I thank all those interposed by email, responded to our previous posts on this topic because this blog is not initiated, by choice comments.
The question is always equal to our previous message : how to end the monetary and fiscal doping without causing too severe a withdrawal that would kill the recovery in the bud?
http://lejournaldesalgret.blogspot.com/2009/09/leconomie-va-un-peu-mieux-mais-la-crise.html
For brevity, reconsider the matter under three perspectives discussed in our last message: Employment , banks, public debt .
The job
Unemployment is the main threat to the recovery . The unemployment rate the 10% against 7.5% in 2007 .
unemployment weighs on consumption because households save for fear of tomorrow. Those who can not eat save of course not.
In Spain, 20% of the workforce is unemployed.
Faced with the crisis and the drop in activity, countries are responding by adjusting according to their habits and patterns and their socio-economic models.
United States, companies lay off. The unemployed are often of makeshift camps on vacant lots, generally forgotten by the media, which does not show the hidden face of Uncle Sam
In Germany, companies retain their employees. Is adjusted by reducing the duration of working time and using partial unemployment. The cost of adjustment is borne by businesses, employees and the State assumes the largest share.
In France, it is between these two models. As the U.S. is downsizing by not renewing fixed-term contracts and putting an end to temporary contracts. For permanent employees, are used to short. The cost of adjustment is supported by the most vulnerable population : labor the least qualified or (and) young .
Unemployment, the household saving effort, all these factors slow down consumption. However, consumption is traditionally in France, the main vehicle for growth.
Unemployment has ever known, in France, a dramatic increase in the minimum time. It is a sad record.
"Work more to earn more" was a great idea without the real concern that "more work" can mean "less work" for others.
Governments who responded last year by a general mobilization to help banks are now in limbo on the subject of Employment ... The job will therefore continue to deteriorate in 2010 ... The necessary measures, it is true, would contradict the promises of the elected candidate in the presidential election. There is currently no question of touching the tax shield, or to devices overtime.
vat State respond? Hopefully ...
Banks
How are the banks? Banks make a lot of money.
How are they? They earn lots of money by doing what is expected of banks : distribute credits.
Nevertheless, the individuals and businesses borrowers pay today, in fact, high price for bailing out banks after the Depression.
When the state has bailed out banks and guaranteed their loans at the most difficult of the Depression, the price charged by the state was that they undertake to advance their credits to the economy. So they have kept that promise by pledging, as we have to write it, alongside individuals but also large enterprises.
These large businesses have been assisted on financial markets. This has also benefited banks that intervened to help companies raise capital . Intervene in the markets for derivative products has allowed less risky for banks to offset their mistakes of the past in these markets ...
However, the cash credit to small and medium enterprises has collapsed . We understand better bankruptcies up 25% . We understand better the unemployment up dramatically in a short time , breaking all records ...
Why banks do not pay them? The European Central Bank, however, they had distributed the cash rate by 1%. And thanks to those States which have guaranteed their loans, the markets had calmed down ...
They have not paid because banks are faced with the need to clear their huge losses .
They did not pay because growth has slowed, thereby making riskier loans. They have therefore not or could pass the falling cost of their resources on the rates at which they lend.
Because, and this is an important fact, banks are still paying the note from their mistakes. They should always be provisioned to cope with the loss of value of toxic assets they hold their balance sheets. These costs have not finished filling their results .
According to International Monetary Fund, banks have recognized that 40% of the losses they will eventually realize.
If recovery was slow, would require banks to provision, even more, to cope with outstanding loans ... Bad sign for the overall economy and credit ...
In the immediate, large margins generated "on the back " of their individual customers added to income derived from financial markets to help compensate, we wrote.
Hopefully these ways will lead to future results and commit to the financing of the economy ...
Public Debt
The public debt has exploded. of 64% in 2007 , it must settle in 84% of GDP in 2010 .
This sad record in the meteoric rise due to a large extent, the widening of the deficit public. We mentioned this already in our previous post: http://lejournaldesalgret.blogspot.com/2009/09/leconomie-va-un-peu-mieux-mais-la-crise.html
In 8.2% government deficit will certainly 8.5% of GDP in 2010 . Reread our previous post the definitions of "public debt" and "deficit".
Some explanations:
In 2007 after three good years, France has not been able to reconstitute budgetary leeway .
then came the negative effect of tax package depriving the state of revenue.
This level of deficit is due, also, of course, by the magnitude of the crisis . For, the state recorded less revenue, due to the contraction of the tax base but also because its expenses are increasing at the same time, mainly social spending ...
This increase in public debt that is found in all industrialized countries is also the result of public support considerable to limit a recession that would have been disastrous without the intervention of the State States in general and at internationnal.
what to do to reduce this public debt?
- Growth is the absolute remedy, of course.
- Inflation may have the same effect that growth, but it can not be decreed.
- Sale of State Assets, its housing stock. Or the valuation of intangible assets (brand Louvre, for example). But those sales are not sufficient and would a single-shot firearm.
Ultimately reduce the government deficit seems the best solution to reduce the public debt.
How then reduce the budget deficit?
The Government is committed to reducing the government deficit of 1% of GDP per year or 20 billion euros per year from 2010.
How can this be done to meet such a commitment?
- The government expects the RGPP (General Review of Public Policies) a saving of 7.7 billion euros only three years from 2009 to 2011 ...
- The non-replacement of staff on two retired not allow that 500 milllion euros economy ...
- Moreover, we want to put order in the organization of local governments. However, there will be no miracle this side of it because their finances are almost balanced. Moreover, one can hardly over : services that local authorities make are appreciated by people as by businesses. The cure may be worse than the disease : seen recently with the reform of business tax.
How to do it then?
- The solution is rather to find the revenue side. The side of tax evasion and more on the side of tax evasion to tax havens. Tax evasion was estimated in 2007 by the Council of compulsory levies, between 30 and 40 billion euros ...
- Other complementary solution, the state should resume its tax potential, especially in times of crisis, during which solidarity has to play beyond all contingencies.
tax cuts voted in 2000 amputated public revenue 66 billion euros.
is the case of tax loopholes which the social utility and economic returns are unproven.
is the case with countless exemptions that favor capital income in a context where it should instead limit the excess savings of French households, but not prevent it, which is not viable, either.
We see therefore that the question posed in the introduction: " how to end the monetary and fiscal doping without causing too severe a withdrawal that would kill the egg in the recovery?" response does nothing is easy ... Economists do not they themselves been bullied, pushed around by the Depression. I bet they will learn from their estrangement from reality, sometimes their greed.
data and figures provided in this message come from business newspapers: La Tribune, Les Echos, Expansion, and Economic Alternative World
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