Why the euro crisis still isn’t over, in 1 chart

Everybody likes to pretend that the euro crisis is over.

There are the politicians who never want to hear the word “bailout” again. The central bankers who never want to hear the word “deflation” again. And the people who never want to hear the words “bond spreads” again. But this suspension of belief, of course, hasn’t done anything to end Europe’s depression. Unemployment is still over 25 percent in Greece and Spain, 15 percent in Portugal and 10 percent in Ireland.

So why hasn’t Europe gotten a real — or any — recovery? Well, it’s the debt, stupid.

Now, it hasn’t been the same kind of debt. Greece, as Germany will sternly remind you, has gotten into trouble from too much government debt. So has Italy, though it’s actually been pretty fiscally responsible — hurt more by bad growth than bad budgeting. But every other country that’s run into problems has done so because of too much private, not public, debt. You can see that in the chart below from Standard & Poor’s, which shows total private liabilities — household and corporate — as a percentage of GDP.

(© Standard & Poor’s 2014)

There’s a reason debt is a four-letter word. Every euro that the private sector spends on paying back what it owes is a euro that gets sucked out of the economy. That’s because overindebted households and companies don’t want to take on much more debt, and banks don’t want to make as many loans now that they have to comply with tougher capital requirements.

In other words, deleveraging is creating economic headwinds that Europe hasn’t been able to overcome. Actually, it hasn’t even really tried.

Lees dit artikel door Matt O’Brien verder op The Washington Post

Has GDP outgrown its use?

Governments and the media obsess about it while statisticians endlessly fiddle – but what is the real point of GDP and can it ever be accurately measured?

What do the price of hair-salon services in Beijing and sexual services in London have in common? The answer is that, depending on how you measure them – or indeed whether you measure them at all – the size of the Chinese and British economies will expand or contract like an accordion.

In April, statisticians working under the aegis of the World Bank determined that China’s gross domestic product was far bigger than they had previously realised. China was, in fact, just about to overtake the US as the world’s largest economy, many years earlier than expected. The reason? Statisticians had been overestimating the prices of everything from haircuts to noodles. As a result, they were underestimating the purchasing power of Chinese people and thus the size of the economy.

Last month, British statisticians worked some magic too. They declared that the UK economy – admittedly only a fraction of China’s size – was 5 per cent bigger than previously thought. It was as if they had suddenly discovered billions of pounds in annual revenue at the back of the nation’s couch. Here the explanation was simpler. Among other tweaks to their methodology, statisticians started counting the economic “contribution” of prostitution and illegal drugs.

Gross domestic product has become a ubiquitous term. It is how we measure economic success. Countries are judged by how much they have of it. Governments can rise and fall according to how effectively their economies create it. Everything from debt levels to the contribution of manufacturing is measured against it. GDP is what makes the world go round. Yet what exactly does it mean? Outside a few experts, most people have only a shaky understanding. In fact, the more you delve into the whole concept of GDP – one of the most centrally important ideas in modern life – the more slippery it becomes. In the words of Diane Coyle, an economist who recently wrote an entire book on the subject, “GDP is a made-up entity.”

Lees deze column van David Pilling verder op The Financial Times

Regeringen worden hoeren van het kapitalisme

De Britse overheid heeft aangekondigd de drugshandel voortaan mee te nemen in het berekenen van de economische groei. Drugshandel en prostitutie leveren een bijdrage van circa 10 miljard pond (12,3 miljard euro) aan de Britse economie.

De Europese Commissie in Brussel kwam al eerder tot deze richtlijn om de groei van de economie op te leuken met de economische waarde van criminele activiteiten. Ook de economische waarde van prostitutie, al dan niet illegaal worden daarin meegenomen. Inmiddels hebben Estland, Oostenrijk, Slovenië, Finland, Zweden en Noorwegen, als niet EU-land, deze richtlijn al toegepast. De financiële kwantificering van alle misdaad binnen een land meenemen in de economische groeicijfers is de volgende stap. Wat let Italië en Spanje om hun zwarte economie, die 25 procent deel uitmaakt van de totale economie, eveneens mee te laten tellen in de nationale groeicijfers?

Het water staat de Europese economieën schijnbaar tot aan de lippen om maar enigszins economische groei te kunnen laten zien. De nieuwe rekenmethode voor de berekening van het bruto binnenlandse product (bbp), waardoor de omvang van de economieën binnen de eurozone in grootte toeneemt, was al een schot voor de boeg. Als resultaat daarvan moet bijvoorbeeld Nederland 360 miljoen euro meer aan Brussel afdragen en gaat er meer dan 500 miljoen extra naar ontwikkelingshulp.

Sinds het neo-liberale beleid in Europa de overhand heeft gekregen worden normen en waarden steeds verder opgerekt, alles in dienst van het kapitaal. Door het meetellen van illegale en criminele economische activiteiten in de nationale groeicijfers, komt langzaam maar zeker het moment dat die illegale en criminele activiteiten als minder erg worden beschouwd. De volgende stap is dat veel van deze activiteiten gedoogd gaan worden onder het mom van ‘goed voor de economie’.

Lees verder op Citareg