tensions in the old world

In my capacity running Sales across Europe it goes without question that I also have an interest and sentiment towards the economic and social developments in this vast and very diverse territory.

The Europe I encounter now is very different to the one faced in the year 2008 when I started out my international sales endavours.

In these days Lehman Brothers filed for bankruptcy and the pictures of suddenly jobless bankers made the headlines, this was only the beginning, Lehman was the tip of the iceberg it showed that the whole US economic model that runs on private and institutional debt alongside a debt-fuelled property market was on the verge of fainting .

The Lehman trigger spread out to Europe (and much later on Asia) where for example the German leaders had to inform citizens that putting taxpayers money into balance sheets of banks was without alternative.

But while propping up bank balances is a timely constraint thing, another measure that started out in 2008 is far more pervasive in its effects: Quantitative Easing i.e. inflating the amount of money in circulation without being backed by increases in productivity and output (chart for Europe) QE has led to an era of low-interest rates, high-risk investments in stock markets, another .com bubble and an era of high investment in property, this has exported the US property model to the rest of the world.

Fast forward we see now 7 years later sky high property prices in Europe out of reach for most, a undecisive US and China reeling in its unsustainable growth blues (China’s debt has quadrupled since 2007) that includes quite a big a property problem.

In 2009 the European debt crisis started out with Greece, Ireland, Portugal not able to finance their debt on the free market as their economies were troubled by the same recipe that brought the US into turmoil a year earlier (high private and institutional debt therefore failing banks that need to be saved by government)

To my eyes to this date in 2015 the European debt crisis still persists in full magnitude the pain has just been flushed with many help packages that contain even more debt.

It becomes quite clear that excessive debt both for individuals, companies, banks and nations is a core pattern that leads to grave problems sooner or later.

Why is a world with healthy debt to performance ratio’s so undesirable then?

It would mean the businesses would grow slower but more sustainable, research & development may be slower as it has to be financed from profits giving small business a healthy chance to compete in global markets and if looked at in more long-term view; the current generation would act responsible in not indebting the future of their children.

But such thoughts are purely optional, the old debt and the new debt created since 2008 (57 trillion US$ globally) is there and will not go away.

See this excellent account by McKinsey on this

http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging

The momentarily painless way out of this high debt burden is forced inflation and currency devaluation which is what QE is meant to spur , so really it is a vicious circle.

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