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How did 'rich' economies get so in debt?

  • #21
  • Aug 2, 2011 9:44am Aug 2, 2011 9:44am
Quoting willf
You can then buy back the country's assets at a rock bottom price. Just google Greece and see what they are doing. Selling off islands, transport networks, postal services & telecoms at rock bottom prices. Once you have these assets you have a country by it's balls.
They will not sell their assets and don't even think of islands, that's for sure. Yes, maybe they'll privatize some companies belonging to the state but nothing more than that.
But don't forget, nobody forced the government to borrow so much. If Joe Greek wants to live like the germans but being much less productive, retiring younger and always forgetting paying taxes, well, after 10 years his way of living becomes unsustainable and something must be done.
Argentina also defaulted but I didn't hear that they sold something and nobody invaded them. They don't have acces to credit markets anymore but this had to be expected.
  • #22
  • Aug 2, 2011 10:38am Aug 2, 2011 10:38am
Quoting Sauron
They will not sell their assets and don't even think of islands, that's for sure. Yes, maybe they'll privatize some companies belonging to the state but nothing more than that.
But don't forget, nobody forced the government to borrow so much. If Joe Greek wants to live like the germans but being much less productive, retiring younger and always forgetting paying taxes, well, after 10 years his way of living becomes unsustainable and something must be done.
Argentina also defaulted but I didn't hear that they sold something and nobody invaded them....
You may want to try using Google a little more. Greece is selling islands, this was reported last year. Argentina sold it's oil reserves to BP to name but one.

Nobody was forced in the EU zone (or the rest of the world) to borrow. But the plan sold to many countries by the IMF/ECB was to buy your way out of the recession and create stimulus by building in the public sector.
  • #23
  • Aug 2, 2011 11:24am Aug 2, 2011 11:24am
We are massively rich in the West. The infrastructure which has been built over centuries on free oil, steel, gas, gold, food, slavery and exploitation and what have you, was relatively cheap.

Well now the resources are getting expensive. In the West we actually ran out a while ago.

You can call it derivatives, greed, mismanagement by politicians - whatever you like. We have eaten the lunch and now we are looking for the next meal.
Gone to a better place
  • #24
  • Aug 2, 2011 12:47pm Aug 2, 2011 12:47pm
Quoting willf
Well maybe that's part of the plan. Lending money that you know can't be paid back with an ulterior motif?

Say you wanted to take control of a country you have only really two options.

1. Invade it by military force.
2. Control it's finances so it has to comply.

Option 1 is well understood and documented even in the last decade (Iraq, Afghanistan,Libya etc).

Option 2 is just as effective but not so easy for the public to spot because who really takes an interest in what their government is doing until it's too late.

[i][b][i]"Give...
Good post my friend, money has always been used to enslave people by debt!

Thomas Jefferson wrote, almost 200 HUNDRED years ago :

"If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."

Sir Josiah Stamp, Head Of The Bank of England wrote in 1781:
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented ... Bankers own the earth. Take it away from them, but leave them the power to create money, and with a flick of the pen they will create enough money to buy it back again ... if you want to continue to be slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit."
  • #25
  • Edited 6:35pm Aug 2, 2011 6:19pm | Edited 6:35pm
Quoting smikester

Well now the resources are getting expensive. In the West we actually ran out a while ago.
We ran out of nothing. Bread becomes more and more expensive over the years not because we are running out of wheat (we have enough wheat to feed 2 planets) but because of inflation.

And we have inflation because we allow central banks to print an ever growing, never ending amount of money out of nothing.
  • #26
  • Aug 3, 2011 1:15am Aug 3, 2011 1:15am
Quoting Mr Breakout
We ran out of nothing. Bread becomes more and more expensive over the years not because we are running out of wheat (we have enough wheat to feed 2 planets) but because of inflation.

And we have inflation because we allow central banks to print an ever growing, never ending amount of money out of nothing.
Wheat has been expensive the past two years because Russia lost a lot of it's crop due to massive fires and put an embargo on exports. Whilst there wasn't a shortage this just drove up prices. The embargo was lifted a few weeks back.
  • #27
  • Aug 3, 2011 1:28am Aug 3, 2011 1:28am
Quoting willf
You may want to try using Google a little more. Greece is selling islands, this was reported last year. Argentina sold it's oil reserves to BP to name but one.
Some german politicians and Findland's prime minister had this idea but it was dismissed from the beginning.
Probably Greece will lease some islands or parts of them to foreign companies in order to invest in tourism. It is a good idea because they are not able to develop them and attract tourists as they should.
But this is far away from forever selling territory to pay their debt, as the conspiracists like to believe.
  • #28
  • Aug 3, 2011 2:15am Aug 3, 2011 2:15am
Quoting seagreen
They are trying to pass the law to move their stop now.

The main rule - Cut the losses! They want to brake it.
  • #29
  • Aug 3, 2011 5:48am Aug 3, 2011 5:48am
As I understand the current problem of economies around the world, by reading the various articles available on the web, it seems to me that the "lack of savings by all people" is the root cause.

Banks and other financial lenders have made access to money way too easy. At the grass root level, the "bank card" ( introduced how many years ago? ), and in the recent housing markets we have the sub prime mortgages ( no deposits = no savings ). This type of access to easy money does not induce anyone to save for what they want. It's a "get it now" attitude and "to hell with the loan if I lose my job". I think this attitude is found in business as well, big and small, as well we "grass root" folk at the bottom.

At 73 yrs of age I may be out of touch with the way of "modern" living, but I for one have always had to SAVE for what I have. I am still saving for what I want. My first vehicle back in the mid 1950's cost me big time interest of 20% for two years. That's saving the hard way in my view. I dont have to do that anymore.

Borrowing money with interest, simply put, is "living today and paying tomorrow". So, too much borrowing and we end where we are right now.

I am beginng to understand that comic who said "stop the world, I want to get off!!"
Good Trading to All ---- fairwind
  • #30
  • Aug 4, 2011 3:34am Aug 4, 2011 3:34am
American's only need to look in a mirror and they will see why we are broke. For decades voters have been putting in the same thieves that misappropriate tax money. From small villages to the White House.

Capitalist nations are prone to graft. It could have been regulated, in fact it was. But by guess who. More crooks. Wall Street and Government regulators were not working in favor of the Public. Post WW 2 the chant was let the good times roll. We paid the fiddler along the way now we must pay the band. We have recently unwisely used up our credit as a Nation.

Welcome to Socialism. History will show us as irresponsible baffoons.
  • #31
  • Sep 19, 2012 5:05pm Sep 19, 2012 5:05pm
Quoting Sauron
They will not sell their assets and don't even think of islands, that's for sure. Yes, maybe they'll privatize some companies belonging to the state but nothing more than that.
But don't forget, nobody forced the government to borrow so much. If Joe Greek wants to live like the germans but being much less productive, retiring younger and always forgetting paying taxes, well, after 10 years his way of living becomes unsustainable and something must be done.
Argentina also defaulted but I didn't hear that they sold something and nobody invaded them....
I rest my case

Inserted Video
  • #32
  • Sep 19, 2012 5:36pm Sep 19, 2012 5:36pm
Debt is a claim on labour... claim on labour increases GDP however a claim on labour may not be able to be fulfilled within a respected time period (THIS WILL CREATE INFLATION) because confidence will fall in the system. As confidence falls the claims on labour should either increase exponentially or fall. If increase and confidence rises (2008 crash) then all is well. If claims increase and confidence still falls (2014-2015?) then we have bankruptcy and war.
  • #33
  • Sep 19, 2012 5:39pm Sep 19, 2012 5:39pm
Quoting sidhujag
Debt is a claim on labour... claim on labour increases GDP however a claim on labour may not be able to be fulfilled within a respected time period (THIS WILL CREATE INFLATION) because confidence will fall in the system. As confidence falls the claims on labour should either increase exponentially or fall. If increase and confidence rises (2008 crash) then all is well. If claims increase and confidence still falls (2014-2015?) then we have bankruptcy and war.
How did we get here? By allowing CLAIMS on labour rather than counting labour itself as collateral. Claims increase efficiency and allow money velocity to rise creating liquidity needed by an exponentailly advancing economy. We have came to an infliction point in the economic system which was thought out when the gold standard was abolished(claims that had a collateral) a backing you can say. As soon as there is no collateral you have to basically blindly trust the system. Inflation will be key role.

If you don't understand this, read chris martenson's etutorial
  • #34
  • Sep 19, 2012 5:59pm Sep 19, 2012 5:59pm
It's pretty simple. the borrower is subject to the lender.
what makes it complicated is when someone lies to get elected into power, then uses that power to basically steal.
Cultural morality, or the decline of such, has a big part, too.
Used to be that debt was avoided, not embraced. That is what made the Western ecomony have such a great growth in the late 1800s, then the progressives changed so many things in early 1900s, and the only thing that ironically made the economy come back was the outcome of world war 2, because it forced everyone to work and become a producer. While enough private people continue to make this happen, the people in power have voted themselves enough power to spend into debt, and simply because they are corrupt, nothing else, they continue to spend way more than can be budgeted....won't last forever
Too close for pips, switching to points.
  • #35
  • Sep 19, 2012 6:06pm Sep 19, 2012 6:06pm
How did advanced economies get so in debt?

Too many entitlement programs. Everyone thinks they're entitled to something.

War. The US and some of its allies strive to be the World's peacekeepers (or warmongers, depending on your point of view).

Fat politicians sticking their fat fingers in taxpayer's wallets. There has recently been ample evidence of this. This is simply a part of government mismanagement.

Interesting notes or distractions;

"It appears that foreigners are no longer lining up to buy U.S. government debt. As reported in the article below, the Federal Reserve is now buying around 80% of the debt issued by the U.S. government to fill its $1.4 Trillion record annual budget deficit. This is a disturbing development and confirms that the U.S. government is essentially broke."
http://www.goldstockbull.com/article...-buys-80-debt/

(though it may be a bit more complex)

Sovereign Debt in Advanced Economies:
Overview and Issues for Congress
http://www.fas.org/sgp/crs/misc/R41838.pdf
When the Joker is in the deck.. fear not and play it well
  • #36
  • Sep 19, 2012 9:35pm Sep 19, 2012 9:35pm
People elect the politicians who promise free stuff and low taxes. Once in office, politicians who know all too well it's impossible to deliver both free stuff and low taxes to the people, unless the government (that is the people, since the government's income comes from taxation of the people) goes into debt, so they get the Central Bank(which is a privately owned corporation) to buy government debt. In order to do so, the Central bank will print money out of thin air and collect interest on it, effectively enslaving the people. People actually get what they payed for. Sad but true.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #37
  • Sep 19, 2012 11:53pm Sep 19, 2012 11:53pm
The answer is easy, because the people that runs the world are trying to destroy sovereign nations by using money and financial instrument(central bank, derivatives) as tools to do so. Nothing much in this world is by accident.
Riding the order flow
  • #38
  • Sep 20, 2012 1:09am Sep 20, 2012 1:09am
I think generally countries take on too much debt, but it makes perfect sense why a country can be considered rich yet have a lot of debt.

Suppose CompanyABC has a profit of $250K per year, and has $750K in debt.

CompanyXYZ profits $20K per year, and has $5K debt.

Any capitalist would say CompanyABC is worth a heck of a lot more than XYZ.
  • #39
  • Sep 20, 2012 1:24am Sep 20, 2012 1:24am
Quoting marwan2010
Guys I am baffled........... Totally baffled.

EVERYONE is in a DEBT
USA, UK, EUROLAND

and they are suppose to be the most economically advanced & Rich states
They give aid to africa, India, China etc

So If these RICH countries are in a debt, than who has given them the money, as the rest outside the western economies are "poor"

if you have any videos than please feel free to share this


That it appears all the major economies are in debt is a matter of accounting. Debt in this context is a profit & loss concept, i.e. governments all routinely spend more than they receive in tax revenues.
However, you must also consider what they spend the money on. If it is spent on schools, hospitals, roads, etc,, improving the infrastructure of the nation, this is investing in the asset base of that nation. This is a balance sheet concept and you have to consider both profit & loss account and balance sheet together.

Is the country really in debt if it overspending current revenues to build its asset base? Every business has to invest now in the hope of returns from that investment further down the road. Nations are no different.

The problem is if the current spending is not genuine productive investment creating future returns, but simply spending, e.g. welfare payments, then there much less chance that this type of investment will ever produce any future returns. Now you are creating debt that is unlikely to be repaid as this kind of spending is unlikely to produce much in the way of future revenues.

Of course, this kind of spending can have a massive social benefit - there are far fewer people in abject poverty in the major nations than the rest of the world. It is very productive spending in a social context but entirely unproductive in a pure business accounting context.

So, whether we are in debt or not depends on how you view and value the spending. However, even if 100% of the spending is "good" business investment to produce future returns, we still have the problem of cash flow, the third major accounting concept. We are spending more than we are receiving, so have negative cash flow. The gap is funded wth debt that incurs interest and capital repayments. If the debt builds up too high this debt servicing becomes a major issue and we lose confidence in the debt servicing ability of the borrower, i.e. credit worthiness issues. Hey presto, pretty much where we are today in much of peripheral Euroland.

Hope that helps
  • #40
  • Sep 20, 2012 2:53am Sep 20, 2012 2:53am
Ponzi schemes...with tax payers being the suckers.

It makes sense that the government pools taxpayers' money to build roads and provide everyone with an equal chance. Sadly they didn't leave it at that and also started stupid expensive wars and allowing large companies (banks, investment companies, oil industry, etc.) to offset their losses with taxpayer money. Even worse, they hand companies that DON'T NEED IT (Exxon, etc.) subsidies.

So Exxon gets taxpayer money, as does AT&T. In return, you are getting cheap oil and a great cell phone coverage...oh...waiiiiiiiiit a second
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