The Day After... Italy.

[Wonkish1]

1) Debt is previously spent money. It can't be invested. If you are talking about new debt that would be a different story, but its not that easy to take on new debt when your at 80% DTI already.

Why is there no capital when a sovereign default occurs? There is obviously a lot less available capital when there is a lot of debt already out there. You disagree with this?

Are you serious? In a sovereign default, the capital markets are collapsed. If you are a start-up you will not get VC funding because your country will be in crisis and all the banks will likely be kaput.

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I would point to Greece's glorious 170-year run from 1830 to 2000 when it went from a backward agrarian province of the Ottoman Empire to a modern, industrialized country with a per capita GDP of 90% of France as evidence that not only was the Drachma sustainable, the modern Drachma era was by far the best in the entire history of Greece.

Edit: And as to default, Greece did not default under the Drachma either since WWII.

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I think economics is complicated but that fundamentally, the problem with France and Italy is their currency membership, not their debt level.

1) How long does that last for? It surely doesn't forever! ....Btw, who tries to raise capital in the middle of sovereign default?

2) Who in Europe didn't go from an agrarian society in the 1800s to an industrialized country by 2000?

3) Even if we looked at the United States which is in a better position than France and Italy and isn't in a European style currency union it would be quite obvious that there will be sizable changes in the budget going forward just by taking into account future social security and medicare liabilities alone. To say that Italy and France's budgetary problems are caused by the Euro is I think a pretty hard case to make. Also since Germany's currency devalued as a result of joining the Euro and made their budget situation better are you saying that France's currency appreciated like Greece as a result of joining the Euro?



At some point it becomes in the interest of the Democrats to realize that this stuff is real its not made up, and so that they can save their welfare state they are going to have to prioritize the list of government programs they care about and draw in the line in the sand based on the numbers what is acceptable to lose and what isn't. Because if they don't it will just be a constant and never ending deterioration in benefits as the upper limit of public debt becomes a never ending pressure on the welfare state and over time dismantles more programs than what would occur if you got the problem under control today. But instead many on the left choose to act as though debt, budgets, earnings, and income are all infinite.

[Wonkish1]

Yes, I have no doubt the franc would be worth less than $1.35-$1.40 today.
However, it is also true that the United States has a much larger deficit than France or Italy or Spain. Our current account position is far more negative. The reason why we're not facing a sovereign debt crisis is because we have our own currency, plus it's the reserve currency of the world. Kind of unfair, which the French have never failed to point out (h/t DeGaulle)

That's why my new plan has the Chinese selling dollars to buy euros in exchange for the ECB creating euros to buy Italian government bonds. You do know who pays the cost of that plan, right? Us! But we deserve it!

The exact exchange rate isn't an example of appreciation or depreciation because you have to take into account the starting values given the supply and denominations. Beet come on this is pretty basic, but don't worry you've proven your knowledge elsewhere so I'll let that slide.

The determination of whether or not France has devalued or appreciated as a result of the Euro is based on the movement before and during the switch not what the initial Franc exchange rate was.

While the Fed and the dollar being the reserve currency of the world are factors they are definitely not the 2 biggest factors as to why the US doesn't have to deal with these kinds of problems.

The real reasons are because the US had a much lower starting point in regards to debt to gdp before the crisis, and because US treasuries are considered the worlds ultimate safe haven at least for now.

[Wonkish1]

Spain and Ireland had very low government debt to gdp before the crisis. Lower than the US. Of course it was a different picture if you looked at total debt to gdp.

It was also true in Iceland.

All the examples can show that you can either have a small starting point and an explosion in deficits against a shrinking economy that can cause a sovereign debt crisis or you can have a high  starting point(like Italy and France) and run medium sized budget deficits and also have sovereign debt crisis.

The US had a lower starting point than Italy and France *and* they have smaller deficits than Ireland and Portugal.

[Wonkish1]

Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

[Wonkish1]

Also I don't think anybody can really dispute the fact that the ECB just broke the law and intervened in the Italian debt auction.

[Wonkish1]

Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Tax evasion in Greece is a major part of why they are in the predicament they are in.  If the wealthy paid taxes at the same rate that public sector employees do that would certainly help.  It makes no sense to implement austerity measures on the people who have been dutifully paying taxes all this time while the wealthy who are the biggest evaders are given a free pass.  If you take that into consideration those riots you have been seeing on TV might make a little more sense.

I guess you have problems reading because that austerity package isn't for Greece its for Italy! Beet and Italianboy figured that out, but gee who would have guessed that you wouldn't figure that out?

[Wonkish1]

Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Well it's a first step. I don't think Mario Monti is coming in, in order to sit on his lap and do nothing further to reform the Italian economy and budget.

As to your proposals, whether they are effective or not depends on what the Italian budget is, no? In the case of Greece, they cut the public employees but the bigger problem was employees of government-owned enterprises, and even more than that, social security payments, so merely cutting the public employees was not sufficient.

Do you have a breakdown of the budget of the Italian republic?

Fair enough, but you can see that I was just making a point about how laughable this "austerity package" is. I didn't give those as examples of the *best* options by a long shot.

[Wonkish1]

You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?

So...why did you lecture someone talking about Italy with evidence from Greece then? That doesn't make much sense?

Because he does it all of the time. He shoots his mouth off on something he doesn't have a clue about then gets into trouble and doesn't take responsibility for it. How Link isn't a *complete and universal* joke(as opposed to just a joke) on these forums already I have no idea.

[Wonkish1]

Disagreeing with Wonkish1=shooting your mouth off on something you don't have a clue about

This is so funny you got caught red handed not even knowing which country I was referring to and now you can't even admit it. Your just making yourself look like a bigger hack and a liar every time you post.


This is definitely not the first time either. You've done it numerous times in the past. Remember this one: https://uselectionatlas.org/FORUM/index.php?topic=141747.30? You got caught not even understanding that I was criticizing people in my own party and then acted like it was me that changed positions. That was I believe the first of numerous times you've embarrassed the he!! out of yourself on here.

Keep digging buddy!

[Wonkish1]

That wasn't a rhetorical question. You seem to have a lot of detailed information about this stuff. Does anyone here have a link to an English language Italian budget?

I may have a decent amount of detailed information, but everybody's got their limits. I've never seen what the Italian budget looks like. I could probably guess what a few areas look like, but I'm not positive. Since I know that most of Italian police are national police not local police if that is true in other public functions I bet that their is a lot of payroll in the Italian budget relative to other countries(a lot of payroll shows up in other countries in local budgets and 'aid to so and so' locality shows up on the federal budget).

But other than that I bet your guess is as good as mine.

[Wonkish1]

My post quite clearly says Greece in bold letters.   If you choose not to read that I can't help.  What I have noticed is that you have not offered any evidence to refute the assertion that perhaps cracking down on tax evasion in Italy is not a bad idea.  Your unwillingness in multiple posts to address this point tells me that it has some merit.  You can type as many belligerent posts calling people stupid and idiots as you want.  That isn't debating.

I don't care if its a good or bad idea! The point is that you thought I posted the austerity package of Greece not Italy, and now your lying to cover it up just like you always do. You are a liar and a hack and every time you post on here without admitting that you mistakenly thought that package was Greece's you dig yourself into a bigger and bigger hole and make yourself out to a bigger and bigger liar and hack.


As to the tax evasion proposals they're probably not going to do much for 2 reasons. 1) The real money is in accumulated tax evasion from the past, but people  don't keep the amount of money they committed tax evasion with around they treat it like its theirs(obviously) so most times if you find it they don't have the money to pay. 2) Limiting cash transactions to 2,500 euros I doubt will net much because most tax evasion in Europe and the US occurs for small things such as: server cash tips(US), lawn care and handyman stuff, taxi's and transportation, etc. While a 2,500 euro limit will cut back on transactions where 1 party doesn't know the problem is that it will do nothing to affect transactions where both parties are okay with tax evasion.

^^This answer still has nothing to do with the fact that you are a liar and hack who wont admit that you thought that austerity package was for Greece.

[Wonkish1]

I found some national accounts information here.

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

It seems fairly standard. A quick glance at the broad line items nothing particularly jumps out at me. It's not clear what "general public services" consists of, however.

Some observations here!
1) If you use general government its total government expenditure on there with states, provinces, municipalities, etc. added in(that is why you don't see differences between countries that have particular services handled locally vs. nationally)
2) Once you click 'central government' only then you start to see where the problems are relative to other countries. As I guessed before their public payroll is really high relative to other countries(I used Belgium, Denmark, and Spain and didn't count social security funds) Italy has over 20%, Belgium is 4%, Denmark is 12% and Spain is about 11%.
3) Just like most countries its the social security system that is really a huge chunk of the central budget(since its the federal government that takes care of it you have to add central and social security together). Its about 50% in Italy, its about 50% in France, its about 40% in Belgium, its 18% in Sweden, and 32% in the US.

[Wonkish1]

The point is that you thought...

I don't know who appointed you the final arbiter on everything connected to this forum.  Due to lack of clarity I have had my posts misinterpreted and I have misinterpreted other people's posts.  What I have never seen is when there is a simple misunderstanding anyone doggedly go after another person claiming to know what they actually meant and calling them a liar.  There are times I have misinterpreted other people's posts and jumped all over them and when it was pointed out I apologized.  Other times I have asked for clarification prior to jumping all over them.  Sometimes I have asked three or four times until they finally unambiguously say exactly what they meant.  I do not then call them liars.  Frankly this is the first time I have seen this type of extreme behavior, but sadly I know it won't be the last.

What crap! I'm not going after you for making a mistake! I'm going after you because you never admit it you just continue along trying to BS your way through so that you never have to admit you were wrong! When I make a mistake I admit it. Remember when I made a mistake about the corporate tax revenue in Ireland and admitted that it was mistake? What did you do, you remember? You turned into a d*ck and tried to null and void everything I had ever said on the topic because I recollected the Irish total revenues as the corporate ones. You think that is how your supposed to treat someone that admits a mistake(to rub it in their face and blow it up)?

Your emphasis is completely wrong! The key is to admit mistakes when you make them and the other side should be gracious enough to accept them as mistakes and move on. You instead never admit mistakes and then turn into a d*ck when someone else admits a mistake to you.

[Wonkish1]

If you would have just said "Oops my mistake, but who's to say this isn't an issue in Italy as well" I would have left you alone. But instead you try to act like you didn't make one so now I'm going after you for being a liar unwilling to admit any mistakes!

[Wonkish1]

If you would have just said "Oops my mistake, but who's to say this isn't an issue in Italy as well" I would have left you alone. But instead you try to act like you didn't make one so now I'm going after you for being a liar unwilling to admit any mistakes!

Oh, the irony.

Really how so?

[Wonkish1]

You instead never admit mistakes and then turn into a d*ck when someone else admits a mistake to you.

1) The thread you linked to quite clearly has me saying I'm sorry to you.

2) You need to take it easy on calling people on this forum "d*cks."  I'm not the one that continually goes into profanity laced tirades and calls other forum posters "stupid" and "idiots."

3) There are other people that would like to enjoy the economics forum.  Everything that can be politely said on this topic has been said.  I have nothing further to add.  Until the next misunderstanding... Adieu.

1) Nice apology you also blamed me for the misunderstanding by incorrectly saying that I had "180ed"

2) Fair enough, but you'll also notice that there are a large number of people on these forums(including tons of Democrats) that I treat politely and a small group of about 7-8 people that I frequently slap around because they are posting things that deserve it.

3) Well if you don't want to go through this again and again I'll point out the 3 things that if you didn't do these types of things wouldn't be so common.
-When you don't know much about a topic just post your link and say "How would you respond to this" and I'll do so. But when you post something about a topic you don't know much about and say the other person is wrong using a link you don't understand then your inviting embarrassment for yourself and ridicule from me.
-When you make a mistake admit it and move on

[Wonkish1]

I found some national accounts information here.

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

It seems fairly standard. A quick glance at the broad line items nothing particularly jumps out at me. It's not clear what "general public services" consists of, however.

Some observations here!
1) If you use general government its total government expenditure on there with states, provinces, municipalities, etc. added in(that is why you don't see differences between countries that have particular services handled locally vs. nationally)
2) Once you click 'central government' only then you start to see where the problems are relative to other countries. As I guessed before their public payroll is really high relative to other countries(I used Belgium, Denmark, and Spain and didn't count social security funds) Italy has over 20%, Belgium is 4%, Denmark is 12% and Spain is about 11%.
3) Just like most countries its the social security system that is really a huge chunk of the central budget(since its the federal government that takes care of it you have to add central and social security together). Its about 50% in Italy, its about 50% in France, its about 40% in Belgium, its 18% in Sweden, and 32% in the US.

Beet, curious about your comments on this. At first I thought that "total" was just federal budget. Did you make the same error? Then I figured out that it combined federal, state, and local and then once you clicked 'central' you get just the federal budget(which is the issue when your talking Italian sovereign debt) you start seeing large differences between various countries.

[Wonkish1]

BTW,the cuts on the police budget have already been ridicolous.
Policemen can't even afford to pay for the car's gas. They often have to pay with their own money.

I have no idea how many police per capita you guys have relative to other countries, but assuming its similar amount(which it does look like you do) I find it odd that making cuts to police in a county like Italy and in municipalities in the US is more politically feasible than cutting the large amount of bureaucrats, cutting public sector compensation, privatizing administrative functions when its cheaper, selling government assets, and making small changes in public benefits including in areas such as welfare, social security, and healthcare. I mean in the US certain violent cities will cut police before they close a library.

That said right now any cuts are a good thing in a country like Italy because the only dispute your country is having right now is between a lot of cuts today or even a ton more tomorrow and yes those police officers will be screaming really hard down the road if you pick the latter.

[Wonkish1]

Already complaining about cuts? italianboy8, the cuts have just started! Have you been paying attention at all? The only way you can avoid cuts is to exit the euro, and you've already said no to that. Sometimes I really wonder if a foreigner understands Italy's predicament better than Italians themselves.

wonkish1: I read your post. I did see the difference between central government and general government expenditures. I did see that if you look at general government expenditures, Italy's public employee salary is 19%. But it is lower than Spain. Where did you get your figures? Also, how did you come up with the figures for social security?

When you live in a country and are affected by particular changes it can be a lot easier to look at those particular changes with disdain instead of taking a step back looking at the big picture here and realize how much crap your in. For people without a personal attachment to avoiding those kinds of changes its much easier to look at the issue holistically.

I used central government numbers because unless I'm missing something I don't care about Spain's local government spending on government employees because it shouldn't affect the national budget and the sovereign debt picture.

Click central government(because that is what we are looking at) and this is what you should see:

Italy: 2009 total expenditure--459 billion, total compensation--96 billion, 96/459= 20%
Spain: 2009 total expenditure--210 billion, total compensation--24 billion, 24/210 = 11%.

[Wonkish1]

privatization is never cheaper.  the private is only interested in the functions that can turn a profit.  sticking the public for the bill on the non-profitable essentials.  privatization is a myth

That is very naive. You assume that public bureaucracies are as efficient as a private company is. There are 2 components to the public vs. private situation. The first is profit which is very small. The second is efficiency which can be absolutely huge!

If your statement was true that we might as well just nationalize everything because if the public sector can be as efficient and innovative as the private sector than you could avoid non reinvested profits(dividends/buybacks) being taken out everywhere and reduce cost, but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

I mean come on there are still many bureaucracies in the US even that are still in the 100% paper era. The notion that they are even close to as efficient as a private company is a joke.

[Wonkish1]

I'm "already complaining about cuts" becaus I actually know what has been going on recently,and don't just look Italy as a bunch of numbers. You are making the  same mistake that ECB did with Greece.
You can't just look at what costs more and say CUT IT. It makes no sense. You need to make cuts where needed,sure,but mostly you need incentives for economic growth.
Now,what kind of an incentive would a State with nil-police be? Those 300 millions you saved with cuts will certainly be lost with less security and less growth.

Economic reform doesn't just mean "cut here and there".

Well I would agree that the first place you look for cuts is probably not the quantity of police(especially since its a pretty small part of the budget), but you and me both know that Italy isn't going to cut the entire national police.

But let me be clear Italianboy, Italy is well beyond the point of trying to use the budget for economic growth. Your 10 year is over 6% and rising; there is no way in hell Italy will post even close to a 6% growth rate any time in the near future. The size of the cuts your country is going to have to do to avoid even bigger cuts in the future are going to come from a lot places that piss off the Italian population. Your beyond the point of being able to just knock out the low hanging fruit(which your government hasn't even done yet) and think it will be enough.

[Wonkish1]

but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

this is totally and demonstrably untrue.

Really? As I've said before if the public sector was as efficient as the private sector it would be true for every business in an economy as well and the Soviet Union, North Korea, Cuba, etc. would have worked.

Also, explain to me how that fits with the fact that states that have outsourced their medicaid administration to the private sector pay significantly less administration costs and a tiny fraction of the fraud than states that haven't.

Then explain to me how its a good deal for the median individual in this country to only receive approximately a 2% return a year on the money they put into social security? And if its a couple earning $100k it drops to less than .75% a year return on the money put in and if they are married at the poverty level they get a whopping 3% on their money. And if they are single all of those numbers are worse. Treasury bonds will return you more than that over the long term.

Then explain to me how CMS being a 100% paper based bureaucracy for handling all of government healthcare claims is an efficient entity.

Then explain to me how Richard Branson is currently engaging in test flights into space with the ability of sending low orbit satellites to space for a very, very tiny fraction of the cost that NASA spends and charges in doing so and that isn't including the enormous capital investment in NASA which if divided over every flight would make Richard Branson's cost of flight look like pocket change in comparison.

Then explain to me why we spend many times the amount of most countries for a traffic control system that is technologically out of date by about 20 years.

Then explain to me what company in the world spent several hundred million dollars to develop a handheld computer for data collection and announces after several years that they probably wont be able to deliver it for at least another half decade or so like the US census tried to develop for people in the field collecting census information. Particularly funny since their are many industries with a very similar device already invented.


I don't get what world your living in. Compare the fact that the vast majority of government entities can't take debit or credit cards with the fact that you can walk into many restaurants in a developing country and they will accept both of them. I mean the level of blindness to the world and history you have to have in order to make a statement like that is absolutely amazing.

[Wonkish1]

but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

this is totally and demonstrably untrue.

I mean this is just an example of beliefs that if you went around the real world saying that to different people you met, people would just laugh you out of the room. Nobody would take you seriously except maybe a majority at an OWS protest.

I mean I just can't possibly understand how someone could be so blind and so absolutely clueless. You're pretty much guaranteeing me that you are a kid that hasn't held a serious private sector job before because otherwise I just don't see how you could post something like that.

[Wonkish1]

I'm not going to go through a blow by blow thing with you like Al did, for a variety of reasons.  just a few general points.  first 'efficiency' is a loaded term designed to give basis to all of those liberal economic models that 'prove' unions are the devil, water should be priced out of reach of vast segments of the population, etc.  usually I don't even bother to engage in market logic driven discussion for this reason (and for other reasons) but a few fairly obvious things here can be said, without getting my hands dirty.

the US private pension system is grossly inefficient, however we can reasonably define the term, compared to the public system.  Social Security's administrative costs are about 1% of total money handled.  contrast this with the mass of fiduciaries, investment advisers, lawyers, etc. that have to be paid off in the private system, it's stark.

the elephant in the room is the US health care system.  here 'efficiency' as a loaded term can be stretched so many ways, but one simply look at US health care costs as a share of GDP, which already dwarf that of the other Western liberal democracies, and at the other end look at the outcomes.  millions go without coverage, infant mortality, 37th according to the WHO, etc, etc.  

You demonstrate quite clearly that you have no idea what economic research looks like. Great Scott.

No kidding! Not only that, but apparently he's oblivious to all of the items that populate his universe provided by private businesses and how advanced those businesses operate.

[Wonkish1]

It is absurd to suggest that technology comes from the 'private sector'.

the windfall profits go to the private sector while the public absorbs the downside risk, standard practice.

Unbelievably naive. At least when a company is allowed to fail it ceases to impact the country. When the public sector does business they end up producing loss after loss after loss that just get picked up by taxpayers via unlimited access to the treasury.