$1 trillion in aid

Cash bailout settled on as financial crisis continues in Greece, Portugal, Spain and Ireland


Marathon talks have resulted in a $1 trillion aid package from the IMF, central banks and the European Union to stabilize the world financial markets in the wake of the Greek debt crisis. It’s the largest payout since the recession struck two years ago following the collapse of Lehman Brothers. The U.S. Federal Reserve has also reopened currency swap lines and the European Central Bank is offering to buy government debt in further efforts to calm investors. So far it’s working. The euro has already risen 2 per cent, and stock markets in Asia, as well as European shares, credit default swaps, and insurance-like instruments to hedge against default are stabilizing. “We shall defend the euro whatever it takes,” said EU Monetary Affairs Commissioner Olli Rehn at a news conference. And It might take a lot—experts warn that the ongoing problems in Portugal, Ireland and Spain could require another 500 billion euros in bailouts.

Vancouver Sun

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$1 trillion in aid

  1. Next country on the debt bailout train, the United States.

    Their total debt is currently $12.95 trillion U.S. with each citizen's share of the National Debt coming in at $41,938.19. For comparison's sake, Canada's per capita federal debt is $15,250 assuming a population of 33,930,800. The United States public debt was 54.6% of GDP in 2009; by comparison, Canada's public debt was 33.9% of GDP. The United States Treasury records that interest payments on their debt has totalled $224 billion in the first 7 months of this year; by the end of this fiscal year, the interest payments on their debt alone will approach Canada's total public debt.

    Buy physical gold.


    • Canada's FEDERAL public debt was 33.9%. It's actual public debt, including provinces and municipalities, was much higher and still is. It was only recently that the US total public debt, as a percentage of GDP, surpassed ours, though it is on a nastier trajectory.

      This whole idea of runaway debt and that gold is the better option is at best, a self-fulfilling prophecy. We've had higher debt and managed it. The US has had higher debt and managed it. Italy and Japan have had huge debt levels for the past decade without collapse, though that and other factors have stifled their economic growth. Gold prices are being driven up now only because people, paranoid about the current financial situation, are buying it in droves – like any other currency, it only has value because others think it has value.

      Debt is a serious issue, as the interest payments on that debt drain taxpayer money and put the extra burden on future taxpayers. As such, prudent measures should always been considered to reduce debt and, as situations permit, prevent it from building in the first place. But the debt levels we're seeing now, even from uber-corrupt and debt-happy Greece, aren't new and on their own, really aren't that scary.

  2. A difficult, but necessary move. If Greece defaults, then other weak Euro-zone countries would likely be right behind. That would reignite the recession in European powerhouses like the UK, France and Germany and suddenly the whole world is right back into recession. Globalization has a lot of advantages, but unfortunately, it means little problems can snowball.

    Amazingly, the debt itself isn't the real issue – countries have managed Greece-level debts before, without too much difficulty. But Greece has other problems. For one, growth seems unlikely in the country for several years, it can't devalue because it's part of the Euro, corruption is still rampant and even moderate austerity measures are being met with violence. Most importantly, it's lost market confidence, causing a manageable debt situation to become unmanageable as potential lenders demand interest rates too high for Greece to handle. Portugal and Spain (especially Portugal) are facing the same risk of losing market confidence – scary, since they weren't any more fiscally irresponsible than most modern countries, Canada included.

    That's what this bailout is for – it's a way for countries to regain some semblance of market confidence. I would argue that, with the exception of Greece, most of these countries should have market confidence anyway, especially if the G7 giants continue to hold it. But, I suspect because they're smaller economies, they're vulnerable to this sort of speculation whether it's justified or not.

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