Via John Mauldin;
“As manageable as Spain’s public debt would appear to be at face value, her private debt is an altogether different story – standing at a staggering 227% of GDP and, according to McKinsey, Spanish corporations hold twice as much debt relative to their output as US companies and, in comparison to Germany, that number goes up to six times….
“As Spain reduced its deficit in accordance with the EU’s Growth & Stability Pact, it meant an increasing reliance on private debt was needed in order to prolong the enormous construction boom that had been ongoing in Spain since the 1970s but which really picked up steam in the 90s and 00s. The outcome of that reliance? A tripling of average household debt.”
Throw in the part about the Spanish unemployment rate skyrocketing toward the 25% mark this year (and twice that for those under 25) and the bit where the new Spanish prime minister, Mariano Rajoy, draws a line in the sand by unexpectedly announcing that his government’s budget deficit would be 5.8% of GDP in 2012, more than 30 percent higher than the 4.4% agreed on with his supposed masters in Brussels, and we have all the makings for quite a spicy little paella.
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Saskatchewan is having an extended housing boom that is causing young adults to take on increasing debt. It’s a flip side to our economic boom.
Unreal. Stick a fork in ‘er, she’s done.
L: difference being there’s not 50% unemployment among the young in Sask.
What your seeing in Europe is akin to the final days before someone declares bankruptcy, a complete panic to avoid it while still not addressing the causes, massive over spending. They’ve called their bank to remortgage’s their home, then they asked to get a bump on their line of credit, then a bump on their credit card limit, a couple months from now they’re down at the payday loan office and soon they’ll be out of places to go for more money. Odds are they can afford to maintain the debt their given, if only they slashed their spending and made the payments with cash rather than credit.
Just like the US, Europe doesn’t have an income problem, it has a spending problem (Canada isn’t any different). The income problem hasn’t even started that’ll come in 10 or so years as we slide down the steep and scary demographic curve. If you thought the US conversation about the debt ceiling last year was stupid and short sighted, wait until there is an income problem while the spending problem is accelerating thanks to entitlements.
Politicians need to stop using rosy economic growth numbers to sell their ideas. They should be assuming 0% growth and striving to make it 5%. Not assuming 5% and striving to make it 0%.
The classic signs of any person, company or government that is about to capsize financially from debt is to carry-on – to keep up appearances – that they are not near the abyss. And like a ship with more weight above the waterline than below it, is that when the inevitable happens it is a sudden, surprise and catastrophic event.
Meanwhile, in the Uber Debt reality of Obamaland, the MSM totally ignores the February deficit number – an all time record of $232 Billion for a single month.
http://fms.treas.gov/mts/mts0212.txt
Seems they are too busy propping up Obama’s election campaign over three months of mediocre but improved UI numbers to cover the record deficit.
According to Stratfor Germany is already looking at Plan B, an alliance with Russia. Once Spain goes down how long will Italy last?
Financial distress is the largest cause of divorce. That being the case then how will it be any different within regions that make up countires. My brother-in-law travels to Italy on business. He says that northern Italy can rival Germany in its industrial production. Why would northern Italy carry the south which is desitute industrially in the event of financial crisis?
In the 18th century the #1 country in the world, Spain, defaulted on debt owed to the Italians in Genoa. When they lost this financing their empire fell apart. No money to maintain their infrastructure or pay their sailors etc. Has Spain ever really recovered?
When people who don’t contribute a cent through taxes or indeed, make any effort other than protesting, decide that everyone has to pay for everyone else’s (read ‘their’) ‘wants’ and not their ‘needs’ then the system collapses under it’s own weight.
We see that happening now in Europe and it may well spread even further here than it has when politicians foolishly bow to the whines of ‘occupiers’ who never contributed a thing to society but have decided that society has to support them.
This is a longish read, but oh, so worth it…
from: http://ace.mu.nu/archives/327371.php
In the Future, Socialism Will Advance Through “Insurance”
I forget who said that. I think it’s insightful and correct.
There are two functions of real insurance: hedging against a risk and risk-sharing for those risks we choose to share.
One in ten thousand people might suffer rectal cancer. It probably makes sense for most people, on a voluntary basis, to decide (voluntarily) to pay in a little money for insurance so that if they suffer such a catastrophic and expensive illness, they’ll be covered.
If they’re one of the lucky ones — well, they’re out a little bit of money, but they are one of the lucky ones.
Insurance makes sense in this situation, for most people, as most people would like to reduce the impact of serious risks that strike like lightning. They are unpredictable, and when they hit, they require major changes in lifestyle. Most people — especially with children, who must be planned for whether their parents are sick or healthy, alive for dead — are willing to pay a little into an insurance pool to manage this risk.
On the other hand there are things which are not risks: Cost of housing. Food costs. Voluntary contraception costs. These are not risks, as the “odds” such costs will be incurred is 100%, and hence cannot be “insured” against.
Do you want to eat? You’re going to have to budget for food. No one can insure you against the possibility you might need food.
You can buy some kind of food plan — like they have at college eating halls, or diet companies like The Zone offer — but that’s not “insurance.” That’s just you paying for the cost of food, plus production and transportation costs, plus profit.
But increasingly we are going to see advocates like Sandra Fluke insist that each and every cost of everyday, workaday livin’ be “insured” in some manner.
That each of these costs will have to be cross-subsidized.
That’s just socialism, of course. If Man A and Man B are forced, by law, to pool costs, and pay for each other’s costs, they’re socializing each other’s costs of living.
Now insurance isn’t socialism, but it does have that socialism-like feature of risk-pooling and cost-sharing. What makes it “not socialism” is the fact that it applies only to catastrophic, rare, or unpredictable costs — costs which are actually quite small per capita, because while the costs of cancer treatment are very high, fortunately very few people suffer from such a horrible disease.
And what makes it “not socialism” is that insurance contracts are entered into on a voluntarily basis. If the costs of insuring a risk are too high, people don’t buy the product. It’s cheaper to just absorb the cost.
But when you have “risk pools” paying everyone out for costs that are incurred every single day, it becomes very expensive indeed, because while the cost-per-purchase are low, if everyone is drawing out of the pool on a daily basis, that’s a lot of money.
At this point, they’re not “risk pools” of course. It’s just a kind of Commune system. You take from the Pile of Free Money what you need, I’ll take what I need.
This is an attractive proposition for those who have little money and high costs. For those who have some money, and manageable costs, well, their costs are now quite high because they’re now paying for everyone in the country.
But this is how socialism will insinuate itself further and further into our lives: Virtually every expense that one incurs in one’s daily life — costs one once simply paid for out of pocket (what a hateful, retrograde idea!) — will be moved into the pile of things we must be “insured against,” and for which we must all “pool our risks” and cross-subsidize each other.
The endgame is just that no one actually pays for anything; the government, or a co-opted government-controlled industry which provides the functions of a socialist government (“insurance companies” which no longer insure anything, but merely send checks to people), simply takes over almost all costs in life.
And there we are.
Brent Crude is 126/barrel this morning. The Eurozone countries are energy poor countries. Only the UK and Norway have oil. And the PIIGS countries have the least energy of all. France has Nuclear etc. The PIIGS have to import all of their energy. They are doomed. On top of having no money they have no oil or gas. Why do you think they want Carbon taxes on the rest of us? Why do you think Chretien signed onto Kyoto? His inlaws the Desmarais have BILLIONS invested in the EU…He knew exactly what he was doing….
Bemused
The form of statism you have described quite well is actually fascism but the differences with socialism are only subtleties. The state and federal mandates required of US health care insurers is classic fascism (private ownership but essentially an agent of leviathan).
According to the Bank of International Settlements the following is a sample of various nation’s debt loads when you add up all public, corporate and privately held debt as a percentage of GDP:
US 268%
Japan 456%
Germany 241%
UK 322%
Italy 310%
Canada 313%
Australia 235%
Greece 262%
Portugal 366%
Spain 355%
OECD average 314%
These numbers say nothing of those nation’s abilities to service or reduce debt load.
The civilized world has a major debt problem that will not be resolved without significant pain. The sooner that corrective measures are taken, the less extreme the ultimate pain. Something for the Harper incrementalists to think about.
the interesting thing is..all of those debts exist only on paper..if each country decided “our debt is now zero” the results would be hysterical…and hysteria…
The day after, a car would still be a car, a potato would still be a potato, you could plant food to feed yourself but nobody knows how anymore and some gov’t moonbat with a degree in Patagonian basket weaving, or more likely one in Patagonian woven basket interpretation since they wouldn’t have the skills to actually weave one themselves, sould uproot your crop because you didn’t follow some ludicrous, counter-intuitive and completely wrong regulation.
I’m not advocating such a thing, the exact opposite, actually, but China must be very nervous about it’s newfound ‘wealth’ one day going ‘poof’ in a flare of 1’s and 0’s on a debit sheet if the European countries say “screw it, we’re not paying, go away” and maybe a complete reset of world wealth (into their hands) is what the UN-driven gorean moonbats are looking for in the end…of course, they’d be cashing in their ‘carbon credits’ for hard currency or commodities first.
So many subterfuges, so little interest…
Bemused, that’s precisely why China is trying to invest its capital in various places around the world in hard assets, particularly in countries with stable governments and predictable legal systems. A pile of cash is of utterly no use unless it’s put to work.
John, what you indicate above with respect to total national debts is true, but it’s understated. Indeed this does not show the countries’ abilities to pay. It also doesn’t show economic growth over time. For example, if Canada had an economic growth rate of 0.5% and Japan had a GDP growth annually of 15%, Japan would be in great shape and us not. This level of debt load is unsustainable precisely because all economies of these countries are now growing at very slow rates. Indeed Japan is shrinking.
Second, it depends upon what the debt is invested in. If it’s invested in things to make the economy grow, then it’s a productive investment. If it’s invested in consumption, then it’s sheer economic drag. Again, there are major differences among the nations you cite as to what their debt has been invested in. For those countries expecting significant economic return out of their debt spending, there is indeed a great deal of pain in their future. And that’s most of the above list.
Why is Greece such a problem with such a relatively low total debt load? Because it doesn’t have anything that can be called a productive economy. The US does, and that’s the major difference.
What happens to a society of paper money when it means nothing? Look to Germany in the 20’s
http://www.wermodandwermod.com/newsitems/news130120111511.html
well…the liebrals did try…but they could only get the dollar down to sixty cents, not the six cents they were aiming for…another term for crouton would have done it though.
Any country that has a youth unemployment rate approaching 50% should have no minimum wage.
Singapore has no minimum wage. It also has a per capita GDP that’s more than double that of Spain.
“…another term for crouton would have done it though.”
Not a chance of that, ever. Martin and his boys were bound and determined to take him down…
just in time to inherit Adscam. Otherwise known as Le p’tit gars sinks Bermudan Shipping Magnate, saying, ‘so long and thanks for all the fish’.
well..being as martini was the finance minister for crouton as crouton was for truedough before him…..
funny how martini’s ‘balanced budget’ ran out jus tabout the sane time the money he lifted from the various pension plans and the EI ‘surplus’ did…you’d almost think they threw the election on purpose to avoid having to explain why it did and appointed dijon and then iggy to take the heat for losing so they could blame it all on Harper.
It’s a good thing he didn’t waste as much money on ‘stimulus’as the liebrals demanded he do or it’d have fit right into their long term game…they know they have to lose once in awhile, they just try and time it so someone else takes the blame when their house of cards comes crashing down and weasel back in based on that just as the foundation is rebuilt by the Conservatives…too bad the electoral base has the attention span of a fruitfly or there’d be a bounty on liebrals.