Portugal’s Economic Revival(nytimes.com)
nytimes.com
Portugal’s Economic Revival
https://www.nytimes.com/2018/07/22/business/portugal-economy-austerity.html
151 comments
> the new government was in a really better position to try "the revival". They started reinvesting and giving the appearance that we are growing (and some things are, but also government spending). And it seems to be working so far...
This statement is very far from the truth.
The current acting government actually cut investment spending to record levels as part of their renewed austerity effort, both with higher taxes and slending cuts, that resulted in record low deficit spending.
While the previous goveremt of Portugal focused on higher income taxes focused on the middle/upper class and public sector workers, the current acting government forced increases in gas prices mixed with off-the-bool spending cuts in the form of captivation of expenditures.
The key factor in Portugal's economic turnaround is the fact that the austerity program was actually surprisingly effective at fixing Portugal's problem, as is demonstrated by the fact that the portuguese recession that started way back in 2008 ended in 2014, right before the end of the austerity program.
This statement is very far from the truth.
The current acting government actually cut investment spending to record levels as part of their renewed austerity effort, both with higher taxes and slending cuts, that resulted in record low deficit spending.
While the previous goveremt of Portugal focused on higher income taxes focused on the middle/upper class and public sector workers, the current acting government forced increases in gas prices mixed with off-the-bool spending cuts in the form of captivation of expenditures.
The key factor in Portugal's economic turnaround is the fact that the austerity program was actually surprisingly effective at fixing Portugal's problem, as is demonstrated by the fact that the portuguese recession that started way back in 2008 ended in 2014, right before the end of the austerity program.
How does austerity (reducing government expenditures in order to control/safeguard public-sector debt) cause the end of a recession (shift from negative to positive GDP growth rate)?
Saying austerity led to the end of a recession is like saying that cutting costs at your restaurant led to an increase in customers, or allowed you to charge higher prices for your food.
Greece and Italy are fighting austerity because they take the traditional economic stance - government needs to spend tax dollars on increasing investment, education, employment, etc. instead of cutting investment costs and ensuring tax money is channeled to interest payments.
Perhaps foreign investors saw that Portugal was taking its austerity seriously and began to increase investment, reassured their money would be relatively safe. But how could austerity lead to the boom in tourism and exports cited in the NY Times article?
Saying austerity led to the end of a recession is like saying that cutting costs at your restaurant led to an increase in customers, or allowed you to charge higher prices for your food.
Greece and Italy are fighting austerity because they take the traditional economic stance - government needs to spend tax dollars on increasing investment, education, employment, etc. instead of cutting investment costs and ensuring tax money is channeled to interest payments.
Perhaps foreign investors saw that Portugal was taking its austerity seriously and began to increase investment, reassured their money would be relatively safe. But how could austerity lead to the boom in tourism and exports cited in the NY Times article?
> How does austerity (reducing government expenditures in order to control/safeguard public-sector debt) cause the end of a recession (shift from negative to positive GDP growth rate)?
One of the key factors was that the national trade balance became net positive during the period, as the private sector was pushed to invest in exports, but I'm sure the issue is much more complex and can't be pinned down to a single cause.
Nevertheless the undisutable fact is that the recession that started in 2008 and caused the then acting government to nearly bankrupt the state in 2011 with their record public spending push, piling yearly deficits of over 10%, ended in 2014 during the third year of the bailout program. That fact is somehow ignored by anti-austerity critics who insist that no recovery is possible when reality shows otherwise.
One of the key factors was that the national trade balance became net positive during the period, as the private sector was pushed to invest in exports, but I'm sure the issue is much more complex and can't be pinned down to a single cause.
Nevertheless the undisutable fact is that the recession that started in 2008 and caused the then acting government to nearly bankrupt the state in 2011 with their record public spending push, piling yearly deficits of over 10%, ended in 2014 during the third year of the bailout program. That fact is somehow ignored by anti-austerity critics who insist that no recovery is possible when reality shows otherwise.
Perhaps austerity destroyed internal spending power (as Mario Monti put it when interviewed about his government on US media) and this made the country more competitive and cheaper to external consumers?
Our sucess boils to a tourism increase (driven from political instability in other countries and a very laxed tax system for foreigners), cheap oil (that gave room to increase taxes on petrol) and historically low interest rates.
I moved here from UK mainly because of Brexit, attractive tax regime helped, also more English spoken than in Spain, more Brit friendly than Spain (not so many drunken UK hooligans), combination of stunning beaches and a safe large City like Lisbon is quite rare, Athens (basket case economy), Barcelona( v high crime rate). Also Great wine food and fantastic infrastructure, only spoiled by insane car & energy prices and totally inept drivers.
Foreign sourced income is easy to get tax free for 10 years via dividends, local income tax is 20% but social costs still high to employ software engineers. Golden Visa also attracted me in case UK crashes out no deal, passport only requires €500k invested in property.
Lisbon Cascais is booming because so many foreigners moving here and spending shit loads of cash on property, renovations furniture, services, schools etc, this has boosted the economy far more than Tourism increase, this also pays a lot of property related taxes and energy taxes and VAT 23%, so for the first time in donkeys years Portugal managed to balance the books last year.
Many very rich successful entrepreneurs and professionals - huge numbers from Brazil, many Scandinavians, not as many Brits as expected (but now increasing), I was also surprised by how many US and Polish expats I have met living here.
> a very laxed tax system for foreigners
Do you think this is one of the reasons (or the major one) that so many Portuguese people live abroad? [1]
[1]: https://i.redd.it/2683a6np1g621.jpg
Do you think this is one of the reasons (or the major one) that so many Portuguese people live abroad? [1]
[1]: https://i.redd.it/2683a6np1g621.jpg
No. The reasons some many people live abroad, IMO:
1. A culture built on world exploration. Our golden age myth is sailors leaving the country to find new lands. Our great epic book is "Os Lusíadas", a celebration of the discovery of a sea route to India by the Portuguese explorer Vasco da Gama inspired by Virgil and Homer's epics.
2. Many people left the country between WW2 and 1974 (due to a ruling dictatorship, a colonial war, and economic difficulties). These were mostly uneducated people that went to France, Germany, Switzerland to become low wage workers.
3. A newer wave of emigration (of much more educated people) due to low salaries in Portugal. I know a lot of people (mostly engineers) that more than tripled their wage simply by moving to more developed countries: Germany, UK, Sweden... Similar to moving to SF/NY when you're in rural US.
1. A culture built on world exploration. Our golden age myth is sailors leaving the country to find new lands. Our great epic book is "Os Lusíadas", a celebration of the discovery of a sea route to India by the Portuguese explorer Vasco da Gama inspired by Virgil and Homer's epics.
2. Many people left the country between WW2 and 1974 (due to a ruling dictatorship, a colonial war, and economic difficulties). These were mostly uneducated people that went to France, Germany, Switzerland to become low wage workers.
3. A newer wave of emigration (of much more educated people) due to low salaries in Portugal. I know a lot of people (mostly engineers) that more than tripled their wage simply by moving to more developed countries: Germany, UK, Sweden... Similar to moving to SF/NY when you're in rural US.
Thank you for the insight.
[deleted]
>"Our sucess boils to a tourism increase (driven from political instability in other countries and a very laxed tax system for foreigners)"
Can you elaborate on what or how the tax system is very lax for foreigners?
Can you elaborate on what or how the tax system is very lax for foreigners?
There are a number of tax breaks for foreigners, meaning effectively if you have not live in Portugal for 5 years you do not pay hardly any tax. This is dependent on you getting good advice.
"Dividends are Tax free from the UK for 10 years, 20% on local income. EU passport if you spend 500k on property"
https://news.ycombinator.com/item?id=18165995
As an anecdote, Madonna is nowadays living in Portugal. Media says the reasons are the Lisbon sunlight and her son wants to learn soccer.
https://news.ycombinator.com/item?id=18165995
As an anecdote, Madonna is nowadays living in Portugal. Media says the reasons are the Lisbon sunlight and her son wants to learn soccer.
[deleted]
>What do you do when you beg someone for their money? You comply! You don't come out for the streets saying you won't pay!
It's not like the creditors were helping from the goodness of their hearts. They made stacks of money off it, off those imposed austerity measures, off (if you excuse the description) of bleeding the working class dry. Let's not forget who profited the most off the situation generated by the European debt crisis: big German banks...
It's in the citizen's rights at least to protest for an alternative solution.
It's not like the creditors were helping from the goodness of their hearts. They made stacks of money off it, off those imposed austerity measures, off (if you excuse the description) of bleeding the working class dry. Let's not forget who profited the most off the situation generated by the European debt crisis: big German banks...
It's in the citizen's rights at least to protest for an alternative solution.
Blaming the big German banks is counterproductive when the real culprit is always the government that does the borrowing and the spending, along with the people that elected them.
It’s how socialism works. Spend other people’s money on handouts then blame capitalism for the public debt.
It’s how socialism works. Spend other people’s money on handouts then blame capitalism for the public debt.
It worked out rather the other way around, though, did it not? Namely, the consequences of the risks taken by the big banks in pursuing aggressive lending policies were effectively socialized, while profits remained private. Even in the case of the large sovereign bailouts (most prominently Greece) most of the money went directly towards debt servicing and associated expenses, further socializing risks taken by private banks.
I'm not expressing any value judgment on these decisions in this post, but it seems to me the basic terminology is hard to dispute.
I'm not expressing any value judgment on these decisions in this post, but it seems to me the basic terminology is hard to dispute.
Can we put this old troll from Thatcher to rest? It’s insulting
>the real culprit is always the government that does the borrowing and the spending
By that logic, I assume that in the case of the subprime crisis of 2008, you also think that the culprits are the indebted families, right? Not the banks that pushed loans on people who clearly couldn't afford them, who set up a system that richly rewarded them for that, that hoodwinked their clients and the public, that stacked regulators with friends to look the other way, that stacked universities with "economists" in conflict-of-interest to tout that their practices were a-ok, that paid themselves billions in bonuses with taxpayer money after the working class bailed out their losses... Not those people, right?
>It’s how socialism works. Spend other people’s money
It's always funny to me that the people who get trillion-dollar bailouts to recoup their losses and keep living an elite life of luxury have the gall to call others out on "handouts".
Anyway, you forgot to set that quote over a photo of Margaret Thatcher /s.
By that logic, I assume that in the case of the subprime crisis of 2008, you also think that the culprits are the indebted families, right? Not the banks that pushed loans on people who clearly couldn't afford them, who set up a system that richly rewarded them for that, that hoodwinked their clients and the public, that stacked regulators with friends to look the other way, that stacked universities with "economists" in conflict-of-interest to tout that their practices were a-ok, that paid themselves billions in bonuses with taxpayer money after the working class bailed out their losses... Not those people, right?
>It’s how socialism works. Spend other people’s money
It's always funny to me that the people who get trillion-dollar bailouts to recoup their losses and keep living an elite life of luxury have the gall to call others out on "handouts".
Anyway, you forgot to set that quote over a photo of Margaret Thatcher /s.
>It’s how socialism works. Spend other people’s money on handouts then blame capitalism for the public debt.
That's how an economically careless welfare state works in a capitalist economy. What you are describing is social democracy, which is not the same as socialism and never has been in the history of the movements or any terminology recognised by social scientists.
Socialism is direct worker control over the state and social means of production (to the point where Karl Marx considered the term synonymous to "Communism"), while social democracy is a liberal capitalist economy in which the government (which owns very little social means of production itself) funds welfare programs through taxes.
That's how an economically careless welfare state works in a capitalist economy. What you are describing is social democracy, which is not the same as socialism and never has been in the history of the movements or any terminology recognised by social scientists.
Socialism is direct worker control over the state and social means of production (to the point where Karl Marx considered the term synonymous to "Communism"), while social democracy is a liberal capitalist economy in which the government (which owns very little social means of production itself) funds welfare programs through taxes.
Lending is a two party interaction. Both sides have responsibilities and not holding German banks responsible for their profligate lending is bad. It is well known what happens when a country is flooded with credit at low interest rates. You shouldn’t just blame on party of the two party interaction.
While this is true, the borrower is going to know their financial situation better and have somewhat more control over it, so it would make sense to blame them more.
There's economic research that shows it's more efficient to regulate (in some sense, "blame") the lenders, because borrowers are often desperate. When you're desperate, you have reduced capacity to objectively judge the consequences of borrowing and are also less sensitive to "blaming", potential penalties for overborrowing, etc.
From this perspective, putting all the blame on borrowers while exonerating the banks is exactly the opposite of what we should be doing as a society, if we want to avoid another debt bubble.
I'd fully agree with you if we were talking about small entities. Maybe we can not expect every citizen to fully learn the details and pitfalls of all those financial constructs available and thus want to protect them with regulation. But when we are talking about nation-states... whom else can we expect that kind of due diligence from to make properly informed decisions and understand the consequences if not governments of nations, representing millions of people?
Lets imagine some democracy votes an incompetent fool into their highest office, who starts making "bad deals". Would you expect other countries to not agree to those deals for reasons other than their own interests?
Lets imagine some democracy votes an incompetent fool into their highest office, who starts making "bad deals". Would you expect other countries to not agree to those deals for reasons other than their own interests?
Lenders are free to deny loans.
> Lending is a two party interaction.
Actually, it's not. Borrowing money is the sole responsibility of the borrower, who decides how much money he wants to borrow based on the impact it will have on their finances.
For a loan to materialize, the borrower needs to be aware of how much it will cost him and for how long he will have to repay or service the loan.
That's all the borrower's responsibility.
Only after the borrower is aware of the immediate and long-term impact of his actions will the borrower petition a lender to execute the loan. The lender's only role in the deal is to double-check the borrower's assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
It's also extremely disingenuous to criticise higher interest rates as they are a safety mechanism that reflects the borrower's ability to repay future loans, and are supposed to act as pressure to dissuade the borrower from digging himself into a finantial hole.
> You shouldn’t just blame on party of the two party interaction.
That's simply wrong on so maby levels. The only part who holds any form of responsibility is the borrower. He's the one making the decision to ask for more loans being fully aware of his financial situation and the impact the new loans have on his cash flow. He is the only part of the arrangement who actively petitions for the deal and has full and complete access to his economic state. The borrower is the only part who has the legal power to sign on the loands. The borrower is the only part who actively seeks the loans and actively engages with each and every single lender in the world to fulfill his desires for more debt.
Actually, it's not. Borrowing money is the sole responsibility of the borrower, who decides how much money he wants to borrow based on the impact it will have on their finances.
For a loan to materialize, the borrower needs to be aware of how much it will cost him and for how long he will have to repay or service the loan.
That's all the borrower's responsibility.
Only after the borrower is aware of the immediate and long-term impact of his actions will the borrower petition a lender to execute the loan. The lender's only role in the deal is to double-check the borrower's assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
It's also extremely disingenuous to criticise higher interest rates as they are a safety mechanism that reflects the borrower's ability to repay future loans, and are supposed to act as pressure to dissuade the borrower from digging himself into a finantial hole.
> You shouldn’t just blame on party of the two party interaction.
That's simply wrong on so maby levels. The only part who holds any form of responsibility is the borrower. He's the one making the decision to ask for more loans being fully aware of his financial situation and the impact the new loans have on his cash flow. He is the only part of the arrangement who actively petitions for the deal and has full and complete access to his economic state. The borrower is the only part who has the legal power to sign on the loands. The borrower is the only part who actively seeks the loans and actively engages with each and every single lender in the world to fulfill his desires for more debt.
Today I learned that lenders cannot deny loans, poor souls forced to give money away to everyone that asks for it, without any kind of background checks.
> Today I learned that lenders cannot deny loans
Lenders can deny loans and they can also reflect the risk in the interest rate. However, lenders only provide their input after the borrower evaluates the impact of a loan on their finances and decides based on his evaluation that he clearly and unambiguiusly is willing and capable of servicing and repaying such a loan in full. Only after that decision is expressly made by the borrower can lenders be involved, and their involvement is restricted to rubberstamp the deal decided by the borrower.
Lenders can deny loans and they can also reflect the risk in the interest rate. However, lenders only provide their input after the borrower evaluates the impact of a loan on their finances and decides based on his evaluation that he clearly and unambiguiusly is willing and capable of servicing and repaying such a loan in full. Only after that decision is expressly made by the borrower can lenders be involved, and their involvement is restricted to rubberstamp the deal decided by the borrower.
How silly of me to think that it was the lender's responsibility to access the possibilities to get the money back.
Love these capitalism excuses.
Give money away, no questions asked, blame the borrower.
Love these capitalism excuses.
Give money away, no questions asked, blame the borrower.
Your belief about the state of knowledge of borrowers is wrong. I teach mathematics at a community college and it is clear that a knowledge of percents and the impact of compounding is lacking in a large portion of the population. In my state a state senator once claimed that since funding to the college system was increased 5% after a 5% decrease this meant that the college system’s funding had been fully restored. Do you understand why this indicates that the state senator doens’t understand percents? Do you see the error? Most people don’t.
There are lots of cases where borrowers do not understand all the terms of the loan. Have you read and understood every single loan document you’ve signed? I doubt it. Your belief that only the borrower actively seeks loans is can easily be dispelled by watching TV and seeing ads for loans.
It’s hard to understand how you can write
Borrowing money is the sole responsibility of the borrower...
And the write
The lender’s only role in the deal is to double-check the borrower’s assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
There are lots of cases where borrowers do not understand all the terms of the loan. Have you read and understood every single loan document you’ve signed? I doubt it. Your belief that only the borrower actively seeks loans is can easily be dispelled by watching TV and seeing ads for loans.
It’s hard to understand how you can write
Borrowing money is the sole responsibility of the borrower...
And the write
The lender’s only role in the deal is to double-check the borrower’s assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
It's not the lender's responsibility to concern itself with the consequences of the lending for the borrower. I understand the impulse to hold people to act with more care for others, but I think it's ultimately counter-productive to absolve the party that is fundamentally the only one responsible of their responsibility for their predicament. This is a government when we're talking about, not a child.
It is the lender’s resposibility (and the govrernment’s responsibility to regulate lenders) when said lenders can loan enough money such that that economy is wrecked if the loans are paid back. Making one bad loan is not a problem. Making millions of bad loans that endangers the economic well being of a nation is a problem.
That depends. Usury is a counter example. There's a reason loan sharks are viewed with disdain. That isn't to say the borrower doesn't bear any responsibility, but consent, apparent or real, is insufficient to categorically absolve the lender.
And yet it’s also children’s lives we’re talking about; not just the government. Country-scale things like this are difficult to boil down.
It's those childrens' parents that are responsible for empowering a responsible government, not German parents.
I mean we can blame the Germans, but it's not going to change anything. Borrowers will find someone to lend to them. It's only the borrower who can avoid getting under crushing debt.
I mean we can blame the Germans, but it's not going to change anything. Borrowers will find someone to lend to them. It's only the borrower who can avoid getting under crushing debt.
If the leader is willing to give money to someone that they know isn't able to pay back, then they surely are to blame.
As a Portuguese person living in Portugal, this article is quite misleading. Portugal is one of the countries with highest income and social security taxes in Europe (not to mention VAT and other types of taxation).
The economy is growing, yes, mainly thanks to tourism. However, austerity is still much in place and taxes have only gone up since 2008 for middle and higher class (for low class people the conditions are much better of course). In order for a country to have a "revival", it needs to be growing in multiple industries but Portugal is evermore dependent on tourism which doesn't scale that well. Entrepreneurship is very limited to due to insane levels of bureucracy, high taxes, difficulty in firing people and most talent leaving to the UK/Germany/Switzerland in search of better salaries and better "value for money" taxation.
The economy is growing, yes, mainly thanks to tourism. However, austerity is still much in place and taxes have only gone up since 2008 for middle and higher class (for low class people the conditions are much better of course). In order for a country to have a "revival", it needs to be growing in multiple industries but Portugal is evermore dependent on tourism which doesn't scale that well. Entrepreneurship is very limited to due to insane levels of bureucracy, high taxes, difficulty in firing people and most talent leaving to the UK/Germany/Switzerland in search of better salaries and better "value for money" taxation.
> Portugal is one of the countries with highest income and social security taxes in Europe (not to mention VAT and other types of taxation).
This is objectively false. Portugal ranks about middle in total taxation, against the rest of the EU. Taxes are about 34% of GDP, which is pretty average in Europe.
You have all the data here, with the most interesting summary in the "Tax Main Aggregates" document:
https://ec.europa.eu/taxation_customs/business/economic-anal...
This is objectively false. Portugal ranks about middle in total taxation, against the rest of the EU. Taxes are about 34% of GDP, which is pretty average in Europe.
You have all the data here, with the most interesting summary in the "Tax Main Aggregates" document:
https://ec.europa.eu/taxation_customs/business/economic-anal...
Numbers are a beautiful thing, but in this case if we attach meaning to numbers, things like salary and disposable income start to pop-up.
We pay middle but earn way less than middle, meaning cost of goods and services are pretty much the same within some margin, but income is a order of magnitude off.
We pay middle but earn way less than middle, meaning cost of goods and services are pretty much the same within some margin, but income is a order of magnitude off.
Self-pity is a national sport, but unwarranted in this case:
The country provides free health services, with quality levels that are worldwide references.
Everyone has access to free high school education and next to free university access. You can earn a medical degree for less than 10k€ in school fees.
Police, although understaffed, are effective, resulting in top world ranks in citizen security.
The only real black spot, in State services is justice. It works, but is slow as molasses.
All of these services must be paid. You draw a correlation between GDP, disposable income, and taxation level that is erroneous. The link is between State service level and taxation level. In Portugal these look OK.
The country provides free health services, with quality levels that are worldwide references.
Everyone has access to free high school education and next to free university access. You can earn a medical degree for less than 10k€ in school fees.
Police, although understaffed, are effective, resulting in top world ranks in citizen security.
The only real black spot, in State services is justice. It works, but is slow as molasses.
All of these services must be paid. You draw a correlation between GDP, disposable income, and taxation level that is erroneous. The link is between State service level and taxation level. In Portugal these look OK.
Also as a Portuguese I consider this article literally fake news/propaganda.
Portugal still has the crazy tax system where deductions are applied over the whole salary, not the bands? That was one thing that never made any sense to me - effectively removing motivations for salary increases, as you could end up with less even with a raise.
It is not quite that bad.
Tax withholding rates are not marginal, they do apply to the whole salary.
But the actual tax rates at the end of the year are marginal.
So it is possible a pay raise means you get less money after witholding on a monthly basis, but on an yearly basis, after taxes paid/refunded, a pay raise is always net positive.
Still silly, but not insane.
Still silly, but not insane.
But that's essentially a big no-interest loan people are giving to the government no? The money returned at the end of the year is money people could have been investing and earning a return on no? That seems closer to "insane" than "silly." Or am I missing something?
From the other side of the table, that is money the government is investing and earning a return on. If they did it the other way they'd have to raise the tax rates to compensate, which wouldn't go down for the politicians doing it, even if the net result is the same.
>"From the other side of the table, that is money the government is investing and earning a return on."
With the exception of a few notable oil economy countries that have sovereign wealth funds, federal governments most certaily do not invest tax revenue in the market. Taxes are used to finance the running of the country. If governments are lucky something is left over paying its' bills and the government runs a surplus.
Please provide a citation that Portugal invest its' citizen's tax revenues in the financial markets and makes a profit from those.
>"If they did it the other way they'd have to raise the tax rates to compensate, which wouldn't go down for the politicians doing it, even if the net result is the same."
Umm no if they did it the other way around the government could additionally tax people's gains from investments, and people could save for things like their retirement at the same time.
With the exception of a few notable oil economy countries that have sovereign wealth funds, federal governments most certaily do not invest tax revenue in the market. Taxes are used to finance the running of the country. If governments are lucky something is left over paying its' bills and the government runs a surplus.
Please provide a citation that Portugal invest its' citizen's tax revenues in the financial markets and makes a profit from those.
>"If they did it the other way they'd have to raise the tax rates to compensate, which wouldn't go down for the politicians doing it, even if the net result is the same."
Umm no if they did it the other way around the government could additionally tax people's gains from investments, and people could save for things like their retirement at the same time.
He never said in the market. They do invest in infrastructure tho, which actually helps the taxpayers.
>"He never said in the market."
What "they" said was:
>"that is money the government is investing and earning a return on."
"Investing money and earning a return on it" is universally understood to mean putting your money to work in the financial markets. Your comment is disingenuous at best.
Further governments don't earn a "return" when they spend money on a stoplight or a bridge. Infrastructure requires upkeep, maintenance and eventual replacement.
It's a coast center not a profit center. If it was the latter governments would be building infrastructure like crazy and running a budget surplus. And that clearly isn't the case is it?
What "they" said was:
>"that is money the government is investing and earning a return on."
"Investing money and earning a return on it" is universally understood to mean putting your money to work in the financial markets. Your comment is disingenuous at best.
Further governments don't earn a "return" when they spend money on a stoplight or a bridge. Infrastructure requires upkeep, maintenance and eventual replacement.
It's a coast center not a profit center. If it was the latter governments would be building infrastructure like crazy and running a budget surplus. And that clearly isn't the case is it?
Investing money is certainly not universally understood as investing it in financial markets... (Per Oxford dictionary:
https://en.oxforddictionaries.com/definition/investment)
You have the right to your opinion, but changing words meaning is taking it a bit far.
You have the right to your opinion, but changing words meaning is taking it a bit far.
Except the phrase was not "investing", it was "investing money and earning a return on it." Maybe you should reread the thread.
In the context of a government or any other large institution this is most certainly understood to mean the financial markets. That is not "opinion" but rather common understanding in English language business parlance.
You have resorted to cherry picking words and trying to play semantic games. You have added exactly nothing to the conversation. In fact it's worse as resorting to "that's just your opinion" type remarks just degrades the level discourse. It's just slightly above name calling.
In the context of a government or any other large institution this is most certainly understood to mean the financial markets. That is not "opinion" but rather common understanding in English language business parlance.
You have resorted to cherry picking words and trying to play semantic games. You have added exactly nothing to the conversation. In fact it's worse as resorting to "that's just your opinion" type remarks just degrades the level discourse. It's just slightly above name calling.
You are not wrong, except it's not usually a big loan. The witholding rates are chosen so that in most cases what is withheld is close to your final tax bill.
In all countries I know of, tax withholding is not a perfect match to final tax bill, and that could amount to a no-interest loan to government like you say. Not sure if in practice that loan is unusually large in Portugal, could be.
In all countries I know of, tax withholding is not a perfect match to final tax bill, and that could amount to a no-interest loan to government like you say. Not sure if in practice that loan is unusually large in Portugal, could be.
It is sensible. First, deductibles are applied to the bands, like everywhere else. This calculation is done over your yearly salary, in March of the following year. You then pay income tax in August.
However, in order to minimize the amount due in August, the government captures an estimate of your income tax every month (before you get paid).
It is this estimate that is designed to be simple, and applies deductibles to the whole salary. There's no harm: If it happens to capture too much, you'll see your money back next August.
However, in order to minimize the amount due in August, the government captures an estimate of your income tax every month (before you get paid).
It is this estimate that is designed to be simple, and applies deductibles to the whole salary. There's no harm: If it happens to capture too much, you'll see your money back next August.
I still don’t understand the benefit over a progressive system.
Under the progressive system, there are no surprises or delays, what I paid that month is exactly what I owe.
Like another poster said, effectively an interest free loan to the government from taxpayers.
What am I missing?
Under the progressive system, there are no surprises or delays, what I paid that month is exactly what I owe.
Like another poster said, effectively an interest free loan to the government from taxpayers.
What am I missing?
> I still don’t understand the benefit over a progressive system.
Simplicity and personal data protection. In order to capture tax in advance with perfect estimates, employers would need to know your total income and deductible expenses. With the simplistic system, they just need to know how much they're paying you.
Simplicity and personal data protection. In order to capture tax in advance with perfect estimates, employers would need to know your total income and deductible expenses. With the simplistic system, they just need to know how much they're paying you.
Wait, what? Are you saying that the top rate in their graduated income tax system is applied to someone's entire income, not just the amount above the lower cutoff point for the highest band?
If so, that seems literally insane to me. Why wouldn't Portugal fix this?
If so, that seems literally insane to me. Why wouldn't Portugal fix this?
An approximation of the taxes are deducted from the monthly pay, and the adjustment to the final tax is done annually, taking in account all deductions.
Yearly final taxes are not applied to the entire income, only to the amount in the band as you mentioned.
The approximate monthly taxes are applied to the whole monthly income.
Because being reasonable and rational won't take you far in Portugal. Trust me, I'm Portuguese.
Exactly my thoughts... this is complete fake news and complete propaganda from the Government Coalition (all Left Wing).
Health system is completely broken the public Hospitals don't have enough resources or money to threat the patients with dignity, people still live with very low salaries and high prices of goods, The industry is still very weak unlike its mentioned in the article etc.. etc...
Honestly seeing these articles makes me really sad.
Health system is completely broken the public Hospitals don't have enough resources or money to threat the patients with dignity, people still live with very low salaries and high prices of goods, The industry is still very weak unlike its mentioned in the article etc.. etc...
Honestly seeing these articles makes me really sad.
>Health system is completely broken
No need to be so dramatic. Compared with countries with a similar economy, our system is objectively very good. Independent reports will back me up.
No need to be so dramatic. Compared with countries with a similar economy, our system is objectively very good. Independent reports will back me up.
There are plenty of reasons to be dramatic. The portuguese national health service debt blew up since the current government entered office due to their expenditure captivation push in a stark contrast with the debt reduction push enforced by the austerity program. Consequently some health services fail even to keep skeleton crews of medical teams to remain operational. Medical suppliers are complaining about the goverent's increased payment delays and nurse unions are on months-long strike demanding additional staff to mitigate their overwork problem and also that the current government actually puts to practice the salary increases he announced some months ago.
The part about balancing the budget is true, though. We have the lowest deficit in many years and (supposedly) on track to surplus in 2020. This is undeniably good news for long-term sustainability.
Austerity doesn't mean high taxes. Austerity means cutting social programs and public investment.
This is incorrect.
Austerity can involve tax increases, spending cuts, or combinations of the two. It’s not limited simply to spending cuts.
That said, it very much matters what “kind” of austerity one engages in, as research indicates that tax increases and spending cuts have different respective effects on an economy.
Austerity can involve tax increases, spending cuts, or combinations of the two. It’s not limited simply to spending cuts.
That said, it very much matters what “kind” of austerity one engages in, as research indicates that tax increases and spending cuts have different respective effects on an economy.
Like most economic principles, there’s a big gap between theory and practice.
In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation - i.e. economic enclosure, debt peonage, and asset sweating - for everyone else. Sometimes that includes tax increases, but if som it usually means indirect taxation.
Austerity is purely ideological. Even the IMF acknowledges that recent Austerity regimes have underperformed expectations while examples of stimulus spending have had the opposite effect.
In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation - i.e. economic enclosure, debt peonage, and asset sweating - for everyone else. Sometimes that includes tax increases, but if som it usually means indirect taxation.
Austerity is purely ideological. Even the IMF acknowledges that recent Austerity regimes have underperformed expectations while examples of stimulus spending have had the opposite effect.
> In reality Austerity is defined by tax breaks for the very rich, combined with spending cuts and privatisation
This is objectively false, and a poor atempt at forcing a particular spin on a very objective definition.
Looking at Portugal, the bailout program enforced tax increases exclusively on the middle and upper class, along with publix sector workers who are by far more priviledged than private sector workers. For example, the bailout program saw the introduction of a new tax bracket for the richest taxpayers which forced a 53% income tax rate.
And also privatizations are implemented to avoid additional austerity pushes by providing the government with one-off sources of free cash thus avoiding further spending cuts or tax increases. Therefore, they are in fact an alternative to austerity, not a consequence.
> Austerity is purely ideological.
This statement is so mind-numbingly wrong that it boggles the mind how anyone in this point in time could be so disingenuous or clueless to keep parroting this silliness.
Let's look at Portugal, who doubled its sovereign debt fron 60% of the nation's GDP to over 120% in about 5 years prior to any mention of austerity, and did so by piling a string of yearly deficits of over 10% including a structural deficit of around 3%.
If your state is so dependent on overspending that it needs loans after loans to keep working and pay up salaries, who in their right mind will argue that they don't desperately need to cut spending and/or raise taxes to avoid going bankrupt or even to keep functioning?
If austerity was actually "purely ideological", how exactly would it be possible for Portugal to keep their 10% spending deficits?
This is objectively false, and a poor atempt at forcing a particular spin on a very objective definition.
Looking at Portugal, the bailout program enforced tax increases exclusively on the middle and upper class, along with publix sector workers who are by far more priviledged than private sector workers. For example, the bailout program saw the introduction of a new tax bracket for the richest taxpayers which forced a 53% income tax rate.
And also privatizations are implemented to avoid additional austerity pushes by providing the government with one-off sources of free cash thus avoiding further spending cuts or tax increases. Therefore, they are in fact an alternative to austerity, not a consequence.
> Austerity is purely ideological.
This statement is so mind-numbingly wrong that it boggles the mind how anyone in this point in time could be so disingenuous or clueless to keep parroting this silliness.
Let's look at Portugal, who doubled its sovereign debt fron 60% of the nation's GDP to over 120% in about 5 years prior to any mention of austerity, and did so by piling a string of yearly deficits of over 10% including a structural deficit of around 3%.
If your state is so dependent on overspending that it needs loans after loans to keep working and pay up salaries, who in their right mind will argue that they don't desperately need to cut spending and/or raise taxes to avoid going bankrupt or even to keep functioning?
If austerity was actually "purely ideological", how exactly would it be possible for Portugal to keep their 10% spending deficits?
What do you mean by "the very rich"? Rich by income, assets or consumption? Currently, lots of governments overtax income and sometimes assets, while undertaxing consumption. They tax the likes of Bill Gates and Warren Buffett a lot (right up until the point when they-- or perhaps their descendents-- actively donate their assets to some charitable trust or another) while leaving the crazy luxury spending of Larry Ellison and others like him largely untaxed! This is crazy, and is what a move to consumption taxes (what you call "indirect taxes" in your parent comment) helps fix.
> Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both.
https://en.wikipedia.org/wiki/Austerity
Those who favor austerity will say that the austerity laid groundwork for Portugal's success, those who have opposing view say that it only helped.
https://en.wikipedia.org/wiki/Austerity
Those who favor austerity will say that the austerity laid groundwork for Portugal's success, those who have opposing view say that it only helped.
"Austerity" can take many forms too. It's not something you should support as a black/white thing. There's a ton of context involved, including why the state needs austerity and also what long term goals are involved.
As far as I'm concerned if a government spent and loaned recklessly for decades and the only solution is to make temporary cuts so the government can go right back to spending (ie, no long term changes to government culture, risk management, and fiscal responsibility were made) then while it's still "austerity", it's not necessarily a very useful one.
Additionally, despite all of the FUD about "austerity" measures the average nation state across the entire western world (and in Asia too, minus Singapore) have exploded in size over the last few decades.
Most of these "austerity" programs are a tiny, temporary, sliver relative to the massive growth in scale of the administrative state.
As far as I'm concerned if a government spent and loaned recklessly for decades and the only solution is to make temporary cuts so the government can go right back to spending (ie, no long term changes to government culture, risk management, and fiscal responsibility were made) then while it's still "austerity", it's not necessarily a very useful one.
Additionally, despite all of the FUD about "austerity" measures the average nation state across the entire western world (and in Asia too, minus Singapore) have exploded in size over the last few decades.
Most of these "austerity" programs are a tiny, temporary, sliver relative to the massive growth in scale of the administrative state.
"Social programs and public investment" are hardly the only things a government can cut. This is just a heavily biased counter-narrative used to protest against them. They may be the low hanging fruit given the entrenched interests which protect corporate welfare projects, tax breaks to "friends" of government, defence spending, foreign aid, the countless non-social agencies within government, etc, etc, etc.
Nor can you point to some half-hearted "austerity" where there was no change in the gov culture which brought about the unsustainable spending, nor factoring in the complete scale on which the previous government spent recklessly for which austerity is required in some countries vs others (and size of GDP, dependency on public investment/social programs, etc).
Even HN isn't immune to political flamewars.
Nor can you point to some half-hearted "austerity" where there was no change in the gov culture which brought about the unsustainable spending, nor factoring in the complete scale on which the previous government spent recklessly for which austerity is required in some countries vs others (and size of GDP, dependency on public investment/social programs, etc).
Even HN isn't immune to political flamewars.
>cutting social programs
When has that ever happend?
When has that ever happend?
You're down voted, but this is no joke. Social programs are very often hyper-pragmatic, overly specific bandaids that effectively pile on each other indefinitely. Cutting social programs essentially only reliably occurs at bankruptcy or collapse, it will almost never occur as the result of the democratic process.
People do not run successful campaigns on the basis of displacing hundreds of San Francisco families, for example, regardless of whether or not those families are rightfully entitled to their housing or not. Once people have come to rely on something, it will upend their livelihood to remove it, and that is not something most people are comfortable voting for.
If you've ever worked in a government job, you can compare the state of the bureaucracy now to previous versions of the texts, and see that they only ever grow and compound on themselves.
People do not run successful campaigns on the basis of displacing hundreds of San Francisco families, for example, regardless of whether or not those families are rightfully entitled to their housing or not. Once people have come to rely on something, it will upend their livelihood to remove it, and that is not something most people are comfortable voting for.
If you've ever worked in a government job, you can compare the state of the bureaucracy now to previous versions of the texts, and see that they only ever grow and compound on themselves.
They’re being downvoted because social programs were cut as part of austerity measures in some European states.
jayalpha(2)
I looked at a job in Portugal an the taxes where less than the UK - this is for a 100,000 euro salary no less.
> this is for a 100,000 euro salary no less.
In Portugal the income tax rate for a €100k gross salary is around 50%.
Then of course there are other forms of taxation, such as a gas tax of over 100%, a rent tax of around 30% and of course a 23% VAT.
In Portugal the income tax rate for a €100k gross salary is around 50%.
Then of course there are other forms of taxation, such as a gas tax of over 100%, a rent tax of around 30% and of course a 23% VAT.
South Europe complaining about high tax is like Americans complaining about expensive petrol.
That's only really true for income taxes; we're in the top 10 for VAT, way above average for gas taxes, high energy taxes, etc. If you look at the net personal average tax rate, we're close to Norway, Luxembourg and France, except when you live with less than €10k/year, every marginal euro taken for taxes hurts quite a bit more.
When one starts to lump unrelated taxes atop of income tax, it's a sure sign it's not that dramatic.
VAT in Norway is 25%, petrol yesterday was €1.6/L (and we're a major oil producing nation). A car here is probably 1.8x of same model sold in Portugal, purely due to the taxes. About 35% of my (unremarkable) paycheck effectively goes towards income tax, after all tax breaks are factored in. If you are in top tax bracket, you'd be easily paying 45% effective income tax, with nominal over 50%.
Do we get fair return for the money? Most people here seem to think so. Can smaller tax on over smaller base income be felt disproportionately? You have a point there. However Portugal is a first world nation, and this level of civics, infrastructure, education and healthcare does require substantial money for upkeep. There is no good way around this, but hopefully you get a better deal on that due to economies of scale than if you had to provide all that for yourself on your own.
VAT in Norway is 25%, petrol yesterday was €1.6/L (and we're a major oil producing nation). A car here is probably 1.8x of same model sold in Portugal, purely due to the taxes. About 35% of my (unremarkable) paycheck effectively goes towards income tax, after all tax breaks are factored in. If you are in top tax bracket, you'd be easily paying 45% effective income tax, with nominal over 50%.
Do we get fair return for the money? Most people here seem to think so. Can smaller tax on over smaller base income be felt disproportionately? You have a point there. However Portugal is a first world nation, and this level of civics, infrastructure, education and healthcare does require substantial money for upkeep. There is no good way around this, but hopefully you get a better deal on that due to economies of scale than if you had to provide all that for yourself on your own.
You seem to be confusing me with someone who wants low taxes. I do not. I just disagree that we already have low taxes, as you implied with your comparison.
Norway is an outlier even among rich countries. Having lower taxes than Norway does not mean taxes are low.
Norway is an outlier even among rich countries. Having lower taxes than Norway does not mean taxes are low.
The article refutes its own premise:
Net spending cuts, rather than stimulus: “Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.”
Growth is slowing, minimum wage is lowest in the eurozone: “Growth is cooling from 2.7 percent last year, as Mr. Costa keeps public investment at a 40-year low to cut the deficit. While he restored public sector salaries to previous levels, they have barely budged since before the crisis. And the minimum wage of 580 euros a month, although up, remains one of the lowest in the eurozone.”
Gov cutting taxes as well: “To cement the growth cycle, the government is putting what little investment it makes into targeted initiatives like tax breaks for foreign companies and training for the unemployed.”
Net spending cuts, rather than stimulus: “Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.”
Growth is slowing, minimum wage is lowest in the eurozone: “Growth is cooling from 2.7 percent last year, as Mr. Costa keeps public investment at a 40-year low to cut the deficit. While he restored public sector salaries to previous levels, they have barely budged since before the crisis. And the minimum wage of 580 euros a month, although up, remains one of the lowest in the eurozone.”
Gov cutting taxes as well: “To cement the growth cycle, the government is putting what little investment it makes into targeted initiatives like tax breaks for foreign companies and training for the unemployed.”
Well, the article is just stating the truth, that is the deficit is going down mainly because public investment in that last few years is being almost null (mainly in infrastructure) and now Portugal can go to the markets after seeing removed the "trash" title from the public debt. (Not) The only problem is that a big part of Portugal's infrastructure is starting to be outdated and should have have been renewed.
The actual government is mainly taking advantage of tourism growth and the stimulus from the Central European Bank (https://www.ft.com/content/7514a734-6fbe-11e8-92d3-6c13e5c92...) and is selling the recent growth as being a consequence from their measures of lowering taxes (which is not exactly true, also - https://www.pordata.pt/Portugal/Receitas+fiscais+do+Estado+t..., and yeah I know that if more people have a job more the total amount of taxes collected is higher) and others.
Being a Portuguese living in Portugal, it is obvious that the economy is improving but that improvement is not sustainable IMHO.
The actual government is mainly taking advantage of tourism growth and the stimulus from the Central European Bank (https://www.ft.com/content/7514a734-6fbe-11e8-92d3-6c13e5c92...) and is selling the recent growth as being a consequence from their measures of lowering taxes (which is not exactly true, also - https://www.pordata.pt/Portugal/Receitas+fiscais+do+Estado+t..., and yeah I know that if more people have a job more the total amount of taxes collected is higher) and others.
Being a Portuguese living in Portugal, it is obvious that the economy is improving but that improvement is not sustainable IMHO.
> The only problem is that a big part of Portugal's infrastructure is starting to be outdated and should have have been renewed.
Meh, you should see the sad state of affairs in the US.
Meh, you should see the sad state of affairs in the US.
That's a bit overoptimistic...the real estate prices in Portugal are CRAZY because of the tourism boom + shared economy, the taxes on food and especial gasoline are really high, so the Portuguese go to Spain(a country that's richer) to shop, as it's cheaper...salaries are a bit of a joke, like making more than 1000EUR is to be considered lucky.
It's true that the "Contraption" in the government is working better than Greece or Italy, but still...
It's true that the "Contraption" in the government is working better than Greece or Italy, but still...
Portugal != Lisbon. You can get reasonable prices everywhere else.
Too bad they don't get reasonable jobs everywhere else, or a job at all.
Not true.
While Lisbon has a big chunk of the jobs, other cities also have plenty of opportunities. YMMV of course.
I work remotely, so I’m outside the local job market, but I still get plenty of offers for local companies in my mid sized city.
While Lisbon has a big chunk of the jobs, other cities also have plenty of opportunities. YMMV of course.
I work remotely, so I’m outside the local job market, but I still get plenty of offers for local companies in my mid sized city.
The premise of the article seems to be: "In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth."
The thing is, less than 3 years is absolutely not enough time to draw any conclusions. Much of the improved results are explainable by an uptick in tourism, and low interest rates, therefore attributing it to this government's policies seems premature. In truth, no true changes are being made. Taxes remain high (which is not necessarily a bad thing in itself), public spending remains inefficient in some areas. No actual, really meaningful reforms have been made, no truly new ideas. The old "systemic" problems, if you will, remain. Corruption remains an issue. Beaurocracy has been somewhat improved, but still needs lots of changes. The judiciary remains slow. Etc, etc.
The thing is, less than 3 years is absolutely not enough time to draw any conclusions. Much of the improved results are explainable by an uptick in tourism, and low interest rates, therefore attributing it to this government's policies seems premature. In truth, no true changes are being made. Taxes remain high (which is not necessarily a bad thing in itself), public spending remains inefficient in some areas. No actual, really meaningful reforms have been made, no truly new ideas. The old "systemic" problems, if you will, remain. Corruption remains an issue. Beaurocracy has been somewhat improved, but still needs lots of changes. The judiciary remains slow. Etc, etc.
Is it true that in Portugal when you issue a receipt as a shop (e.g. when some person buys something and you issue a receipt for the client) the client gets automatically a number for a national lottery from the machine which is directly connected to some central government's lottery & tax department (kind of controversial, hehe)?
A portuguese colleague told me a few years ago that this was one of the measures taken by the government to lower tax evasion (and I thought "cool, why not") but I don't really know if that's true nor if it's still used nowadays.
A portuguese colleague told me a few years ago that this was one of the measures taken by the government to lower tax evasion (and I thought "cool, why not") but I don't really know if that's true nor if it's still used nowadays.
It is true. The prize used to be a car, now it is government bonds.
It is fully automatic. You just tell the cashier your tax id number, and you are set. No need to keep the receipt.
It is fully automatic. You just tell the cashier your tax id number, and you are set. No need to keep the receipt.
Thx!!!
Yes, I now remember my colleague mentioning a car :)
But well, I wouldn't have enough faith in XXX cashiers. I'd want a hard receipt (confirmation of submission on paper with some kind of checksum which I could confirm online if I wanted to).
Yes, I now remember my colleague mentioning a car :)
But well, I wouldn't have enough faith in XXX cashiers. I'd want a hard receipt (confirmation of submission on paper with some kind of checksum which I could confirm online if I wanted to).
You do get a paper receipt, which is just your normal sales receipt (which usually I just throw away immediately).
You can also check all your receipts online, on the Finance Ministry website.
You can also check all your receipts online, on the Finance Ministry website.
So you have a centralized database that tracks all purchases country-wide? Maybe Portugal government could compete with Google/FB providing personalized ads...
Screw the car. I want my receipts downloadable!
Portugal is moving to digital receipts for individuals in 2019. If you give the cashier your VAT ID, no paper receipt is produced, and you may download the receipt from your IRS dashboard.
Anonymous paper receipts will remain valid, indefinitely (i.e. they are not being phased out).
Anonymous paper receipts will remain valid, indefinitely (i.e. they are not being phased out).
Sounds perfect.
I'm confused, what is the purpose of the automatic lottery ticket tied to a sales receipt?
I've spent time in Portugal and was never asked if I would like to participate. Is it only certain types of store or receipts?
I've spent time in Portugal and was never asked if I would like to participate. Is it only certain types of store or receipts?
To combat tax evasion/parallel economy. The rationale goes: People want to get deductions and maybe even win a car, so they demand a receipt from business. That means said business can't keep that transaction off the books.
"Is it only certain types of store or receipts?"
Every business.
"Is it only certain types of store or receipts?"
Every business.
I would take this news with caution and let's see how long this boom lasts.
This being said, I don't live in Europe but I speak Portuguese. I plan to buy an apartment in Europe. Lisbon was always a serious consideration. But prices are through the roof. Golden Visa did not help either. I am also skeptical on having too much money invested in real estate in a, comparably, poor country. Real Estate taxes are a bargain compared with some US states. This could change (outch!). But basically they priced me out already. Overtourism does not help either.
This being said, I don't live in Europe but I speak Portuguese. I plan to buy an apartment in Europe. Lisbon was always a serious consideration. But prices are through the roof. Golden Visa did not help either. I am also skeptical on having too much money invested in real estate in a, comparably, poor country. Real Estate taxes are a bargain compared with some US states. This could change (outch!). But basically they priced me out already. Overtourism does not help either.
I remember when Brazil was "taking off", president Lula was called "the man" by Mr. Obama, Eike Batista was heralded the modern Brazilian industrialist and the seemingly limitless "pre-salt reserves" was going to turn the country into a leading oil producer.
Since then, we've learned this short-lived economic boom was really just attributable to outsized Chinese demand for commodities which went away as quickly as it came about. The Workers' Party spent its ~16 years in power fostering the centuries old crony capitalism that has fundamentally defined that South American nation since it was a Portuguese colony, throughout its 19th century monarchy, its 20th century republic, the congress-appointed military regime in power between 1964 and 1988 and all of the democratically elected presidencies since.
Eike Baptista was indicted and convicted for fraud and embezzlement, his companies sold for pennies on the dollar.
Lula's anointed political successor, Dilma Rousseff, was ridiculed, impeached and couldn't even win a senate seat in the last elections.
Lula himself was indicted, tried and convicted, along with hundreds of other politicians – not to mention the countless more the country hasn't yet gotten around to convict.
The populace radicalized to the point of destroying families and friendships before fatally electing a bizarro president – when the alternative was keeping the Workers' Party in power for another 4 or 8 years, Brazilians opted instead for a diabolical Faustian-Orwellian blend.
I'd love to hear Obama's take on how wrong he was. And I caution others to resist the temptation of extrapolating from a handful of moderately successful economic years, thinking their countries have fundamentally changed overnight.
You know what causes extreme changes overnight? A revolution. Brazil hasn't experienced one, and I doubt Portugal has.
Since then, we've learned this short-lived economic boom was really just attributable to outsized Chinese demand for commodities which went away as quickly as it came about. The Workers' Party spent its ~16 years in power fostering the centuries old crony capitalism that has fundamentally defined that South American nation since it was a Portuguese colony, throughout its 19th century monarchy, its 20th century republic, the congress-appointed military regime in power between 1964 and 1988 and all of the democratically elected presidencies since.
Eike Baptista was indicted and convicted for fraud and embezzlement, his companies sold for pennies on the dollar.
Lula's anointed political successor, Dilma Rousseff, was ridiculed, impeached and couldn't even win a senate seat in the last elections.
Lula himself was indicted, tried and convicted, along with hundreds of other politicians – not to mention the countless more the country hasn't yet gotten around to convict.
The populace radicalized to the point of destroying families and friendships before fatally electing a bizarro president – when the alternative was keeping the Workers' Party in power for another 4 or 8 years, Brazilians opted instead for a diabolical Faustian-Orwellian blend.
I'd love to hear Obama's take on how wrong he was. And I caution others to resist the temptation of extrapolating from a handful of moderately successful economic years, thinking their countries have fundamentally changed overnight.
You know what causes extreme changes overnight? A revolution. Brazil hasn't experienced one, and I doubt Portugal has.
The article is just a fluff piece, stating some facts but sugarcoating their full meaning.
Pretty much everyone in Portugal ( other than the usual ones ) rolls their eyes when the read stuff like this.
Although not at the same level of Brazil, politicians in Portugal do the same thing depending of how arrogant they are in not getting caught. It's full of bottom feeders trying to get some cushy position for themselves, I think it's our main problem right now, the sheer amount of money sucking parasites from top to bottom.
Pretty much everyone in Portugal ( other than the usual ones ) rolls their eyes when the read stuff like this.
Although not at the same level of Brazil, politicians in Portugal do the same thing depending of how arrogant they are in not getting caught. It's full of bottom feeders trying to get some cushy position for themselves, I think it's our main problem right now, the sheer amount of money sucking parasites from top to bottom.
Interesting fact: you can become a resident (and then citizen) under the Golden Visa program by buying 350-500k EUR of property in Portugal.
(Which is incidentally approximately free if you have access to capital, since your returns from airbnbing the right property, net of management costs, will exceed the mortgage. There's risk, obviously, that the rental market could change or real estate value could drop, but it's a pretty good deal. Each EUR 350-500k includes spouse and dependents, so it's up to 6 people. Very popular with people from China right now.)
Like many libertarian leaning people I used to be a fan of "Austrian" type economics. In the past few years as a result of watching both the recovery and the cryptocurrency experiment I've changed my mind. I now think that Keynes was at least largely correct in the essentials.
I think two things trip people up. One is blind extrapolation of good personal and business financial advice onto macroeconomics. It's clear to me that macroeconomic systems seem to have their own rules. Secondly I think some of the disdain for Keynesian ideas comes from dislike of the power concentration inherent in central banks.
The latter is still IMHO a valid criticism. There might be different more transparent or decentralized ways of achieving what central banks achieve. But the overall history of macroeconomics seems to fall on the side of Keynes and his successors.
I think two things trip people up. One is blind extrapolation of good personal and business financial advice onto macroeconomics. It's clear to me that macroeconomic systems seem to have their own rules. Secondly I think some of the disdain for Keynesian ideas comes from dislike of the power concentration inherent in central banks.
The latter is still IMHO a valid criticism. There might be different more transparent or decentralized ways of achieving what central banks achieve. But the overall history of macroeconomics seems to fall on the side of Keynes and his successors.
The biggest problem with Keynes is a psychological one.
It makes sense to spend more during tough times, but it's a career suicide for a politician to suggest tightening the purse strings when the times are good.
In essence, modern Keynesian politics oscillate between "The times are bad, we have to spend more", and "The times are good, what do you mean we can't afford to spend more".
It makes sense to spend more during tough times, but it's a career suicide for a politician to suggest tightening the purse strings when the times are good.
In essence, modern Keynesian politics oscillate between "The times are bad, we have to spend more", and "The times are good, what do you mean we can't afford to spend more".
> it's a career suicide for a politician to suggest tightening the purse strings when the times are good
Not necessarily. In 2014, California Proposition 2 (originally 44) passed with over a 2-to-1 margin [0], reforming and expanding the "rainy day fund" created by 2004's Proposition 58. California now has almost $30B in surplus [1].
[0] https://ballotpedia.org/California_Proposition_2,_Rainy_Day_...
[1] https://www.politifact.com/california/statements/2018/dec/18...
Not necessarily. In 2014, California Proposition 2 (originally 44) passed with over a 2-to-1 margin [0], reforming and expanding the "rainy day fund" created by 2004's Proposition 58. California now has almost $30B in surplus [1].
[0] https://ballotpedia.org/California_Proposition_2,_Rainy_Day_...
[1] https://www.politifact.com/california/statements/2018/dec/18...
Still beats tightening the purse strings during recession.
The shitty metaphor of tightening your belt at home extended to government has done a lot of damage, and that metaphor is used by politicians to look "responsible" to people who don't understand.
Unless you really go whole-hog on the metaphor: if the son sells apples to the dad to make a living, and the dad decides to cut back on apple buying, then the son loses his income. Then the son can't buy the cucumbers the dad was selling him, and the dad is even worse off. There is no-one outside the house.
Unless you really go whole-hog on the metaphor: if the son sells apples to the dad to make a living, and the dad decides to cut back on apple buying, then the son loses his income. Then the son can't buy the cucumbers the dad was selling him, and the dad is even worse off. There is no-one outside the house.
There seem to be many politicians including the US Republican Party that just lie. They implement aggressively Keynesian or heavily deficit spending based policies while toting a "fiscal responsibility" line and sounding like advocates of austerity.
Republicans are not Keynesian; they push for tax cuts on the rich at all times, no matter the economic conditions. They also do not support investment that would seriously help unemployment in dire times (eg. Great Recession).
If there are no consequences to lying and lying gets you power and influence you are at a disadvantage to not lie.
I think there are consequences, but unfortunately they are more subtile, long term, and society wide rather than immediate and felt directly by the liars. Lies told by politicians erode the overall trust basis of society over time, leading in the end to major social breakdowns or even civilizational collapse.
Wrong. Lying is always and everywhere immoral (yes, even when it is understandable and forgivable such as the classic Nazi thought experiment). Not only is it intrinsically immoral as it perverts the functions of speech and communication, but it has long term consequences like the undermining of trust and social relations and the further corruption of the liar's character and the scandalous contribution to a degenerate ethos in society where truth is treated as selectively important. Our present day culture of sophistry and bullshit with its cavalier attitude toward the truth is what you can expect.
Mental reservation, on the other hand, is sometimes justified.
Mental reservation, on the other hand, is sometimes justified.
> Our present day culture of sophistry and bullshit with its cavalier attitude toward the truth is what you can expect.
It's too bad religion is so obsessed with not being gay as the most important of all moral issues. Our culture of lying is a real moral crisis with real consequences. I have never once heard any religious figure take a strong public stand against it. If anything most seem willing to lie in service of their own causes.
It's too bad religion is so obsessed with not being gay as the most important of all moral issues. Our culture of lying is a real moral crisis with real consequences. I have never once heard any religious figure take a strong public stand against it. If anything most seem willing to lie in service of their own causes.
> One is blind extrapolation of good personal and business financial advice onto macroeconomics.
This is the main misconception that people have.
Microeconomics deals with open systems, macroeconomics deals with closed (or mostly closed system).
In personal economics, penny saved can be penny earned. In macroeconomics penny saved is penny that someone else does not earn. Fiscal multipliers affect how government spending or saving actually affects the government debt. Sometimes spending may actually increase tax returns. https://en.wikipedia.org/wiki/Fiscal_multiplier
Another issue is that while creative destruction is good thing in business, people are not very elastic. They, their families will be permanently damaged if they are long without jobs.
This is the main misconception that people have.
Microeconomics deals with open systems, macroeconomics deals with closed (or mostly closed system).
In personal economics, penny saved can be penny earned. In macroeconomics penny saved is penny that someone else does not earn. Fiscal multipliers affect how government spending or saving actually affects the government debt. Sometimes spending may actually increase tax returns. https://en.wikipedia.org/wiki/Fiscal_multiplier
Another issue is that while creative destruction is good thing in business, people are not very elastic. They, their families will be permanently damaged if they are long without jobs.
Power concentration is not inherent to central banks; it's inherent to government-provided money of any sort. (And as David Graeber's work on "Debt" suggests, government money is in turn fundamental and closely related to other basic functions of government, including dispute resolution! The sorts of exchanges for which you need money the most are also the exchanges where the dispute-resolution function provided by government courts is important.) Even gold/silver currency never actually solved this, because people never really used well-defined amounts of pure gold/silver as money; they use either paper currency or coinage, either of which were quite frequently debased.
And because the supply of gold and silver is only weakly correlated with what the economy needs to keep nominal incomes on a predictable path (which mitigates market frictions and delivers a smoother-functioning economy, for standard "Keynesian" reasons), there is no well-established solution to this issue; in practice, we've settled on having centralized issuance of money, and having it managed by an independent authority, with strong, constitutional-level guarantees to that effect. For essentially historical reasons, we like to call that authority a "central bank".
And because the supply of gold and silver is only weakly correlated with what the economy needs to keep nominal incomes on a predictable path (which mitigates market frictions and delivers a smoother-functioning economy, for standard "Keynesian" reasons), there is no well-established solution to this issue; in practice, we've settled on having centralized issuance of money, and having it managed by an independent authority, with strong, constitutional-level guarantees to that effect. For essentially historical reasons, we like to call that authority a "central bank".
I don't even think cryptocurrency can solve this. It's easier to store a key than a ton of gold, but without the dispute resolution and policing functions of government you are still utterly screwed if your coin is stolen or if you fall for a scam. People also still tend to use banks (e.g. coinbase) due to the convenience, security, and value adds they provide.
I think the Austrians have a fair point that overexpansion of credit during booms is a key cause of recessions. However, the medicine they prescribe once a recession occurs, namely allowing the money supply to contract and letting many businesses fail, is not only inhumane but less effective at encouraging recovery than the Keynesian approach.
I lean toward the view, espoused by modern liberal economists like Paul Krugman, that goverments should tighten spending and run surpluses during booms, so they have some cushion to increase spending during downturns. This tends to run counter to human psychology, as during a boom, people have trouble imagining it coming to an end. And politics tends to interfere with good economics; thus we have the spectacle of the Republican Congress passing a major tax cut when the economy was already heating up. (I'm actually sympathetic to the argument that the corporate income tax rate was too high and needed to be cut, but other taxes should have been enacted to make the whole package revenue-neutral.)
I lean toward the view, espoused by modern liberal economists like Paul Krugman, that goverments should tighten spending and run surpluses during booms, so they have some cushion to increase spending during downturns. This tends to run counter to human psychology, as during a boom, people have trouble imagining it coming to an end. And politics tends to interfere with good economics; thus we have the spectacle of the Republican Congress passing a major tax cut when the economy was already heating up. (I'm actually sympathetic to the argument that the corporate income tax rate was too high and needed to be cut, but other taxes should have been enacted to make the whole package revenue-neutral.)
"I think the Austrians have a fair point that overexpansion of credit during booms is a key cause of recessions."
No, this is actually their greatest weakness. Mises biggest joke is: “Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.”
It is a tautology. A joke. Idiotology.
1. Yes, every boom ends in a bust. I must, because you can't predict the end of a cycle and always have to pre-finance production. There is an analysis, the tallest skyscraper always get's build before the bust. Obviously.
2. Yes, every credit expansion creates a boom and every boom creates a credit expansion. They go hand in hand. Which boom did NOT GO with a credit expansion? It has to be.
No, this is actually their greatest weakness. Mises biggest joke is: “Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.”
It is a tautology. A joke. Idiotology.
1. Yes, every boom ends in a bust. I must, because you can't predict the end of a cycle and always have to pre-finance production. There is an analysis, the tallest skyscraper always get's build before the bust. Obviously.
2. Yes, every credit expansion creates a boom and every boom creates a credit expansion. They go hand in hand. Which boom did NOT GO with a credit expansion? It has to be.
> However, the medicine they prescribe once a recession occurs, namely allowing the money supply to contract and letting many businesses fail, is not only inhumane but less effective at encouraging recovery than the Keynesian approach.
I think this is a pretty fair criticism of Austrian solutions. But like telling a drug addict that he must get clean, there is no way out of it other than to get clean. Some drug addicts can quit cold turkey (which is what Austrians recommend), others need to switch to a different less addictive drug (like Methadone etc) until they get completely clean.
I believe (and has been my belief for past few years) that Cryptocurrencies will play a major role this recession, acting as 'methadone'.
How? I will explain it from two different point of views:
- Krugman-Keynesians: Recessions are caused by liquidity crunch and liquidity must be pumped into the market by the fed and the govt in order to clear the market. Govt should also absorb excess unemployment by hiring people and shut down those programs when the market recovers and private sector can absorb the labor. These Keynesians are also great fan of artificially created liquidity (to get out of the liquidity trap) by Capitol Hill Babysitting Co-op [1], Alternative currencies issued by various cities during the Great Depression [2].
My claim is that in the next recession in the 'liquidity crunch', people will find it easier to switch to Cryptocurrencies and tokens, perhaps even issuing it themselves on local level. Bitcoin has a problem with having a fixed money supply, but at least the first switch from Fiat to crypto would happen without issues, but for the next to next recession, bitcoin would represent the same liquidity trap as fiat does, in fact worse. Due to this, many people will dump the dollar, but it also would ease up the liquidity crunch of the dollar economy. Therefore bitcoin and fiat economies being headlocked in a duel, until people decide to come back to the dollar again.
- Austrians: The single most important thing which needs to happen (and generally does not happen in recessions) is that the real wages must move downwards (fast enough). Govts try to solve a recession by pumping more credit and money into the markets, esp to keep people employed and wages up, but it doesn't really happen. Eventually some real wages move down enough and some inflation of the assets which starts a new bubble causes the market to 'recover'.
My claim is that in the next recession people will switch to more inflation-proof cryptocurrencies for salary but for a 'lower real wage' (potentially because they will either perceive crypto to be better medium or it would be the only expanding economy or/because dollar is losing value compared to crypto). This allows markets to get cleared faster and recovery to happen. But more of this effect results in an avalanche effect with people fleeing from dollar jobs to bitcoin based jobs and faster clearing of the markets.
1. https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
2. https://www.armstrongeconomics.com/history/europes-economic-...
I think this is a pretty fair criticism of Austrian solutions. But like telling a drug addict that he must get clean, there is no way out of it other than to get clean. Some drug addicts can quit cold turkey (which is what Austrians recommend), others need to switch to a different less addictive drug (like Methadone etc) until they get completely clean.
I believe (and has been my belief for past few years) that Cryptocurrencies will play a major role this recession, acting as 'methadone'.
How? I will explain it from two different point of views:
- Krugman-Keynesians: Recessions are caused by liquidity crunch and liquidity must be pumped into the market by the fed and the govt in order to clear the market. Govt should also absorb excess unemployment by hiring people and shut down those programs when the market recovers and private sector can absorb the labor. These Keynesians are also great fan of artificially created liquidity (to get out of the liquidity trap) by Capitol Hill Babysitting Co-op [1], Alternative currencies issued by various cities during the Great Depression [2].
My claim is that in the next recession in the 'liquidity crunch', people will find it easier to switch to Cryptocurrencies and tokens, perhaps even issuing it themselves on local level. Bitcoin has a problem with having a fixed money supply, but at least the first switch from Fiat to crypto would happen without issues, but for the next to next recession, bitcoin would represent the same liquidity trap as fiat does, in fact worse. Due to this, many people will dump the dollar, but it also would ease up the liquidity crunch of the dollar economy. Therefore bitcoin and fiat economies being headlocked in a duel, until people decide to come back to the dollar again.
- Austrians: The single most important thing which needs to happen (and generally does not happen in recessions) is that the real wages must move downwards (fast enough). Govts try to solve a recession by pumping more credit and money into the markets, esp to keep people employed and wages up, but it doesn't really happen. Eventually some real wages move down enough and some inflation of the assets which starts a new bubble causes the market to 'recover'.
My claim is that in the next recession people will switch to more inflation-proof cryptocurrencies for salary but for a 'lower real wage' (potentially because they will either perceive crypto to be better medium or it would be the only expanding economy or/because dollar is losing value compared to crypto). This allows markets to get cleared faster and recovery to happen. But more of this effect results in an avalanche effect with people fleeing from dollar jobs to bitcoin based jobs and faster clearing of the markets.
1. https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
2. https://www.armstrongeconomics.com/history/europes-economic-...
Interesting that this comment is downvoted even though none of the posted replies disagree with it very much. Would some devotee of the Austrian school care to post a rebuttal?
"Like many libertarian leaning people I used to be a fan of "Austrian" type economics. ...I now think that Keynes was at least largely correct in the essentials."
Welcome in the club. Mises is great. Everything sounds very logical, written from a guy who never worked one day in a free market enterprise. Mises never understood a capitalist market economy and the money and debt that drives it. He basically describes a middle-ages, barter free market economy.
Welcome in the club. Mises is great. Everything sounds very logical, written from a guy who never worked one day in a free market enterprise. Mises never understood a capitalist market economy and the money and debt that drives it. He basically describes a middle-ages, barter free market economy.
>"Like many libertarian leaning people I used to be a fan of "Austrian" type economics."
Can you elaborate? What exactly are "Austrian" type economics? I'm not familiar with this distinction.
Can you elaborate? What exactly are "Austrian" type economics? I'm not familiar with this distinction.
Thanks, I was familiar with "marginal utility" theory. How or why does that align itself with Libertarian views though? That wasn't clear to me. Cheers.
This is absolute crap. We've been growing a bit under the european average which we've always done, other than during the crisis, at which time we greatly fell behind. We haven't recovered any ground to the rest of the european zone. Ireland for example has pretty much recovered and in the last 4 year grew 50% more than Portugal.
There's a name for a rule that escapes me right now, on when the news writes about a subject you know about, that's when you realize all news reporting is utter crap. This was that moment for me.
There's a name for a rule that escapes me right now, on when the news writes about a subject you know about, that's when you realize all news reporting is utter crap. This was that moment for me.
Let's see how lithium mining will do then.
Obligatory https://outline.com/qnEaGZ
is this because they decriminalized drugs? seems like when the government lets people do what they want, it helps the economy.
You can't "do what you want", there is just no jail time for possession.
> no jail time for possession.
isn't that the definition of 'do what they want'
if you are not going to put people in jail for drugs
people will do drugs.
isn't that the definition of 'do what they want'
if you are not going to put people in jail for drugs
people will do drugs.
People will do drugs regardless, the threat of jail has, historically, not worked.
What Portugal showed was that punishing them is actually counterproductive.
What Portugal showed was that punishing them is actually counterproductive.
In 2011, Portugal applied to an IMF bailout. What do you do when you beg someone for their money? You comply! You don't come out for the streets saying you won't pay! You say creditors exactly what they want to hear. You (seem to) reduce costs, you cancel holidays, you go even beyond what creditors ask you to do. You get smart, you understand you're in a weak position and take the best advantage of it. You don't do like the Greeks who let their egos be greater than their brains, and be on the spotlight for being over-spenders by saying they won't pay their creditors. That's what the government did in 2011-2015 and it worked! We got out of the spotlight and stop being perceived as over-spenders..
In 2015 a new government was elected. With the influx of tourists, and being seen as people who saved some money (and learned their lesson), the new government was in a really better position to try "the revival". They started reinvesting and giving the appearance that we are growing (and some things are, but also government spending). And it seems to be working so far...
So, what really seems to work? Both things. When you're in a weak position you comply, and then when you get to a stronger position, you negotiate. So both type of governments were needed at exactly their time.. A good timing - I think that was the key to the current success!