Spain should have been a success story.

Greece was irresponsible and IMO pretty much deserves its fate what with off balance sheet spending and loans, politicians who stop collecting taxes on election years, and a highly bureaucratic system which makes even simple tasks take days to accomplish. Spain is a different story though. Before the crisis Spain's budget was balanced, it's government sector is one of the smallest in Europe, wages and pension obligations were also one of the smallest in western Europe, taxes were relatively low, regulations much less than the rest of Europe, and by & large even government spending was well targeted despite a few white elephant projects (Business Week pointed out one new airport with almost no traffic but that was part of a military base closure and not a wider government spending issue).

By all accounts Spain's government was doing everything right yet the property bubble developed almost entirely due to private banks running a muck. The financial crisis which threatens to plunge Spain's economy into the abyss was almost entirely due to private banks borrowing private money from over seas and then way over lending the money to other private borrowers to fuel a realestate boom which has now gone bust so the banks are left holding collateral which is now, post bust, worth way less than the amount they owe. A liberal would say they needed more regulation to prevent such speculative bubbles from forming in the first place but American conservatives always push for such deregulation so once again Spain did what the right wing wanted them to do.

The government of Spain was actually pretty responsible (other than listening to American conservatives and not properly regulating banks) and the problem was all in the private sector running a muck. What do you folks think?

One of the reasons I made this thread is that on other forums I've seen a lot of self styled "conservatives" reacting with near glee to Spain's difficulty and always they claim it is the result of some sort of mythic socialism by the government of Spain. The problem is Spain's government seems to have acted very responsibly with its own finances and almost all of the trouble is coming from the private sector behaving irresponsibly.

I just don't get how mythical "socialism" had anything to do with how private banks acted foolishly or why so many American conservatives are so gleeful about countries like Spain slipping into depression. Especially since this is going to cause big problems for the US economy.

http://www.city-data.com/forum/poli...s/1596940-how-can-repubs-so-gleeful-over.html

There are a lot of stupid self proclaimed conservatives in that thread and I thought I'd post it before anyone denied Republicans are getting gleeful about Spain's troubles or wanted to deny that tons of Republicans still have no idea what caused Spain's financial crisis. It would be hilarious to see some many people blowing bullshit about "socialism" if it didn't mean near economic collapse for tens of millions of people.

One thing this crisis does show is that concept of putting all the European economies under the Euro was a bad idea. It was supposed to be the world's new reserve currency, replacing the greenback. Now it strikes me as a symbol of political hubris. Kind of like that early pyramid that collapsed under its own weight because it did not have a proper foundation.
Here's an interesting article I came across. It's a blog, so I'm not judging its accuracy or the author's qualifications, but I will say it seems to match what I've come to understand about the problem and if nothing else is worth considering. LINK

No one should be gleeful over shit like this. People may disagree on policies and economic ideas, but misery is bad regardless.

I'm not seeing any mention of Spain's "Green Energy" boondoggle.




Leaked Spanish Report: Obama’s Model ‘Green Economy’ a Disaster

A copy of the report you can read for yourself. It's all the evil banks' fault though. /sarc

$5 billion out of a $1.411 trillion is not why they're having a banking crisis. This is just another example of why only morons read garbage like Pajama Media. BTW the budget was balanced, their taxes were one of the lowest in western Europe, wages and pension obligations were also one of the lowest in western Europe, etc...

When a country gets 80%+ of it's electricity from domestically produced coal and you try to claim that a tiny subsidy for green power is the root of all their banking troubles... Well, at that point I just have to question your intelligence.

The problem is the banks are bankrupt because they went on a huge speculation binge loaning a quarter of a trillion dollars to developers who built millions of new beach front apartments which now aren't worth half what it cost to build them because no one wants to buy them.

BUMP.

What is happening now is revealing. Spains banks are fucked, and the ECB/Germany/austerity hawks are demanding that Spain takes their debts onto its sovereign balance sheet, rather than bailing them out directly, meaning that Spain would need to inflict even more hardship on its people.

(There isn't even a suggestion that they should fail. )

So far, Spain is refusing. Who will blink first? It's a dangerous game of brinkmanship.

It's rumored that Spain's private banks will be getting the first part of their bailout from the EU today.

My understanding of the speculation is that the Spanish sovereign will apply for aid. Meaning that Spain will have blinked first.

It's likely to be light on conditionality. But that doesn't change much. Once again we see taxpayers being forced to bail out the financial system.

If the banks fail then the German and French banks (and no doubt British Banks were involved too) would start failing too. Spain no longer has a central bank so it can't do what the Federal Reserve did the bailout US banks so now they're in something like a catch 22. If they do nothing and let the banks fail then Spain immediately goes into a liquidity trap as banks fail and the amount of money in the economy contracts violently while there is a very likely spill over effect in France and Germany as their banks also loose big... But Spain doesn't have the money to bailout the banks nor, really, does the ECB (it doesn't have half of the powers of the Federal Reserve or even the old independent central banks had). Taking on the debt nationally might be the only way to prevent the banking crisis but it's extremely unfair to the common man, it encourages future bankers to also run a much (too big to fail), and it doesn't hurt the bankers because they've already stuffed their bonus money from years past into numbered accounts in the Caribbean.

The ECB could be given powers, as they should have had all along. Or the debt should be taken on centrally. It is outrageous to use this as a means to dismantle the social contract.

I'm unsure exactly what links Hood wants me to provide so I'll start with the budget surpluses.



As you can see Spain began a series of major budget reform processes in the mid-90's with the deficit shrinking to just fractions of a single percent by 2000 and they actually had three years of rather large surpluses despite tax cuts in the years up to the financial crisis. Since the crisis started they've gone full hog austerity but the deficit just kept getting worse. It's the classic downward spiral where you cut, this causes the economy to contract so you cut more, which causes the economy to contract more, etc...

I can generate graphs over at Eurostat showing government sector vs private sector, public debt to GDP, and other such things though it would be a lot of work. Or Hood could just accept the fact that Spain's public sector really is one of the smallest in western Europe, that the Spanish really do make less than other western Europeans, and so the amount they get from their pensions is also smaller. Someone with a passing knowledge of Europe should already know this to be true though.

You moron, the surpluses were because of tax cuts. Every single time taxes go up, the government gets less money. Every single time they go down, the government gets more money. Every. Single. Time. You can only take the lion's share a few times before you get nothing. Don't get greedy and you stay flush. Apparently, this self-evident fact is a mystery to the state, and to statists like you, no matter how widely or how frequently it proves out.

The problem is you're not very bright and you're highly ideological. The raised taxes and cut spending in the mid 90's to close their deficit and, as you can see, that worked in closing their deficit. The real main reason they had a surplus for those three years is it was the height of the property bubble so lots of people were flipping houses thus producing capital gains on paper which were taxed by the government.

You see, if you knew even the slightest bit about the topic then you wouldn't be mumbling nonsense. The tax cuts in started as the economy slowed (and they were mostly targeted at trying to get the stalled property market back going) but it was too late, the bubble popped, and it's been a world of shit for them ever since.

BTW since 2009 the ECB has pushed austerity budgets on them demanding big spending cuts and big tax increases in order to balance the budget. This is pretty standard medicine but one which just hasn't been working in a lot of cases lately because it crushes domestic demand. Typically, a country going through austerity can at least rev up exports to increase employment but given that the whole global economy is having trouble (even India and China are seeing growth collapse) there are very few international buyers out there to export to.

No, the problem is that you're a stupid doo-doo head.

And the deal is done for the first 100 billion.

You're a moron. By this logic, the optimum tax rate is 0%.

WOW that's fucking dumb.

That's not what the Laffer Curve says. Laffer doesn't say that.

Cut the tax to zero. You don't get more money.

There is a point where as a general rule you will get less money by raising taxes because of the cost of the tax on the economy. The debate is over where that point is - serious economists talk about it being between 30-75%, which is a huge difference, and there's no broad consensus as to where it lands.

THAT's the Laffer Curve.
http://en.wikipedia.org/wiki/Laffer_curve


Ultimately, there's no direct correlation between the top marginal tax rate and GDP growth - the highest GDP growth in the country's history corresponded to the highest marginal tax rate.

While I believe taxes can be an inhibitor of growth, its clear that there's far more going on than just the tax, and that other signals can be far more dominant than the tax rate.

What the tax rate does is piss off the rich people, so there's huge amounts of propoganda out there about it because they can afford to pay people to shout out their bullshit.

More:
http://www.time.com/time/magazine/article/0,9171,1692027,00.html

In other words, bullshit propaganda brought to you directly by the people that benefit from lower taxes, and can afford to get their message out.

And more:

Yes. It's also clearly what they are no longer doing - we have account after account after account of extremely rich people and corporations paying reduced tax rates, or even getting money from the government!

Are the rich now firing their lawyers and accountants and paying their taxes?

We all know the answer to that.

Read more: http://www.time.com/time/magazine/article/0,9171,1692027,00.html#ixzz1xONS5RU0

You don't say.

Republicans, the new moocher class.

They want roads, infrastructure, defense, a space program.

They just don't want to have to pay taxes.

Or they want government coercion out of most of those things. The bastards! How dare they object to being told what to do!

"Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all." - Frédéric Bastiat

Ya don't say!

Right. Because if someone else owned the roads or the army, they'd never, ever tell you what to do.

Of course, you could always sue... no, wait, you said you wanted no taxes, so there wouldn't be any courts.

And if the enforcement mechanisms were all privatized, then even if you had courts, it wouldn't matter.

There's going to be rules, little boy. You are going to have to follow them because other people are going to have far, far more power than you do.

The question is whether or not you will have any rights to go along with those rules.

I didn't say. You said, then argued against what you said.

Its the most common logical fallacy on the internet.

http://en.wikipedia.org/wiki/Straw_man

Well, following the Spanish bailout, the markets rallied for less than 24 hours, and Spanish bond yields are on the way up again.

Every kick of the can buys less time, for more money.

http://www.zerohedge.com/news/europe-brings-out-capital-controls-bazooka

Capital controls. Oh-ho-ho.