Speculations about future are making the current financial situation even worse.

There was a good article on this matter last week in local paper, now sharing the point here in my own words

The point is, all those speculations about euro collapse and crisis are simply cultivating fear.

Many people are in extemely bad financial situation.

Although many people are currently financially stable.

All the fear-mongering creates a situation, where the people who would be able to spend, start to save up. Overally saving up is not that bad, although in current situation saving up makes the situation even worse.

Think about it. Because they spend as little as possible because who knows what the future brings creates a situation where the profits of the companies fall, which makes them cut down on employees and their salaries, which already makes the situation even worse as the amount of unemployeed people in financial bankrupt increases, they lose homes etc.

That creates an endless spiral until the economy melts down and then we are in real trouble and the value of the money in the bank accounts is either taken by the banks or it simply loses all its value.

The average amount of money in the bank accounts here is higher than ever. When there was the boom, everybody put nearly nothing aside and spent everything to dime and up to some point it kept the economy flowing. Although currently people are often putting aside nearly 50% of their salary and that even deepens the crisis.

Best solution would be around 10% of monthly salary to savings, not more and not less, whatever the financial situation and spending the savings yearly or investing them to keep the economy better.

Long term savings are worth nothing. The monthly salary my father saved in the 1990s would have gotten him a car back then. Now, when the same amount is still in his bank account, you can not buy even a pair of sneakers with the same amount... Considering inflation, long-term saving is not good, the best solution is simply investing it into something worthful. If he had bought the car back then, it would be worth around 10 pairs of sneakers currently 10 times more

I think ur arguement is faulted in regards to people spending less therefore companies make less and less jobs are out there. From what ive seen profits of big companies have still been increasing even though the economy has been bad since 2001 or so.

Originally posted by thegoods724
I think ur arguement is faulted in regards to people spending less therefore companies make less and less jobs are out there. From what ive seen profits of big companies have still been increasing even though the economy has been bad since 2001 or so.

Big companies, yes. They are able to earn more money because they can keep the prices lower due to lower own price (Buy buying more products in from suppliers, you get them at a lower price) . The lower the prices, the more people buy their products, which raises their overall profit.

Smaller ones are the ones that suffer and that makes the economy worse.


PS. This is not my argument, but an argument from a locally well-reputated economics specialist.


Also I will ask you, what does a profit of a company depend on? What happens when the profits are too low?

Answers are: 1) the amount of clients buying products which earn profit 2) Expenses are cut down, usually on workers salaries

The two are in correlation. No profit=Less jobs/Worse salaries Less jobs/Worse salaries= Less consumption
Less consumption=Less profits

It is simply a never-ending cycle, downward spiral.

reply to post by Cabin

For the longest time we were told, on a collective level, we didn't save enough. Now we're saving too much? We were also told we lived on too much credit. Then people started to either pay down their credit or they lost it due to the inability to pay. Now they don't even want to extend credit to worthy borrowers after we helped them with the bailout. They were supposed to keep the markets fluid. Now they just pass notes back and forth between banks. Businesses and individuals have been cut out of the credit stream.

I know someone trying to get refinancing on a commercial loan. The person has triple A credit, strong income and net worth, yet the banks balk at the loan under $2million. The loan to value is less than 1/3rd. The banks initially express interest then walk away. I know this person intimately and they have nothing to hide. Something is very wrong here.

reply to post by Cabin


Interesting read . . . but when I see articles stating people need to stop worrying and start buying, I look at who'd best benefit from that.

See . . . the news media relies on advertising revenue . . . and if people don't buy stuff, those who are selling don't buy ads.

So, I wish sometimes these 'reporters' and 'columnists' would just be a tad more sussinct in their 'spendy-spendy, savin' ain't trendy' pieces and say . . .

Buy stuff already . . . my job depends on it

just sayin'

please don't ask responsible people to aid and abed a faulty system, just so the elite can have their cake.

if it doesn't work for everyone, it doesn't work at all.

the Keynesian system we currently live under is a one way street and we're just about at the end of the road on this one. you cannot allow bankers and govt. to work together to keep a failing system going by blaming the people that have been saddled with the debt of said bankers and govt.'s for decades.

Currently, there are many speculations that what happened in Cyprus for EU bailouts will serve as a template for all future bailouts in the EU.

In truth, only truth can set us free.

Let us analyze why greece, which many cypriots complained, had FULL bailouts and haircuts, and yet Cyprus was given none.

The awful realities are that in the case of Greece, it was the govt at fault for failing to oversee the banks with better regulatory measures as well as ending its endermic TAX AVIODIANCE and corruption issues which were the core root problems of its demise.

The banking system played ball, or at the least, did as instructed by the greek govt. The greek bonds failed, as there was no sensible way Greece could pay back those HUGE loans it took, under closet corruption agendas. Bankruptcy was the only norm under the true capitalist system.

Fortunately for them, bleeding heart EU stepped in to save them by pumping vast amounts of taxpayer monies and savings from the richer nations in EU such as Germany and France.

It was not a banking problem, but rather the demagogue politicians' despicable greedy errors that caused the collapse. Thus EU propped up the banks with its taxpayers funds to save the rest of the depositors.

However, Cyprus WAS a banking problem. Despite EU warnings for more regulatory controls and oversight over that bloated low tax economy based unsustainably solely upon banking, its govt and the cypriots gave the middle finger to EU, resulting in warnings ignored.

As such, when SHTF with the banking crisis, its vast sums given low taxation and promised huge returns, bombed.

EU could just walk away, let Cyprus bankrupt itself, as per free market capitist rule of being responsible for one's mistake, but bleeding heartedly, it tried to save Cyprus with the bailout, but ensuring the govt and bankers acknowledge its mistakes and correct them, and thus a 'pain' levy to ensure that they learn.

Yet cypriots blame the already over taxed germany and EU taxpayers for saving the masses.

The capitalist free market is bound and ruled by its own laws. Adam Smith alluded to the mystical 'Free Hand' of the market that regulates the market. But unfortunately, wealthy elites sought to be that 'free hand' to move markets, and only resulted in widespread destruction of the market, as it was human self imposed and not from the unknown immortal market's 'Free Hand'.

Like any laws, it will be tampered with compassion, and thus each bailout is viewed and judged upon its merits on a case-by-case basis, and not one size fits all as many in the world feared about EU's bailout stance. There is no need to fear a repettition of what happened in Cyprus being replicated for other nations.

Greece was only a political mistake, and be corrected when the masses are more aware of what's going in the nation to elect better representatives so as not to repeat the same mistakes again.

Cyprus was a Banking and govt regulatory mistake, and thus, in this day and age of accountability and the end of making the small guys pay for the mistakes of the big guys, 'pain' levy was instituted so that all may learn and progress from it.

EU. ECB and IMF are manned by civilised fellow humans, to share cavier during good times and broth during bad times. They could have walked away from Cyprus just like Russia's Putin did after being worshipped by cypriots as being the saviour but turned out to be an uncaring bast*rd.

Cyprus is only a small state, and the Troika could anytime, let it bankrupt and everyone far worse off with no hope for the future, but it did not, for we are all fellow humans, and wealth will be shared, not equally, but fairly so that none be left behind as all will still have a measure of small sustainable short termed wealth left after the bank collapses.

May cypriots know the truths, differentiating them from the many self defeating hate filled conspiracy theories spewed by the ignorant over this affair, and overcome this harsh time together as one people, one nation, and one EU.

Cyprus, being a great tourism destination is fully capable of gaining immediate wealth with right tourism polices as well as finding niche areas for manufacturing, agriculture and services, should know the value of welcoming EU members and world now, rather than to live in hate, anger and chaos which will only result in the destruction of its GDP and hope for oneself and innocent future generations.