Hello, no, not as a greeting but the sarcastic comment made by “realists” when an “optimist” discovers that “anything that appears to be doing well is just an illusion.” Today´s news gives plenty of examples of “hello” moments.
Tunisia which was supposed to have changed to a “vibrant” democracy after overthrowing its long time president-come-dictator is witnessing a resumption of street violence demanding the overthrow of the new regime. Egypt is returning to massive street violence in protest of its current election of a replacement for its long-time president-come-dictator. Libya is dissolving into renewed inter-regional conflict. Yemen is still in turmoil after its long-time president-come-dictator resigned.
In the US election we hear lots of comments about the good done by the current administration but it is still the “economy, stupid” that will determine the outcome.
Lots of “hello” moments but the one that grabs my attention most is the continued failure of almost all to understand the nature of credit and debt. I saw on TV today a German financial analyst speaking from his current based of operations in Singapore saying, with that Teutonic smirk made famous by Erich von Stroheim dressed in Prussian uniform with a monocle playing the evil, savage Hun, that everyone should shed his holdings of governments bonds issued by European Union members and the USA and invest the proceeds in gold and other precious metals. Well hello, this so-called financial advisor is telling his clients to sell their bonds paying interest rates of up to 8% for gold that has lost 15% of its value in the past eight weeks.
But this is the popular belief held by most, including the so-called “experts.” Even President Obama, who has been spending federal funds like a sailor on shore leave, seems to be having second thoughts about the growing federal debt this spending spree has produced.
All of this concern is rooted in one false assumption, it is the size of the debt that is important. Of course, as I have tried to explain over and over, it is not the size of the debt that is the important facet of a debt but the ability to service that debt.
Regarding the size of the debt as a worry, the public debt of Japan is twice the size of the country´s annual economy, while that of the USA is just about equal to the economy. I hear no warnings about holding Japan´s public debt, not even from the smirking German analyst who said dump US bonds.
I also read an economist for the International Monetary Fund (IMF) who said we need debt to spur economic growth and employment, but at the same time said too much debt is bad. Well my reply is that as long as growth and jobs are stagnant we need more debt, regardless of the size of that debt.
To underline my point, that it is the ability to service debt that matters, not the size, in spite of doubling in size in the last six years the US national debt costs just about the same to service in 2012 as it did in 2006. In other words, while the debt has mushroomed in size, it costs us no more to pay it now as it did before the “Great Recession.”
I say all of this to support my main contention, that we will not return to our former economic heights, 5% unemployment and a chicken in every pot, until we reconstruct that mountain of easy credit on which it was built. And the problem is not that the credit is not available, I just bought a new motorcycle with a loan at 3.5% interest for five years. The problem is that we have beaten into every consumer and businessman´s mind that we have to reduce our debt because “it is too big.”
Hello, do we need to relearn basics?
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QEG
(beloved dear “Guru”)
This greeting, as you use to express that sarcastic comments made by “realists” in discovering the illusion of things that appears to be doing well, in spanish, we translate that “Hello” by “Estoy patitieso!”, that literally means: I am flabergasted! . Other moe spiritulistics would translate it by: “Alah es Grande!”.
One question:
What would be wrong in Spain if we could have easy credit for buying motorcycles at 3.5 % or other comodoties like you do in the State?
No posible, because the European Union just lend $125 billion at 3.5% interest to the Spanish govertment, and they will lend to the banks at 8.5%.
How much have to charge those banks to the public to make worthwhile the loand?. 10.5%?.. And how I will be able to by such a motorcycle like you did if I have to repay over 60% if interests in five years! Would I be able to repay it?
Continuing saying….
I think Leo that I will not wait for your answer and I will refuse to by the damn motorcycle or another consumption items for tehe moment.
Reason?, because if those loans that govertment will give to banks from the money goen from EU, for any reason, any of them go on bankruptcy, we, the suffering taxpayers, will have to pay back to EU at the end. So, and for the moment I will consume the minimum to survive and put the money in a good saving place (Away of banks in Spain and create a pre “corralito” as in Greece?) in order to be able to pay the future higher taxes to cover those banks tha might felt its repayment.
It is hard for us to think that we have to pay those bankers for their wrong doing at the end while they still have tremendous high salaries and hugh severance paying. This is another “hello” you should include in your article.:
ESTOY PATITIESO!;
( I am flabergasted!)
Hello, no loans, no consumption, no investment, no economic growth.