It’s shaping up to be another busy week, so here’s a quick update on the European Debt Crisis front:
Posts Tagged ‘Economics’
European Debt Crisis Update for July 22, 2013
Monday, July 22nd, 2013Texas vs. California: The Fate of Cities
Thursday, May 30th, 2013There’s a lot to digest in this comparison of migration in California urban areas vs. migration in Texas urban areas. Quick take: Despite anti-sprawl laws, the cores of California cities would be emptying due to migration to the suburbs, were it not for net immigration from abroad. Texas cities, by contrast, are see growth in both the core and suburbs.
California’s political economy is based on high tax rates; rent control and growth controls; inflated housing values, but relatively low property tax rates because of Proposition 13; mandatory inclusionary housing and more jobs for teachers, tax assessors, subsidized solar power technicians, urban planners and environmentalists. Its immigration policies are mostly the symbolic “Dream Act,” anti-deportation laws and “sanctuary cities.”
Texas’ economy is based on low or no business and income taxes, no rent control, few growth controls, higher property tax rates based on lower housing values, inclusionary old inner cities by markets, and tax incentives for private sector jobs. Only El Paso and Houston have sanctuary city policies. An anti-sanctuary city bill died in the Texas legislature in 2011.
California has passed anti-sprawl legislation to try to halt the out-migration from its older big cities. The results would have been miserable if international in-migration had not stemmed the outflow of population.
Texas has accomplished balanced in-migration into its older city centers where California has failed. The Texas incentive model is performing better than the California disincentive model as far as sustaining the center of its older big cities while Texas suburbs are booming at the same time. Texas is accomplishing what 75 years of public housing and lending policies could not in California: an older city core that is attracting a “return to the city” by domestic and international migration and concurrent suburban growth.
Read the whole thing.
And while we’re on the subject, this piece on the dynamism of Houston is worth reading as well.
What Austerity?
Monday, May 27th, 2013Forbes makes the same point that I have made repeatedly: Austerity has not been tried and failed in Europe, it has been found difficult and left untried.
The official figures show that PIIGS governments embarked on massive spending sprees between 2000 and 2008. During this period, their combined general government expenditures rose from 775 billion Euros to 1.3 trillion – a 75 percent increase. Ireland had the largest percentage increase (130 percent), and Italy the smallest (40 percent). These spending binges gave public sector workers generous salaries and benefits, paid for bridges to nowhere, and financed a gold-plated transfer state. What the state gave has proven hard to take away as the riots in Southern Europe show.
Then in 2008, the financial crisis hit. No one wanted to lend to the insolvent PIIGS, and, according to the Keynesian narrative, the PIIGS were forced into extreme austerity by their miserly neighbors to the north. Instead of the stimulus they desperately needed, the PIIGS economies were wrecked by austerity.
Not so according to the official European statistics. Between the onset of the crisis in 2008 and 2011, PIIGS government spending increased by six percent from an already high plateau. Eurostat’s projections (which make the unlikely assumption that the PIIGS will honor the fiscal discipline promised their creditors) still show the PIIGS spending more in 2014 than at the end of their spending binge in 2008.
Remember: Real austerity is cutting budgets until receipts match outlays. In Europe this hasn’t been tried outside the Baltic states. Meanwhile, Japan has been trying Keynesian stimulus for two decades and has nothing to show for it but a mountain of debt.
Or take this abstract (I’m still working through the actual paper) from German Institute for Economic Research economist Georg Erber: “The core thesis of the paper is that taking a close look at the actual statistics available from Eurostat on the PIIGS-countries plus Cyprus, one finds little empirical evidence that the governments there have de facto reduced their total public expenditures.”
Keynesian pump-priming hasn’t worked in Europe. Could real austerity (i.e., cutting budgets until they’re balanced) work to restore growth in Europe (and here)?
Why not actually try it and see?
Texas vs. California Update for May 9, 2013
Thursday, May 9th, 2013Time for another Texas vs. California update!
Spain IS Beyond Doomed, But It’s Not Practicing Real Austerity
Tuesday, April 30th, 2013Take a look at these charts. Unemployment in Spain is up over 25%, and most have been unemployed more than 2 years. Matthew O’Brien is correct when he says that Spain’s inflexible labor laws contribute greatly to the unemployment, but errs when he says that “austerity hasn’t been the path to prosperity. It’s been the path to perma-slump.”
Austerity hasn’t failed in Spain. It hasn’t been tried.
Spain last ran a budget surplus in 2008, and since then it has engaged in deficit spending. In 2012, Spain’s budget deficit was 9.4% of GDP, and this year it will be 10.6% of GDP.
Remember, real austerity isn’t trying to tax-and-spend your way to prosperity. Real austerity is cutting budgets until outlays match receipts. Estonia bit the bullet and balanced its budget, and its economy is now growing at a steady clip. Meanwhile, governments all across Europe continue to try the same deficit spending Keynesian pump-priming, and keep having the same recession. In most of Europe, “austerity” has meant digging their own graves more slowly rather that stopping digging.
And European elites refuse to stop digging because their power and perks all stem from swaddling voters in an unsustainable cradle-to-grave welfare system.
If all this sounds familiar, that’s because it is. Europe makes the same mistakes, gets the same results, and keeps doubling down on stupid, content to keep the farce running as long as they possibly can. Instead actually of solving the interrelated problems of debt, unsustainable entitlements, and the Euro, the Euroelite seem content to preside over the world’s slowest, most boring train wreck. Yes, it’s a pity the train is sliding inexorably toward the chasm, but there’s such fine vintages to be had in the saloon car, and it offers such a magnificent view of the coming crash…
Mid-Day Cyprus Bailout Update for March 26, 2013
Tuesday, March 26th, 2013News keeps on churning…
Lessons from the Cyprus Bailout
Tuesday, March 26th, 2013So the Cyprus crises is “solved,” for values of “solved” that means “everyone but bankers and Eurocrats get screwed.”
The European cradle-to-grave welfare state is unsustainable. It’s only a matter of how many trillions will be destroyed before the world is willing to face that fact.
Quick Cyprus Update for March 21, 2013
Thursday, March 21st, 2013Cyprus crisis is a miniature version of the Greek crisis, and the Greek crisis is a miniature version of Europe’s crisis. The scale and details differ, but the underlying problem is mind-numbingly familiar: People spending too much of other people’s money with too little accountability. Cyprus bank bailouts are unsustainable in the same way that Greek government bailouts are unsustainable in the same way that the European cradle-to-grave welfare state is unsustainable.
How could it have been avoided? The same way any of the multitudes of financial crises that have rocked Europe in last several years could have been avoided: Don’t spend money you don’t have. That solution is both blindingly obvious and completely unacceptable to the Eurocratic elite (as well as our own liberal ruling class). After all, the bloated welfare state is where they get theirs. Nothing can be allowed to come between the permanent ruling class and their perks. Nothing.
Some current Cyprus news:
Once Greece hit the skids in 2010, it was inevitable that Cyprus would follow. Already by 2011 the government was effectively prevented from selling bonds by a junk credit rating. It resorted to a €2.5 billion ($3.2 billion) loan from the Russian government, due in 2016. The killer, though, was the pact reached in October 2011 to reduce the value of Greek government bonds by 70 percent. That produced a loss to the Cyprus banks of more than €4 billion—the same in proportion to the economy’s size as a $4 trillion loss in the U.S. President Demetris Christofias, seemingly not realizing the severity of the blow, agreed to the haircut without seeking offsetting aid for Cypriot banks. He eventually sought a bailout, but, befitting a left-wing politician who earned a doctorate in history in the Soviet Union, dragged his heels on cutting government spending while inveighing against the “troika” of the European Union, the European Central Bank, and the International Monetary Fund. Losses mounted.
Instapundit’s Favorite Word
Tuesday, February 19th, 2013See if you can fill in the blank for the following headline:
“Homebuilder Confidence in U.S. BLANK Fell in February”
Having trouble? Try again with the first sentence
“Confidence among U.S. homebuilders BLANK dropped in February from a more than six-year high, a sign the real-estate market will take time to accelerate.”
If you’ve been reading Instapundit for any length of time, you know exactly what the word replaced with BLANK is. And that word is “unexpectedly.”
Gee, how could anyone possibly have seen that continued high unemployment and an economy that is shrinking might negatively impact the housing market? (And of course, when the economy shrank, the shrinkage happened “unexpectedly.”)
Obama and friends keep trying and trying neo-Keynesian pump-priming and keep getting the same results: economic stagnation. While trying the same thing over and over again and expecting different results is the definition of madness, that doesn’t matter to them, since it allows them to continue the payoffs to cronies and interest groups that keep the Big Government Class in power (and rolling in taxpayer dough). Germany and Estonia performed no or minimal “stimulus” deficit spending and their economies are growing again. Obama and congressional Democrats have taken the opposite tack: Keep pouring money down the big government rathole and hope that results this year won’t be identical to the last four. My prediction: higher deficits, continued high unemployment and continued economic stagnation.
And each and every negative economic indicator the media will report as arriving “unexpectedly.”
Expect it.
Rick Perry’s State of the State Address
Wednesday, January 30th, 2013Rick Perry delivered his State of the State address on Tuesday. Here’s the complete text.
And here’s the speech itself:
A mixture of interesting tidbits on the Texas success story, some generic inspirational boilerplate, and some broad outline policy proposals.
Good: More constrained spending, tax cuts, no ObamaCare expansion.
Probably bad: “$3.7 billion from the Rainy Day Fund for a one-time investment in infrastructure programs.” There are, in fact, some infrastructure improvements that would be made around the state, but Perry has occasionally supported infrastructure boondoggles (like the Trans-Texas Corridor) in the past.
The general outlines are very good, but the devil is in the details, which should be forthcoming in the current legislative session.