Archives of “budget deficit” tag

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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%

US National Debt is at $11.9 trillion.

  
Analysis, Economy, Education, US Market
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US-DEBTI came across this national debt clock today and it is crazy. It breaks out the complete US balance sheet in real time. Numbers include: US National Debt, US Spending, Debt Per Citizen, Debt Per Taxpayer, US Budget Deficit, US GDP, US Federal Tax Revenue, GDP Per Citizen, Income Tax, Payroll Tax, Total Federal/State/Local Tax Revenue, Medicare/Medicaid, Social Security, Trade Deficits, Imported Oil, Personal Savings, Food Stamp Recipients, Auto Sales, Household Assets, Interest on Debt, Defense/Wars, US Private Debt, Mortgage Debt, Personal Debt, Credit Card Debt, Money Creation and more. It is the craziest counter I have ever seen. Go to USDebtClock.org and see for yourself.

Why is Jim Rogers Sceptical of India's Future?

  
Analysis, Economy, Education
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Investor and Adventure Capitalist Jim Rogers remains deeply sceptical of India’s future. In an interview with Forbes India, he argues the country is sitting on a fiscal time bomb.
 

The finance minister has changed the direction of India’s budget deficit by reducing the target for 2010-11 to 5.5 percent.
You really believe it will happen? Go back over the years and see their previous claims.

He has got a lot of praise for that in India. Still you are not impressed. Why?
Even if it happens, it is not being done by sound budgeting. It is from selling off the family jewels if it happens.

Don’t you think a high deficit was justified last year when the government had to spend and help the economy revive?
No. They are just trying to push the problems out into the future rather than solving the underlying problems. Do you really think the solution for a problem of too much debt and too much consumption is more debt and more consumption?


Are we not living in extraordinary times when we have to follow such flexible policies?
We are indeed. They are making the problems worse in extraordinary times which require tough measures to correct decades of abuse.

The finance minister rolled back some of the economic stimulus measures he had announced last year. Would you have preferred to see a complete rollback than a partial one?
Yes. And more.

If you were to set an agenda for the government, what would that be?
Cut spending and subsidies dramatically. Many studies have shown that countries start having serious growth problems when debt is 90 percent of GDP (gross domestic product). India is now [at] 80 percent and will be [at] 90 percent soon under this budget. The subsidies distort the economy in less productive areas.

Full Interview: LINK

Rogoff Sees Sovereign Defaults

  
Economy, Education
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rogoff01

Feb. 24 (Bloomberg) — Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.”

Click here to read more

Another Massively Interactive European Chart

  
Analysis, Economy, Education
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With all chart porn these days focusing on Europe, the Economist may have outdone itself with this combo set of all key financial and economic statistics for European countries.

Here is the caption provided by the Economist:

 
 

EUROPE is damned if it does and damned if it doesn’t, fiscally speaking. Fears that Greece’s debt crisis presage similar episodes elsewhere in the euro zone—notably in Portugal and Spain—have sent sovereign-bond yields for several southern European countries drifting higher, and have fuelled fears about the exposure of Europe’s banks to indebted governments. Attempts to rein in the public finances may calm bond markets but they also risk weakening growth, which makes life more difficult for exporters in places like China and America, and spells trouble of a different kind for the banks.

The interactive graphic above underlines some of the problems that the European economy faces. In 2009 only Poland of the 27 countries in the European Union managed to record positive growth. Although many countries have now returned to growth, it is generally anaemic. In many countries unemployment rates have not risen as much as you might expect given the depth of the crisis—there are times when making it hard to fire people has some advantages. But the flipside of labour-market rigidity is that the unemployment rate may be “sticky”, because firms have less need to hire as recovery takes hold. That will keep demand growth subdued.

Mediocre growth rates are more of a problem for some countries than others. They spell particular trouble for those that have high levels of debt and that do not have the option to devalue their currencies. That explains why Greece was first to lose the confidence of the markets: with a public-debt-to-GDP ratio of 115% and a budget deficit of 13.6% in 2009, it was the euro zone’s outlier country. Other countries are now scrambling to avoid Greece’s fate. Ireland, another heavily indebted euro-zone member, embarked on austerity early; Portugal and Spain, whose problems stem as much from levels of external and private debt as from government borrowing, have had their hands forced. Others still are pruning before the markets exert real pressure: Britain’s debt has the longest maturity of any EU member but it is still aiming to get its finances in order within four savage years.

Full chart after the jump

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