Susmakech
Rookie
One of my teachers at school pointed out today that the 2 only times interest rates went negative worlwide, WWI and WW2 happened shortly after.
Negative Interest Rates
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Futuristic Eskimo
All Star
Your teacher made that up
Ghost_In_A_Shell
Talk No Jutsu
america, not world bank slaves
Who do you think we borrow from? lol
Ghost_In_A_Shell
Talk No Jutsu
Nobody Understands Debt
Paul Krugman FEB. 9, 2015
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Many economists, including Janet Yellen, view global economic troubles since 2008 largely as a story about “deleveraging” — a simultaneous attempt by debtors almost everywhere to reduce their liabilities. Why is deleveraging a problem? Because my spending is your income, and your spending is my income, so if everyone slashes spending at the same time, incomes go down around the world.
Or as Ms. Yellen put it in 2009, “Precautions that may be smart for individuals and firms — and indeed essential to return the economy to a normal state — nevertheless magnify the distress of the economy as a whole.”
So how much progress have we made in returning the economy to that “normal state”? None at all. You see, policy makers have been basing their actions on a false view of what debt is all about, and their attempts to reduce the problem have actually made it worse.
Paul Krugman[/paste:font]
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First, the facts: Last week, the McKinsey Global Institute issued a report titled “Debt and (Not Much) Deleveraging,” which found, basically, that no nation has reduced its ratio of total debt to G.D.P. Household debt is down in some countries, especially in the United States. But it’s up in others, and even where there has been significant private deleveraging, government debt has risen by more than private debt has fallen.
You might think our failure to reduce debt ratios shows that we aren’t trying hard enough — that families and governments haven’t been making a serious effort to tighten their belts, and that what the world needs is, yes, more austerity. But we have, in fact, had unprecedented austerity. As the International Monetary Fund has pointed out, real government spending excluding interest has fallen across wealthy nations — there have been deep cuts by the troubled debtors of Southern Europe, but there have also been cuts in countries, like Germany and the United States, that can borrow at some of the lowest interest rates in history.
All this austerity has, however, only made things worse — and predictably so, because demands that everyone tighten their belts were based on a misunderstanding of the role debt plays in the economy.
Stop stealing from our kids.” It sounds right, if you don’t think about it: Families who run up debts make themselves poorer, so isn’t that true when we look at overall national debt?
No, it isn’t. An indebted family owes money to other people; the world economy as a whole owes money to itself. And while it’s true that countries can borrow from other countries, America has actually been borrowing less from abroad since 2008 than it did before, and Europe is a net lender to the rest of the world.
debt is money we owe to ourselves, it does not directly make the economy poorer (and paying it off doesn’t make us richer). True, debt can pose a threat to financial stability — but the situation is not improved if efforts to reduce debt end up pushing the economy into deflation and depression.
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Which brings us to current events, for there is a direct connection between the overall failure to deleverage and the emerging political crisis in Europe.
Swabian housewife.
This was a prescription for slow-motion disaster. European debtors did, in fact, need to tighten their belts — but the austerity they were actually forced to impose was incredibly savage. Meanwhile, Germany and other core economies — which needed to spend more, to offset belt-tightening in the periphery — also tried to spend less. The result was to create an environment in which reducing debt ratios was impossible: Real growth slowed to a crawl, inflation fell to almost nothing and outright deflation has taken hold in the worst-hit nations.
Suffering voters put up with this policy disaster for a remarkably long time, believing in the promises of the elite that they would soon see their sacrifices rewarded. But as the pain went on and on, with no visible progress, radicalization was inevitable. Anyone surprised by the left’s victory in Greece, or the surge of anti-establishment forces in Spain, hasn’t been paying attention.
Nobody knows what happens next. Bookmakers are still giving better than even odds that Greece will stay in the euro. But if it doesn’t, I don’t believe the damage would stop there — a Greek exit is all too likely to threaten the whole currency project. And if the euro does fail, here’s what should be written on its tombstone: “Died of a bad analogy.”
most of our debt we owe ourselves. that and china
Ghost_In_A_Shell
Talk No Jutsu
Krugman
yes thats right..scoff away at an nobel prize winning economist who has taught at Princeton University and MIT.
he's right but the thing is it's just delaying the inevitable
In other words, you have to pay money for the privilege of loaning a bankrupt government your money. And people don't have money to begin with.
Neoliberalism is coming to a head..