Top Diaries

If we do not get rid of the Maastricht straitjacket, there is a realistic possibility that you will not have a European Union to spend an EU budget in.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:05:00 PM EST
[ Parent ]

It's not about the Maastricht straitjacket, it's about Keynes' negative feedback loop on surpluses.

Of course, admitting that deficit spending needs to be unconstrained in a recession and that the ECB should monetize public debt if necessary, would help.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 06:37:21 PM EST
[ Parent ]

Re: all I can say (4.00 / 2)

Lifting the Maastricht straitjacket would impose a negative feedback on surpluses. Unless the surplus countries enjoy getting paid for their exports with their own money.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:53:36 PM EST
[ Parent ]

But that's what they have been doing. The German export surplus gets loaned back to the deficit countries so they can continue to import.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:29:13 AM EST
[ Parent ]

Re: all I can say (4.00 / 5)

No, that's not what they've been doing.

They have clearly been living under the impression that they were going to get paid in the Greeks' money. Eventually.

The fact that this is mathematically impossible does not seem to have dawned upon them just yet.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 01:35:47 AM EST
[ Parent ]

Of course they were always going to be paid in the ECB's money, given that the Euro is a fiat currency. The real problem is that the Germans and the ECB are Aust[e]rian gold bugs.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:40:08 AM EST
[ Parent ]

Comes to the same thing (n/t) (4.00 / 2)

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 01:41:04 AM EST
[ Parent ]

Re: all I can say (4.00 / 3)

Sending in the bailiffs to take away some sun-drenched islands and perhaps an Acropolis (or more mundane goods) is a way of getting paid in Greeks' money.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:10:58 AM EST
[ Parent ]

Or just buying up even more holiday homes, businesses and other property assets in Greece. The Greeks get an Aldi near them by way of recompense.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:28:57 AM EST
[ Parent ]

Re: all I can say (none / 0)

PS an Aldi is about yo be built just up the road from my home...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:29:40 AM EST
[ Parent ]

Re: all I can say (4.00 / 2)

In rural France, I don't have far to go to two Lidls and an Aldi. I don't consider them evidence of German colonisation, just part of an even cheaper crap food distribution subsystem of large-corporate supermarketry in general.

As to Greece, I did mention "more mundane goods". The point being that the core financial system will (if not checked) extract its pound of flesh.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:49:51 AM EST
[ Parent ]

... if they get to keep them.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:02:59 AM EST
[ Parent ]

Just like to note for clarification that "they" are not a consistent group.

German workers has by way of slashing the social safety net been convinced not to fight for their fare share of production increases. (If they had more would have been consumed, leading to imports and more even trade.)

This surplus has instead been claimed by German owners of industries and gambled through the financial system.

The German financial system has then loaned the money back to the deficit countries, unaware or not caring about how unsustainable the total is.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Tue May 31st, 2011 at 04:44:37 PM EST
[ Parent ]

Re: all I can say (4.00 / 6)

If instead of excess German capital going to Greek bonds, Irish real-estate banking, US mortgage backed bonds and so on, the money had been paid out to German workers for vacations in the South, the world economy would have been on a more solid footing and German workers would have been happier.

by rootless2 on Tue May 31st, 2011 at 06:37:09 PM EST
[ Parent ]

Yes but if everyone was happy with their lot, why would we need banks? People wouldn't have to borrow. We need pain and suffering to make the system work. How else can we extract "value" from the have nots to make sure the have mores have more. Isn't that the point of economics?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:30:44 PM EST
[ Parent ]

exactly (4.00 / 5)

the problem is not so much the euro as the robber baron policies of all of our elites, including the Germans.

But the Germans have been especially effective at pushing the blame away from them and towards Southern Europeans and making the average Germans feel self-righteous about their efforts instead of furious at having being ripped off by their bosses and banks.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:06:23 AM EST
[ Parent ]

Re: exactly (4.00 / 6)

The design of the Euro, like the gold standard before it, encourages mercantilist inflation policies by allowing the mercantilists to externalise the unemployment caused by their irresponsible policy.

You can't design a system that favours irresponsible policy and then claim that the only problem is the stupidity of the people who implement that policy.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 10:59:53 AM EST
[ Parent ]

Re: exactly (none / 1)

"You can't design a system that favours irresponsible policy and then claim that the only problem is the stupidity of the people who implement that policy."

Your point, which I grant and agree with, is that one ought not do that.

But, unfortunately, "you can do that." And that is, to greatly over-simplify things, much of the trouble today. You can do that and do it over and over and over again. We are perhaps going to discover whether or not this state of affairs can last much longer.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 11:28:28 AM EST
[ Parent ]

A swedish kind of death:

The German financial system has then loaned the money back to the deficit countries,

all the while patting themselves on the humanitarian back for 'developmental aid'. who can deny the new businesses and suv sales? GROWTH has arrived!

send in the clowns.

The power of knowledge is in mortal combat with the knowledge of power. It really is that simple... That's the Edenic apple we are all munching on.

by melo (melometa4(at)gmail.com) on Wed Jun 1st, 2011 at 02:03:57 PM EST
[ Parent ]

I must have missed the ad hominem comment (4.00 / 4)

I thought we were discussing the best way of framing the problem:
a) from a theoretical/analytical perspective, and
b) from a populist/propagandist perspective

From either perspective, I am not persuaded that Euro Crisis is not the best short hand to describe it. Sure, German intransigence, policy, trade surpluses, and ECB domination are a large part of the problem. But there are also problems in other member states, and the overall problem is one of a lack of an appropriate policy framework and economic leadership at EU level.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:17:27 PM EST
[ Parent ]

Re: all I can say (4.00 / 6)

I see this as a macroeconomic crisis brought about by ideological and incompetent economic design of the Eurozone. It's not about the "Maastricht Straitjacket". It's about the single-minded focus on monetary variables to the exclusion of what really matters, trade imbalances, current account imbalances and structural unemployment. The political crisis just makes the structural macroeconomic crisis impossible to solve, but in fact given the pitiful state of economic thought in the EU policy establishment, the political crisis is the least of our problems. The economic advice that politicians are getting and the very public pronouncements of the ECB council members and central bankers would be enough to sink the Euro even without nationalistic politicians at the helm. Just consider that the new BuBa chief said at his inauguration that financial stability should be subordinate to "price stability" and that Merkel wanted the guy to chair the European Financial Stability Board (!)

And if the crisis is resolved somehow without instituting some sort of negative feedback loop on trade imbalances, it is guaranteed that it will blow up again.

You may find this piece interesting and instructive: On the Political Economics of Dominic Strauss Kahn's Political Death

Back in January (of 2011), DSK was being interviewed by a BBC Radio journalist in the context of a documentary on the history of the IMF. Toward the end of the program, I heard the distinctive voice of DSK responding to a journalist's question about how the global economy ought to be reconfigured in the aftermath of the 2008 Crisis. His astonishing answer was:
Never in the past has an institution like the IMF been as necessary as it has been today... Keynes, sixty years ago, already foresaw what was needed; but it was too early. Now is the time to do it. And I think we are ready to do it!
This was, in my estimation, a bombshell of a programmatic statement by the IMF's Managing Director. What was he referring to? He was, of course, referring to Keynes' powerfully put argument (in the context of the 1944 Bretton Woods conference) that a system of fixed exchange rates cannot survive for long without an automated mechanism that treats (a) systematic trade surpluses and (b) systematic trade deficits as the different sides of a problematic coin.
...
As I have explained in some detail (see here for example) the poignancy of an SRM [Surplus Recycling Mechanism] (and of its absence), I shall desist from repeating it here. Suffice to point out the political and economic significance of DSK's endorsement of Keynes' suggestion and, in particular, the determined statement that Keynes was ahead of his time but not, after the Crash of 2008, "Now is the time to do it. And I think we are ready to do it!"
...
Within Europe, the prospect of a French President who believes strongly (and is prepared to back up his convictions with a formidable analytical panoply) that the eurozone cannot survive without a Surplus Recycling Mechanism (which channels German surpluses to the deficit countries in the form of productive investment) had the potential radically to alter the political and economic agenda of the continent. It would, in particular, offer an invigorating counterpoint to the current mental incapacity to come to terms with the deeper causes of the euro crisis and to, at long last, recognise that the debt crisis is a symptom, not the cause of the string of failures that threaten the eurozone's very existence.

(Yes, I've read a goodly chunk of Varoufakis' blog today)

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 06:34:45 PM EST
[ Parent ]

The problem - in Ireland's case - was that German banks were recycling their surpluses not in productive investment, but into an asset price bubble which rendered Ireland's economy still less competitive.

This dysfunctionality was exacerbated by the fact that banks, as surpluses recyclers, were predisposed to "safe" financialisation or property investments rather than "risky" productive investments, or long term infrastructural investments which might have rendered the irish economy more competitive.

Thus private banks or "markets" are ineffective rebalancers of surpluses, and what is needed is an EU directed infrastructural, regional, industrial and energy policy framework.

So yes, it is a problem of too little EU, but also a lot of the wrong sort of EU intervention - such as currently being peddled by the ECB. The EU is not an unalloyed good which should be supported in all circumstances, it needs to be pursuing different policies in a much more effective manner.

Jerome has argued that administrative competence is a form of democratic legitimacy. The EU has been losing legitimacy because it has been incompetent. NOT because of the British, or there being too much English spoken in Brussels.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:49:21 PM EST
[ Parent ]

Re: all I can say (4.00 / 6)

It's not as if SG and DB and the landsbanks didn't have profitable investment opportunities in the home countries either. But the big money and bonuses came from speculation in real-estate and in junk bonds.

by rootless2 on Mon May 30th, 2011 at 07:18:55 PM EST
[ Parent ]

Re: all I can say (4.00 / 5)

This dysfunctionality was exacerbated by the fact that banks, as surpluses recyclers, were predisposed to "safe" financialisation or property investments rather than "risky" productive investments, or long term infrastructural investments which might have rendered the irish economy more competitive.

Bingo!

This is why relying on "the market" to determine the direction of investment is wrongheaded. Which means that the EU rule that the public sector must fund itself in the money markets is barking mad. But it's written into the EU treaties (the infamous article 123).

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:34:20 AM EST
[ Parent ]

And the EU has been becoming incompetent as a result of the Reagan/Thatcher revolution and the hollowing out of Economics education by Friedman followers (and worse) since the 1980s.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:35:52 AM EST
[ Parent ]

Keynes was partially right.... (4.00 / 2)

I think that Keynes' Gesellian approach at Bretton Woods to his Bancor/International Clearing Union was spot-on and is a key insight which I have referred to here many times.

But the central issuance of a fiat Bancor by the ICU quasi-IMF/World Bank institution he had in mind required global government and global taxation to back it. This is just a New World Order wet dream.

I like to distinguish between:

(a) Financing - which is short/medium term, high risk credit based upon productive people, and which enables the creation of productive assets;and

(b) Funding - which is medium/long term; low risk, and based upon the use value of productive assets.

Financing does not require deposits: merely credit clearing based upon the capacity of individuals and corporates to provide value.

VISA is a good example, where there are no deposits, and both the sell side (through charges) and the buy side (who pay interest in respect of unpaid balances) cover system and default costs and provide a handsome profit to the owners.

The Swiss WIR is another credit clearing system which has been around since 1934, and the ongoing Ecuadorean FactoRepo is yet another. In neither case does fiat currency change hands: obligations are settled not in exchange for, but by reference to fiat currency as a numeraire.

It is the deployment of the credit necessary for Funding of productive assets which is the interesting question.

This is where the need for deposits comes in and how a currency issue may actually be based upon productive assets.

Here, John Law's analysis and proposal in 1705 for land-backed currencies remains valid, I think, but requires updating, through the creation of units redeemable in payment for rentals in respect of real property held by a custodian. Of course, such land-based currencies would be by definition domestic, but their creation would enable existing unsustainable property debt to be converted to undated credits ina debt/equity swap on a cosmic scale.

But in relation to the EU and the need for a common (not a single) currency there is IMHO a genuine opportunity to base a European currency upon the value of energy. Moreover, the skills and experience to architect and lead such a project are available on this site.

How that might work is one of the things we'll probably touch upon next week when we focus on my pet subject of Resilient Financial Markets.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon May 30th, 2011 at 07:32:13 PM EST
[ Parent ]

Re: Keynes was partially right.... (4.00 / 2)

But the central issuance of a fiat Bancor by the ICU quasi-IMF/World Bank institution he had in mind required global government and global taxation to back it.

Yes.

Shared fiscal policy is a necessary condition for a stable fixed-currency regime.

That is not an indictment of Keynes' analysis, it is an indictment of the Gold Standard.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 07:36:50 PM EST
[ Parent ]

Re: Keynes was partially right.... (4.00 / 2)

In addition, the EU (unlike the World as a whole) could have federal level fiscal policy...

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:31:32 AM EST
[ Parent ]

Re: Keynes was partially right.... (4.00 / 2)

Which presumably was the plan by the Euro founders - who had a strategic vision unlike their successors today who couldn't think their way backwards out of a paper bag.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 02:54:37 AM EST
[ Parent ]

Re: Keynes was partially right.... (4.00 / 3)

Hmm, they already knew Germany wouldn't go for it 20 years ago...

Or Germany was hoping to impose German macroeconomics on the rest of Europe, as has happened with Merkel's "Euro Plus Pact" (formerly the Pact for the Euro formerly the Competitiveness Pact formerly the Deauville pact).

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:43:09 AM EST
[ Parent ]

Re: Keynes was partially right.... (4.00 / 7)

Migeru:

they already knew Germany wouldn't go for it 20 years ago

You've said that Germany has been pursuing the same mercantilist goal for twenty years, and now that the other EEC leaders at the time knew that Germany would never accept compromise on the currency (so, presumably, moves towards a more federal type of economic governance), but went ahead all the same.

Can you write a diary explaining this?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:40:43 AM EST
[ Parent ]

well, 20 years ago (4.00 / 3)

there still was momentum for "ever closer union." This died somewhere in the late-90s/early 00s and was killed off by France's NON to the EU Constitution, which basically set in stone the message that there would be no increase to the political legitimacy of the Brussels institutions, ceding the ground to national governments.

And at times of crisis, national populism is the easy route to deflect blame and rally people, with predictable results.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:09:44 AM EST
[ Parent ]

Re: well, 20 years ago (none / 0)

Stop blaming the political left for the sins of Third-Way social democrats.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:19:24 AM EST
[ Parent ]

Re: well, 20 years ago (none / 0)

where did you see me blame the political left in my comment above?

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:33:27 AM EST
[ Parent ]

Re: well, 20 years ago (none / 1)

France's NON to the EU Constitution

which you blame (not in that comment, but you did all thrrough the Constitution debates on this site years ago) on the French "lyrical left" and rebels within the PS.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:40:09 AM EST
[ Parent ]

Re: well, 20 years ago (4.00 / 4)

I did indeed, but in this case I was making a more general point about the overall loss of desire for "ever closer union." Maybe it was generational change, maybe it was the focus on enlargement (which as we know the Brits did see, rightly or wrongly, as a distraction from deepening tendencies), maybe it was having a fundamentally eurosceptical French president (Chirac), maybe it was the cost and change in perspective(s) from Germany' reunification it was the scandinavians and the more utilitarian view of the EU, or (more likely) a combination of all that.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:23:21 AM EST
[ Parent ]

Re: yeah sure (none / 0)

Well if it's populist propaganda you want, then "Euro Crisis" is the more evocative term - because it is a crisis for all in the Eurozone. Sovereign debt crises are for politicians, bankers and economists to worry about.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 05:48:21 PM EST
[ Parent ]

call it the German crisis... (4.00 / 5)

Yes. Yes you could.

Because it's fundamentally a crisis about Germany wanting to eat its cake (have a foreign surplus) and have it too (have a fixed exchange rate with the deficit countries). Without paying for it.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 05:48:33 PM EST
[ Parent ]

Let's have some commentary that Jerome can dismiss off-hand because of the nationality and language of the source.

Irish Times: Berlin's bailout dilemma a defining Merkel moment

"We have to follow our path with the Greeks, too, even if it costs us something," argued Dr Helmut Kohl last week in Berlin, an observation as self-evident as it is out of place in the era of his political protege.
...
Alarmed, the German old guard, from philosopher Jürgen Habermas to ex-chancellor Helmut Schmidt, have come back into the fray to explain Germany's place in Europe and its role in the crisis. With the passion of life-long Europeans, they try to explain the potential cost of loans to Greece, Portugal or Ireland against the certain cost to Germany of not providing loans, namely a collapse of the euro zone as we know it.
"We are making mistakes without even realising it," wrote Schmidt in the Die Zeit weekly. "Our huge trade surplus happened unintentionally but it annoys our neighbours . . . In addition, we behaved very badly in the Greek debt crisis and Libya crisis."

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:53:07 PM EST
[ Parent ]

well, yes, "German crisis" would be more accurate than "euro crisis" - my suggestion was not dismissive, it was a serious proposal.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:55:40 PM EST
[ Parent ]

But the Germans have written their position into the constitutional rules of the European Union.

The German crisis is a euro crisis.

(And I seem to remember rather heavy French and British exposures as well...)

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:02:57 PM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 6)

to call it a German crisis you would have to believe that the Austrian economists in the ECB are not there. They are there, I think they are not necessarly influenced by Germany; They are really stupid , nuts and fundamentally religious.

So ECB+Germany crisis= euro crisis-> Euopoean crisis.

So I think to put all the blame in Germany elite is unfair.. just two-thirds of it. So, euro crisis is a good description. If the ECB were loaning funds at 0% to Greece, eliminate the austerity measures (except for the increase in taxes) I would say is a German crisis.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Tue May 31st, 2011 at 06:51:27 AM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 5)

The euro does not behave differently than the DM did. The only difference is that instead of one big crisis, you had smaller crisis every few years, with devaluation, austerity (yes, already back then, that was the unavoidable result of a devaluation) and loss of wealth for all. It just happened in 10% increments rather than the 30-40% increment that seems needed today.

The euro was designed from the start to be a "strong" currency (call it an Austrian, goldbug currency if you will) and the Germans made it clear that it would be managed that way, and they were openly skeptical that the Southern countries' economies could cope. There was a spurt of policies to meet the criteria in the 90s, and then the windfall of suddenly lower interest rates came along in these countries, giving them a 10-year easy ride.

Now, they're back to paying the interest rates they were paying before the euro came along - except that they are no longer used to such a burden, and have been spending the money on other stuff in the meantime (and such spending was largely unfair or bubbly).

And they never made the case for a political union in the meantime. After 10 years of saying "we're in" and behaving as if they were "normal" members of the zone despite being less competitive in terms-of-trade.

Sure, Germany should have worried about that unsustainability, but, again, they have an easier exit from the current crisis than the weaker countries, and they have, in today's Europe, no compelling political reason to make an effort.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:20:31 AM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 4)

The euro does not behave differently than the DM did. The only difference is that instead of one big crisis, you had smaller crisis every few years,

Even if that were true, it would still be significant. Recessions are not additive - a 20 % drop in output every twenty years does a lot more damage than a 2 % drop every other year.

But it is not, in fact, true. There was no compulsion under the old system to devalue from one fixed exchange rate to another (a move which is almost always stupid). You had the option to float your currency instead (as the British did when they got tired of subsidising BuBa irresponsibility), which relieves the need for Austerity^TM after depreciation, because you are not committing to defending the new exchange rate - if "the markets" want to bet that they can crash your currency, they'll have to find some other sucker than your central bank.

Now, they're back to paying the interest rates they were paying before the euro came along

Before the Euro, they only had to pay that interest on their foreign debt (in a floating rate regime, the central bank has complete control of the domestic policy rate). Now they have to pay it on both foreign and domestic debt. Which means that interest rate movements to close the foreign deficit depresses domestic economic activity, and therewith the ability to generate the wealth required to close the foreign deficit.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:45:50 PM EST
[ Parent ]

buy stock in "Kick Me" signage (none / 1)

That sounds like a home-owner who refinances his home at a higher interest rate, pays penalties for late payments, bank charges on the over-drafts from penalty payments, and then, on top of it, pays a monthly rent on the same dwelling.

So, let's review:

"The Euro does not behave differently than the DM did."

(A truly marvelous subtlety is there; the Euro itself may behave similarly to the DM, but it produces very important disadvantages--which are different, that is, "not (necessarily) there," under the DM) So: nope.

"Now, they're back to paying the interest rates they were paying before the euro came along"

Needless extra interest rates with, to boot, a punishing double-whammy effect if steps are taken to reduce one. So: nope.

Jake, whatever you're earning, it's less than you deserve.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 03:22:14 PM EST
[ Parent ]

You're not suggesting Jerome dismisses me because of my nationality and language?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 05:58:20 PM EST
[ Parent ]

Only if you criticise the EU.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:59:22 PM EST
[ Parent ]

The problem is not too much EU, it's too little. And yes, English speakers are the main proponents of less EU. And, surprise, the EU has stalled right at the time everybody in Brussels switched to English.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 06:02:37 PM EST
[ Parent ]

So if the Germans spoke less English and more German the problems would be resolved? I thought it was "Austrian" economics which were the main problem?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:08:20 PM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 9)

Huh?

The main problem is too much financial brain rot. The "less EU" issue would be an irrelevance if it weren't for the pirates at the ECB.

As for speaking English - if the EU had a clue how to promote itself properly, it could easily sideline the naysayers and bring a majority of English-speakers onside.

The EU has been good at spending regional development money in the UK, but almost unbelievably bad at converting that spending into political capital.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 30th, 2011 at 06:11:55 PM EST
[ Parent ]

http://www.eurotrib.com/story/2011/5/30/133913/924#111

I'm not close to UK politics/media commentary, but what I have found surprising is the lack of British shadenfreude at the Euro Crisis many Brits predicted. It's almost that they seem to miss the prospect of not having the Euro to kick around any more. I don't get the sense that they want the Euro to fail, just that they are relieved not to be part of the current Euro systems failure. There must also be millions of British expats who would love their pensions to be in the same currency as their expenditure...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:24:04 PM EST
[ Parent ]

hmmm (none / 0)

where exactly do you think the "financial brain rot" comes from?

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:21:51 AM EST
[ Parent ]

Re: hmmm (4.00 / 2)

Originally, Austria.

The Anglo press and upper classes have been enthusiastic promoters and missionaries. But they were never the originators.

And don't forget that Keynes was British.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 08:46:59 AM EST
[ Parent ]

Keynes was British (4.00 / 4)

Henry George: American
Veblen: American
Fisher: American
Keynes: British
Kalecki: Polish
Galbraith: American
Minsky: American
Steve Keen: Australian

Institutional Economics: American
Keynesian economics: British/American
Modern Monetary Theory: British/American

This may have something to do with my own bias as I read mostly in English. Chartalism was developed by a German: Knapp. But the intellectual heirs of the theory are mostly British or American. Monetary Circuit Theory which appears to be most closely associated with French and Italian economists. It bears a strong resemblance to the Tableaux Économiques of Quesnais (an 18th Century French Physiocrat). Silvio Gesell was a German anarchist. The Wörgl experiment took place in Austria. The JAK banking cooperative is Scandinavian.

Pretty much the only prominent economic school originating in Continental Europe is Austrian Economics (Hayek). That then became Neoliberalism and the Chicago School, which was back-exported to Europe where it was adopted with the zeal of the bad student that must memorize Jesuitic nonsense and then spouts it uncritically. I might observe that European central bankers and economic policy makers have been a lot more "orthodox" than Americans in this crisis, who have been more "pragmatic".

Trichet, a Frenchman, was initially more daring in his liquidity provision, but has since been reined in by the recalcitrant ECB council.

Goldbuggery is a sure sign of insanity. Martin Wolf describes the Eurozone's design as a modern version of the classical Gold standard.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:14:23 AM EST
[ Parent ]

maybe (none / 0)

there's been more critics in English because they were closer to the problem...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:32:18 AM EST
[ Parent ]

Re: maybe (none / 0)

Oh for crying out loud.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:38:46 AM EST
[ Parent ]

Re: maybe (4.00 / 5)

And maybe there are so few critics from Europe because they don't believe there's a problem at all.

You're trying to have it both ways - justifying the EU's design as an extension of German policy tradition, and then trying to blame the Anglo countries for those same policies.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 09:42:46 AM EST
[ Parent ]

Re: maybe (4.00 / 2)

And which part of the "Anglo-Saxon" economic thought has been taken up by the Eurozone economic policy elites? Market fundamentalism or the macroeconomics of Veblen-Fisher-Keynes-Kalecki-Minsky? The menu was there and they did their picking.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:43:20 AM EST
[ Parent ]

yes (none / 0)

I've never said that our continental elites had not been largely infected in the past 2 decades.

But I'm still saying that the German "disease" (the one that led to the design of the euro) is somewhat different. I agree that the combination of the two is especially noxious.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:48:38 AM EST
[ Parent ]

Re: yes (4.00 / 3)

The combination of the two leads to

a, yes, flawed design of the Eurozone
policy inability to devise solutions to the macroeconomic crisis
political wilingness to IMF fellow EU member states

The whole thing would have been avoided had the ECB simply acted as a market-maker of last resort for Greek (and, generally, EUsovereign debt) bonds back in February 2010. That, however, was incompatible with the ideological blinders of the Eurozone policy apparatus. In particular, the canard that secondary market purchases of sovereign bonds are illegal was debunked immediately on this site, which didn't prevent Axel Weber and Jürgen Stark from lying about it as late as May 2010 and making the bond purchase program ineffective when it did get going.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 10:00:20 AM EST
[ Parent ]

agreed. (none / 0)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:11:07 AM EST
[ Parent ]

Yes, but (none / 0)

You do know that Stark and Weber were hardly the whole governing council and executivge board.

Stark is one of six; Weber and Strak arer two out of 23.

So this is hardly a german affair.

But somehow you only seem to dislike neo-liberalism if its speaks with a german accent.

by IM on Thu Jun 2nd, 2011 at 12:00:40 PM EST
[ Parent ]

Re: Yes, but (4.00 / 3)

Stark and Weber famously broke collegiality and spoke in public against ECB council decisions in May/June 2010.

They also spoke demonstrably factually wrong.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 01:35:24 PM EST
[ Parent ]

Proving (none / 0)

that the ECB is hardly german-dominated.

And what do you mean, its not their neo-liberalism?

For all their inflation obsession, none of them is a gold bug.

by IM on Thu Jun 2nd, 2011 at 06:41:19 PM EST
[ Parent ]

Re: Proving (4.00 / 2)

I call them gold bugs because they manage the Euro as if it were on the Gold standard and not a fiat currency.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 06:55:59 PM EST
[ Parent ]

Name-Calling (4.00 / 2)

Entertaining but nothing more. The obsession of german central bankers with inflation is odd, but a gold standard it isn't. Their intellectual background is neoliberal; Weber did go to Chicago, after all.

by IM on Thu Jun 2nd, 2011 at 07:19:34 PM EST
[ Parent ]

Re: Name-Calling (none / 1)

I happen to be in good company: The eurozone was supposed to be an updated version of the classical gold standard. says Martin Wolf.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 07:25:26 PM EST
[ Parent ]

So (none / 1)

you base your unfounded claims on the unfounded claims of Martin Wolf. Who hardly was a architect of the eurozone. And who is claiming that - unsourced n. b. - now.

by IM on Thu Jun 2nd, 2011 at 07:52:06 PM EST
[ Parent ]

Re: So (4.00 / 3)

The Eurozone operates like on a gold standard in that the ECB refuses to create fiat money.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 07:55:55 PM EST
[ Parent ]

Re: So (none / 0)

Not enough money. That is not quite the same. A too strict monetary policy is exactly that, not a gold standard. Words have meaning, after all

And the "left" in the US has more or less the same complaints about the Fed. A gold standard too?

by IM on Thu Jun 2nd, 2011 at 08:01:30 PM EST
[ Parent ]

Re: So (4.00 / 2)

Are you familiar with "bond purchase sterilization"?

A central bank which insists on borrowing from private banks with one hand in order to buy bonds from them with the other and frets every time it fails to borrow enough is operating as if it believed that the total available number of Euros is constant. Which makes sense under a gold standard but it bizarre nonsense in a fiat currency regime.

Therefore the ECB manages the currency as if it were on a gold standard and not a fiat currency.

The macroeconomic consequences of the gold standard, of currency pegs, of the European Exchange Rate Mechanism and of the Euro are the same: recurrent devaluation crises. The Euro may yet succeed in replicating the greatest feat of the 1920s gold standard: an actual depression.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 08:12:12 PM EST
[ Parent ]

Re: Yes, but (4.00 / 3)

It's not their neo-liberalism. It's their gold-buggery.

You can find plenty of criticism of Trichet's neo-liberalism in my comments, even on this thread.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 01:36:51 PM EST
[ Parent ]

Re: Keynes was British (none / 1)

Curious. But thinking about it: Does academic economics play any part in German public debate? The mass media is usually dominated by a couple of think tanks shilling for the usual suspects and sending out their talkshow economists, but I don't have the slightest idea what the state of the rest of German economics is.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Thu Jun 2nd, 2011 at 07:12:13 PM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 8)

The problem at the moment is neither too much nor too little EU. The problem is that the EU is pushing policies that are objectively insane.

If the EU does not stop doing that, then there is a very real risk that we will stop having an EU.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:24:32 PM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 4)

Which goes back to Migs point that criticising the EU is not the same as being anti-EU (and, in any case, it is not the British who are causing the Euro crisis).

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:31:27 PM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 8)

This isn't some high-minded debate about possibilities, J. This is really happening.

And not calling it a currency crisis has a vaguely Baghdad Bob-ish feel.

You dismissed English-speakers like Krugman and Stiglitz -- who'd warned about this about a decade before it finally happened -- as "sneering anti-European" talking heads, which I called you on a year or two ago when this first blew up. Now it's all come true, but in a more violent way than either of them were discussing back in the late-'90s/early-'00s, and you're still fighting the English vs Not-English battle when the real fight has devolved into Sanity vs Insanity with very real consequences.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue May 31st, 2011 at 07:03:21 AM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 9)

Though the Anglo-Disease was largely originally an illness of the Anglo-Saxon mind it has become endemic throughout Europe and the rest of the world.

The EU is infected, in executive, treaty and leadership. More of this EU will not help. It needs to become a different EU and it's hard to see how that's going to happen in the current political environment without serious damage to the institutions.

Did Brussels switch to English as a result of the infection or did it facilitate the disease?

by Colman (colman at eurotrib.com) on Tue May 31st, 2011 at 08:16:33 AM EST
[ Parent ]

illness of the Anglo-Saxon mind ---no, thanks... (4.00 / 4)

"an illness of the Anglo-Saxon mind"?--- no, thank you. I'll pass.

Let me agree whole-heartedly with you here, before getting back to the just-above:

"More of this EU will not help. It needs to become a different EU and it's hard to see how that's going to happen in the current political environment without serious damage to the institutions."

That's quite good, in my opinion.

But illnesses of 'the Anglo-Saxon mind' don't help or get us anywhere.

I used my Anglo-Saxon mind to read Bertrand Russell and Robert Heilbroner and--speaking of (linguistically) "German minds," I like "them" as much as any others. I used the same mind it to reject most of what I was taught about the neo-lib pantheon's belief-system--a pantheon which includes people who spoke German or Italian or French. Whatever there is to the idea of national minds is much, much over-rated, I contend.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 08:49:41 AM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (4.00 / 7)

It's not so much the Anglo-Saxon mind as missionary work for the Anglo-Saxon class system.

The current crises seem tailored to ensure there is no alternative to this political model.

Since most Anglo-Saxons are either indifferent to the model (if they assume it's part of the political background noise) or hostile to it (if they've been paying attention) it's only a race issue in the sense that one particular tiny caste has been promoting it aggressively across the world for the last couple of centuries.

It's usual to compare it to the Catholic Reformation. I don't think that's a bad analogy at all.

It also explains why certain classe in Germany and France support it uncritically. They're closer to it ideologically than they are to any local tradition of democracy or dissent.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 09:32:33 AM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (none / 1)

Funny you mentioned that. I just read this from you, having posted, meanwhile, the comment here:

so, clearly, we're thinking very much alike about this--unless I've missed your point.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 09:38:16 AM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (4.00 / 4)

It's interesting that none of the PIIGS are protestant states, while the ECB does very much seem to be dominated by Calvin's humourless spiritual heirs.

Max Weber already covered this ground, but it's a surprise to find it taking its current form.

Perhaps the EU should have aimed for religious uniformity before attempting economic, social and political uniformity.

Of course the PIIGS are not only profligate but lazy, so they deserve to be punished - but it seems no one expected the Serious Inquisition.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 12:09:46 PM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (4.00 / 4)

If ECB doctrines may be characterised as "Austrian"... Austria is overwhelmingly Catholic. Germany has equal proportions of Protestants and Catholics. The Netherlands has more Catholics than Protestants. It has been suggested here that France, if you scratch its secular paint-job, is deeply Catholic - in any case, it isn't Protestant.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 12:45:38 PM EST
[ Parent ]

I blame the Pope! (none / 1)

Its all the fault of the Anglos again! - except even the Church of England has a large Anglo-Catholic wing - and church going Catholics in England are more numerous that their Church of England equivalents.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 12:50:44 PM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (none / 1)

Austria was overwhelmingly Catholic numerically, but there's an excellent chance that Hayek's noble ancestors were Lutheran hold-outs rather than fervent Papists.

In any case, most "Austrian" economists are now British and American.

France is somewhat tangential to the ECB. Germany and Protestant Scandinavia are in the driving seat, and Merkel is certainly Protestant.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 03:21:47 PM EST
[ Parent ]

Scandinavia? (4.00 / 2)

ThatBritGuy:

France is somewhat tangential to the ECB. Germany and Protestant Scandinavia are in the driving seat, and Merkel is certainly Protestant.

Germany is half Protestant, Denmark and Sweden are not in the Eurozone and Norway is not even in the EU. So how can Scandinavia be in the driving seat?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 03:28:22 PM EST
[ Parent ]

Re: Scandinavia? (none / 1)

It's a Pope-mobile?

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 03:34:04 PM EST
[ Parent ]

Re: Scandinavia? (4.00 / 5)

Okay - I was thinking about Finland's contribution to the debate, while trying to finish four thousand words about servers at the same time.

The point was more that the Finnish outpost certainly is in the EU, is certainly Lutheran, and is part of a shared Scandinavian/Northern culture.

I'm not suggesting the PIIGS crisis is a literal replay of the Thirty Years' War, and Europe is set to explode because of underlying Christian tensions.

But I do find it interesting that the periphery and the Northerns have distinct religious histories, and I don't think it's a stretch to suggest that contributes to the "they're not like us" rhetoric.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 04:39:21 PM EST
[ Parent ]

Re: Scandinavia? (4.00 / 3)

I look forward to your four thousand words... I think your point is a bit of a stretch given the size of Finland (which is not normally considered part of Scandinavia) and the unlikehood of it dominating the ECB.

I think Weber's point about the Protestant Ethic and the Spirit of Capitalism was more applicable at the time when the Catholic Church was more like a feudal construct. In the intervening years the "Catholic ethos" has had no difficulty in transforming its loyalties to a corporate ethos... The democratic (state) ethos, on the other hand, has been a little more problematic for old style Catholics...and democratic reforms may be a little more associated with the Protestant Ethos and its emphasis on the responsibility of the individual...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 05:16:43 PM EST
[ Parent ]

Re: Scandinavia? (4.00 / 7)

Thinking about this, I'd see the ECB/IMF and the Austrians as the natural heirs of joyless Calvinist morality blended with dogmatic Catholic Scholasticism.

So you get an unfortunate mix of the crippled seriousness of one with the quaintly anti-rational and hierarchic pseudo-academicism of the other - backed up with inquisitorial economic persecution of heretics and infidels, and painted with a bit of rationalist gloss to make it appear more modern than it really is.

Anything with this kind of pedigree can only be reactionary.

The point isn't that there are explicit Catholic or Calvinist policies, but that historical Catholic and Calvinist attitudes are the root and excuse for modern "serious" values.

As for Finland -

The politico-cultural location of Finland is a moving one. It has shifted from being a province in the Swedish Empire to an autonomous unit in 'Eastern' Europe, then to an independent state in 'Northern' Europe or 'Scandinavia'. After joining the European Union, Finland has recently been included in 'Western Europe'.

Since I'm not talking about very recent history, I think it's fair to include with the other blonde Northerns.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 06:04:50 PM EST
[ Parent ]

I think it's a blonde thing, myself n/t! (none / 0)

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 06:17:50 PM EST
[ Parent ]

Re: Scandinavia? (4.00 / 2)

The word these days is 'Nordic', which sometimes also includes the states around the Baltic, other than Scandinavia + Finland. If you want to refer to Estonia, Lithuania and Latvia as a bloc, then it's the Baltics. The long term Nordic grouping is Hanseatic - it includes N. Germany and Russia.

There's obviously a language element to the description of Scandinavia, but culturally I don't see Finland as any less homogenous with Sweden as either Denmark or Norway. There is a cultural gap between Russia and the rest of the Nordics in religion, but I've not seen it manifested in any kind of cultural conflict. There are far more socialistic connections to outweigh that difference.

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:38:58 PM EST
[ Parent ]

Re: Scandinavia? (4.00 / 2)

The religious roots of Socialism, if there are any, is a different - interesting - topic.

In the UK you'd have to name check the Quakers, but I don't know if there are deeper roots or other influences elsewhere, and I've never seen anyone try to follow Weber with a parallel review.

It may exist in academia, but I suspect this kind of analysis isn't very fashionable among the Critical Theory types.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 09:48:59 AM EST
[ Parent ]

If Hayek's ancestors are relevant, let me point out that Merkel is quarter-Polish, i.e. Catholic....

by gk (g k quattro due due sette "at" gmail.com) on Tue May 31st, 2011 at 03:35:26 PM EST
[ Parent ]

Re: illness of the Anglo-Saxon mind (4.00 / 2)

We've gone from politics to economics to religion and now genealogy. Is there any sphere of human knowledge we can't cover in the course of one conversation?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:19:34 PM EST
[ Parent ]

Yes. http://en.wikipedia.org/wiki/Chess_boxing

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 04:27:34 PM EST
[ Parent ]

According to Wikipedia, Hayek was "nominally catholic but nonpractising". He hailed from Austrian nobility.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 04:38:01 PM EST
[ Parent ]

"It's interesting that none of the PIIGS are protestant states, while the ECB does very much seem to be dominated by Calvin's humourless spiritual heirs."

Actually, I think that there is no paradox here. We shouldn't "expect the Spanish Inquisition" in Protestant states, should we? By the same token, there is something ideologically consistent in the PIIGS nations being more Latin, more Catholic, in tenor. Thus, the Calvinist strictures fall not on those who profess (or pretend to profess) them but on those who not only don't profess them but also see no reason to keep up an other-than-rather flimsy window-dressing.

Now, I think that the so-called believers in the Calvinist strictures are also phonies; but they have one or more advantages going for their efforts to seem to be respectable up-holders of it. Though, for crying out loud, one would have thought such pretenses would be showing blatant cracks in the foundations or that the cracks, being clearly obvious now, would start to bring the orthodoxy into very dangerous and persistent question. That this hasn't happened suggests to me that the Left is still smoking dope and not in possession of its faculties--such as they are.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 03:05:29 PM EST
[ Parent ]

"All A is B" does not imply "All B is A".

"Myxomatosis is a disease of rabbits" does not imply "All rabbits have myxomatosis".

Fill in the rest yourself as an exercise.

by Colman (colman at eurotrib.com) on Tue May 31st, 2011 at 11:27:57 AM EST
[ Parent ]

But "All A is B" doesn't represent the syllogism in dispute.

What you've seemed to contend is not an identity but rather a relationship. But maybe you are asserting an identity, as in "the Anglo-Saxon mind <=> "observed economic wackiness". But if so, how do you account for the Salt-water folks or just any Anglo-Saxon minds' opposition to the Austrian/Chicago-Or-What-Have-You-Schools?

So, it's represented as

"illness of the Anglo-Saxon mind" ---> "observed economic wackiness" (by whatever descriptors you may like)

Then, while it's quite true that "All A is B" does not imply "All B is A", that's beside the point here.

What we want is examples of, if not "healthy Anglo-Saxon mind" (which should be no great shakes to supply) then, at a minimum, some "uninfected" cases of "observed economic wackiness". Can't those be demonstrated? Was the illness of the Anglo-Saxon mind the necessary and sufficient condition of the advent of the Austrian School?

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Tue May 31st, 2011 at 03:21:33 PM EST
[ Parent ]

Colman:

It needs to become a different EU and it's hard to see how that's going to happen in the current political environment without serious damage to the institutions.

Good summary.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 09:03:33 AM EST
[ Parent ]

the language thing is a red herring.

banksters are multilingual, after all.

the amount of energy saved by being on the same linguistic hymnsheet will grow even more immense, but if the religion of free-predator crapitalism is the raison-d'etre, the choice of lingo is irrelevant. you can fool the voters any which way. one language promotes transparency through transnational criticism.

it's the old 'finger pointing at the moon not being the moon...'

The power of knowledge is in mortal combat with the knowledge of power. It really is that simple... That's the Edenic apple we are all munching on.

by melo (melometa4(at)gmail.com) on Tue May 31st, 2011 at 07:53:11 PM EST
[ Parent ]

But I think Colman's point was not so much a matter of what language is in predominant daily use as it is that the "illness of the Anglo-Saxon mind" (that wooly-mammoth) is an important source of TVHTBN-thinking or, TIOTASM --> Protestant Ethic --> TVHTBN.

When I point out that the so-called Anglo-Saxon mind has taken us lots of varied places, his retort is that Only Rabbits get disease "X", but that doesn't mean that all rabbits get it. This is pure begging the question: TIOTASM remains an undefined fancy. We don't know what it is, what it consists of. We only "know" it from Colman's claims of the effects it produces--a certain observed economic wackiness.

Until his paper on the origins and functions of the Illness of the Anglo-Saxon Mind appears in the JEP, I'm just having fun observing the fascinating mental universe his comments suggest he inhabits: a place where it seems a very great part of humanity are the helpless prisoners of their mind-set, where important reasoning and concepts can't filter in or filter out, leaving people victims of the inescapable traps of their pscho-linguistic "givens."

He seems to have completely missed the point of my comment concerning my own Anglo-Saxon mind. I was trying to argue against this static-and-doomed vision of mental equipment--a point of view which he seems to have very strongly rooted in his outlook-- that my Anglo-Saxon mind (and those of many others, too) have somehow been able to import lots of what has to be regarded as non-native furnishings. In that way, whatever the extent of our mental imprisonment, we can, if we choose, bring in an almost unlimited amount of furnishings to decorate the cell. As soon as that is admitted, Anglo-Saxon minds can be found to share a lot of intellectual furnishings with any other psycho-linguistic prison camp--leading to non-native and varied modes of thinking.

If it's a red herring it's one that seems to figure very importantly in the fundamental ways he views common habits of thought and behavior.

----------

abbreviations:

TIOTASM: the illness of the anglo-saxon mind

TVHTBN : the virgins have to be naked

JEP : The Journal of Economic Psychoses

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Wed Jun 1st, 2011 at 07:33:40 AM EST
[ Parent ]

Could be a diary there somewhere, but my Germanic mind and anglo-Irish conditioning have left me in too confused a state to discern just where the virgins come in...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 1st, 2011 at 07:42:11 AM EST
[ Parent ]

The virgins don't come in. They go in (naked). Into the volcano, of course. And now that I think of it, this would suggest that Iceland must be naturally suited to have one of the world's best economies because it's never very far to go to throw a naked virgin.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Wed Jun 1st, 2011 at 08:02:52 AM EST
[ Parent ]

Oxymoronic (4.00 / 3)

Assuming that there is a supply of Icelandic virgins - a rare species according to my knowledge of that culture.

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 09:10:08 AM EST
[ Parent ]

Re: Oxymoronic (4.00 / 3)

The extent of your knowledge of Iceland virgins would, though, make for a rare and interesting diary....

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 1st, 2011 at 09:48:45 AM EST
[ Parent ]

Re: Oxymoronic (4.00 / 2)

It'll be in the book ;-)

The thing is, the small fun area of Reykjavik is full of bars that sell concoctions with names like 'The Black Death'. I thought I could hold my booze fairly well (the first sign of alcoholism)*, but I was a total amateur compared to the lads and lasses of Codland. The heady aroma of hormones seeking collision didn't help sobriety either.

*Those days of madness are long gone. A G&T and two large glasses of a nice red on a Friday, are about all I can manage these days. There are better ways of stimulating "emotion recollected in tranquility".

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 11:07:01 AM EST
[ Parent ]

The book (none / 1)

I'm toying with the idea of doing my autobiography as a series of podcasts, making up, if you will, a 'talking book'.

I still have to write the damn thing, but I'm attracted to the idea of launch release as free podcasts, using the number of downloads - in negotiations with publishers - as indicative of an audience for a printed commercial version. The printed version would be fully illustrated, so it would be a reason to buy if the stories were liked.

The cost is minimal: I may be a highly paid voiceover artiste, but I'm not going to charge myself ;-) A typical talking book takes 10 - 14 hours of recording studio time, which I get free. So, virtually zero transaction costs and cut out the vanity publisher.

I haven't yet found any informative download info on podcasts as book instalments, but it seems that talk podcasts are growing in popularity. I know quite a few friends who are not into music any more, but like to listen on their smartphones to chat: in the car, on the bus, jogging, walking, relaxing etc.

I'd appreciate it if anyone here has or comes across pertinent information.

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 11:26:16 AM EST
[ Parent ]

Surely you're joking, Mr. Triloqvist (none / 0)

I can't wait!

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Jun 1st, 2011 at 11:45:22 AM EST
[ Parent ]

Re: The book (none / 0)

will the book have pictures of the naked virgins?

Seriously, what's the sales pitch - why would it appeal to a more general audience?

Can't help on podcasts I'm afraid - are they not just audio files linked to on your title page?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 1st, 2011 at 11:46:23 AM EST
[ Parent ]

The pitch (none / 1)

I don't really have a pitch outside of Finland, except amusing stories of 40 years in media of various types, in the mould of Patrick Campbell and other laid back short essayists. Vignettes, if you will, with a Kaurismäki flavour.

In Finland I have a somewhat mysterious reputation for being involved in projects that have been in the public eye and ear. And since I have the dirt on any number of celebrities, there should be some mileage in the gossip.

But the aim, apart from the vanity (or because of it), is just stories that are fun to listen to and maybe have some insights.

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:11:37 PM EST
[ Parent ]

Re: The book (4.00 / 3)

You have an interesting problem in that you have a potentially viable book project, but you don't currently have what publishers call a platform - which is a recognisable name and following, and/or academic tenure.

Podcasting book chapters would probably be a clumsy way to build a platform, unless you managed to become cult-y and immensely popular through the 'casts. (Possible, but something of a long shot.)

Podcasting other content, becoming a Twitter/Facebook celebrity through that, and then pitching the autobiography might be a more likely route.

World+dog are e-publishing now, and it's easier just to write the damn thing and promote it yourself than it is to wait the two or three years it's going to take to wind its way through an official commissioning, editing, design and promotion cycle.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 1st, 2011 at 01:34:31 PM EST
[ Parent ]

Re: The book (4.00 / 2)

Quite. That's the reason I'm looking for alternatives that will also motivate me to finish the damn thing.

OTOH The Singing D seems set for world domination (wait till you hear her mind-blowing first single that is about to be released), so I may just be able to sneak in on her wake. I know that's pathetic, but why else do we invest so much time and money into our offspring ? ;-)

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:18:43 PM EST
[ Parent ]

Migeru:

that Jerome can dismiss off-hand because of the nationality and language of the source

Say what?

This is not a question of heat and light only, this is serious and gratuitous ad hominem.

What shred of evidence do you have for it?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:34:17 AM EST
[ Parent ]

In fairness Jerome did raise the language issue - in the context of things going to pot when Brussels switched to speaking English - and his Anglo-Disease thesis does imply that there is a peculiarly Anglo-phone or British American plot to undermine the EU. The fact that some Brits/Americans where actually right in some of their criticisms of the Euro doesn't imply they where part of some anti-EU conspiracy and we have to be careful about dismissing (or not taking seriously) criticisms from Anglo sources because they come from Anglo sources.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:53:22 AM EST
[ Parent ]

Jerome is one of the top recommended bloggers on DKos - in English - and founded this place - in English - six years ago. As a native English-speaker myself, I have often expressed the idea that the English-language media tend to dominate the content and standpoint of much of international media, spreading neoliberal ideology (which has proved itself much more effective in undermining the European project than anti-EU broadsides). But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

As for the Anglo Disease idea, it's about the destructive dominance of the financial sector, not about an Anglo-plot to undermine the EU. The disputed "Anglo" part is based on the pre-eminence of Wall Street and the City of London in the global financial sector.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:09:20 AM EST
[ Parent ]

But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

But that is not what Mig claimed. Mig claimed that an off-site source of news was more likely to be dismissed out of hand if it were in English and critical of EU policy. And considering that (from right to left) Krugman, Stiglitz and Mitchell have, on different occasions, been dismissed on precisely that ground over the past couple of years, this does not seem like a wholly spurious charge.

As a pragmatic matter, I find it unproductive to keep bringing it up as often as is being done. But it is not without a factual basis.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:27:43 AM EST
[ Parent ]

JakeS:

if it were in English and critical of EU policy

What is written is "the nationality and language of the source".

Secondly, what you call "the charge" is backhanded, not addressed directly to Jerome.

At the very least, as you say, "unproductive".

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:54:05 AM EST
[ Parent ]

Agreed on all of the above. I am not aware of any adverse history between Mig and J and perhaps you are reading the comments in that light. In the context of the discussion here I didn't notice any comments meriting a down rating - as a serious ad hominem should.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 08:29:26 AM EST
[ Parent ]

But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

No, the idea is that external sources quoted on this forum are dismissed off-hand because the source is English-speaking.

See, for instance, Jerome dismissing a timely and accurate diary about German attitudes to the EU written by marco a year ago

remember my quip about this being an English language article about France, Europe and Germany

"Never believe anything you read in English about Europe" is Jerome's wholly predictable rejoinder. When marco answers

no doubt. but then what is the bias of Jacques-Pierre Gougeon, a French professor writing in Le Monde?

there's no answer from Jerome.

This is not an isolated incident.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 08:54:26 AM EST
[ Parent ]

Then you might take care about how you phrase that kind of aside in a comment that didn't call for it.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:58:33 AM EST
[ Parent ]

Another dismissal in this very thread. Jerome doesn't tell us why the analysis is flawed, just that "unsurprisingly the new FT Brussels bureau chief" disagrees with him. Then, in response to an article by Marshall Auerback that

So far, most of the people who call for Germany to exist the eurozone are, unsurprisingly, people keen to break Europe.

ignoring people like Jörg Bibow or Yanis Varoufakis. Or claiming (as pointed out by Drew repeatedly) that Krugman or Stiglitz have an anti-EU agenda when they criticise the macroeconomic construction of the Eurozone.

I don't know what your

Jerome is one of the top recommended bloggers on DKos - in English - and founded this place - in English - six years ago.

has to do with Jerome's habitual dismissal of English-language commentary on the EU on the grounds that English language commentary is generally biased, often without addressing the merits or lack thereof of the commentary at hand.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 09:10:40 AM EST
[ Parent ]

Re: call it the German crisis... (4.00 / 9)

I'll illustrate the point in what I hope is a succinct way:

If I came here two years ago and said, "Greece is a pig that needs to shred its bloated welfare state, privatize its government functions, and implement a strict austerity program," I would've been (rightly) called a far-right wackjob who wanted to turn Europe into Texas or something.

But for some reason when these same principles are implemented by Europeans through the EU -- who turn the EU into the very monster we're supposed to believe the EU is to stand in stark contrast to -- suddenly it's somehow acceptable and above criticism. "My Country, Right or Wrong."

The true anti-Europeans are the ones holding the reigns now. The EU is becoming the monster it was supposed to stand in contrast to.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue May 31st, 2011 at 11:04:12 AM EST
[ Parent ]

But for some reason when these same principles are implemented by Europeans through the EU

Yes, the problem is that we have far-right policies. The euro need not be managed in a far-right manner - and again, "balanced budget, generally" and "lower taxes" are NOT the same thing.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:34:28 AM EST
[ Parent ]

The Euro was badly designed.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:17:37 AM EST
[ Parent ]

bad design? (none / 0)

It was designed for the core, and it would have worked for the core. It was not designed to include the periphery without additional political gimmicks.

The periphery was brought in in the 90s, after the "proved" they could make the efforts to join, but the discipline stopped as soon as they were in, and no political changes were made to the design.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:31:14 AM EST
[ Parent ]

Re: bad design? (4.00 / 5)

the discipline stopped as soon as they were in

Here's your impression of a German dining room table again:

We talk about the euro crisis. They say, "Clearly, this was about fiscal irresponsibility, and we need to enforce much stricter rules." I say,

No fiscal rule would have constrained the Spanish housing bubble and its consequences.
And they say, "Thank you for your contribution. Clearly, this was about fiscal irresponsibility, and we need to enforce much stricter rules."
...
... The blue line is Germany; the red line is Spain.

The Euro rules never constrained the private sector. Constraining the public sector without constraining the private sector, and without instituting negative feedback mechanisms for trade imbalances, and allowing free movement of capital, leads to the private sector of the surplus countries financing the deficit of deficit countries through private sector debt.

The Euro has three flaws at least:

an explicit anti-public-sector bias (which, if Minsky is to be believed, removes the ability to constrain budding depressions to recessions)
no surplus-recycling mechanism
free movement of capital

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:38:15 AM EST
[ Parent ]

Re: bad design? (none / 1)

Well, that might have meant that, in the existing framework, the periphery should have been running large surpluses to prevent the external imbalances. Not the best policy, admittedly, but one that was possible.

But discipline is not just about budget policy (and in any case, budget policy is not just about the balance, but about how taxes are raised, and what they are spent on) - more stringent regulation of the banking sectors (something Spain did to a decent extent) and of asset sectors.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:06:57 AM EST
[ Parent ]

Re: bad design? (4.00 / 4)

I don't think that was possible. Surpluses by whom?

In the short run, the trade deficit is a given. If you run a public budget surplus (rather than the tamer 3% deficit allowed by the GSP) you only make the private debt grow faster.

The alternative is a serious recession in all of the periphery. So much for Growth and Stability. Martin Wolf again:

The eurozone was supposed to be an updated version of the classical gold standard. Countries in external deficit receive private financing from abroad. If such financing dries up, economic activity shrinks. Unemployment then drives down wages and prices, causing an "internal devaluation".

Münchau calls "internal devaluation"

a euphemism for a depression

Strong money regimes such as the Gold standard cause depressions. We thought the lesson had been learned in the 1930s and the economic theory for it existed.

Here's another statement of the same by Yanis Varoufakis:

The idea was pure brilliance: Combine a twin (trade and government) deficit with a strong capital account surplus. Suck into the US other people's exports and a tsunami of other people's capital. Thus my term for the period after 1971: The Global Hoover: From the late 1970s until 2008 the US acted as a gargantuan vacuum cleaner that sucked in the trade surpluses of Germany, Japan and, later, China while, at the same time, attracting into Wall Street something in the order of $3 to $5 billion net on each working day.
...
The euro, it must be remembered, was conceived at the height of the Grand Hoover's reign. Germany thought that it could extend its growth model to the eurozone. Convinced that the Grand Hoover would continue to suck in its surpluses, Germany thought that its surpluses could expand further within Europe if deficit countries like Greece, Spain, Italy etc. were given a strong DM-linked currency. Germany's condition for sharing its currency with the rest was that nothing else would be shared except for the common currency: Debt, taxes, government expenditure would be all nation-state-specific. Each euro of debt would belong to one country only and no surplus recycling mechanism would be set up.
...
Of course, while the Grand Hoover worked its magic, sucking up the German surpluses and keeping alive the worldwide glut of cheap private money, all seemed well. While the imbalances within Europe were getting larger, cheap private money allowed deficit states to cover the gap by borrowing. But when the Grand Hoover splattered and died, Europe's underlying imbalances came to the fore.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 10:26:58 AM EST
[ Parent ]

Well, that might have meant that, in the existing framework, the periphery should have been running large surpluses to prevent the external imbalances.

That's the IMF recommendation.

It only works if you crater your economy so hard that it stops importing altogether.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:46:40 PM EST
[ Parent ]

So, though you don't seem to want to admit it, apparently the upshot of your comments is, we're going to see the European Union reduced to what you call "its core"-- and that this will in effect resemble what was once the case, the power-center, Germany, with one to three others big enough to hold their own, playing along in a situation where Germany's economic predominance effectively sets the terms. The rest may watch.

Why then were these others "allowed in" in the first place? It seems it served "someone's" interests to do that.

So, as I see it, we have a 'family': Mom or Dad (or both) are drunks. But, it's imperative that we always keep ample quantities of liquor handy for them. We can't have one without the other. Meanwhile, we "enlarged the family", adopting other kids --who, with the original offspring, now suffer from the drunk parents.

And your plan to ameliorate the situation is to let the weaker kids who don't bear up well under the rule of the drunken parents go off and fend for themselves so the other, rather stouter kids, can get on with daily life with Mom and Dad, because, no matter what, we're gonna have parents, they're gonna be drunk, we can't take their liquor away and we can't grow up and move out. But we can congratulate ourselves for paring down the number of offspring living at home to those who are the hardiest, the most resilient in a drunken home.

Have I missed something?

Lovely.

BTW, don't look now, but, it would appear that not everyone lives in a household run by drunk parents. Some have sober parents--not perfect parents, but sober ones.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 09:48:27 AM EST
[ Parent ]

Re: bad design? (4.00 / 3)

When forced to bite the bullet, Euro apologists seem happy to fall back on "the EU is France and Germany, the rest is negotiable". I think we're all about ready to wake up from the European dream.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:54:10 AM EST
[ Parent ]

Re: bad design? (4.00 / 2)

And that awakening is going to be a very rude one.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 10:22:12 AM EST
[ Parent ]

Re: bad design? (4.00 / 3)

No, it would not have worked for the core because the core would have had to contend with strong revaluation pressures on their currencies vis-a-vis the non-Euro currencies.

The common feature of the European Exchange Rate Mechanism and the Euro is the shifting of the burden of depressing the DM exchange rate from the Bundesbank to the deficit countries.

It appears that the 1992/3 crisis of the European Exchange Rate Mechanism was used by the Bundesbank to assert itself as the most powerful institution in Europe, already. In a recent diary of mine I quoted
this third-person account by the Bundesbank itself:
Crises in the ERM. In 1992, investors lose confidence in the stability of the pound sterling, in particular, and then, in 1993, in the French franc, resulting in speculative selling of the pound and franc; in 1992, the United Kingdom and Italy leave the ERM; in 1993, the fluctuations margins around the bilateral central rates are expanded sharply. The Bundesbank with its commitment to price stability had refused to lower interest rates massively. The partner countries are forcibly reminded of their responsibility for their currencies; the process of convergence needed for monetary union is strengthened.

(links in the original)

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:48:44 AM EST
[ Parent ]

European Tribune - Submit New Story

"It was designed for the core, and it would have worked for the core."

In that case, I see the virtues of all but "the core" leaving the E.U.--IOW, "getting rid of Germany" in a manner of speaking--and joining instead a trade & currency alliance with China, India--maybe Brazil, Indonesia, and Canada would like to belong, and, perhaps Russia, though personally I think Russia more naturally belongs with "the core" you refer to.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 09:57:53 AM EST
[ Parent ]

Sure (none / 0)

China wants to revalue its currency just to make some smaller european countries happy.

by IM on Thu Jun 2nd, 2011 at 12:49:05 PM EST
[ Parent ]

Re: Sure (4.00 / 2)

Uh, no.

But China might want to allow its currency to appreciate against a few small European countries, if that means it gets to use them as bridgeheads into the Common Market. Sort of like how the US used Britain as a Trojan horse into the EU.

Mind you, that won't do anything good for European solidarity. But I think we passed the event horizon on that around the time the Troika started suggesting selling off the Acropolis.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:54:42 PM EST
[ Parent ]

Re: bad design? (4.00 / 2)

Has the countries in the core balanced trade with each others? Otherwise, I doubt very much that it could work for the core either.

Structural trade imbalances would have built up, the surplus recycled to the trade deficit countries through the finance sector and then when recession hits, it turns into depression through the budget deficit ban, the vultures start attacking the debt of the trade deficit countries as the ECB demands shock therapy and demands that the finance sector of the trade surplus countries be protected at all costs.

Methinks inhabitants in the countries in the core that has a structural trade deficit against other members of the core should be very happy that they got away with a warning thanks to the admission of the periphery.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Thu Jun 2nd, 2011 at 03:24:15 PM EST
[ Parent ]

Re: bad design? (none / 1)

Can we fashion that argument into an LTE to be sent to newspapers in surplus countries having a deficit within the group of surplus countries?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 03:49:38 PM EST
[ Parent ]

This is good... (none / 0)

"Can we fashion that argument into an LTE to be sent to newspapers in surplus countries having a deficit within the group of surplus countries?"

I like it.

Please also see my query at:

http://www.eurotrib.com/comments/2011/5/30/133913/924/237#237

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu Jun 2nd, 2011 at 04:21:22 PM EST
[ Parent ]

Re: bad design? (4.00 / 2)

I say yes, we can.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Jun 3rd, 2011 at 12:58:46 PM EST
[ Parent ]

European Tribune - LTE draft: the periphery protects the weaker parts of the core

That linked wrong. New try:

I say yes, we can.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Jun 3rd, 2011 at 01:30:50 PM EST
[ Parent ]

Has the countries in the core balanced trade with each others? Otherwise, I doubt very much that it could work for the core either.

It might, if they ran an overall foreign surplus. And the incentive to allow the currency to depreciate in value to protect the currency-wide foreign surplus is greater if you have fewer participants. Because fewer participants means fewer ~~partners~~ suckers on whom you can externalise the unemployment cost of deflation. A point that goes double if those partners are themselves high-status countries deliberately pursuing a foreign surplus.

Or, in simpler terms, the Netherlands is less likely to roll over and play dead in a Ger+Fin+BeNeLux currency union than Greece is to roll over in the €-17 currency union.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 04:04:55 PM EST
[ Parent ]

"balanced budget, generally" and "lower taxes" are NOT the same thing.

But "balanced budgets" and "deflation" are the same thing in a growing economy. And deflation kills economies.

Balanced budgets. Economic growth. Pick at most one.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:46:26 PM EST
[ Parent ]