economist, Is there life after debt?

ei.sdraob

says the economist

For policymakers, the priorities are clear. First, they need to focus on generating growth. America, with its relatively young, rising population, will find that comparatively easy. Continental Europe, by contrast, runs the risk of ending up like Japan, which has spent two decades struggling to grow in the face of its debt burden and ageing population. The best and the brightest young Europeans may emigrate to countries without such burdens; and if the economy stagnates, those that remain may eventually decide either to default on their debts, or to cut benefits to the elderly. Faced with those dangers, Europe needs to embrace the structural reforms necessary to make its economies as fast-growing and flexible as possible.

Second, policymakers need to begin the long task of rebalancing the world economy. It makes sense for Western countries, like workers in their 50s, to save for retirement rather than run up their credit-card bills. But if one lot of people saves, another must borrow. At the moment the developing world is unwilling to run current-account deficits; even getting China to save less is a huge task (see article). All the same, a shift is in everybody’s long-term interest—and the younger parts of the world should be the borrowers.

Weaning rich countries off their debt addiction will cause withdrawal symptoms. Austerity does not appeal to voters, who may work off their frustrations on politicians and (worse) foreigners. Mr Micawber’s phrase may be turned on its head again. When annual income is forced to exceed annual expenditure, the result may well be misery.

we here in Ireland could relate to this article

ardmacha

we here in Ireland could relate to this article

Don't be simplistic. In that article Ireland is as close to America, "with its relatively young, rising population", who can work off the debt than we are to most European countries.

jimmycrackcorm

As long as austerity applies to cuts in public spending and not a tax on those who will add growth to the economy then the article will have no bearing

ardmacha

As long as austerity applies to cuts in public spending and not a tax on those who will add growth to the economy then the article will have no bearing

Also a bit simplistic. The present cuts reduce educational expenditure while keeping pensions at their peak level, not necessarily of benefit to those who will add growth to the economy.

George Orwell 1982

The economist is a right wing rag with a neo-liberal agenda.

Europe will eventually resort to quantitative easing and gradually inflate away debt as the US did after the WWII.

Krugman writing in the Irish Times:

"For example, in 1946, the US, having just emerged from the second World War, had federal debt equal to 122 per cent of GDP. Yet investors were relaxed, and rightly so: over the next decade the ratio of US debt to GDP was cut almost in half, easing any concerns people might have had about its ability to pay what it owed. And debt as a percentage of GDP continued to fall in the decades that followed, hitting a low of 33 per cent in 1981.

So how did the US government manage to pay off its wartime debt?
Actually, it didn’t. At the end of 1946, the federal government owed $271 billion; by the end of 1956 that figure had risen slightly, to $274 billion.
The ratio of debt to GDP fell not because debt went down, but because GDP went up, roughly doubling in dollar terms over the course of a decade.

The rise in GDP in dollar terms was almost equally the result of economic growth and inflation, with both real GDP and the overall level of prices rising about 40 per cent from 1946 to 1956."

http://www.irishtimes.com/newspaper/opinion/2010/0412/1224268138270.html

http://www.irishtimes.com/newspaper/opinion/2010/0507/1224269862656.html

In fact the ECB has already formally embraced quantitative easing: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5292781/European-Central-Bank-falls-into-line-and-embraces-quantitative-easing.html

danbohan

ardmacha wrote: »

Don't be simplistic. In that article Ireland is as close to America, "with its relatively young, rising population", who can work off the debt than we are to most European countries.

we can ? , the relatively young rising population will rise and leave especally as become a highly taxed nation and no we are not yet highly taxed.

Permabear

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George Orwell 1982

donegalfella wrote: »

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Eh what? Democracy? Free speech? Equality before the law?

Permabear

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