
Spain Is Beyond Doomed: Unemployment Charts - colinismyname
http://www.theatlantic.com/business/archive/2013/04/spain-is-beyond-doomed-the-2-scariest-unemployment-charts-ever/275324/
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lolcraft
I don't know why journalists, when writing about economics, invariably pick
the least adequate people to be interviewed. Some time ago, there was a
feature about unemployment for college graduates in the US... which talked
about a woman with a _dance_ degree. Now it's about a fucking _cani_ [1] whose
major accomplishment in life is pasting some rubber and metal together,
earning 1200 undeserved euros a month. Before that, he did the same thing,
earning _2500€_ \-- that ridiculous salary is the reason his Social Security
benefits are so high. For comparison, many engineers here consider themselves
lucky for earning 1000€/month.

What I find missing is how entrepreneur-social culture in Spain is, basically,
the least funny joke you'll hear in all Europe. 23.3% of GDP are black market
operations. The European country with highest quantity of 500€ banknotes per
briefcase. 10% unemployment for workers with tertiary education. Esperanza
Aguirre wanting to exile the poor from Madrid (it's a long story). Widespread,
also not very covert, abuse from employers. That sort of thing.

Fortunately, the country is sort of duct-taped together, so it all works
fairly well in the end. Not at all as gloomy as pictured here.

[1] Like a chav, but Spaniard.

~~~
auctiontheory
What, pray tell, is a "chav"?

~~~
edderly
Pretty good background here: <http://www.bbc.co.uk/news/magazine-13626046>

TL;DR Jersey Shore (sometimes minus the tan).

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mseebach
The problem with stimulus spending in a place like Spain is that someone will
have to lend them the money to spend. They either have to charge pretty high
interest (which exacerbates Spain's already high deficit) or give a discount
on the interest, such that it no longer reflects the risk the lender is
taking. Most anti-austerity calls seem to suggest the latter, which basically
amounts to redistribution from those countries (Germany, Netherlands et.al.)
that did not enjoy the easy living during the boom years that Spain did.

~~~
jwcooper
Germany isn't completely innocent here though either, even though it can look
like they were frugal during the boom years.

From Michael Pettis [1]:

The strength of the German economy in recent years has largely to do with its
export success. But for Germany to run a large current account surplus – the
consequence I would argue of domestic policies aimed at suppressing
consumption and subsidizing production – Spain and the other peripheral
countries of Europe had to run large current account deficits. If they didn’t,
the euro would have undoubtedly surged, and with it Germany’s export
performance would have collapsed. Very low interest rates in the euro area
(set largely by Germany) ensured that the peripheral countries would, indeed,
run large trade deficits.

The funding by German banks of peripheral European borrowing, in other words,
was a necessary part of deal, arrived at willingly or unwillingly, leading
both to Germany’s export success and to the debt problems of the deficit
countries.

[1] <http://www.mpettis.com/2011/07/19/current-account-dilemma/>

~~~
mseebach
It was certainly very convenient for the germans to have some takers for their
cheap bonds, but the fact remains that nobody forced the peripheral countries
to live beyond their means and to refrain from implementing necessary reforms.

~~~
graeme
The difference is that in the past, the peripheral countries were able to live
beyond their means without such drastic consequences.

Too much debt? Devalue the peseta and drachma. Exports increase, imports
decrease, unemployment adjusts. Lenders knows that they must charge higher
interest rates to those countries.

That process can't happen anymore. So the same behavior that was mildly
damaging before suddenly became very, very damaging. Neither Southern nor
Northern European leaders fully recognized this problem when they created a
single currency.

~~~
dpe82
Some recognized the problem, but they were largely shouted down. The single
currency has always been a political initiative, not an economic one.

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eksith
The labor disparity between senior workers and young ones will lead to a lot
more trouble. Irrational people take out their frustrations on the easiest
target; irrational young people even more so.

I'm not sure if the article's doom and gloom is actually reflected in reality
though. Most people are averse to letting society collapse (especially when
they've had a history of it standing upright and stable for a long time).

Spain doesn't "just" need stimulus, it needs well guided and allocated
stimulus or it will accomplish nothing.

~~~
fixxer
Spain needs to breed. Their median age is ~41 (US at about 37... ). Not as bad
as Japan, but very ominous when you've got a society built on pensions.

Ireland is about 35 and it shows (little pale kiddies running around
everywhere). That is the only one of the PIIGS I'm betting on.

~~~
jwilliams
Spain's youth unemployment is astronomical (55%+). Young people with useful
skills are increasing choosing to emigrate -- With lots of encouragement too.
e.g. Germany is actively recruiting Spanish Engineers to fill labour gaps
there.

Without structural changes, no amount of youth is going to dig them out.

~~~
futhey
Yes, and in recent years Spaniards have been immigrating to South America to
take incredible cuts in pay to do jobs (Often regardless of legal status) that
require few of the qualifications, if any, they had earned in Spain.

~~~
seanmcdirmid
How is this comment related to parent?

As long as we are wildly off topic, a lot of young people in Japan are
"encouraged" to move to Bangkok to do Japanese customer service jobs, where
they can be paid less.

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pfortuny
I -Spaniard here living in Spain- tend not to believe those figures. Also:

1) Hiring is unbelievably costly due to Social Security. 2) Hence you tend to
pay "in black". 3) People HAVE TO pay for the Soc Sec even though they do not
earn enough for a living. At the very leas, 250 bucks per month whatever your
earnings are. 4) We are spectacular liars at polls. Nobody in the black market
will say he has a job.

So a grain of salt is required.

EDIT: although the outlook is really really bleak, there is no denying it.

~~~
forgottenpaswrd
True. Americans can't understand it without traveling and living abroad.

It is very easy for them to make business.

Also, lot of people here are in "paro" subsidy earning 400euros a month and
working in the black, 600 or 700 euros. There are also lots of other subsidies
like PER witch is part of the "social net" that make Social Security so
expensive(a millennial is earning more than 2000euros before taxes make it
1000).

If they report they are working, they lose the subsidy.

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dade_
It's called bankruptcy. I'd get on it. Austerity is going to start civil wars
at this rate. Oh yeah, and next time, don't bail out banks run by sociopaths.

~~~
barking
This week the Irish government who now unwillingly own a huge chunk of bank of
Ireland said it could do nothing about the chief executive's generous salary.
This despite further losses at the bank. Meanwhile further cuts in the rest of
the economy.

~~~
AnthonyMouse
The executive compensation thing is a red herring. People keep talking about
it because of the manifest unfairness of allowing these people to wreck the
economy and still take home 100 times what their victims do, but reducing
their compensation wouldn't bring back any jobs. The problem is that a million
dollars is a huge amount of money for an individual and a drop in the ocean
for a government or a bank. Taking the money from them to try to undo what
they've done wouldn't make the slightest dent, so all it would do is to punish
them. And if that's what you're after then stop with pussyfooting around and
just put them in prison already.

~~~
barking
There's a perception amongst the 'ordinary' people that those at the top
scratch one anothers backs. The government spin is that we're all in this
together but the reality seems to be different. It's not surprising when you
see how politicians when they retire often go on to get directorships at
banks. Or how in the case of our most toxic bank, the chief executive
apparently used to personally handle loans to politicians and other
influential people. Politicians have talked the talk but when it has come to
punishing those responsible nothing happens. Constitutional property rights
are cited. They'd love to do something but their hands are tied or it would
spook the markets or to paraphrase you the effect would be negligible so let's
not bother. Much more would be raised by milking the masses some more.

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pinaceae
but if you actually go to spain, it does not look like somalia.

nasty secret - all those unemployed? work anyhow, "black" as we say in austria
- unofficial, tax free. 50% youth unemployment? if all that were real, there
would be open war. yet bars, stadiums, beaches are full.

the official economy is getting smaller, the unofficial one is growing.

as long as there are illegal immigrants from africa working the fields in
spain and not spanish people, the economy is not that bad.

lies, damn lies and statistics.

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raheemm
It seems Iceland was in worse shape than Spain but they have managed to
resolve their issues by revaluing their currency (similar to declaring
bankruptcy?).

Why is Spain not able to do the same? I'm guessing it's because they are part
of the EU and do not have their own currency?

~~~
graeme
That's a large part of it. Spain can't devalue it's currency easily, or get
rid of their debt. Europe won't let them default and stay in.

They'd basically have to leave the Euro to do what Iceland did. And that would
be complicated.

~~~
return0
What's happening now is actually more complicated. The economies of the south
are never going to take off with measures that are planned by a committee of 3
world institutions. The more the south sticks to the euro, the more
complicated it's going to get. There is a good chance that a 'southern euro'
might actually work, as the southern economies are all in similarly bad shape
and in need of stimulus.

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robryan
What the is the precedent for austerity? What countries have used it
successfully to get out of recession and improve unemployment?

~~~
skylan_q
_What the is the precedent for austerity?_

To have enough money left behind to pay the bills.

 _What countries have used it successfully to get out of recession and improve
unemployment?_

This worked in the (now seemingly ancient) past. Governments were a much
smaller portion of the economy and taxes were much lower to begin with. These
days, up to 50% of people can be employed by the government. When governments
get that large, there is no possibility nor space for a recovery:

Stimulus: add more debt to an unpayable debt? increase taxes and chase out
people who pay the largest sum of taxes?

Austerity: cut gov't pay and jobs? that leads to less tax revenue and higher
unemployment... nevermind the fact that the party won't ever be elected again.

The only way to win at this is to not have an economy that depends so heavily
on indebted government nor one that removes risks for the banking system. If a
country is already at that point there is no moving forward. Declare
bankruptcy, destroy your credit ratings and start over.

~~~
robryan
How does declaring bankruptcy help creating more jobs? (Honest Question) Would
seem to me that it would been even harder to get credit flowing once all your
previous creditors have been wiped out.

From an admittedly fairly uninformed position it appears to me that cutting
spending is only going to further erode businesses positions and tax revenue,
leading to an even worse position.

~~~
skylan_q
In the short-term it doesn't help the employment situation. Like in (software)
engineering, there is no free lunch.

Here's another example in Canada of austerity working:
[http://articles.businessinsider.com/2010-06-07/markets/29978...](http://articles.businessinsider.com/2010-06-07/markets/29978945_1_canada-
debt-eurozone)

They have 5 bullet points, and I think only 4 really applies. But even then,
Canadians weren't getting heavily leveraged, especially since the BoC had a
single mandate of keeping inflation in check which means high interest rates
(and no mandate to respond to labor market conditions, which usually results
in more leveraging and higher inflation)

This austerity something most hated Chretien for, but people didn't make too
much of a fuss. 10% expenditure reduction? grumble grumble... Today's
reaction: sacrificing a 2.4% increase in the federal budget for a 1.8%
increase? BRUTAL AUSTERITY DON'T YOU REMEMBER NAZIS???

Ontarians all hate Mike Harris. After he was done the deficit was gone and
debts reduced, schools and medical care resumed as before and everyone had
jobs. We brought in automotive emissions tests, many new provincial parks,
many new lands for natives and the environment was much cleaner than when he
showed up. He was hated because he made everyone do what they were supposed to
do. As far as I've seen, people only like the politician that promises the
moon and loads on debt that "someone else" will pay for. :(

 _From an admittedly fairly uninformed position it appears to me that cutting
spending is only going to further erode businesses positions and tax revenue,
leading to an even worse position._

Many people use their gut to voice their opinions on these things, and that's
not to say that they're wrong. People often extend the concept of household
finances to the economy.

Simple analogy might help explain where that notion might come from: Your
parents are heavily indebted seniors that do some chores for you in order to
live with you. You are working to support yourself and them, financially. Your
company is having money issues and decides you are working 30h weeks instead
of 40h weeks. (25% pay cut) Would you then take money from your heavily
indebted parents to then buy product (economic stimulus) from the company so
that their earnings increase just enough to be able to afford to hire you back
to full capacity? Would you have your heavily indebted parents borrow more
money to buy enough product? Not likely. You'd probably rather just look for
other work or start a company and take the financial hit/cost of having to
look for new work or starting a company. Basically starting over. You could
also just tough it out and stick to eating cheap canned goods, cancel netflix,
and slowing down repayment of your parent's debt and getting them the cheap
diapers and only absolutely necessary meds (austerity option)

Applying moral of the story: If Spain doesn't go through bankruptcy, (or
severe, short-term austerity) it's keeping the 30h work week while the parents
are still saddled with huge debts while also trying to maintain the lifestyle
that it could maintain working 40h weeks. So the less Spain spends today and
tomorrow, the less it has to tax today and tomorrow.

The above is all for illustrative purposes.

 _Would seem to me that it would been even harder to get credit flowing once
all your previous creditors have been wiped out._

For sure, no one will be keen on buying 30-year government bonds. This is a
huge problem for the credit markets. We've seen some mixed results in Iceland,
though. But a larger economy like Spains? Might not fare as well.

------
guelo
Tell the Germans to fuck off, leave the Euro, pull an Argentina, watch the new
peso exchange drop to 1000 to 1 Euro, get a flood of French and Germans
hunting for bargains, which generates jobs. But make customs treat these
tourists like shit, just for a little passive aggressive revenge.

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yekko
Nothing a little austerity can't fix, right? Time to fire more government
workers.

~~~
seanmcdirmid
Yes! At this point, taking more money out of the economy will increase
economic activity...no...wait...I'm with Keynes that this is the wrong thing
to do.

------
known
<http://www.lietaer.com/2010/03/the-worgl-experiment/> will create millions of
new jobs.

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brianbreslin
Semi off topic, but I'm going to Spain in June, anyone recommend anything
startup related? People i should meet?

~~~
znq
Check out <http://barcelona.io> or contact me at stefan@barcelona.io

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superflit
Why complain?

The Economy is only taking a 'siesta' (nap)..

These 'uptight' anglo-saxon coutries only think about work... (sarcasm)

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anuraj
Spain's problems are endemic; but most of Europe shows similar tendencies now
- High level of entitlements, soaring deficits, lower cost efficiency and
lumpen youth. Europe's post developmental problems need high level of
innovation - but the youth do not seem particularly ready for it.

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Tangaroa
Long-term unemployment is happening in the US too:
[http://blogs.cfr.org/kahn/2013/04/17/our-long-term-
unemploym...](http://blogs.cfr.org/kahn/2013/04/17/our-long-term-unemployment-
challenge-in-charts/)

Unemployment in the US is near 15% including U6, or near 23% if using pre-1994
counting methods: [http://www.shadowstats.com/alternate_data/unemployment-
chart...](http://www.shadowstats.com/alternate_data/unemployment-charts)

(On that subject, I'm looking for work in the north SF bay area, Sonoma/Marin
region)

~~~
rayiner
The SGS numbers are basically fictional. See this contemporaneous discussion
of what really changed between the pre-1994 and post-1994 counting methods:
<http://www.bls.gov/mlr/1995/10/art3full.pdf>. The current U4-U6 do include
discouraged workers, they simply require the person to indicate on the survey
that they have searched for a job in the _past year_ rather than the
unworkably vague prior methodology that simply asked whether the person wanted
a job. See: [http://www.ritholtz.com/blog/2012/08/discouraged-by-the-
medi...](http://www.ritholtz.com/blog/2012/08/discouraged-by-the-media-again).

The most sensible employment measure is U4 (official unemployment + people who
have searched for a job in the last year). U5 and U6 are far too sensitive to
demographic changes to serve as a good basis for comparison. E.g. since the
1950's the work force has added a lot of female part-time workers that are
counted in U6, but would have been stay-at-home wives in the 1950's and thus
not counted as unemployed at all. Also, older people have always been over-
represented among the marginally-attached, part-time work force, and as the
population ages there are naturally more of this demographic. Both trends
inflate U6, but neither are a negative indicator for the economy per se.

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krugmanlol
And we still think krugman is a god.

~~~
Afforess
Krugman has been against the austerity in Europe from the start. So Krugman
was right all along.

~~~
Houshalter
Yes, austerity caused their ridiculous employment regulations.

