Sovereign debt bubble thread

[MadImmortalMan]

The problem with the ultra-rich is that many of them don't seem to be spending it, instead parking it in various tax havens. It's a massive drain on demand. I wonder, also, to what extent the ageing of society leads to this playing safe; which damages the very economies which old people rely on to keep comfortable in old age.

It's pretty bad when people are emigrating to Belgium for tax reasons.


http://www.cnbc.com/id/48998008/Arnault_Move_Highlights_Belgian_Links

[frunk]

Shouldn't be, as long as hot money can enter and exit a high equality country as easily as it can a low equality country.

I doubt it can, since there are economies of scale associated with larger amounts of money.  It doesn't make sense to set up an offshore account for a couple thousand or tens of thousand nearly as much as for millions or billions.

[Admiral Yi]

I doubt it can, since there are economies of scale associated with larger amounts of money.  It doesn't make sense to set up an offshore account for a couple thousand or tens of thousand nearly as much as for millions or billions.

I'm afraid I don't see the connection between that and income inequality.

[Martim Silva]

Spanish cops went up 5 notches on the Ed Anger Respect Scale when I saw the footage on CNNI of the Spanish cops beating the living hell out of people.

The bigger problem in Spain is that the country is, quite literally, falling apart.

I'm surprised nobody has mentioned it, but Catalonia has scheduled elections to pave the way for a referendum on independence.

Basically, the richest regions in the North have become fed up with the South (the catalonian government spokesman said the southerners use the money 'to go to the bar' (Sic)) and are not willing to take it any more. They wanted freedom to control the tax revenues generated in their territory, something Madrid will not accept.

As a result, the government will hold a referendum to break from Spain, no matter if the central government approves it or not. The fact that 20% of the population came down to the streets on September 11th to demand independence helped the local politicians to make up their minds.

In Portugal, the goverment of highborns had in the meanwhile decided to ignore the troika and move in with their usual solution to the budget problems: a massive rise in the taxes on the poor (the poorest, for example, got their tax burden hiked by 70%), to finance tax brakes to the companies.

This led to a national revolt, as such a measure would collapse the national economy (not even the companies that would benefit accepted the measure). The government had to pull back after severe demonstrations and revolt by even the top brass of the government parties [the VP of the state bank stated on his Facebook account that if his taxes represented again 7 months of his income he'd 'scram outta here' [Sic]], but to compensate they're readying another massive hike on the IRS, despite the fact that the troika is insisting that the reduction of the deficit must be done through cuts on government expenditure, not through massive tax hikes on the private sector.

(but the government can't do that, because those expenses come from ruinous deals that gave control of many public companies to highborns).

Currently the government has no legitimacy (but nobody wants their job), no idea on where or how to get money, and everybody against it. And we're the most stable of Europe's austerity plans...

[Iormlund]

It's been the same story for 30 years.

What they Catalonian politicians want is to have their hands on all the loot. They've increased their part of the pie by acting as kingmaker in Madrid for as long as I remember. Now they just want it all.

Catalonian socdems know perfectly well that Catalonia would suffer immensely on its own. Every major company would relocate before finding itself outside the Common Market and Catalonia would be placed between two very big and hostile neighbours who would veto any chance of accession. Yet they think playing the nationalist angle is a good move to keep them in power.

[Admiral Yi]

Knuckleheads.  Catalonia is running a massive deficit and need a bailout already from the central government.  How does seceding help them?

[frunk]

I'm afraid I don't see the connection between that and income inequality.

It's easier and less expensive (per unit money involved) to move a single large pool of money out of a system and into another one then it is many pools of smaller amounts.  Income inequality means that the large pools of money carry a greater percentage of the wealth in the economy, and hence are better able to enter or leave it as circumstances dictate.

[Iormlund]

Knuckleheads.  Catalonia is running a massive deficit and need a bailout already from the central government.  How does seceding help them?

If you are oblivious as to how reality actually works (as nationalists are prone to do) you might think Catalonia is running a deficit because it does not collect its own revenue (not all of it anyway). Since it's one of the richest regions, some of that money leaves for places like Extremadura or Larchie's Galicia, just like it happens in any other country.

Basically nationalists think Catalonia would keep all its wealth in case of secession, and they would get to tap it all.

[Martim Silva]

Catalonian socdems know perfectly well that Catalonia would suffer immensely on its own. Every major company would relocate before finding itself outside the Common Market and Catalonia would be placed between two very big and hostile neighbours who would veto any chance of accession. Yet they think playing the nationalist angle is a good move to keep them in power.

The thing is, it is not clear that Catalonia would be outside the EU. They are already in as part of Spain, and don't want to be "out". Nor would Europe gain anything by having them "out", either. So a can of worms would be opened.

The biggest headache in Brussels is that this would be a precedent for other regions in Europe that have the same separatist reasons - like Flanders, for example.

Knuckleheads.  Catalonia is running a massive deficit and need a bailout already from the central government.  How does seceding help them?

Catalonia runs a deficit in part, as they see it, because it has to send most of its money to the central government. Alone, it is the 50th largest exporter in the planet (not bad for a nation of 7 million people: per capita, it's WAY richer than Portugal).

Besides, the fact is that Spain faces many years of austerity and that will only mean more money going out of Catalonia to help the rest of the country. Facing 20% unemployment (50% amongst the young), Barcelona feels that it can put its money to better use by helping its own instead of the others.

This is also a massive failure of the Spanish state as it stands now. The spanish socialist party has now opened the doors to a federal Spain, but this solution by no means implies the end of the problem. Maybe it would only delay it enough for the economic situation to improve.

[Iormlund]

The thing is, it is not clear that Catalonia would be outside the EU. They are already in as part of Spain, and don't want to be "out". Nor would Europe gain anything by having them "out", either. So a can of worms would be opened.

The biggest headache in Brussels is that this would be a precedent for other regions in Europe that have the same separatist reasons - like Flanders, for example.

Spain and France would veto any attempt of including any seceding party within the EU. There's just no question about the result of such a vote. Catalonia would lose pretty much every market it sells to.

[Crazy_Ivan80]

The problem with the ultra-rich is that many of them don't seem to be spending it, instead parking it in various tax havens. It's a massive drain on demand. I wonder, also, to what extent the ageing of society leads to this playing safe; which damages the very economies which old people rely on to keep comfortable in old age.

It's pretty bad when people are emigrating to Belgium for tax reasons.


http://www.cnbc.com/id/48998008/Arnault_Move_Highlights_Belgian_Links

Belgium has always been a taxhaven if you have enough money.

[Admiral Yi]

It's easier and less expensive (per unit money involved) to move a single large pool of money out of a system and into another one then it is many pools of smaller amounts.  Income inequality means that the large pools of money carry a greater percentage of the wealth in the economy, and hence are better able to enter or leave it as circumstances dictate.

I understand how income equality can produce more global capital flows; what I'm having trouble seeing is why that money would only flow in and out of countries which also income inequality.

[Admiral Yi]

If you are oblivious as to how reality actually works (as nationalists are prone to do) you might think Catalonia is running a deficit because it does not collect its own revenue (not all of it anyway). Since it's one of the richest regions, some of that money leaves for places like Extremadura or Larchie's Galicia, just like it happens in any other country.

Basically nationalists think Catalonia would keep all its wealth in case of secession, and they would get to tap it all.

I can't tell if you're saying Catalonia would be better off in or out of Spain.

[Iormlund]

Their size of the pie would increase. Actual size of the pie would drastically decrease.

[Sheilbh]

If you are oblivious as to how reality actually works (as nationalists are prone to do) you might think Catalonia is running a deficit because it does not collect its own revenue (not all of it anyway). Since it's one of the richest regions, some of that money leaves for places like Extremadura or Larchie's Galicia, just like it happens in any other country.

Basically nationalists think Catalonia would keep all its wealth in case of secession, and they would get to tap it all.

I can't tell if you're saying Catalonia would be better off in or out of Spain.

Spain's regions, from my understanding don't collect taxes but have powers of varying spending. The central government collects taxes, retains some and then disburses the rest to the regions, my understanding is that this isn't entirely linked to the size of the region's contribution to the economy.

Catalonia's rich and says that they've been underfunded by the central government for years. In addition they've recently said the central government (of an anti-regionalist, centralist political party) has been keeping more money to prove their international credibility/deficit and to weaken the regions. Catalan estimates put their lost revenue (going to poorer bits of Spain and Madrid) at around 8-9% of GDP, way above their deficit.

But all the reading I've done makes me think all stuff about regional Spanish debt needs to be taken sceptically, because it's such a live political issue.