Anyone Notice? The Recession Diaries - April 16th
There’s a problem with the way reports are covered in our media. Take the recent ESRI Spring Quarterly Commentary, for example. The demands on journalists to cover a statistically-dense 85 page report for the next news bulletin or the next day’s paper means that they can’t possibly work their way through it to get a sense of the wider narrative. And by the time they do, it’s yesterday’s news.
So just some quick points you might have missed.
1. The Annual Deficit: big issue since reducing this is the primary, if not exclusive, obsession of the Government (it sure ain’t unemployment). The Government wants to reduce the deficit marginally this year - from -11.7 percent to -11.6 percent. This would show that they have the ‘troughed’ the deficit’s decline.
The ESRI throws cold water on this. They show that the deficit will continue to deteriorate. They project it will fall to -12 percent. Not much different except that it’s going in the wrong direction and that it will hit a highly significant number. Don’t forget, the Government introduced the April emergency budget out of the fear that the deficit would exceed -12 percent. So, if the ESRI is right, we’ll be there 18 months later. Anyone notice?
2. Overall Debt: another big issue since higher debt means higher interest payments which means a greater burden on the economy. The Government is projecting overall debt to be 83 percent of GDP by 2011. The ESRI projects a much higher number - over 89 percent. That is really going in the wrong direction and could result in increased expenditure of over €250 million a year in debt servicing. Anyone notice?
3. Employment: a few weeks back you couldn’t open up a newspaper without some government agency promising thousands of jobs coming on stream. This was led by the Minister for Finance who stated unequivocally that there would be a net increase of 20,000 jobs in 2011, followed by years of 40,000 job growth. The ESRI, however, projects that the job increase for 2011 will be . . . 1,000. The cost of this difference, according to Department of Finance estimates, would be €475 million a year in extra unemployment costs and lost tax revenue. Anyone notice?
4. GDP Growth: much attention was given to the ESRI’s projection that the economy would start growing later this year (it was hardly a new projection; they and other independent forecasters have been saying this for some time). The ESRI’s projections for this year are more optimistic than the Government’s. However, by 2011 the ESRI projects a lower growth rate than the Government (2.5 percent as opposed to 3.3 percent). This will mean lower tax revenue and higher unemployment costs as the economy remains sluggish. Anyone notice?
5. GDP Levels: not only are GDP growth projections lower than the Government’s, the ESRI predicts that the size of the economy will be significantly smaller in nominal terms. In 2011, the Government hopes GDP will be nearly €170 billion. The ESRI, however, projects a much smaller size - €164 billion. If the tax/GDP ratio holds, this will mean over €1.1 billion less in net current revenue (and that doesn’t count lost PRSI revenue). Anyone notice?
The Minister claimed that the ESRI report vindicated the contention that we had turned the corner. Maybe so. But we’re turning into a cul de sac. Higher deficit, higher debt, lower employment, lower growth and lower national income - the ESRI report actually vindicates what the TASC open letter described as a ‘low-growth, high-debt’ future.
You thought the economic decline was bad? Wait for the recovery - joyless and jobless.
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EU Should Admit Greece is Bankrupt | Christian Rickens
The unvarnished truth - the second Greek Bailout should not have happened.
The mistake isn’t the size, but the construction of the bailout package. It isn’t geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.
How else can one explain the fact that around a quarter of the package won’t even arrive in Athens but will flow directly to the country’s international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn’t bankrupt — after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.
That leaves €100 billion. But that too isn’t geared to what Greece needs in order to get back on its feet. It’s linked to an estimate of how much debt the Greek economy can bear without collapsing. International technocrats agree that with debts amounting to 120 percent of gross domestic product, the country can just about go on servicing its debt. That’s the level at which the cow can go on supplying milk without dying of exhaustion. So 120 percent became the goal.
Collaboration, with our European partners | Cunning Hired Knaves
The European project was supposed to be a bulwark against the dangers of fascist ambition, but now it is the instrument used to dismantle European democracy in the interest of the risk adverse looking for a steady income stream from the provision of the social net by those who cite the words and actions of old fascists while doing so.
The post Collaboration, with our European partners by Richard of Cunning Hired Knaves summed up in one sentence. For much better sentences and many more urgent points read the post.
On Sunday there were massive demonstrations throughout the Spanish state, with half a million people on the streets of Madrid and 450,000 in Barcelona, protesting against the labour ‘reform’ planned by the Partido Popular, the right-wing party that most closely represents the interests of the power elites that conserved their position when the transition from dictatorship to democracy was undertaken.
S.P.A.R.K. protest at cuts to lone parents, Dublin 18th February 2012
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There is particular anger directed at the Labour Party because they are associated with women’s rights and a more progressive society.
Please share the link to this video
Exiting the euro | Michael Roberts
Michael Roberts argues that those in Greece who cite the example of Argentina when suggesting that Greece should leave the Euro are not necessarily looking at the whole picture. The situations are not the same, Roberts points out, citing Argentina’s former central bank governor at the time, Mario Blejer and his recent piece in the Financial Times. He also points to research based on the the experience of five recent devaluations of economies in crisis (including that of Argentina) which “shows that they lead to a 10-20% fall in real GDP and take five to ten years to recover to previous real GDP levels. But that is not to say that there is no alternative to “lowering wages, privatising the state sector, reducing taxes for the corporate sector (especially big business) and ‘deregulating’ labour markets i.e. the super-exploitation of the Greek people to raise profitability.”
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Solidarity campaign to support the people of Greece
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Chris Dillow | Capitalism against freedom
[...]
During the Cold War, opponents of communism routinely, and not entirely wrongly, claimed to be champions of liberty. Freedom for capitalists and freedom of speech and thought go together, it was claimed. “Freedom is indivisible” wrote Bruce Winton Knight in 1952. “Economic freedom is…an indispensable means toward the achievement of political freedom“ wrote Milton Friedman in Capitalism and Freedom. And back in 1944 Friedrich Hayek complained that “We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.”
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Ian Stewart | The mathematical equation that caused the banks to crash
In The Observer, Sunday 12 February 2012
Anyone who has followed the crisis will understand that the real economy of businesses and commodities is being upstaged by complicated financial instruments known as derivatives. These are not money or goods. They are investments in investments, bets about bets. Derivatives created a booming global economy, but they also led to turbulent markets, the credit crunch, the near collapse of the banking system and the economic slump. And it was the Black-Scholes equation that opened up the world of derivatives.
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Greece: a Sisyphean task | Michael Roberts
In a Eurozone that is unwilling to share its surplus with weaker, hardest hit economies there is no other option for those economies but default. Despite the agreement of Greek politicians to shorten their political life and accept the deal all that they have done is simply postpone this eventuality once again. However, even that postponement might be shortened by the Greek elections in April where the smaller leftist parties outside the coalition currently have 40% of the vote. Or so says Michael Roberts:
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As Greece stares into the abyss, Europe must choose | Maria Margaronis
Do we really want to live in an economic union that must destroy the future of millions in order to just tick along? Maria Margaronis points out that the situation in Greece today says little about Greece and everything about the EU.
The trouble with historical metaphors is that they can obscure the present: what’s really at stake here is not Greece’s identity but Europe’s. All eyes are fixed on Athens, but the way out of the crisis requires a choice about what kind of Europe we want. The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology, protects neither democracy nor human rights. Stiff-necked and punitive, it prefers to eat its children.
Comment by: Robert McC
Apr 18th 2010 at 16:04
Sure look on the bright-side…
“hey!!…who switched out da lights…?*%@£*#”