Sovereign Debt Crisis Accross the Globe

[Guest Franco]

Sovereign debt - A debt instrument guaranteed by a government. Greece can longer back loans without the help of the European Union (EU and the International Monetary Fund (IMF)

 

Greece has formally asked for rescue loans by the European Union and International Monetary Fund (IMF) to be activated, aimed at helping the country recover from an economic crisis.

 

Under the plan, countries in the Eurozone will provide up to 30 billion euros in loans in the first year, while the IMF will contribute ten billion euros.

 

As prime minister, his father riled the West by embracing spendthrift socialist practices. Now, a generation later, current Greek Prime Minister George Papandreou is struggling to guide his nation through its worst financial crisis in recent history, and may soon have to activate a $61 billion rescue package to stave off default. Anthee Carassava spoke with him in Athens.

 

The numbers look awful. Can you blame market analysts for fearing a case of Argentina on the Aegean?

 

We’re not looking for scapegoats. These are problems of our own making. Markets, however, take a snapshot of the day, projecting it onto the future. It’s difficult for them to evaluate the changes we are making: changes in mentality, changes in our political culture. That may take some time for the markets to realize. But we need a period of calm to make these changes happen. We just passed a new tax law, for example, that is a major revolution in our country. It’s more just and transparent, and it will target tax evaders. This will help slash our deficit. Those numbers are bound to come down.

 

But does Greece have enough cash to make it make it through May? How long can it keep borrowing at such high rates?

 

For starters, we will not default. The EU-IMF support mechanism safeguards against us falling off the cliff. Secondly, this is not a bailout. It’s not free money. We’ve tapped into the markets, but the problem is the cost of borrowing, and how long we can sustain that. I don’t see a problem even in May, but that doesn’t mean that we have closed the option of using this mechanism. Greece and its citizens have gone through a sense of psychological terror these past few months. Their psychology has been swinging up and down to the moves of the markets. There is a need, now, to move on—to go beyond this daily crisis mode and turn this situation around. We will have to make a decision about whether we activate this mechanism in the next few weeks.

 

So activating this package is no longer a matter of choice, but of time, right?

 

We haven’t taken an official decision yet. All we’re saying is let’s prepare so that if we have to push the button, it’s ready. The preparations may take a few days or a few weeks for the details of both the terms and the way this mechanism will work. That’s being worked out between Greece, the EU, and the IMF now. Once this happens, we will have to assess the situation in a calm and organized fashion.

 

Do you want to gauge the U.S. market for investor appetite before pressing the button?

 

The markets are part of the evaluation. But this is a road show [for U.S. investors] we’re launching; we basically will be saying this is the new Greece, it’s a new government making historic changes, tackling bureaucracy with new, one-day startup business shops, downsizing local government, moving into green energy, busting cartelism, and bringing in meritocracy. It’s a worthwhile investment.

 

Can Germany’s anger at Greece’s profligacy delay the aid?

 

We ourselves are angrier about this situation than anyone else in the world. The Germans are obviously unhappy about the situation, but they are happy that the government here is making these changes. We’re not asking for a bailout to continue bad practices. All we’re telling them is support the changes we have to make.

 

The aid package won’t solve Greece’s problems, though. It may just defer the prospect of default, no?

 

It gives us the room to maneuver to make the necessary changes to make our economy a viable one. That’s the basic logic of this mechanism.

 

Could more than one support package be in store?

 

That’s implied, and it’s there if necessary. The issue is that we may not need it. But the fact that it is there is a good cushion. Our reforms are building a track record of credibility. Don’t forget, the Wall Street crash was all about shattered trust. This is one of the deficits Greece faced until recently.

 

But next to trust, there is also the issue of political will. Are you prepared to take additional budget cuts, sack public employees, and lower labor costs, or will the IMF decree that?

 

The IMF will not come in on its own. It will be with the EU, and it will only come in in this mechanism. That’s what we decided. Secondly, we will do whatever we need to do. And this isn’t puff talk. We’ve already done it. We’re not renewing tens of thousands of contracts in the public sector. We are moving to close down or merge hundreds of public-sector organizations. We’re shrinking local government, scrapping some 6,000 semiofficial operations. Thousands of board members will be out of jobs. That shows our political will and determination.

 

But if you need to do more, you will do it?

 

We know we need to do more. And we have a program. What exactly the measure will entail remains under debate. We don’t want to burden those who do not have a responsibility for this crisis.

 

Do you fear social unrest?

 

It’s very easy to show a picture of a protester and say protests are gripping Greece. You also have to consider the support of people who want to see this change happen. I’m not saying that they are happy with these painful measures. But they want and hope that the result will be a better Greece.

 

The attention is shifting to Portugal, Spain, and Italy. Are you concerned about the negative impact this may have on the Greek crisis?

 

The fact that a support mechanism has been decided offers a buffer so that there is no contagion. But sovereign debt is a wider question not only in Europe but across the globe. While every country is a unique case, I think it’s not an issue of countries acting on their own. We need a more coordinated strategy not only in Europe but around the world.

 

In hindsight, do you regret going public with the 12.7 percent deficit figure that shocked global markets and fed global speculation?

 

People have told me, you could have hidden this deficit. It would have been a hidden time bomb ticking under the government. It would have exploded and blasted our credibility. We chose to instead say “Hey, we’re transparent. We’ll accept the costs.” This may have created a sense of short-term turmoil, but it will turn out positively for Greece in the mid- and long term.

 

If you saw your predecessor on the street, what would you tell him?

 

I’d tell him that he could have had the courage to face up to problems and done a much better job. That he and his party shoulder huge responsibility for the problems we face today.

 

No rage? Or “You screwed up and I’m paying for it”?

 

The rage is there, but most Greeks are anguishing over the “Why?” because they know they have the potential, that Greece deserves so much more. Still, it’s not worth pondering over the past. We have to move forward. There is a real sense of urgency.

 

Your father, a former prime minister, had several run-ins with European leaders. Are there times when you wonder how he would have handled this crisis?

At times of distress, we all like to recall the advice of fathers and mothers. The best advice my father gave me was to keep faith and deep confidence in the potential of the Greek people; nurture the belief that they can do things. After living through several years of frustration and disappointment, their self-confidence was in doubt. Today Greeks believe that things can change; that we can become the masters of our fate and make Greece a better place. We’re using that dynamic to re-create Greece.

[Guest M. Tuya]

Growing European Public Debt Anxiety Pulls Spain's CDS Spread Wider

 

Like Greece, Spains's credit default swap (CDS) spread has more than tripled over the past year as market concerns expand about the Europe's public debt obligations, which intensified with the financial assistance for Greece. Market sentiment remains very cautious, with investors looking beyond Greece to scrutinize the fundamental credit obligations of other European countries.

 

Spain's swelling CDS spread grew wider than it CDS benchmark of 'AA+' and even wide of the 'BBB+' Eurodollar sovereign benchmark. In reviewing Spain and other 'AA+' and 'AA' sovereign peers, concerns are apparent in the European continent as the CDS spreads of Ireland and, to some extent Belgium have widened recently.

 

Standard & Poors Rating Services lowered its long-term sovereign credit rating on Spain from 'AA+' to 'AA' and maintained a negative outlook. They believe that the Spanish economy's shift away from credit-fueled economic growth is likely to result in a more protracted period of sluggish activity. Spain's GDP growth will average o.7% annually in 2010 through 2016.

 

Possible CDS Implications

 

Spains wider CDS spread reflects continued concern about European public debt. Over the past week it CDS spread has widened to 50 bps (base points) to 189 bps. With other CDS spreads of Greece, Spain, Portugal, and Ireland widening. The anxiety appears focused to their substantial entitlement systems and higher public debt.

[Guest greezen]

Introduction to Credit Default Swaps

 

A credit default swap (CDS) is a swap contract in which the protection buyer of the CDS makes a series of payments to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default.

 

[Guest GOP 4 Life]

U.S. Congressman Mike Pence, Chairman of the House Republican Conference, and Conference Vice Chair Cathy McMorris Rodgers urged their House colleagues today to sign a letter to U.S. Treasury Secretary Tim Geithner, calling on the Obama Administration to block any American taxpayer-funded bailouts of Greece. Greece is seeking funding from the International Monetary Fund (IMF), due to the country's debt, and other European countries, including Portugal and Spain, may soon make similar appeals. Congressman Pence made the following remarks today:

 

 

"The American people are tired of the endless bailouts. The United States is facing nearly 10 percent unemployment and a fiscal crisis of its own, and propping up Greece or any other European Union nation that may face a similar crisis in the future should not be the responsibility of American taxpayers. The EU was created to compete economically with the United States, and if it needs to bailout one of its own, it should do so without bilking the American taxpayer.

 

"The administration should do everything in its power to block taxpayer money from financing an international bailout slush fund. Hard-working Americans should not see their tax dollars sent overseas to bail out nations that have acted irresponsibly. As we are seeing here in the United States, borrowing, spending and bailouts are not the path to economic prosperity, but are instead a formula for disaster."

 

"At a time when America is experiencing its worst economy in 30 years and is burdened by a $1.3 trillion deficit, it is simply unfair to force American taxpayers to spend billions more of their hard-earned dollars to prop up failed policies in a relatively wealthy nation," said Vice Chair McMorris Rodgers.

 

Congressman Pence added, "The Obama Administration needs to understand that bailing out Greece will not solve Greece's problems; it will only create a moral hazard that gets America more involved in the gathering storm of European bailouts. A Greek bailout today will encourage larger countries, such as Spain and Italy - which have similar problems - to get in line for American tax dollars tomorrow and continually delay the fiscal disciplinary actions that are necessary for a long-term recovery."

[Guest Shelby]

The days of Americans getting away with prideful arrogance are simply being American are far over. Look around, your soaking in decline.

[Luke_Wilbur]

There is no better country than the United States. The American Dream is alive and well.

[Guest GOP 4 Life]

U.S. Congressman Mike Pence, Chairman of the House Republican Conference, released the following statement today as he and Conference Vice-Chair Cathy McMorris Rodgers sent a letter to Vice-President Joe Biden, who is traveling to Madrid to meet with Spain's Prime Minister José Luis Rodríguez Zapatero on economic issues:

 

"American taxpayers should not be asked to bail out European countries from their debt crisis. Congresswoman McMorris Rodgers and I are urging the vice-president to make that message absolutely clear on his trip to Europe.

 

"The vice-president's trip is happening as several European Union (EU) countries, including Spain, are struggling with massive debt. We hope the vice-president will be unambiguous in telling European leaders that the U.S. taxpayers should not fund European bailouts when we are struggling with nearly 10 % unemployment and trillion dollar deficits as far as the eye can see."

[Guest Cathy McMorris Rodgers]

There's a lot of issues on the minds of the American people, probably none is more pronounced than the economy and continued concerns about the amount of money that Washington is spending, the bailouts. In the last two years we've seen tens of billions of dollars used to bail out Chrysler, GM, Fannie Mae, Freddie Mac, Wall Street and now the president is taking us down this new road of bailing out foreign countries.

 

On Sunday, it was announced that the IMF and the European Union had this agreement to bail out Greece, $145 billion. What a lot of stories have missed is that the United States is one of the largest contributors to the IMF and in this agreement it means more taxpayer dollars being spent to help bail out, now, European countries. At a time when we have the most difficult economic crisis in decades, and ten million people are out of work, we're running deficits in our own country - $1.4 trillion. I really question whether or not we should now be spending U.S. taxpayer dollars to bail out countries like Greece and there are other European countries that may follow.

 

Chairman Pence and I are circulating a letter to Secretary Geithner to express our opposition to this bailout and to encourage, at least the Obama Administration, to be upfront and forthright with the potential cost of this bailout and take ownership of their decision by acknowledging that they have the tools to stop the bailout. We understand that if one other country would join the United States in opposing this deal at the IMF, that it could be stopped

[Guest Matt Renner]

The BBC is reporting that violent protests in the Greek capital have left at least three people dead. Protesters, angry about tax hikes and government service cuts as a result of the country's debt crisis, have clashed with police outside the Marfin bank building and the Greek Parliament. Gasoline bombs are said to have started multiple fires in the area and clashes between protesters and police are ongoing.

[Guest Ralph]

The concerted attack by a group of New York hedge funds such as George Soros' and Paulson's earlier this year and the precisely timed credit downgrade of Greece to "junk" status were part of a concerted US strategy of financial warfare against that Eurozone, the only potential alternative to the dollar as world reserve currency.

[Guest Cato]

The shady manipulation of the financiers are the catalyst of the great wars.

[Guest Old Timer]

Here is a inciteful video that explains why rising monetary assets and debts force interest to grow over economic output.

 

[Guest LAW]

Under Secretary for International Affairs Lael Brainard Remarks at the Institute of International Bankers’ Breakfast Regulatory Dialogue with Government Officials

 

As Prepared for Delivery

 

Good morning. I would like to thank IIB for hosting this event. It's a pleasure to be here.

 

We have just concluded a series of meetings with finance officials from around the world at the Annual Meetings of the World Bank and the IMF. The dominant focus was the need for greater cooperation and coordination to steer the global economy onto a path of stronger and more balanced growth. Officials from around the world emphasized the critical responsibility of each major economy to support the global adjustment process. When some countries engage in policies of competitive non appreciation that impede global adjustment, it exacerbates adjustment challenges for other countries--whether through intensified capital inflows or diminished trade opportunities--and lowers growth overall.

 

To ensure more sustainable and balanced growth will require not only national policy actions in each of our countries, but also stronger international agreement on the rules of the game and a framework to ensure coordination.

 

Stronger rules of the game and greater international coordination--these are also the key requirements of a sounder and more resilient financial system. As everyone gathered in this room acutely understands, the financial crisis took an immense toll on our businesses, families and workers. We are still healing from the crisis, and we are still working to strengthen the global recovery and repair the financial system.

 

As you know, the United States is aggressively pursuing financial reform at home. The historic Dodd-Frank legislation, which my colleague Bill Dudley will address, is the most far reaching reform of our financial system in decades.

 

But one of the fundamental lessons of the crisis is that national efforts, by themselves, while necessary, may not be sufficient: globally synchronized financial markets require globally convergent financial standards. International coordination is critical to ensure that efforts to promote safety and soundness in one major financial jurisdiction are reinforced and not undermined by other jurisdictions, globally active institutions are overseen by globally coordinated authorities, and the playing field is level. That is why we are pursuing a common agenda across the major financial jurisdictions through the G-20, the FSB, the IMF, and the international standard setting bodies.

 

But while our domestic reforms are comprehensive, our efforts to achieve international convergence are selective. Where financial activities and transactions migrate rapidly across borders in response to minute differentials, we are working to achieve international harmonization. Where longstanding differences in national institutions and business models call for tailored national solutions, we are working internationally to share best practices and principles. And where cooperative action across borders is needed, we are working to establish complementary national regulatory foundations coupled with international frameworks for cooperation.

 

Achieving Convergence on Capital, Derivatives, and Hedge Funds

 

Why do we need convergent international financial regulatory standards? I'd suggest that we can answer that question by simply looking around the room. Decades of technological innovation and globalization have created an interconnected financial system that requires convergence on core standards to ensure safety and soundness no less than fairness.

The two biggest issues in this camp are capital and OTC derivatives.

 

Capital is at the core of the system. Failures in our system of capital requirements contributed centrally to the severity of the crisis. Where we had capital requirements, they were too low and they were not supplemented with complementary liquidity requirements. A set of financial institutions were allowed to emerge in the shadows of the banking system with no capital requirements at all. And capital standards were not applied consistently around the world, with banks in some jurisdictions allowed to operate with low levels of capital relative to the risks they took on.

 

At last year's Pittsburgh Summit, President Obama and other G-20 Leaders, called for financial institutions to raise the quality and quantity of capital, strengthen liquidity standards and implement rules to limit leverage. Strengthening capital requirements and ensuring more stable funding for major financial institutions was an important objective of our domestic legislation. Together, the Dodd-Frank Act and the Basel III capital framework are designed to ensure that major financial institutions here and around the world are subject to rigorous and consistent capital requirements.

 

The new Basel III capital accord will significantly tighten the system of global capital requirements in a number of important ways. The new rules will increase the proportion of capital that must be in the form of common equity--the form that can best absorb losses--and will restrict forms, such as deferred tax assets, which proved to have little value during the crisis. Banks will be required to hold more capital against the kinds of risky products and activities that caused such damage two years ago. In addition, the new Basel framework will apply a leverage ratio to banks. And Basel III will impose minimum liquidity requirements for the first time to help banks weather unexpected funding shocks.

 

The new Basel III requirements will be the bedrock of the new, more resilient global financial system, and America is committed to implement Basel III.

 

Similarly, the opaqueness of the OTC derivatives market contributed centrally to the uncertainty that sapped market confidence in the crisis. Lack of understanding about derivatives exposures made it difficult for firms to fully assess counter party risk. This added to the reluctance to extend credit and was a further drain on liquidity.

Recognizing the global reach of these markets, we have worked internationally to develop common standards for derivatives trading. G-20 Leaders committed to bring standardized OTC derivatives trades onto organized trading platforms, as appropriate. Leaders also committed to ensure that all standardized contracts would be executed through central counterparties, to help reduce bilateral exposures between firms. Finally, Leaders called for all OTC contracts to be reported to trade repositories, so that supervisors could better monitor systemic risks.

 

The Dodd-Frank Act implements these G-20 commitments, and goes further, providing strong oversight of major derivatives markets participants and market infrastructure. And the EU is working on a parallel track to introduce consistent reforms across European markets.

 

It is also vital to have common agreement on the regulation of hedge funds, and to extend the perimeter of regulation to ensure stronger oversight of these funds. We have pursued international agreement on the same approach adopted by the United States: requiring all advisers to hedge funds, above a threshold, to register and report appropriate information so that regulators can assess whether any fund poses a threat to overall financial stability by virtue of its size, leverage, or interconnectedness. And to impose heightened supervisory and prudential standards on entities that do.

 

It is essential to ensure convergence of regulatory treatment for hedge funds to avoid a race to the bottom and promote a level playing field. Indeed, all the members of the G-20 committed to the same standards for oversight of hedge funds and to implementing these standards in a nondiscriminatory manner, and we are working hard to ensure these commitments are fulfilled.

 

Common Principles and Differentiated Practices

 

At the other end of the spectrum lies a set of issues that may be informed by common international principles, but where our national efforts are most effectively tailored to national circumstances.

 

We have long recognized differences in the institutional structure of national financial systems, reflecting different laws and histories. The United States has long placed restrictions on the scope of activities undertaken by banks, while some countries in Europe and elsewhere have long experience with universal banking models. In order to ensure the financial safety net is not extended to activities it was never intended to cover, the Dodd-Frank Act would place certain restrictions on banks engaging in proprietary trading and involvement with hedge funds. Other countries may take different approaches to ensure against excessive risk taking by their banking institutions, appropriate to the particulars of their own institutional structures.

 

Similarly, one of the central achievements of Dodd Frank will be to create strong and consistent regulation and supervision of consumer financial services to protect consumers from unfair, deceptive, and abusive practices. We look forward to consulting with UK and other authorities that also put a high priority on this shared agenda, while recognizing this is fundamentally a domestic imperative.

 

International Cooperation

 

Finally, let me address a core part of our reform agenda where the most effective approach is likely to combine elements of international convergence and cooperation while recognizing different national contexts.

 

Addressing Too Big to Fail is at the heart of our efforts domestically in The Dodd-Frank Act and internationally through the G-20, FSB, and Basel Committee. There is growing international consensus that an effective solution to reduce the moral hazard associated with large interconnected financial institutions must include at a minimum more intensive supervision, heightened loss absorbency capacity--reflected in Basel III--and effective resolution tools and frameworks.

 

The G-20 agreed that large and complex financial institutions require particularly careful oversight given their systemic importance. In the United States, the Dodd-Frank Act has addressed the issue of systemic firms by bringing all bank holding companies with assets over $50 billion, as well as non-bank financial firms deemed to be systemic by our new Financial Stability Oversight Council, under our new enhanced supervision regime. The EU, for its part, is institutionalizing a new European Systemic Risk Board, and some countries are instituting new national oversight mechanisms.

 

Instituting strong national resolution regimes is also central to this effort and a key building block for effective cross-border resolution frameworks. In March, the Basel Committee made an important contribution with its 10 key recommendations on the cross-border resolution of banks and non-banks, and G-20 Leaders in Toronto committed to implementing them. In the months ahead, it will be important to review implementation at the national level.

 

And there is an important FSB work agenda to ensure that national resolution frameworks mesh to provide a strong foundation for cross-border resolution, ring-fencing and burden-sharing are effectively addressed, and cooperative frameworks are developed among supervisors consistent with firm specific resolution and recovery plans. More analysis will be needed to determine the feasibility of contingent and bail-in capital instruments, which could contribute to loss absorbency and serve as complements to effective resolution frameworks, as Paul Tucker will address.

 

Let me conclude by noting that the leading economies have made significant strides in advancing international financial regulatory reform. With the enactment of The Dodd-Frank Act and agreement on Basel III, and with important parallel efforts underway in other major jurisdictions, the outlines of a more resilient financial system are now clearly in sight. We look forward to working with our partners on implementation of these efforts in the months and years ahead.

 

Thank you.

[Guest Peter Morici]

QE2 and G20 Hypocrisy

 

As President Obama heads for the G20, Germany and others cry foul about U.S. Quantitative Easing—QE2 in popular jargon.

 

Seldom has the G20 been treated to such hypocrisy.

 

November 3, the Federal Reserve announced plans to purchase $600 billion in U.S. Treasury securities. Pushing liquidity into bond markets will lower interest rates on mortgages and business loans, and hopefully boost demand for U.S. goods and lower unemployment.

 

Since 1995, China has done the same on a grander scale. To keep its currency about 40 percent below its market value against the dollar, it prints yuan to purchase dollars, and then purchases U.S. Treasuries. That makes Chinese exports artificially cheap, and powers a huge trade surplus and 10 percent economic growth.

 

Inexpensive Chinese goods at Wal-Mart come at a steep, hidden cost. Those destroy U.S. factory jobs that are not replaced by new employment to make exports.

 

At the October IMF meetings, Germany and Japan rebuked U.S. requests for help in persuading China to stop intervening in currency markets. That was hardly surprising, as both profit from currency mercantilism too.

 

Through the 1980s and 1990s, the Bank of Japan intervened in currency markets to keep the yen, and auto exports, artificially cheap. Subsequently, it imposed near zero interest rates, and encouraged private investors to borrow yen, convert those to dollars and then purchase higher yielding U.S. Treasuries—a disguised variant of China’s manipulation.

 

After the Federal Reserve moved to near zero rates, too, Japan made clear that it will intervene in currency markets should the yen fall too far, spooking speculators from betting on yen appreciation.

 

The German scheme is more complex.

 

Exchange rates translate the whole register of prices for goods and services in each country into the dollar, which is the international yardstick for pricing products and debt.

 

Germany is in the euro-zone with Portugal, Ireland, Greece, and Spain, whose economies are less efficient than Germany and sovereign debt is suspect. The risk one of their governments will default pulls down the value of the euro.

 

Were the Euro zone to split up, the value of the new deutschemark—and resulting dollar prices for German products on world markets—would be much higher than the current euro-dollar rate implies. Conversely, dollar prices for the new currencies of Greece and others would be much lower, and competitiveness of their products much stronger on world markets, than the current euro-dollar rate indicates.

 

The euro-zone permits Germany a de facto undervalued currency and huge trade surplus, and to lecture Mediterranean nations and the United States about the virtues of Teutonic thrift. Meanwhile, weaker euro-zone economies labor under de facto overvalued currencies and punitive austerity.

 

U.S. consumers and businesses are spending again but too much goes into imports instead of creating American jobs. Since the recovery began, the combined U.S. trade deficits with China, Japan and Germany is up 127 billion and now totals $448 billion.

 

With the Gang of Three stonewalling on currency talks, the U.S. economy is growing well below potential and unemployment hovers near 10 percent. Now, the United States has resorted to QE2.

 

The United States should tax purchases of yen, yuan and euro used to import goods from those three economies. Set it at about 40 percent until the Gang of Three agrees to acceptable exchange rate reforms.

 

At a recent dinner for western financial ministers, Secretary Geithner was told the Americans don’t matter anymore.

 

Such a tax would inspire a different tune—perhaps, “God Bless America”—and a pilgrimage to Washington to strike a deal.

 

Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.

 

Peter Morici

Professor

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742-1815

703 549 4338

cell 703 618 4338

pmorici@rhsmith.umd.edu

http://www.smith.umd.edu/lbpp/faculty/morici.aspx

[Guest GandalftheWhite]

1930s all over again... Sovereign debt by Govts must be paid back to their investors, banks!, pension funds who lent them money .... Govts now trying to inflate the debts away will create further massive risks of depression or recession prolonged as the cuts take away spending and taxes needed for the economy; a downward spirral.

 

Yet Capital Gains Tax still remains Low, the wealthy still escape the cuts through low CGTax, even the 50p tax is only for those earning over £150,000+ and they have so many loopholes to escape, just as do propery speculators or B2L milking the poor and disenfranchised.

 

2008 CGT 40% on profis

2008 summer CGT slashed o 18% o prop up B2L etc banks assets

Emergency budget CGT to 28% but still can pay just 10% if you play yr cards right or even none as there are so many loop holes like Flipping yr 2nd home!

 

Now thats an injustice and Clegg, Osboune who have properties know this...

Just check out the DT search on CGT to see how the wealthy are protected before the CSR so have less impact , protected from these cuts, they remain better off. While the majority are made to pay even more. The so called Big Society, bollocks I hear you say.. ;o)