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UBS' George Magnus Asks "Why Are The European Streets Relatively Quiet?"
The wave of social unrest that rumbled across Europe between 2008 and 2011 has become less intense. This has come as a cause for relief in financial markets, as it has helped to underpin the marginalization of ‘tail risk’ already addressed by the ECB and the Greek debt restructuring. And yet the latest crisis over the Cyprus bail-out/bail-in not only shoots an arrow into the heart of the principles of an acceptable banking union arrangement, if it could ever be agreed, but also signifies the deep malaise in the complex and fragile trust relationships between European citizens and their governments and institutions. Some people argue that protest, nationalist and separatist movements are just ‘noise’, that the business of ‘fixing Europe’ is proceeding regardless, and that citizens are resigned to the pain of keeping the Euro system together. UBS' George Magnus is not convinced, even if public anger is less acute now than in the past, it is far from dormant, and its expression is mostly unpredictable. So is the current lull in social unrest a signal that the social fabric of Europe is more robust than we thought, or (as we suggested 14 months ago) is the calm deceptive?
Another systemic problem
Social unrest is a systemic phenomenon, which, according to an OECD report, meets two principal criteria. It is highly uncertain, complex and ambiguous; and it is highly likely to generate ripple effects into other sectors of the economy and society, possibly leading to the toppling of governments, or even political systems. Although European social unrest since the crisis in Greece began has claimed a small number of fatalities and considerable damage to property, it has been notable more for the public expression of lack of trust in the institutions of government, including in Brussels. If a rising number of people give up on the willingness and ability of their institutions to address grievances, then the lull is most likely deceptive.
We have been here before. The economic and political context of the 1930s was, of course, different. Then there was much historical and unresolved geo-political baggage, and a rupture of the political centre as two radically different ideological veins erupted from the backlash against free trade and the gold standard. One championed radical social reform, the other what may be euphemistically called ‘nation-building’ 5 . And there was no EU. But the problem today, as then, is the same, namely the inadequacy of mainstream, political channels to address rising public concern about the loss of economic security, social stability and, yes, cultural identity6. How else to explain both the rise of Spain’s indignados, and other similar national protest movements in Europe, and the increase in nationalist, populist and separatist sentiment, and representation in national parliaments from Greece, France, and Spain to Finland and the Netherlands, and now Italy?
Via George Magnus, UBS:
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Still an austerity zone
Even though the financial crisis in Europe has faded, for the time being at least, the economic stress nurturing protest movements hasn’t. The best that can be said is that the incidence of austerity may not be as significant as it was in 2010-11
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Backlash link to austerity
Let’s assume nothing changes, and that while European elites debate how – or if – they can build strong European banking, fiscal and economic institutions, with the required transfer mechanisms between creditors and debtors, the economic lot of European citizens, an unhappy one for five years now, shows no improvement. This seems a decent assumption.
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The principal economic lesson is that an austerity regime with recurring reductions in public outlays won’t work a) when the private sector is trying to delever and shrink liabilities at the same time b) when it is a generic phenomenon and c) when its principal impact is to depress the level of money GDP and sustain the economy in a liquidity trap. But thanks to some interesting empirical work, another lesson concerns the corrosive and dangerous effects of large and sustained austerity in creating a social backlash that results in greater uncertainty, and therefore inertia, when it comes to corporate hiring and capital spending. As a result, output and public sector tax revenues suffer, reinforcing the negative dynamic between debt and the economy.
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when expenditure cuts, specifically, rise to more than 2% of GDP, and particularly when they rise towards or over 5% of GDP, the number and the severity of incidents of unrest rise sharply.
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Self-evidently, there have been heightened levels of social unrest and shocks to the political system in Greece, Spain, Portugal and Italy, but not in the UK or Ireland, or in the US, for that matter, though neither the US nor the UK, for example, have been immune to social unrest, sometimes requiring the force of the state to suppress it.12. But the main difference between many incidents of social unrest and the ones that damage the social fabric and the economic environment is the impact (sometimes more perceived than real, perhaps) of highly restrictive budgetary measures. Some governments may be better able to implement and absorb them, and sustain the trust or belief in citizens in perseverance. Mostly, this comes down to the robustness of local institutions, and the performance of leaders, as well as culture and history.
The most fundamental manifestation of this damage is, of course, unemployment. But this is only the most visible sign of the upheaval in Europe’s famed social model, and overlooks other important social and economic fault lines, including stagnant or declining real wages, rising income inequality, levels of youth unemployment of between 25% and 50%, and the rise in the numbers of long-term unemployed.
These phenomena didn’t begin with the financial and Euro crises, of course, but they have certainly been exacerbated by it and by the response of governments, and citizens are certainly making the connection, regardless.
So why are the streets relatively quiet?
The short answer is we don’t know. None of the reasons we can think of add up to much, but judge for yourself. It could have something to do with Europe’s rapid ageing demographic transition. The proportion of young adults, aged 15-24 has already been falling from peak levels seen in the mid 1980s, and is on track to decline further in the next 20 years. The proportion of 15-59 year olds, or what we might imagine as the part of the population most likely to express non-voting anger, is peaking now, but a significant decline is predicted. Perhaps the baby boomers have expended their protest energy!
Rapid growth in, and a rising proportion of, the numbers of young people, say aged 15-29, certainly feed the potential for social protest and upheaval. But they also need a catalyst, which could be the emergence of high inflation.
Empirically, there is an unequivocal association, but this is best applied, in contemporary times at least, to the experience of emerging and developing countries, for example, as in the Arab Spring. Although the European upheavals in the 1960s and 1970s were set against a backdrop of rising inflation, those in the 1930s and today are the product of depression and awkward questions of self-determination, not inflation.
Perhaps the relative calm in Europe has something to do with European family structures. The Bank Credit Analyst recently published a chart, emphasizing the role of the family as a shock absorber. The authors suggest that the countries with the highest youth unemployment rates are also those with the highest proportion of young adults living with their parents, who fulfill the role of effecting transfers and economic and social support.
We are not sure about this one either, although having an extended family structure on which to rely is clearly a mitigating factor against poverty and social exclusion. But the two variables may simply be spuriously correlated since both represent symptoms of a depressed economy. In any event, those countries with the highest youth unemployment and numbers living at home have already claimed the bragging rights for anti-austerity protest, while six of the other eight countries have been characterized by fallen or weakened governments, and the rise of nationalist and anti-immigrant political parties and policies.
A conclusion to this discussion is not possible.
In a benign outcome, the potential for social disorder will be defused by a new approach to economic burden-sharing, a re-sequencing of the pursuit of austerity and growth objectives, and steady progress towards the establishment of credible and trusted European banking, economic and political institutions, including financial transfer mechanisms. Motherhood, to be sure, and this has at least two vital caveats, namely the willingness of Germany and other northern European countries to accept significant sovereignty compromises, and the implications for the EU project, if this level of integration proves a bridge too far for UK voters in the promised 2017 referendum.
Social and political upheavals would doubtless haunt the worst-case outcome, where muddling through leads nevertheless to a fragmentation of the Eurozone, or, in extremis, a collapse, in spite of OMTs and the like. The possible consequences, including for the social fabric of Europe, have been well aired in the last couple of years.
The middle way, so to speak, is a muddling through that never scales the successful outcome hurdles, but carries on regardless. Political bonds, maybe fear, sustain the Euro system, but European leaders are unable to reach an agreed and acceptable framework for durable economic recovery and full integration. This outcome describes the status quo, and is the base case for most people. But it is also about stagnant, low growth, persistent high unemployment, retreating targets for debt sustainability, more bail-outs and bail-ins, latent financial instability, and likely sovereign default. The current Eurozone news could not be more apt, and doesn’t seem like the ideal scenario in which to expect European social unrest and political turbulence to fade away.
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Yep. All the two faced lying brats in CONgress will blame each other and their paymaster lobbyists will smirk.
'Smart' money is ok. Brat money voters will be fighting among themselves, as per usual, two faced lying selfish bastids who don't care if record numbers of Americans rely on food stamps and big companies like Walmart profiteer off the staff, the government, the shareholders, the everyone.
DC are fuckwit corporatist bumb boys and girls, screwing America's families.
Professors are most responsible for giving any kind of intellectual legitimacy to retarded ambiitious money grubbing politicians and warmongers...who ensured that professors get their tenure and money...while waging endless war and killing ruthlessly.
Who took the CON out of congress??
I know it is pointless to speculate,but just for fun what if interest rates had been raised by the FED after the 2000 dot.com crash.We would have had a recession,but the housing bubble would not have existed,no securitization of debt (mortgate backed securities) and no CDO's to inject toxin into the European banks. Also Goldman Sachs would not have had the liquidity to make all these toxic loans (some linked to strengthening currencies such as the Swissie) to small and medium size towns in France ,Italy and elsewhere.
Nuttin' wrong with speculation. I'll kick it up a basis point or three. What if there wasn't a Fed to manipulate rates at all? What if market forces set them? What if the Bankers had no government protection/cartel and had to answer for their individual actions? Get sloppy, go broke and let creative destruction sort it out. Screw their depositors and swing from a tall oak.
Why not? That's the way I had to do things for 40 years of sole proprietorship? My customers all had my home phone number and address if they had a problem with the way I did things. No net, couldn't get slack! Certainly no nanny gumnut to protect me from my own greed or stupidity.
Every time a bad decision bit me on the ass, I paid for the experience. Tuition? F'n A!
Hello? Scotty? Need a lift.
Your "what if" would only delay the inevitable. So long as the FED and Fractional Reserve Banking exist, we're always heading towards the cliff...
In 1997 when Greenspan spied the bubble he created and later denied, "irrational exuberance", all that was needed was in increase in margin for stock speculators. But the speculators wanted to high-jack the high-tech economy and skim all the wealth from it. So they got paid and America got fucked.
Correct. Leverage is the problem, not debt.
Allowing parasites to skim the productive.
I am really surprised at the lack of protest in Ireland,
they had a brilliant history of insurrection against their British overlords,
now they are financial slaves of their new Germanic masters.
The EUSSR scammed Eire.
Someone smart once said that a man won't understand if he is paid NOT to understand.
"It is not, as people think, the monopolists, but the monopolized, that sustain the monopolies."
Frederic Bastiat
So. People are paid to serve the monopolists, and Zionists in particular.
No shit, Sherlock. Like it is not clear that most people go to work every day for pay. Oh. It is clear that people go to work every day for money.
Unless they are smart arse tax paid tenured political serving shill professors who mock most, and take most from most, and think mere money is a trifling thing, something to be dismissed as ...whatever, dude.
Your pay check is insecure, now that you and yours have bankrupted your employers: the taxpayers.
'Professor', smug for not much longer.
One of y'all needs to change their avatar, it's somewhat confusing -- you could always just do a color inversion on yours...
Tell you wot, my darlin. I'll keep the emerald and pink, and the eejit can keep wotever he's sellin.
Fair dues?
It's time to find the crack pipe.
Watch and see. The old republic is aware, and bloody furious. Wait and see. Do not think that the boyz have given in to the bastid banksters. Wait and see. Perhaps read more newspapers from the emerald isle.
My answer is that after one understands these problems, it becomes all too clear that there are no solutions. No protesting makes sense, unless one has some demand one can coherently make. There are no such demands which are now possible.
The established systems are INSANE on an astronomically amplified scale: global electronic fiat money frauds, backed by atomic bombs.
Since that is an utterly irrational "reality" which is already totally INSANE, there are NO sane solutions which one can imagine, especially since the overwhelming vast majority of people still do not have a clue about that "reality."
Nobody, including the ruling classes, can possibly have any good ideas regarding what to do with technological capacities which are already trillions of times greater than any previous period in human history, and which are still on obvious exponential growth curves towards becoming even more orders of magnitude greater in the foreseeable future, IF civilization survives ...
The vast majority of people are almost completely clueless, and do not want to learn what they would need to learn to even begin to have some clues. The elites are also not actually able to know any better either, although they might well want to learn. Nobody knows, and nobody could possibly know ...
Therefore, even after someone attempts to work hard to understand these problems, the final result is that one can not, and there are certainly no practical political solutions, since the vast majority of people do not want to even bother to learn what the real problems are.
So, with the ruling classes trying to keep things within the same old systems (which is impossible, since they can not be amplified trillions of times, and then even more so, and still stay the same), while those who are being ruled certainly can dislike that, but not come remotely close to having any good ideas regarding what to demand should be done instead ... THE ONLY POSSIBLE FUTURE IS COLLAPSE INTO CHAOS, WHICH WILL BE POSTPONED AS LONG AS POSSIBLE, BUT STILL MUST HAPPEN, EVENTUALLY!
However, despite being on that path towards the psychotic breakdown of the runaway systems of force backed frauds, there still are no coherent, politically possible, set of genuine solutions to the INSANITIES caused by the current systems of force backed frauds actually controlling civilization.
The "reality" IS SO INSANE, that there is no sane way to protest against that, because there are no ways to believe in any sane set of alternatives, which are practical and realistic, given the actual conditions of our current runaway social insanities.
There is no way to get motivated to go protest, since the problems are too insane to be able to have any sane solutions which could be implemented, given that the ruling classes would never agree, while those who are being ruled would almost certainly never understand.
MEANWHILE, the only "solutions" that the ruling classes have actually prepared for are to start more genocidal wars, and impose martial law. Of course, those are not sane solutions, but will only make thing even worse. However, those sorts of events are the only things which people have prepared for, and could understand.
The only good theoretical "solutions" would be to do those things better. However, since neither the rulers nor the ruled would ever admit or agree what their problems truly were, we are STUCK inside the runaway INSANITIES of force backed frauds being what continues to control our civilization, in ways which automatically become more insane, since everything IS based on frauds, backed by force.
To sanely protest, enough people who were protesting would have to agree upon and understand enough truth, so that their protest was not merely more insanities, driving the collapse into chaos. However, that is apparently not possible ... so going to protests is just to join in with the manifestation of social insanities.
I think most are holding their breathe waiting for the collapse which seems inevitable. The protests will be about what the new system will be.
The calms is deceptive, in Europe and in the U.S.A.
Blow on a bed of hot coals for a while. They will glow, and if you stop blowing keep glowing - that is - until that one breath where they burst into flames,
These dumbfuck politicians and bankers are stoking what will eventually be a raging fire.
When the time comes, cut off the head of the snake people, not the tail.
Bullish for guns, ammo, canned food, water, low-tech older cars.
Dumb fucking juveniles in charge of the lives of most people; hang the narcissistic juveniles.
i have the answer : PEOPLE ARE IGNORANT, dumb as fuck, retarded lazy sissies
or howabout: By putting the southern european poor on half-rations for a few years they have been sufficiently weakened to make violent protest unlikely.
Fuck you buddy. If you, like me, had your eyes glued on the events which have unfolded over the last 7 years, you'd see there are people who are trying to change this fucking world. There are people who have been beaten brutally, who are still in jail, there are people who have to pay money they do not have because they went into the streets while you mutherfucker sat at your computer and called them lazy. You asshole, FUCK YOU. Fuck you for not joining in when they gathered the strength and courage to stand up to the riot police as powerful as a military, AND DO IT WITHOUT ARMS.
FUCK YOU! FUCK YOU UNTIL YOU DIE MUTHERFUCKER.
Sheep don't protest. And especially sheep who know they don't stand to gain anything anyway. They can leave the Euro, and be much worse off immediately. They can stay in the Euro and get worse off slowly but surely. They can demand that the ECB print and bail them out, but the ECB isn't going to listen to foreign protests. There are no options worth fighting for unless they are going to go to Brussels or Frankfurt and string up Eurocrats..
super broccoli
+100000
absolutely true
One giant communist planet! I feel special!
Here in the uk one of my friends texted me to say he was pleased about the budget and that the interest rate stayed low
I told him what he was pleased about only cemented the road to ZIMbabwe even more
I was then accused of sounding like EDD fucking Milliband
I told himk NEVER to compare me to a ZIonist commie fuck like that
I told him to prepare for complete collapse and safeguard his family
I told him its a mathematical certainty that collapse was coming
I nhave not heard one workd from him since
this is the type of complete and utter de4nial and ignorance we are dealing with
and this guy is university educated
Its very inetresting as I lived in the Philippines for years and just returned here a few months ago
In the Phils there are many expats who get it and thats why they are there to escape the bullshit
but back in the Uk I have only ever spoken to one person who gets it and he was an ex banker who knows the system
The greatest shortcoming of the human race is our inability to understand the exponential function
Be wary of the day when the EBT cards quit working. Until then everything will be fine. The top will continue to skim from the transfer of money from the workers to the slackers......
Notice how there is no and there is never a discussion of welfare or foodstamp cuts in the USSA? Where is the roll back of government welfare in cyprus... there isnt one..... nor will there be one, they will clean out your bank account to feed the dole roles....
gato
agree
the only onmes who will riot is the welfare class
but once the currecny goes then their welfare will not pay for shit
then the riots start
so when the bond bubble bursts, the riots start
Magnus is on UBS payroll but he is independent by the way. His view doesnt represent the house view. So whenever you say "UBS' Magnus", it is a bit of a misnomer.
i think for the masses to do anything about what is going on there have to be at least two conditions met: one is a more severe and rapid deterioration of living standards than people have experienced thus far and the second condition is an emergence of a leader or leaders who are capable of showing people an alternative to the current sorry state of affairs...................
Because they know they're done! http://shutupnsing.wordpress.com/2013/03/22/why-are-they-so-desperate/
The seismometer is slowing to almost no fluctuation, right before the big eruption.
http://www.youtube.com/watch?v=hcP2pf_DAmM (What If - Judge Napolitano)
It is called Oppression when your voice is silenced.