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I haven’t had a chance to read it all but this is a thought-provoking paper on how to stimulate the economic use of savings, which would also help the Spanish property market…..
Do savings promote or hamper economic growth? The Euro area example.
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I have had a quick read. It cover various economies and I feel we have to read in a manner that it reflects each economy i.e. Germany, Holland, Spain,Italy & UK,
Once the above is understood a bigger picture can be established. What I did find not surprising is that:
a) The mismatching of housing needs against the buildings as I could see this by simply travelling though Spain and talking to the Spaniards..
b) I was aware of the lower gearing ratio of Spain v Germany and the substantial difference between.them. I am horrified and not surprised of the gross mist match of liquidity. Even allowing for Spanish mas o minus/pasa nada mentality.
As far as I am aware no one has been made accountable for this economic treason !!!!!!.
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Some good ideas in that paper, sadly much too radical for the ECB to implement. I don’t think the suggested tax rebate in Spain would have any positive impact on the property market. In fact it suits the economy of Spain right now to have a market that’s stable, albeit at a low level of transaction and value. Spanish consumers need to relearn the value of money and the virtues of saving.
It’s unrealistic to expect the richer EU states to have comparative wealth with Spain, Portugal and Greece. Their economies are entire different and diverse. Education and training is also a factor, as also are economies of scale and capacity in industrial production.
What is a scandal in my view is how selfish German is when is comes to helping out it’s so called industrial partners. Had Markle acted earlier in the crisis German could have prevented a lot of the pain. As it is they sit on their hands accruing more wealth at the expense of smaller EU nations. The EU is supposed to be about solidarity between nations. It’s just a sick joke.
The Germans are a nation of savers but as Kees de Koning points out that does not necessarily benefit their economy. It is already predicted the German economy is set for stagnation in the next decade. What then for Europe and the Euro?
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@Mark, there is a difference between vandalism and incompetence.
@Logan: The fact is that Germany is another league and partnerships do not work if it is not on equal footing.Besides the diplomatic language the partnership here means we make them & you buy from us and if you were not in Euro you simply could not afford to buy.Germany, in this instance acted in its self interest like all nations do including including UK. Many of the self interest is not transparent or the benefits are long terms.
I recall an interview of Wolfgang Schäuble on bloomberg where he was accused of the situation and he said that we are not asking/forcing the world to buy our product. This summed it up for me that despite of the higher cost of German product the consumer private or industrial buy their products.
Yes, it is radical & ECB will not take act on some one writing a paper on a particular aspects of the working of the whole EU concept.
Spaniards are & have always been savers. This stems from their recent history, job insecurity, poor economy, lack of a bigger money market/liquidity, lack of access to credit, cost of acquiring credit i.e. creative Bank charges, high interest rates ( before the monetary union ) & the notary fee.
I recall that people would save despite of high inflation & we discussed the erosion of the value of money. They were aware of this & were willing to pay this price for having excess to their savings for reasons of medical, school/university fee, wedding etc.
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I expect nothing less than sovereign nations to act in self interest.
However within the Eurozone it’s supposed to be different, that was my point. Member states sign up to the single currency straight jacket in return for economic solidarity and co-operation. That’s how it’s sold to the public.
Instead during the crisis what you saw was Germany dragged kicking and screaming to contribute to national bail out loans for which they charge high levels of interest and extremely narrow austerity rules.
Given recent and on going economic history you might be justified in asking what on earths the point of it? The Euro is the most effective instrument ever invented for wrecking national economies with the very noted exception of Germany.
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@shakeel wrote:
@Mark, there is a difference between vandalism and incompetence.
It’s not incompetence although I can understand why people might like to interpret it that way. The politicians and bankers know precisely what they’re doing and the consequences of doing it. They’re just enriching themselves at the expense of everyone else.
@shakeel wrote:
I recall an interview of Wolfgang Schäuble on bloomberg where he was accused of the situation and he said that we are not asking/forcing the world to buy our product.
No they’re not forcing people to buy their products. But they don’t have to keep lending the money/bankrolling the ECB to loan out to sovereign central banks to loan to provincial banks to loan to people to buy their products. If they stopped this flow of credit, no-one would buy their products. You can see however why they might not want to do that so they deliberately continue the cycle of easy credit.
The Germans are doing to the EU precisely what China is doing the USA.
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The system capitalist countries have in place in order to finance consumerism, mortgages, pensions and insurance is not a perfect example of economics working for the benefit of society at it’s best. However it’s far better than the any of the alternatives.
I expect politicians and bankers to operate in the same way we all do. Doing our level best to enrich ourselves, provide for our families and give our children the best start in life we can manage. I don’t believe they do it at the expense of others. Their success at what they do in producing profit and reward is rarely achieved by shafting the ordinary public. Quite the opposite.
I know there have been examples of just that in recent history but they are found out and pay the price.
Crooks and corruption, aside I don’t blame any banker for honestly achieving the best target for the highest reward. Let’s face it most of them are honest in the same way as every other profession. Bad apples there are in every barrel.
If you strip high risk. high wire professions of financial incentive they with the best abilities and motivation simply move on to where their talents are best rewarded. What you will be left with is a bunch of dull arsed time serving clock watchers who will eventually bring the company, bank, institution or political party to it’s knees.
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@logan wrote:
I don’t believe they do it at the expense of others. Their success at what they do in producing profit and reward is rarely achieved by shafting the ordinary public. Quite the opposite.
Then you’re either naive or being deliberately blind to the machinations and greed of politicians and bankers.
Low interest rates, high real inflation and QE is allowing the government to take fistfulls of my savings every single year. They gain, I lose.
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@zenkarma wrote:
Then you’re either naive or being deliberately blind to the machinations and greed of politicians and bankers.
Low interest rates, high real inflation and QE is allowing the government to take fistfuls of my savings every single year. They gain, I lose.[/quote]What other policies would you suggest to turn the financial disaster round? Perhaps you believe in reflating the economy or spending the countries way out of recession with massive borrowing.
Someone has to pay and take the pain and yes everyone actually does, even bankers and politicians. They have savings as well remember.
I admire the Irish. They were faced with an economic catastrophe. The government did what was necessary, knuckled down and the people accepted the collective pain. Now there is some light and the country can borrow again on international markets.
It’s useless to play the blame game we all know what went wrong, repairing the damage trying to make sure it won’t happen again and sharing the pain is a necessary process I’m afraid even for bankers.
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There is an article in the FT this morning which perfectly illustrates the unfairness which exists within the EZ and how the ECB is impotent to deal with it.
Quote:
European Central Bank action has had only modest success in easing big differences in interest rates paid by businesses across the eurozone, which remain near peaks seen at the height of the region’s debt crisis.
Companies in the eurozone’s weakest economies still face significantly higher borrowing costs than rivals in countries such as Germany, according to a cross-market analysis by Goldman Sachs. The extent of the divergence has fallen since a peak in May 2013 but is higher than in mid-2011.
http://www.ft.com -
Logan not really. That may be true for smaller companies only located in a certain country. The truely international companies can twist politicians arms and loan where ever it benefits them the most. The tax payers will take up the bil ofcourse. You cant blame Germany for behaving sound with their assets. I find it kinda funny that just after Germany has paid off their massive punishments for ww1 and ww2 they are now being targeted for other blame. At the same time they have together with some asian countries during severe punishments kicked our asses economically.
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