France cuts frantically as Italy nears debt spiral

The Telegraph ^ | 11/7/2011 | Ambrose Evans-Pritchard

[bruinbirdman]

France has unveiled the toughest austerity measures since World War Two despite the looming danger of a double-dip recession, vowing to slash borrowing by €65bn over the next five years in a last-ditch effort to save the country's AAA rating.

French Prime Minister Francois Fillon

"We wish to protect the French against the grave problems facing other European countries. Bankruptcy is not an abstract word," said premier Francois Fillon.

The belt-tightening plan -- the second package since August, taking total cuts to €112bn -- include a 5pc super-tax on big firms, a rise in VAT on restaurants and construction, and cuts on pensions, schools, health, and welfare. It is the latest squeeze in a relentless campaign of fiscal tightening across the eurozone.

"It is like the 1930s: imposing austerity on countries already in recession is the way into a death spiral," said Danny Blanchflower, a former UK rate-setter.

Left-wing critics have evoked grim parallels with the "deflation decrees" of Pierre Laval in 1935 when France had to take ever harsher measures to preserve the country's viability on the Gold Standard, a gamble that ultimately set off violent street protests.

France's move came amid a further blizzard of grim data from Europe, confirming that most of the region is already on the cusp of recession. Growth has reached a "virtual standstill", said EU commissioner Olli Rehn.

Eurozone retail sales fell 0.7pc in September from the month before. German industrial output plunged 2.7pc, the steepest drop since the depths of the crisis in January 2009. Factory orders fell 12pc.

Mr Fillon said the country must accept sacrifice to "avoid the day where policies are imposed upon us by others," insisting that France would meet its "untouchable" deficit target of 4.5pc of GDP next year -- down

[USFRIENDINVICTORIA]

"France has unveiled the toughest austerity measures since World War Two despite the looming danger of a double-dip recession, vowing to slash borrowing by €65bn over the next five years in a last-ditch effort to save the country's AAA rating."

See the logical fallacy? Saying "despite ..." is begging the question. It assumes that the proposition (that "stimulus", not "austerity" is the right policy) has already been proven -- when it most certainly has not been proven. Quite the opposite.

This is nothing more than mindless parroting* of ersatz Keynesism. (I say "ersatz", because even Keynes would not be calling for more deficit spending, to "cure" the problem caused by large deficits. The threat of a double-dip recession comes from uncertainty created by the overhanging debt load, which is about to crash down upon us. (* "parroting" was not intended as a slur on you bruinbirdman)

[RetiredArmy]

All the time welcoming more and more and more muslins to invade their nation. They are as stupid as we are on allowing low lifes into the nation.

[bruinbirdman]

Perhaps one problem is including government spending in GDP.

One of the ways The Obammunist can claim there is no recession (two quarters of falling GDP) is by increasing government spending more than other factors of GDP decrease.

Right now, Hussein has increased spending 13% more of GDP than the 2008 budget. Take that away and what does the 2.5% growth look like?

yitbos

[Soothesayer9]

In addition to the low-life corporations here who refuse to train any american, instead demanding more H1 Visas for those from muslim/communist countries like China, Pakistan, India and Mexico so they can pay them pennies. The stench of corruption goes all the way up the ladder.

[garbanzo]

One of the things people forget about Keyes is that he wrote when most major economies were on a gold standard and not in the fiat, central bank managed currencies.

[Soothesayer9]

“Right now, Hussein has increased spending 13% more of GDP than the 2008 budget. Take that away and what does the 2.5% growth look like?

Actually it kinda looks like this:

http://townhall.com/video/to-congress-well-never-return-to-pre-obama-unemployment

[Mariner]

bookmark

[USFRIENDINVICTORIA]

Perverse, n’est ce pas?

[familyop]

European ownership of US debt surges 56%: BIS
France 24 ^ | 7/27/2011 | AFP Posted on Wed 27 Jul 2011 12:39:32 AM UTC by bruinbirdman

Excerpt:
"French banks meanwhile also have significant exposure to Italian state debt, holding about 45 percent of the country's public debt, according to BIS data which only includes figures from 24, mostly large economies."

[familyop]

From the same post (link in comment above),...

"Their French counterparts were close behind, lending 31 percent of Greek state debt.

French banks hold 30 percent of Spanish public debt..."

[USFRIENDINVICTORIA]

Good point. That's why Keynes was so concerned with fiscal policy — especially “counter-cyclic spending”. Today, monetary policy (”printing money”) could be more effective (and dangerous). One of the problems with “stimulus” spending, is that the spending is almost never done, when it's needed. We saw that recently, when Obama admitted that there weren't actually many “shovel-ready” projects.

[happyathome]

“In addition to the low-life corporations here who refuse to train any american, instead demanding more H1 Visas for those from muslim/communist countries like China, Pakistan, India and Mexico so they can pay them pennies. The stench of corruption goes all the way up the ladder.”

You can’t “train” someone to be an electrical or mechanical engineer. Takes a college degree. Indians and Chinese are willing to put in the hard work to become real engineers. Many American kids prefer college majors like “____-American Studies” or “Medieval French Literature” (dont’ laugh - got a cousin who did that). And they’re shocked that they are unemployable.

A company that needs an electical engineer will often have to get a foreigner on an H-1B visa. Either that or outsource the job to India or China. Take your pick.

[garbanzo]

It’s the difference between sopping up excess inventory and devaluation. I don’t think Keynes ever advocated the latter. I think even Keynes would find the debt levels we’ve obtained with cheap credit offensive and counterproductive.

[bruinbirdman]

"Many American kids prefer college majors like “____-American Studies” or “Medieval French Literature” (dont’ laugh - got a cousin who did that). And they’re shocked that they are unemployable."

Liberal Arts = good for government work, unless you're willing to start at the bottom and prove you can climb the ladder.

yitbos

[USFRIENDINVICTORIA]

Exactly! That's why I used the term “ersatz Keynesiasm”. Keynes, himself, advocated paying back any debts incurred at the trough of the business cycle, during the peaks. BTW, ironically, the OWS crowd would class Keynes as a 1%er — he made a bundle through investments.