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Economics Applicant Thread UCAS 2012

Reply 4820

Tateco

OP

14

Original post by 94george94

You know ****'s going down when Tateco brings out the bar charts.

:L I understand exactly what he's saying and do agree with him, but I don't think you can disregard public spending as a side affect when the Euro Area has had significant debts since 2001. If they kept this under control then it would be much more easy for them to deal with harder times wouldn't it?

Reply 4821

mcfc2009

Original post by Tateco

:L I understand exactly what he's saying and do agree with him, but I don't think you can disregard public spending as a side affect when the Euro Area has had significant debts since 2001. If they kept this under control then it would be much more easy for them to deal with harder times wouldn't it?

All developed countries spent in an unsustainable way, some more than others but pre crisis the cause of this problem has been due to the fact that you cannot have a monetary union without fiscal union and that if their had been this burgeoning euro threat would of been averted.

Reply 4822

lordvulture

Original post by Tateco

Which will be even more of a problem depending on what happens in Greece. Greece defaulting may push them over the edge.

If I were Eurozone leaders, I will go ahead with the current bailout agreement to get Greece doing tough austerity measures. If they do it, it should be a good buffer for italy in the short run.

If they refuse, just let them default, and put ECB behind other PIIGS to stop the contagion.

Reply 4823

MosterGuru

Unconditional Offer from Bristol ^^

Reply 4824

Acerbic

14

Original post by Tateco

So government debt was stable across the Eurozone from 2000-2009, and that leads you to believe that 'ridiculous spending by governments' caused the crash? Have I missed something here?

It seems to me that the graph shows exactly that public debt had nothing to do with causing the crisis; rather, the trade imbalances which existed worldwide were exacerbated by monetary union, and a means of adjusting post-crash was removed from deficit countries. The exaggerated reduction in output which followed for those countries lead to sharply rising levels of government debt, but this is nonetheless a symptom, rather than a cause, of the disease which fiscal and monetary policy ought to be curing. Read Martin Wolf's most recent article in the FT for an idea of the nonsensicality of policy in the Eurozone at present.

Reply 4825

Tateco

OP

14

Original post by lordvulture

If I were Eurozone leaders, I will go ahead with the current bailout agreement to get Greece doing tough austerity measures. If they do it, it should be a good buffer for italy in the short run.

If they refuse, just let them default, and put ECB behind other PIIGS to stop the contagion.

Interesting, how do you think other countries and banks will feel about the ECB absorbing PIIGS losses from Greek defaults but not theirs?

Original post by MosterGuru

Unconditional Offer from Bristol ^^

Congratulations! :party:

Reply 4826

Tateco

OP

14

Original post by Acerbic

So government debt was stable across the Eurozone from 2000-2009, and that leads you to believe that 'ridiculous spending by governments' caused the crash? Have I missed something here?

It seems to me that the graph shows exactly that public debt had nothing to do with causing the crisis; rather, the trade imbalances which existed worldwide were exacerbated by monetary union, and a means of adjusting post-crash was removed from deficit countries. The exaggerated reduction in output which followed for those countries lead to sharply rising levels of government debt, but this is nonetheless a symptom, rather than a cause, of the disease which fiscal and monetary policy ought to be curing. Read Martin Wolf's most recent article in the FT for an idea of the nonsensicality of policy in the Eurozone at present.

I did not mean it caused the crash, but had governments had more control over their spending do you not feel that they would now be in a much better position to tackle the crisis (for example being able to increase their spending in key areas to encourage growth and output) instead of having to sort out their fiscal problems at the expense of the current economic climate?

(You obviously know more about the economics behind this than me, but nevertheless I find it interesting to respond and argue so I can learn from it, so don't be angry at my continual responding, I just want to learn :wink:

)

Reply 4827

Acerbic

14

Original post by Tateco

I did not mean it caused the crash, but had governments had more control over their spending do you not feel that they would now be in a much better position to tackle the crisis (for example being able to increase their spending in key areas to encourage growth and output) instead of having to sort out their fiscal problems at the expense of the current economic climate?

I agree with you that public spending ought in general to be countercyclical, but I don't buy the argument that austerity is being forced upon us. It's a choice we've (in my view wrongly) made to view reducing government debt as more important than reducing unemployment, increasing growth, or moving towards more balanced, sustainable trade.

Original post by Tateco

(You obviously know more about the economics behind this than me, but nevertheless I find it interesting to respond and argue so I can learn from it, so don't be angry at my continual responding, I just want to learn :wink:

)

I'm not angry. I enjoy debate like this - it's why I'm applying to study economics at uni!

Reply 4828

Tateco

OP

14

Original post by Acerbic

I agree with you that public spending ought in general to be countercyclical, but I don't buy the argument that austerity is being forced upon us. It's a choice we've (in my view wrongly) made to view reducing government debt as more important than reducing unemployment, increasing growth, or moving towards more balanced, sustainable trade.

I agree that they are probably introducing cuts too hard and too fast, but I praise the current government for actually doing something about it in spite of voters looking negatively on the cuts. They are necessary and they will have to come at some point, and with the euro crisis picking up pace it doesn't look like they are going to have any easier time to start introducing cuts any time soon.

So while I don't think the austerity is being forced upon us, I think it is easy to take the view that cuts aren't right at the moment due to hard economic times, but this is something that could be said many times in many different circumstances and something has to be done at some point because it is simply not sustainable, so why not now? (I understand you think those other things are more important at the moment, and I actually agree to an extent, but I would be interested to hear your key issues with cuts being now instead of later)

Reply 4829

Acerbic

14

Original post by Tateco

I agree that they are probably introducing cuts too hard and too fast, but I praise the current government for actually doing something about it in spite of voters looking negatively on the cuts. They are necessary and they will have to come at some point, and with the euro crisis picking up pace it doesn't look like they are going to have any easier time to start introducing cuts any time soon.

So while I don't think the austerity is being forced upon us, I think it is easy to take the view that cuts aren't right at the moment due to hard economic times, but this is something that could be said many times in many different circumstances and something has to be done at some point because it is simply not sustainable, so why not now? (I understand you think those other things are more important at the moment, and I actually agree to an extent, but I would be interested to hear your key issues with cuts being now instead of later)

I don't think the government deserve praise simply for doing something, especially when that thing is the imposition of aggressive fiscal deflation on an economy barely growing, with producers indexes suggesting we'll have negative growth within six months. My essential criticism of the pace of cuts, disregarding politics, is that they will be counterproductive - rising unemployment and lower growth rates will reduce tax revenues and increase spending on unemployment benefits. This has the feel of a Japanese style crisis - a growth recession I've heard it termed - out of which the way is aggressive fiscal stimulus, not fiscal deflation.

But this is perhaps too big an area of debate to be had out on TSR, especially when I'm sleepy.