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‘If you really want a fiscal problem, look at the UK’

  
Analysis, Economy, Education
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uk crisisInvestors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.…

“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”

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the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation.

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As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.

David Rosenberg of Gluskin Sheff also referred to the piece in his morning missive, noting:

Britain is probably one of the few countries in the world where political uncertainty, a renewed round of house price deflation and a sinking currency can manage to elicit a bounce in consumer sentiment (the country has a Greek-like 12.5% deficit-to-GDP ratio, which is double the European average and a household debt-to-GDP ratio that, at 170%, makes the U.S. household sector downright frugal at 130%

U.S debt to rise to $19.6 trillion by 2015

  
Analysis, Economy, Education
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June 8 (Reuters) – The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress.

 The report that was sent to lawmakers Friday night with no fanfare said the ratio of debt to the gross domestic product would rise to 102 percent by 2015 from 93 percent this year.

“The president’s economic experts say a 1 percent increase in GDP can create almost 1 million jobs, and that 1 percent is what experts think we are losing because of the debt’s massive drag on our economy,” said Republican Representative Dave Camp, who publicized the report.

He was referring to recent testimony by University of Maryland Professor Carmen Reinhart to the bipartisan fiscal commission, which was created by President Barack Obama to recommend ways to reduce the deficit, which said debt topping 90 percent of GDP could slow economic growth.

The U.S. debt has grown rapidly with the economic downturn and government spending for the Wall Street bailout, the wars in Afghanistan and Iraq and the economic stimulus. The rising debt is contributing to voter unrest ahead of the November congressional elections in which Republicans hope to regain control of Congress.

The total U.S. debt includes obligations to the Social Security retirement program and other government trust funds. The amount of debt held by investors, which include China and other countries as well as individuals and pension funds, will rise to an estimated $9.1 trillion this year from $7.5 trillion last year.

China’s malls are empty, but whole cities?

  
Analysis, Economy, Education
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The China bears tell us that stimulus spending there is largely being wasted. This report from Al Jazeera offers startlingly strong support for that proposition:

China’s economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585bn.
But doubts remain whether such strong growth can be sustained by public spending alone.

Al Jazeera’s Melissa Chan reports from Inner Mongolia, where  a whole town built with government money is standing empty.

Unknown Facts

  
Analysis, Economy, Education
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-Over the past five years, poverty ratios have remained extremely high despite rapid GDP growth; 77 per cent of Indians survive on Rs20 or less a day. While the top 10 per cent earn First World annual incomes such as Rs5 crores, the wretched of the earth must make do with Rs7,000 a year.

-An additional 100 million people have been driven into poverty by two decades of “free-market” or neoliberal policies. India’s Human Development Index rank has slipped from 121 in 1991 to 134.

-In the Global Hunger Index of the International Food Policy Research Institute, India ranks 65 (of 88 nations). Pakistan’s rank is 58.

-Despite two decades of rapid GDP growth, India scores worse than its neighbours, barring Bangladesh, and also worse than over 20 Sub-Saharan African countries which have experienced economic collapse, civil war, famine and genocides during the past quarter-century.

-None of the 17 major Indian states surveyed falls in the “low” or “moderate” hunger category. Twelve states fall in the “alarming” category, and one — Madhya Pradesh —in the “extremely alarming” category. Four states — Punjab, Haryana, Kerala and Assam — fall in the “serious” category. On a global scale, India’s best-performing state, Punjab, ranks 34th.

-Food grains availability in India has decreased from 200 kg per person a year at the beginning of the 20th century to under 170 kg. As a result, 33 per cent of Indian adults have a body-mass index (weight in kilogrammes divided by the square of height in metres) less than 18.5. (The normal range is 18.5 to 25. People under 18.5 are malnourished, those above 25 obese.)

-If the Wadhwa Committee’s report is adopted, the number of families treated as Below Poverty Line (BPL) would rise to 200 million, in place of the 105 million estimated by the states and the 92.5 million by another official committee.

The EGoM’s draft is minimalist, reneges on the promise of nutritional security, and perpetuates today’s collapsing PDS which supposedly only targets BPL families. Estimates of their number vary from 28 to 50 per cent of the population. These estimates are based on convoluted methods and are unreliable.

The more reliable National Sample Survey (2004-05) found that only one-half of the poorest households had a BPL card. Worse, many non-poor people use influence to illegally procure a BPL card and corner PDS grain.

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