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  #21  
Old 07-20-2012, 08:24 PM
parsonsj parsonsj is offline
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Are you referring to the slow growth and possible looming recession in central Europe? Or the high unemployment and sovereign debt crisis in southern Europe?

(probably not the solid growth exhibited by northern European social democracies with their cradle-to-grave government programs )

To be fair: Portugal, Ireland, and Spain do have similar problems to the U.S., in that much of their current issues can be traced to a de-leveraging private sector after their housing bubble burst.

But we're talking about government debt, and there is a huge difference between the U.S and Europe: currency. The U.S. has its own currency and can borrow at historically low rates. European governments cannot (due to their shared currency), and borrowing costs are sky-high for them since there is no European bond that would correspond to U.S Treasury bonds.

Anyway, here's the point of my ramble: the UK and much of southern Europe have been on government austerity experiments for the past 2.5 years. And the results have been very disappointing: cutting government spending has reduced growth, reducing tax receipts, resulting in more debt. It's proved to be self-defeating. Recent elections there seem to be pointing to more "growth" policies with more government spending. In fact, many economists and politicians there have started to point to the US as a model. Even though our economy is way below optimum and our unemployment rate is way too high, our growth has been better, in part because we did do some (not that much, but some) stimulus, rather than austerity.

Whew. I need a nap.
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  #22  
Old 07-20-2012, 09:59 PM
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Originally Posted by legend View Post
I was shocked, in china everyone saves 40% of their income, we'd be in a very different position if that was the case in the west
I try to do that but then I go on Lateral G and get ideas for my car and there goes my saved money again...
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  #23  
Old 07-21-2012, 08:14 AM
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Originally Posted by parsonsj View Post
But we're talking about government debt, and there is a huge difference between the U.S and Europe: currency. The U.S. has its own currency and can borrow at historically low rates. European governments cannot (due to their shared currency), and borrowing costs are sky-high for them since there is no European bond that would correspond to U.S Treasury bonds.


Debt is a "product" -- which, when offered, needs a buyer... when the buyer is afraid of the product - he'll demand a higher premium or he won't buy.

It's the oldest market in the world... Our debt is "cheap" (Low coupon rates) because we are seen as having the ability to pay back the debt with the interest. Europe's debt carries a high coupon rate because there is a far higher risk of default.

As a buyer of bonds and corporate bonds etc... I wouldn't care if Europe paid 15% - I wouldn't touch it. It wouldn't make me a buyer even if all of Europe backed the bonds, because their problems are so systemic that issuing more bonds to cover their current crisis is only adding to their problems.

It's like getting pregnant to save a marriage - or borrowing a third mortgage on your house because you have a debt problem... either way - it's going to end badly.

The real issue is - whether you're a household, or a government - you can't spend more than you earn.

The problem is fixing what got you here in the first place...
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  #24  
Old 07-21-2012, 09:38 AM
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Originally Posted by Greg
It's the oldest market in the world... Our debt is "cheap" (Low coupon rates) because we are seen as having the ability to pay back the debt with the interest. Europe's debt carries a high coupon rate because there is a far higher risk of default.
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Just look across the pond at Europe if you'd like to see where we're headed... Debt and an entitled population...
Just a couple of points here.
1. "Europe" can't sell debt government debt. Only sovereign governments can, and there's a big difference in yields between Spanish yields and German yields in bond markets. That's a significant problem in how the euro is set up. Shared currency, but not a shared ability to raise money via bond auction.

2. I agree with you about why the yields are so different between the US and Spain, or the US and Italy. The markets see the US as the safe place to invest their funds, with little risk of default or future inflation. That's why yields are so low, and they are low on 10 year bonds too. IOW: the market disagrees with your assertion (and BucketList's) that the US is headed for debt difficulties similar to that in southern European governments within the next decade.
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Old 07-21-2012, 09:53 AM
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Originally Posted by parsonsj View Post
Just a couple of points here.
1. "Europe" can't sell debt government debt. Only sovereign governments can, and there's a big difference in yields between Spanish yields and German yields in bond markets. That's a significant problem in how the euro is set up. Shared currency, but not a shared ability to raise money via bond auction.


Well - exactly - and think of it this way.... you pay your bills and have a low mortgage rate (Germany)... would you consider guaranteeing your neighbors (Greece/Spain/Italy) debt when you know he's out of work, and owes everyone in town, and spends money like a fool??
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Old 07-21-2012, 10:02 AM
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The market ? You mean the "free" market ?

The one artificially propped up with worthless dollars ? Pumping money into the markets and the government by the Federal Reserve only prolongs the agony.

You do not see a Debt crisis ? Well you are entitled to your opinion, but there is a Debt crisis, now and in the future.

The Market is feeding on the stimulus money.Take that away and let the market settle to where it should be..

I have set my Investments for "stimulus" for the last 4 years. If it continues, you will be left with the Rich and the Poor, the middle will be hollowed out.

Stimulus without Debt reduction is madness..And the only way to prove it is to let the next few years play out...Charts and opinions mean nothing and time to let it play out is the true way to see who is right. I will bet on the debt crisis..I bet on the 2008 Crisis and was right, so I will follow my gut on this debt crisis..Our opinions are just that, and the true test is Time.
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Old 07-21-2012, 10:23 AM
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Mikes "summation".....


You can not spend your way to wealth...


I agree.


If you're in debt - and someone gives you some money - you have two choices. Pay off your debt - or spend it, and spend even more, on your credit card while you're at it. Choose the latter and the guy that gave you the money might get pissed and start making demands that you change your ways, or chooses to cut you off. At some point you either go bankrupt, or you make a deal with your creditors to take a haircut, and you wise up and eventually pay them off.
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Old 07-21-2012, 10:56 AM
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Originally Posted by GregWeld View Post
Mikes "summation".....


You can not spend your way to wealth...


I agree.


If you're in debt - and someone gives you some money - you have two choices. Pay off your debt - or spend it, and spend even more, on your credit card while you're at it. Choose the latter and the guy that gave you the money might get pissed and start making demands that you change your ways, or chooses to cut you off. At some point you either go bankrupt, or you make a deal with your creditors to take a haircut, and you wise up and eventually pay them off.
Greg,

I have come to find that you can take my long winded posts and summarize them in a few sentences..

Also this thread is just to get people thinking about Debt, and the government's debt. It isn't about changing each other's minds. It is just about different opinions. Parsons has his, and we have our's. It gives the readers something to think about.

I have always said that I run MY economy, I am too small in the pond to run the Government's Economy. I can only see what I see, give my opinion, and position myself to protect my wealth, however small or large it may be..
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  #29  
Old 07-21-2012, 12:19 PM
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Quote:
Originally Posted by Greg
If you're in debt - and someone gives you some money - you have two choices. Pay off your debt - or spend it, and spend even more, on your credit card while you're at it. Choose the latter and the guy that gave you the money might get pissed and start making demands that you change your ways, or chooses to cut you off. At some point you either go bankrupt, or you make a deal with your creditors to take a haircut, and you wise up and eventually pay them off.
Governments (and especially governments with their own currency) are not the same as households or businesses. The government has an obligation to follow policies to support employment for all its citizens that's very different than what a household or business does. If your reaction to that statement is that that isn't in the Constitution -- imagine the US with a balanced budget and 30% unemployment. The government wouldn't last long in that scenario.

The data shows that the European (UK, Greece, Italy) experiments with austerity -- reducing their future debt by cutting government spending -- has proven counter-productive. Cutting government spending has increased debt by creating more unemployment and reducing tax receipts.

Simply put: you can't save your way to prosperity. You have to invest your way to prosperity.

Fixating on debt at a time when the economy is operating below capacity and millions of people are out of work (or working below their skill level) is a false savings. A better policy would be to pursue an agenda to support more employment and grow the economy to reduce debt in the future. And that's especially true when the US government can borrow money at historically low rates.
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  #30  
Old 07-21-2012, 01:17 PM
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[QUOTE=parsonsj;425933]

Simply put: you can't save your way to prosperity. You have to invest your way to prosperity.


In one's personal life, Saving and Investing are keys to prosperity. The way you use the word "Invest", is code for Spending. They have changed the word from Spending to Investing. The government is the King of wasteful spending.

As with everything , it is all or nothing..They believe they will spend their way out of this mess..You can call it Investing, but it is spending.And the King of waste, Our government, will waste it away.

An example is California, the way the country is going, but on a smaller scale..They approve your "Investing" on a Bullet train..It will triple in costs, and not be finished.At a time when the state has 17 billion in the hole, and they continue to approve programs that are not funded. Also they pass a budget hoping for the upcoming vote on tax Increases..

Again we can agree to disagree. I won't ever agree with you, and you won't agree with me. I am cool with that.

But this thread is to give Information for the readers of the thread, so I thank you for your views.

Let the Individual Reader decide. That what this thread is about..Not you convincing me, or me convincing you.That for sure will never happen.

We can take the small pill now, or the large pill later..
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