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I'm not very well educated in this area, for anyone else like me, this infographic video really helped explaining the European Debt Crisis. [0] https://www.you

I'm not very well educated in this area, for anyone else like me, this infographic video really helped explaining the European Debt Crisis. [0] https://www.youtube.com/watch?v=C8xAXJx9WJ8 https://www.youtube.com/watch?v=C8xAXJx9WJ8

gizmo 11y ago
The first half was reasonable, the second half just bad. It literally portrays Greek people as drinking grappa on the beach while hardworking Germans pay for their lifestyle. Greek people as immoral, Germans as respectable and responsible. That kind of cultural stereotyping is toxic. It's also analytically bad. It argues the problem is fiscal irresponsibility, even though Spain had a budget surplus before the crisis hit. Spain was a model of fiscal responsibility (and was lauded as such), and yet they too went into a deep depression with 50% youth unemployment. The video doesn't even mention the most important cause of the crisis: balance of payments between the north and south.
- adventured 11y ago
  Spain was wildly fiscally irresponsible in numerous ways. Their total government spending went from $280 billion Euros in 2002, to $450 billion Euros just six years later in 2008. That's a 60% increase in government spending in six years. The government premised their spending on the real estate bubble, which was floating their growth for years prior to the crash. The fall-out from that behavior of course was a tripling of their debt to GDP ratio in just seven years when the crash hit. Their household debt to income ratio went from about 70% in 2000, to 125% by 2007. Spain was living far beyond its means for years, with the bubble temporarily holding off the consequences of that behavior. They weren't being fiscally prudent, they were being fiscally irresponsible by spending as though the bubble would go on forever.
  - gizmo 11y ago
    Not so. Spain's gov't spending to GDP ratio developed in the same way as the Netherlands: http://imgur.com/I5AZaN9 http://imgur.com/I5AZaN9 Spain had a housing bubble, of course. And the housing bubble was the primary cause of the crisis. But there was a bubble in the responsible northern countries too. And in the USA. So it's not the case that Spain was an outlier in terms of fiscal responsibility. Don't forget that Spain had a lower debt to GDP ratio than Germany at the start of the crisis: http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ If Spain was irresponsible, then Germany and the Netherlands moreso. Private and commercial borrowing in Spain was a big part of the problem, but because the Eurozone has no trade barriers the government in Spain can't stop it. I'm not saying Spain isn't partially to blame for the mess, but it's not a case of fiscal irresponsibility.
    - adventured 11y ago
      Yes, it is so. Spain's total government spending increased by 60% from 2002, to 2008. That is a fact [1]. Spain's household debt to income ratio, increased from 70% to 125% from 2000 to 2007, another fact. [2] Both are clear indications of fiscal irresponsibility. How could increasing total government spending by 60% in six years, be anything but? How could households taking on so much leverage so quickly, be anything but? You reference the Netherlands, which has the most indebted households in the Euro zone, and is in the midst of a debt disaster. That's a really bad example [3]. Their GDP hasn't increased in nearly eight years. [1] http://i.imgur.com/tSu2htA.jpg http://i.imgur.com/tSu2htA.jpg [2] http://i.imgur.com/z8VUtFs.png http://i.imgur.com/z8VUtFs.png [3] http://www.cnbc.com/id/100905782 http://www.cnbc.com/id/100905782
      - gizmo 11y ago
        I don't dispute the accuracy of your numbers. Spain's household borrowing was unwise/irresponsible, no question about it. No good comes from a housing bubble like that. Of course, this housing bubble was funded by foreign banks. When people see an opportunity to live in a big house for cheap they just sign on the dotted line. That's human nature for ya. Household debt in the Netherlands also way too high, although it's unclear whether it will become a disaster in any meaningful sense. Stagnant GDP caused by austerity. No surprise there. I specifically mentioned the Netherlands because they're portrayed as a responsible country, in contrast to GIPS countries. Spain's labor costs also increased by 50% during the boom (http://i.imgur.com/pdHgmf4.png http://i.imgur.com/pdHgmf4.png), so gov't spending had to go way up just to provide the same services. Besides, spending a lot of money for a couple of years is no big deal when the country doesn't have a big national debt, and Spain didn't. Doesn't mean Spain's fiscal policy was beyond reproach, of course. Ideally speaking a government should have anti-cyclical fiscal policy. Bubbles followed by recessions happen all the time in Western Europe and the US, but the consequences are usually pretty manageable. When it comes to Spain the government was no more irresponsible, but because of the Euro they got pulled into a crushing depression. If you want to argue that every modern government is irresponsible, fine. But if you want to demonstrate that Spain was fiscally irresponsible compared to the rest of Europe or the US you're going to need better stats.
Confiks 11y ago
In addition to gizmo's comment the story also seems unreasonable in another way. The very last chapter, starting at 10m18s, presents a false choice between establishing a fiscal union and pending doom. That union is modeled as the Frankfurt ECB office and is characterized as "The United States of Europe". From the story: "This brings us back to that fundamental division of monetary policy and fiscal policy. Ultimately, the euro area requires a fiscal union to match its monetary union, or neither. That is, there must be a political organization with authority to set fiscal policy within every euro area country. It must have the power to cut spending, raise taxes and set laws." The authors of the story clearly believe that a fiscal union will solve all problems of deficit across the European union, but plainly fail to articulate why beyond presenting an animated hand which is cutting state spending.

gizmo 11y ago

The first half was reasonable, the second half just bad. It literally portrays Greek people as drinking grappa on the beach while hardworking Germans pay for their lifestyle. Greek people as immoral, Germans as respectable and responsible. That kind of cultural stereotyping is toxic. It's also analytically bad. It argues the problem is fiscal irresponsibility, even though Spain had a budget surplus before the crisis hit. Spain was a model of fiscal responsibility (and was lauded as such), and yet they too went into a deep depression with 50% youth unemployment. The video doesn't even mention the most important cause of the crisis: balance of payments between the north and south.

adventured 11y ago
Spain was wildly fiscally irresponsible in numerous ways. Their total government spending went from $280 billion Euros in 2002, to $450 billion Euros just six years later in 2008. That's a 60% increase in government spending in six years. The government premised their spending on the real estate bubble, which was floating their growth for years prior to the crash. The fall-out from that behavior of course was a tripling of their debt to GDP ratio in just seven years when the crash hit. Their household debt to income ratio went from about 70% in 2000, to 125% by 2007. Spain was living far beyond its means for years, with the bubble temporarily holding off the consequences of that behavior. They weren't being fiscally prudent, they were being fiscally irresponsible by spending as though the bubble would go on forever.
- gizmo 11y ago
  Not so. Spain's gov't spending to GDP ratio developed in the same way as the Netherlands: http://imgur.com/I5AZaN9 http://imgur.com/I5AZaN9 Spain had a housing bubble, of course. And the housing bubble was the primary cause of the crisis. But there was a bubble in the responsible northern countries too. And in the USA. So it's not the case that Spain was an outlier in terms of fiscal responsibility. Don't forget that Spain had a lower debt to GDP ratio than Germany at the start of the crisis: http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/ If Spain was irresponsible, then Germany and the Netherlands moreso. Private and commercial borrowing in Spain was a big part of the problem, but because the Eurozone has no trade barriers the government in Spain can't stop it. I'm not saying Spain isn't partially to blame for the mess, but it's not a case of fiscal irresponsibility.
  - adventured 11y ago
    Yes, it is so. Spain's total government spending increased by 60% from 2002, to 2008. That is a fact [1]. Spain's household debt to income ratio, increased from 70% to 125% from 2000 to 2007, another fact. [2] Both are clear indications of fiscal irresponsibility. How could increasing total government spending by 60% in six years, be anything but? How could households taking on so much leverage so quickly, be anything but? You reference the Netherlands, which has the most indebted households in the Euro zone, and is in the midst of a debt disaster. That's a really bad example [3]. Their GDP hasn't increased in nearly eight years. [1] http://i.imgur.com/tSu2htA.jpg http://i.imgur.com/tSu2htA.jpg [2] http://i.imgur.com/z8VUtFs.png http://i.imgur.com/z8VUtFs.png [3] http://www.cnbc.com/id/100905782 http://www.cnbc.com/id/100905782
    - gizmo 11y ago
      I don't dispute the accuracy of your numbers. Spain's household borrowing was unwise/irresponsible, no question about it. No good comes from a housing bubble like that. Of course, this housing bubble was funded by foreign banks. When people see an opportunity to live in a big house for cheap they just sign on the dotted line. That's human nature for ya. Household debt in the Netherlands also way too high, although it's unclear whether it will become a disaster in any meaningful sense. Stagnant GDP caused by austerity. No surprise there. I specifically mentioned the Netherlands because they're portrayed as a responsible country, in contrast to GIPS countries. Spain's labor costs also increased by 50% during the boom (http://i.imgur.com/pdHgmf4.png http://i.imgur.com/pdHgmf4.png), so gov't spending had to go way up just to provide the same services. Besides, spending a lot of money for a couple of years is no big deal when the country doesn't have a big national debt, and Spain didn't. Doesn't mean Spain's fiscal policy was beyond reproach, of course. Ideally speaking a government should have anti-cyclical fiscal policy. Bubbles followed by recessions happen all the time in Western Europe and the US, but the consequences are usually pretty manageable. When it comes to Spain the government was no more irresponsible, but because of the Euro they got pulled into a crushing depression. If you want to argue that every modern government is irresponsible, fine. But if you want to demonstrate that Spain was fiscally irresponsible compared to the rest of Europe or the US you're going to need better stats.

Confiks 11y ago

In addition to gizmo's comment the story also seems unreasonable in another way. The very last chapter, starting at 10m18s, presents a false choice between establishing a fiscal union and pending doom. That union is modeled as the Frankfurt ECB office and is characterized as "The United States of Europe". From the story: "This brings us back to that fundamental division of monetary policy and fiscal policy. Ultimately, the euro area requires a fiscal union to match its monetary union, or neither. That is, there must be a political organization with authority to set fiscal policy within every euro area country. It must have the power to cut spending, raise taxes and set laws." The authors of the story clearly believe that a fiscal union will solve all problems of deficit across the European union, but plainly fail to articulate why beyond presenting an animated hand which is cutting state spending.