Austerity as ideological opportunity As prominent economist Ha Joon Chang has written many times, the UK's problems go far deeper than the cuts agenda. British debate on economic policy is getting nowhere. The coalition government keeps repeating that it has to cut spending in order to cut deficits, no matter what. The opposition has been at pains to explain … that trying to cut deficits by cutting spending in a stagnant economy is a largely self-defeating exercise, as it reduces growth and thus tax revenue.
Email MoneyWatch Perhaps the largest concern investors have coming out of the election relates to our debt burden. Well, you should be worried. It's why stocks weren't trading at historically high valuations even before the election.
A recent study measures the negative impact a high debt-to-GDP ratio has historically had on world economies, and the results haven't been favorable. Professors Carmen Reinhart and Kenneth S.
Specifically, they looked at periods where debt-to-GDP exceeded 90 percent for at least five years, as prior studies have shown that to be the point when it starts to have a negative effect.
As a side note, the U. How to survive the crummy economy: Do nothing Perhaps the biggest finding is that high levels of public debt have been associated with lower growth. The vast majority of the episodes -- 23 of the 26 -- coincided with substantially slower growth, and average annual growth was 1.
Another issue is that these episodes tended to last a long time. The average duration was 23 years, and 20 of the 26 episodes lasted more than a decade.
The long duration suggests that even if such episodes were originally caused by a traumatic event such as a war or financial crisis, they took on a self-propelling character.
It also implies that the cumulative shortfall in output from debt overhang is potentially massive -- with an average duration of 23 years, the cumulative effect of annual growth being 1 percentage point slower is GDP that is roughly one-fourth lower at the end of the period.
Adding to the concerns is that today's high debt burdens don't include the actuarial debt implicit in underfunded old age pension and medical care programs.
The authors note that the public debt overhang problem that already affects some advanced economies has the potential to affect many others including the United States sometime soon, with consequences possibly as large as the ones studied. The reason is that "public debt is projected over the next decade or two to rise from its already high levels in many advanced economies, as the contingent liabilities now built into old-age programs come to pass.
At present, the momentum is for public debt to become substantially worse over time, even when or if more sustained and rapid economic growth resumes. Raising taxes or ramping up inflation to deal with the debt both have a negative impact on investors' willingness to invest.
High levels of public debt also call into question whether the debt will be repaid in full. That can lead to a higher risk premium, and that's associated with higher long-term real interest rates, which in turn has negative implications for investment as well as for consumption of durables and other interest-sensitive sectors, such as housing.
There's an old saying "That which cannot continue, will not. However, the evidence shows that soaring government debt has resulted in slower economic growth.
It also suggests that we should be very wary of arguments for any further short-term fiscal stimulus, as the long-term secular costs of high debt service could easily outweigh any potential short-term benefits.When discussing the student debt crisis, most people focus on the rapid growth in outstanding debt and several recent milestones.
For example, student loan debt exceeded credit card debt in The European debt crisis (often also referred to as the Eurozone crisis or the European sovereign debt crisis) is a multi-year debt crisis that has been taking place in the European Union since the end of Several eurozone member states (Greece, Portugal, Ireland, Spain and Cyprus) were unable to repay or refinance their government debt or to bail out over-indebted banks under their.
Since Greece’s debt crisis began in , most international banks and foreign investors have sold their Greek bonds and other holdings, so they are no longer vulnerable to what happens in Greece.
The global financial crisis, brewing for a while, really started to show its effects in the middle of and into Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems.
Corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national governments, civil society, judiciary functions, large and small businesses, military and other services and so on.
1. You don't have to owe! It is entirely possible to use credit cards regularly and stay out of debt forever. How? By only charging what you can afford to pay when the bill arrives.