Western nations extreme spending an

[Sekhem]

d debt.

The U.S. is now running more than a trillion dollar deficit.

Financing of Eurozone countries pulled in 1.6 trillion euros, U.S. issued 1.7 trillion dollars in security bonds, Japan is rolling over about 213 billion yen worth of bonds.

Foreign investment is completely funding countries such as Greece now. All European nations are currently spending far more than they are making, Ireland and France being the only ones not doing too poorly. Europe is in apparently even worse shape than the U.S. due to lack of any strong leadership and the uneducated masses not doing much besides irrational rioting in countries like France (due largely to their misunderstanding of even basic economics).

How will any of these western countries manage their sovereign debt? It's especially a problem in Europe as it appears nothing strong is being done about it. Maybe Berlusconi can call The Economist the "Ecommunist" again as it's really funny and showcases how big of a fucking idiot he and other European leaders are.

[Drakim]

The europian nations don't have a republican party doing everything in their power to freeze the actions of elected leaders though. If they ever get their act together, they will at least have the possibility of doing some smart things, unlike America, which is always a start.

[Warforger]

At 10/22/10 08:11 PM, Drakim wrote: The europian nations don't have a republican party doing everything in their power to freeze the actions of elected leaders though. If they ever get their act together, they will at least have the possibility of doing some smart things, unlike America, which is always a start.

I know those Republicans driving down the national debt

[lapis]

At 10/22/10 07:51 PM, Sekhem wrote: Ireland and France being the only ones not doing too poorly.

Erm, could you provide some sort of motivation? Because last time I checked Ireland was still one of the PIIGGS due to its annual budget deficit that surpassed 10% of the country's GDP. Maybe they took some drastic steps, but I haven't heard about it.

Europe is in apparently even worse shape than the U.S. due to lack of any strong leadership

I think most countries with budget problems are now slashing expenses, like the UK (81 billion pounds), Spain (7.7% of the budget combined with tax increases) and Italy (25 billion euros, 10% buget cuts in 2011 and 2012). Even countries with a relatively (emphasis on relatively) healthy budget, like France, Germany and the Netherlands, are trying to reduce spending. Time will tell whether the measures taken were enoug, but most governments acknowledge the existence of the problem and seem to be willing to spend whatever political credit they have on taking action. Besides, new EU legislation was recently passed that would penalise countries that run a budget deficit that's higher than some acceptable level. It was watered down after protests from France and Germany, but still.

and the uneducated masses not doing much besides irrational rioting in countries like France (due largely to their misunderstanding of even basic economics).

Rioting is a French national tradition. I think the people there are pissed that the biggest part of the austerity measures target the lower classes (to which most of the protesters belong). But yeah, it's kind of frustrating to watch the French get pissed when the pension age is gradually raised from 60 to 62 while the pension age in the Netherlands is being gradually raised from 65 to 67. This was even worse in Greece where the pension age was 53 or something silly like that.

[Der-Lowe]

I agree with the stance lapis here has taking, that your claims are, imperfect.
The high deficits we are experiencing right now have little to do in most cases with irresponsible spending, but rather with collapsing revenues do to lower economic activity, and minimum automatic increase in spending due to social programs, as unemployment benefits.
The US is the most blatant example, and Spain was even running a surplus before the crisis, unlike other European nations, yet its budget situation is temporarily worse

*cough*Germany*cough*

[SohlTofang]

Who will hold the western world accountable for a monetary system they control?

[Musician]

At 10/22/10 07:51 PM, Sekhem wrote: irrational rioting in countries like France (due largely to their misunderstanding of even basic economics).

I was actually watching an interview with Joseph Stiglitz on Democracy Now the other day, and he said it was basically the opposite. Namely, that those who believe that a recession is a good time for austerity cuts don't understand economics. I'll just post a bit of the interview here:

My view is we cannot afford not to stimulate the economy. So, you know, anybody that says we should go back to austerity or we should not have a second-round stimulus just doesn't understand economics. And let me be very clear about this. If we don't stimulate the economy, the economy is going to get weaker. When the economy gets weaker, tax revenues go down and expenditures go up. Already, more than 40 million Americans are on food stamps. Number of people on Medicaid is reaching record levels. So, revenues go down, expenditures go up, deficits get worse. If you stimulate the economy, then people get jobs, they spend money, tax revenues go up. Now, if we spend the money on investments-investments in education, technology, infrastructure-you grow the economy in the short run from the stimulus, you grow the economy in the long term because of the returns that you get on these investments.

I mean, just think about this from the point of view of a firm. If you are a firm and you could borrow at zero to two-and-a-half percent, which is what the government can borrow, and you have investment opportunities that you owe ten, 15, 20 percent, you would be irresponsible, you would be foolish, not to undertake those investments. So, anybody that says, "I'm going to only look at one side of the balance sheet, the liabilities; I'm not going to look at the other side, the assets," is really not understanding economics. It's that kind of reasoning that got our country in the trouble in the first place, the people who didn't-you know, shortsighted behavior of the banks that got our country in trouble in the first place. And to me, I just view those kinds of statements as totally irresponsible.

[Memorize]

At 10/22/10 09:08 PM, Warforger wrote:

I know those Republicans driving down the national debt

Debt to GDP...

[Warforger]

At 10/23/10 06:26 PM, Memorize wrote:

At 10/22/10 09:08 PM, Warforger wrote:

I know those Republicans driving down the national debt

Debt to GDP...

Doesn't change anything, even there the Republicans are still driving the debt and the Democrats are driving it down aside from Obama.

[Memorize]

At 10/23/10 06:43 PM, Warforger wrote:

Doesn't change anything, even there the Republicans are still driving the debt and the Democrats are driving it down aside from Obama.

Uh... yes it does.

Tell me, what would you rather have?

$50,000 with $10,000 debt?

or

$100,000 with $20,000 debt?

But let's take a good look at the graph.

FDR (Democrat): Up (in fact, the Democrat is highest on the chart)
Truman (Democrat): Down
Eisenhower (Republican): Down
Kennedy (Democrat): Down
Johnson (Democrat): Down
Nixon (Republican): Down
Ford (Republican): Flat
Carter (Democrat): Down
Reagan (Republican): Up
Bush 1 (Republican): Up
Clinton (Democrat): Down
Bush 2 (Republican): Up
Obama (Democrat): Up

So 3 Republicans and 2 Democrats went up.

Which I consider a tie because the highest amounts of public debt are all Democrats.

[Camarohusky]

At 10/24/10 01:26 AM, Memorize wrote: Which I consider a tie because the highest amounts of public debt are all Democrats.

It would seem that the most astute revelation from this graph is that when the economy is bad spending goes up.

I don't just mean bad like the oil shocks, I me3an complete sectors of finance fallnig apart bad. See Great Depression, S&L, and the current crash.

[Der-Lowe]

At 10/24/10 01:46 AM, Camarohusky wrote:

At 10/24/10 01:26 AM, Memorize wrote: Which I consider a tie because the highest amounts of public debt are all Democrats.

It would seem that the most astute revelation from this graph is that when the economy is bad spending goes up.

Eh, his graph is debt/GDP, so it doesn't really treat spending. As I've said, the deficit could go up because of falling revenues, and moreover, the debt/GDP ratio could go up because of um, a recession that makes GDP plunge.
Here's the graph for expenditures in real dollars (2005 dollars):

[lapis]

At 10/24/10 02:00 AM, Der-Lowe wrote: Eh, his graph is debt/GDP, so it doesn't really treat spending. As I've said, the deficit could go up because of falling revenues, and moreover, the debt/GDP ratio could go up because of um, a recession that makes GDP plunge.
Here's the graph for expenditures in real dollars (2005 dollars):

I wonder what caused that spike between 1940 and 1945. It's probably health care reform or something similar, which would make Memorize's comparison to other presidents very valid.

[SadisticMonkey]

At 10/22/10 08:11 PM, Drakim wrote: The europian nations don't have a republican party doing everything in their power to freeze the actions of elected leaders though. If they ever get their act together, they will at least have the possibility of doing some smart things, unlike America, which is always a start.

Let me guess, when you're bankrupt and heavily in debt, the "smart" thing to do is...borrow and spend even more, right?

I don't like the republicans or anything, but this whole "Obama would be able to fix everything if only the republicans would let him ;_; " crap is a load of crap. Obama is not doing the right thing. You can't just pump money into an economy with an entirely messed up structure of production and expect it to fix anything.

At 10/23/10 12:17 PM, Musician wrote: I was actually watching an interview with Joseph Stiglitz on Democracy Now the other day, and he said it was basically the opposite.

hahaha, STIGLITZ? hahah

He said that there was essentially no risk of things fucking up with Freddie Mac & fannie Mae. And we all know how disastrously wrong that ended up. meanwhile, those with opposing economic views like Ron Paul predicted five years before the crash that the actions of Freddie and fannie would cause precisely what they did.

But yeah, its everyone else that doesn't understand economics...hahah

Already, more than 40 million Americans are on food stamps.

because pumping trillions of dollars into the economy brings down the price of food....

Number of people on Medicaid is reaching record levels. So, revenues go down, expenditures go up, deficits get worse. If you stimulate the economy, then people get jobs

Until the stimulus runs out...

Now, if we spend the money on investments-investments in education, technology, infrastructure-you grow the economy in the short run from the stimulus, you grow the economy in the long term because of the returns that you get on these investments.

Except government is entirely detached from the structure of production and so is essentially blind when it comes to investment, which leads to massive wastage and destroys future private sector production and employment which emerge through market demands and so create wealth, and not just "because Obama said so" government spending.

I mean, just think about this from the point of view of a firm. If you are a firm and you could borrow at zero to two-and-a-half percent, which is what the government can borrow, and you have investment opportunities that you owe ten, 15, 20 percent, you would be irresponsible, you would be foolish, not to undertake those investments.

So, after having artificially low interests rates fuelling irresponsible housing investment....the answer is...artificially low interest rates fuelling more irresponsible investment....LOL

So, anybody that says, "I'm going to only look at one side of the balance sheet, the liabilities; I'm not going to look at the other side, the assets," is really not understanding economics.

No, not understanding economics is thinking that you can spend your way out of a recession, and that attempting to do so won't cause even larger problems.

It's that kind of reasoning that got our country in the trouble in the first place, the people who didn't-you know, shortsighted behavior of the banks that got our country in trouble in the first place.

Haha, ignoring the fact that the government was actively promoting as much house ownership as possible with low interest rates and freddie and fannie and community reinvestment acts....

[SadisticMonkey]

and stop with the goddamn graphs. This isn't a matter of parties, its a matter of policies.

Both parties supported the bailouts. This partisan crap is so simple minded.

[Der-Lowe]

At 10/24/10 07:58 AM, SadisticMonkey wrote:

At 10/22/10 08:11 PM, Drakim wrote: The europian nations don't have a republican party doing everything in their power to freeze the actions of elected leaders though. If they ever get their act together, they will at least have the possibility of doing some smart things, unlike America, which is always a start.

Let me guess, when you're bankrupt and heavily in debt, the "smart" thing to do is...borrow and spend even more, right?

Actually, you can. There's a fallacy of composition taking place with the debt issue, which a school of thought that is entirely microeconomic would surely miss.
As households try to cancel their debt, they obviously consume less. You'd say that the creditors would consume as well, and therefore compensate for the diminished consumption, but this is not so, because debitors have a higher marginal propensity to consume. So as everyone tries to pay debt back, because GDP is plummeting (and maybe there's even deflation, which makes the vicious cycle worse) Debt/GDP increases.
A much better solution would be to have our pie and eat it too: Government, who has a much softer liquidity restraint (was going to say trap, hahaha) can print money, lend it to itself, and spend it. It increases its debt, but it also pushes GDP up, through increased output, and maybe even inflation. Then, the debt problem the economy was in ends. Once the debt induced depression is over, the Government can commit itself to long term budget balance path, which won't be as harsh, considering that GDP is higher, so it can sustain higher debt.
Don't believe me?
I'm not talking hypothetically, I'm describing history:

YES MORE GRAPHS
and yes I continue to steal from PK's blog

[Der-Lowe]

At 10/24/10 05:59 AM, lapis wrote: I wonder what caused that spike between 1940 and 1945. It's probably health care reform or something similar, which would make Memorize's comparison to other presidents very valid.

Making fun of Memorize would be too easy, so let me focus on another thing the graph shows.
See that gigantic spike of spending during the commie years of FDR, the infamous New Deal?
No? Me neither.
How was the US going to get out of the GREAT depression with such a small spending increase?
That's why the definitive study of fiscal policy in the '30s, by the M.I.T. economist E. Cary Brown, concluded that : "fiscal stimulus was unsuccessful "not because it does not work, but because it was not tried".