To be worried about all this Euro crisis stuff

[hiddenhome]

Seriously, what's the worst that might happen to the UK?

What if loaves of bread end up being £100 or the banks refuse to give us our money?

Are we safe in our beds?

I read krugman.blogs.nytimes.com/ a` lot. Think he has some excellent insights.

Scary I agree with you, really well put.

Does all of this in effect mean that mere mortals like me and my famiily can do nothing to ease our situation? Must ordinary families just wait for the meltdown while trying to carry on as normal?

The Eurozone as a whole is actually in not bad shape; much better shape than the USA, for example.

Blimey, I've just watched the Farage clip. The world's coming to something when he's the most honest man in Europe...

So what happens to the deficit amount from the previous year, does it just get carried over ad infinitum? That's unsustainable. Is that why we're in such trouble?

Just read this on the UKIP website and am impressed

"UKIP was founded in 1993 to campaign for the UK?s withdrawal from the EU. Not because we hate Europe, or foreigners, or anyone at all; but because it is undemocratic, expensive, bossy ? and we still haven?t been asked whether we want to be in it.

But the EU is only the biggest symptom of the real problem ? the theft of our democracy by a powerful, remote political ?elite? which has forgotten that it?s here to serve the people."

I want to support and donate to them...any one got a good reason why not to do so? Are there any skeletons...

I am getting sooo angry with the EU elite (except Merkel). Almost as much as with the banking mafia!

I think so Hiddenhome.

I think the idea is, in the 'normal' run of things, that your growth of your domestic econmy + moderate inflation levels, covers the cost of borrowing.

Yes, it's worth getting angry with the EU elite who a. got us into this mess and b. have no regard at all for citizens - treat democracy as a mere inconvenience and something that can mostly be ignored. (I had a meeting with a senior EU civil servant the other week - he was almost amused by the idea that citizens should have any influence on EU policy, let alone that EU mandarins should seek our consent.)

However, UKIP has always been a refuge for oddballs and scoundrels - Farage claimed every expense which he could get his hands on, hundreds of thousands of pounds. As did the rest of the MEPs, I'd imagine. Makes our own MP's exes scandal look like small beer.

As someone who works with majority German colleagues, I can see their side though, Germany has worked to pull itself out of recession, and tax rates averaging at 50% for the average person in previous years, they were finally looking towards a decrease in tax for the public. France although powerful never strikes as a particularly affluent country to me, and in recent years they had to bring in economic control through working week initiatives etc.

The Greece system is one plagued with issues around income, taxation, tax avoidance, corruption, sub prime land sale abuse etc I never really see Italy as any better, I have dealt with certain beaurocratic areas of Italy and there seems no consistency in the laws or systems. Curently, for example, there are issues on the border of Switzerland with large undeclared investments in Italy and abuse of Swiss banking privacy, tax declaration etc.

Unlike the US we never had a common set of laws, and practices and there was still a lot of differences between the countries and their methods. Imposing the Euro was an imbalanced act in hindsight, and now countries like Greece are unable to opt out and devalue their currency, and the strongest country, Germany, would as expected, refuse to take on another financial burden for it's nation and therefore is becoming strongwilled in the internal workings of the failed countries.

Greek system - apologies

Well, I think it's a little ironic to be talking about democracy when the world's democratic nations are forming an increasingly disorderly queue at the door of China for help.

And frankly, China has done a better job economically and socially than democratically elected fuckwits like Bush and Berlusconi. China's explicit focus is on stability and increasing the wealth and welfare of its citizens. I don't think that's a bad aim, and certainly better than the economic rape Bush and Berlusconi have inflicted on their citizens.

Democracy is a great concept; the problem, as with most things in life, is in the execution. People who are gullible or just plain stupid enough to vote for a fuckpuppet like Bush/Cheney (or, God help us, Michelle Bachmann or Sarah Palin) actually aren't well served by democracy. Time and again people vote against their own interests because someone is waving an American flag (in the case of Bush) or a pole-dancer's tits (in the case of Berlusconi) at them.

As an aside, it's naive to think that anyone in the West gives a shit about Arab democracy. All they care about is having someone in charge who keeps the pipelines open. Pretending they support democracy is just making sure they have a dog in the fight, and that their dog wins.

China doesn't exactly have the best record for human & workers rights though does it? And I'd be concerned about a reliance on China and its "overnight" economic growth and stability.

They are a mimic manufacturing country quickly born out of a peasant farming one. They rely entirely on the rest of the world to ship and buy their products, for their strength of innovation, scientific development etc. Without a consumer/developer at the other end, China will not manage long term growth. They need a consumer west, as much as we need them.

The truth is, we have all been living in a bubble for a few decades and things have to get harder whilst countries pay off debts. The important thing to watch for is the interest rate on lending, and whether some control can be actioned on this, as it is he interest that normally kills a country economy.

"Must ordinary families just wait for the meltdown while trying to carry on as normal?"

To a point. However, there have been many crises in recent history and, each time, 'ordinary families' have to ride them out best they can. To put yourself in the best position to do so you have to anticipate and plan for the worst. In this particular case where things like interest rates and inflation are outside of our direct control, it makes sense to reduce financial vulnerability. Reducing debts, building up savings, increasing income and reducing outgoings wherever possible. Doesn't do a lot for the national economy if everyone pulls their horns in, admittedly, but looking after #1 is the way forward.

I think building up savings is not the most advisable at the moment, unless they are in an appreciating assets. Cash savings are just not that attractive . I would say, buy farmland with a water supply, if you can.

I honestly don't think interest rates will rise in the next 10 years. Seems like we are in a Japanese-style slump.

" Seems like we are in a Japanese-style slump."

I think there is a real chance that may well be happening right now. The stockmarket is stil below the level it was 10 years ago.

My favourite scenario though is a sudden collapse in the stock market, property market, falling commodity prices and falling wages that creates mass deflation. This will cause banks to collapse as the real value of debts increases and becomes impossible to repay as wages and prices fall.

Govts will respond to that deflationary panic by printing huge amounts of money (QE 3) and that will initially have no effect so they will print even more (QR unlimited) and then suddenly we will get hyperinflation that destroys all fixed income savings and especially pensions.

We are also already partly in this later scenario as central banks keep printing monmey to prop up asset markets and fund Govts that are fundamentally insolvent.

Good thread. I don't think anyone's yet mentioned the Argentine financial crisis of the early 00s - that provides quite a good model of what could happen in a 'worst case' scenario.

We saw a lot of the fall out at the time as we were living in Spain. An awful lot of people whose parents and grandparents had emigrated in the hard years post Civil war (and hence had right to settle) came back. I wonder how many of them will be emigrating right back again now :(

Yes, and you can see the same idiotic failures being repeated today: 'To quell the crisis the IMF recommended that the government dramatically cut spending. These cuts led to reduced public-sector wages and pensions and a delay in pension benefits for over 1.4 million retirees and their families (Lewis 2002). In addition, as the unemployment rate grew, more people sought unemployment insurance and other social services, the very services being cut. Many people were forced to find jobs in the informal sector that paid very little and offered almost no security for the future (see Jeter 2003).'

Exactly edam! Though I wasn't trying to make a political point, more look at what some of the after effects could be (which happened regardless of whether you think the 'medicine' was necessary or wrong).

"I think building up savings is not the most advisable at the moment"

Not to the exclusion of all else but what I was referring to was creating a buffer. For all the complexities of interest rates, exchange rates, national debts and austerity measures, the worst and most likely practical thing that could happen to a regular person at moment is that they lose their job. So if the household is already running close to the wire then that household is more vulnerable should that happen. By reducing outgoings and debts & building up savings you can increase the time between losing your income and having to do something really drastic like losing a home or declaring bankruptcy. It may only delay the eventual outcome rather than prevent it all together but it's far more constructive than 'waiting for the meltdown' like a lamb to the slaughter.

Gosh you're all worrying me - I'm off to check the foodcupboards and make a stockpiling list!

True, Cogito. I agree that savings that would allow a family to survive for, say, two years of no income is an important safety buffer.

at this unachievable goal

"I agree that savings that would allow a family to survive for, say, two years of no income is an important safety buffer."

They rely entirely on the rest of the world to ship and buy their products, for their strength of innovation, scientific development etc. Without a consumer/developer at the other end, China will not manage long term growth.

Short term, yes, but it won't be long before it can be largely self-sustaining, because as Chinese people get richer, they will all want the TV's, cars, fridges, computers etc that are being shipped to the west. The potential for demand growth from the Chinese themselves is unprecedented. This isn't replacement demand, as in the west. This is the "have nots" becoming the "haves".

Remember that adoption of lifestyle gadgets in the west was partially hampered because new technology was expensive- microwaves used to be 100's of pounds when they were first invented. Chinese manufacturers can make them for a tenner. Flat screen TVs were 1000's- now they're 100's etc.

And yes, they have no respect for patents and they will rip off everything that they can.

China appears to be on a bit of a knife edge as well, I have seen reports which indicate their construction bubble is about to pop. China holds a lot of foreign debt, particularly US.

And goods in China will only be cheap as long as labour continues that way. If there are employment gaps and a better standard of living available the workforce won't accept such low pay as they currently do. This will hike up the prices of goods we take for granted should get cheaper.

Their natural resources will also face limitations.

From a personal point of view, I would try and tackle all debts to a manageable extent, pay off high interest ones first and try to eliminate any borrowing. Try and keep at least a safety net of 6 months salary in the bank. It's hard but anything will help in the pot. I've been made redundant twice with no back up savings and I won't go through that again.

For the future I think we must just learn to live to our means again, stop risky borrowing, save for things rather than accept credit, and not overstretch ourselves to mortgages with risk. Like a lot of European countries (and as I remember as a child in the 70's) I will assume my children will live with me longer, perhaps even when married, to allow them to save properly for the future. When I moved countries I didn't bother applying for a new credit card, and it really does make a difference to my purchasing habits. I pay the essentials, a little savings and if i can't afford something I want I learn to live without it.