28th May 2013, 12:53
National debt approaching danger levels across EuropeThe head of the European Central Bank (ECB) said today that the overall euro area debttoGDP ratio could hit the dangerous 100 percent level in coming years if tough measures to reduce spending are not enacted.This is a pretty big deal and here's the easiest way to explain why: Right now, debt makes up 48 percent of Finland's GDP, and Finland's in pretty good shape, economically. In Greece, debt makes up 125 percent of GDP, and you know what kind of mess the Greeks are in.The ECB says that everything that's happening to Greece default as a nation, basically can happen to the remaining 15 euro area countries if steps are not taken soon.In Europe, the same thing happened as happened here: a Great Recession followed by massive amounts of government stimulus to try to keep the ship from sinking, which has led to huge and unsustainable levels of debt.It's just like a household: What happens when you run up such a high amount on your credit card that you can only afford to make the minimum payments? Right. It gets ugly.The most worrisome thing to me in the report, however, was something else:"The real GDP growth assumption which is used for each of the three baseline scenarios is based on the path for the real potential growth rate of the euro area, as underlying the baseline longterm projections in European Commission and Economic Policy Committee (2009). According to this source, real potential growth gradually declines from 2.2% in 2011 to 1.5% in 2030." (My emphasis added.)That's a shocking prediction. It's basically saying that Europe's economy will shrink, not grow in the next 20 years. I knew that Europe had terrible economic growth demographics and older population, no path to citizenship for immigrants in many countries, no ability for each country to set their own monetary policy because they all use one currency but I didn't see the future as being that bleak. GDP should start rising back toward its morenormal 5 percent clip. That's one way you work off the big debts you've incurred, and as we have incurred. But if your economy is shrinking instead of growing, well, I don't know what you do with your debt problem. In the old days they rioted and destroyed competition. Now it is a half conscious effort to prevent new devices from working successfully. Once momentum is gained it continues automatically like a semimilitary operation. Morale is higher along with value, so you can take weeks or months off and growth fuels more growth. Fuel up the jet and take a nice long European vacation I guess. Take time to think about eventual results. A good vacation improves performance in the long run and Europe needs the money in the short run. That makes it more of a business trip. The kids will enjoy it, so that makes it an educational trip. Children have an inborn quality to profit by such an education.I guess that long European vacation will have to wait until later. There's always Bermuda and clear skies and sandy beaches. Open an off shore bank account and make it a business trip. This is about to get a whole lot more dangerous! Profitable too, so pack lots of shorts and never refuse an option when you can get it. You must understand what banking is. I am the banker not you, my job is to take care of your money. Your job is not to take care of my money. You understand now, I am sure your do. If the publisher says I do, we could be talking about substantial profits as opposed to talking about subprime loans and other nonsense. We are better served writing numbers if the numbers grow larger as they have been known to do. Firmer than ever here at USG Corps. It's happy hour, so I'm getting plastered. I don't know about there and Iceland just exploded. She's a match on fire and I'm cold on ice. We'll do dead mans touch later and stock washing. See what washes up. The population growth rate in Europe is about zero in fact the number of people in some countries is likely to shrink, just like in Japan. Thus the forecast growth rates translate into about the same value of 1% to 2% in per capita GDP growth.The USA is about the only 'first world' country with 'third world' population growth rates: in 1900, the USA had about twice the population of Britain and about one and a half times that of Germany: now it has five times as many as the UK and four times as many as Germany.