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  By Mystic | July 8, 2012 - 04:17 |

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13:12 min.

Written by: Mystic on July 8, 2012.
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  • ZarathustraSpeaksAgain

    The Democrats have NOT led the charge to reduce state and local employment. The Republicans have swept into power at those levels of government in a HUGE way!

    Most of the reductions at the state and local level are the result of two things:

    1. Budget problems related to underfunded future obligations for retirement which are largely the result of the financial crisis beginning in 2007.

    2. Reductions in Federal grants to state and local goverment that are the result of fiscal austerity measures pushed through Congress by Republicans and Blue Dog Democrats.

    I should also toss in this observation that state governments have been creating one fiscal crisis after another by reducing business and higher earner income taxes and then cutting employment to pay for it.

  • ZarathustraSpeaksAgain

    I know this doesn’t add much to the discussion, but I really liked your discussion at the end on China and the various ways that credit was being expanded.

    It took me forever to figure this out, but all of the these clever ways to make goods and services move with verious types of lending other than commercial bank lending is what used to be called M3.

    That uncontrolled, massive expansion of credit is as you said, “unsustainable” and will be bitting China in the @$$.

    I think it is a big mistake to think that China is the world’s next financial USA and that they will be replacing the USA as the world’s banker or their money will every be the reserve currency of the world. China has lots of problems like the ones you described and with a population as big as theirs they have internal challenges ranging from infrastructure to political stability that we can’t begin to imagine.

  • CSArichardo

    In Canada Education and Health Care are provincial/state responsibilities and appear to be growing slightly by your reference. 

    Public service jobs in the federal government in Canada are are on major decline.

    http://www.thestar.com/news/canada/politics/article/1153804–federal-budget-2012-conservatives-to-cut-19-000-public-service-jobs

    Here is a good interactive

    http://www.cbc.ca/news/interactives/unemployment-stats/

  • Jasp

    Hello,
    As one of the despised lurkers, I find myself making the first comment to this post and promptly failed by somehow ending up in “send a message” instead.
     I very much appreaciate the time and work Nick puts in. There is no way
    I would have the time to look through and select intersting items from
    so many sources. Thanks.
    In trying to understand what is
    happening in the world around I do feel I am playing this board game
    where pegs pop up and you hit them with a hammer (ahah, understood that)
    and promptly another one pops up (sheesh, how does that fit in) etc etc
    etc
    So, I think I get that QE is a little merry go round
    between the Central Bank, our darling bankrupt banks and the government
    (all the media talk of putting money into the system is tosh) and then
    we seem to have the rest of the economy where the producing and
    consuming of stuff goes on.They appear to have de-coupled but must be
    interacting intensively. Not quite sure how, but let’s move on. Then
    there is all that fun debt on private households books, the government,
    and in corporations (but there are reports that the corps. are sitting
    on cash piles in places). Households are doing what is good for them,
    reducing debt. Bad for corps (fewer jobs etc), government trying to
    spend to prevent economy completely grinding to a halt and then after
    the mortgage bubble going pop stuffing money into the banks as well.
     
    If I have understood it, this is what has been going on in Japan for
    over 20 years now. Can someone explain to me why Japan has managed to
    keep going? Perhaps they are reaching the end of being able to do this.
    Somewhere in all this complex mess there is also the religious fervour
    with which “growth” gets repeated as a mantra. I assume it is the only
    way governements can inflate away their debt.

    Ah well,
    not very coherent I’m afaraid. But I’d rather try to understand a little
    bit than just stay ignorant. Maybe too many issues for one short post.
     Kind regards

    • http://overthepeak.com/wordpress/ Mystic

       Thanks Jasp,
      Japan kicked off its crisis with Government debt/gdp of about 50% ….. now it is 175%.
      So, well over one whole gdp increase.
      Say 20 years ….. that is at least 5% of gdp going in every year.

      • Jasp

        Thx – that is interesting. Raises quite a temptation to wonder whether this is a pattern that is repeatable, or whether  we will see the same path developing with other economies.

        • http://overthepeak.com/wordpress/ Mystic

           It has started to be repeated all round world ….. and, unless they want depressions, it will be continued all round the world.

          • windslice

            It would seem that slowly monetising the government deficits by the local friendly Central Bank is becoming a part of the fiscal plan.

            The next deficit that has to be dealt with is the current account deficit.

            Japan so far has not had this problem, as they manage to export more than they import. Although the gap is closing rapidly.

            The US has it very easy. The USD is required in huge amounts abroad to keep the wheels of international trade turning.

            The UK has been running a trade deficit for a long time. At some point this will lead to a problem. I guess that the GBP is on track for another devaluation unless they stop buying stuff from abroad.

            The Eurozone is a mess. Greece is economically a desolate landscape, high minimum wage, high costs of doing business all wrapped up in an impossible web of corruption. And I suppose that is how Europe will end up. Areas of high wealth and vast areas of poverty.

            • http://overthepeak.com/wordpress/ Mystic

               http://www.actionforex.com/analysis/daily-forex-fundamentals/japan%27s-trade-balance-recorded-an-unexpected-deficit-in-may-20120709169461/

    • snedmeister1

      Good evening Jasp.

      I thought I would slip in a comment, if you don’t mind…??

      Good question… ( And coherent enough for everyone to understand, I am sure )

      The reasons are more than one simple answer really…
      It comes down to an old Mystic video about `credibility` ultimately…

      Their citizens save in bonds, the economy is large and well established, and the country is considered politically stable, and they have full control of their own monetary policy…

      ( Those are my initial `spring to mind` answers, although there maybe more )

  • axionication1

    The ‘polish blanket tricks’ of the Chinese business folk committed with the full knowledge of the banks, local authorities and most probably local government too.
    Seems to me not too different to the subtle shananigans in the west.

    It will work until it stops working. Growth at any cost eh…

    • http://overthepeak.com/wordpress/ Mystic

       I think sorting out the Western money problems, may even be easier than sorting out the Chinese money problems~!?

      • axionication1

        Things will be well nutty in China.’ Herding cats’ springs to mind.

        Similarities in west: growth is also required/demanded by tptb- facilitators will always be around to oblige (& clip the ticket).

  • windslice

    Here comes a tsunami of oldies.

    http://www.telegraph.co.uk/health/elderhealth/9166884/One-in-three-babies-born-this-year-will-live-to-100.html 

    30% of new born brats living to be 100. They had better have some savings in the bank.

    And Zarathustra will not be happy to read this…….

    • http://overthepeak.com/wordpress/ Mystic

       I know it is a silly thing for me to say, but I bet that stat won’t be seen to be correct in a 100 years.

      • windslice

        It is just a forecast….won’t be a stat until 2112. By that time our footprints in the sands will have been trampled on by many.

        As no member of TPTB will be around either, nothing will be done, it is WAY too far in the future.Today’s problems and winning the next election have much higher priority than any long term plans.

        Led me to think about Visionaries, people who could think further than their own lifespan and implement very long term policies.

        We don’t have any nowadays.