Skip to comments.Spain Is Doomed: Why Austerity Is Destroying Europe
Posted on 04/18/2012 7:43:02 AM PDT by ctdonath2
Let's try a thought experiment. Imagine you walked into the bank, told them you were going to be taking pay cuts for the next few years, and then asked for a loan. You'd be laughed out of the office or else pay an interest rate so high that "usurious" wouldn't do it justice. The logic is simple: If you're in debt and your income is shrinking, it's mighty hard to pay back what you already owe.
... Nearly a quarter of Spain's population is unemployed. Half of its youth are out of work. And it's only going to get worse. Spain is supposed to trim its deficit by some 5.5 percent of GDP over the next two years. That's not a recipe for growth. Just ask the IMF, which downgraded its projections for Spain's economy back in January.
What matters for a nation is its GDP. That's a country's equivalent of personal income. If Spain's GDP is set to fall for the foreseeable future -- and it is -- then who would want to lend to Spain?
(Excerpt) Read more at theatlantic.com ...
They have no choice.
They want to run Keynesian “stimulative” deficits? But who exactly is going to fund their deficits? Didn’t Italy and Spain just have another jump in their debt CDO’s?
I am not surprised the ECB has stepped in with their LTRO, It is the last, best resort for EU Keynesians and their political project. I am sure that Bernanke and Geithner are advising them to print, print, print.
If austerity is destroying Europe, how about trying profligacy? Oh, wait, that’s what caused the problem in the first place.
It can’t happen here. /S
Adam Smith knew this centuries ago when he wrote "Wealth of Nations". Hard work and exploitation of natural resources create wealth, not the printing of money. This is true of individuals as well as nations. The nations that discourage hard work and the exploitation of resources are doomed to fail.
>> This, of course, does not bode well on any path.
Yes, and no.
In the near term, the austerity path is painful. But it’s the only way to get back to a working and growing economy.
It’s astounding to me that folks (and their leaders) somehow expect to find a way out that involves no pain at all, and no serious changes in the way we do economic business. Such a path does not exist.
The day of reckoning is here. It’s time to pay the price for our worldwide lunacy. It’s a high price to be sure, but running our debt up further to “avoid pain” will only increase the inevitable pain later.
~1 month ago, our economy (and national debt) was estimated to have hit 101% of GDP. We are in such deep doo-doo that, if Europe and Greece collapse, we will be sucked into the economic sinkhole with them.
Of course, with the global economy that has been forced on us by the “One-Worlders”, once we go, the rest of the world pretty much collapses with us. IOW, we are facing a nasty, NASTY global depression. This spells disaster for a significant majority of the world’s teen and twenty-somethings because they are going to have to clean up the mess that Obama and our criminal Congress has dumped on them.
If you have kids and you haven’t taught them the fundamentals of conservatism and responsibility and introduced them to the brilliance of the Founder’s Declaration of Independence and Constitution, then NOW is the time. Do it NOW, BEFORE they have to rise up as leaders and fix the mess the politicians are leaving them.
Has Europe actually tried austerity or is this more socialist propaganda? I say the latter...
What this author is proposing is that Spain accelerate the process that brought them to the brink of economic failure. Do not cut back on entitlements. Keep borrowing and spending. Spoken like a true short term minded liberal Keynesian who refuses to make the hard choices. This author is perfect for Obama’s economic team.
Upshot is: Spain is doomed. Hence the title.
Why is it that government spending ever got to be part of GDP? Just what product is it that government produces?
Without some kind of incredible breakthrough in technology, there is not going to be a way out of this death spiral. These stupidass socialists will never make any meaningful cuts.
But the problem is, even if they do, it won’t solve anything in the short term. Lets say you chop government in half gradually over a 6 month period. That is going to put a lot of people out of work(government workers) in an economy that cannot absorb them...and to make matters worse, those people will stop spending money when they have no job and this will hurt the economy even more(in the short term).
The only way out of this is massive increases in manufacturing...and the only way that is going to happen is a sudden technology breakthrough. Fully autonomous android robots that can learn, better batteries, a new kind of computer, better spaceships, space elevator, permanent colony on the moon with its own mining and manufacturing...these are the kinds of things we need.
Only under socialism would cuts in government spending be bad, for in reality what is at work is that far too many people have spent their lives being dependent upon socialist government policies and how that has been exhausted, like so many animals at a zoo, they cannot support themselves.
This article just gave me a migraine.
Have you found a source for this quote? I have found it attributed to Galileo Galilei by François Arago in a written work from 1859, but have not found it in Galileo's actual writings.
What Spain needs is a big ole tax increase. That will solve everything. /sarc
The same pinheads who insist that a government can spend it’s way into prosperity never take that same action in their personal lives.
“When your outflow exceeds your income, your upkeep becomes your downfall”.
applies to all levels of the economy.
With half of those under 25 unemployed there, and total unemployment at 25% and rising fast, austerity may be the only path but it’s not a sure one. A lot of people aren’t going to survive it; remember the line “9 meals away from revolution”. If enough value isn’t created fast enough (not printed), attrition is the remaining solution.
Methinks our leaders are looking at the same future and figure if a crash is inevitable they may as way party their way to it.
-—Spain is supposed to trim its deficit by some 5.5 percent of GDP over the next two years. That’s not a recipe for growth. Just ask the IMF——
Has anything good ever come from the IMF? Are we allowed to ask?
Contract the hell out of gov’t services, cut regulations, and cut the govt budget by 50%.
Or follow the IMF’s advice.
Free up the markets, reduce government debt, get out of peoples way...
Things will take care of themselves from there.
Don't take my word for it. It's worked every time it's been tried over the last 5000 years...
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