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It is impossible to pay this amount of money. For this simple reason the interest rate is zero, almost negative: European central bank is buying huge amounts of

It is impossible to pay this amount of money. For this simple reason the interest rate is zero, almost negative: European central bank is buying huge amounts of national debt. Setting an interest rate of zero is just a trick to lower debt interest payments. EU is doomed.

zdkl 9y ago
Wasn't the fed at zero/negative as well recently?
- based2 9y ago
  https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ https://fred.stlouisfed.org/categories/22 https://fred.stlouisfed.org/categories/22 https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key... http://ec.europa.eu/eurostat/statistics-explained/index.php/Structure_of_government_debt http://ec.europa.eu/eurostat/statistics-explained/index.php/...
JoiDegn 9y ago
Can you please explain the reasoning behind your statements better? The way they stand it seems like you say it is impossible to repay the debt because the interest rate is zero. Why would that make it harder to repay? Finally, why do you follow that the EU is doomed?
- smcl 9y ago
  They're saying its the other way round - it's impossible to repay, so the rate is set to effectively zero. I disagree with GP however, and don't think the EU is doomed
  - alkonaut 9y ago
    The issues are more EMU (Eurozone) than the EU?
EliRivers 9y ago
Is it necessary to pay this money?
- tehabe 9y ago
  No it isn't. If all the debt is paid in full, the only effect this would have is that the income of the economy would be lower. The interests are low now because many states don't invest as much as they used to do. So the demand for money is low. And when the demand for something is low, the price for it goes down.
  - iagooar 9y ago
    Trying to wrap my head around "the demand for money is low, the price goes down". Genuinely curious.
    - lowpro 9y ago
      If an entity doesn't see a good way to invest money, they won't borrow money to make money. This is what they mean when 'the demand for money is low'. If the government borrowed money, they would not make as much on that money as the interest payment to who they borrowed from, so they never borrow the money. This has the overall effect of reducing money demand, reducing the premium to get that money (the interest rates continue to drop). Everyone though 0% interest was a hard line and you couldn't go lower, until negative interest rates were introduced to try and reverse this trend, which it largely hasn't.
    - thesumofall 9y ago
      What part of it? You are a bank and try to earn as much as possible with the money your customers gave you. However, states, consumers, and businesses don't invest as much as they used to / don't borrow as much money. What do you do as a bank? You lower your interest rates to try to attract at least some customers. Combine that with exceptional supply due to quantitative easing and you have what you have right now
    - tehabe 9y ago
Brakenshire 9y ago
EU debt is lower as a percentage of GDP than the US or Japan.
- _0ffh 9y ago
  Also quite interesting is that total EU debt stayed ~constant 2008-2016, while in the same time frame US federal debt ~doubled.
  - adventured 9y ago
    The US made a huge fiscal mistake in going on a hyper government spending spree in response to the recession, whereas most European nations heavily locked down spending expansion. The US did however get new annual economic output the size of Germany's entire economy out of the 2008-2016 time frame. During that time, the EU's economy didn't hardly expand at all, with numerous nations suffering hardship (eg Spain, Italy, Greece, Portugal, Finland). France and Germany also saw essentially zero growth during that time (France lost $400 billion off its GDP due to the dollar, from 2008-2016). It's only just in the last 12 to 18 months that the EU economy is starting to pick up steam. Which approach is better? I prefer lower debt personally, I would have rather the US lock down spending to population growth in response to the recession; such that we might have closer to 60%-80% debt to GDP today.
    - _0ffh 9y ago
      Good point there. While I also think that lower debt is very desirable, the US example here seems to show that there is a positive effect to be had from spending as opposed to a strict austerity policy. It's probably a matter of degree and specific circumstances and goals how much spending exactly is most appropriate.
- adventured 9y ago
  The US solidly off-sets the difference with its ownership of the global reserve currency. Japan, which also has drastically more debt as a % than the US (and without the consistent growth or assets), doesn't quite have that benefit. When the US debases the dollar, a big part of that inflation is absorbed by the global economy (such as via commodity prices going up, or external dollar instrument holders taking some of the punch). When Japan debases the Yen, the hit is almost entirely absorbed by the people of Japan and its economy.

zdkl 9y ago

Wasn't the fed at zero/negative as well recently?

based2 9y ago
https://fred.stlouisfed.org/ https://fred.stlouisfed.org/ https://fred.stlouisfed.org/categories/22 https://fred.stlouisfed.org/categories/22 https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key... http://ec.europa.eu/eurostat/statistics-explained/index.php/Structure_of_government_debt http://ec.europa.eu/eurostat/statistics-explained/index.php/...

JoiDegn 9y ago

Can you please explain the reasoning behind your statements better? The way they stand it seems like you say it is impossible to repay the debt because the interest rate is zero. Why would that make it harder to repay? Finally, why do you follow that the EU is doomed?

smcl 9y ago
They're saying its the other way round - it's impossible to repay, so the rate is set to effectively zero. I disagree with GP however, and don't think the EU is doomed
- alkonaut 9y ago
  The issues are more EMU (Eurozone) than the EU?

EliRivers 9y ago

Is it necessary to pay this money?

tehabe 9y ago
No it isn't. If all the debt is paid in full, the only effect this would have is that the income of the economy would be lower. The interests are low now because many states don't invest as much as they used to do. So the demand for money is low. And when the demand for something is low, the price for it goes down.
- iagooar 9y ago
  Trying to wrap my head around "the demand for money is low, the price goes down". Genuinely curious.
  - lowpro 9y ago
    If an entity doesn't see a good way to invest money, they won't borrow money to make money. This is what they mean when 'the demand for money is low'. If the government borrowed money, they would not make as much on that money as the interest payment to who they borrowed from, so they never borrow the money. This has the overall effect of reducing money demand, reducing the premium to get that money (the interest rates continue to drop). Everyone though 0% interest was a hard line and you couldn't go lower, until negative interest rates were introduced to try and reverse this trend, which it largely hasn't.
  - thesumofall 9y ago
    What part of it? You are a bank and try to earn as much as possible with the money your customers gave you. However, states, consumers, and businesses don't invest as much as they used to / don't borrow as much money. What do you do as a bank? You lower your interest rates to try to attract at least some customers. Combine that with exceptional supply due to quantitative easing and you have what you have right now
  - tehabe 9y ago

Brakenshire 9y ago

EU debt is lower as a percentage of GDP than the US or Japan.

_0ffh 9y ago
Also quite interesting is that total EU debt stayed ~constant 2008-2016, while in the same time frame US federal debt ~doubled.
- adventured 9y ago
  The US made a huge fiscal mistake in going on a hyper government spending spree in response to the recession, whereas most European nations heavily locked down spending expansion. The US did however get new annual economic output the size of Germany's entire economy out of the 2008-2016 time frame. During that time, the EU's economy didn't hardly expand at all, with numerous nations suffering hardship (eg Spain, Italy, Greece, Portugal, Finland). France and Germany also saw essentially zero growth during that time (France lost $400 billion off its GDP due to the dollar, from 2008-2016). It's only just in the last 12 to 18 months that the EU economy is starting to pick up steam. Which approach is better? I prefer lower debt personally, I would have rather the US lock down spending to population growth in response to the recession; such that we might have closer to 60%-80% debt to GDP today.
  - _0ffh 9y ago
    Good point there. While I also think that lower debt is very desirable, the US example here seems to show that there is a positive effect to be had from spending as opposed to a strict austerity policy. It's probably a matter of degree and specific circumstances and goals how much spending exactly is most appropriate.
adventured 9y ago
The US solidly off-sets the difference with its ownership of the global reserve currency. Japan, which also has drastically more debt as a % than the US (and without the consistent growth or assets), doesn't quite have that benefit. When the US debases the dollar, a big part of that inflation is absorbed by the global economy (such as via commodity prices going up, or external dollar instrument holders taking some of the punch). When Japan debases the Yen, the hit is almost entirely absorbed by the people of Japan and its economy.