Daily Economy Thread

[Economy 52,861]

It was a metaphor for Greece :toofloppy:

 

And actually, Canada ranks #30 in home ownership and the Netherlands #31.

when i saw the rankings last time Canada was at #5... i checked them again and ur right but its not what it showed last time

 

Anyway regardless tho u get my point. u cant pay off a mortgage on part-times. its one thing to have a spouse working full-time and another bringing in a little extra. if you have too many part-times tho, then many couples will be stuck with both working part-time. thats not a healthy way to build an economy

 

And the Netherlands is high export oriented which means u must have a large manufacturing sector with high paying Jobs. America is a consumption based economy and manufacturing is a small portion of its job. Its economy naturally is filled wioth low paying service jobs and more hours of works are required to get the same GDP output as we can see from stats

 

Same thing in Canada. We have the energy sector and some heavy duty manufacturing. But weve lost many high paying jobs unfortunately in most Provinces. Its not easy to find work at this time that pays over $17/h. they exist, but not many

 

so to make a confortable living on wages that have stagnated behind inflation, people work more hours to maintain a standard of living and maintain the economy healthy. Over-time is not uncommon here at all

[Luc 4,776]

Fun fact: Greece's debt isn't unsustainable at all. Greece's interest to gdp is in fact lower than Italy's, Portugal's, Ireland's and Spain's. And it's near the US'. That's because the ECB and Eurozone already gave so many benefits to Greece in the form of low interest rates. In fact, it's lower than pre-crisis.

Also, compare 1996-2000 to 2001-2005 and you'll see why the Euro is so important for Europe. See how much Italy profited from it. Look at Finland, Portugal, Belgium and Spain...

[Economy 52,861]

Fun fact: Greece's debt isn't unsustainable at all. Greece's interest to gdp is in fact lower than Italy's, Portugal's, Ireland's and Spain's. And it's near the US'. That's because the ECB and Eurozone already gave so many benefits to Greece in the form of low interest rates. In fact, it's lower than pre-crisis.

Also, compare 1996-2000 to 2001-2005 and you'll see why the Euro is so important for Europe. See how much Italy profited from it. Look at Finland, Portugal, Belgium and Spain...

u wanna know about interest rates look at Japan.

In fact todays update was exactly about that :haha:

[Luc 4,776]

u wanna know about interest rates look at Japan.

In fact todays update was exactly about that :haha:

A high debt doesn't necessarily mean that the country is worse off, but Japan is at huge risk in case the interest rates go up. I think Europe (besides Greece) is getting in Japan's situation, but then without the high deficits and high debt. Which is amazing, because they'll be able to invest more in things that cause growth.

[Economy 52,861]

A high debt doesn't necessarily mean that the country is worse off, but Japan is at huge risk in case the interest rates go up. I think Europe (besides Greece) is getting in Japan's situation, but then without the high deficits and high debt. Which is amazing, because they'll be able to invest more in things that cause growth.

the only reason Japan can handle such high debt is because of how bad they are

Inflation doesnt go high up so investors eccept lower returns... Equities are risky there so ppl avoid it, and with on and off deflation real estate is a even worse investment...

So whats left? Bonds. Ppl seek the safety of bonds.

And banks there are required to keep a high level of capital in "safe investments so they buy Government bonds which are easy. It gives Government even lower interest rates but its part of the problem to begin with cause banks dont lend enough to other sectors

And then of course the massive QE meant to lift up inflation because of weak economy is forcing yields even lower

The very problems they have is also what is allowing them to sustain their debt to begin with. If the economy finally revives and rates shoot up with it, will their entire system face a bond market collapse and a financial meltdown?

They are in a strange and unusual dilema. If they finally succeed in lifting inflation and economy, rates will surge and they could self-implode shortly after. But at the same time do nothing and eventually Japan will crack anyway, even with low rates

Problem is in most cases, a country with growth can lower their debt to GDP ratio and compensate for the higher rates that comes with a stronger economy. But Japans debt of 230% of GDP is so high that even if they grew 10% to 15% in 2-3 years their debt ratio would remain enormous and the lower than 0.5% rates theyve been relying on to survive would be gone

[Luc 4,776]

the only reason Japan can handle such high debt is because of how bad they are

Inflation doesnt go high up so investors eccept lower returns... Equities are risky there so ppl avoid it, and with on and off deflation real estate is a even worse investment...

So whats left? Bonds. Ppl seek the safety of bonds.

And banks there are required to keep a high level of capital in "safe investments so they buy Government bonds which are easy. It gives Government even lower interest rates but its part of the problem to begin with cause banks dont lend enough to other sectors

And then of course the massive QE meant to lift up inflation because of weak economy is forcing yields even lower

The very problems they have is also what is allowing them to sustain their debt to begin with. If the economy finally revives and rates shoot up with it will their entire system face a bond market collapse and a financial meltdown?

They are in a strange and unusual dilema. If they finally succeed in lifting inflation and economy, rates will surge and they could self-implode shortly after. But at the same time do nothing and eventually Japan will crack anyway even with low rates

Problem is in most cases, a country with growth can lower their debt to GDP ratio and compensate for the higher rates that comes with a stronger economy. But Japans debt of 230% of GDP is so high than even if they grew 10% to 15% in 2-3 years their debt ratio would remain enourmous and the lower than 0.5% rates theyve been relying on to survive would be gone

Japan is basically in a downward spiral.

 

The only solution I can think of is allowing a huge amount of immigrants from China and the Philippines, to artificially boost the economy growth.

[Economy 52,861]

Japan is basically in a downward spiral.

 

The only solution I can think of is allowing a huge amount of immigrants from China and the Philippines, to artificially boost the economy growth.

that wouldnt be artificial growth that would be real growth. They have serious demographic problems and that would help

 

artificial growth is what they are doing now. Trying to fix the economies competitiveness and raising inflation by printing money and devaluing the currency. That wont work forever because it doesnt solve their fundamental problems that are causing their weakness to begin with. Even now their massive QE effects and benefits are limited

[Woolfsmck 2,763]

Japan benefits from a giant trade surplus with the U.S. tho.  That bring in enough revenue to counter some of the negative effects. 

 

I agree however that Japan is in a downward spiral, but they were in such a strong position prior to 2000 that they can fall a long way and still be on par with many of the other asian economies.

[Economy 52,861]

Japan benefits from a giant trade surplus with the U.S. tho.  That bring in enough revenue to counter some of the negative effects. 

 

I agree however that Japan is in a downward spiral, but they were in such a strong position prior to 2000 that they can fall a long way and still be on par with many of the other asian economies.

ok were talking 25 years straight of constant on and off deflation as well as frequent recessions...

 

Their financial position has a chronic problem where the large deficits arent going away and their debt to GDP Ratio now stands at 230%. Their population continues to age and old age security, pension costs anealthcare costs will only keep rising. Last year almost half the money they spent was freshly borrowed money

 

And that trade surplus is gone. Mabe with the US they have a suirplus but that irrelevant. The over-all balance of trade is what matters a they do not produce enough for what they consume. Not surprising considering that between retirees and low female participation rate, barely 50% of their population is actually working and producing anything (and we all thought Americas labor force participation rate of 62.5% was bad)

 

Japans problems cannot be understated. Its very serious. They are a grenade waiting to explode. They will keep piling on this debt as the economy stagnated and the labor force keeps shrinking... the Government will continue to pile on debt and for a while avoid a financial meltdown thanks to their abnormally low rates

 

Eventually their financial system will crack, the bond market wont be able to raise enough funds, yields will rise, investors will panic and liquidate their government bonds early forcing yields even higher (a typical bond market collapse when rates start rising quickly and investors panic and sell off bonds, it happened in 1994 in the US when rates rose sharply)

 

Japan will either:

 

A) Print lots of money to avoid default and cause hyper inflation

B) Make some very severe austerity and they will be in a worse position than Greece considering their root issues are worse than the Greeks (they are just dormant for now)

C) they default on debt payments and cause investors to loose total confidence, credit will freeze and Japan collapses

 

I know this may sound over-dramatic... but if Japan doesnt make some SERIOUS and AGGRESSIVE changes soon this will be their fate. They are perhaps the MOST unsustainable Nation on Earth when you look at their long-term prospects

[Woolfsmck 2,763]

Look on the bright side.  Japanese make Gaga look much taller when she does her shows over there... 8-)

[Luc 4,776]

But what can Japan actually do..?

[Economy 52,861]

But what can Japan actually do..?

ummmmm... make long term changes... increase retirement age, encourage more women to work, increase immigrants... at the root cause of everything, their population is too old and on top of that half their women in working age dont work so the percentage of their population thats working and producing is way too low

 

Their taxes and regulation is rather tight... too much, so they dont encourage business investment

 

This would make gradual positive changes... rather than trying to get sharp bursts of short-term growth and inflation with so much QE...

 

Cause #1 QE doesnt fix their fundamental problems, and #1 because its fast acting, if their schemes ever work as fast as they hope, that can trigger that sharp rise in yields and collapse the bond market and bring that financial meltdown i talked about. Its happened in Countries before and Japan is extra exposed because of its insane debt

 

Japan is like a really ill person that if they dont get any treatment eventually they will die... but get too agressive with treatment, and the treatment will also kill the person because of how fragile they are... they need balance

 

In this case their economy is really sick. But with that really high debt, they cant have fast rising rates which is what would happen if growth eccelerated too sharply and if inflation accelerated too quickly...

 

If they fix their fundamental issues that are actually causing the problems, the changes will come gradually and sustainably. IF they keep relying on devaluing the currency with QE to make artificial inflation and use low currency to boost exports  (with labor they dont have) its gonna end in a huge mess

[Luc 4,776]

Deal with the Greeks. Hopefully they'll keep their current privatizations and such and at the same time fight corruption and tax evasion.

[Economy 52,861]

Deal with the Greeks. Hopefully they'll keep their current privatizations and such and at the same time fight corruption and tax evasion.

oh i havent read on it yet. wat was the deal?

 

been busy lately so i havent been as up to date with economy news as i usually am

[Luc 4,776]

http://mobile.reuters.com/article/idUSKBN0LS0V520150224?irpc=932

I'm glad Europe pushed Syriza. These reforms are great and will help fix the long-term problems Greece has. Next to that they're trying to keep improving their competitiveness, keep privatizating, refrain from highering pensions and minimum wages to pre-crisis levels, spend less on the government itself and most importantly fight corruption and tax evasion.