Re: Austerity gone too far? : Wed May 01, 2013 8:55 pm  

Dally wrote:

So, you must be arguing that Spain's "growing" economy was sustainable in its previous form. If that was the case why the austerity now, why isn't it still powering ahead and recruiting unemployed people from other EU member states?

Spain and to a lesser extent, Portugal, embarked on a massive construction programme. Most of this construction was apartment and villa developments and strangely enough was funded by Irish banks or funded by Spanish banks on behalf of Irish investors. When the Irish economy (especially the banks) tanked, it led to an emergency stop on the Spanish property market. Couple this with a typical southern European method of conduting business, where 75% of any deal is legitimately declared and 25% is "black money" - i.e. paid in cash. There's no wonder the Spanish economy is in a dire position.

What boils my piss is when I hear Osborne and other right-wing fukwits telling us we need to keep on the path of austerity because we don't want to end up like Greece, Portugal or Spain. There is absolutely zero chance of us following them into the catastrophic state they currently experience.

We desperately need to embark on a massive building programme, not to flog off to speculators, in the hope of a quick buck but to house our own population at a reasonable cost. This situation is not too dissimilar to the one we found ourselves in at the end of WW2 and as a nation, we were more skint then than we are now. I have previously given an example of how this could be achieved through issuing government bonds. The only thing preventing it is an ideological aversion to non-private renting.

Re: Austerity gone too far? : Wed May 01, 2013 9:12 pm  

[quote="cod'ead"]

What boils my piss is when I hear Osborne and other right-wing fukwits telling us we need to keep on the path of austerity because we don't want to end up like Greece, Portugal or Spain. There is absolutely zero chance of us following them into the catastrophic state they currently experience. [/ quote]

Why do you say that there is zero chance of us following those countries? Our aggregate debts are higher in percentage terms than those countries. The only reason why we may not is that we have a history of sorting out messes before, via strong government. That said, this crisis is arguably our worst ever. I think I am correct in saying that no country has ever recovered from a situation as bad as ours without an effective collapse in their financial system or decades of stagnation.

Re: Austerity gone too far? : Wed May 01, 2013 9:26 pm  

Dally wrote:

So there property prices were sustainable? This crash of which you speak is not something divorced from the "real" economy. It occurred because the real economy of the "Western" world was a basket case.

Except it wasn't. The vast majority of the "real" economy of the Western world was perfectly fine. 1 part of it was not due to the greed/incompetence/short-sightedness/short-termist culture that had developed in the financial sector.
Everyone knows something was wrong to cause the crash, that's not the issue being discussed. You were inferring that the Spanish economy was unsustainable pre crash, it wasn't. It was perfectly sustainable. As in most countries, the reduction in demand post crash is the main reason why the economy has contracted. That reduction in demand has been exacerbated by austerity measures and the Euro. In Britain we're lucky to have the BoE to print money and lower interest rates to try and stimulate demand. Sadly the government has been undermining that with contractionary measures.
In Spain they don't have the option to print money and lower interest rates, so the austerity measures have an even more deleterious effect. Spain was in a weaker position to us, no doubt, but had they still retained monetary control and pursued an expansionary fiscal route instead, they would not be in the current horrible position they are.
Of course if we didnt have a government determined to pursue ideology and stopped contradictory fiscal & monetary policies by increasing government spending to fill the demand gap then we would be a lot better off too.

Re: Austerity gone too far? : Wed May 01, 2013 9:40 pm  

Him wrote:

Except it wasn't. The vast majority of the "real" economy of the Western world was perfectly fine. 1 part of it was not due to the greed/incompetence/short-sightedness/short-termist culture that had developed in the financial sector.
Everyone knows something was wrong to cause the crash, that's not the issue being discussed. You were inferring that the Spanish economy was unsustainable pre crash, it wasn't. It was perfectly sustainable. As in most countries, the reduction in demand post crash is the main reason why the economy has contracted. That reduction in demand has been exacerbated by austerity measures and the Euro. In Britain we're lucky to have the BoE to print money and lower interest rates to try and stimulate demand. Sadly the government has been undermining that with contractionary measures.
In Spain they don't have the option to print money and lower interest rates, so the austerity measures have an even more deleterious effect. Spain was in a weaker position to us, no doubt, but had they still retained monetary control and pursued an expansionary fiscal route instead, they would not be in the current horrible position they are.
Of course if we didnt have a government determined to pursue ideology and stopped contradictory fiscal & monetary policies by increasing government spending to fill the demand gap then we would be a lot better off too.

The financial sector does not operate in isolation! The apparent boom in economies was primarily (if not wholly) down to cheap money creating asset price bubbles. The construction of which you speak was the most tangible and obvious example. Eire is the extreme case of its effects - a booming "tiger" economy built on building. I spent half a day in Dublin a couple of years before the collapse and they were all buzzing. When I pointed out the obvious - that there was no need for all these buildings and it would end in tears they didn't seem to see that. In short, the real economy was not in good shape or else all those secured loans could be serviced and the banks would not be shakey now. Your naivety and head-burying is staggering.

Re: Austerity gone too far? : Wed May 01, 2013 10:04 pm  

Dally wrote:

So, you must be arguing that Spain's "growing" economy was sustainable in its previous form.

Must I? How do you work that out, then? You asked:
" is not all that a direct result of a nation previously living above its productive means?"
..to which I replied "No." I.e, no, it is not a direct result of a nation previously living above its productive means.

I did not refer to "Spain's growing economy", I did not mention its sustainability or otherwise, and so as per you are commenting from the wrong orifice.

Re: Austerity gone too far? : Wed May 01, 2013 10:55 pm  

Dally wrote:

The financial sector does not operate in isolation! The apparent boom in economies was primarily (if not wholly) down to cheap money creating asset price bubbles. The construction of which you speak was the most tangible and obvious example. Eire is the extreme case of its effects - a booming "tiger" economy built on building. I spent half a day in Dublin a couple of years before the collapse and they were all buzzing. When I pointed out the obvious - that there was no need for all these buildings and it would end in tears they didn't seem to see that. In short, the real economy was not in good shape or else all those secured loans could be serviced and the banks would not be shakey now. Your naivety and head-burying is staggering.

The economic "boom", as you inaccurately put it, was not wholly or even primarily down to asset price bubbles, and that bubble wasn't solely due to increased money supply.
I didn't speak about any construction, you're confusing me with someone else, in much the same way as you are confusing financial gambling/greed/short-termism in the financial sector as representative of an entire economy.
You spent half a day in Dublin looking at buildings and so worked out the Irish economy would fail? Did you walk back across the Irish Sea too?

Re: Austerity gone too far? : Thu May 02, 2013 6:06 am  

cod'ead wrote:

Spain and to a lesser extent, Portugal, embarked on a massive construction programme. Most of this construction was apartment and villa developments and strangely enough was funded by Irish banks or funded by Spanish banks on behalf of Irish investors. When the Irish economy (especially the banks) tanked, it led to an emergency stop on the Spanish property market. Couple this with a typical southern European method of conduting business, where 75% of any deal is legitimately declared and 25% is "black money" - i.e. paid in cash. There's no wonder the Spanish economy is in a dire position.

That was pretty much exactly what happened in Portugal, particularly on The Algarve, I have a friend who operated as an architect designing two, sometimes three huge multi-million euro villas per year on the most expensive strips of land on The Algarve since around 2000, he's pulled back from that business now as the market is completely dead but up to 2008 or so his clientele were 100% British and Irish clients, particularly Irish, and some very famous names too.

I was out there with him last June socialising with one of his Portuguese main contractors and he was speaking of which millionaire pad was up for sale, which one was slashed to half its price (you never see for sale signs on the streets but they are being handled by sales agents), and the fear that the new money being invested on The Algarve now was Russian and former Russian states, the Portuguese don't like the situation, they have traded with the British and Irish for as long as there has been an Algarve and they just don't trust the Russian money but they have very little choice.

There is a new project emerging for my mate later this year and so he's spending more time out there again, I'll be partaking in a little "business trip" of my own in a few weeks time, four days of "research" for paintings which is chargeable on the "other job" business account of course

Re: Austerity gone too far? : Thu May 02, 2013 7:38 am  

Dally wrote:

The so called "growth" strategy of paying people artificially high wages (often to do artificial jobs) and providing them with easy spending power is what lead to the financial crisis.

Really? The financial crisis was caused by 'artificially high wages'? Unless you're talking about the 'artificially high wages' received by the greedy, irresponsible wankers who made a fortune gambling on sub-prime debt, I must respectfully suggest that you're talking crap.

Re: Austerity gone too far? : Thu May 02, 2013 10:51 am  

Him wrote:

Did you walk back across the Irish Sea too?

No, but I walked back.

Re: Austerity gone too far? : Thu May 02, 2013 1:35 pm  

Him wrote:

...You spent half a day in Dublin looking at buildings and so worked out the Irish economy would fail? ...

"It will fail" is Dally's default setting.

Credit where it's due (pun unintended) ... knee-jerk as his judgement was, at least it was better than Osborne's pronouncements that the Irish economy was an example to us all, a shining beacon that we should be praising and following.