Interestingly, the article doesn't say how much debt Catalonia has relative to its GDP (it's 17%) or its tax revenues. Without that information, we don't know anything other than the obvious, which is that a sudden quadrupling (or whatever) of interest rates is going to be a problem for any debtor. Just imagine 10-year treasuries going to 5% by the end of the year.
Presenting Catalonia as some kind of an exemplary case for a larger problem may be misguided for another reason. Spanish regions are famously independent minded. Normally, no one outside Spain listens to the the Catalonian government's tactical maneuvering to extract concessions from the central government. But these days, any mention of debt in Europe causes panic attacks.
The Levenshtein distance between Catalonia and California is just 4 whereas the distance from Catalonia to Greece is 9. That can't be a coincidence ;-)
I think that the writer wanted to show how the "best" part of Spain was struggling after having done almost everything "right". I couldn't see if the writer wanted to cause panic attacks or just make us think about what is the "right" thing to do....
Local debt is the big untold story of the Euro crisis and, if that was not apparent before, it became glaringly so when Catalonia’s President this week told the world his autonomous Catalan Government would struggle to meet its bills at the end of this month.
What I take issue with is that he didn't actually fact check whether or not Catalonia is an example of a dangerously indebted region. He makes it sound as if Catalonia is on the brink of default by the end of the month, which isn't the case at all. He just takes the words of a politician at face value, apparently unaware of the internal dynamics of Spanish politics.
What the Catalonian president did was to pressure the Spanish government to let the regions refinance in federal Spanish bonds because interest rates are lower than for debt issued by the regions.
From reading his blog you'll also know that:
- Spain had surpluses and was lowering public debt before the crisis
- The catastrophe that austerity caused and how the idea was very bad in the first place
- How the crisis was made worse by the 'euro straightjacket' (ECB tight money policy).
- How the euro caused trade deficits in the southern countries that were compensated with German and French capital.
The weird thing is - its not even unorthodox, unconventional economics. Its the basics that everyone studies, but no one remembers.
Canadian austerity in the '90s was largely a systematic shifting of financial burdens down to provinces and then many of those provinces them under-funding areas where local government would be forced to pick up the slack. I suspect the Europeans were guilty of this in many places in trying to meet the EU budget restrictions. Unlike Canada they did not get lucky, in Canada we were recovering from a recession and the real estate values that property taxes were based on were steady or rising and provided some cushion for the local governments. The EU municipalities find themselves in the opposite circumstance as the real estate markets are a disaster. They are being crushed from both sides.
Here in Spain the biggest problem has been the three years that the real debt has been kept hidden under the carpet. The previous socialist government expected that the general recovery would help to exit the crisis and then be able to clean all the mess with out to much light from the international markets. Meanwhile they said that they were making a "social" exit of the crisis. That means increasing the spenditure, a bad idea when what you have is a mad excess of public wasting. Very little has been spent in R&D or other meaningfull spendings, just new rich projects and "me too" business plans.
The problem is that nobody really knew ( maybe they didn't want to know) how big the hole really was: municipal debt (the bigest debtors to private companies in Spain, are city Halls), public banks (cajas) unrecoverable credits (huge lendigs to political friends for building proyects), crazy public spending ( huge airports,high speed railroad between small towns..).
Mind you that all this has been caused by every political party, government agency, local government, private companies( mostly construction ones) and banks( friends of mine bank office directors were regularly yelled by their bosses to increase lending no mater who). Of course a gold rush of cheap credit infected the whole population. A perfect storm if ever have been one in the spanish economy.
Finally this government is taking the rudder of all this madness , and making real changes relatively fast: new transparency law for public agencies(there was none, all the accounting was almost secret!), plan for paying all the municipal debt to small companies (this finally has made public all hidden cities debt, and will avoid that lots of small companies go bankrupt), new banking and financial markets law (to increase the transparency and safety levels), public spending cuts (pretty heavy ones), another law to take control of regions that are not taking measures and making the needed cuts in spending.
I think that we are at the worst of it but only because all the truth (well maybe only the biggest part) is coming in to the light. I also think that we will go through this as real measures are being taken, in Greece they have the problem that there is no strong government taking this kind of measures.
Also a real deflation is taking place, in salaries and prices( as we can not devaluate due to the euro), this is quite traumatic for the people as you see how bussiness are cuting your pay slowly every year. But as prices were artificially inflated due to the euro ( germany used to be expensive in the nineties, now lots of things are cheaper there!), and the competitiveness of Spain sank, we only created wealth via credit. Maybe this deflation will increase our export rate slowly.
Somebody commented if it would be a good oportunity to start a bussiness or a shop here. Nothing that is related to sales is a good idea, as there is no cash around to buy anything. But it is a good time for hiring people with high qualification at a discount ( programers , biologist, architects, physicists, lawyers, ingeniers, doctors) for little more than 1000€/month, even with 1000€ you'll have peolple lining up for the Job.
Also it is a good time to buy spanish companies (we have some good ones too) with big discounts due to market undervaluation and their need for money (banks are not lending AT ALL!).
Edit: typos and general editing as I wrote it from the Iphone.
I agree on "it is a good time for hiring people with high qualification at a discount". Here is a cultural caveat:
A very closed friend of mine started his company (internet startup) in Spain just over 12 months ago. He wanted to hire Spanish developers, with c. 5 years experience. And he did. Even if this was a startup, the working conditions were pretty good for Spain: €32,000 (well above many corporate jobs), private health insurance, equity, job responsibility and decision making. My friend was paying salaries out from his own savings, no seed money raised, and he was paying himself zero.
Since founding the company, he has fired two developers because of a "legacy" cultural clash. What my friend (late 20's guy) found out was that many developers (and probably this extends to many other industries) were looking for a 9-to-5 job, no frills jobs. They did not show any motivation/passion at all. They took no ownership of projects, did not step-in when issues came up and showed no motivation for "getting things done". He was frustrated because the company was a startup, not a large corporate, and his bank account wasn't cash rich, but Spanish developers showed no respect and did not go that extra mile to ship product in a responsible timeframe.
These two developers, in their mid-30's, are probably not representative of the entire dev community in Spain, but my friend burnt out, and hired developers in Poland. The Spaniards were let go, in time to pay them no equity.
From what he has told me, a part from some minor communication issues, Polish developers showed the right work attitude and passion, with a mentality very much like the Valley. Since the initial work crunch, from working 80 hour weeks, he is now doing a 9-6, and the company is cash flow positive. Just shows that hard work does pay off, and how a 9-5 mentality (specially when starting a company form scratch) is cancer to the company.
If your friend needed people ready to work 80hr weeks in Startup Crunch mode, in exchange for 32k + eventual equity, and hired people who wanted 9-to-5, he is a horrible recruiter or a terrible leader. Don't get me wrong: lots of people here are angry at the situation and will act pissy and self-entitled. But good engineers are still not cheap, and motivating them takes a lot more than "at least you have a job".
Anyway, happy it worked out for your friend. Yay for outsourcing!
just to clarify: FT hire in another country != outsourcing
It's more like: devs tell him, "yes, super excited to work in a startup, salary is terrific, challenge accepted."
truth: "oh, it's 5pm, lets go home. we haven't had the time to push production code to fix that bug, but we can do it tomorrow."
it is easy to say that someone is a bad leader/bad recruiter, but the fact of the matter is that it is a common cultural issue (as per other comments in this thread). Hence, why did it work in Poland and not Spain? Many good engineers at large corporates in Spain don't make that money, and yet for less one can get an equal service in Poland.
Clearly "at least you have a job" was not an approach to motivate hires, they were let go.
If he hired people who became 9-5ers, either he failed to correctly identify their expectations and attitude and their true self revealed once they were in, or he failed to keep them motivated and they scaled back to more relaxed work schedules. It's quite possible they were the best he could find: even in the current climate, I don't know any highly skilled developers willing to give up their personal life for E32k unless they really really believe in and share your project.
Poland has almost 1/3 the GDP of Spain; of course his money was more effective there. Did he bring them to Spain? Last time I interviewed a Polish developer, salary expectations including relocation to Spain were roughly 2/3 from a pool of candidates decidedly more expert than their Spanish counterparts.
That's one of the big challenges Spain faces in the next few years: reducing the cost of living without destroying the standards of life, so it can become competitive again while keeping a reasonable amount of experts and highly skilled workers (who are now fleeing the country in droves).
He didn't bring de Polish devs over, they work from Poland. on the "2/3" comments, i think you are pretty much spot on.
Don't get me wrong on the hiring issue, I think they are both parts at fault. The irony in this whole situation is that you hear from Spaniards (primarily those called "indignados") complaining about €1k/month salaries, shitty jobs, etc. and my friends stumbles into a situation where his employees have above avg working conditions (€2,700/month, with private health insurance and equity"!") and there is no reciprocity in specific working situations (he was definitely not asking 80hr/week in perpetuity, he was just asking to ship on time to meet deadlines, if that means working leaner, or working more hours that is up to each individual, just get it done).
For 11 hours of high quality, skilled technical work every day, 7 days a week, and the minimal job security of an unproven business? €32k is not going to buy you that person. You have to find someone who believes in you and your project, shares your passion (and equity), and can afford to have basically no family & social life until things work out.
I know a lot of people who really believe in a project and it's leader who ONLY work for equity without any money, benefits, health care and such.
I know where you are coming from but unlike people here on HN seem to think; the whole world is not Silicon Valley (and I know at least one person in Silicon Valley crunching 11+ hours/day for equity in a startup actually); the amounts paid to programmers there are not really examples for the rest of the world. If you want that just move there and pray the stories are true; there is no bubble.
One of my best friends in the Netherlands has been working for around E40k gross as a top dev for 15 years; he doesn't care about money, doesn't ask for raises. The company still looks like a startup, but is making enough to pay salaries every month for 15 years. He doesn't mind crunching outside work time and often does.
Besides the question if it is 'smart' or not to do so, I don't know a lot of people who worry about these kind of things much. They just work and have fun doing it and the moment they don't like it anymore, they switch.
Exactly what we found. And time after time again; I live parts of the year in Spain and I love it, but the mentality is really off. Unless they fix that, I'm not positive about the future of people here. It's good to see that that's not only me; someone else in this thread (read my other comments if you care to) said mid 30s might be ok, but they don't seem to be either in mine (and your friends' experience).
I don't see that Spain is at the worst of it. The majority of the people I talk to about this, both family, friends, and people on the street (seriously, I ask cashiers, waiters, friends of friends) don't seem to get it it yet.
Most of the debt issues are just coming to light, small town/village governments are still doing the same old thing, and the "people in power" are still getting away with it.
Nothing is going to make this go away, and this government, with their watered down transparency plans and regional examples (think Madrid and Comm. Venlenciana) isn't going to be capable to doing what it takes. There's just too much mud on their hands.
I will say when my wife and I spent some time on Ibiza and Mallorca that the attitude of the workers there seemed a little different, perhaps because these places are so heavily sold into servicing northern Europeans. On the mainland the amount of people I have seen collecting paro and working, or collecting power and rejecting work is horrible.
Unfortunately all this is true, but something is finally changing (although slowly). My wife used to see as a doctor lots of people that where feigning illness just to get the medical dismiss and receive a pay without working. They even came to the hospital with their lawyers in order to intimidate the doctors or worst physical threats and yelling.
Now all this has almost disappeared, not completely but is much better. People is realizing that the Belle Epoque where everybody had right to receive money for nothing is gone.
Okay, so they aren't gaming the system in that manner, and in that there is a ray of hope.
But it could also be that they are out of work and cannot play that game any more, instead are either 1. properly (or willfully) unemployed and on Paro or 2. they are working under the table and collecting Paro or 3. they are simply working under the table or 4. they are unemployed and have zero income...
Well there is still people that is not working and just wants to game the system to obtain more money, but much less than before.
At the higher point people was rejecting job offers because they had unemployment and didn´t want to lose it. It has been pretty standard(I have some friends and family who have been doing exactly this) to have a temporal contract in any job (6 months or 1 year) and when it finished you went to receive your unemployment pay till you finish it, 6 months or so without looking for a job, just enjoying. Then, and only then you looked for another job!. You can not repeat more than 3 periods of 6 months, because the company will have to transform your contract to a fixed one. So it does´t really matter how good you are, you are going to be fired no matter what after a year and a half.
Work contracts here are a bad joke (they have changed the law, but I don´t think it will really change that much as they only made firing cheaper, hiring is still very expensive). Companies are forced to hire people with this horrible contracts that don´t allow you to get a fixed job, because it is very difficult to be flexible with fixed employees (autopun no intended). Workers become more expensive as time passes, no matter how good or bad the worker is. Also firing somebody when he has been a lot of time in the company was very expensive (40 days for year worked, now reduced to 20)
Unions are defending the rights of the fixed employees but almost no one can get one of those contracts, so they are not defending the workers that really need to be defended, but the unions status quo. Also the companies have gamed the system and played with the contract conditions of hard working people, discouraging hard work (good workers are not payed more here, in general they prefer by far a cheap and unexperienced worker than a more experienced and productive one that happens to be more expensive).
We have a system in which from school hard working people were considered dumb, and made jokes of them. You pass from one course to the next even if you fail. Why are you going to study that hard if it is possible to earn more working in construction, and receiving the unemployment help?. The same happens in the companies (not all of them of course, but it is really common), why are you going to work hard if they are going to fire you anyway when the year and a half expires no matter how good you are.
That is why a lot of young people can´t afford to go living alone, of course is a cultural problem (not moving far from your town to get a job, requesting the best job conditions even if you are not the best worker nor have experience, etc..), but working and social conditions for young people have not been very encouraging to do much differently, in fact the opposite has been true.
The excess of cheap money around made people to see working as time lost. Much better go gambling (invest) in your flat, after all you were supposed to be able to sell it for double in 3 or 4 years.
You can also add the cultural loath to the EMPRESARIO (business owner). Here if your business is making money, you´ll be suspicious of stealing from your costumers or/and your employees (maybe is a catholic sin?, or simply good ol´ envy). People rather be a civil servant or be unemployed than be an employee and much less try your own business . Now it seems that people is changing the way they look at entrepreneurship, mostly due to the internet and Facebook, and of course necessity.
All this doesn´t mean that there is no really hard working people in Spain, there is, but in general it wasn´t seen as something to be proud of. More like kind of stupid (this depends heavily on your social extraction, lower levels where the ones that fell more deeply in this trap).
Maybe this deep crisis will have the effect of reseting all this broken system, and a change to a more rational one. (just maybe)
I have a few neighbors who have the entrepreneurial bug and have started small businesses during this downturn. One fellow said he would be happy to be making enough to employ his brother in-law and take home 1300 for himself.
Spanish modesty and enjoying the good life, while creating a proper small business and employing one or two people. Ole, here's to more people like that!
What you are saying about things being under the carpet, I totally agree with you. While living near Andalucia it was evident there was a huge social and structural problems that was not financially sustainable, but yet things on the surface appeared to work out.
Perhaps a good side effect of how unemployment benefits work there is that people become willing to gear down their salary expectations. You have a long period of living off the dole where you reduce your spending, and by the time that runs out you are probably more willing to work for less. I thought I would never say this, but this might be what saves Spain and the Eurozone by allowing Spain to become more competitive without inflation.
You can't hire doctors for 1000€(18-20keur/year gross). The lowest paid doctor working for the public health system gets 42keur/year. That's very low, even portuguese doctors are better paid, but that's nowhere near 1000eur/month.
You can hire entry level programmers or engineers por 18-20k, but experienced ones will cost you 25keur or more, and probably you can get better price/quailty ratio in Eastern Europe.
Until very recently that was the norm, my wife is doctor in a public hospital. Here in Mallorca they are closing 2 public hospitals and the private ones don´t have money to pay their employees. Doctors always can emigrate to Dubai, Australia or places where they can get high salaries but most spanish doctors won´t move from Madrid to Toledo just to get a job, much less go to a place where you have to learn a foreign language and be far from the family.
Maybe 1000€ for doctors is a bit too low is true, but this year we are going to see stuff like that for people who doesn´t want to move away from their city.
Do you think that house prices have found a bottom yet? I fear that the structural reforms you mention will not have enough of an effect on public finances quickly enough if house prices keep falling and more banks go bust.
Looking at spanish stocks, I wonder why Telefonica is falling so precipitously. That seems way overdone to me.
I don't think so. Not on the med coast, anyways! Still way too many empty places.
Sometimes I wonder if a return to the Peseta and devaluation would bring back the foreign money in the RE market... It would at least move towards filling up the housing bubble with real money.
You forgot to mention that "this government" is also aligned with the "craziness" If not how do you justify the 20billion rescue on Bankia? That money at least doubles the amount "recovered" in the spending cuts. Although is true that they are introducing changes fast.
Bankia is the result of many "Cajas" creating a bank together. "Cajas" are non-profit financial institutions that have to use their benefits for social responsibility (http://en.wikipedia.org/wiki/Savings_bank_(Spain).
Admin council of "Cajas" are formed by people selected by political party in power in that region, thus "Cajas" are highly politized. Many "Cajas" had a lot of toxic assets, and were forced to unite and create Banks to be able to refinance themselves.
Bankia is the fusion of many "Cajas" controlled by the PP (Partido Popular - Popular Party, right-wing party) in an effort to create a "Bank of Popular Party", that is Bankia. The "Cajas" involved, being the most important Caja Madrid, had huge losses due to toxic assets. The fusion of all of them won't get anythyng but a even greater hole.
That hole of toxic assets is being nationalized and assumed by the state. Remember that Spain is now ruled by the PP. That allows effectively saving Bankia as a Bank of PP. But Bankia is NOT owned by the state, only 100% of BFA (the bad part of Bankia) is owned by the state, which in turn controls 45% of Bankia. That leaves 55% of Bankia, free of toxic assets and owned by private hands, but effectively controlled by the PP.
You are right that the PP is trying to fix their own mistakes. But the Spanish central bank has been instrumental in hiding ALL the spanish banks holes (or ignoring it or I don´t know what they have been doing).
There are no cajas without exposure to the crisis, all the local governments have used them as if they where their own bottom less booty that had to be shared out.
Maybe I wasn´t very explicit but in the second paragraph I say that it has been a general illness. All the spanish politicians have behaved equally, despite their party or region.
It has been a gold rush and nobody is free of guilt.
The only thing that I am stating is that finally the central government is taking action (late, maybe too late), the former one just sited on their asses doing nothing because after all they were going to lose anyway and why lose more votes and carry that bad karma when the next government cant take it all?(no great statemen lately around here :( ).
If they had won this elections for any reason, they surely would be doing something pretty similar (after all Merkel has been dictating the economic measures this last 6 months). We don´t have too much options left and even then is maybe too late. (I really hope not)
Well, I don't think the PP had much of a choice. And there wasn't really much the PSOE could do either. This is much bigger than either party, because its the sum of both parties' opulent building and pocket filling, from the local governments right up to the king's son in-law :)
And for the sake of being in the Euro the margin call has come, so to speak.
What I don't get, is why didn't they at least try to clean things up a little bit before all of this? I guess Aznar's idea was that the economy would pull thru all of the the corruption with the housing bubble. Kinda shortsighted.
I think whole Europe will pay because of being too late...
I live in Barcelona since 2009 and I couldn't believe the total lack of reaction of the current government at that time. I don't know if it was because they didn't know what to do (anything should have done better than nothing I think) or if they didn't want to pay the political cost of doing something "wrong", which, ironically, they have paid because of doing absolutely nothing at all!
I don´t think people realize how little the former government did, and now with their opposition strategy they are in fact gaining support little by little.
They only have to criticize the cuts and call them "right wing" and people will flock to them. We don´t want to hear bad news, and when you have had 3 years of them, some people is asking for somebody to sell them the snake oil that will bring everything back to 2005.
People have been getting mortgages way over what's reasonable.
Local banks have been getting credits to provide these mortgages they knew were unreasonable.
Foreign financial institutions have been lending money and allowing debt levels to rise uncontrollably.
Industries everywhere have benefited from all this available money to sell more product (esp. houses).
Politicians, companies and markets have emphasized and focused on short-term benefits over any kind of long-term strategy.
Everyone, everywhere has stood by and let this happen, because everyone assumed that everyone else knew what they were doing. Voices of concern were quickly silenced. Nobody wanted to be the party pooper, nobody has done anything to prevent this, nobody wants to bear the responsibility for what has happened, and nobody knows how to fix it.
I know that in Madrid salaries are around 2000€ month or more, here in Mallorca it can be something less I think more around 1500€ (it used to be much more of course but everything is going down pretty fast). Any way is a bargain compared to US salaries, and I think salaries will go further down during this year(although maybe not so much in programers as is a realatively hot market here too). It is also true that you receive what you pay for and good programers are earning much more than that, and always in short supply.
Any way I´ll tell you in a couple of weeks, as I am planing to hire 2 or 3 programers along this month.
That guy was outed as a Walter Mitty. You can check for yourself: he's not and has never been registered with the FSA. He fooled the BBC because he said what they wanted to hear, this was a big blow to their fact-checking credibility.
I don´t think that catching falling knives is a good way to make business, but now that the market is so low, some companies are taking undeserved punishment, just due to the panic. Go and ask Warren Buffet how he made his money.
Please read again what I wrote as it has nothing to do with what that guy said . Somebody commented if there are opportunities here in Spain due to the crisis, and I still think there are, if you know what you are looking for.
>In fact in the case of France much of the local debt was inherited from the central Government, which “delegated” the debt to localities where national funds were spent, effectively reducing the national debt headline figure. French finance Minister during this process was Christine Lagarde, now head of the IMF.
Interesting: a uniformly distributed, uniformly crippling debt. The public will be forced to adopt whatever the business community's EU/IMF proxies ask for in exchange for debt maintenance.
Without trying to sound like a foil-hat wearing loonie, I feel like this is the direction things will go, and the IMF (and related orgs) will welcome it.
So what are the opportunities there? Opening shop in spain to take advantage of an educated and competitive workforce?? Or it follows the greek way avoiding it altogether???
Its still too early, IMO. Prices aren't that cheap yet and the cost of living, while cheap, hasn't plummeted. Yes, there are a lot of people out of work, but speaking with a few folks in the last 6 months they say it is still hard to fill IT jobs.
Wait until (if) Spain exits, then capitalize. But remember, the work ethic here is not the same as elsewhere. And people who don't fit that mold are leaving the country.
If it doesn't exit... Hard to see what will happen here.
That's what I see; we tried to establish a developer team in Spain and we found out that good people went to Germany and a large portion of the remainder don't actually don't want to work. We are talking university level CS people. I was amazed by this. Even when I met one who was willing to work he wanted a contract for life and part time.
I know a lot of kids there who finished school, live with their parents on (some kind of; I'm not totally clear on this; I know they receive a few $100/month) benefits. I'm from the Netherlands and this concept is alien to me. None of the people from the schools I went to would consider living off benefits unless very ill or something like that; the ones who did not get a regular job opened companies. Probably it depends on the part of Spain but it was a strange experience.
I'm Canadian and have lived here (Spain) for 10 years.
I think it is partly a generational thing. If you find a mid-30's developer with kids, my experience is they will take what they can get. The trouble is, as you said, many have left (I know a few now in Germany) and others have simply created their own little space/niche of work.
The younger gen seems exactly as you say: back to home, parents footing the cost (I know one guy whose parent's are paying the loan on his BMW!).
At some point the pain is going to become too much and the "ni-ni"s, as they call them, are going to have to do something. Their country has already been sold, what next?
It might be true about the mid-30s for developers, but as anecdote: I read in a local newspaper about a small taxi company almost going bankrupt and we needed a taxi for quite a bit of a ride. So I called them, asked if they had time for a half day ride; they guy sounded happy and said they had. Then I told him where we live. No that was too far away (it isn't; it's a little more than half an hour drive from him); I told him we would pay for it. But it was a definite no; too far he wouldn't do it.
I see that mentality everywhere; builders (who are all out of a job now), pool cleaners, car repair etc. If something is slightly out of the comfort zone it's usually a no. How bad does it need to become before people see it doesn't work that way (anymore; obviously before 2008, if you were lucky and not too greedy, money was rather 'free' for a lot of people; for instance the local bar owner didn't have to work at all; his bar was packed every day before 2008 so he hired people, put the profit into building; unfortunately he got out too late and there you go; hard working which he 'doesn't do'. Rather live in poverty.).
The majority of the people here don't get it yet; how much pain will have to pass to sort this out. Its been a windfall for the last 10 (to 20) years, and then it is just too easy to blame the government.
I wish some form of serious, respected Spanish person, who isn't in politics, would stand up and stir the people into action as what happened in Iceland. Its sad to see a country rotting out from its core, the anger yet the complacency, the loud voices but muted actions...
The traditional way of a leader taking command and saying 'we can fix the problem sticking together, working together, with a common goal, etc' is almost impossible in Spain because we're a broken nation.
We have a huge problem with nationalism (specially in Catalonia, Basque Country, and some testing in Galicia) and in the autonomous communities (regions) without that kind of problem --like Andalusia or Valencia-- the political caste is a real tribal mafia.
Of course, in the nationalist zones the political caste is a mafia as well. 'The Caste' is the only common denominator in Spain.
Adding more emotion to the Spanish puzzle, Catalonia is trying to annex Andorra, a piece of Southern France, Valencia, and the Balearic Islands.
Basque Country is trying to annex Navarre, and another piece of Southern France.
Worth mentioning the very different Tax system in every region (in some places with huge privileges).
my experience in the Netherlands is "odd": people work, no question about that but most of the ones I know work 4-day weeks (good for work-life balance) and there are interesting benefits for people who don't work.
I'm sure it's not exact but I met people who had a high paying job, decided to leave/were fired and immediately got unemployment benefits from the government while they were looking for a new job.
Which is cool but mmmm maybe premature? If you had a high paying job for 3 years why should the government immediately step in giving you something like €500/month while you are looking for a new one? kinda removes the pressure to find a new one from day 1, doesn't it?
> If you had a high paying job for 3 years why should the government immediately step in giving you something like €500/month while you are looking for a new one? kinda removes the pressure to find a new one from day 1, doesn't it?
"The government" here is the tax payers, including the person in question, who has decided to pay into an insurance system exactly to avoid that pressure and give people a chance to look for a job without panicking over how they'll be able to pay the mortgage next month.
I'm Norwegian - the Norwegian system is similar - and was shocked when I moved to the UK, where unemployment benefits are a joke (still better than most US states) and notice periods are ridiculously short by my standard (in the UK 1 months notice is pretty standard; in Norway it's 3 months). In Norway you also get most of your salary for the first 12 months or so, I believe (it's been 12 years since I moved out, so not kept up to date how it's changed) so for most people it's way above €500/month).
If you look at unemployment in these countries when the economy is good, it's still usually low - the people who don't want to work will eventually be moved over to the regular benefits system which is far stricter and with lower amounts, and the people who do want to work rarely see unemployment benefits as some kind of paid holiday, but want to get back in work ASAP. Especially since a gap in employment will be something prospective employers will see as a worrying sign, so people are acutely aware that the longer they wait the harder it will be to get a new job at the same level.
And when times are not good is exactly when these benefits are important: We pay or dues to have a safety net in particular for those situations when it's not our fault we can't get a new job right away.
I wasn't criticising it but as usual it depends where you come from: I'm Italian, have been living in UK for 7 years and run a bunch of companies in both countries. As such I've never even considered job benefits, the way I see it is: I put enough money aside when things are good in order to be prepared for when things might not be that good.
I'm sure there are situations where really "it's not your fault" but most of the time I talk to people in dire situations they completely failed to do anything when things were going great for them. I have little sympathy for them, especially when they end up blaming everything but themselves.
Most "normal" people don't make enough money to set aside additional cash on top of the national insurance they already pay in part to cover unemployment benefits.
This is not "free money" - it is insurance payments that people in most cases have paid premiums for.
Why should people need to set aside additional money to avoid claiming benefits they are paying towards their entire working life?
> Most "normal" people don't make enough money to set aside additional cash on top of the national insurance they already pay in part to cover unemployment benefits.
please note I always referred to "people who had great periods" work and money wise
> Why should people need to set aside additional money to avoid claiming benefits they are paying towards their entire working life?
because if you are doing great how fair is it for you to be careless only because "if I need it the state will support me?" Looks to me like it quickly becomes your fault and you only subtract funds that should better be used for the people who really need the support (the people you mentioned at the beginning of your reply)
>kinda removes the pressure to find a new one from day 1, doesn't it?
Probably better both for society and business if people take a month or two to find a job that's a good fit rather than having to jump on the first one that comes.
Yeah you are right, however as I have seen, most people I have ever talked to in NL do not like getting benefits. If they are able to work, they do feel it their responsibility to do so. Of course there are plenty of exceptions, but for people say they are on benefits is something they are ashamed off. Which is a larger stimulation than money for most.
fair enough. As I wrote there is no question about the fact they work (I might not be crazy about the rhythm but that's a different thing and changes from company to company).
I'm very surprised about your experience. Unemployment hasn't hit that hard the IT sector,and finding good people ain't easy, but people willing to work on IT? There are plenty and doing very long hours...
I would guess it depends on the market you are after. I know Java devs working long hard hours and people who want to hire them that cannot find anyone. But I'm guessing those folks aren't the young crowd.
It depends a lot on how the local government want to address the issues of the debt. If it goes through massive tax increase, it's probably not a good time to setup a business there.
Best opportunity is to invest in physical silver and gold, as the euro (and by extension the dollar) will not be able to hold their value as the printing presses run ever faster...
Seriously, all the commodities guys are. If you look at gold/silver demand guess what the major determinant is - OH YEAH - JEWELLERY! You know the stuff people buy when veblen goods are popular (i.e. a strong world economy).
Your baubles are worth nothing if the 2 largest economies go down.
Everyone dumped emerging markets, the euro and stocks to buy dollars and treasuries (flight to quality during high vol.).
Not because anything drastically changed, but because of the beauty contest dynamic in markets. You predict what others may predict to happen in the short term and act accordingly.
Go buy yourself a gun, food, and some survival training if that is your position. You can't eat gold. You can't live in silver. And you most certainly can't sell it when everything goes down.
Notice the graph and its constituents. Gold/Silver guys mock us fiat currency types (i.e. everyone) when they themselves are trading the same trust based tulips as the rest of us.
Everything you trade is based on trust, and trust is, and always will be, a bet on the future being better.
Gold/Silver is a bet for the world getting better, not worse.
You can't invest in the end of the world. You can merely prepare for it.
You certainly sound ferociously biased. In another comment, you implied you're making huge trades, so it's not very surprising.
> You can't eat gold. You can't live in silver. And you most certainly can't sell it when everything goes down.
Hyperinflation in Zimbabwe ring a bell? They sure didn't seem to mind that you can't eat gold, and just went ahead and exchanged it for food instead: https://www.youtube.com/watch?v=8HD0NWRSEjU
Your dismissal of gold as "baubles" doesn't change the fact that it does seem to work as a medium of exchange, even in a situation where a fiat currency no longer doesn't.
Sure, that's based on trust, just like you said. But mcantelon's point that gold can't be created out of thin air is relevant to that trust.
> Well seeing as my tbills represent the future output of the world's largest economies
Your T-Bills are IOU's from one of the world's largest economies, and guess what? -Those are based on trust too.
> Money moves to safety during times of high vol. People think money moves to gold, when in fact it moves to the highest quality bonds and currency.
Yes, money moves towards perceived safety. The mainstream perception of the ultimate safe investment has been US bonds.
But you know, it's possible that something else might end up being perceived as safer than US bonds. Perhaps something that's not controlled by any government, and can't be created out of thin air. Perhaps something that is still trusted as a medium of exchange.
Government bonds in general have been thought of as a safe investment, but Greece's bonds are government bonds too. Care to buy some?
I trade large currency/bond markets, not the relatively small markets like gold. I was making a point. I can't make people do things, the market is way too big (just ask the Bank of England!). Gold huggers can. Hence why I stated:
> Don't buy t-bonds, don't buy gold. Look at incentives. Look for production of useful goods. Make your own decisions.
Yeah you're picking and choosing your examples there. I only talked about super clusters (euro/dollar/yen/yuan/rupee), not POS countries in Africa that have 0 impact on global markets, as they aren't connected, or correlated. Care to read my other comments, they indicate when hyperinflation occurs:
> Hyperinflation is often associated with wars or their aftermath, political or social upheavals, or other crises that make it difficult for the government to tax the population.
Sounds like Zimbabwe now then doesn't it?
Barter > Gold. Barter is the normal medium of exchange. It scales nicely in the developing world, where things are slow, and people are poor. Gold is a POS medium of exchange for the exact reasons gold huggers love it. There isn't enough of it to do anything with. It's nothing but shiny baubles for the uncritically thinking. Why not diamonds? They're just as rare, just as hard to handle? Why not cacoa beans? Or platinum? Or terbium? HUH!
> Sure, that's based on trust, just like you said. But mcantelon's point that gold can't be created out of thin air is relevant to that trust.
Yeah that's the point. Your gold has no use in a developing country, despite what you think. People trade in dollars for a reason.
> Yes, money moves towards perceived safety. The mainstream perception of the ultimate safe investment has been US bonds.
The US has the fastest nukes, the best standing military and one of the greatest economies.
> But you know, it's possible that something else might end up being perceived as safer than US bonds. Perhaps something that's not controlled by any government, and can't be created out of thin air. Perhaps something that is still trusted as a medium of exchange.
Nothing is safer than the US government.
And do you know why?
Because if the US government isn't safe, well then, none of this matters. The US is a conduit for massive capital. It exports huge amounts of goods and services, and consumes far more. You want to bet on the end of the US? You can't, because that bet is the exact same as the one for the end of the world. You cannot invest for catastrophe. Merely depression!
Buy gold all you want. Your bet, if you look at it closely, is exactly the same as mine.
"Not.. sure.. if intentionally obtuse, or just messing with me.."
> Yeah you're picking and choosing your examples there.
Ah yes, the classic "cherry-picking" -accusation. Always a good distraction.
You said:
>> Your baubles are worth nothing if the 2 largest economies go down.
>> You can't eat gold.
I pointed out that gold was actually "worth" food in Zimbabwe, and that therefore it was unnecessary to try and subsist on it. Gold has been used as a medium of exchange for ages, and it's still useable in that capacity. It doesn't really matter why, as long as you can trade in it.
You claim that if one "super centre" goes down, all others will follow. That may be true, but it's just as possible that all super centres going down would not affect gold's useability as a medium of exchange. For example, all those piece of shit backwaters outside of your super centres may just happily continue trading in gold and whatever other currencies they happen to use.
It's also possible that all other super centres would not fall in a chain reaction.
> Barter is the normal medium of exchange.
No. Barter is a method of exchange. Gold is a medium of exchange.
Here's how barter works:
Let's say you have 10 apples, and you meet some other guy with 10 oranges. You feel like eating an orange might be fun for a change, so you suggest a trade with him. He figures he could use some apples too, and so, he accepts some apples in exchange for his oranges. You both walk away munching on your newly acquired fruity loot, and there is much rejoicing.
Now, if for some reason you don't feel like eating oranges at the time, but feel like making a trade, then a medium of exchange is necessary. You want to exchange your apples for something that you can later exchange for something other than oranges. So, the guy with the oranges needs to give you a few apples' worth of "money" - be it gold or dollars, or whatever medium of exchange you trust enough. You might even accept cocoa beans, if you believe you can exchange them for something you want later on.
OK, I suppose you get the idea, but let me know if there was a part you didn't understand.
> Your gold has no use in a developing country, despite what you think. People trade in dollars for a reason.
I'm sure we all understand that physical gold is just pretty fucking inconvenient as a medium of exchange when you want to deal with someone who's not standing right in front of you, because it can't be converted into ones and zeroes and zapped across the world. But that is completely irrelevant to gold's "worth" as long as you can, in fact, exchange gold for things of value.
On the other hand, you need to consider the possibility that fiat currencies may actually end up dying, if taken over by de-centralized, cryptographic currencies like Bitcoin. That would be a welcome change, in fact.
> But gold huggers work on a small market, and it is their incentive for others to buy into this farce. Take from that what you will (reminds me of pump and dump and the tulip mania).
You're thinking like someone used to the idea of manipulating markets to their benefit, much like a Wall Street trader might. Do you think that gold's exponential rise in the past few years just might have something to do with the on-going disaster that the world woke up to in 2008? http://www.usagold.com/reference/prices/2012jangoldprice.jpg .. or is it just "gold-huggers" working their evil schemes pumping up the price, in a time where the vast majority of investors are completely oblivious to gold as an investment or even a store of value?
Do you think that the prices of gold in various fiat currencies might actually reflect the their perceived trustworthiness as mediums of exchange?
> Nothing is safer than the US government.
Right, and the fact that your nation's external debt is more than 100% of your GDP, and currently increasing at 1.5 trillion dollars per year does not affect the trustworthiness of your IOUs? Just like it doesn't matter that various US states and municipalities are bankrupt?
> Because if the US government isn't safe, well then, none of this matters.
There are other countries out there you know. No one knows what will/would happen if the US went down in flames. But it might also not be the end of the world.
> The US is a conduit for massive capital. It exports huge amounts of goods and services, and consumes far more.
Its main export seems to be global economic calamity. I'm not sure if iDevices count as US or Chinese exports.
Most of the "assets" sloshing around the globe are of imaginary value. Debt sliced and diced into various financial instruments, etc. Bullshit, pretty much. Tens of trillions of dollars "worth" of bullshit. Again, no one knows what will happen in the world's economy, but I'm sure we could do with less bullshit.
> It's just that you don't know what you're doing.
Well what exactly am I doing? Besides, you know, educating you? :p
Well seeing as my tbills represent the future output of the world's largest economies, and one of the greatest consumers of veblen goods (which includes most of the demand for your commodities), you and I aren't so different. We bet the same.
But you have no idea what you're doing.
I merely wish to point out that you can't bet for the end of the world. You can merely prepare for it.
I can short the end of the world; as long as there is enough time between when I profit and when I cash that profit out into something that will provide me with long term value (house, etc).
For this argument, I define value as providing ME something, not value that can be traded.
Not really. You make a tonne of assumptions stating that gold will be better than paper. You assume rule of law, efficient markets, a government that will protect your assets, a place where you can spend your gains. etc. etc.
Reports of paper money's death have been greatly exaggerated.
Floating paper is here to stay people. If the world falls apart, all that matters is guns, food, water and shelter.
Your baubles are worthless without the society to back it up. And since we move trillions across nations everyday, I'm going to go ahead and say the world trade markets are synced up and highly correlated/dependent. If one super centre goes down, so does everyone else.
We live in one world now, people just don't know it yet.
>You assume rule of law, efficient markets, a government that will protect your assets, a place where you can spend your gains. etc. etc.
It sounds like you equate a hyperinflation scenario with a complete societal breakdown. That isn't necessarily the case.
>Reports of paper money's death have been greatly exaggerated.
Paper money as a tool will never die because it's convenient. Individual currencies, however, have and will. This is historical fact.
>Your baubles are worthless without the society to back it up.
Of course, but currencies collapse more commonly than societies. Value stored in commodities can be recovered. Currency value killed by hyperinflation can't.
Hyperinflation in a super centre will lead to societal meltdown, massive change in rule of law, and a massive reallocation in assets. I wouldn't be surprised if we had a revolution on our hands.
Those countries you speak of were when the markets weren't tied to each other and weren't highly correlated/dependent (1700-1960s). This was due to flux in global geopol structure where the countries didn't have much to do with each other.
Tell me the last time a developed nation got hyperinflation.
Stick your money in uncorrelated risky countries, and you take the yield, but you take the risk of hyperinflation.
>Hyperinflation in a super centre will lead to societal meltdown, massive change in rule of law, and a massive reallocation in assets.
What's a "super centre"?
>Those countries you speak of were when the markets weren't tied to each other and weren't highly correlated/dependent (1700-1960s). Tell me the last time a developed nation got hyperinflation.
Argentina (ended 1991) and Yogoslavia (ended 1994).
You have a country that went under massive transformation and another under the thumb of dictators. Two risky countries. Two high yields. Two cases of hyperinflation. Just like I said.
Hyperinflation is often associated with wars or their aftermath, political or social upheavals, or other crises that make it difficult for the government to tax the population.
Obviously the next comparison will be with the largest and most stable economies the world has ever seen, moving the largest quantities of wealth it has ever seen. Not.
Super centres are where the majority of cash moves through, either for trade or as an intermediary. Eurozone, Japan, China, America, India. Those are the places that matter.
Some small POS country in South America and another in Eastern Europe are rounding errors. Hyperinflation is only a concern for relatively risky, isolationist countries that are still undergoing societal flux.
Once again, the reports of paper money's death have been greatly exaggerated - ESPECIALLY by those who stand to benefit from it - long gold/silver etc.
>Hyperinflation is often associated with wars or their aftermath, political or social upheavals, or other crises that make it difficult for the government to tax the population.
The western world may be headed for upheaval. Globalization and technological progress are making western labor redundant and the economic center of gravity may eventually move to the East.
Transformation brings uncertainty. Paper money will always remain as a tool, but when global orders change, as they have throughout history, individual currencies may be casualties.
Thanks for the reply. Interesting, I thought (speaking roughly here) entities put money in gold during high volatility - times where its hard to find stable bonds and currency. Thinking about it, perhaps that last condition is rarely the case.
So why the "flight to gold" that is spoken of in the media?
Same reason puppies and natural disasters are in the news.
It sells papers and ads - it's link baiting in real life.
You need to look at the incentives of parties before you take their word. My incentive is obviously for people to buy dollars and treasuries, but guess what, everyone does that every day of the week (business/buying/stocks/retirement accounts). So I don't really care what gold huggers think.
But gold huggers work on a small market, and it is their incentive for others to buy into this farce. Take from that what you will (reminds me of pump and dump and the tulip mania).
Don't believe what I say, go figure stuff out for yourself. Everyone is biased.
Don't buy t-bonds, don't buy gold. Look at incentives. Look for production of useful goods. Make your own decisions.
My point was that if you bet on commodities, you bet for increased production, and increased consumption of scarce resources.
Not the end of the world.
It's no different from buying the stock of companies that sell the goods the commodities are composed of (since they demand those commodities and in turn set their prices in the market via demand).
The bonds Greece/Spain/Portugal hold and are defaulting on were largely purchased by German and French banks. These banks turned around and hedged the default risk with US banks. When the defaults occur (or if...they could choose to inflate to the moon or call the default by another name), the German banks will go to their US Bank counter parties asking to be made whole en mass. US banks will be unable to cover this pay out (unless the fed steps in with truly massive amounts of capital) and have no real reason to do so...
What we saw in the US housing crisis is now playing out on a scale of nations.
This thread is the second reason why HN still outclasses everyone else.
I have just got a better perspective on the Euro crisis than all the newspapers and tv of recent weeks. I never knew the debt delegation issue had been happening.
I would like to know how we can see the total level of debt for each country. If we can find a reliable source let's put it on wikipedia :-)
Presenting Catalonia as some kind of an exemplary case for a larger problem may be misguided for another reason. Spanish regions are famously independent minded. Normally, no one outside Spain listens to the the Catalonian government's tactical maneuvering to extract concessions from the central government. But these days, any mention of debt in Europe causes panic attacks.
The Levenshtein distance between Catalonia and California is just 4 whereas the distance from Catalonia to Greece is 9. That can't be a coincidence ;-)