The Eurozone Bailout Plan

InvisibleJim

InvisibleJim

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The Eurozone Bailout Plan

Problem
a) Governments are over indebted and cannot pay off their debts, particularly Greece, Spain, Italy and Portugal.
b) Governments are within euro and cannot deflate their currency to manage the debt.
c) An implosion within the euro has massive impacts on larger and more stable, non-indebted countries such as Germany.

The proposed solution
a) Use the funds held by the European Central Bank and Safety Fund (approx 500 Billion Dollars) as capital to raise approximately 4 Trillion Dollars
b) Send the money out left right and centre to 'forgive' approx. 50% of debt in countries like Greece.
c) Any excess may be used to protect weak banks which are heavily exposed to sovereign debt such as in France.
d) The 'mortgage' on the raised money is then paid collectively by the euro-zone governments thus transferring debt to Germany, etc.

Comment
a) Will Germany stand for it?
b) Does robbing Peter to pay Paul ever stop Paul living on the hair of the dog perpetually?

Le Chart.
97bf19af5af6691e3c3459e7901164d6.png
 
Le chart makes me facepalm.

Like, this is getting ridiculous and I've never been the one to tote "the world economy is going to end" but we're seriously fucked right now. When Greece falls, Spain and Italy will follow and Germany will have to bail them out, making them the unofficial head of the EU (U jelly 3rd Reich?).

England is sittin' pretty laughing their asses off at the EU because they control their own interest rates to deal with debt internally.

Supposedly, we're on the verge of a double dip as well (or even on the ride down into economic hell). Part of me thinks it'll be fine, the other part of me thinks we're off into area we haven't really explored before and it will lead to like a new world order or some shit.

How are they going to use what they have in reserve to make 8 times of what it is now? Where will all of the other money that they would be handing out come from?

From what I've heard, they want to start printing more money to cover the cost, which is a very bad idea.
 
I'm not comfortable with the idea of writing off debt / forgiving debt in any form... I'd rather see the whole system crumble, it doesn't seem fair to those of us that have tried very hard to live within our means... For years I've scratched my head wondering how long the insanity can go on for, the abject greed and blind faith in corporatism and capitalism. Now that we're seeing some serious cracks appearing the powers that be propose stepping outside the capitalist game they worship so much.

Too big to fall? nope.... it needs to happen, it won't be fun for anyone but it's the fair thing to do.

Or, maybe I should just rack up the debt and kick and expect my neighbours to cover me when things get out of hand. Can you imagine getting a loan for a swimming pool and then being bailed out when the proverbial hits the fan... Can you imagine the death stares from your neighbours who were fiscally responsible and feel penalised for it now?
 
You've probably already seen it since it's going viral since last night... but just in case:

[video=youtube;aC19fEqR5bA]http://www.youtube.com/watch?v=aC19fEqR5bA[/video]
 
We've reached peak everything. Economic growth as was seen in the twentieth century is simply unstable, and China will overtake the US as a superpower. David Cameron is screwing up the UK economy, and Ed Miliband is just as bad. Vote Labour and have your country screwed up by an idiot, vote conservative and have your country screwed up on purpose, vote liberal democrat and you deserve it. I abstain.
 
We need to realize that debt is a BAD THING and stop looking for loans immediately. This is true whether you are a dude living in Calamazoo, or a mutlinational corporation, or a SuperPower.
 
When my mind worries and feels like it is going to implode, I watch this....

[video=youtube;8r1CZTLk-Gk]http://www.youtube.com/watch?v=8r1CZTLk-Gk[/video]
 
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I would say it is the same issue the US faced. You toss everything in one Kitty--like form a huge conglomerate of countries with a common currency, mix in some economic hardship and Voila---a situation where one country cannot "fail" or it brings down everyone. It is a curious development in the market. The effect of globalization has had a far greater impact that was largely overlooked by economists. This creates an instability in the market that cannot be adjusted for. Additionally, the fact that individual salaries have not really increased significantly, yet costs have risen--notice recent rise in gas prices--and the markets become further stressed. The problem is that the greedy bastards who own everything fail to realize an important fact--you have to spend money to make money. Keeping the little man down has and will continue to have a detrimental effect in all industrial markets. If the little people can't afford to buy your products, you lose profits. Profits are weak, you cut labor. More little people can't afford to buy other products either. Other greedy bastard's profit is weak, they cut labor......see? Healthy markets depend on money flowing. If the people don't have money to spend and it is bottlenecked in the control of the wealthy....

It doesn't matter what Germany does or does not do. Protecting the market should take presidence but it will take some serious long term planning to stabilize it. Typically European countries have higher tax rates to begin with. I am not familiar enough with the general working knowledge of their economies. I will say you will probably see a severe backlash against government spending and/or social program spending. Cutting spending is not a wise idea, it will exasperate the issue. Careful government spending, with an eye toward stimulating the economy on the micro level should be the plan.
 
Sonya said:
Cutting spending is not a wise idea, it will exasperate the issue. Careful government spending, with an eye toward stimulating the economy on the micro level should be the plan.
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Borrow and print growth based economies are a perpetual failure. There is sensible growth caused by real underlying activity converting raw materials into useful product and providing services that people want and artificial growth based upon unsustainable debt and money printing. It's easy to confuse the two. The capital structure is key. Strong economies have non-indebted governments and individuals with high earnings.
 
I agree [MENTION=3473]InvisibleJim[/MENTION] I am not talking about creating further debt. I am speaking to more fiscally responsible government spending aimed at stimulating the economy and growing it from the bottom up to assist in creating "individuals with a high level of earning" .
 
Sonya said:
I agree
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You think we agree; but you don't really - tax/borrow and spend by governments does not generate real growth.

If it was real economic growth it would already attract finance/investment.

The two investments available to governments are: too risky vs return, or sub par return vs bonds with low risk.

You see the problem?

Note what governments just bailed out which was too risky vs return vs bonds growth? BANKS!
 
Paper money isn't the problem. The problem is people using too much debt, and too much speculation regarding investments, to determine value. Liquid currency (not necessarily debt and loans being considered money) has helped increase economic growth, and gains in real capital. The problem was poor investment. Gold and other precious metals are not immune to speculation and fluctuation in values, as has been shown. The major problem regarding the EU is inviting too many countries to share its currency and not being able to enforce or dictate policy regarding money and economy -- this is not mentioning the irresponsibility of the Grecian government. That has nothing to do with paper money. There is a big difference between trading lots of debt (3+ times) and using paper money. It would be better to make things, like computers, with gold and metals than creating scarcity by using them as money.
 
InvisibleJim said:
Borrow and print growth based economies are a perpetual failure. There is sensible growth caused by real underlying activity converting raw materials into useful product and providing services that people want and artificial growth based upon unsustainable debt and money printing. It's easy to confuse the two. The capital structure is key. Strong economies have non-indebted governments and individuals with high earnings.
Click to expand...

I could not agree more.

The problem being, of course, that when you decimate your manufacturing base, you are fucked. No real growth, much less recovery, is then possible.

Add in profligate spending (leading to debt), shell games, and a “worry about it tomorrow” attitude, and you are well and truly fucked.


cheers,
Ian
 
Yes but the problem is that government spending is a major component of "capitalist" economies. When your investment arm is weak, and your consumer base is overspent...what does that leave you to stimulate the economy to trigger growth in you investment sector? Are all the greedy bastards who own everything all of a sudden going to infuse your economy with capital? Or are they going to bail and invest in "less risky" ventures outside your economy? So the investors are either too far into the economy to pull out without losing it all and/or have already pulled out as much capital as they can to put into more profitable ventures. Your consumer base has no real worth. Their income has not kept up at a reasonable rate to adjust for the cost of goods in an unsteady market. They are not investing money into savings and banks because everything they earn is earmarked for survival. There are no solid benefits for saving nor the capacity to save. Where does that leave your economy? You have to redistribute a portion of the wealth and economic power into more hands to stimulate economic activity throughout your economy.
 
Sonya said:
Yes but the problem is that government spending is a major component of "capitalist" economies. When your investment arm is weak, and your consumer base is overspent...what does that leave you to stimulate the economy to trigger growth in you investment sector? Are all the greedy bastards who own everything all of a sudden going to infuse your economy with capital? Or are they going to bail and invest in "less risky" ventures outside your economy? So the investors are either too far into the economy to pull out without losing it all and/or have already pulled out as much capital as they can to put into more profitable ventures. Your consumer base has no real worth. Their income has not kept up at a reasonable rate to adjust for the cost of goods in an unsteady market. They are not investing money into savings and banks because everything they earn is earmarked for survival. There are no solid benefits for saving nor the capacity to save. Where does that leave your economy? You have to redistribute a portion of the wealth and economic power into more hands to stimulate economic activity throughout your economy.
Click to expand...

You haven't went full circle with your analysis. You have got stumped at 'Rich' = greedy, evil nasty people who inherit everything and 'Poor' = needs money because they are just and nice people who just don't have any opportunities, they're just waiting to happen, no really, they ARE!

I call: No.
 
Not really, but then you are entitled to your opinion on the matter. My descriptive use of language aside, it doesn't mean that there isn't something to be said about the damaging affect that "bottlenecking" wealth and the problems this creates. You gotta spend money to make money. I am not advocating for "poor" people. I am stating that if you want to stimulate a depressed economy, you have to broaden the base of people who have spending power. Such stimulation, like all stimullation in life ;), must be done carefully with well thought out strategies. I personally advocate for programs and projects that stimulate rural economies because it will allieviate urban sprawl--as people move back to where jobs are, it stimulates the most depressed economies which should radiate outward toward urban centers. Just because my tribal heritage finds certain ideals about "greed" doesn't mean that I am incapable of looking at the problem objectively--it does mean that I will advocate for ideas and solutions that take the whole into account over the individual every time though.
 
Somewhat off topic, but a little bit related...

Mark Esterhuysen was fired after a 40-second rant, featuring the f-word 13 times, live to air on radio in Johannesburg.... becoming an overnight social network celebrity.

"F*** perpetual growth on a finite planet".... Indeed, well said sir :-)

Seems to me that the elephant in the room is the discussion that's not being had about human nature... those that think human nature should be left to run free and we'll do just fine... and those that think if we're left to our own devices then we're doomed.

[video=youtube;8iP9OO34Ld8]http://www.youtube.com/watch?v=8iP9OO34Ld8[/video]
 
Why bailouts are bad

The monstrous quantity of debt in Western economies is the result of decades of deferring pain. Whenever an economic downturn looms, governments run deficits to "stimulate the economy" and central banks lower interest rates to encourage borrowing and investment. Public and private sector debt grows and the next emergency is even worse.

Politicians always want economic pain to come after the next election. Transferring the debts of insolvent governments from banks to public bodies
Click to expand...
 
aeon said:
from BBC News


cheers,
Ian
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The biggest crime of bailouts is that they eradicate the wealth of those who have been careful to make sub-par investments which the individuals would never choose by communal force/theft and by deflating the currency.
 
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