedented in history

 

Yeah, maybe that is partially why China's economy is the world's current success story, and why the Western world is bankrupt through reckless consumption.

 

 

 

I have always felt the EU or at least the Eurozone should have been confined to Germany, France and the Benelux countries, at least initially. The expansion into fiscally irresponsible countries threatens the entire project.

 

As long as Germany is willing to bail out southern Europe the charade will continue, but I suspect even the Germans will eventually get tired (after all, those within living memory of WWII are rapidly dying off, and post World War II guilt can't be used indefinitely to tame Germany into submission).