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Finance  |  September 18, 2011 13:44:43

Fiscal tale

Since the establishment of a credit crisis in 2008 many things happened that we in the meantime considered very unlikely. Property prices may actually drop, risk management of banks (banks or similar institutions) and credit rating agencies really can go wrong, the economic cycle can almost fall into a depression and the governments of developed markets may not be longer risk-free.

The continuing financial crisis, which is part of the current debt crisis taught us that the tools of macroeconomic and financial policies and academic theories may not be in mitigating the economic cycle and shocks in the system of omnipotent

  Loss of solid ground

 Against the background of all this passed in the last 3 years, politicians, academics and many other experts in different stages of disbelief and confusion. The current belief had to be quickly raised and reviewed policy and innovation have avoided the worst possible consequences. After we found ourselves in a new reality seem as if these tools dazed, exhausted, or even both.

No surprise then that the willingness of politicians looking disappearing sophisticated solutions to existing problems caused by the debt crisis. This is not the way out of problems. Simple measures may be more fragile global economic system is a big risk.The next result can then be increased costs to deal with debt problems and threats to future economic growth. Disturbing trivializing the problems associated with difficulty in balance sheets now has the form of debt that the solution to their problems can not be moved from one place to hand.The approach also ignores the fact that the current debt problems   are mainly distribution problem, not the problem of accumulation of huge debts, debt will always remain debt.

The huge imbalance in the balance across sectors or countries creates pressure through reducing insolvent players (ie the U.S. government, Great Britain, peripheral Eurozone, Japan and emerging markets).They had then not be willing to use their potential purchasing power, which results from the weak end demand outlook and the increased risk of delinquency due to their high concentration.

Everyone wants to save

  The only possible result of it all at once try to reduce their debts seškrtáním expenditure will be that demand will fall, economic growth and income, debt, however, this imbalance is reduced.One of the most worrying consequences of the ongoing financial crisis, especially with regard to the U.S. mortgage market and the Greek debt problems, is the belief that the only way forward is tightening their belts. However, it can only work if the country would be willing to take unencumbered spending pin. If this does not happen, then we can look very probably the second floor.

Part professionals argue that fiscal restrictions will lead to an expansion in fact, it could encourage greater activity in the private sector.History shows, however, that fiscal restrictions are accompanied by economic growth only in the presence of one of the factors such as risk premiums fall in local bond markets, heavily degraded currency, volatile external demand, or a combination of these factors. Significant improvement in the economic environment without any of these elements is very unlikely.

For many countries, where cost-cutting measures already underway, it is very difficult to achieve even just one of these elements.Traumatized by the Greek tragedies, many experts suggest immediate austerity measures not only just for Greece but also for other economies that are still not facing immediate financial risk and pressure on bond markets.

The most realistic approach showing the path of the problems is not to rely on expansionary measures miracle, but a combination of short-term stimulus with long-term restructuring of debts arising from spending on health care and penze.Řeč is the "core" of the Eurozone, Great Britain,   U.S. and Japan. All these countries have very serious long term problems with their solvency. This is due to demographic trends and rising health care costs and pensions. Very optimistic assumptions say that the problems of these countries can be solved by reducing the costs of health care or pensions. Large budget deficits, which now has a number of economies, but they are also the result of the greatest recession since the Great Depression and the very poor recovery. Play a role in the inability (due to the deleveraging process) or unwillingness (lack of confidence in future demand), the private sector to increase their spending. Without immediate government intervention to support the economy is very unlikely that the estimates of future growth could become a reality.

  Politicians are at an impasse?

  However, the government directed that his faith and prayers to the cash-rich corporations, which, according to politicians have in understanding the short-term measures to recruit workers and increase investment, governments can also get into a situation where they start to chase its own tail.Similarly, it is already in Greece, where austerity measures undermined the strong domestic economy and subsequently budget revenues so much that the Greek government ultimately failed to meet its fiscal targets.

Neither too rosy a view of further development in the U.S., Eurozone and UK, and specifically because of the weak economic recovery and future debates on fiscal policy, which is now restricted to the issue of tightening. As I said before, these economies must focus on long-term solutions without undermining economic growth in the next 12 to 18 months. With regard to the lack of will to implement these measures, however, the risk for further economic growth.Hopefully, therefore, that fiscal policy under consideration tale quickly disappear from the world of light, in order to prevent further economic slowdown. Recent developments suggest that, unfortunately.

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