Euro continues on its downward plunge as the temporary euphoria over the almost $1 trillion bailout loan package by the European Union for socialist countries in the region who take and redistribute other people's money (which they have now run out of) at a rate they can't afford, is now over, and the repercussions of the spending is starting to be understood by those stepping back and looking at another misguided attempt to save those who refuse to manage their financial affairs in a responsible manner.
Many are realizing that even $1 trillion isn't near enough to handle the situation, and all it's doing is postponing the inevitable, as it's going to be difficult to force these countries to turn from their outrageous spending and turn to a more market-oriented economy, like Germany generally has.
The problem with Germany is it took them about 15 years to make the transition, making the $1 trillion a tiny amount when taking into account several countries which will probably have to take as long as Germany to implement these changes, and $1 trillion won't be anywhere near enough to extend the time needed to do what needs to be done.
These people in the countries in trouble have been weaned on entitlement programs where they actually think they should be taken care of by the state, which is the underlying cause of the debacle Europe is facing, as they simply can't afford the wages and perks their governments have promised them.
It could even last longer if people rise up and violently protest, destroying a lot of their countries because they're going to throw tantrums over being cut off and having to start taking care of themselves more.
Showing posts with label PIIGS. Show all posts
Showing posts with label PIIGS. Show all posts
Tuesday, May 11, 2010
Nouriel Roubini: $1 Trillion Won't Fix Europe
NYU professor Nouriel Roubini said in an interview on tech ticker that the $1 trillion attempt to bail out Europe will fall short, and it's not the amount of money, but the fundamentals which led to the problem in the first place which will haunt the euro-zone for years into the future.
Roubini stated that all the $1 trillion will do is kick "the can down the road," and they'll have to face a similar problem again.
He especially noted how long it took Germany to implement austerity measures to be able to compete on a global basis, taking 15 years to change the private sector so labor costs reflected the market. With the countries like Greece, Portugal, Italy, Ireland and Spain, that probably isn't possible, as they lack the ability to deflate their currency to make it possible.
Roubini said even if these countries had the will and started today, it'll take years for them to make it happen, and it's questionable if they have the political will or if their people won't start riots and extraordinary civil unrest is the result.
The socialist, entitlement culture of these countries has brought all of this on, and now that it's time to pay the piper, there really aren't any answers over the near- or mid-term which will solve this problem.
This is why governments around the world need to quit spending and making promises that simply aren't able to be fulfilled, or be sustainable over a long period of time.
There could be huge amounts of violence and riots as austerity is forced on these countries in order for them to survive economically, and for the member states of the EU to pay out so much money, with their own citizens in many cases already upset over having to pay for their irresponsibility.
With the probability of higher tax and lower government spending, there are no guarantees any of this will work, and if the people in the countries will be willing to take it or not.
Roubini also believes these two measures will lead to a recession and possibly deflation, which would make it even more difficult to implement austerity measures on the people.
All of this because politicians and central banks won't say no. They've created a monster, now they have to deal with it.
To create a generation of people who believe they're entitled to what they are handed out by the government is a disaster, and all of us know when people are treated that way, when you say they can't have it any more, all hell will break loose, and we've already seen glimpses of that in Greece.
This won't work like politicians think it has worked during the recession, as the amount of money and the people being affected aren't the same as those in Asia, the U.S. or the UK. These people believe they should be able to continue receiving their handouts from the government in its various forms, and they don't want to hear anything else.
The bailouts in other areas of the world bought time, and even though we really aren't sure it has bought enough time, it has some possibility of working, although there are still a lot of consequences like inflation which will have to be dealt with.
But with the length of time it'll take for the PIIGS to change their economies and entitlement culture is many years, and $1 trillion can't buy that kind of time, or even close to it.
This is what Roubini means by kicking the can down the road. There simply isn't enough money to save these nations, and already the Federal Reserve has reportedly sent a bunch of money to banks in Europe to lend out. How long will Americans put up with that once they're clued into what's happening?
In the end, these countries will fail or fall into chaos, as a generation of those receiving redistributed money and perks find out there's no one else to take money from.
Roubini stated that all the $1 trillion will do is kick "the can down the road," and they'll have to face a similar problem again.
He especially noted how long it took Germany to implement austerity measures to be able to compete on a global basis, taking 15 years to change the private sector so labor costs reflected the market. With the countries like Greece, Portugal, Italy, Ireland and Spain, that probably isn't possible, as they lack the ability to deflate their currency to make it possible.
Roubini said even if these countries had the will and started today, it'll take years for them to make it happen, and it's questionable if they have the political will or if their people won't start riots and extraordinary civil unrest is the result.
The socialist, entitlement culture of these countries has brought all of this on, and now that it's time to pay the piper, there really aren't any answers over the near- or mid-term which will solve this problem.
This is why governments around the world need to quit spending and making promises that simply aren't able to be fulfilled, or be sustainable over a long period of time.
There could be huge amounts of violence and riots as austerity is forced on these countries in order for them to survive economically, and for the member states of the EU to pay out so much money, with their own citizens in many cases already upset over having to pay for their irresponsibility.
With the probability of higher tax and lower government spending, there are no guarantees any of this will work, and if the people in the countries will be willing to take it or not.
Roubini also believes these two measures will lead to a recession and possibly deflation, which would make it even more difficult to implement austerity measures on the people.
All of this because politicians and central banks won't say no. They've created a monster, now they have to deal with it.
To create a generation of people who believe they're entitled to what they are handed out by the government is a disaster, and all of us know when people are treated that way, when you say they can't have it any more, all hell will break loose, and we've already seen glimpses of that in Greece.
This won't work like politicians think it has worked during the recession, as the amount of money and the people being affected aren't the same as those in Asia, the U.S. or the UK. These people believe they should be able to continue receiving their handouts from the government in its various forms, and they don't want to hear anything else.
The bailouts in other areas of the world bought time, and even though we really aren't sure it has bought enough time, it has some possibility of working, although there are still a lot of consequences like inflation which will have to be dealt with.
But with the length of time it'll take for the PIIGS to change their economies and entitlement culture is many years, and $1 trillion can't buy that kind of time, or even close to it.
This is what Roubini means by kicking the can down the road. There simply isn't enough money to save these nations, and already the Federal Reserve has reportedly sent a bunch of money to banks in Europe to lend out. How long will Americans put up with that once they're clued into what's happening?
In the end, these countries will fail or fall into chaos, as a generation of those receiving redistributed money and perks find out there's no one else to take money from.
Monday, March 15, 2010
Citigroup (NYSE:C) Right on China Debt
Citigroup on China Debt and Risk
Citigroup (NYSE:C) was right when it warned China could have some major problems based on local government debt issues in the country. Seeming to confirm that, China Premier Wen Jiabao said China faces some challenges in that regard of its own, but the global economy also faces major problems going forward, with double dip recession very possible.
Of particular concern to Wen was the export market, which remains down, as consumers (especially Americans), hold back on spending, causing demand for products to continue to falter.
Other things that could dramatically impact the markets could be ongoing instability in the exchange rates, along with continuing sovereign debt problems in Europe, which while temporarily relaxed because of commitment by the European Union to back Greece if its efforts don't pan out, still are there with more important countries like Portugal, Ireland, Italy and Spain, which if any were to fall would be much more damaging than the fall of Greece; as far as the EU being able to save them goes.
For China, there are also issues of the extraordinary debt they now have as the consequences of their stimulus program, which Citigroup estimates could result in up to $350 billion in bad loans in the years ahead.
Citigroup (NYSE:C) was right when it warned China could have some major problems based on local government debt issues in the country. Seeming to confirm that, China Premier Wen Jiabao said China faces some challenges in that regard of its own, but the global economy also faces major problems going forward, with double dip recession very possible.
Of particular concern to Wen was the export market, which remains down, as consumers (especially Americans), hold back on spending, causing demand for products to continue to falter.
Other things that could dramatically impact the markets could be ongoing instability in the exchange rates, along with continuing sovereign debt problems in Europe, which while temporarily relaxed because of commitment by the European Union to back Greece if its efforts don't pan out, still are there with more important countries like Portugal, Ireland, Italy and Spain, which if any were to fall would be much more damaging than the fall of Greece; as far as the EU being able to save them goes.
For China, there are also issues of the extraordinary debt they now have as the consequences of their stimulus program, which Citigroup estimates could result in up to $350 billion in bad loans in the years ahead.
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