Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Boomtje en Bustje

admin by admin
April 23, 2012
in Uncategorized
0
0
SHARES
2
VIEWS
Share on FacebookShare on Twitter

by Dirk Ehnts

The Telegraph has written on April 18 about the coming economic problems of the Netherlands (look at the text, not the picture):

tulipSMALL“The Dutch are on the edge of a negative rating action,” said Chris Pryce, Fitch’s expert on the Netherlands. The first move is likely to be a switch from stable to negative outlook rather than a full downgrade.

“We will hold a rating committee meeting in June. They run risks if they keep letting debt rise: a cautious approach would be advisable,” he told the Telegraph.

The warning comes as Dutch property tips into deeper slump, with the inventory of unsold homes nearing South European levels. Household debt is the eurozone’s highest at 249pc of income, compared with 202pc in Ireland, 149pc in the UK, 124pc in Spain, 90pc in Germany, 78pc in France and 66pc in Italy – according to Eurostat data from 2010.

The Netherlands is caught in a “negative feedback-loop” as recession and house price falls feed on each other. Building permits have dropped 9pc from a year ago, the lowest since 1953. “The housing market is in a coma,” said the Volkskrant newspaper.

I had reported domestic credit/GDP levels for some European economies earlier this year in this post. You can see clearly that Dutch levels of domestic credit are right there with Spain’s, Ireland’s and Portugal’s. So, I would expect the Netherlands to enter the abyss when I read this:

Premier Mark Rutte is struggling to put together an austerity package before a deadline this week but he relies on support from populist leader Geert Wilders, who has threatened walk out of talks.  His Freedom Party calls for a return to the guilder.

Well, now the solution to every economic problem is: austerity. Too much government debt? Austerity! House price bubble collapses? Austerity! Low growth? Austerity! The solution of Mr Wilders is premature, although in theory it would work. However, as long as unemployment is suppressed, it doesn’t make any sense for the Netherlands to leave the euro, especially since it is a “supertrader”: (exports+imports)/GDP>100% (well, almost).

Historical evidence says that austerity doesn’t work, and to my knowledge there is no theory that supports it either. You can, of course, use neo-classical theory, but that is about flows, not stocks. You simply cannot jump to the conclusion that if you stop a flow (government expenditure) the stock (government debt) will change in the very same direction by the very same amount. For a single household, that may work: I save €100 a month more in order to repay my debt of €1,000, and after 10 months it is all over. However, if all households do it at the same time, then the increase in savings will cause a significant contraction in demand. Hence, firms will not be able to sell and not hire or fire workers. That will make the demand problem worse, since now these newly unemployed consume even less. The government income (taxes) will sink and expenditures will rise (unemployment insurance). There is no one-to-one relationship between the flow and the change in the stock!

The neo-classical theory is a strict flow theory and cannot deal with levels debt. In neo-classical theory, households (entrepreneurs) can only borrow from other households, so that aggregate household debt is zero and non-relevant. However, that is not what reality looks like. Households as an aggregate are indebted, and very much so. Also, some households might face bankruptcy problems. Using neo-classical theory in a situation where debt levels play a major role will lead to wrong policy prescriptions, like austerity. It is the same with some policy prescriptions of Keynesian theory in a situation of full employment, where debt levels might not be binding and a liquidity trap is nowhere in sight. When ideology rules, economies break.

 

Articles by Dirk Ehnts

analysis blogopinion blog

 


About the Author

Dr. Dirk Ehnts is a guest lecturer in monetary macroeconomics at the Berlin School of Economics and Law.   His focus is on economic integration and economic geography, covering trade, macro and development. He is working at the chair for international economics since 2006 and has recently co-authored a book on Innovation and International Economic Relations (in German). Ehnts has written at his own blog since 2007: Econblog 101. Curriculum Vitae.


Previous Post

President Obama Doesn’t Understand Oil Markets

Next Post

Live Market Commentary For 04-23-2012

Related Posts

Lab-Grown Meat Draws Closer To American Dinner Plates
Business

Lab-Grown Meat Draws Closer To American Dinner Plates

by John Wanguba
January 26, 2023
New Suppliers Scramble To Plug Into Electric Vehicle Market
Business

New Suppliers Scramble To Plug Into Electric Vehicle Market

by John Wanguba
January 26, 2023
Coinbase Fined $3.6 Million In The Netherlands
Business

Coinbase Fined $3.6 Million In The Netherlands

by John Wanguba
January 26, 2023
Consumer Reports Encourage Dark Chocolate Producers To Minimize Lead, Cadmium Levels
Business

Consumer Reports Encourage Dark Chocolate Producers To Minimize Lead, Cadmium Levels

by John Wanguba
January 26, 2023
Bloomberg To Pay $5M Fine To Settle SEC Charges Linked To Fixed-Income Valuations
Business

Bloomberg To Pay $5M Fine To Settle SEC Charges Linked To Fixed-Income Valuations

by John Wanguba
January 26, 2023
Next Post

Live Market Commentary For 04-23-2012

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis markets Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia technology Tesla the UK the US Twitter

Archives

  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Lab-Grown Meat Draws Closer To American Dinner Plates
  • New Suppliers Scramble To Plug Into Electric Vehicle Market
  • Coinbase Fined $3.6 Million In The Netherlands

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish