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"and then hyperinflate. Once the economy is helped with this"
Hyperinflation in general is not realy helping the economy.
Only war wich is possible in europe is civil war i think, though we way to rich for that still.
Greece might get into war with turkey one day but that would have to do little with the situation in the eurozone.
All this debt; its just a number , a tool to inflate and deflate bubbles at apropiate times.
If we see the whole western world as one then Its a debt to ourselves in the end.
Debt has been growing since it was invented , it has never ever declined nor ever will.
We are deflating atm, or at least not inflating. why?
Well we had years of inflating behind us, all this monney found its way out in the real estate market.
Housing prices more then doubled and in some areas trippled in the past 10 years, normal inflation has been kept relativly under control thx to cheap production in asia.
Now they letting out some air.
I have no idea why now,seeing the dollar/euro there still seems room to inflate the euro.
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On May 22 2012 05:23 storkfan wrote:
Savings is demand for goods in future. When you save you say to the economy - take the goods i produced now, and give me back more goods in the future. So that is what savings does: you forgo consuming goods in proportion to the money you save, and that money bids factors of production to produce future goods. And by doing so, it creates demand for the industries that produce future goods(producer industries, as opposed to consumer industries to which you bid resources to when you consume instead of save).
When the interest rates were artificially low in the 2000s economic boom, it signaled to produce future goods - like houses. Things that are owned only after a long period of time. Because low interest rates are exactly that, they are savings. When you save a lot, interest rates go down. The only problem was, people didnt save a lot, central banks only created the illusion that they did. This is the scizophrenia of monetary policy.
While your reasoning makes sense it does not take into account any internal spending imbalances, which also seems to be one of the reasons for what you refer to as schizophrenia of monetary policy.
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For anyone in London, England on June 21st. The Adam Smith Institute is hosting a talk about the future of the economy and longer term consequences. Here's the page:
http://bit.ly/KJwPKs
The reason why he is a person of interest is because he predicted the problems facing America long before they we're beginning to emerge in the news. That's why he was successfully able to avoid the practices that led to the crisis. In fact, he grew his bank more than 30 fold during his time as CEO and continued to be profitable in a bad economy. Allison led BB&T to be in the top ten of banks in the US. He spoke out against the housing bubble before people recognized it was a bubble.
The reason why I thought this might interest you is because Europe is facing alot of financial problems that Allison predicts will get worse. He has a principled approach and may provide you with good insights with regard to what to expect in the future. There will also be a Q&A if he leaves you with an questions.
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On May 21 2012 23:17 CuddlyCuteKitten wrote:Show nested quote +On May 21 2012 23:09 Psychobabas wrote:On May 21 2012 22:43 CuddlyCuteKitten wrote:
I just came back from Greece so I wanted to make a few points from a Swedes perspective.
The situation in Greece is really harsh for a lot of people and it will get far worse soon. The price on food is the same as in Sweden or higher and yet before the crisis Greeks made less money than Swedes did. Now they've slashed wages with 700 euros per person/month and fired a whole bunch of people and it's only the start.
Basically people suffer a lot and we should remember this regardless if it's their fault or not.
I think it's entirely possible the country will devolve into a totalitarian state because that's what happens when it gets this bad. And it's entirely possible that the crisis drags down other countries with debt problems and they turn into totalitarian states as well if it goes really bad.
Now people are saying that is was impossible that this situation would led to Greece leaving the Euro. Clearly these things are hard to predict. Even now experts doesn't rule out a totalitarian government rising to power in Greece, but they say that a war in Europe is impossible.
I don't agree.
The number one priority in this crisis should be to make sure that France and Germany agrees, regardless on what the hell they are agreeing on. Because as long as they are together there will be no war and no violence within Europe but if they start squabbling all kinds of minor powers might take the opportunity to start shit and we do not know where that ends up.
If you think war in Europe is impossible you should read up on your history, the last 60 years or so are more or less unique and it's all thanks to EU. It's impossible to determine what is going to happen in terms of major economic turmoil and I think we should be better safe than sorry because after the great depression in the 30's we had a major world war and as bad as a "lost generation" of kids are because of economic problems a lost generation of dead kids are far worse. As a Greek (and English) I find this hilarious. War? What war? A war against the banks and E.U. oppression? Maybe. But this is already happening and E.U. countries are already changing their views. You really think Greece might desolve to war? No chance. also: "Now they've slashed wages with 700 euros per person/month and fired a whole bunch of people and it's only the start." This has been happening since basically 2008 in Greece. I'm not worried about Greece declaring war on anyone but you don't think there is a possibility of nationalists and communists being in streetfigths half a year from now?
I assumed you meant civil war obviously.
Again, they already are and have always been fighting in the streets for as far back as I remember (lived there for 19 years, born in 1982). The vote towards the two extremes was a warning of the Greek people that this situation cannot continue and that they are sick and tired of the same 2 parties being elected over and over. It doesn't mean that we will have a new Stalin or Hitler in government. Desperate people always tend to vote for the extremes.
Obviously it is in a sense like playing with fire but I think everybody knows that the next elections will show less hot-headed results.
I think most people are expecting a new, anti-austerity, left-minded government, much like Hollande in France.
It's an incredibly sad situation, not just for Greece but for most European countries that are struggling, Spain, Italy, Portugal, Ireland and yes, even the U.K. is in recession once again.
Personally I support a united Europe, but I don't support complete control over a countries' economic policies. You can never expect, Italy, Greece etc to have the same efficiency as the Germans, paying the same prices as Holland. Neither can you expect the Germans and Dutch to be as relaxed and friendly and family-oriented as the Greeks and Spanish. It's completely true, it's culture. Whoever thought that this was feasible must have been on drugs. I can tell you that the cultural differences between a Greek or Spanish and a Dutch or German are gigantic. Absolutely huge. But that's how it is.
For people like you and me, we were only teenagers or even children when these decisions were made and now we are facing the terrible consequences. I imagine in Sweden and most of Northern Europe people are just observers.
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On May 22 2012 00:29 DeepElemBlues wrote:
The EU should just give up on Greece... Tzipas is going to win the new election too and he's determined to send his country over the cliff, the EU needs to resign itself to the drachma coming back (and Greece getting way worse for a while before it has a chance to get better) and focus on trying to keep Italy and Spain from going down the same road Greece has... it's time to stop throwing good money after bad in Athens.
I dont think you understand. The country is already over the cliff. 50% unemployment from the 18 to 25 year olds and 23% official overall unemployment (imagine the real percentage), means the country cannot function any more. The question is, can they deal with another 10+ years of austerity? Governements in the E.U. are progressively saying no, including France and soon the U.K., going towards the left.
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On May 22 2012 18:29 Psychobabas wrote:Show nested quote +On May 22 2012 00:29 DeepElemBlues wrote:
The EU should just give up on Greece... Tzipas is going to win the new election too and he's determined to send his country over the cliff, the EU needs to resign itself to the drachma coming back (and Greece getting way worse for a while before it has a chance to get better) and focus on trying to keep Italy and Spain from going down the same road Greece has... it's time to stop throwing good money after bad in Athens. I dont think you understand. The country is already over the cliff. 50% unemployment from the 18 to 25 year olds and 23% official overall unemployment (imagine the real percentage), means the country cannot function any more. The question is, can they deal with another 10+ years of austerity? Governements in the E.U. are progressively saying no, including France and soon the U.K., going towards the left.
I don't think you understand. You will see what over the cliff really if, once Tzipas forms a government, he doesn't back down and the German spigot of money is cut off. Weimar Germany levels of inflation once the drachma comes back is a lot worse than what is going on now and that is what going to happen.
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25% unemployment and 50% youth unemployment is kinda over the cliff, how much worse can it get?
Unemployment can not get worse realisticly.
It does not neccesarely have to lead to hyper inflation i think, and definatly not permanent.
Dont know much about the greek economy but the only thing that would become alot more expensive are their imports.
Cars, oil and luxery items will become alot more expensive but not neccesarely housing, food and healthcare.
If they focus their economy on tourism only, a weak drachme is not a big problem,.
All investments they have to make to facilitate tourism are local, they dont have to import annything for it.
The initial chaos in greece would be huge and they would have a severe loss of wealth during the transation but afterwards they would be free to employ a monetery policy suited for their situation and start building up again.
As it is now greece has to compete with germany on equall grounds and they simply are not capable doing that.
Forcing them is not the solution i think.
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There are thousands of ways for Greece to get out of this situation without necessarily becoming the next weimar. Please keep it real. There is a difference between refusing to pay your debt, and going from 1 to 750 000 000 000 in 10 years (that's weimar's inflation).
It's interesting that most people who think they know economy in this forum are believers or ignorants. Like saying saving is just demand of goods for later, that's a neoclassical point of view, not an economic truth.
From the neoclassical point of view, or monetarian point of view, inflation is bad sure because it punish savings... From a keynesian point of view, a neokeynesian, a regulationnist, or most orthodoxe schools in economy, it is just not true. In fact most economist would say a little inflation is not that bad from time to time (we are talking about 4 or 6 % inflation a year, hyperinflation is 50% a month at least).
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On May 22 2012 22:26 DeepElemBlues wrote:Show nested quote +On May 22 2012 18:29 Psychobabas wrote:On May 22 2012 00:29 DeepElemBlues wrote:
The EU should just give up on Greece... Tzipas is going to win the new election too and he's determined to send his country over the cliff, the EU needs to resign itself to the drachma coming back (and Greece getting way worse for a while before it has a chance to get better) and focus on trying to keep Italy and Spain from going down the same road Greece has... it's time to stop throwing good money after bad in Athens. I dont think you understand. The country is already over the cliff. 50% unemployment from the 18 to 25 year olds and 23% official overall unemployment (imagine the real percentage), means the country cannot function any more. The question is, can they deal with another 10+ years of austerity? Governements in the E.U. are progressively saying no, including France and soon the U.K., going towards the left. I don't think you understand. You will see what over the cliff really if, once Tzipas forms a government, he doesn't back down and the German spigot of money is cut off. Weimar Germany levels of inflation once the drachma comes back is a lot worse than what is going on now and that is what going to happen.
When a country's currencies devalue, it's exports become more competitive, and it's ability to import becomes inhibited. Basically, its the fastest way to go from an import economy to an export economy. This is precisely what Japan has done to remain an economic powerhouse despite having little to no natural wealth.
So basically, going the the drachma would be awesome for Greece, but terrible for the rest of Europe, which is why the people of Greece want the drachma, and the government of Germany wants generations of already overworked Greeks to pay for the failures of globalization and neo-liberalist financial institutions.
Of course 'failures' is a bit disingenuous, as the intent of globalization is the extortion of wealth from weaker nations by stronger nations and the transnational corporate interests they represent.
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On May 22 2012 22:26 DeepElemBlues wrote:Show nested quote +On May 22 2012 18:29 Psychobabas wrote:On May 22 2012 00:29 DeepElemBlues wrote:
The EU should just give up on Greece... Tzipas is going to win the new election too and he's determined to send his country over the cliff, the EU needs to resign itself to the drachma coming back (and Greece getting way worse for a while before it has a chance to get better) and focus on trying to keep Italy and Spain from going down the same road Greece has... it's time to stop throwing good money after bad in Athens. I dont think you understand. The country is already over the cliff. 50% unemployment from the 18 to 25 year olds and 23% official overall unemployment (imagine the real percentage), means the country cannot function any more. The question is, can they deal with another 10+ years of austerity? Governements in the E.U. are progressively saying no, including France and soon the U.K., going towards the left. I don't think you understand. You will see what over the cliff really if, once Tzipas forms a government, he doesn't back down and the German spigot of money is cut off. Weimar Germany levels of inflation once the drachma comes back is a lot worse than what is going on now and that is what going to happen.
Tzipas the commie will surely call down the five horsemen and the end of days for mankind with his... Socialism...
Seriously: 2 % of the european budget is not enough to change that much in the rest of EU. Most countries have already limited their exposure towards Greece to a point where a default for Greece can even get to be an advantage for their trade.
With regard to Greece, Tzipas is nowhere near the most extreme people elected. The new dawn giving the finger to foreign press and heiling for their leader, while throwing out press who does not do the same at their press-conferences, is far more scary in my eyes.
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On May 23 2012 01:24 radiatoren wrote:Show nested quote +On May 22 2012 22:26 DeepElemBlues wrote:On May 22 2012 18:29 Psychobabas wrote:On May 22 2012 00:29 DeepElemBlues wrote:
The EU should just give up on Greece... Tzipas is going to win the new election too and he's determined to send his country over the cliff, the EU needs to resign itself to the drachma coming back (and Greece getting way worse for a while before it has a chance to get better) and focus on trying to keep Italy and Spain from going down the same road Greece has... it's time to stop throwing good money after bad in Athens. I dont think you understand. The country is already over the cliff. 50% unemployment from the 18 to 25 year olds and 23% official overall unemployment (imagine the real percentage), means the country cannot function any more. The question is, can they deal with another 10+ years of austerity? Governements in the E.U. are progressively saying no, including France and soon the U.K., going towards the left. I don't think you understand. You will see what over the cliff really if, once Tzipas forms a government, he doesn't back down and the German spigot of money is cut off. Weimar Germany levels of inflation once the drachma comes back is a lot worse than what is going on now and that is what going to happen. Tzipas the commie will surely call down the five horsemen and the end of days for mankind with his... Socialism... Seriously: 2 % of the european budget is not enough to change that much in the rest of EU. Most countries have already limited their exposure towards Greece to a point where a default for Greece can even get to be an advantage for their trade. With regard to Greece, Tzipas is nowhere near the most extreme people elected. The new dawn giving the finger to foreign press and heiling for their leader, while throwing out press who does not do the same at their press-conferences, is far more scary in my eyes.
But if Greece refuse to pay its debt, then some country will just lose money (around 83 billions euros for france I think) and a lot of banks will lose a lot money too.
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The northern countrys make alot of monney btw by helping greece, as long as it does not lead to greece leaving the zone in the end.
All this monney that germany ,the netherlands , finland etc has lend to greece @5% interest rate they are lending themselves @ 2%
As long as they get it back in the end its verry profitable.
Even if they dont get it back it doesnt realy matter i think.
All this monney wich is lost didnt exist in the first place. Its all only paper losses, virtual monney.
Usa got the 100b for bailing out freddie mac by simply typing the amount needed in the computer for example and i am 99.9% sure europe did the same with the monney for greece.
We have suposedly contributed ~ 15b to greece this year but you wont see that 15b as a cost in the fiscal budget for this year, nor the next.
If the eu wont get back the euros from greece then thats not a huge problem at all.
The euros are already spend, the inflation is already in the system.
Not taking the monney out in the end does not realy have a big effect i think.
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+ Show Spoiler +
European BoT interest rates. I hope you can recognize the countries nontheless.
The huge peak from before should have been the timing when a sudden stock market crash happened.
Looks like we are on the way to the next peak.
The question is whether there will be some sort of intervention from the ECB this time.
An economist in a german article said that the bailouts were just a way for the creditors to get rid of the Greek BoT they still had.
Regarding economic theories: It doesn't require (/suffice) the theory to be plausible in general.
They all are valid in specific contexts, the question which theory to apply depends on the environment you want to have explained.
Saying one doesn't support keynesianism or monetarism or whatever without mentioning the particular fact that shows that the theory is inappropriate applied on the discussed problem is something i saw a lot of times.More relativism pls, the theories were created in times with a certain type of economy, formed by political interests.
Also, people need to realize that the 'real economy' (as opposed to the financial industry) has waaaay less influence on global processes than they had a few decades ago. Most theories are based on the explanation of real economy processes. Like, there are people talking about inflation as if someone pushed the print-money-button, automatically giving an equal part to each citizen.
Differ between asset and consumer good inflation. Whenever your government tells you about inflation, it mentions the latter.
Back to the banks (in Europe): They don't just have own interests anymore. Bigger banks were supposed to support Greece with their financial support from the ECB.
The financial industry has become a political instrument, that makes economic theories based on the assumption that everyone in a market wants to maximize his profits even weaker.
For an overview of bank engagements in Greece (sorry, i only found it in german):
+ Show Spoiler +
Source: www.euractiv.de . There might be an english version of the site.
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On May 23 2012 02:30 Cattivik wrote:+ Show Spoiler +European BoT interest rates. I hope you can recognize the countries nontheless. The huge peak from before should have been the timing when a sudden stock market crash happened. Looks like we are on the way to the next peak. The question is whether there will be some sort of intervention from the ECB this time. An economist in a german article said that the bailouts were just a way for the creditors to get rid of the Greek BoT they still had. Regarding economic theories: It doesn't require (/suffice) the theory to be plausible in general. They all are valid in specific contexts, the question which theory to apply depends on the environment you want to have explained. Saying one doesn't support keynesianism or monetarism or whatever without mentioning the particular fact that shows that the theory is inappropriate applied on the discussed problem is something i saw a lot of times.More relativism pls, the theories were created in times with a certain type of economy, formed by political interests. Also, people need to realize that the 'real economy' (as opposed to the financial industry) has waaaay less influence on global processes than they had a few decades ago. Most theories are based on the explanation of real economy processes. Like, there are people talking about inflation as if someone pushed the print-money-button, automatically giving an equal part to each citizen. Differ between asset and consumer good inflation. Whenever your government tells you about inflation, it mentions the latter. Back to the banks (in Europe): They don't just have own interests anymore. Bigger banks were supposed to support Greece with their financial support from the ECB. The financial industry has become a political instrument, that makes economic theories based on the assumption that everyone in a market wants to maximize his profits even weaker. For an overview of bank engagements in Greece (sorry, i only found it in german): + Show Spoiler +Source: www.euractiv.de . There might be an english version of the site.
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible.
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On May 23 2012 01:18 WhiteDog wrote:
There are thousands of ways for Greece to get out of this situation without necessarily becoming the next weimar. Please keep it real. There is a difference between refusing to pay your debt, and going from 1 to 750 000 000 000 in 10 years (that's weimar's inflation).
It's pretty much impossible to happen an hyperinflation in Greece. There are many reasons why there is a certain limit on how much inflation can exist like for example the wealth that currently exists in the country (someone could possibly sell his iphone on ebay and have nuff money for a year?).
Another thing is immigration, would be possible for someone to work abroad for a year and earn enough money to live his life for 10 years back home.
Also the globalized market works as an obstacle to extreme devaluations and inflation, assuming a new currency devaluated by, lets say, 100 times that would be something like 3euro monthly wage, obviously there would be a huge interest for cheap workers and that soon would increase the wages.
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On May 23 2012 07:30 accela wrote:Show nested quote +On May 23 2012 01:18 WhiteDog wrote:
There are thousands of ways for Greece to get out of this situation without necessarily becoming the next weimar. Please keep it real. There is a difference between refusing to pay your debt, and going from 1 to 750 000 000 000 in 10 years (that's weimar's inflation).
It's pretty much impossible to happen an hyperinflation in Greece. There are many reasons why there is a certain limit on how much inflation can exist like for example the wealth that currently exists in the country (someone could possibly sell his iphone on ebay and have nuff money for a year?). Another thing is immigration, would be possible for someone to work abroad for a year and earn enough money to live his life for 10 years back home. Also the globalized market works as an obstacle to extreme devaluations and inflation, assuming a new currency devaluated by, lets say, 100 times that would be something like 3euro monthly wage, obviously there would be a huge interest for cheap workers and that soon would increase the wages.
I think you don't plainly understand what inflation is. I agree hyperinflation is hardly a possibility (but never say never). On the other side, it doesn't mean at all that the workers would become cheap with a huge inflation, nor that one guy would live for a year selling his iphone.
Let's say your iphone cost 20€, your are paid 100€ and you buy your bread 1€. Now with an inflation of 100%, relatively nothing change, you still gain enough to pay 5 iphone (we suppose you still have your job of course), and a hundred bread, except you are paid 200 and the iphone cost 40 while the bread is 2€.
There is nothing against devaluation in the market, as we have seen in recent crisis, like the Asiatic crisis in 1997 (for exemple, the indonesian rupiah had 2,380 exchange rate per US $ in june 1997 and 14,150 exchange rate in july 1998, 83.2% increase in a year). Not to mention that cheap wage doesn't mean at all that it will create interest and work. The job market is not a market rule by offer and demand like the banana market, at least in the short term.
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On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible.
It sounds like you completely exclude banks as political instruments, but what would you call bad banks then?
What ways do you have of making profit out of Greece as a bank?
Some kind of explication would be nice.
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Well as a bank you could lend monney from the ecb at 1% interest under their Ltro.
The ecb requires a colleteral for this loan but the good thing is that they accept nearly anny colleteral (as long as its european).
So the banks can buy the greek bond giving them 5% interest and use thoose as a collateral to lend the same amount at 1% from the ecb.
The difference is pure profit for the bank, no initial investment is needed.
There are some strings attached though.
What if greece (and other southern european countrys) dont pay back the new bunds?
Well that should be no problem for the bank, i asume they can just default their debt to the ecb and not get back their collateral.
The ecb now holds all the debt and the ecb never has to write down on its debt !
(debt to the ecb was the only debt excluded from the greek debt deal and it still has to be repaid 100%)
The banks also made (and probably lost) monney on making bets against or in favour of greece on the financial markets
though i think this is not what you meant.
The banks had to write of 80% on their "old" greek debt,
The banks had to get some compensation for this loss and this is how they got it.
(in the end the banks didnt buy as manny european bonds as the ecb did hope, they mostly refinanced their own debts)
This also was needed to re- finance the banks as they had run into huge trouble getting financing on the markets.
It is a verry complicated situation and i definatly dont think i fully understand it but i do think that banks now make (well rather made, during the ltro wich is now closed) monney on buying bonds from the southern eurozone.
I thought that was the idea at least,
The ecb could in this way indirectly support the southern bonds,while at the same time supporting the banking industry.
If i am completely wrong here btw, feel free to enlight me
Banks are a political instrument, but its also the other way around.
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On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible.
Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark.
The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German.
The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks.
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EURUSD at 1.2580, resistance at 1.26, which is a psychological level. Double bottom pattern failed. Maybe by the end of next week, or the beginning of the week after that, we will see the price go to 1.2, the next major psychological level.
Get analyzed you stupid currencies.
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EPT![[image loading]](http://i.imgur.com/lgRoF.gif)
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