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On August 27 2014 23:12 radiatoren wrote:
Now that is not the complete story:
I know danish politicians were terrified after meeting the greek parliamentarians in 2008. They claimed the parliamentarians had absolutely no respect for how grave the situation was for their country and they were being extremely irresponsible with their suggestions. I guess they found out later, but the fact remains that irresponsibiliy in governments is difficult to handle in EU and that is problematic for the EURO-zone.
To be fair to North Europe, the Greeks lied to get into the EU, they continued to lie in the EU. Quite frankly it is a country that has no reason to be part of the Union. Greece has been skating on the legacy of ancient Greeks for hundreds of years now to trick gullible Western Europeans out of their money.
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On August 27 2014 23:41 Sub40APM wrote:Show nested quote +On August 27 2014 23:12 radiatoren wrote:
Now that is not the complete story:
I know danish politicians were terrified after meeting the greek parliamentarians in 2008. They claimed the parliamentarians had absolutely no respect for how grave the situation was for their country and they were being extremely irresponsible with their suggestions. I guess they found out later, but the fact remains that irresponsibiliy in governments is difficult to handle in EU and that is problematic for the EURO-zone.
To be fair to North Europe, the Greeks lied to get into the EU, they continued to lie in the EU. Quite frankly it is a country that has no reason to be part of the Union. Greece has been skating on the legacy of ancient Greeks for hundreds of years now to trick gullible Western Europeans out of their money.
Greek politicians lied, to europe and to Greeks. Politicians in the entire europe are corrupted - wasn't Juncker forced to quit his job in Luxemburg because of some kind of affair ?
Meanwhile the idea of europe appeared in Greece - with the democratic system. It does not have the "right" to be in the european union, it is one of its most important place.
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On August 27 2014 23:41 Sub40APM wrote:Show nested quote +On August 27 2014 23:12 radiatoren wrote:
Now that is not the complete story:
I know danish politicians were terrified after meeting the greek parliamentarians in 2008. They claimed the parliamentarians had absolutely no respect for how grave the situation was for their country and they were being extremely irresponsible with their suggestions. I guess they found out later, but the fact remains that irresponsibiliy in governments is difficult to handle in EU and that is problematic for the EURO-zone.
To be fair to North Europe, the Greeks lied to get into the EU, they continued to lie in the EU. Quite frankly it is a country that has no reason to be part of the Union. Greece has been skating on the legacy of ancient Greeks for hundreds of years now to trick gullible Western Europeans out of their money.
Well to be fair Kohl and later Schröder were really pushing to get Greece into the Eurozone and from what I have heard they were completely aware about the fact that Greece was not ready economically. The Euro was more of a political tool to further increase integration, it wasn't really an economical decision.
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Yeah, they wanted a big EU asap to make it more politically powerfull. That this would lead to problems was probably just accepted.
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On August 27 2014 13:58 IgnE wrote:Show nested quote +On August 27 2014 13:22 Taf the Ghost wrote:
It's the same pool of people that end up working for all of the big Banks and Finance companies, which are most definitely not paragons of truth.
A huge portion of those service sector jobs don't *exist* without the real estate bubble, which was intentionally fueled by WAY too easy of lending standards (which is probably the only thing the banks can't be blamed for; it was forced on them) and the Fed driving interest rates very low.
While I agree with many of the premises in your post, don't you see a tension between those two sentences, spaced far apart from each other? The banks had it forced on them . . . by who again?
Congress and a lot of activists. You have to look back at the Savings & Loan crisis from the late 80s to see where it started rolling. The "Banks" today are not much like what they used to be. It was before huge amounts of derivatives & "financial products" sprung up in the mid-90s. They used to be stodgy, boring and not really making much money.
They were also claimed to be all sorts of bigots, by activists for whatever group you wanted to look at, because of Lending Standards. You used to need 20% down, in Cash, on a mortgage for a house. This used to mean either you saved the 20% or you had a loan from a family member to pay it. (Classically, it was also something of a wedding present) Now people can get into homes with 0 cash down. Big difference.
And, yes, that part was forced on them by Congress, HUD and a few other regulatory branches starting in the 90s.
Alt-As and the full, 0 cash down types of loans? That was actually just a few mortgage dealers that worked in that, then they all got bought up by the bigger banks starting in 2005 or so, because those mortgage companies were making a killing. Right until they all blew up. See my note about Spain in my last post. 
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In Scotland they are bracing for the vote on independence september 18 this year. One of the big issues seems to be the currency. The most likely solution would have been to have a currency union between the two countries. The similarities are expected to be sufficient for it to work. However the brits have refused it. Now there seems to be a discussion of what has to happen if that situation occurs. The pro independence parliamentarians are arguing that if UK should choose not to accept a shared currency, Scotland would refuse to take on part of the debt. Stiglitz (he has been involved in the economic evaluation of scottish indepence) has chimed in and called the brits on a bluff and claims there are plenty of workable alternatives if they vote for independence (BBC).
It is not exactly the same, but the discussion can have relevance for the EURO. here is the fiscal commissions recommandations from last year in terms of how they propose Scotland should handle the monetary question if they choose independence. Be aware that most sources are biased and the commission and Stiglitz are biased pro-independence. The analysis could serve as descriptions and analysis of ways to leave a currency.
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On August 28 2014 02:51 Taf the Ghost wrote:Show nested quote +On August 27 2014 13:58 IgnE wrote:On August 27 2014 13:22 Taf the Ghost wrote:
It's the same pool of people that end up working for all of the big Banks and Finance companies, which are most definitely not paragons of truth.
A huge portion of those service sector jobs don't *exist* without the real estate bubble, which was intentionally fueled by WAY too easy of lending standards (which is probably the only thing the banks can't be blamed for; it was forced on them) and the Fed driving interest rates very low.
While I agree with many of the premises in your post, don't you see a tension between those two sentences, spaced far apart from each other? The banks had it forced on them . . . by who again? Congress and a lot of activists. You have to look back at the Savings & Loan crisis from the late 80s to see where it started rolling. The "Banks" today are not much like what they used to be. It was before huge amounts of derivatives & "financial products" sprung up in the mid-90s. They used to be stodgy, boring and not really making much money. They were also claimed to be all sorts of bigots, by activists for whatever group you wanted to look at, because of Lending Standards. You used to need 20% down, in Cash, on a mortgage for a house. This used to mean either you saved the 20% or you had a loan from a family member to pay it. (Classically, it was also something of a wedding present) Now people can get into homes with 0 cash down. Big difference. And, yes, that part was forced on them by Congress, HUD and a few other regulatory branches starting in the 90s. Alt-As and the full, 0 cash down types of loans? That was actually just a few mortgage dealers that worked in that, then they all got bought up by the bigger banks starting in 2005 or so, because those mortgage companies were making a killing. Right until they all blew up. See my note about Spain in my last post.
It must be fun to paint the history you want to paint.
You needed "20% down" back then because there was no way to actually track somebody's credit. Getting a loan was much like going into a job interview. You presented yourself well, showed that you were reliable in any/every way possible (like putting 20% down), and hoped your agent didn't have something awful for breakfast/lunch. As computers came about, actuarial calculations became simpler to do and could be applied to a larger number of people (which came around in the 80s and 90s). Your loan agent could then put information into a calculator, like income, expenses, and other metadata to calculate what you could afford. Even later, we started getting credit scores that almost does the agent's job for them.
Congress (and HUD) didn't really do all that much. The responsibilities for banks to take on loans from poorer individuals were very tiny compared to the loans they actually gave. At the most, it gave them a nudge into subprime lending which they soon embraced; At the least, it gave them a "gold star" of public service for doing something they already did/wanted to do. Also, EU doesn't have the same programs in place, so their lending went something like I described earlier. Technology gave banks and investment firms a much, much greater ability to assess risk and build confidence (sometimes incorrectly).
For Europe, a lot of investors misinterpreted the Euro arrangement as a guarantee of value on their investments. Greek debt was just as good as French, Spanish business was a proxy for German business, so on and so forth. At the first big crash (subprime mortgage crisis), the rose tinted glasses were removed and investors realized that Europe loans weren't all created equal in risk (because of Greece). Some EU economies relied so heavily on investment (Spain and Italy) that their economies collapsed when investment did (reminiscent of Argentina). Governments propped up what they could until they ran out of cash. The ECB was too focused on price stability (because that's what made the USD so powerful, RIGHT GUYS?!) to adequately react to the liquidity crisis going on in PIIGS.
Also, by and large, bankers were called a lot of things, but rarely "bigots"...
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Investor didn't misinterpreted at all. The euro was basically made for that, as a tool to facilitate investment in southern countries. You must go back into this moment dominant economy to fully understands it : before the sub prime crisis, the newly created financial market were supposed to be efficient : they lead to the most optimal investments by default. The flow of money from the strongest countries to the weakest was supposed to facilitate investment and the development of the less competitive part of europe - leading in the long run to a unified and balanced situation, with the weakest catching up with the biggest economical power in euro zone.
In reality, the euro strenghtened the disparities and the specialisations.
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During her visit, Merkel congratulated Spain on its awesome "reform", despite a 25% unemployment and twice the French deficit. Don't try to understand...
Merkel and Rajoy postponed their joint press conference in the face of protests in the capital of Spain's Galicia region, Spain's El Público newspaper reported.
Scuffles broke out as police tried to prevent people from entering Santiago's Plaza de la Quintana square, after being turned away from the city's Plaza del Obradoiro, outside the city's cathedral.
Merkel and Rajoy postponed their joint press conference in the face of protests in the capital of Spain's Galicia region, Spain's El Público newspaper reported.
Scuffles broke out as police tried to prevent people from entering Santiago's Plaza de la Quintana square, after being turned away from the city's Plaza del Obradoiro, outside the city's cathedral.
Several people were pushed to the ground in the face of police charges, Spain's 20 minutos newspaper reported.
Police called for back-up as demonstrators moved forward, the daily added.
"We want work. We don't want to emigrate," some of the demonstrators were heard to yell out, while others called for Merkel and Rajoy to leave Galicia.
http://www.thelocal.es/20140825/merkel-joins-spanish-pm-on-camino-de-santiago
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I wonder what the emigration stats are for Spain right now...
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http://www.nytimes.com/2014/08/29/opinion/paul-krugman-the-fall-of-france.html
How does France fit into this picture? News reports consistently portray the French economy as a dysfunctional mess, crippled by high taxes and government regulation. So it comes as something of a shock when you look at the actual numbers, which don’t match that story at all. France hasn’t done well since 2008 — in particular, it has lagged Germany — but its overall G.D.P. growth has been much better than the European average, beating not only the troubled economies of southern Europe but creditor nations like the Netherlands. French job performance isn’t too bad. In fact, prime-aged adults are a lot more likely to be employed in France than in the United States.
Nor does France’s situation seem particularly fragile. It doesn’t have a large trade deficit, and it can borrow at historically low interest rates.
Why, then, does France get such bad press? It’s hard to escape the suspicion that it’s political: France has a big government and a generous welfare state, which free-market ideology says should lead to economic disaster. So disaster is what gets reported, even if it’s not what the numbers say.
And Mr. Hollande, even though he leads France’s Socialist Party, appears to believe this ideologically motivated bad-mouthing. Worse, he has fallen into a vicious circle in which austerity policies cause growth to stall, and this stalled growth is taken as evidence that France needs even more austerity.
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On August 30 2014 05:27 Sub40APM wrote:http://www.nytimes.com/2014/08/29/opinion/paul-krugman-the-fall-of-france.htmlShow nested quote +How does France fit into this picture? News reports consistently portray the French economy as a dysfunctional mess, crippled by high taxes and government regulation. So it comes as something of a shock when you look at the actual numbers, which don’t match that story at all. France hasn’t done well since 2008 — in particular, it has lagged Germany — but its overall G.D.P. growth has been much better than the European average, beating not only the troubled economies of southern Europe but creditor nations like the Netherlands. French job performance isn’t too bad. In fact, prime-aged adults are a lot more likely to be employed in France than in the United States.
Nor does France’s situation seem particularly fragile. It doesn’t have a large trade deficit, and it can borrow at historically low interest rates.
Why, then, does France get such bad press? It’s hard to escape the suspicion that it’s political: France has a big government and a generous welfare state, which free-market ideology says should lead to economic disaster. So disaster is what gets reported, even if it’s not what the numbers say.
And Mr. Hollande, even though he leads France’s Socialist Party, appears to believe this ideologically motivated bad-mouthing. Worse, he has fallen into a vicious circle in which austerity policies cause growth to stall, and this stalled growth is taken as evidence that France needs even more austerity.
Krugman is right on the first part, but doesn't know about French politics. Hollande has never been anything else that a tard free marketist. Back whe he was "this guy" that nobody cared about, he gave class in Science Po (school for rich kids who want to become politician, journalists or lawyers) about the "socialism of the offer".
He just lied to everybody, with a heavily socialist campaign, with a hundred proposition, that he didn't respected. That's why he is the least respected of all french president (with 12 % approval rating...) : the right never liked him, and he betrayed the left that voted for him.
If Eurozone monetary policy was working, the Eurozone would be experiencing additional (monetary) stimulus everywhere, and average inflation would be 2%. Because Germany through 2000 to 2007 had an inflation rate below that in France and Italy, it now has to have an inflation rate above these countries. Something like 3% in Germany and 1% in countries like France and Italy for a number of years. If ECB monetary policy was working, Germany would get no choice in this, because it is part of what they signed up to when joining the Euro.
Monetary policy is not working because of the liquidity trap, so we instead have average Eurozone inflation at about 0.5%, with Germany at 1% and France/Italy at nearer zero. That implies a huge waste of Eurozone resources. That waste can be avoided, in a standard textbook manner, by at least suspending the Stability and Growth Pact (SGP), and preferably by a coordinated fiscal stimulus.
Why is this not happening? There are two explanations: ignorance or greed. Ignorance is a non-scientific belief that fiscal stimulus cannot or should not substitute for monetary policy in a liquidity trap. Greed is that Germany wants to avoid having 3% inflation, because it controls fiscal policy.
Those that say that Germany would be ‘helping out’ France and Italy by agreeing to suspend the SGP and enact a stimulus therefore have it completely wrong. If things were working normally, Germany would be getting a (monetary) stimulus, whether it liked it or not. What Germany is doing is taking advantage of the fact that monetary policy is broken, at the rest of the Eurozone’s expense. Germany gains a small advantage (lower inflation), but the Eurozone as a whole suffers a much larger cost.
Often greed fosters ignorance. It is unfortunate but not surprising that many in Germany think this is all about Greece and transfers and structural reform, because that is what they keep being told. How many of its leaders and opinion makers understand what is going on but want to disguise the fact that Germany is taking advantage of other Eurozone members I cannot say. What is far more inexplicable is that the rest of the Eurozone is allowing Germany to get away with it.
http://mainlymacro.blogspot.fr/2014/08/eurozone-delusions.html
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Is there empirical evidence that expansion of the money supply right now is going to result in the desired inflation? Doesn't the term 'liquidity trap' imply that exactly this is not happening although the money supply expands?
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On August 30 2014 09:59 Nyxisto wrote:
Is there empirical evidence that expansion of the money supply right now is going to result in the desired inflation? Doesn't the term 'liquidity trap' imply that exactly this is not happening although the money supply expands?
There's empirical evidence that tightening the monetary supply in these conditions causes deflation and hurts the economy. So, you can either keep rates at 0 to not tank the economy further, or keep it at 0 and try other kinds of expansion to spark inflation.
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On August 30 2014 09:59 Nyxisto wrote:
Is there empirical evidence that expansion of the money supply right now is going to result in the desired inflation? Doesn't the term 'liquidity trap' imply that exactly this is not happening although the money supply expands?
Of course there is empirical evidence : it is happening, a 0,25 % interest rate and the most agressive policy from BCE in its history that result in a - 0,2 % inflation rate in France. That s not evidence enough ?
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On August 30 2014 09:59 Nyxisto wrote:
Is there empirical evidence that expansion of the money supply right now is going to result in the desired inflation? Doesn't the term 'liquidity trap' imply that exactly this is not happening although the money supply expands?
And just like that, Krugman has a response:
...
It’s true that we’re living in a time of monetary impotence, where central banks trying to reflate economies are not having much success gaining traction. But it’s important to note that contractionary monetary policy is working just fine; all the central banks that mistakenly decided that it was time to raise rates succeeded in doing just that, before realizing their error and reversing course.
But what about the fact that vast increases in the monetary base have failed to do much to the economy, and that various broad measures of money haven’t moved; doesn’t this show that monetary policy doesn’t matter?
No, not at all. The irrelevance of the monetary base isn’t a generic issue, it’s something that happens when you’re in a liquidity trap — when interest rates are at the zero lower bound.
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Source
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I basically agree with Krugman's article, but why are the countries in a liquidity trap, and why are the banks hording the central bank money instead of getting it into the economy? Because there is a lack of profitable investment opportunities. You can print as much central bank money as you want, but if there's nowhere to put it it's not going to do anything. And that's something that monetary policy, Brussels or Germany can't solve.Restructuring the economy in a way that actually makes investment and growth possible is only something the respective countries can do.
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This has happened before. For example with the Netherlands and the saturation of the Baltic Sea trade in the 17th century. What ended up happening was that the excess liquidity flowed out of the Netherlands and into the emerging center of london. In fact basically the same thing has happened in, sequentially, Venice Genoa Netherlands London and now new york. What we're experiencing is what Giovanni arrighi calls the 'terminal crisis' of this cycle of accumulation - essentially the lack of investment opportunities leads to a financialization of the economy which leads to capital outflows to a new center of accumulation (probably this time somewhere on asia). I highly recommend his book The Long Twentieth Century
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On September 04 2014 01:26 bookwyrm wrote:
This has happened before. For example with the Netherlands and the saturation of the Baltic Sea trade in the 17th century. What ended up happening was that the excess liquidity flowed out of the Netherlands and into the emerging center of london. In fact basically the same thing has happened in, sequentially, Venice Genoa Netherlands London and now new york. What we're experiencing is what Giovanni arrighi calls the 'terminal crisis' of this cycle of accumulation - essentially the lack of investment opportunities leads to a financialization of the economy which leads to capital outflows to a new center of accumulation (probably this time somewhere on asia). I highly recommend his book The Long Twentieth Century
This is a bit how I see it as well. Europe/US won't grow in a per capita way in a while, while Asia will have good growth. Then once both markets are near same wage levels both sides will even out in growth or it will move to Africa from Asia.
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On September 04 2014 01:26 bookwyrm wrote:
This has happened before. For example with the Netherlands and the saturation of the Baltic Sea trade in the 17th century. What ended up happening was that the excess liquidity flowed out of the Netherlands and into the emerging center of london. In fact basically the same thing has happened in, sequentially, Venice Genoa Netherlands London and now new york. What we're experiencing is what Giovanni arrighi calls the 'terminal crisis' of this cycle of accumulation - essentially the lack of investment opportunities leads to a financialization of the economy which leads to capital outflows to a new center of accumulation (probably this time somewhere on asia). I highly recommend his book The Long Twentieth Century
"Excess liquidity aggregates in a location where people play with it." Duh. It has yet to be seen if this directly causes real problems though.
On September 04 2014 01:16 Nyxisto wrote:
I basically agree with Krugman's article, but why are the countries in a liquidity trap, and why are the banks hording the central bank money instead of getting it into the economy? Because there is a lack of profitable investment opportunities. You can print as much central bank money as you want, but if there's nowhere to put it it's not going to do anything. And that's something that monetary policy, Brussels or Germany can't solve.Restructuring the economy in a way that actually makes investment and growth possible is only something the respective countries can do.
The only restructuring that needs to take place is giving more people the power to invest. You do this by not undermining employment and wages by slashing the number one wage source in an economy, the government.
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EPT
