{"id":361,"date":"2009-05-23T09:58:00","date_gmt":"2009-05-23T09:58:00","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=361"},"modified":"2009-05-23T09:58:00","modified_gmt":"2009-05-23T09:58:00","slug":"crecimiento-y-deuda","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/crecimiento-y-deuda\/","title":{"rendered":"Growth and Debt."},"content":{"rendered":"
\"\"<\/a>Having read the latest analysis by Dr H. W. Brock, chairman of Strategic Economic Decisions <\/span>(SED\u2019s Advisory Services<\/a>), I think it would be interesting to reflect on the relationship between growth and debt. The table opposite illustrates the explanation that Brock<\/a> describes the \u00abperfect storm\u00bb in which we find ourselves:<\/p>\n

We have all heard time and again that the cost of this crisis \u2013 of the excesses committed in the past \u2013 will result in a huge bill that our children will also have to foot. And that is probably true. But the excessive personal debt that is being passed on to governments (via personal and corporate insolvencies to the banks and from there to the governments) could unfold in two radically different ways in the long term. And The key to whether this development leads to positive results or disaster lies in the ability to generate growth.<\/span><\/p>\n

It seems that we are going to try to resolve the systemic leverage we have reached by pressing ahead, as the regression, famine and chaos that a clean slate would cause are things that humanity cannot and must not allow. But this headlong rush could lead to two very different scenarios: the one we know as \u00abBanana Republic<\/span>\u00ab, with hyperinflation and constant stopgap measures without substantial increases in GDP; or that of rebalancing debt in relation to growth in the medium and long term. The aforementioned essay by SED<\/a> highlights the significant link between debt and growth, which he describes as Debt-to-GDP ratio<\/span> and its medium- and long-term trend. It is precisely the reduction in this ratio that will make the difference between a headlong rush into debt until we suffer irreversible damage; or the light at the end of the tunnel if we manage to achieve sufficient growth to pay off that debt and public deficit:<\/p>\n

\"\"<\/a>At a point where public debt may have reached a point of no return, long-term recovery is possible. But only if the policies adopted lead to an increase in the denominator and a reduction in the numerator, in a ratio that must be our top priority in the coming years<\/span>. To achieve this, of course, we must think long-term; in other words, decisions must be taken with a view that goes beyond a single parliamentary term and a single election. But unfortunately I am not very optimistic about this, either at the political<\/a> nor at the level of trade union<\/a>.<\/p>\n

As for the measures to be taken, Brock<\/a> It proposes several, which I will outline below, but all of them are based on the two complementary sources of real economic growth:<\/p>\n

<\/span><\/p>\n

\u00abThe growth trend is the sum of the growth in productive capacity and the growth in productivity.\u00ab<\/p>\n<\/blockquote>\n

The proposed measures include, for example: fiscal incentives aimed at developing the infrastructure needed for growth, and the promotion of innovation and Venture Capital<\/span>. And from a much more nationalist perspective, the promotion and education of brilliant minds, both nationals and university students from immigrant backgrounds. He also advocates incentives for investment in the private sector, and regulation limited to capping excessive employee bonuses and drastically reducing widespread leverage. According to Brock, these regulations will automatically rectify the other excesses that have occurred, particularly over the last three years.<\/p>\n

\"\"<\/a>As regards increasing productive capacity, it proposes the deregulation of the labour market. It also advocates a fiscal policy aimed at strengthening value-added tax and minimising those taxes that affect labour income, as these distort labour market growth and, consequently, production capacity. And, of course, a re-evaluation of the public deficit so that borrowing is directed towards areas likely to generate greater growth in the medium and long term.<\/p>\n

A crossroads with no turning back, an extremely complex one, with two paths ahead: one leads to fruitless hyperinflation and the other to long-term normalisation, though the latter will require a great deal of effort and collective wisdom along the way. The following charts show a projection of the two possible scenarios:<\/p>\n

\"\"<\/a>\"\"<\/a>There\u2019s no doubt that we\u2019ve ended up in this grim situation because of our foolishness and our desire to become rich through money alone brought from the future<\/a>, a misuse of The Theory of Speculation<\/a> which has led us to financial collapse. And we can only emerge from this successfully through long-term effort, but one focused on the only part of the equation that we can change: growth, since the debt exists because we unconsciously created it over at least the past decade and we cannot simply make it disappear. Indebtedness continues on its grim course: individuals\u2013banks\u2013states. And it is the state itself (or macro-states such as the USA or the EU) that must grow at full throttle for many years to bring the debt-to-GDP ratio under control. If we fail to do so, we will inflict damage upon ourselves from which we will never be able to recover.<\/div>","protected":false},"excerpt":{"rendered":"

Despu\u00e9s de leer el \u00faltimo an\u00e1lisis del Dr. H. W. Brock, presidente de Strategic Economic Decisions (SED’s Advisory Services), creo que ser\u00e1 interesante hacer alguna reflexi\u00f3n respecto a la relaci\u00f3n entre Crecimiento y Deuda. En el cuadro de al lado vemos gr\u00e1ficamente la explicaci\u00f3n que Brock hace de la \u00abtormenta perfercta\u00bb en la que estamos […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-361","post","type-post","status-publish","format-standard","hentry","category-sin-categorizar"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=361"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/361\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}