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> Budget Wars V: The Socialists and Populists Strike Back, The French Alps vaguely resemble Hoth
Research Monkey
post Apr 23 2012, 05:52 PM
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Hitting the news today:
---French Parti socialiste candidate is currently in the lead after the first round of voting, just ahead of the center-right Sarkozy, who will both compete in a run-off. In third with a surprising 18% of the vote was the populist, anti-immigrant National Front.
---The Dutch government has stepped down after its coalition government, reliant on the populist Freedom Party, has been unable to pass a budget that included austerity plans. Polls recently found that more than 2/3 of Czechs want their ruling center-right party to step down and force early elections. This follows the Romanian centrist government which fell in response to opposition to austerity measures in February.

In addition:
---Euroskeptics in Hungary are increasingly dissatisfied with the slow pace of progress following the end of communism, and in Switzerland, anti-immigrant euro-skeptics actually form the largest political party in the country. Following the strong showings of the True Finns in January and the noisy showing of the Slovak National Party (whose hero is a fascist who deported Jews and Hungarians to Nazi death camps in WW2...and they won 5% of the vote...), though ultimately overshadowed by the bailout battle, it appears faith in the European Union is at all-time low.

So, where is Europe headed? The international financial markets are clearly worried by Parti socialiste's proposals to attempt to spend France out of the current crisis. While conservatives won a comfortable victory in Spain and forced Berlusconi out of Italy, it appears that the countries in the best position following the 2008 crisis may be the ones moving away from right. With today being the last day for opinion polls to be published in Greece before the parliamentary elections in two weeks time, their center-right party is polling better than the incumbent socialist party is losing ground rapidly, and the third party (hilariously, a Marxist party) is down slightly in polls. Outside of these three, Europe still appears to be in flux.

But what concerns me is that in a lot of these cases, people appear to be purely voting against the ruling party. Governments in Ireland, Portugal, and Greece, and eventually Spain an Italy fell because of their inability to control their budget. Rightfully so, I think. I'm beginning to wonder, though, if the rise of radical right-wing parties and the surging socialists stands in dangerous contrast to the moderate and conservative governments which had ruled much of Europe outside Scandanavia since the end of 1991. What are your thoughts, DDT? Does all this really matter, or is this upheaval mostly just reactionary? Does a return to the left pose problems to Europe long-term?

And what of the elections? Do you think Sarkozy can lure enough far-right voters, or possibly Greens, to his cause to keep the presidency?


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tryingtothinkaga...
post Apr 23 2012, 08:13 PM
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All I know is I'm investing in gold.


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QUOTE (BearMan @ Feb 2 2012, 01:52 PM) *
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Research Monkey
post Apr 23 2012, 08:27 PM
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QUOTE (tryingtothinkagain @ Apr 23 2012, 01:13 PM) *
All I know is I'm investing in gold.


The peak back in August (closed one day just over $1900) is the highest gold will get this decade. Gold is every bit as susceptible to bubbles as any other commodity, currency, or equity position. And we're in a fear-fueled gold bubble right now.

You heard it here first:

QUOTE (Research Monkey @ Dec 14 2011, 05:48 AM) *
There are segments of the business community (largely libertarian leaning pseudo-intellectuals) that are adamant that gold will always be the safest investment, and in times of uncertainty, it's price will rise regardless of any other external factors. They think it's some sort of perpetual value creation engine, and that the slightest hint of quantitative easing necessarily means that gold will appreciate 20% in a year. I think in that sense, many conservatives severely underestimate the complexity of the market, which is rather ironic.

Gold will not break $2,000 this decade. It might never. But there are plenty of people betting it will next year.


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tryingtothinkaga...
post Apr 23 2012, 09:31 PM
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I heard somewhere that two things are being invested in heavily right now: government bonds and gold; and that one of them is a bubble and one is a sound investment. European government bonds aren't sounding too spectacular right now.

I've also heard theories that there are very powerful interest groups making sure that the value of gold remains relatively stable, and was shown a graph of values of precious metals between 2005-ish and 2009-ish. All of them showed a rather large dip, then a return to higher prices....except gold, which showed a very slight dip, then an increase in value.


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QUOTE (BearMan @ Feb 2 2012, 01:52 PM) *
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Research Monkey
post Apr 23 2012, 10:30 PM
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QUOTE (tryingtothinkagain @ Apr 23 2012, 02:31 PM) *
I heard somewhere that two things are being invested in heavily right now: government bonds and gold; and that one of them is a bubble and one is a sound investment. European government bonds aren't sounding too spectacular right now.


Commodities bubble easily, bonds don't really bubble at all.

The problem here is that gold is at this point almost entirely a speculative investment given its volatility since the crisis. It's not the safe haven that it has historically been, and I think it's fair to say that pessimism is nearly at a peak, which is where you'd expect to find a peak in gold prices. It's not going to suddenly become worthless, but if you're going to hoard commodities, hoard barrels of oil or something that will actually have a functional use that will increase in value. Gold is just shiny.

Obviously the default risk is high on junk bonds like Greek debt, but the bund is a European government bond that's AAA rated--theoretically safer than U.S. debt. Numerous other countries (Denmark, Netherlands, Finland, Norway, Sweden, among them) also still have AAA ratings. Default risk on euro-denominated bunds have almost negligible default risk, even if the Eurozone totally collapsed in the next year. So the difference between these bonds is huge, and I'd be much more interested to know what the spreads look like on these investments more than anything. Even a high return or a substantial purchase of a government's debt doesn't put it in a bubble, i.e., governments are not likely to spend more purely because they have more buyers to sell debt to. Because of the way bonds are structured, they're like options in that they're hedged against some bubble risk, so there really is no such thing as a bubble in government bonds. Prices are very sticky and the market generally clears.

QUOTE (tryingtothinkagain @ Apr 23 2012, 02:31 PM) *
I've also heard theories that there are very powerful interest groups making sure that the value of gold remains relatively stable, and was shown a graph of values of precious metals between 2005-ish and 2009-ish. All of them showed a rather large dip, then a return to higher prices....except gold, which showed a very slight dip, then an increase in value.


The amount of gold in the world is stable and what people value it at inherently is relatively stable, but since people started freaking out and searching for safe havens since the financial crisis. 2005-2009 is pretty hilariously biased data selection, considering the price of gold more than doubled since the start of 2009, but I think that does say something about the fairly constant demand for it, outside of exogenous shocks. World oil demands, as we all know, fluctuate by season, and so oil prices are very volatile. Gold doesn't have that kind of demand.

This post has been edited by Research Monkey: Apr 23 2012, 10:32 PM


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Stanley Tree
post Apr 24 2012, 12:31 AM
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Wilders and the Dutch government is now out too, ostensibly for not being able to get a budget together. Another blow to Europe, especially considering this is the first time the inconsistency of the Eurozone has creeped into northern Europe.

I think it's interesting that the polarization plaguing the U.S. is also seeping into Europe- the whole "not happy with the status quo" is in all of the West. Although you would think it would actually have more effect in Europe, considering the easiness in which third parties can gain power as opposed to here.

Are technocrats a better option to what was going on in Italy and Greece? I would think so, at least they won't liberally give out social programs (especially Greece). I'm all for the social net, not the social hammock.

The socialist party would seem to have the upper hand in Europe, what with the lack of opportunity and all. Of course, that also gave rise to Hitler, so it's kind of a crapshoot, really depending on the country. Places like the Netherlands would seem to go more conservative. I'm worried places like France and Italy will continue to get away with their "laissez-faire" attitude to life- every time I studied French culture, it talked about how they always take at least two hour lunches so they can hang out and whatnot. I'm sorry, but if you're going to depend on social services that will eventually lead to the collapse of the world economy, you need to take some smurfing responsibility and start working harder so you can at least earn those services.

That's actually what frustrates me here- every time we talk about social services, it always tends to tip the fine line of "well if they actually work hard". In America, damn near everyone who is trying to get a job or is struggling is actually working their ass off (no evidence, pure hearsay), while in half of Europe they actually don't work hard. Except Germany.
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Research Monkey
post Apr 24 2012, 09:18 AM
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QUOTE (Stanley Tree @ Apr 23 2012, 05:31 PM) *
I'm worried places like France and Italy will continue to get away with their "laissez-faire" attitude to life- every time I studied French culture, it talked about how they always take at least two hour lunches so they can hang out and whatnot. I'm sorry, but if you're going to depend on social services that will eventually lead to the collapse of the world economy, you need to take some smurfing responsibility and start working harder so you can at least earn those services.

That's actually what frustrates me here- every time we talk about social services, it always tends to tip the fine line of "well if they actually work hard". In America, damn near everyone who is trying to get a job or is struggling is actually working their ass off (no evidence, pure hearsay), while in half of Europe they actually don't work hard. Except Germany.


What you're saying here, as I understand it, is the line of thought is typically uttered and interpreted as, with the slightly more informed version in parenthesis, follows: "(Southern) Europe doesn't work as hard or as long as North America (or Northern Europe, Japan, or the Asian Tigers) because they are lazy and their cultures don't value hard work."

That is generally the standard Neo-Con line that moderates and some liberals have bought into, and it's completely false. The United States actually follows pretty much to trend the productivity you would expect from a nation given our marginal tax rates and level of economic freedom, which are the most important factors in determining how many hours people work. Southern Europe has a less efficient government, less efficient laws, and a less incentivizing tax code, than the U.S., Canada, Australia, Germany, the U.K., Sweden, Denmark, the Netherlands, Switzerland, Finland, Norway, Japan, South Korea, Singapore, Hong Kong and to a lesser extent, Belgium, France, and the Czech Republic. The United States is not exceptional, but rather the Nordic Model of a high taxes and a very generous social safety net produces effective workers much more efficiently that would be expected.

Southern Europe, though, is acting purely rational relative to their tax code. The difficulty of finding employment and the high tax rates encountered in Italy simply mean that the tradeoffs between leisure and wages which we experience everywhere in the world are more skewed away from wages. It's not laziness, culutral Darwinism, or anything else, it's rational decision-making given very real opportunity costs. The ra-ra-ra America is the best camp needs to acknowledge that we're skewed incredibly towards wages over leisure, and that's why we work so hard. It's rational, not because we're naturally hard workers. It's a common misconception that has been tainting Western thought for centuries, and via Montesquieu's geography-based cultural model, was even pervasive in Latin American political thought into the 20th century that somehow the English and Germans were higher quality, more efficient workers, while the 20th century has shown that to be idea horribly misguided. Economies flourish and disintegrate as a result of policy.

Max Weber was only correct about the ability of a capitalist spirit to exist outside of religion, where he was incorrect is that the political environment that allowed for Protestantism to exist was the same that allowed secular capitalism to exist. Rather than that spirit existing as a result of Protestant culture, both were correlated with the lurking variable of the political environment surrounding them both.


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