Limit to deficit level in the Spanish Constituition

Spain announced that is considering a Constituitional amendment to limit the annual deficit percentage - a move that is naturally welcomed by the sovereign debt markets. My only point is that they should avoid to fall in the same trap as the US. Though there is a Constituitional debt level (as part of the Laws to protect the future Citizens of the country), that level is permanently raised whenever it is necessary, rending it inoperational - see this article for more information http://my2centsontheworld.blogspot.com/2011/07/us-debt-limit-angle-of-thought.html

Now, of course a deficit and a debt level limits are different, but, in the end, it will always come up to how well will that be operationalised in the real daily world. And how will Spain make the economy grow without the debt doping...

http://economia.publico.pt/Noticia/congresso-espanhol-aceita-tomar-em-consideracao-alteracao-da-constituicao-para-limitar-o-defice_1509772

Have Sarkozy and Merkel been reading this blog?

I doubt it...

Still, as you might have already realized, I look at the "stronger financial european government" point with good eyes. My only concern is that they link it altogether to a new tax - and, Mr Sarkozy and Mrs Merkel, if you would read this blog, you would know that we should primarily strive to cut unproductive government and european expenses...

http://economia.publico.pt/Noticia/sarkozy-e-merkel-querem-uma-taxa-tobin-e-um-novo-governo-para-a-zona-euro_1507865

That would be a very bad signal to the markets, Mr Soros

George Soros stated that Portugal and Greece should move out of the Euro. In a way, I understand his perspective. But we shouldn't have any doubt - if the EU does it, it is passing a terrible sign to the market. The sign that it will allow attacks to break up the currency union and generate speculative moves against the Euro and the new coins. It would be an incredible feast for currency speculators... The real answer is exactly the opposite move - further union, moving to "de facto" financial and stronger political "europeization".

http://economia.publico.pt/noticia/portugal-e-grecia-devem-sair-do-euro-defende-george-soros_1507623

Buffett's scream

Warren Buffett's cry on The New York Times, concerning the tax benefits that favour American millionaires is a mild surprise - though everybody knows of the filantropic concerns of Buffett's and his sense of justice and opportunity, it is still not very common to see someone asking for more taxes on himself... Still, Washington politicians should really listen to this cautious (remember hte dotcom craziness? He said that he would never invest in a business model he didn't understand. The bubble burst proved him right) and opportunistic (he loves to buy during recessions) man, the third-biggest forune in the world. If he cries for more taxes for the super-rich, it is because he believes the benefits will far exceed the costs - and he usually knows what he is talking about...

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=3&hp

http://economia.publico.pt/Noticia/warren-e-buffett-parem-de-mimar-os-superricos_1507727

Riots

A few months back, looking at youth unemployment situation throughout Europe, I warned that troubles would be coming if Governments didn't find a way to act on. Spanish 25M movement (that is largely peaceful) and Britain's riots over the last few days are (unfortunately) confirming it - and may be only the first, if countries don't act to solve the underlying economical (lack of perspectives for a large group of young people) and social issues. It is up to everyone to demand not only swift justice (we can't forget that in the UK, crimes are being commited and the people practising them should be brought to trial) but also to address the motivations behind them. Not on a paternalist way - just on a pragmatic and democratic fashion.

http://edition.cnn.com/2011/WORLD/europe/08/10/uk.riots/index.html?hpt=hp_t2

W

For many months, a discussion was raging, on the path to recovery after the 2009 financial crisis - would it be linear, steeper or smoother than predicted, and so on. We now know its shape - since this weekend, the path for recovery is a "W", with a new recession following a number of months of recovery. But it is important to remember that a "W" also ends in a high note. Though we are probably heading now to a few more months of recession, in the end, we will readjust and grow.

http://economia.publico.pt/noticia/roubini-avisa-que-evitar-nova-recessao-mundial-pode-ser-uma-missao-impossivel_1506700

Wrong

Whoever is blaming the Euro crisis for the recent drop in stock prices is (at least to some extent) wrong. The concerns about the Euro are only partially to blame. In my opinion, the markets are actually more worried about the US economy performance sustainability in the medium term…

http://economia.publico.pt/Noticia/wall-street-com-pior-queda-desde-fevereiro-de-2009_1506265

A few thoughts on US Sovereign debt

"Is US debt sustainable?" This is the question that is in everyone mind these past weeks. With a 90% of GDP plus debt, a struggling economy and huge Governmental spending, the answer is probably not. And that drives a few thoughts on itself:

- how was it possible to move from a Governmental surplus in the Clinton era to this situation? Well, the answer combines tax cuts (done by the Bush administration on top income) and an escalation of costs, namely military - all the show-off on anti-terror efforts and fighting 2 wars in Iraq and Afghanistan have huge costs! That drove the US budget towards disaster... And enhance that with a complete lack of attention to American competitiveness and economic situation.

- So, this actually means that the true responsable for this situation is really the American voters. Congratulations for prefering George W Bush to Al Gore and for reelecting him when you already had all the information about this huge disaster...

- What to do? Actually Obama started by doing the right thing in some dimensions - he was able to coordinate the pull-off from Iraq and he is doing the same thing in Afghanistan. He is also trying to stimulate the economy - but through subsidies. The problem is that US is losing competitiveness fast, and needs strategic direction - but how can you do it with a split Senate and Chamber?

- If US debt is not controlled, we should expect to see debt rating degradation. Actually, nowadays, US debt is probably already overvalued - I strongly doubt that it should be an AAA title. But debt degradation will mean that interests would rise - and the consequences would be devastating for all the individuals that have massive credit (housing, cars, personal goods - and we know how americans are indebted), banks that borrowed them (we should expect individuals defaults to hit new highs) and companies (both from a crash in consumption of goods, but also due to higher investment costs). A debt degradation of the US economy would throw it off a cliff. The point is it seems unavoidable...

http://economia.publico.pt/Noticia/acordo-no-senado-evita-entrada-dos-eua-em-incumprimento_1505864

http://economia.publico.pt/Noticia/subida-do-limite-da-divida-nao-acalma-bolsa-de-nova-iorque_1505922