Simon Johnson has weighed in on this as well (rather technical but worth a look):

http://baselinescenario.com/2010/02/09/revised-baseline-scenario-february-9-2010/

I’d like to second that recommendation to look at Simon Johnson’s latest scenario. Not too technical and ends with a wallop.

I live in Spain. Many people here feel that this is speculation. Some say that Spain’s economy is not as weak as Greece’s, for example, (I’m sorry I don’t know the statistics) and that this is the opportunity for speculative investment, blown out of proportion by the press, such as the Financial Times, in London.

This brutal capitalism is going too far. There has got to be a better way.

I saw I think on network news that in Greece a proposal to raise taxes got a big thumbs down, that people there (like people in the USA) flat reject new taxes, even if it will “save” them. Why?

If the EU bails out Greece, which represents only 3% of the total output of the EU economy, bailing them out would be relatively low-cost but open the door to the other nations at risk, thus rewarding very bad behavior (think our bailouts and what the bailed out companies have done since). Greece (like all the American states in dire economic trouble) can no longer take the easy way out and inflate their currency to make their debt go away, since they gave up their own currency when they joined the EU. And our stock market bounced yesterday on hopes Greece would be bailed out, thus putting off the Day of Reckoning by another 24 hours, which seems to be the lifespan on any coherent thought on Wall Street. The Greek labor strikes may be non-violent for a while, but sooner or later the anger will spill over into the streets as the final reality checks get cashed. It may start with thrown shoes, but…. painful cuts are ahead for all of us, regardless of our nation or government system.

It’s not only Greece, we can add Ireland, Spain was mentioned. Iceland is not in the EU but they have been in free fall since the beginning of this crisis.

Austerity is a word that us U.S. Citizens will also need to learn. The question is do we have the will.

Dee, we hear that in Greece “cushy government jobs” (one of every four and a half workers are in the public sector) make taxes look like a terrible investment to the taxpayers there. My paraphrase.
The hedge fund “exacerbations” amplifying things sound scary.
Greece, apparently, can go on a public spending diet. Globally speaking, the issue would be different, I think.
It seems to me no country will be left with money to bail anyone out. All money will be worth less, blanket, because more will be issued, etc?

Recently I was in the Kosovo region of Eastern Europe. I was surprised that our State Dept was having the same trouble with the economic development plans as we have here at home.

Imports from China. Every retail store had no goods from Europe. It was a bizarre feeling because almost all the goods in their stores were just like ours, only 240 watts instead of 120 watts.

So even with NATO and EU encouragement, goods were shipped through either Albania or Serbia, but were made in the same place.

Another problem I had was that I wanted authentic cultural products to bring home to my family that represented local culture. And even though I was willing to be a foolish American to waste his money, it was very difficult to find them.

I wonder if the rest of Europe is the same way?

OH boy the caller going on about the social spending, give me a break. At least people don’t go broke from medical bills or die from lack of care.

Is “living beyond your means” buying bigger cars, bigger homes, fueling the thirsts of Wall Street and investors with an eye on the bottom line?
Or is “living beyond your means” more structural, i.e., houses cost more than they are worth because they are expected to appreciate in value, etc. Or structural from all the other manipulations to squeeze profit out of life?
Is “socialism” per se “living beyond your means” personified?

This is some ways a nonissue. Greece like most of Europe has problems implementing necessary structural forms (just like the US unable to perform its healthcare sector, distinguished by rapidly rising costs for lower quality care). However, one need only think of states like California (taken separately, the world’s fifth-largest economy) regulate near default

In response to the caller who said that Bono receives a subsidy and that Europeans want the government to take care of them, I would say, yes, the government ought to take care of its citizens. Is your meat over there fit to eat or is the FDA too weak to inspect the meat packing plants? Do you know if your meat has been radiated?

I must say to those Americans who complain about social spending in Europe, what about your out of control, huge defense spending? You spend more money on defense than everybody else in the world combined, and so of course you can’t depend on your government to take care of you. They’ve got to take care of the defense contractors. I prefer to live in a place where there is investment in childcare, health and centers for elder-care, etc., that benefit the people, than in a place where they spend on being able to blow people up.

And these hedge funds have got to go.

I believe it was Carmen Reinhart who said that the end of the road would be much slower growth because it will cost a lot more to borrow money.
I am SO skeptical of that. Money doesn’t fall out of the walls. Governments issue it. They are saying now that AIG didn’t have reserves for the credit default swaps.
I think issuance of debt as a strategy into the future has limits. Governments take over and “issue money.” Then you have Weimar Germany — something like that, wheelbarrows of money to get a loaf of bread.
DISCLAIMER. I don’t know what I’m talking about.

Indeed, regarding social spending, as a small-business owner even though I pay a great deal for healthhcare benefits, it represents one tax I am always glad to pay. And I know that if I do not have the means to pay, my family and myself will still received the same access to among the best healthcare in the world

Does the international community and the EU esp. have the clout to compell Grecian austerity under threat of NO FRESH start in the event of default. In other words the debtor country will have to pay for ALL goods and services in cash?

I am so sick and tired of this phrase “Too big to fail”. The financial institutions gamble their luck away, they lost, simple as that. The West is a capitalism society, the strong survive, the losers die, simple as that. Why should anyone have to clean up their mess?

Tom, I too pay a hefty “tax” as a small business owner, but I pay it to a for-profit company, and though some of the excess I’ve been paying goes to other more needy people, I wish I was paying an actual tax, not a premium, in this case. To be “responsible” in boosting someone’s profits seems wrong.

Does NPR now suffer from the same hype and fear mongering that the rest of the media? The “collapse of the EU”, please!

I was speaking of medical insurance there.

Most interesting point (to me): Europe runs on the emotion of hope (due to greater socialism), whereas the USA runs on fear. Whoa.

Gee, ain’t globalization just grand!?

readers might find two brilliant minds helpful in this debate – both predicted the recession well ahead of others, both feel that the debt is NON ISSUE – Paul Krugman and David Cay Johnston (his book “Free Lunch” details corporate tax welfare, the shift in tax burden from the wealthy to the worker since Reagan, the 168,000,000 tax gift to GW Bush to build the Rangers’ stadium w/ his pals – then sell it at a huge profit – etc ) – Debt results from under collection of revenue and corporate welfare – http://en.wikipedia.org/wiki/David_Cay_Johnston and http://krugman.blogs.nytimes.com/

Tom where do you live if you don’t mind me asking?

I assume it’s not here in the US. For instance health care in Italy and Spain is not the same as it is in France and Germany even though they are all using some kind of single payer system.

From what I have been reading about this France has one of the best health care systems in world overall.

p.s. to Rich – the west has not been a true capitalist society in the Hamiltonian sense for a long time – it’s a system rigged by the connected and wealthy to legislate their advantage and shift the tax burden to the non-wealthy working class – check out this, if you don’t believe it http://www.npr.org/templates/story/story.php?storyId=1587250

Debt is debt. Well almost. Those who lend to a business look at the leadership to see if they are going to increased productivity, or if they would blow it on strip clubs and casinos.

And, if we are going to borrow more money, are we renewing the infrastructure? Or are we just coping with those who blow their money on importing from the very people we borrow from?

It is not fair to honest tax paying companies that create value and jobs in our economy, to foot the bill for those who take their business tax deductions so they can import goods.

Does NPR now suffer from the same hype and fear mongering that the rest of the media? The “collapse of the EU”, please!

I agree Chip the way Tom was framing his questions was a bit much. We Americans should take heed that the EU is a larger financial force than we are.

That said after reading Simon Johnson’s blog from the link above and it does point out some very interesting problems and how the power of the wealthier nations such as Germany, are playing into this mess.

Notice that whenever that old demon, social spending comes up, it’s always dangerous and wasteful … always that old devil conjured up by “those other guys” that generates the bulk of the complaints. Wouldn’t it be interesting to look over their shoulders and take a peek at their own personal spending habits and their own personal debt?

It’s nearly always these people who complain that while other people are being bailed out from the tragic realities of life, they (the complainers) are always above it all. Spending–when it’s lavished on others who are less intelligent, less savvy and less important than their kind–is always immoral when wasted on those who are receiving more than “their share.”

READ: “Where’s mine?” … words that are forever in the backs of their bigoted minds, but that they would never dare articulate out loud.

Most speakers turned far too quickly to European remedies or even IMF intervention in favour of Greece. Before doing so, local solutions to home-made deficits have to considered. For the better part of the past decade most Greeks have lived in denial of the fiscal crisis and mounting public debt. The reality check now setting in will require adjustements that must be communicated to an unprepared and hitherto unconvinced public in Athens, Thessaloniki and elsewhere in Greece.

Socialist funny all the countries in Europe has Socialized Healthcare. They’re all on top of the list.
America? We are beside Costa Rica and below is Cuba.

Greece Economy is in jeopardy? What about Iceland it’s worst than Greece.

United States made the world miserable and Greece doesn’t even come close to our Economic Republican disaster.

BY THE WAY,

Why is it that everytime a Republican President takes office. The United States economy is RUIN.

I noticed that since I was still in the Philippines.
from Reagan, George Bush and George W. Bush.

Can any American born and bread in the USA explain that to me?

The last American Hoorah was from Bill Clinton everytime I quit my job there is a new one waiting for me but now when I apply for a new job there is nothing out there.

About Stimulus package that Obama made the deficit gone higher. yes it is out there and it is working well for construction people/carpenters.

I saw some Boston Housing construction project on the Chronicle show on channel 5.

They reported were the stimulus package are going.
Dorchester housings, Greenway project on the former central artery etc etc.

Those are projects that the Stimulus money are helping.

http://www.nytimes.com/2010/02/05/opinion/05krugman.html?partner=rssnyt&emc=rss

lot of very smart people are not worried about the deficit

Re: A lot of very smart people are not worried about the deficit.

My problem is not with running a deficit, we’ve done that before. It’s the feeling I have that things are truly different this time, that jobs are not coming back, that millions of people are now permanently unemployed, and the old “normal” will never return.

The problem with the EU is that its principles carry the mandate to support supranational conglomerates with tax payers’ funds without forcing these conglomerates to give back and/or support the population that pays the actual taxes. (Essentially, the situation is similar in the US.) The EU provides the legal system for a feudalistic type of social structure and capitalism based economy.

If, as a person, you’re not independently wealthy in Europe (or anywhere else in the world), you have been reduced to be a SERF who works for or soon will be working for an unlivable wage, or a service provider who is being wrenched dry by a high taxation system.

These supranational companies don’t pay taxes in any of these countries or they are non-profit (ie. IKEA); they only want the market for their ‘cheap’ products and exploit the population by employing them in low-wage jobs. Manufacturing is pretty much outsourced to Asian countries where they can squeeze more out of workers.

The European Union was created in the disguise of democracy but it is virtually a step back to the Middle Ages, to feudalism!!!

The situation is dire in European countries, including those that joined the EU during the past 30 years. In Easter Europe it brought an economic disaster with the introduction of privatization without an appropriate legal system to defend and/or form private property or having the national capital to keep private property in the hands of the citizens. The concentration of ‘foreign’ ownership in Europe drives political, economic power. Citizens DO NOT matter, they only keep paying higher taxes to support giant bureaucracies and corporations, when at the same time their rightfully earned social benefits are curtailed day by day.

What is new in Greece, Spain, Portugal, nothing really… The decreasing number of taxpayers whose taxable income has also decreased or disappeared (and most likely never return) is unable to support their own governments and the bureaucracy of the European Union with its supranational corporations behind it. Additionally, there is a high concentration of foreign ownership in these countries whose allegiance resides somewhere else.

“The problem with the EU is…”
Posted by Liz B.

Exactly right! And, unfortunately, the EU is the multinational government model that the rest of the world is being pressured to following.

The EU should never have grown so fast. The European Community as of 1973 was Belgium, France, (West) Germany, Italy, Luxembourg, the Netherlands, Denmark, Ireland, and the UK. All of those countries had relatively strong economies and stable democratic systems of government. Greece, Spain and Portugal were all under repressive regimes with weak economies. Eastern Europe was behind the Iron Curtain.

The original 1973 membership would still be stable and prosperous as an economic community today. Why on earth they ever felt a need to allow economically weak and politically doubtful nations in the Balkans and southern and eastern Europe to join the club is a mystery to me.

I think it’s because they lost sight of their raison d’etre which was economic mutual self-interest. Instead, they started seeing themselves as some sort of a geopolitical do-gooder club trying to raise living and political standards among in the low-rent countries of Europe. This is what they get.

Instead of bailing out Greece the EU should actually enforce its existing fiscal discipline rules (which they are loathe to do). Any country that can’t get its act together should be kicked out. The result will be a core group of politically and fiscally-disciplined nations that can once again be a strong and prosperous community.

Puerto Ricco is in the same predicament. But it is further exacerbated because of the U.S.Domination on our country. Free Puerto Rico now, Independence Now!!!!!!!

Hector L.Lopez

Free Puerto Rico now, Independence Now!!!!!!!

Referendums are held routinely in Puerto Rico on the options of independence, commonwealth (status quo) or statehood, and independence always come in last.

So don’t complain to us – it’s your fellow Puerto-Ricanos who are preventing independence. Personally, I’d love to see PR independence because right now Puerto Rico is a drain on US taxpayers. That’s why Puerto Ricans keep voting for status quo – they know they’ve got a sweet deal at our expense. Puerto Rico is like the grown-up child still living at home, mooching off his parents, instead of getting a job and a place of his own like an adult.

The comment about Bono getting government support for his children is a red herring. It is no different than public education (funding) in the US which is not means tested. Although free lunch programs are. In any case, it is probably more efficient and therefore less costly overall (in total) to provide the same benefit to everyone, i.e., the cost to Ireland and Bono could and should be less if Bono receives government support for his children and the cost of doing so is included in his taxes than if he were not receiving government support for his children and the cost of doing so was not included.

A significant reason for government support for children, at least in Greece, is to encourage couples to have children. As with many, if not all, EU countries, the average age has been going up not only because their citizens live longer but even more so because birth rates were declining. This can and has resulted in an increasing need for foreign workers and its own set of problems.

“lot of very smart people are not worried about the deficit”

And a lot of very smart people weren’t worried about the Nasdaq at 5049; it was the new post-industrial economy and rules are different! Fast forward ten years, it’s managed to claw its way back to 2177.

A lot of smart people weren’t worried about Enron, because it was run by a lot of smart people.

A lot of smart people weren’t worried about Maddof Investment Securities LLC; Bernie’s a smart guy who makes steady profits even in the bear markets.

A lot of smart people weren’t worried about a housing bubble; after all, housing prices haven’t declined nationally since accurate record keeping began in ‘68.

A lot of smart people – make your own list, but don’t forget Bear Stearns, Countrywide, AIG, Lehman, Fannie, Freddie, B of A, Citi Group, USB, the Fed, this is too easy.

Turns out a lot of smart people aren’t that smart after all…

“A lot of smart people weren’t worried about Enron, because it was run by a lot of smart people.”

Not worried but did not care remember laza faire

“A lot of smart people weren’t worried about Maddof Investment Securities LLC; Bernie’s a smart guy who makes steady profits even in the bear markets.”

Not worried but greedy 15% return + and no one question it as long as there were making money

“A lot of smart people weren’t worried about a housing bubble; after all, housing prices haven’t declined nationally since accurate record keeping began in ‘68.”

not worried but again greedy and the laza faire mentality

A lot of smart people – make your own list, but don’t forget Bear Stearns, Countrywide, AIG, Lehman, Fannie, Freddie, B of A, Citi Group, USB, the Fed, this is too easy.

All tied to greed and again the laza faire mentality remember this companies leverage were 20+ to 1 some as high as 30+ all where betting for and against each other.

Yet still a lot of smart people think that the laza faire system that just collapsed is the answer

Turns out a lot of smart people aren’t that smart after all…(totally agree) greed tends to do that along with short term thinking.