Britain’s austerity experiment is faltering
It was the Welsh sage Alan Watkins who remarked that a budget that looked good the day it was delivered to the British Parliament was sure to look terrible a week later, and vice versa. The avalanche of new information dumped by the Treasury is simply too much to grasp at a single sitting, and governments tend to bury bad news in a welter of statistics. And so it proved with finance minister George Osborne’s budget served up last week.
The immediate headlines stressed that rich Brits would pay less income tax – down from 50 percent to 45 percent – but it only took a day before even traditional Conservative cheerleaders like the Daily Mail were condemning Osborne for funding tax breaks for bankers and billionaires by stealing from those living in retirement. The paper’s cover screamed: “Osborne picks the pockets of pensioners.”
Osborne insists he is sticking to his “Plan A” to reduce the public deficit by sharply cutting state spending by 25 percent over the five-year parliament and imposing severe austerity. Because he believes his “Plan A” is on target, all he needed was a touch on the tiller. He therefore designed his budget to be fiscally neutral – that is, for every tax cut there was a corresponding tax increase. He put up tobacco and alcohol duties and sliced a little off corporation tax.
Osborne’s broader economic experiment, however, is fast faltering. If it were a drug trial, doctors would be urgently taking patients off the snake oil and feeding them the placebo. In 2010, he inherited from Gordon Brown’s Labour government a fast-rising recovery in economic growth, but now, after two years, GDP is headed south, and Britain is teetering on the edge of a government-inspired double-dip recession. In the last quarter of last year, GDP shrank by 0.3 percent.
As predicted, “Plan A” is not working. The number of jobless is 2.67 million (8.4 percent) and rising, the highest rate for 17 years, and the cost of paying the unemployed to do nothing is soaring. Inflation is running at 3.7 percent. Most galling of all, no doubt, for Cameron and Osborne, who were rushed into taking drastic measures when Bank of England Governor Mervyn King spooked them into believing the markets would punish them if they did not tackle the deficit right away, the rating agencies Moody’s and Fitch have warned that notwithstanding the debt-reduction efforts, Britain could soon lose its AAA status.
Far from spurring the British economy to greater things, the Cameron coalition’s slash-and-scrimp policies have moved the government sector even deeper into debt. According to the latest Treasury figures, in February the current budget deficit rose to £11.1 billion. Borrowing rose to £15.2 billion. And the net public debt was £995 billion, or 63.1 percent of GDP. Critically for the coalition, even by the Treasury’s optimistic estimates, public-sector net debt as a percentage of GDP will continue to rise for another two years, maxing out at 76.3 percent just in time for Cameron to call a general election.
Debt reduction and austerity may be popular with the financial markets and Austrian economists, but British voters are fast beginning to tire of hard times. Cameron’s cry of “We’re all in this together” sounds a little hollow when he and his multimillionaire colleagues, such as Osborne – 23 of the 29 members of the Cabinet are worth more than $1.6 million – are so conspicuously not consuming the gruel they are feeding the rest of the nation. Cameron took five expensive high-profile family holidays last year, four of them abroad, all dutifully recorded in detail by Fleet Street’s finest.
How the Industrial Revolution created modern debt
This is an excerpt from Paper Promises: Debt, Money and the New World Order, published this week by PublicAffairs.
Consumers have always borrowed money from friends, neighbors and relatives. Merchants would not exist without credit; the habit of making debts on a “slate” in the local butcher or greengrocer was still common in the middle of the twentieth century. But the local merchant would normally offer credit only to a known, local customer; serial defaulters, or those deemed to be untrustworthy, would be refused business. In David Copperfield, Mr. Micawber’s failure to repay merchants required him to cadge off his friends.
But the modern idea of widespread consumer credit (in the form of national lenders, credit cards, etc.) really dates to the Industrial Age. A peasant’s income is unlikely to grow over the long term; at best, it will be highly variable, with bumper harvests in good years giving the peasant sufficient income to pay off debt incurred in bad years. But two or three bad harvests in a row could be ruinous.
This point illustrates a wider truth. The granting of a loan requires both the creditor and the debtor to be confident that the latter’s income will grow sufficiently to repay the debt. Think of a retailer that sells a washing machine, or television, in installments. Clearly the customer does not have the money now; otherwise he or she would pay upfront. Moreover, the overall bill, including interest, will be greater than the cash price. So the debtor must be confident that he will stay in employment to pay the larger sum. In addition, he or she will probably be confident that their future income will rise so as to offset the additional interest. A growing economy makes that calculation all the more likely. The Industrial Revolution changed the pattern of human civilization. It allowed economic growth to expand at a much faster rate than ever seen before. This was probably down to the use of carbon-based fuels (wood, coal and, eventually, oil) to power technologies to replace human and animal labor. This resulted in a substantial increase in productivity.
Think of an economy as a business with inputs and outputs. An agrarian economy is often dubbed a subsistence economy; it takes all the energy of the workers (and their livestock) to produce the food necessary to live. A bull may plow a field, and reduce the effort of the farmer, but it takes a lot of land to feed the bull. The economy (business) does not produce a profit. Carbon-fuelled machines transform the situation. Initially, man naturally exploited those fuels that were easiest to reach; chopping down trees, getting coal nearest the surface and so on. So the output, in terms of goods and energy produced, was much greater than the effort put in.
The movement of people from the land to the new industrial cities also required an agrarian revolution. Those remaining on the land had now to produce a surplus, enough to feed the industrial workers as well as themselves. Fortunately, this happened, thanks to the consolidation of smallholdings, new farm machinery, crop rotation and a host of other small reforms. In turn, these improvements allowed the population to grow.
So we now had economic growth and population growth. The next stage emerged as workers gathered in factories. Initially, the conditions were terrible – long hours, low pay (albeit better than a farm laborer’s income) and non-existent safety standards. In the crowded towns, sanitation was poor, disease spread quickly and life expectancy was severely restricted. But factories made a big difference in that they grouped workers together and made it easier for them to organize in their own interest. That was very difficult for geographically dispersed agricultural workers. Steadily over the nineteenth century, trade unions grew in membership and workers flexed their muscles through strikes. Governments started to recognize their power and buy them off. Bismarck, a hard-headed pragmatist, introduced old-age pensions in Germany as a way of recruiting worker support for the Hohenzollern monarchy.
As with all systemic problems, when local banks got big enough to go national and then international greed and profit became more important than helping “store” local successes and make more by lending a portion to others.
Morals and intergrity were used to compare banks not profit, hence decay in the banking industry. Which gave rise to investment schemes with effective lobbying of government ruling bodies.
To bridge the deficit, collect some taxes
By David Callahan
The views expressed are his own.
At a time when the U.S. government needs every dollar of revenue it can get, alarm bells should be sounding in Washington about a new IRS study showing that the Treasury is losing a fortune to tax evasion.
The study, released last Friday, found that the government missed out on $385 billion in uncollected taxes in 2006, the most recent year for which the IRS has complete data. If we extrapolate the IRS’s assumption that the U.S. government only collects about 85 percent of total tax liabilities, the revenue lost by the Treasury in the past decade exceeds $3 trillion.
That is serious money–nearly equal to all the new federal debt incurred during the Bush years. And without tougher action against tax cheats, the U.S. government stands to lose trillions more over the next decade.
Many of the biggest tax cheats are wealthy earners. While most working stiffs–the W-2 crowd–get their taxes automatically withheld from their paychecks, business owners and self-employed professionals have lots of ways to cheat. And cheat they do: Unpaid taxes by businesses and corporations accounted for nearly half of the total tax gap in 2006.
These figures only reinforce the public’s view that the U.S. tax system is unfair. According to a poll released last month by the Pew Research Center, 57 percent of Americans said that what bothers them most about taxes is that the wealthy don’t pay their “fair share” (compared with 28 percent who cited the complexity of the system and 14 percent the amount they paid as their top gripe).
This is the surest sign that the GOP does not care one bit about the deficit.
The GOP wants to scream and scream – Joe Scarborough comes to mind – that the deficit is a crisis, but are unwilling to treat it like a crisis and get a plan to get us out of it as soon as possible, including raising revenues, they simply are not serious and simply want to use it as a ruse to justify killing Social Security and Medicare.
Italy’s fundamentals aren’t worse than usual
By James Macdonald The views expressed are his own.
The markets have come to the conclusion that Italy’s debts are unsustainable in the long term. They are therefore demanding a higher risk premium to compensate for the risk that they might not be repaid in full. So runs the conventional wisdom. However, the situation is not that simple.
In the first place it is not at all clear that Italy’s situation is especially worse than it was ten or fifteen years ago. The country’s debt first hit 120% of GDP in 1993, after the spending spree of the 1980s when budget deficits were regularly higher than 10% of GDP. In 1992 the deficit was 9.5% of GDP; and with interest rates on the debt of 10% or more, the country’s interest bill represented 12% of GDP. Throw in a discredited and dysfunctional political system, and the situation looked bleaker than it is today. Yet the country did not default. The old political parties were blown away, and a series of governments, both technocratic under Ciampi and Dini, and party-based under Berlusconi and Prodi, oversaw a period of fiscal retrenchment which brought the deficit to under 3% of GDP by 1997. Part of the improvement came through a fiscal squeeze which brought the primary balance from a deficit of 2% of GDP in 1990 to a 5% surplus by 2000. The rest was the result of lower interest rates. By the late 1990s Italy was able to borrow at around 6% — a rate that no one then considered unaffordable.
Over the past fifteen years Italy’s budget deficit has averaged 3.5% of GDP. It is currently 4.5%. Before the financial crisis erupted, its public debt had fallen to 105% of GDP. It has now risen to 120% of GDP again. Under normal circumstances a reduction of its budget deficit to 3% of GDP would be sufficient to stabilize the situation – a far smaller adjustment than was necessary in the 1990s.
So why has the market suddenly decided that the country’s position is untenable? It cannot be simply that Italy lacks a stable and convincing government. That has been the case for the majority of the postwar decades, and was certainly so in the early 1990s. Yet the country has shown that it can jettison discredited politicians when necessary, as it did in 1992, and as it is doing now.
A more compelling reason may be that the international climate is less benign than before. Italy’s growth rate has been sclerotic for years. But until recently the world economy was growing at a decent clip so that it could be hoped that “a rising tide lifts all boats.” Now, the future of uncompetitive economies looks bleaker.
However, the current climate is as much as anything else a case of self-fulfilling prophecy. One of the reasons that Italy’s position is looking worse than before is the rise in its borrowing costs. With public debt at 120% of GDP, a 4% rise in interest rates, which is what Italy has faced over the past year, will more than double its prospective budget deficit. A further negative feedback loop is provided by increasing margin requirements on its bonds as their prices drop and as trading volatility increases, thus making them less attractive to hold.
from Edward Hadas:
What is the morality of debt?
Debt is a moral matter. While most economic activity is concerned with the “is” of how things are (investment, consumption and so forth), debts are always entwined with an “ought” – to repay. In discussing controversial debts--for example government borrowing in the euro zone and the U.S.--the moral question should be addressed directly: should these debts be paid off in full, or is some forgiveness justified?
Aristotle can help frame the argument. The philosopher condemned all lending at interest because money cannot create wealth by itself; a loan is just a way for the lender to take advantage of the borrower. Some proponents of Islamic finance make a similar argument, but it is not quite right. Capitalism has shown that loans can indeed produce wealth. If the lent funds are invested well, enabling the borrower to improve his lot and the world’s, then interest payments are the lender’s just reward for providing the fruitful funds.
But Aristotle’s moral logic remains relevant; his condemnation is appropriate for loans which do not share wealth justly between borrower and lender. Unfair loans should not be made, and where they have been, full repayment only compounds the original injustice.
Libertarians, believers in the right of individual to make their own decisions, have another contribution to the moral discussion. They point out that loans are freely agreed contracts which should be honoured. Both sides should understand the possible consequences of their free choices. Borrowers should repay, even if that requires making sacrifices, and creditors who make bad lending decisions should suffer losses.
In the euro zone, some libertarians (and most Germans) consider the borrowers’ obligations to be paramount. The governments of Greece and the other over-extended nations can and should repay all their agreed debts. The citizens just have to work harder and pay more taxes.
Other libertarians take the opposite moral line. Losses are the just punishment for the foolish creditors. And the Aristotelian logic may justify forgiveness. The lent money has mostly been spent unproductively, so the borrowers now have few gains to share with the lenders. The original loans turned out to be unjustly generous to the debtors, but the terms have become unjustly harsh.
Morals? There has been no display of morals, even an attempt at appearances of morals from: Congress, Wall Street Banks , Corporate “Citizens”, Big banks, Investment Banks. To expect the taxpayers, strapped, underemployed, to be morally motivated to repay these con artists who want all the gain while sharing none of the losses is beyond all gall.
Here’s morals-BoA offered my hubby a credit card, he had no income, he declined. BoA persisted in offering this credit, knowing hubby had no income. My credit is trashed-medical debt and divorce, matters not, I was not in consideration, nor could he add me to the account. I was the sole household income, and seriously making way in (finally) breaking even. BoA kept at it, hubby caved and BoA gave him $5000, Why? I was laid off shortly after that. Knowing my own credit could be further damaged, I did set up auto payments-and BoA chose to withdraw their payments, 3-5 days before the due date, and that due date began to fluctuate(my auto pay acct was also with BoA) causing a missed payment, and overdraft fees, as I had no idea the date had changed in a way that preceded my auto deposit of earnings. Nice moral behavior all around, no, I will not be paying anymore money to banks nor government, even if I somehow could-They mismanage on their end and want to convince me I mismanaged a loan I had no say in!?!
Keep paying if you want, or feel morally obligated to. The one’s you owe are relying on you for their excess to continue.
Take advantage of today’s low costs
By Robert H. Frank The opinions expressed are his own.
Reuters invited leading economists to reply to Lawrence Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Franks’s reply. Here are responses from Laura Tyson, Benn Steil, Russ Roberts, Donald Boudreaux and James Pethokoukis as well.
I’m in general agreement with Larry Summers’ piece. If it had been my column to write, I’d have been more emphatic about how much more important the unemployment problem is than the deficit problem. Deficits need to be reduced, yes, but not in the midst of a deep downturn. If we could put just half of the people who are either unemployed or underemployed back to work, for example, national income would be larger by more than ten times the interest we’re paying on the 2011 deficit. The extra income tax revenue alone would be enough to cover the interest on last year’s debt.
I’d also have hit harder on the claim by ostensible deficit hawks that extra spending right now would impoverish our grandchildren. Some of the most vivid and easily understood counterexamples involve infrastructure maintenance. According to the Nevada Department of Transportation, repairing a damaged 10-mile stretch of Interstate 80 would cost $6 million if we did the work today. But if we postpone repairs, weather and traffic will continue to damage the roadbed. If we wait just two years, the cost of bringing that same stretch of road up to par rises to $30 million. There are thousands of similar projects crying out to be done.
The Nevada cost inflation estimates, by the way, take no account of the special circumstances associated with the current downturn. There are idle machines and workers who could do the work today, for example, but if we wait a few years, we’ll have to bid them away from other useful tasks. Materials are cheap in world markets now, but if we wait, their prices will rise as the global economy recovers. Interest rates on 10-year T-bills are near record lows. They’ll be higher if we wait. No one proposes to allow the interstate highways to deteriorate back to gravel. We either fix them now or we fix them later. Fixing them now is MUCH cheaper, AND it will put unemployed workers back on the job. If we REALLY wanted to impoverish our grandchildren, it would be hard to come up with a better strategy than failing to undertake these projects right away.
Unfortunately iowafarm, the military is just as inept at constructing levees as it is at prosecuting a war. It can certainly be argued that they are incompetent and and no longer retain the basic knowledge and personnel for such projects.
Still you are correct, there is no large commitment to rebuilding and building anew the infrastructure that this country desperately needs. Perhaps if Washington allocated large, substantial, no strings attached funding for infrastructure, (like they fund the DOD)the knowledgeable and skilled would be encouraged to step forward and offer their services. We might also be able to put Americans back to work in large numbers.
Investments in public education,transportation, water supply and sewers, the electrical grid, highway and rail expansion as well as renewable energy would reap incalculable dividends for our children and grand children. Our investments in war have only saddled them with debt. Where is the American conscience?
Three reasons conservatives should oppose a balanced budget amendment
By James Ledbetter The opinions expressed are his own.
One of the crucial lubricants allowing Congress to resolve the debt-ceiling friction was, apparently, the inclusion of a provision to vote on a balanced-budget amendment. Assuming this version of the deal passes, then at some time between September 30 and December 31 of this year, both houses of Congress will be required to vote on a ‘‘joint resolution proposing a balanced budget amendment to the Constitution of the United States.’’
Whatever the political expediency of this provision may be, a balanced budget amendment is a bad idea from a conservative point of view, for at least three reasons.
It won’t work. Historically, conservatives have opposed extending government authority in places where it is not effective. You can find all the evidence you need to conclude that balanced budget requirements are useless by simply investigating the oft-repeated claim that 49 states have laws requiring a balanced budget. Leave aside the falsity of the claim and just consider the logic: if so many states are required to balance their budgets, why are so many states in the red?
The answer is that requiring state governments to annually balance their books simply encourages them to find clever ways to disguise debt and deficits. For example: California has both a Constitutional and a statutory requirement that its budgets be balanced. Would any sane person maintain that the state’s books have been anything resembling healthy for at least a decade? This year, after some brutal spending cuts, the governor’s office found that the state still had a short-term deficit of more than $9 billion and $35 billion in long-term debt. The governor’s budget report noted that California’s “massive budget deficits for most of the past decade…have been largely the result of a reliance on one-time solutions, borrowing, accounting maneuvers, and cuts or revenues that were illusory and therefore did not materialize.”
If that sounds familiar, it may be because, as Richard Quest pointed out on CNN Sunday evening, we’ve witnessed numerous Congressional attempts in recent decades to rein in federal deficits—including Gramm-Rudman in 1985 and the Budget Enforcement Act of 1990—all of which fell victim to legislative legerdemain. Why would a federal balanced budget amendment be any different?
It won’t pass, because it’s bad for the states. In recent weeks, many Republicans have behaved as if a balanced-budget amendment is some kind of magic wand that need only be proposed in order to achieve its desired effect. And that might be true, if the desired effect is a vote that can then be used for demagogic purposes.
A balanced budget? Does that mean if your state has had a huge windfall like Bill Gates presenting it with a weeks profit from Microsoft, would the state have to find new ways to spend it, and balance the books?
In bad times, why can’t they borrow money like everybody else against future good times?
Zero U.S. debt wasn’t so great the first time around
At this rate, we’re going to have more debt-reduction proposals than we have trillions in debt. There was Simpson-Bowles, the Gang of Six (Pt. 1), Obama’s $4 trillion gambit, Coburn’s $9 trillion slash, Cut-Cap-and-Balance, and the Gang of Six (Pt. 2), Obama and Boehner’s near-deal, and as of this week Reid and Boehner’s dueling plans. But even the most austere of these proposals would have left us more than $5 trillion in debt, and the one likely to pass—if one passes, that is—will likely still leave us with more than $10 trillion of obligations. Somewhere, Andrew Jackson is shaking his skeletal head, pissed that a bunch of profligate Americans have soiled his legacy.
As president, Jackson was responsible for the first and only time the country stood at a true Debt Zero. The debt was $58.4 million when he first took office in 1829; six years later, as he would announce in his 1835 State of the Union, the country was finally in the black, with $440,000 in the bank. All it took to get there was a maniacal devotion to small government, the forced removal of tens of thousands of Native Americans, and tariffs so high the union nearly broke apart. The kind of thing that’s easily replicable in 2011.
So while we’re counting down the days until the U.S. bursts through the ceiling like a Roald Dahl character, let’s dwell on a different timeline: Andrew Jackson’s. It’ll remind you that Debt Zero doesn’t happen overnight.
1795: For Jackson, debt became his white whale from an early age. Before he went to battle and burnished his Old Hickory* legacy, he was a lawyer and real-estate man, and a rich one at that. When Jackson was 32, he sold 68,000 acres of land to a guy named David Allison. But Allison didn’t have the most stable of financial lives, and soon ended up declaring bankruptcy and rotting in a debtors prison, where he’d die in 1798. Jackson, meanwhile, was left in a lurch, having used the promise of Allison’s money to start buying supplies for a trading post he was starting. According to John Steele Gordon’s surprisingly readable history of U.S. debt, Hamilton’s Blessing, Jackson would spend the next 15 years sorting it all out.
1824: When Jackson first unsuccessfully campaigned for president he did it on a platform that would make Tea Partiers blush. He framed the federal debt as an almost-spiritual affliction, calling it “a national curse.” As Jon Meacham writes in, American Lion, his Pulitzer-winning biography of Jackson: “To him debt was dangerous, for debt put power in the hands of creditors—and if power was in the hands of creditors, it could not be in the hands of the people, where Jackson believed it belonged.”
1828: Likewise, he was adamant power not be in the hands of the Brits. The country’s protectionist streak meant a series of tariffs were passed to help build the economy. Starting in 1824, when Jackson was still a Senator, he voted in favor of tariffs in an attempt to raise revenue on imports and help the country’s fledgling manufacturing industry compete with Britain’s. 1828′s Tariff Act, menacingly nicknamed the “Tariff of Abominations,” was especially restrictive, and South Carolina, whose economy was already suffering, was furious (again—some things never change) that the legislation would raise duties from 33 to 50 percent, reinforce Britain’s unwillingness to import its cotton, and keep prices on manufactured goods from the north high. The Union was threatening to fracture, but the Treasury was getting rich. Tradeoffs.
1829: Once he took office, Jackson finally had enough power to spear the debt, pursuing it single-mindedly, no matter the costs. He refused to finance state projects with federal funds, partly because he believed in a small federal government, and partly because it would cost too much. Predictably, congressmen who were trying to get funding for local projects (proto-pork!) were angry, but Jackson wouldn’t budge. In 1830, he threatened to veto any funding for state infrastructure. “I stand committed before the country to pay off the national debt at the earliest practicable moment,” he told a Kentucky congressman seeking funding. “Are you willing–are my friends willing to lay taxes to pay for internal improvements?–for be assured I will not borrow a cent except in cases of absolute necessity!” The Congressman replied, “No, that would be worse than a veto.” (Some things never change.)
So how would president Jackson have fared in today’s world with the internet, global markets, video on demand, public officials’ lives open for scrutiny and all documents available for review on the internet.
Nevertheless, thank you for a historical perspective. It is true that borrowing money from someone does give them power. That is something that we have forgotten about.
from Reuters Money:
Is the American Dream dead?
The American Dream lures people from all over the world, and it’s because of this possibility: If you come here and work hard, your kids will have a better life than you.
What if that weren’t true anymore?
Record debt, persistent joblessness, millions of underwater mortgages and a stock market that hasn’t gone anywhere in 10 years: For today’s kids who are entering the job market, it’s hardly a recipe for future success.
For parents who only want the best for their children, those prospects are like a wrenching pit in our stomachs. When such a central pillar of the American story is falling apart, frantic moms and dads hardly know what to think.
“My husband and I are terrified for our sons,” says Saideh Browne, a 40-year-old mom of two who heads up a speaker’s agency in New York City. “When they were born, we figured as long as we saved for college, they would be okay.
“But now, we can’t just tell them to go to school, get a good job, and retire at 65. We’ve had to rethink parenting, and it hasn’t been easy. We’re encouraging them to learn a trade, and hope it all works out before the economy tanks further.”
Browne is hardly alone in fretting about her children’s future. According to a new survey from Ipsos, sponsored by New York Life, only 41 percent of parents surveyed think that kids will have a better standard of living. It’s a major tectonic shift in our national belief system, but given the events of the past decade, it’s not that shocking.
It died in 1975….
the last year America had a trade surplus and Sam Walton listen to a whistle while you work song east of Seoul.
Remember what Lance Winslow wrote in that article “The Flow of Trade in a Global Economy”….
“Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”
Think for a moment about George Washington….yes the man that is on the US dollar bill….How do you think George feels being sent overseas in return for all that foreign so-call cheap items and being left in a foreign bank because the American worker doesn’t make anything for the foreigners to buy. Cheap items didn’t make this great union of 50 states the greatest place on the face of this Earth…..the American worker (union and non-union) did.
You can’t have a strong country without having a strong currency and you can’t have a strong currency unless you keep it floating around within your 50 states. This is why the store with the star in the name puts 95% China made items in their stores in China….to keep their “yuan” in their country helping the nice people there. And with only 5% left for all the other 182 country’s that make stuff including the United States of America….that doesn’t produce very many jobs outside of China.
Being an old person myself and knowing how it was back in the 40′s, 50′s and 60′s in this union of 50 states….I look at George each time I pull him out of my billfold and make a promise to send him out for items made in America so after floating around helping each hand he touches just maybe one day he will shake mine again.
Fifteen cargo ships pollute as much as 760 million automobiles.
$9 billion a year in hidden taxes to all American taxpayers to clean fish from ballast tanks of ships…
think about all those facts the next time you pull that George out of your pocket….
Retail makes NOTHING…
Governments only make MORE DEBT…
It’s time for less of those two and for America to get back to what it does best….MAKE STUFF..
cause George Washington on that dollar can’t help anyone in the United States of America if he is being held in a foreign hand.
Made In America is the only way out of this mess cause foreign made put US here.
Five ways to correct the Greek debt crisis
By Mohamed El-Erian This piece is the English version of the one that appeared in Handelsblatt. The opinions expressed are his own.
Not a day goes by without a flood of comments on Greece and its debt problems. They seem to come from everywhere. Some are later denied while others are left to stand, accompanied by a continuous string of worrisome data. In the process, even greater disorder is gaining hold of the country’s debt markets, with credit spreads exploding in an ever more alarming fashion.
There is a risk that all this could serve to confuse rather than illuminate the key issues that should be on the radar screen of many, whether they are policymakers or normal citizens. I can think of five such issues.
First, there is a good reason why Europe’s current approach to Greece’s problems has not worked well. Indeed, many, including me, believe it will not work any better going forward. Meanwhile, the costs and risks are growing exponentially.
Despite a year of large sacrifices on the part of Greek society and exceptional financial support from neighbors, Greece is still very far from regaining economic and financial stability. Output continues to collapse, unemployment is rising, the budget deficit remains alarming, and the already excessive debt burden is increasing further.
As a result, the country is no closer to re-establishing normal access to the global financial markets. New investors prefer to wait on the sideline, thereby starving the country of fresh capital. Meanwhile, doubtful liabilities are increasingly being transferred from creditors, who knew they were taking risks in lending to Greece (rather, for example, than buy German debt at a lower interest rates), to Greek and European tax payers as well as to the balance sheets of public organizations.
Second, the time has come to urgently recalibrate the EU/ECB/IMF approach to solving Greek’s debt crisis. This must start with an open recognition that an insufficient number of the original key objectives of the Greek adjustment program have been realized and, going forward, even fewer stand any realistic chance of being realized under the current approach. As a result, the country will not be able to harvest gains from the courageous steps taken to improve the efficiency and functioning of the public sector. Indeed, it could be forced to reverse them.
Quote from the article: “In the case of Greece today, too much of the debt is being transferred from creditors to the public sector. As a result, too many tax payers and public institutions will end up taking the hit that many creditors should have taken.”
This is the primary problem of economies around the world as evidenced by Iceland, Ireland, Portugal, Spain and even America, but Greece’s problem is far greater.
Greece’s underlying fundamentals are so wretched that they have zero chance of achieving economic viability within the next ten years.
This epic drama can only end with loan forgiveness or default… and the end draws ever closer.
I’m astonished that the Eurozone and other investors have been willing to toss billions of Euros into Greece’s black hole of a deficit every time the bills come due.
Surely, most of those investors are sophisticated enough to know that Greece isn’t capable of generating enough income to actually repay all of that money. The risk of default is virtually 100%; it’s just a matter of when.
Yeah, perhaps Mr Wapshott should explain in greater detail how he would fund the spending binge that he proposes.
Would he rob anyone with savings yet again, through quantitive easing, or does he have a better plan?
I guess we could always default on our debts, but that would also cause a lot of short-term pain.
So far, the government is still a long way off even balancing the books, and the budget deficit is hardly narrowing. So what we’re seeing so far is really not even “austerity”, it’s just a small concession towards sensible management of the country’s accounts. Something that the Labour government should have done years ago to stop us from getting into this mess in the first place!