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April 23, 2014 / 23 Nisan, 5774
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Posts Tagged ‘austerity’

Egypt’s Finance Minister: IMF Deal by this Weekend

Tuesday, November 13th, 2012

The Egyptian government will most likely sign a memorandum of understanding with the International Monetary Fund for a $4.5 billion loan before the weekend, Egypt’s Finance Minister Momtaz El-Said told reporters.

Al Ahram reports that Egypt’s government is planning to eliminate subsidies on gasoline, in line with IMF recommendations, in order to convince the IMF that it is serious about economic reform and to close the deal.

The Egyptian government needs the $4.5 billion loan to reduce its budget deficit, which stands at 11% of GDP, as well as manage a balance-of-payments deficit that has so far cost more than $20 billion in foreign reserves, since the toppling of Hosni Mubarak last year.

Government officials have proposed austerity measures, including cutting fuel subsidies, raising sales taxes on goods and services, taxing stock exchange IPOs, higher taxes on phone calls, cars, cigarettes, liquor, carbonated drinks, coffee beans and water-resistant cement.

Weatherman calling for food riots with a chance of mayhem.

Europe’s Wrongheaded Austerity Policies

Tuesday, May 22nd, 2012

Austerity — what governments are currently experiencing in Europe – can be a bad thing. It is a well-known basic economic theory that when politicians try to slash the government budget by taxing citizens rather than by cutting government expenditure, they only harm the economy, which results in less tax income and worsens the situation. In the early 1970s, economist Arthur Laffer visualized it by drawing a curve on a napkin, indicating that from a certain point on, higher taxes result in less government income. When taxes are raised even further, the economy begins to contract.

A typical example can currently be seen in the Netherlands. The country’s economy has not grown in the last three quarters. Pressured by the European Union, austerity policies were introduced in 2010. Last April, the government fell when the Freedom Party of Geert Wilders refused to back a new austerity package of €11.5 billion, of which only €4 billion was to come from cutting expenditures and €7.5 billion was expected to come from raising taxes. The new austerity round was nevertheless imposed by the EU, which insisted that the Netherlands trim its budget deficit to 3% of BBP in 2013. Geert Wilders was right to have refused to go along with the latest plans. Not only will the amount of €7.5 billion in new taxes in all likelihood not be reached, but the Dutch economy will be hampered even more.

Last January, Standard & Poor’s warned the Netherlands that its credit rating could be lowered if its growth kept declining. S&P warned that the Dutch austerity policies risked “becoming self-defeating, as domestic demands fall in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.”

Geert Wilders’ party is expected to do well in next September’s general elections. The electorate agrees with his rejection of the austerity package. Like Mr. Wilders, it blames the EU authorities in Brussels for imposing these policies on the Netherlands.

The same phenomenon can be seen all over Europe, with electorates in revolt against EU-imposed austerity everywhere. The rising unpopularity of governments that are trying to cut back their deficits has worried the IMF. Earlier this month, IMF Managing Director Christine Lagarde said that the IMF is aware that fiscal austerity holds back growth and that the effects are worse in an economic downturn. This is, however, only a half-truth. As no one, not even the state, can indefinitely continue to spend more money than he receives, cutting government expenditure – hence austerity – is badly needed. The problem is that the austerity policies are targeting not the institution which is living beyond its means — namely the government — but the taxpayers. As Europeans are already suffering tax levels that are almost twice as high as those in the U.S., it is only natural that the voters are in revolt.

The irony is that the austerity policies of the past years have been imposed at the behest of the unelected liberal, leftist authorities in Brussels on center-right governments in the EU member states. The electorates are punishing their center-right governments by voting in center-left politicians who promise to end the austerity policies and “tax the rich” — a course that will make matters even worse.

The Dutch are lucky to have Geert Wilders; but the French, who lack an equivalent of Mr. Wilders, quite understandably voted President Nicolas Sarkozy out because they disagreed with his austerity policy. However, they voted the Socialist François Hollande in, who will undoubtedly only heighten the problem.

The same phenomenon can be witnessed in the United Kingdom. Two years ago, the Conservative David Cameron managed to oust Labour. Today, polls predict that if elections were to be held now, Labour would beat the Conservatives with a margin of 10%. David Cameron is fortunate that Labour leader Ed Miliband is unpopular or the margin might be even larger.

What did Cameron do wrong? He, too, made tax payers pay for austerity. One of the first things Mr. Cameron did was to raise Britain’s top tax rate to 50%. The result was that the tax revenue from Britain’s highest income group fell. Another thing Cameron did was to raise sales taxes. VAT – or Value Added Tax – rose from 17.5 to 20%, the highest level ever, as part of Cameron’s effort to bring down the country’s budget deficit.

Rubin Reports: Western Civilization Faces the Big Test – Citizens! Heal Your Societies or Go Over the Cliff

Tuesday, May 8th, 2012

http://www.rubinreports.blogspot.com/2012/05/western-civilization-faces-big-test.html

The current political crisis in Europe, and in America as well, is not at all hard to understand. Think of it like this: society is not infinitely malleable. If you pull a rubber band far enough it is either going to snap back or it will break.

Western democracies have worked very well for 60 years now. They have been remarkably prosperous; remarkably peaceful. They defeated the Communist challenge. In a sense they—and I include the United States here—are victim of this very success.

Out of rational self-interest, the realities of electoral politics, and a strong sense—misguided or otherwise—the welfare state and the payment of entitlements have been expanding.

You can—as my grandmother used to say—throw around money like a drunken sailor until you run out of money.

The self-imposed burdens have reached, and exceeded, the limit of what these societies could finance. This problem has been highlighted, of course, by an economic recession but it is not the product of that business contraction.

Things have been made worse by the fact that most governments in power have tried to apply the very old policies that were making the societies ill in the first place. The situation is akin to the medical practice of centuries ago in which an already sickly patient was bled further by the application of leeches. Death often followed.

Those governments buried in the equivalent of “old-think” in the USSR have just three alternatives:

–Deny any of this is happening. Every penny spent is absolutely necessary to stop old people from starving, women from keeling over in their 30s, the globe from heating up like a tea kettle, and in short the mass extinction of the human race.

–Self-defense. Say that anyone who wants to recognize reality is a violent Nazi hater of women and a racist flat-earther.

–Use a scapegoat. If only taxes were raised on rich, greedy people then the party can go on uninterrupted.

Obviously, I’m being facetious but that when all the verbal foliage is cleared away that list is pretty accurate.

But what about those governments, or oppositions, that wanted to be responsible by limiting spending, reorganizing or reducing entitlements, and cutting their own payroll to a level that could be sustained?

Well, that’s an uphill battle as we’ve just seen in Greece. People don’t want to be told to sacrifice, especially because they suspect that the elite isn’t doing so and that this same elite is responsible for the mess. So they can be—easily?—manipulated into voting for those who tell them to eat, drink and be merry, with a minimal tax on billionaires and millionaires paying off the caterer.

If you can buy or import voting blocks to ensure your victory that also helps. Is any government in France from this moment on going to limit immigration, fight Islamism, cut back on vacations, and raise retirement ages and the length of the work week? That’s doubtful.

Now this is the very moment that democracy comes into play. It is in the hands of the voters to decide whether to face the music or default on paying the fiddler. Can they be made to understand in the face of a clueless mass media and a fantasy-intoxicated intellectual class what is at stake and what needs to be done? Ask again in November.

Something very important should also be made clear here: political stances and solutions are not historically permanent. I would argue that liberalism (and a dose of the social democrats) was the best solution for the West’s problems in 1900. But it is no longer 1900. Huge social reforms have been made; out-groups have been brought into the fold with equal rights. The balance has shifted and that reality must now be the starting point in facing reality.

Could it possibly be that a government that has grown steadily for so many decades might have become too big? Is it conceivable that regulations imposed by the thousands have become too onerous? Is it within the realm of the real world that the burden of salaries and retirements for those who draw government pay checks have become too onerous? Might it be true that if you keep dividing society into warring groups they will eventually go to war against each other?

Or is this all a fantasy of a reactionary, evil, woman-hating racist mindset that should be dismissed by any civilized being?

Democracy is based on the idea that the average citizen is wise enough to understand what his society and country must do to survive and to do better, or at least minimally well. We are now going to find out whether that proposition is accurate.

Tel Aviv Stock Exchange Up

Sunday, November 13th, 2011

The Tel Aviv Stock Exchange (TASE) rose strongly in trading Sunday following reports of a new government in Greece and the resignation of Prime Minister Silvio Berlusconi in Italy following the passage of an austerity law in the senate. The Tel Aviv 25 Index rose 2.2% by midday to 1,130 points, and the Tel Aviv 100 Index rose 2% to 1,022 points.

Printed from: http://www.jewishpress.com/news/breaking-news/tel-aviv-stock-exchange-up/2011/11/13/

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