Spain asks Youth to Leave

[JEast]

A follow up to the discussion on the Euro zone concern.

 

http://www.ft.com/intl/cms/s/0/f2018cf0-9467-11e1-8e90-00144feab49a.html#axzz1tofL9Wrv

 

Cheers

JEast

[WarrenWatsa]

Wow. What a mess.

 

I'm thankful that the US has avoided that...so far. Could something like this be coming to the US? When will the American government start tackling its debt woes?

[Parsad]

Wow. What a mess.

 

I'm thankful that the US has avoided that...so far. Could something like this be coming to the US? When will the American government start tackling its debt woes?

 

It's not as big of a problem for the U.S.  They aren't beholden to other soverign nations under a unified currency.  In the worst case, the U.S. can inflate their way out of this.  It will be painful, but it would be fine.  Spain, France, Italy cannot do this unless they leave the Eurozone and that is when the shit hits the fan if any of them do.  How do you bailout Spain?  What about France? 

 

Unless the Eurozone works together, they cannot solve the problem.  If the cannot solve the problem due to a lack of agreement, which gets harder and harder due to political change, then the solution of last resort comes to the forefront...breakup of the Union!

 

They only have a couple of weapons...a unanimous decision to fix their financial system...or a change to the EU Agreement on needing to have unanimous decisions.  Either way, their will be fights to prevent either option, and then you could still have someone just leave the Union.  This is completely uncharted waters and what happens is anyone's guess.  Cheers!

[prevalou]

Europe is now inflating via the banking system (3 years facility) . Is it so different from the US? BCE lends to the banks who lend to the states. The problem is undercapitalization of the banking system according to Basel 3. The banks have to raise capital or sell assets.

[prevalou]

But in the meantime banks make cash flows (borrowing from the BCE and lending to the states) and the problem will be less accute.

[Parsad]

Europe is now inflating via the banking system (3 years facility) . Is it so different from the US? BCE lends to the banks who lend to the states. The problem is undercapitalization of the banking system according to Basel 3. The banks have to raise capital or sell assets.

 

You can't just lend to the banks without fixing the underlying capitalization problem.  Imagine the Fed window lending to U.S. banks without a TARP program?  Just throwing good money after bad.  They need to recapitalize the banks now. 

 

The other problem is that the bank's can keep lending to the states, but you are pretty much running a Ponzi.  If unemployment is increasing, incomes are decreasing, then tax revenues decrease.  How can the states pay the banks back, who then have to pay the BCE?

 

The only solution is selective defaults with austerity measures applied after.  You cannot help a bad borrower until you've reduced the debt load to a level that is sustainable or repayable.  Spain will need a bailout.  Cheers!

[prevalou]

I agree with you a Tarp would be better. Spain maybe will need a bail out but its economy is a lot more fragile and less diversified than french economy. In France the problem is the weight of the public sector which prevent private initiatives and slow growth (public spending = 56% Gdp ). This situation goes from bad to worse and nobody wants to change the system. Hopefully this crisis will help to open eyes about the virtues of the private sector.

[Parsad]

I agree with you a Tarp would be better. Spain maybe will need a bail out but its economy is a lot more fragile and less diversified than french economy. In France the problem is the weight of the public sector which prevent private initiatives and slow growth (public spending = 56% Gdp ). This situation goes from bad to worse and nobody wants to change the system. Hopefully this crisis will help to open eyes about the virtues of the private sector.

 

I agree.  I think France and Italy will be able to repair their finances similar to the United States, but only after applying cuts to the public sector.  Spain is a big problem any way you cut it.  Cheers!

[RusticFrank41]

Ireland has been sending away their educated and uneducated since 1845. Remittance men were commonplace in North America. Indeed some economies today are considered remittance economies. To my thinking it may well be a good thing for countries which welcome legal immigrants, like Canada and the USA, to profit from the tenacity and the desire to succeed of these remittance men. The fact that it is now affecting Spain, though unusual for Spain, is not unusual from a global perspective. It will be very good for the ones that leave their countries as so many of us have. For those who remain, the crush of competition will doubtless abate somewhat.

All a part of the rich tapestry of life.

[Parsad]

Ireland has been sending away their educated and uneducated since 1845. Remittance men were commonplace in North America. Indeed some economies today are considered remittance economies. To my thinking it may well be a good thing for countries which welcome legal immigrants, like Canada and the USA, to profit from the tenacity and the desire to succeed of these remittance men. The fact that it is now affecting Spain, though unusual for Spain, is not unusual from a global perspective. It will be very good for the ones that leave their countries as so many of us have. For those who remain, the crush of competition will doubtless abate somewhat.

All a part of the rich tapestry of life.

 

Most correct!  North America was created from such economic calamities in the past.  Cheers!

[ERICOPOLY]

So our unemployment rate goes up and theirs goes down.  I like the other idea better -- give out visas to people who can pay cash for houses.

[Parsad]

So our unemployment rate goes up and theirs goes down.  I like the other idea better -- give out visas to people who can pay cash for houses.

 

I don't think Twacowfca was saying allow only poor immigrants.  He was saying that immigration would be a net positive...all forms be it refugee, entrepreneurial, etc.  Cheers!

[ERICOPOLY]

So our unemployment rate goes up and theirs goes down.  I like the other idea better -- give out visas to people who can pay cash for houses.

 

I don't think Twacowfca was saying allow only poor immigrants.  He was saying that immigration would be a net positive...all forms be it refugee, entrepreneurial, etc.  Cheers!

 

Hopefully they are placed somewhere where their skills can be applied.  Twelve percent of Spain's workforce was employed in construction in 2007 -- unless they have other skills, these laid off workers are not a good fit for the US.  But somewhere in the world they must be in shortage?

 

I am getting impatient with the US government.  Our problem has been one of too many houses for sale -> so we just need more people to purchase and fill them.  Why is this taking so long to recognize and address?

 

[prevalou]

http://www.reuters.com/article/2012/05/04/bnpparibas-results-idUSL5E8G40U220120504?feedType=RSS&feedName=financialsSector&rpc=43

 

 

not a catastrophic situation...

[petec]

Parsad, something I have been wondering about.  The US government has a lot of debt but not so much that it would be a huge problem on its own.  The problem is the deficit, which in large part is driven by inflation-linked entitlements spending.  So why does anyone think the government can inflate its way out of the problem? 

 

I accept that a bit of inflation would help over-indebted homeowners, but not the government, not without cutting the deficit, which might well trigger deflation.

 

Thanks! 

[SharperDingaan]

In southern Italy the youth unemployment rate is around 80-85%, & the biggest employer is the mafia. We would gather that much of the remaining employment is sheep sheparding....

 

http://www.managementtoday.co.uk/news/1130480/unemployment-sends-italians-flocking-hills/