5 ms·

They've cut expenses enormously, and the amplifying effect on growth is 1.6 (that means that the government saved 17 billions and it cost us 30 billions in lost

by wazoox 13y ago

They've cut expenses enormously, and the amplifying effect on growth is 1.6 (that means that the government saved 17 billions and it cost us 30 billions in lost GDP). Cutting expenses in a recession is stupid.

varjag 13y ago
Just curious, how causality between government savings and GDP losses is established? Since there was recession in the first place?
- wazoox 13y ago
  Well, I don't know the ins and outs, but that's what came from the ministry of Finance, IMF and OECD economists. I suppose they know what they're talking about. IIRC France state spendings represent more than 40% of GDP.
ekianjo 13y ago
> Cutting expenses in a recession is stupid. First, they are not cutting expenses "enormously" (enormously would be halving the yearly deficit, they haven't even started to stop its growth! So they are still digging further into debt every year), and then you need to spend less when your budget goes to debt repayment, if not you are going right in the wall while accelerating. Having a huge debt means the population / the whole country is living on credit, and therefore ABOVE their means. It's natural a recession would take place, whether you like it or not. Take it as a reality check.
- loup-vaillant 13y ago
  > Having a huge debt means the population / the whole country is living on credit, and therefore ABOVE their means. A country is not a household. The difference is not merely of scale. A country can create the freaking money. Well, except since they decided to stop that around the seventies, and borrow at a hefty interest rate instead. (By the way, thanks to things such as Fractional Reserve Banking, the money is created out of thin air anyway.) Did you know that about 80% of our (French) debt is made up of interests we paid in the past? It's hardly about a whole country living above its means. More likely, it's about a government playing Robin Hood, only in reverse –taking from the people to give to a few rich entities. Even the 20 remaining percent may not represent 20 percent too much. A part of it arguably represents actual wealth that has been created, such as transports or schools. Now I agree that we are in deep. I disagree however with the suggestion that it could be the people's fault. It's the government's fault, which is not the same thing at all. Because, we don't live in a democracy. Instead, we elect representatives based on what mass media tell us, and once elected, they hardly listen to the people. (Take the European Constitution, for instance: the people once voted "no" by referendum at about 60%. No matter, they reordered the paragraphs, and made the parliament vote instead. Basically, the government acted against the will of the people —maybe for its own good, but that's not the point.)
  - varjag 13y ago
    > A country can create the freaking money. A country can print money, but it can't create value to back them at will: the national workforce at their productivity rate create only so much added value at any time. Yes if a government wants to live beyond its means, it can either print more money, with inflation following shortly; or borrow money, and hope the future generations sort out the downpayments somehow. If a country has enough assets and reputation on the market it can borrow for decades, but eventually the risk of piling up the debt becomes unacceptable to usual investors, and it's payback time.
    - loup-vaillant 13y ago
      Create vs print: I was indeed talking about printing money (which doesn't necessarily mean actually printing notes). If I recall correctly, inflation is hardly a bad thing. Okay, super-inflation is a bad thing, but I'm talking 5-15% a year. As if controlling inflation would ultimately cause unemployment. As long as we keep it smooth, and the salaries rise along with the prices, then it's only a tax on savings. Plus, inflation seems to be heavily and negatively correlated with unemployment (I'm not sold on that idea, but as far as I know, it seems plausible). I also agree that there is such a thing as living above one means, even if it's a whole country. I disagree however that printing money (with the intention of destroying most of it later) instead of borrowing it at a significant interest rate would necessarily cause inflation. Or are you implying that your government is by nature unreasonable, and will systematically abuse its power to print? Possibly. But then, if I can't trust my government with that, I can't trust it with anything (starting with taxes). If it's a problem with this particular government, we have elections. If it's a problem with any possibly elected government, then maybe it's time to change the governance itself.
      - derleth 13y ago
        > inflation is hardly a bad thing The idea that inflation is always and forever a bad thing, PERIOD, is religious dogma for some people; they will not be budged, nor swayed, nor convinced to look at any evidence that inflation is part of a healthy, growing economy.

by wazoox 13y ago

varjag 13y ago

Just curious, how causality between government savings and GDP losses is established? Since there was recession in the first place?

wazoox 13y ago
Well, I don't know the ins and outs, but that's what came from the ministry of Finance, IMF and OECD economists. I suppose they know what they're talking about. IIRC France state spendings represent more than 40% of GDP.

ekianjo 13y ago

> Cutting expenses in a recession is stupid. First, they are not cutting expenses "enormously" (enormously would be halving the yearly deficit, they haven't even started to stop its growth! So they are still digging further into debt every year), and then you need to spend less when your budget goes to debt repayment, if not you are going right in the wall while accelerating. Having a huge debt means the population / the whole country is living on credit, and therefore ABOVE their means. It's natural a recession would take place, whether you like it or not. Take it as a reality check.

loup-vaillant 13y ago
> Having a huge debt means the population / the whole country is living on credit, and therefore ABOVE their means. A country is not a household. The difference is not merely of scale. A country can create the freaking money. Well, except since they decided to stop that around the seventies, and borrow at a hefty interest rate instead. (By the way, thanks to things such as Fractional Reserve Banking, the money is created out of thin air anyway.) Did you know that about 80% of our (French) debt is made up of interests we paid in the past? It's hardly about a whole country living above its means. More likely, it's about a government playing Robin Hood, only in reverse –taking from the people to give to a few rich entities. Even the 20 remaining percent may not represent 20 percent too much. A part of it arguably represents actual wealth that has been created, such as transports or schools. Now I agree that we are in deep. I disagree however with the suggestion that it could be the people's fault. It's the government's fault, which is not the same thing at all. Because, we don't live in a democracy. Instead, we elect representatives based on what mass media tell us, and once elected, they hardly listen to the people. (Take the European Constitution, for instance: the people once voted "no" by referendum at about 60%. No matter, they reordered the paragraphs, and made the parliament vote instead. Basically, the government acted against the will of the people —maybe for its own good, but that's not the point.)
- varjag 13y ago
  > A country can create the freaking money. A country can print money, but it can't create value to back them at will: the national workforce at their productivity rate create only so much added value at any time. Yes if a government wants to live beyond its means, it can either print more money, with inflation following shortly; or borrow money, and hope the future generations sort out the downpayments somehow. If a country has enough assets and reputation on the market it can borrow for decades, but eventually the risk of piling up the debt becomes unacceptable to usual investors, and it's payback time.
  - loup-vaillant 13y ago
    Create vs print: I was indeed talking about printing money (which doesn't necessarily mean actually printing notes). If I recall correctly, inflation is hardly a bad thing. Okay, super-inflation is a bad thing, but I'm talking 5-15% a year. As if controlling inflation would ultimately cause unemployment. As long as we keep it smooth, and the salaries rise along with the prices, then it's only a tax on savings. Plus, inflation seems to be heavily and negatively correlated with unemployment (I'm not sold on that idea, but as far as I know, it seems plausible). I also agree that there is such a thing as living above one means, even if it's a whole country. I disagree however that printing money (with the intention of destroying most of it later) instead of borrowing it at a significant interest rate would necessarily cause inflation. Or are you implying that your government is by nature unreasonable, and will systematically abuse its power to print? Possibly. But then, if I can't trust my government with that, I can't trust it with anything (starting with taxes). If it's a problem with this particular government, we have elections. If it's a problem with any possibly elected government, then maybe it's time to change the governance itself.
    - derleth 13y ago
      > inflation is hardly a bad thing The idea that inflation is always and forever a bad thing, PERIOD, is religious dogma for some people; they will not be budged, nor swayed, nor convinced to look at any evidence that inflation is part of a healthy, growing economy.