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On February 14 2015 04:19 Nyxisto wrote:
I don't understand the point about cash flow out of Greece, if anything the creation of a common currency has lead to "excess money" going into Greece, creating the imbalance that has now lead to Greece's indebtedness?
Compare to a closed circuit : if greece was closed, the excess money in greece would have created inflation right ? That was not the case, so it was not excess money : it didn't lead to a decrease in the value of money, so it mean that the money was actually used to increase production somewhere (it responded to a demand of money), just not in greece, or not at a rate high enough to pay back the interest and the debt (or both).
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On February 14 2015 04:22 warding wrote:
WhiteDog I studied economics in college and I'm having a hard time interpreting what you're saying. Could you elaborate a bit on what you mean by closed circuit? Do you mean a country that has its own currency and restricts trade with the outside world? By saying that the problem with Greece is not being in a 'closed circuit' are you implying that the solution is an exit from the Euro and from the single market?
I'm simplifying because I don't have the courage to actually write something decent but yeah in economic term I guess a closed circuit is a protectionist state with its own currency - the euro zone.
Now think about the euro zone, with a few agent (each for one country) each receiving influx of cash and giving back influx of cash : if there is a sudden and endegenous increase in cash from one agent (greece debt), this money did flow somewhere (or created inflation if it was completly useless and just decreased the value of money, but that was not the case), so the main problem is not that the money was unproductive, but that the flow didn't come back to greece (because someone, somewhere, didn't spend it after receiving it).
Seeing the problem this way, it's way deeper than just a question of debt : the real problem is how the euro zone can be a real circuit that permit fiscal transfert (or cash flow in my 2d easy to get modelisation) efficiently so that all investments in a country eventually get back to that country (o say it in another way, since the money does not balance trade, how can the state do it). Since all agents, or countries, in the euro zone are HUGELY different in their competitiveness (differences in inflation rate most notably due wage increase, consumption and saving practices), it does not work this way, and there is a huge collection of flow that stack up in specific area (germany, maybe the ile de france) and nothing to force this money to go back to greece.
I feel like it's a very bad way to explain what I'm talking about. Maybe I should write something serious, tell me if you think I'm unclear.
Ha sorry for doublepost.
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On February 14 2015 04:01 Sub40APM wrote:Show nested quote +On February 14 2015 03:26 Taguchi wrote:On February 14 2015 03:13 Sub40APM wrote:On February 14 2015 03:02 Taguchi wrote:On February 14 2015 02:29 Nyxisto wrote:
I think there's a difference between some shitty tabloid or if it's a political party that creates hostility. I don't see the current German government treating Greece in the same way. Are you serious about this? Greece just had an election, where they voted the parties that brought it to its knees (PASOK and ND) out of government, for the first time ever in the period of parliamentary democracy (after the 1967-74 junta). Whats the difference between what Styrizia says its going to do and the way PASOK ruled? It seems like their public spending promises are the same, no? I guess Styrizia's election also seems to have caused many Greeks to stop paying taxes too. Syriza has been in power for about 3 weeks now, and was sworn in only last week. Tax collection crumbled during December and January, possibly (wild speculation, I know) because the leader of ND, Samaras, went on a campaign centered on fear and misinformation about the results of Syriza getting voted in. Who knew that having the current PM tell you we're about to go up in flames would destroy tax receipts?! Yea but I am talking about policies, PASOK spent a lot on varous social spendings no? Show nested quote +
Difference between PASOK and Syriza is that Syriza proposes to never go into debt again, and values this goal more highly than any other announcement.
How are they going to do that? Show nested quote +Given that even announcements like the hike of the minimum wage do not affect government spending all that much (goverment doesn't employ minimum wage people, only unemployment benefits are tied to minimum wage and these aren't a whole lot obviously - longterm unemployed people don't receive benefits at all, after all). High minimum wage --> more un employed people ---> more government benefits. I am not saying the old boys club should have preserved but from what I read on actual policies PASOK and Syriza are more or less the same, except Syriza couldnt get some pet oligarch to pay for their elections. I am genuinely curious what the Greeks think Syriza can do other than add a bit more anti-German rhetoric?
The minimum wage hike has been agreed to by industry, fyi. And it will be implemented gradually (small hike, see what happens, small hike again, see what happens, up to whatever the target amount is) so if it's a failing measure it can easily be rescinded. If unemployment doesn't rise as a result of the measure it will boost spending capacity of the very people who couldn't afford anything previously and may thus play a role in starting up a virtuous economic cycle. Besides, the minimum wage flattening did not do anything positive for unemployment, and it certainly contributed to the deflationary spiral seeing as even people with minimum wage jobs couldn't afford stuff anyway.
The policies espoused by PASOK were espoused in rhetoric only. In reality, crony capitalism benefitted - a shipping industry that didn't have to pay taxes, monopolies/oligopolies that were established and so on. With Syriza there is the potential that these mistakes will not be repeated - one can hope, right?
Again, about PASOK: The current leader (Venizelos) claims he 'forgot about' the Lagarde list in a shelf in his desk, hence he did nothing about it as MinFin. The previous PASOK MinFin (Papakonstantinou) is under trial for erasing certain names from the Lagarde list - the names of his own relatives, that is. When corruption gets to this point, any 'policies' and 'measures' inevitably become insignificant.
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Of course Greece still needs to continue reforming its government and economy. But people need to have some realism here. Real reform is going to be a decades long process and be quite painful for the Greeks. Sure, in the very long run that will be beneficial to the Greeks, but for the next few decades the Greeks will see little benefit. A stronger Greek economy means that Greece will be able to pay back its debts, and little else - like a classic debt overhang. Who in Greece is seriously going to be motivated by the prospect of working hard so that Germans can get more cash?
Additionally, the plan from the start has been for the Greek government to engage in austerity and for the private sector to fill the void. It should go without saying that the latter just hasn't materialized. I'm also not sure how it is supposed to materialize without resolving the uncertainty over the Greek government's debt, or how Greek exporters are supposed to flourish with Germany already exploiting that avenue of the crisis.
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On February 14 2015 04:23 WhiteDog wrote:Show nested quote +On February 14 2015 04:19 Nyxisto wrote:
I don't understand the point about cash flow out of Greece, if anything the creation of a common currency has lead to "excess money" going into Greece, creating the imbalance that has now lead to Greece's indebtedness? Compare to a closed circuit : if greece was closed, the excess money in greece would have created inflation right ? That was not the case, so it was not excess money : it didn't lead to a decrease in the value of money, so it mean that the money was actually used to increase production somewhere (it responded to a demand of money), just not in greece, or not at a rate high enough to pay back the interest and the debt (or both).
But isn't that just another way of saying that the money borrowed by the Greek government and private actors just simply was wrongly invested or spent, because else it would have created productivity that would have enabled Greece to pay back debt and interest now? So it's at least partially a structural problem within the Greek economy and not only a problem of the Eurozone?
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On February 14 2015 04:28 WhiteDog wrote:Show nested quote +On February 14 2015 04:22 warding wrote:
WhiteDog I studied economics in college and I'm having a hard time interpreting what you're saying. Could you elaborate a bit on what you mean by closed circuit? Do you mean a country that has its own currency and restricts trade with the outside world? By saying that the problem with Greece is not being in a 'closed circuit' are you implying that the solution is an exit from the Euro and from the single market? I'm simplifying because I don't have the courage to actually write something decent but yeah in economic term I guess a closed circuit is a protectionist state with its own currency - the euro zone. Now think about the euro zone, with a few agent (each for one country) each receiving influx of cash and giving back influx of cash : if there is a sudden and endegenous increase in cash from one agent (greece debt), this money did flow somewhere (or created inflation if it was completly useless and just decreased the value of money, but that was not the case), so the main problem is not that the money was unproductive, but that the flow didn't come back to greece (because someone, somewhere, didn't spend it after receiving it). Seeing the problem this way, it's way deeper than just a question of debt : the real problem is how the euro zone can be a real circuit that permit fiscal transfert (or cash flow in my 2d easy to get modelisation) efficiently so that all investments in a country eventually get back to that country (o say it in another way, since the money does not balance trade, how can the state do it). Since all agents, or countries, in the euro zone are HUGELY different in their competitiveness (differences in inflation rate most notably due wage increase, consumption and saving practices), it does not work this way, and there is a huge collection of flow that stack up in specific area (germany, maybe the ile de france) and nothing to force this money to go back to greece. I feel like it's a very bad way to explain what I'm talking about. Maybe I should write something serious, tell me if you think I'm unclear. Ha sorry for doublepost.
Yes please write something more serious.
Though if I understand it correctly you're saying money goes from Greece to a specific area(Germany Netherlands etc.) Into savings (and thus debt). What should happen is that those savings get spent and thus flows back to Greece.
In a closed economy and a nation state where the same thing the savings would go back at least partly by fiscal transfers.
I'm even worse in describing my thoughts than you but I guess this is the gist of it?
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somewhat related with all the talks about german export lately:
A Reuters poll of 51 economists had forecast a 0.2 percent expansion, the same rate as in the third quarter.
Year-on-year, euro zone growth was 0.9 percent in the fourth quarter, also 0.1 percentage points higher than expected.
The euro zone's biggest economy, Germany was a clear outperformer, growing by 0.7 percent in the quarter, far surpassing expectations of a 0.3 percent rise.
[...]
Domestic demand lifted Germany out of its mid-year lull and allowed it to achieve 2014 growth of 1.6 percent. The Statistics Office said a significant pick up in household spending had helped overcome the summer slowdown.
"This is a thunderbolt," UniCredit economist Andreas Rees said. "Some spoke of possible recession after the summer but instead Germany rebounded. The fact that the growth comes mainly from the domestic economy gives strong grounds for optimism."
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Do more detailed statistics on bilateral trade exist somewhere? I wonder how much increasing demand from Germany affects trade within EU as opposed to the Germany - China trade relationship, for example.
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On February 14 2015 10:07 Toadesstern wrote:somewhat related with all the talks about german export lately: Show nested quote +A Reuters poll of 51 economists had forecast a 0.2 percent expansion, the same rate as in the third quarter.
Year-on-year, euro zone growth was 0.9 percent in the fourth quarter, also 0.1 percentage points higher than expected.
The euro zone's biggest economy, Germany was a clear outperformer, growing by 0.7 percent in the quarter, far surpassing expectations of a 0.3 percent rise.
[...]
Domestic demand lifted Germany out of its mid-year lull and allowed it to achieve 2014 growth of 1.6 percent. The Statistics Office said a significant pick up in household spending had helped overcome the summer slowdown.
"This is a thunderbolt," UniCredit economist Andreas Rees said. "Some spoke of possible recession after the summer but instead Germany rebounded. The fact that the growth comes mainly from the domestic economy gives strong grounds for optimism."
The German economy is still expanding slower than the Japanese economy.
Government spending on infrastructure still remains low. The budget is running on deficits.
The only advantage Germany has over Japan is that its country isn't as aged as Japan's and that Germany exports more than Japan does.
User was banned for this post.
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and why is that relevant at all?
I think you are in the wrong thread
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On February 15 2015 00:16 AutoEngineer wrote:Show nested quote +On February 14 2015 10:07 Toadesstern wrote:somewhat related with all the talks about german export lately: A Reuters poll of 51 economists had forecast a 0.2 percent expansion, the same rate as in the third quarter.
Year-on-year, euro zone growth was 0.9 percent in the fourth quarter, also 0.1 percentage points higher than expected.
The euro zone's biggest economy, Germany was a clear outperformer, growing by 0.7 percent in the quarter, far surpassing expectations of a 0.3 percent rise.
[...]
Domestic demand lifted Germany out of its mid-year lull and allowed it to achieve 2014 growth of 1.6 percent. The Statistics Office said a significant pick up in household spending had helped overcome the summer slowdown.
"This is a thunderbolt," UniCredit economist Andreas Rees said. "Some spoke of possible recession after the summer but instead Germany rebounded. The fact that the growth comes mainly from the domestic economy gives strong grounds for optimism." The German economy is still expanding slower than the Japanese economy. Government spending on infrastructure still remains low. The budget is running on deficits. The only advantage Germany has over Japan is that its country isn't as aged as Japan's and that Germany exports more than Japan does.
haha you are still on the japan thing in every thread
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Norway28647 Posts
I think he confuses every thread with the "this is why japanese demographics are hurting them" thread. Incidentally, we have no such thread, because it's not a topic many people care about.
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I suggest making a blog. Isn't that what they're for?
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I thought he was banned from posting in general forum?
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Saw this in a blog post. I've no idea how good the methodology is. Still, it puts Greece as a major reformer in the OECD.
+ Show Spoiler +
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WhiteDog, I'm sorry, but you are misunderstanding money theory somewhat. If you've taken Macroeconomics in college, you accept that generally money comes from work and then it is spent on consumer goods & things like rent/food/plane tickets/entertainment. So there is some exchange between countries occasionally and banks CERTAINLY move a lot of money around between various locations if they are multinationals (Wells Fargo, Nordea, etc), but really most of the money comes from one or two or three sources and is then disseminated to a variety of outlets.
Edit: Sorry TeamLiquid, I couldn't resist the chance to post a classic Dilbert. This is the corporate economy, in a nutshell.
http://dilbert.com/strip/2014-04-08
Edit2: rest of post redacted due to threats.
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(Reuters) - Talks between Greece and euro zone finance ministers over the country's debt broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout as "unacceptable".
The unexpectedly rapid collapse raised doubts about Greece's future in the single currency area after a new leftist-led government vowed to scrap the 240 billion euro bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.
Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said Athens had until Friday to request an extension, otherwise the bailout would expire at the end of the month.
How long Greece can keep itself afloat without international support is uncertain. The European Central Bank will decide on Wednesday whether to maintain emergency lending to Greek banks that are bleeding deposits at an estimated rate of 2 billion euros a week.
"The general feeling in the Eurogroup is still that the best way forward would be for the Greek authorities to seek an extension of the programme," Dijsselbloem told a news conference.
Greek Finance Minister Yanis Varoufakis hit back, complaining that Dijsselbloem had refused to discuss a proposal from the executive European Commission that would have given Athens a four-month breathing space in return for the new government holding off on major policy changes.
He sought to play down the setback as a temporary hitch rather than an impasse.
"I have no doubt that within the next 48 hours Europe is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary," Varoufakis told a news conference.
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Huh not really. Money does not come from work at all, I'm not sure where you learned that but it's not economic theory at all. Money is an intermediary for trade in economic theory - the idea of the veil or the dichotomy stress that enough. Money has no value in itself, and it's the quantity of money that create its value : by rarity. Thus, by choosing to extend or compress the monetary mass, it's the central bank that define the value of money in an economy (the inflation rate).
It's true that bank move the money, but adding the financial system to the little model I was discussing does not make it false : it just create the possibility of a debt crisis, because in the existance of a stable desequilibrium, the debtor and the creditor are always the same.
That germany does not spend money is not the problem in itself, the problem is that they are in the same common currency as Greece, and that without a floating exchange rate, their exchange rate in relation to Greece's exchange rate does not change even if they don't spend.
I was away on a week end, I'll try to post a clear explanation in a few days of the european monetary system and how it is entirely responsible for situation at hand, and how reforming the public sector in favor of the private sector is not a solution - like suggested in previous posts.
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EPT![[image loading]](https://dl.dropboxusercontent.com/u/72070179/OECD%20reform%20chart.png)
