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On February 09 2012 08:05 vetinari wrote:Show nested quote +On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely.
I agree with you mostly. Only I do believe that a country can enter the Euro if there is a fund to overcome the negative effects of giving up flexible currency rates. Applied to the current situation in the EU, there should be a fund of considerable size to offset the negative spirals in Spain & Greece. That is the institutional requirement for sharing a currency. If this is not possible, because of politics, then I agree that sharing a currency fails. <3
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When the entire idea of lending to greece to avoid bankruptcy was proposed I already expected it to be wasted. A goverment that cant pay next months bill wont be able to pay the same bill 6 months later either. Now im no experianced economic but this whole, might have to default anyway despite spending millions to avoid it, seems like a giant I told you so and a major blunder by all political parties involved.
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On February 09 2012 08:23 Gorsameth wrote:
When the entire idea of lending to greece to avoid bankruptcy was proposed I already expected it to be wasted. A goverment that cant pay next months bill wont be able to pay the same bill 6 months later either. Now im no experianced economic but this whole, might have to default anyway despite spending millions to avoid it, seems like a giant I told you so and a major blunder by all political parties involved.
Yeah, one does not have to an expert economist/political scientist to figure out that the answer of the European politicians was flawed. It pains me to see that people in countries such as Greece & Spain have to suffer severly for the prestige of those politicians. They didn't want to gave up the Euro because it would imply their failure BUT they didn't dare to take necessary steps to make it actually work. In the end, noone will gain.
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On February 09 2012 08:19 Trollk wrote:Show nested quote +On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Outdated and caught up by reality. This New-Classical point of view has been tried often, failed, tried again and failed again. First time where it was shown that it did not work at non-full employment was during the Great Depression. The President of the USA asked these economists what the solution was, and its Quoted was their advice. The unions were broken (what automaticly occurs in times of duress. People leave unions for personal certainty) and still there was depression. Demand for labor didn't suddenly peaked as these economists suggested because of the price drop. No, because there wasn't any aggregate demand for products and thus no need for hiring new workers to satisfy aggregate demand. The problem was then and it is still today (for the weak state of the current economy, not the europroblem specific) is that worldwide aggregate demand < worldwide supply. And as long as this is the case, there will not be a revival of the world economy. Lowering wages and decreasing public spending will only make our times even harder. What the people who argue for decreasing public spending often forget, is the simply the difference between a household and a government. If a household is in financial trouble, it should reduce spending till the point where revenues >= spenditures. Applying this logic to the governement fails because government spending affets general income. If 1 household decreases spending then the economy wouldn't suffer very much and would stay more or less the same. For a government, whos spending often combine to 30+% of the GDP this is NOT the case. Decreasing expenditures would decrease their incomes and the general state of the economy. Making everybody worse off then they were before.
Your rewriting history. The Great Depression was a big government experiment. Maybe Hoover wasn't the favourite politican of Keynes, but this certainly wasn't a refusal of Says law.
Problem with the politics of Hoover and Roosvelt was that they didn't let prices fall. This is how a crisis is solved. When prices are too high, they ought to go down. Its really that simple. There is not magic cure. You cant make the economy sound by increasing demand at procucts which are too high priced. Savings are needed.
We had this discssuion at the republician thread. You can look it up if you have time. The problem of the keynesian way of thinking is that they for some reason think that the bubble economy is sound. That prices aren't too high and that some people don't need to get fired. You just need to increase spending becasue that increases aggreate numbers. But that only prolongs the crisis.
Btw your example is actually wrong even according to keynesian logic. A household spending change has a multiplicator effect as well. What you might have wanted to imply was that government can idebt it self much more as it can always increase revenues (taxes) to get rid of the debt. Households can't do that.
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On February 09 2012 08:05 vetinari wrote:Show nested quote +On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely.
How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money?
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On February 09 2012 08:23 Trollk wrote:Show nested quote +On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. I agree with you mostly. Only I do believe that a country can enter the Euro if there is a fund to overcome the negative effects of giving up flexible currency rates. Applied to the current situation in the EU, there should be a fund of considerable size to offset the negative spirals in Spain & Greece. That is the institutional requirement for sharing a currency. If this is not possible, because of politics, then I agree that sharing a currency fails. <3
The institutional requirement of sharing a currency is a single federal government with sovereignity over all member states.
As an aside, the obsession in australia over achieving a budget surplus makes me want to strangle the editors of the Australian Financial Review.
(S-I) = (G-T) + (X-M)
Assuming that imports = exports, net private sector saving = government deficit.
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On February 09 2012 08:38 Hider wrote:Show nested quote +On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money?
They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster.
On February 09 2012 08:35 Hider wrote:Show nested quote +On February 09 2012 08:19 Trollk wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Outdated and caught up by reality. This New-Classical point of view has been tried often, failed, tried again and failed again. First time where it was shown that it did not work at non-full employment was during the Great Depression. The President of the USA asked these economists what the solution was, and its Quoted was their advice. The unions were broken (what automaticly occurs in times of duress. People leave unions for personal certainty) and still there was depression. Demand for labor didn't suddenly peaked as these economists suggested because of the price drop. No, because there wasn't any aggregate demand for products and thus no need for hiring new workers to satisfy aggregate demand. The problem was then and it is still today (for the weak state of the current economy, not the europroblem specific) is that worldwide aggregate demand < worldwide supply. And as long as this is the case, there will not be a revival of the world economy. Lowering wages and decreasing public spending will only make our times even harder. What the people who argue for decreasing public spending often forget, is the simply the difference between a household and a government. If a household is in financial trouble, it should reduce spending till the point where revenues >= spenditures. Applying this logic to the governement fails because government spending affets general income. If 1 household decreases spending then the economy wouldn't suffer very much and would stay more or less the same. For a government, whos spending often combine to 30+% of the GDP this is NOT the case. Decreasing expenditures would decrease their incomes and the general state of the economy. Making everybody worse off then they were before. Your rewriting history. The Great Depression was a big government experiment. Maybe Hoover wasn't the favourite politican of Keynes, but this certainly wasn't a refusal of Says law. Problem with the politics of Hoover and Roosvelt was that they didn't let prices fall. This is how a crisis is solved. When prices are too high, they ought to go down. Its really that simple. There is not magic cure. You cant make the economy sound by increasing demand at procucts which are too high priced. Savings are needed. We had this discssuion at the republician thread. You can look it up if you have time. The problem of the keynesian way of thinking is that they for some reason think that the bubble economy is sound. That prices aren't too high and that some people don't need to get fired. You just need to increase spending becasue that increases aggreate numbers. But that only prolongs the crisis. Btw your example is actually wrong even according to keynesian logic. A household spending change has a multiplicator effect as well. What you might have wanted to imply was that government can idebt it self much more as it can always increase revenues (taxes) to get rid of the debt. Households can't do that.
The federal government can indebt itself indefinitely, because all government spending is financed by printing money.
Allow me to repeat that. All government spending is financed by printing money. All taxation is the burning of money.
The government also accepts deposits of cash, and pays interests on those deposits. We call this federal government debt.
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On February 09 2012 08:40 vetinari wrote:Show nested quote +On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster.
No. Being part of the euro prevents certain measures to fight the problem.
Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem.
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On February 09 2012 08:40 vetinari wrote:Show nested quote +On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. The federal government can indebt itself indefinitely, because all government spending is financed by printing money. Allow me to repeat that. All government spending is financed by printing money. All taxation is the burning of money. The government also accepts deposits of cash, and pays interests on those deposits. We call this federal government debt
No they didn't. The euro is sustainable if countries keeps a decent budget. Greece didn't.
(However obv. as countries has incentives to not act responsible the euro is not sustainable.)
Its not like you need a cheap currency to be have large exports. If wages are flexible, greece can export as well.
I don't get your point regarding burning money? Aren't taxes used to finance spendings? Printing money is kinda last resorder solution.
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On February 09 2012 08:38 vetinari wrote:Show nested quote +On February 09 2012 08:23 Trollk wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. I agree with you mostly. Only I do believe that a country can enter the Euro if there is a fund to overcome the negative effects of giving up flexible currency rates. Applied to the current situation in the EU, there should be a fund of considerable size to offset the negative spirals in Spain & Greece. That is the institutional requirement for sharing a currency. If this is not possible, because of politics, then I agree that sharing a currency fails. <3 The institutional requirement of sharing a currency is a single federal government with sovereignity over all member states. As an aside, the obsession in australia over achieving a budget surplus makes me want to strangle the editors of the Australian Financial Review. (S-I) = (G-T) + (X-M) Assuming that imports = exports, net private sector saving = government deficit.
You and me both, the problem is that a surplus is seen as a safety measure. It is a reassurance in an unstable world and promotes consumer confidence. Whether it is worth the cost is largely irrelevant due to the current political environment.
On February 09 2012 08:48 Gorsameth wrote:Show nested quote +On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. No. Being part of the euro prevents certain measures to fight the problem. Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem.
When you plan, you should plan for the worst. There is no point creating a potentially dangerous setup (like the euro) without having mechanisms available to deal with your member states not complying to the rules you set. The fact taht Greece could get away with having such large budget deficits for so long is proof the euro is a bad idea. When nations have different priorities to their neighbours, they should be able to act on them and accept the financial consequences. With a euro this cannot happen. A country that cannot set its own budget is not sovereign.
To me, if the combined budget of those representing the euro is not controlled by the countries representing the euro then this issue will appear again. In other words, without a central bank that can enforce budget limits the euro will have this problem again.
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On February 09 2012 08:48 Gorsameth wrote:Show nested quote +On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. No. Being part of the euro prevents certain measures to fight the problem. Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem.
Ireland, spain were running a surplus before the crisis.
The problem isn't deficits, its the euro itself.
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On February 09 2012 08:57 Probulous wrote:Show nested quote +On February 09 2012 08:38 vetinari wrote:On February 09 2012 08:23 Trollk wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. I agree with you mostly. Only I do believe that a country can enter the Euro if there is a fund to overcome the negative effects of giving up flexible currency rates. Applied to the current situation in the EU, there should be a fund of considerable size to offset the negative spirals in Spain & Greece. That is the institutional requirement for sharing a currency. If this is not possible, because of politics, then I agree that sharing a currency fails. <3 The institutional requirement of sharing a currency is a single federal government with sovereignity over all member states. As an aside, the obsession in australia over achieving a budget surplus makes me want to strangle the editors of the Australian Financial Review. (S-I) = (G-T) + (X-M) Assuming that imports = exports, net private sector saving = government deficit. You and me both, the problem is that a surplus is seen as a safety measure. It is a reassurance in an unstable world and promotes consumer confidence. Whether it is worth the cost is largely irrelevant due to the current political environment. Show nested quote +On February 09 2012 08:48 Gorsameth wrote:On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. No. Being part of the euro prevents certain measures to fight the problem. Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem. When you plan, you should plan for the worst. There is no point creating a potentially dangerous setup (like the euro) without having mechanisms available to deal with your member states not complying to the rules you set. The fact taht Greece could get away with having such large budget deficits for so long is proof the euro is a bad idea. When nations have different priorities to their neighbours, they should be able to act on them and accept the financial consequences. With a euro this cannot happen. A country that cannot set its own budget is not sovereign. To me, if the combined budget of those representing the euro is not controlled by the countries representing the euro then this issue will appear again. In other words, without a central bank that can enforce budget limits the euro will have this problem again.
True. If a country gets a penalty tax for having 3%+ budget deficits, then it would be interesting to see how they would turn out. That would imply that some of the bigget deficits EU countries would need pretty big cuts. Is that realistic? And what if a country is already in financial problems. That would just bring them even more into debt.
Obv. the best solution is just to abolish the EU. It really has no advantages from a economical perspective.
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On February 09 2012 08:40 vetinari wrote:Show nested quote +On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster.
Sure. But what do we do from here? Stop Euro? Or kick our respectives employees ass (i mean presidents and prime ministers, they are employees of the people, not bosses, neither leaders) to shut their mouth and start to work on a real federal government for Europe?
Second choice for me.
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On February 09 2012 08:58 vetinari wrote:Show nested quote +On February 09 2012 08:48 Gorsameth wrote:On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. No. Being part of the euro prevents certain measures to fight the problem. Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem. Ireland, spain were running a surplus before the crisis. The problem isn't deficits, its the euro itself.
You need to argue why the sudden budget deficits were related to the euro (like how was irish bailout of banks related to the euro?). Then you need to analyze what would happen if labor markets were flexible, and explain why that wouldn't "solve" their problem.
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On February 09 2012 09:05 Hider wrote:Show nested quote +On February 09 2012 08:57 Probulous wrote:On February 09 2012 08:38 vetinari wrote:On February 09 2012 08:23 Trollk wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. I agree with you mostly. Only I do believe that a country can enter the Euro if there is a fund to overcome the negative effects of giving up flexible currency rates. Applied to the current situation in the EU, there should be a fund of considerable size to offset the negative spirals in Spain & Greece. That is the institutional requirement for sharing a currency. If this is not possible, because of politics, then I agree that sharing a currency fails. <3 The institutional requirement of sharing a currency is a single federal government with sovereignity over all member states. As an aside, the obsession in australia over achieving a budget surplus makes me want to strangle the editors of the Australian Financial Review. (S-I) = (G-T) + (X-M) Assuming that imports = exports, net private sector saving = government deficit. You and me both, the problem is that a surplus is seen as a safety measure. It is a reassurance in an unstable world and promotes consumer confidence. Whether it is worth the cost is largely irrelevant due to the current political environment. On February 09 2012 08:48 Gorsameth wrote:On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. No. Being part of the euro prevents certain measures to fight the problem. Budget Deficit is the problem. If greece had balanced there budget before the crisis hit they wouldnt have been in a problem. When you plan, you should plan for the worst. There is no point creating a potentially dangerous setup (like the euro) without having mechanisms available to deal with your member states not complying to the rules you set. The fact taht Greece could get away with having such large budget deficits for so long is proof the euro is a bad idea. When nations have different priorities to their neighbours, they should be able to act on them and accept the financial consequences. With a euro this cannot happen. A country that cannot set its own budget is not sovereign. To me, if the combined budget of those representing the euro is not controlled by the countries representing the euro then this issue will appear again. In other words, without a central bank that can enforce budget limits the euro will have this problem again. True. If a country gets a penalty tax for having 3%+ budget deficits, then it would be interesting to see how they would turn out. That would imply that some of the bigget deficits EU countries would need pretty big cuts. Is that realistic? And what if a country is already in financial problems. That would just bring them even more into debt. Obv. the best solution is just to abolish the EU. It really has no advantages from a economical perspective.
Aside from being a trade barrier free trading block the weaker countries benefit from having lower interest rates and the stronger economies benefit from having a weaker currency. There are very real benefits to a single currency. The problem is one of enforcement. There were supposed to be penalties for countries that did not comply with the 3% rule but they were not enforced. I can't see a way around this aside from having a single centre setting budgets. Ultimately if a country is struggling (Greece for example) they can just tell the EU to fuck off and keep setting bad budgets. The fact that Greece is tied to the euro is the problem. If Greece had to comply with the rules then the euro makes sense. So for me you either have a central budget setting environment (unlikely) or the euro is a stupid idea and should be abolished (also unlikely).
The final option is to have a savings account large enough to offset any potential future budget issues a particular country may have. This is the plan that has been chosen but unfortunately creates a huge incentive for countries to not care about their budgets. It works the same with bank bailouts. If there is no accountability the rules will be broken. If this issue is not sorted the euro will not recover.
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On February 09 2012 08:50 Hider wrote:Show nested quote +On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. The federal government can indebt itself indefinitely, because all government spending is financed by printing money. Allow me to repeat that. All government spending is financed by printing money. All taxation is the burning of money. The government also accepts deposits of cash, and pays interests on those deposits. We call this federal government debt No they didn't. The euro is sustainable if countries keeps a decent budget. Greece didn't. (However obv. as countries has incentives to not act responsible the euro is not sustainable.) Its not like you need a cheap currency to be have large exports. If wages are flexible, greece can export as well. I don't get your point regarding burning money? Aren't taxes used to finance spendings? Printing money is kinda last resorder solution.
Taxes are used to finance spending only when we are using a commodity currency. That is, using a precious metal as a currency.
In the world of fiat currencies, taxes do not finance spending. What taxes do, is give value to fiat currency within the country, and reduce the spending power of the private sector.
Thought experiment: A new country is founded, using TL Dollars ($) as the fiat currency, with the two of us as the only citizens. There currently exist no TL Dollars in circulation. The government decides to enact a flat tax of $1000 per person. However, since there exist no TL dollars, no one can pay the tax.
So, the government decides to hire me to build a road, and pays me $3000. I pay you $1500 to build me a house.
Since we need the TL dollars to pay the taxes (which we need to do in order to not find ourselves in prison), we accept the fiat TL dollars for payment, even though they are all freshly printed, and no taxes have yet been paid.
On tax day, we pay $1000 each to the government. The government burns the paper money.
We each have $500 left over. The government decides to let us deposit our spare cash with the central bank, and they pay us 5% interest.
So, what happened? The government printed $3000 dollars, then taxed us 2000, destroying the money in the process, while issuing 1000 dollars of government debt.
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Get out of Euro Union, devalue the currency, so that demand for greece's goods will go up, NX will go up, GDP will go up...ez
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On February 09 2012 08:40 vetinari wrote:Show nested quote +On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. Show nested quote +On February 09 2012 08:35 Hider wrote:On February 09 2012 08:19 Trollk wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Outdated and caught up by reality. This New-Classical point of view has been tried often, failed, tried again and failed again. First time where it was shown that it did not work at non-full employment was during the Great Depression. The President of the USA asked these economists what the solution was, and its Quoted was their advice. The unions were broken (what automaticly occurs in times of duress. People leave unions for personal certainty) and still there was depression. Demand for labor didn't suddenly peaked as these economists suggested because of the price drop. No, because there wasn't any aggregate demand for products and thus no need for hiring new workers to satisfy aggregate demand. The problem was then and it is still today (for the weak state of the current economy, not the europroblem specific) is that worldwide aggregate demand < worldwide supply. And as long as this is the case, there will not be a revival of the world economy. Lowering wages and decreasing public spending will only make our times even harder. What the people who argue for decreasing public spending often forget, is the simply the difference between a household and a government. If a household is in financial trouble, it should reduce spending till the point where revenues >= spenditures. Applying this logic to the governement fails because government spending affets general income. If 1 household decreases spending then the economy wouldn't suffer very much and would stay more or less the same. For a government, whos spending often combine to 30+% of the GDP this is NOT the case. Decreasing expenditures would decrease their incomes and the general state of the economy. Making everybody worse off then they were before. Your rewriting history. The Great Depression was a big government experiment. Maybe Hoover wasn't the favourite politican of Keynes, but this certainly wasn't a refusal of Says law. Problem with the politics of Hoover and Roosvelt was that they didn't let prices fall. This is how a crisis is solved. When prices are too high, they ought to go down. Its really that simple. There is not magic cure. You cant make the economy sound by increasing demand at procucts which are too high priced. Savings are needed. We had this discssuion at the republician thread. You can look it up if you have time. The problem of the keynesian way of thinking is that they for some reason think that the bubble economy is sound. That prices aren't too high and that some people don't need to get fired. You just need to increase spending becasue that increases aggreate numbers. But that only prolongs the crisis. Btw your example is actually wrong even according to keynesian logic. A household spending change has a multiplicator effect as well. What you might have wanted to imply was that government can idebt it self much more as it can always increase revenues (taxes) to get rid of the debt. Households can't do that. The federal government can indebt itself indefinitely, because all government spending is financed by printing money.Allow me to repeat that. All government spending is financed by printing money. All taxation is the burning of money. The government also accepts deposits of cash, and pays interests on those deposits. We call this federal government debt.
Are you North Korean or sth? How is all goverment's spendings being financed by printing momey even possible?
There has to be any work put into producing that wealth represented by money.
If i am to recieve a salary for doing nothing and every citizen of my country have recieved this salary, how do i spend this money? On what, if nothing have been produced, since goverment just printed mony and gave it to it's people for nothing?
This kind of money have no value, since no wealth have been produced for exchange.
Printing money is very dangerous and may lead to hyperinflation. Belarus is on a verge of collapse thanks to Lukaszenka's policy of money printing.
There are two ways to paying up country's spendings:
Taxes
Loans
Healthy country has very low loans and balanced taxes.
Greece had huge loans and low taxes with huge financial bonuses and rights.
It's all thanks to Greece's voters and their politicians to place themselves under such gargantuan debts.
I'm relieved that Polish constitution forbids debt beyond 55% GDP, and if it is to be surpassed, radical cutts to goverment's spendings are to be issued immediately.
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On February 09 2012 09:18 vetinari wrote:Show nested quote +On February 09 2012 08:50 Hider wrote:On February 09 2012 08:40 vetinari wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? They got into the mess by entering the euro. No more, no less. A single currency without a single country is a road to disaster. The federal government can indebt itself indefinitely, because all government spending is financed by printing money. Allow me to repeat that. All government spending is financed by printing money. All taxation is the burning of money. The government also accepts deposits of cash, and pays interests on those deposits. We call this federal government debt No they didn't. The euro is sustainable if countries keeps a decent budget. Greece didn't. (However obv. as countries has incentives to not act responsible the euro is not sustainable.) Its not like you need a cheap currency to be have large exports. If wages are flexible, greece can export as well. I don't get your point regarding burning money? Aren't taxes used to finance spendings? Printing money is kinda last resorder solution. Taxes are used to finance spending only when we are using a commodity currency. That is, using a precious metal as a currency. In the world of fiat currencies, taxes do not finance spending. What taxes do, is give value to fiat currency within the country, and reduce the spending power of the private sector. Thought experiment: A new country is founded, using TL Dollars ($) as the fiat currency, with the two of us as the only citizens. There currently exist no TL Dollars in circulation. The government decides to enact a flat tax of $1000 per person. However, since there exist no TL dollars, no one can pay the tax. So, the government decides to hire me to build a road, and pays me $3000. I pay you $1500 to build me a house. Since we need the TL dollars to pay the taxes (which we need to do in order to not find ourselves in prison), we accept the fiat TL dollars for payment, even though they are all freshly printed, and no taxes have yet been paid. On tax day, we pay $1000 each to the government. The government burns the paper money. We each have $500 left over. The government decides to let us deposit our spare cash with the central bank, and they pay us 5% interest. So, what happened? The government printed $3000 dollars, then taxed us 2000, destroying the money in the process, while issuing 1000 dollars of government debt.
Thats most likely not how a new new country will be founded. They will most likely print money first (like 3.000$). Then they would hire 2 people and pay them 3.000$ in wages, and tax half of it.
Sure they will slowly inflate the currency, but they dont (nessarscily) finance spending by inflations.
Not sure where you get all this.
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On February 09 2012 08:38 Hider wrote:Show nested quote +On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money?
Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore.
On February 09 2012 09:19 Corsica wrote:
Get out of Euro Union, devalue the currency, so that demand for greece's goods will go up, NX will go up, GDP will go up...ez
the problem is there are no greece goods. So if you cant sell anything it doesnt matter how worthless your currency is.
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EPT
