DawgTalkers.net Forums DawgTalk Everything Else... European Austerity = US Future?

For those of you who still don't think the national debt is a big problem, but just something that Republicans in congress are using as an excuse to not pass legislation, here's a look into the future of the U.S., except we won't have anyone to bail us out:

Greek riots, Spanish anti-austerity marches shatter Europe’s relative financial calm

ATHENS, Greece — Europe’s fragile financial calm was shattered Wednesday as investors worried that violent anti-austerity protests in Greece and Spain’s debt troubles showed that the continent still cannot contain its financial crisis.

Police fired tear gas Wednesday at rioters hurling gasoline bombs and chunks of marble during Greece’s largest anti-austerity demonstration in six months. The protests were part of a 24-hour general strike, the latest test for Greece’s nearly four-month-old coalition government and the new spending cuts it plans to push through.

The brief but intense clashes by several hundred rioters among the 60,000 people protesting in Athens came a day after anti-austerity protests rocked the Spanish capital.

In Madrid, thousands of angry protesters again swarmed as close as they could get Wednesday night to Parliament, watched by a heavy contingent of riot police. There was no fresh violence, but the demonstrators cut off traffic on one of the city’s major thoroughfares at the height of the evening commute.

The protesters chanted for the release of 34 people detained Tuesday night in clashes that injured 64 others. They also demanded new elections to oust Prime Minister Mariano Rajoy and his conservative government, which has imposed cutbacks and tax hikes, deepening the gloom in a country struggling with recession and unemployment of nearly 25 percent, the highest among the 17 nations using the common euro currency.

Spain’s central bank warned Wednesday the country’s economy continues to shrink “significantly,” sending the Spanish stock index tumbling and its borrowing costs rising.

Across Europe, stock markets fell as well. Germany’s DAX dropped 2 percent while the CAC-40 in France fell 2.4 percent and Britain’s FTSE 100 slid 1.4 percent. The euro was also hit, down a further 0.3 percent at $1.2840.

The turmoil Wednesday ended weeks of relative calm and optimism among investors that Europe and eurozone might have turned a corner. Markets have been breathing easier since the European Central Bank said earlier this month it would buy unlimited amounts of government bonds to help countries with their debts.

The move by the ECB helped lower borrowing costs for indebted governments from levels that only two months ago threatened to bankrupt Spain and Italy. Stocks also rose. Media speculation about the timing and cost of a eurozone breakup or a departure by troubled Greece faded.

However, the economic reality in Europe remained dire. Several countries have had to impose harsh new spending cuts, tax rises and economic reforms to meet European deficit targets and, in Greece’s case, to continue getting vital aid. The austerity has hit citizens with wage cuts and fewer services, and left their economies struggling through recessions as reduced government spending has undermined growth.

“Yesterday’s anti-austerity protests in Madrid, together with today’s 24-hour strike in Greece, are both reminders that rampant unemployment and a general collapse in living standards make people desperate and angry,” said David Morrison, senior market strategist at GFT Markets.

“There are growing concerns that the situation across the eurozone is set to take a turn for the worse,” he said.

Spain has struggled for months to convince investors that it can handle its debts. The government is to unveil an austere 2013 draft budget and new economic reforms Thursday. Many believe they could be a precursor to a request for financial help from the ECB. The government has already introduced €65 billion ($83.5 billion) in austerity measures designed to bring down its deficit.

The country is suffering its second recession in three years, with a predicted 1.5 percent economic contraction in 2012. The Bank of Spain warned Wednesday the recession could be deeper.

Spain has come under pressure to tap the ECB bond-buying program that has been partly designed to keep a lid on the country’s borrowing costs. So far, the government has been reluctant to ask for help for fear of the conditions that may be attached.

Spain’s IBEX stock exchange fell in 4 percent on Wednesday while the interest rate on its 10-year bonds rose 0.26 percentage points to 5.99 percent on concerns about the country’s economy and that it is taking too long to make up its mind about applying for ECB assistance.

“The demonstrations remind us that central bankers cannot solve the crisis alone. The ECB’s plan to intervene in sovereign bond markets can only succeed if governments in crisis countries can convince their electorates that ongoing austerity and reform are necessary to avoid bankruptcy,” said Martin Koehring of the Economist Intelligence Unit.

“This, however, is increasingly challenging without the return of economic growth.”

Greece, meanwhile, has been dependent since May 2010 on billions of euros in two rescue loan packages from other eurozone countries and the International Monetary Fund. In return, it slashed salaries and pensions and hiked taxes in an effort to reform an economy derailed by decades of overspending and corruption.

Although Greece accounts for only about 2 percent of the eurozone’s total economy, its crisis has shaken the euro and led to concern it could destabilize other, much larger economies in the 17-nation bloc. Greece is in its fifth year of recession, with unemployment above 24 percent.

Shortly before Greece’s strike got under way, Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras hammered out a €11.5 billion ($14.9 billion) package of spending cuts for 2013-14 demanded by the country’s international lenders, along with another €2 billion in improved tax collection.

The government has struggled to come up with austerity measures acceptable to the country’s creditors, with disagreements arising between the three coalition parties. The next payment of €31 billion hinges on the further cuts.

Stournaras was briefing the other two party leaders Wednesday, and Samaras was to meet with them Thursday morning. If they agree, the package will be presented to Greece’s debt inspectors.

Wednesday’s strike shut down Greece’s famed Acropolis and halted flights for hours. Ferry services were suspended, schools, shops and gas stations were closed and hospitals functioned on emergency staff.

Government spokesman Simos Kedikoglou said the limited violence and what he called a smaller turnout than opposition parties had hoped for showed that “Greek society understands what the government is doing is the only possible solution.”

Looks like fun!

If we'd just live within our means, there'd be no need for "austerity measures" at all..... but, I'll be damned if we won't try to emulate Europe right to the point of our own demise.

I had a whole reply typed out earlier, then lost it when I went to submit it ....... but the gist is this .....

We could be hit even harder, because we print our own currency, based upon the full faith and credit of the US government. This currency is used in trade with other countries, in addition to being used domestically. Greece and Spain have had someone else push the brake pedal. There is no external entity who can do this to the US before we go completely over the cliff, into the lake, and are drowning in a sinking car. Only we can do this internally, and no one seems willing to do so.

If the US gets to the point where no one else will buy our debt, then we'll be in trouble. Other countries will refuse to accept our currency. Inflation because of a devalued currency will run rampant. Peoples savings will be worthless. Business reserves will be worthless.

Further, once business reserves are worthless, we'll really see employment plummet. People bring up the Great Depression with regards to the recession we went through in 2008-2009 .... and there is one similarity. Businesses that survived did so by cutting employment down to their minimal possible levels. During the Great Depression, not everyone was unemployed. This is a really heavy misconception. We were a far more industrial/manufacturing economy at that time, so when manufacturing bottomed out, so did a lot of manufacturing jobs. I'm not looking it up, and the unemployment rate did hit something like 25% ..... but some people still had jobs. In fact, that 25% rate was only for a couple of years. I'm not an expert as to how they calculated unemployment back then, but I would have to guess that it wasn't nearly as politically favorable to the in power administration as it is today.

Anyway, like in the Great Depression, not everyone was out of work during the most recent recession. If we ever get to a major and horrific event like Greece, but on a US scale, we'll see unemployment run amok. Who will work for worthless wages? Who will try to manufacture for worthless dollars? What service sector will be able to survive with inflation devalued dollars?

Yeah, if anything like that ever hits the US, we'll go down in devastating fashion, and take down much of the world with us .... because it will be worse than anything we have ever seen. Only those who oppose us will benefit.

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but just something that Republicans in congress are using as an excuse to not pass legislation,

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I am a registered Republican and even I will admit that they had no problem passing legislation and spending money BEFORE Obama got in office. So their new found desire to stop spending money now comes across as more than just a little disingenuous.

I mean I agree that they ALL need to think very carefully before spending a dime... but this moral highground of fiscal responsibility that the republicans are trying to claim looks very politically motivated.

That said, yes, we are rapidly approaching a similar kind of meltdown. Can you imagine as we give healthcare, social security, medicare, food stamps, welfare, unemployment to larger and larger numbers of people what will happen if/when we have to stop giving it to them? That is what some parts of Europe is experiencing.

Serious question going off of your post, DC You don't have to answer but you can if you want.

How come, for a very long time, many nations in western Europe have been able to provide healthcare, education (through college), and other services? Is it because of higher taxes and lower populations per nation?

I know the education systems across the pond are much more selective and teach nowhere near the amount of students we teach here in The United States. I've heard the argument that many come here for healthcare due to certain things but I've heard the other side of that argument too.

There are so many examples of things like this.

If you start giving people free stuff, when you take it away theyre UPSET. I have one incredible example from a friggen TV show. Ladies will know this more, the gf had me watching Friends one day...

Courtney Cox was making chocolates to leave on her door for her neighbors in an attempt to make friends within the building. She left em there for free and everyone loved em so they wanted more...by the end of the episode she wasnt making them quick enough or enough and the people were legitimately mad at her...and there have been several tv things like that too...

Essentially thats what were doing. When you give hand outs...people love them at first...but then they want them, and then they depend on them...and if you take it away, theyve been conditioned to think that they just should have it, or that they deserve it...Then they dont work to make it on their own, or get it on their own...they just want it, need it and demand it...

Given leads to entitlement leads to hositility

As I said in the "Veteran's Job Bill" thread, I have no problems blaming Bush for starting us down this path. Obama has failed to learn from this mistake, and has actually done the opposite and increased spending even more.

What angers me is when I hear people say things like:

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this whole GOP tactic of using the national debt as a reason to challenge the every bit of legislation that comes before Congress is just a charade

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This situation is not a charade. It's real. Failure to learn from history is a sin; failure to learn from current events is an even greater sin.

If you look at the falls of powerful nations throughout history, you can't help but see that we are traveling down a similar path. Already, we are seeing problems in Europe linked to national debt. For some to turn a blind eye and label this as simply political fear mongering is ignorant.

Don't get me wrong, politics does play a role on voting down certain legislation (this is Congress we're talking about), but to call it all a charade is just

Not only that, but how many more credit downgrades can we receive before it begins to affect the cost of credit on our national debt?

Right now, any and every .25% of a bump in the rate we pay on our debt costs us an additional $37 billion in interest.

The reality of the problem exists, but the charade lies in the complaints of the political opposition, i.e. if the GOP takes over, they're not going to seriously address the debt, and the Dems will suddenly care deeply about the debt.