Visualizing An Austere Europe

Tyler Durden's picture

With the euro collapsing, all of Europe is on the brink, and as a result, every European country has now instituted some form of austerity measures. Hereby, we summarize what these look like to date. Unfortunately, we are confident the current batch of austerity will be materially insufficient with many more rounds of cutbacks to come. Looking across the Atlantic, the US has yet to initiate any reductions in its gargantuan budget deficit or governmental spending. And as can be seen its metrics are just as bad if not worse than most of Europe. Use this chart to get a sense of what the initial round of US austerity, when it strikes, will look like.

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DoChenRollingBearing's picture

Awesome work!  The chart is coming out of my printer now.

If the math works the same here as in Europe, well, things look pretty bad in the near future.

Miles Kendig's picture

As the process of revolution in the affairs of western finance & governance continues.

The ends..of so many


gotgold's picture

mk...your body of work is impressive, thank you.
Beyond the suffering is hope. This clusterfuck will pass
and the hope will be for leadership. From here on the
west coast to Tennessee.... grace and peace.

Miles Kendig's picture

You speak of my body of work.  Wow.  Amazing that anyone would look, at least it is amazing to me.  Once I fly my kites I release them.  Have a wonderful evening and thanx for the pat in passing.  peace

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jaybaybaker's picture

Very true. Great stuff, thanks, Tyler!

Don't forget that Europeans know that their money CANNOT be endlessly printed, they remember what happens then. More austerity (read DEFLATION) coming.

As an example, see the Weimar-remembrance panic gold-buying in Germany and Austria during last week.

So to all the geniuses who are shorting the euro and betting on gold AFTER the move: good luck, because ...

(1) the shot across the bow puts enormous pressure on the EU political elite, they know it's austerity or disaster. They WILL NOT abandon their euro (and therewith their EU integration) project that they have worked for their whole professional life, just because it's fashionable right now to say so;
(2) most euro-countries have laws pending that will make primary budget deficits unconstitutional (on a national level, in Germany including the "laender");
(3) the low euro gives an enormous boost to Germany's (and France's to a lesser extent) export-oriented capital goods sector;
(4) no one seems to realize hat everyone is on the same side of the boat: expect a euro short squeeze (maybe an epic one) and a "surprise" gold pullback, once the newby gold buyers who came in at $1250 start panicking;
(5) yes, Greece is a write-off, the 30-40% haircut will come, when the French and Swiss banks can handle it (within the next six months); the resulting currency destruction will tend to make the euro stronger.

Let's see how the $2tn debt roll-over plus new $2tn new debt work out over the next 12 months. That's $4tn, friends, for those who care to count the trillions. Is the printing press an option, when average maturity is 4 years? Probably not.

Anybody want to bet that we will not talk about these $4tn (plus some major states going bust or near-bust) over the next few weeks and months? Will the "flight to safety" into the dollar continue, or will we talk about the euro as a reserve currency again, as we did on November 2009?

TBT or not TBT's picture

The european education systems have been teaching marxist, zero-sum game mishmash for a few generations, so the installed software in every european's head won't accept any useful measures of austerity for any length of time.   They'll bang their sippy cups like the childish dependents they've become, striking, reversing governments in favor of more demagogical types.   Count on it.

jaybaybaker's picture

It seems like you really know Europe. Or not.

You are completely wrong. Europeans know that this is a matter of survival.

The "surprise" will come when Americans refuse to pay higher taxes (e.g. VAT) and austerity becomes an impossibility because of an out-of-control health care sector (despite delivering one of the lowest life expectancies in the developed world).

pan-the-ist's picture

There is a simple solution to solve the healthcare crisis:

Lower the pay for doctors.  They make way too much.

jaybaybaker's picture

Or eliminate the health tax that Americans are paying to their "private" insurance companies, which are nothing other than government-like bureaucrats pushing paper without adding any value. Americans get the worst of both worlds: a bloated healthcare system AND the worst healthcare bureaucracy in the world. Who is world number 1 in denied procedures again?The U.S. by a long shot; and who denies? The "private" insurance monopolists who absurdly make more money the worse people are in shape ... hmm, and what does it cost?

The healthcare tax paid to the bureaucratic monopolists called "health insurance companies" stands at 30% at the moment. That's a good point to start to lower actual taxes and increase efficiency. What is Medicare's overhead? 1-2%. How many people do you know who don't like Medicare? I rest my case.

About Europe: Europeans know that this is a matter of survival. They are implementing constitutional limits, the countries behind the curve will get a brutal dose of deflation overseen by the new European Monetary Fund (or whatever they will call it), funded by euro members only.

pan-the-ist's picture

I agree.

Not only that, but Medicare already covers the most expensive/risky people - the senior citizens.

jaybaybaker's picture

Yes. And that at the lowest cost.

However, the upside-down logic perpetuated by the lobbyists and the CNBC (corporate nonsense broadcasting corp) anchors has been deeply ingrained in the population. Like a host thinking he needs the parasite for survival, people think they need the paper-shuffling insurance types.

The numbers:

In 2008, 31% of U.S. health care cost, or $715 bn, or 5% of U.S. GDP, went to health care ADMINISTRATIVE costs. In other words to a non value-adding, purely paper-pushing activity. Hello Soviet Union.

And: lower doctors' pay yes, but lower their tuition, tort claims, overhead (created by the insurance bureaucrats, i.e. "insurance specialists" who work "for" the doctor and make as much net as the doctor), and their other cost, too.

Result: deflation here we come. This is the inevitable outcome.

Miles Kendig's picture

Most folks forget that no matter public or private health insurance decisions as to availability & pricing will always be made by some Twinkie eating bureaucrat.  The only question that influences the process is which way the cost/benefit analysis flows.

jaybaybaker's picture

The process is determined by the rules of the game set by the government.

Why does an antibiotic from Pfizer cost 25 euros in a private French pharmacy and the identical box 250 dollars at CVS??

Why are American insurance companies offering private policies in France? Not to make a profit? Hmm, how does all of this actually work ... let me ask CNBC to "learn" something.

scaleindependent's picture

Physician income is less than 20% of health care expenditures.

Educate thyself.

A Man without Qualities's picture

it would make more sense to start by reducing the prescriptions for psychotropic medication and taxing the junk products (palm oil, corn syrup) and forcing those who have obesity related diseases to eat a healthy diet.  The obesity crisis in the US is the most unnecessary health crisis in the history of the world and yet most Americans seem to blind to see... 

jimijon's picture

Just legalize it and of course tax it. Safer and more effective than pharma pychotropics.

Or, for instant psychotherapy, just take a hit of acid with a shaman type guide. I guarantee you will face your demons.

jimijon's picture

Just legalize it and of course tax it. Safer and more effective than pharma pychotropics.

Or, for instant psychotherapy, just take a hit of acid with a shaman type guide. I guarantee you will face your demons.

brushfire's picture

Riiiight. Let me get this straight. I took out $300,000 in loans to work 90 hours a week and make $50,000 a year as a resident for 6 years...and I'm overpaid. Physicians are among the most productive members of our society, and we provide an absolutlely necessary and socially redeeming service at well below market prices. It seems to me you might better apply the word overpaid to any banker, lawyer, plumber or unionized worker anywhere in the world. Wait...nevermind....I take it would better use "overpaid" to describe just about anyone who has an education and works anywhere in the world. No matter, when TSHTF and doctors start charging market prices for their services you will see what overpaid looks like. Want a preview? It looks like idiots like you being priced out of the market. For those with means it looks like you will be liquidating a large portion of your estate to fix that broken leg...because without me you're never walking again. How many people in the US can fix that compound fracture youre suffering with? Around 750. How many can do whatever bullshit job you do? I'm guessing just about anyone. Youre so stupid I can't believe you read a website like ZH...matter of fact I can't believe you read at all.

whatsinaname's picture

The AMA ensures that the number of doctors in this country per capita is strictly regulated. Outsourcing is also highly controlled as compared to manufacturing. Its not surprising that you pay them high salaries but for the most part the quality is high too (or so has been my experience).

Great post btw..terrific chart...

TBT or not TBT's picture

"It seems like you really know Europe. Or not."     Oh, just lived and worked over there for 11 years, got a couple of degrees over there, did business all over, traveled all over, extensively.  Stuff like that.  Most of the population harbors typically fantastical beliefs you find on the left anywhere you go.  Belief in central planning.  Belief that corporations and rich can pay the bills.  Belief that you can "share" jobs by, oh, moving working hours from 39 to 35 per week(at the same pay).   Belief that jobs can be saved by making it just about impossible to fire people.  Belief you can regulate anything into good working order if just you apply willpower.   Good intentions matter far more than good results.   I could go on, and on, and on.....In French if you prefer that language.   The Europeans in crisis will revert to form, by identifying scapegoats, internal and external, who have little or nothing to do with their problems.  Demagogues will figure out which chords resonate, and they'll bang away on those notes.  

jaybaybaker's picture

You mean we have something completely different here in the US?

Reply in French if you wish ;-) je te repondrai en italien.

So our folks will be happy to pay 19.6% VAT (TVA). They don't feel entitled? Over 20% unemployment if you use the same metrics as in France. Don't mix up "no delusions" with "different delusions". Like rolling over and creating $4 trillion debt in the next 12 months (i.e. 30% of GDP) with a shrinking tax base. The cuts are coming and I can see the headlines.

The bottom line is, in a deflation everyone suffers and must give up something, because there is no other way out. That, mon ami, will eventually be understood everywhere, after some street protests, especially in France, or Italy. It will not go easily here either when austerity will come to the US. After a monetary crash or before, the result will be the same. Here and there.

George the baby crusher's picture

I was going to write something about TB being an ignorant prick, and how wrong he is, blah, blah, blah.  But I just can't be bothered.  But TB still seems like a delusional ignorant prick.

WaterWings's picture

Vai a fare in culo.

Taxes in the age of the Printing Press serve two purposes:

1) perceived equal re-distribution of wealth

2) price control

kaiten's picture

I wonder you waste your time replying to TBT. No matter how long he lived in Europe as he clearly had blinkers on his eyes all over the time. 

Apostate's picture

Cutting doctor pay isn't the solution.

In New York City, there's already been one major hospital closure - St. Vincent's. Every contact that I have in the medical profession complains about late payment from Medicare.

Sorry, the government fails to pay its checks on time, it requires too much from hospitals, and there's too much red tape and liability.

Increasingly, the best doctors are heading overseas, building themselves a mansion, and evading their medical debt.

Ready to die, baby boomers? Hope you like your "free health care."


CharlesBronson's picture

To the "always something or somebody elses fault" crowd, the answer is get healthy. Americans are unhealthy and represent a costly "conclussion." Dr's paid to much? Not even on the radar screen as part of the proper solution.


Our problem? Overpopulation, birth rates being driven by the poorest, least educated and most vulnerable. That and no consequences for the largest employer being the Government.


JethroBodien's picture

Its called for profit healthcare.  When you put the profits and interests of corporations above the interests of a countries citizenry you shouldn't be surpised by the results.

This isnt complicated!

That said, at the end of the day we all have to take personal responsibility for our own well being.  For example, the obesity problem is definitely a huge problem as are cigarettes (cancer sticks)   How is it that tobacco companies have not been litigated into oblivionYou can thank the government for that one.


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Augustus's picture


It is certainly a daunting task but please keep trying to explain it to the simple statists who post here.  Whether is is health care or water service, there are some who continue to believe that the government will do a better job of delivery and can do it for free.  It has never worked that way anywhere.  It will be interresting to locate the admirers of Hugo Chavez when that poor experiment in disaster hits bottom.

whatsinaname's picture

I'd rather TBF until the next round of deflation is done.

Quintus's picture


"It seems like you really know Europe. Or not.


You are completely wrong. Europeans know that this is a matter of survival."


Fundamental misunderstanding.  

There is no such body as 'Europeans'.  In the course of my career I have lived and worked in just about every country in Europe, and I have never once heard anybody describe themselves as a 'European' first and foremost.  German yes.  French yes.  Austrian yes.  Spanish yes....and so on, you get the point.  Not even when I worked in Brussels, the supposed heart of Europe.

There is no 'European People' except in the parasitic and self-interested mind of the Euro 'Elite' who are trying (and failing) to force this ridiculous construct upon a fragmented cultural and political inheritance that goes back millennia.  

Simply put, when push comes to shove, the sovereign nations of Europe will look inward and focus on the survival of their own people first.  They always have, and they always will.

Within reason, some hardship on behalf of foreigners will be borne, partly out of a sense of solidarity with other countries and peoples, but mostly out of a self-interested fear of economic repercussions to the banking system and export industries.  Merkel and Sarkozy have already stepped beyond these limits, as the electoral catastrophe that Merkel suffered last week in North-Rhine Westphalia illustrates.  The Germans are not finished yet, as awareness grows that they have been sold out by their own political class, expect rising nationalism to dominate the political debate there.

No, there is no love among the people of European countries for the Euro or indeed the supranational institutions cobbled together by the Eurocrats over the heads of the people, and people will not suffer on their behalf.


WaterWings's picture

Wish our leadership would take care everyday Americans.

izmasterzvois's picture

You have no idea what you're talking about.

Good To Great's picture

Appreciate your posts, jayjay.  You and Mako (and probably others) are getting junked for gold bashing, but you guys are expecting the excrement to hit the fan in a way that deflates all assets.  Not unreasonable in my estimation.  How are you positioned to survive it?

jaybaybaker's picture

You can figure it out from there.

Btw, love that book "Good to Great".

Good To Great's picture

Hopefully you do recognize the irony  :-)

In the 30s the USD was devalued relative to gold.... although we are no longer on the gold standard this is clearly happening yet again in terms of relative purchasing power over the past ten years.  In the 30s if one retained the ability to eat and pay the taxes/expenses/loan on the hard assets in possession, those hard assets became the foundation of wealth after the dislocation.  Gold isn't necesarily the best bridge from one era to the next (no productive capacity or income), but I'm not sure it's fair to say it won't be a store of value.

Spastica Rex's picture

Did the sequel "Why Settle for Great when you can be Fabulous" get released yet? That book should be AWESOME!

Rider's picture

The printing press is our saviour, no austerity needed here, let expend at the cost of the rest of the world.

Its called coinage its the US end game to (attemp) conquering the world.


orange juice's picture

The math isn't exactly the same in the US as the EU for a number of reasons, chief reason is the ability of the US to export T-Bills, right now EU's govts (germany being the exception) are gradually losing thier status (downgrades etc.). There are other tools that the US has that arent' afforded to individual countries in the EU, of course ease of movement in central banking is one, QE is another, unification, etc.

Europe is in dire straights and is unlikely to exit for quite sometime, in relationship to the US I would surmise their aboooout 2-3 years behind the US in economic developments.

PS -I'd buy European straw hats next winter if you know what i mean.

kaiten's picture

Europe has one huge advantage over the US. Eurozone have 14-16% saving rates and thus dont depend on outside world for deficits funding. Moreover, eurozone is still the biggest manufacturer and exporter in the world and the weak euro is boosting export, thus helping offset the austerity measures.

MsCreant's picture

Austerity is clearly a joke. Looks like the Germans are the only ones that come close to telling the truth in their stats. Notice everyone else assumes projected budget deficits will drop, but Germany predicts rises. 


seventree's picture

If EMU states start re-issuing "local" currencies (as some expect) theirs will be the only one worth anything.

Cistercian's picture

 Math really sucks.The reality is inescapable.

 Currency FAIL.But everyone knows this...and yet it totters on.

 Why?One currency to be implemented.That would be some trick.As it is the Euro and the Dollar are doomed.The real question is what will happen after they do.It will be an opportunity for positive change..but it will not be easy.And that's an understatement!


deadparrot's picture

Planned austerity measures are indeed a joke. Politicians will draw up all sorts of grandiose ideas but few will achieve their goals. It being a depression, for every expense cut, 3 more "urgent" expenditures will appear. You can bet one expense will skyrocket in the next year - personal security for govt officials.

Miss Expectations's picture

Gosh, I thought I misunderstood the chart when I saw the huge - Deficit Change...

It wasn't until I read your comment that I realized they were actually projecting deficit reductions. 

bugs_'s picture

Austerity for thee

but  not for me

fx swaps for free

have a bond or three

TBT or not TBT's picture

Rahm and the Bamster, together with Pelosi and Reid, are working by the FDR playbook:  Use the crisis to permanently grow the reach and power of the central government.   Thus the talk of VAT and tax increases, inspite of the proven fact that increasing taxes reduces government revenues, usually.