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Now just a minute. I have argued patiently in this thread and elsewhere against the use of Nazi terminology in speaking of modern Germany, and part of this thread is, it seems to me, an intelligent discussion of the question.

However, are you denying that the "debt brake" constitutional amendment that is the subject of this diary, finds its origin in Germany, and that Merkel and the German government have clearly expressed the wish to see it introduced in all eurozone countries?

There are no conspiracy theories here, there is no reason to bring in the freemasons or the Illuminati. The current ideology, the official policy, and, apparently, a large proportion of the public opinion of Germany are quite sufficient.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 01:56:41 AM EST
[ Parent ]
The whole post is titled "Gleichschaltung" and I shall calm down? Blaming the messenger.

The debt brake is popular in Germany. But then all kind of nonsense is popular. As our american friends can tell us, a balanced budget amendment is an eternal favourite among american politicians because this kind of stuff is popular. Do you want to claim that the tea party, "cut, balance and amend" etc. are german imports to american politics?

Westerwelle indeed bragged just mow that the german government induced other countries to introdurce debt brakes. But so what? the man is an inveterate liar.

 "The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings."

22 or so of the 27 countries of the EU are governed by right wingers. Blame them and the citizens who voted them in and who like simplistic blather about debt, for austerity debt brakes etc.

Not some german conspiracy.

by IM on Wed Sep 7th, 2011 at 05:40:58 AM EST
[ Parent ]
IM:
The whole post is titled "Gleichschaltung" and I shall calm down? Blaming the messenger.

Have you read the discussion about this?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 05:59:42 AM EST
[ Parent ]
I wonder if he has read the diary past the title.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:01:03 AM EST
[ Parent ]
I have read all your nonsense.

And when afew tried to point out to you that you were once again talking tacky nonsense, you babbled on about a german cabal of fascists lead by Merkel

by IM on Wed Sep 7th, 2011 at 06:17:39 AM EST
[ Parent ]
I have read all your nonsense.

My condolences.

You can now move on to Jerome's thread about "senior Germans" who "casually forget history".

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:21:19 AM EST
[ Parent ]
Oh god. Not Jerome too.

Hans-Olaf Henkel is a clapped put has been of no account.

Jerome should know this.

by IM on Wed Sep 7th, 2011 at 06:31:00 AM EST
[ Parent ]
Really, I just looked it up. Henkel hasn`t been head of the BDI since 2000. Senior indeed, as in senior citizen.
by IM on Wed Sep 7th, 2011 at 06:33:49 AM EST
[ Parent ]
Senior enough to get an op-ed into the Financial Times, and add to the noise we all receive from Germany.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:19:28 AM EST
[ Parent ]
More noise then signal.
by IM on Wed Sep 7th, 2011 at 08:36:26 AM EST
[ Parent ]
Fair enough, so point that out without insulting everybody.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:43:13 AM EST
[ Parent ]
I am hardly the only one using harsh words here.
by IM on Wed Sep 7th, 2011 at 08:49:45 AM EST
[ Parent ]
Jerome is just having a Niemöller moment over Herr Henkel's suggestion that France of all countries should be left out of the Neuro.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:35:36 AM EST
[ Parent ]
Please. Just stop this tacky references, cheapening  national socialism.
by IM on Wed Sep 7th, 2011 at 06:46:53 AM EST
[ Parent ]
What are we supposed to call France is not Italy is not Spain is not Portugal is not Ireland is not Greece, then?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:49:05 AM EST
[ Parent ]
We told Jerome two years ago that they would come for France. He didn't believe it. France was not Greece, we were told. "Niemöller moment" is precisely the right term for the shocked realisation that they are in fact coming for France now.

We even called the order in which they would come for Eurozone countries after Greece: Portugal, Spain, Italy, France, with Belgium either just before or just after Italy, depending on how much being white and speaking decent English counts for. And lo and behold, it happened exactly as predicted. Because we were right in our fundamental analysis: This is not a debt crisis. It's a currency crisis with some cheap lipstick smeared on.

The people who claimed that this was a debt problem and (implicitly or explicitly) that the ECBuBa would not thrown France under the bus were wrong.

So maybe, just maybe, you should put your righteous indignation on hold long enough to consider the possibility that we may have an objectively superior understanding of what is going on here than you do, and than the people you usually get your news and views from do. We certainly have a better track record at the whole "empirical predictions" thing.

Incidentally, the fact that it is a currency crisis and not a debt crisis means that Germany bears the lion's share of the blame for it. For the precise same reason Germany bears the lion's share of the responsibility for the breakup of the ERM in 1993: Germany has the largest internal current accounts surplus, which means it falls to Germany to perform employer and market maker of last resort functions. That's not just some arbitrary rule or distributional policy demand - it's a fundamental requirement for a stable currency union.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 07:21:57 AM EST
[ Parent ]
You don't understand the simplest things. Superior, m<y god. <br> Look: "he people who claimed that this was a debt problem and (implicitly or explicitly) that the ECBuBa would not thrown France under the bus were wrong."

Let's ignore your obsession with a defunct central bank for a moment. Henkel is not "them". He hasn't mattered since the last century. He is an entertainer, a talk show habitue. Whoever "they" are in you imagination, Henkel is really not a part of it.

Or did conclude that corporate america wanted to annex the libyan oil when Donald Trump propoes that? Henkel is the Trump of german business. Nothing more.

And crowing we were right all along and that gives us a right to use nazi metaphors by the barrel based on the ramblings of a clapped out has been is quite premature.

by IM on Wed Sep 7th, 2011 at 07:31:15 AM EST
[ Parent ]
We understand that this sort of nationalist whining appears every time the focus is on one government or another. We get it: be nice and civil and don't criticise anyone except in the mildest terms. Even if they are a crowd of cargo cultists intent on exploiting xenophobia for their own personal gain despite the risks for the entire European project and the people thereof. It's more important to be civil than right, eh?
by Colman (colman at eurotrib.com) on Wed Sep 7th, 2011 at 07:37:31 AM EST
[ Parent ]
It is important to use the right words. Fascism has a meaning. And blaming spanish decisions on Germany is nationalistic whining. "Der Hauptfeind steht im eigenen Land", you know, and that should some remember here from time to time.
by IM on Wed Sep 7th, 2011 at 07:45:33 AM EST
[ Parent ]
Do you need a list of links to my criticism of Zapatero?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:33:30 AM EST
[ Parent ]
No.
But can't you critizise him without calling him a german puppet and using terms like Gleichschaltung? The last time we argued about this you set out to critizise Sarkozy, but then mostly talked about "Frankfurt" anyway.

So if you stop using Gleichschaltung and Untermenschen and calling the ECB Bundesbank I would be happy enough.

by IM on Wed Sep 7th, 2011 at 09:56:22 AM EST
[ Parent ]
But can't you critizise him without calling him a german puppet and using terms like Gleichschaltung?

I do, when he isn't reforming the Constitution in a rush while the Parliament is in recess and most people on vacation, on the sternly worded request of Merkel, Sarkozy and Trichet.

Do you want to see some criticism of Sarkozy with no blaming of Germany? Try this one from a month ago. To each their own, when they deserve it.

Here's some fun criticism of Zapatero on the eve of the Irish "rescue":

Zapatero, the last best hope of Social Democracy in Europe [sic], joins forces with the Conservative-Neoliberal governments of Germany, France, Britain and Italy in a futile attempt to protect his own bond spreads, only to find a few weeks/months from now that the other 4 larger economies hang him out to dry...
Because France is not Italy is not Spain is not Portugal is not Ireland is not Greece...

You see, my ranting and raving has been consistent for 18 months now, and unfortunately it's also been predictive, too.

But, really, it appears that Zapatero has done whatever Merkozy have told him to do since May 2010, so they're all inseparable. And, given that, one has to criticize the ones calling the shots even if they happen to be German.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 10:31:03 AM EST
[ Parent ]
"And, given that, one has to criticize the ones calling the shots even if they happen to be German."

But in your perspective of th world somehow everybody n the world calling the shots is a german. Even? Especially.

by IM on Wed Sep 7th, 2011 at 10:44:40 AM EST
[ Parent ]
In the current drive to align the constitutions of all Eurozone states with the macroeconomically illiterate German debt brake introduced in 2009... yes, actually, very much so.

On other issues, I have heaped a lot of criticism on Trichet, Juncker, Barroso, Bini-Smaghi [and, yes, Weber, Stark and Wiedmann, if that's okay with you] as and when they have deserved it.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 10:49:13 AM EST
[ Parent ]
for instance...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 10:50:37 AM EST
[ Parent ]
and, yes, Weber, Stark and Wiedmann, if that's okay with you]

Don't be petty. I am not the one running around and blaming a foreign country for everything. I just tend to point out that only two of the 18 people making decisions at the ECB are Germans. And Weber is history.

by IM on Wed Sep 7th, 2011 at 10:55:56 AM EST
[ Parent ]
1) The BuBa owns 20% of the ECB's capital (~GDP in the EU27), so it is not farfetched that they have disproportionate influence on decision-making; 2) going by the public pronouncements of the people involved, the Germans have been notorious for public breaches of ECB council collegiality, undermining or delaying ECB action repeatedly in this crisis; 3) we're still pretty much living with the non-petty economic consequences of Herr Weber.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 11:19:03 AM EST
[ Parent ]
Do you really think it is wrong that the largest economy in the Eurozone has some influence? And capital doesn't vote the heads of the central bank do.

 "2) going by the public pronouncements of the people involved, the Germans have been notorious for public breaches of ECB council collegiality, undermining or delaying ECB action repeatedly in this crisis;"

In your hate of the Bundesbank you don't seem to see what is happening here: The yare losing and try to use extraordinary means tp compensate for the fact that at the regular CBE decisison nobody listens to them.

 3) we're still pretty much living with the non-petty economic consequences of Herr Weber.

You mean Trichet.

by IM on Wed Sep 7th, 2011 at 11:56:29 AM EST
[ Parent ]
Both. But, in fact... Read this and that.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 12:00:11 PM EST
[ Parent ]
The Bundesbank are losing because they can't win as their ideas, if implemented, would destroy the Euro, but they are taking the rest of the Euro down with them.

Do you remember what happened on August 4-8 with Trichet's press conference, the market meltdown, the weekend conference calls and the Black Monday that wasn't?

All that would have been avoided if Weidmann had accepted on the 4th what he agreed to on the 7th.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 12:05:04 PM EST
[ Parent ]
Do you really think it is wrong that the largest economy in the Eurozone has some influence?

I think it is wrong that incompetent fuckwit ideologues have any influence at all, let alone disproportionate influence.

And the highest concentration of incompetent fuckwit ideologues East of London happens to be in the BuBa.

And capital doesn't vote the heads of the central bank do.

Yeah, yeah, on paper.

Just like, on paper, every NATO member has veto rights over foreign adventures.

The Americans call that sort of kabuki theatre "legal fiction."

In your hate of the Bundesbank you don't seem to see what is happening here: They are losing and try to use extraordinary means to compensate for the fact that at the regular CBE decisison nobody listens to them.

On what planet do you spend most of your time?

The ECB's playbook for this crisis has been a virtual carbon copy of the Bundesbank's playbook for the 1993 ERM breakup. And every single time the ECB has deviated a single millimeter from the BuBa 1993 playbook, the incompetent fuckwit ideologues at the BuBa have pitched a public hissy fit. In direct violation of the rules of confidentiality that the same incompetent fuckwit ideologues insisted on to begin with.

If the ECB had consistently overruled the BuBa, not a week would have gone by without a BuBa hissy fit. The fact that we only have about one hysterical tantrum a month demonstrates that the other 22 business days in each month the ECB is toeing the BuBa line to the letter.

You mean Trichet.

Yeah, him too.

But the thing about responsibility for fuckups is that it does not become more diluted by being spread out over more people.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 04:00:13 PM EST
[ Parent ]
Let it go. The eighties are over and he nineties are over. Your obsession with the Bundesbank just shows that you never left the last century.
by IM on Wed Sep 7th, 2011 at 06:13:57 PM EST
[ Parent ]
Theory: The BuBa irrelevant to ECB decisionmaking.

Hypothesis: The ECB's decisions should not conform to longstanding BuBa policy more often than would be the case by random chance.

Empirical reality: The ECB's policies conform to longstanding BuBa policy with very few exceptions, and when one of these exceptions arises, the BuBa throws a histrionic tantrum as if their most sacred and fundamental rights have been violated.

Conclusion: The theory is falsified.

You can repeat the fact that the BuBa has only one vote on the board until you go blue in the face. That does not change the readily observed fact that the BuBa is setting policy.

And I really don't care whether they do that by bullying the rest into line with their supposed Seriousness; by packing the analysis staff with their insane Hayekian crackpots (but I repeat myself); or even by plying the other members with hookers and cocaine (although the latter would admittedly be the more entertaining version).

I care about the fact that they are setting policy. Because their policies are not sanity-based.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:11:23 AM EST
[ Parent ]
JakeS:
or even by plying the other members with hookers and cocaine (although the latter would admittedly be the more entertaining version).

The central difficulty in writing a novel about the current ongoing crisis is finding a plausible explanation for the ECB's decisions. This one works better than any of the others I have played around with.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu Sep 8th, 2011 at 05:00:43 AM EST
[ Parent ]
IM:
blaming a foreign country for everything

But it is not. A foreign country that is, it is another state in a somewhat federal construction. Do you similarily find it unfair when criticism against certain aspects of US policy is formulated in terms of Texas billionaries?

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

by A swedish kind of death on Wed Sep 7th, 2011 at 03:13:17 PM EST
[ Parent ]
Don't you see the problem? oppose Rick Perry, he is one og this crazy texans like Bush. Fine. But that keeps you pretty helpless against Mitt Romney, very much not a Texan. The more thoughtful american progressives are against this kind of rhetoric, Texas this and the south that. Rightly. Right-wingers are all over the US and most of the leaders actually dwell in  New York or DC.

So your opinion - it is all right to blame " Germany" for everything, it will hit some of the right people -  is quite self-destructive. It lets right-wingers in the rest of the EU of the hook. That is enabling one of the oldest right-wing tactics, to blame everything on outsiders (bicoastal eleites, new York, Hollywood)  

by IM on Wed Sep 7th, 2011 at 06:24:12 PM EST
[ Parent ]
Nobody here is engaging in nationalist attacks on "Germany", a "foreign country". Or if they are, they are doing so from about nine distinct national chauvinist positions, which would be quite extraordinary. We are all convinced European federalists here (any dissenters will be taken outside and shot...)

Would it help if we only criticized bloody-minded austerian policies by quoting German sources?

Eurointelligence Daily Briefing, 7 de Setembro de 2011. Enviado por Domenico Mario Nuti. - aviagemdosargonautas

Writing an Op-ed in mass circulation daily Bild FDP's honorary chairman Hans-Dietrich Genscher launches an emotional appeal to the Angela Merkel's coalition to vote for the German law enhancing the EFSF. "Whenever Europe was confronted with a crisis in the past the answer was: with more Europe out of the crisis", the former foreign minister writes. Confronting the eurosceptics whom Genscher calls the "paymaster-agitators" he writes: "As Europeans we have been able to reach a so far unknown wealth in a common internal market with a stable currency", he goes on. He reminds them that because of Europe, Western Europeans were able to overcome the cold war divisions and invite in the Eastern neighbours. "All parliamentarians in Bundestag should be aware of the decision's significance for future generations", he concludes.

Poor old Genscher. The current FDP doesn't much resemble that of the seventies.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Sep 7th, 2011 at 07:28:41 PM EST
[ Parent ]
Ah yes, Genscher But that is not only a pro EU comment, but very much a pro Merkel comment. To be specific, a pro Merkel-Sarkozy comment.

"Die EU erlebt die schwerste Krise ihrer Geschichte. Es ist nicht eine Krise des Euro, sondern eine Schuldenkrise. Sie entstand durch Aufweichung der Stabilitätskriterien der Europäischen Währungsunion. Sie ist auch eine Vertrauenskrise. Neues Vertrauen bilden, bedeutet jetzt, peinliche Beachtung der Stabilitätskriterien, die Verbesserung der Kontrollmöglichkeiten für die Einhaltung dieser Kriterien, die Einführung von Schuldenbremsen in allen Mitgliedsstaaten und die Nachrüstung der Wirtschafts- und Währungsunion durch die Herstellung einer kohärenten übereinstimmenden Wirtschafts- und Finanzpolitik. Auch deshalb darf das Signal Merkel-Sarkozy nicht ungehört verhallen."

"Einführung von Schuldenbremsen in allen Mitgliedsstaaten" that is introduction of debt brakes in all member countries of the EU. That is hardly a critique of austerity.

On topic: I just want to dial you down all that nazi rhetoric like "Gleichschaltung". And I don't think it is good in the long term not to fight wrong policies in your own countries. What's so defensive about that? Defensive is to not accept the slightest bit of critique on even your phrasing.

by IM on Thu Sep 8th, 2011 at 04:48:30 AM EST
[ Parent ]
However
IM:
I don't think it is good in the long term not to fight wrong policies in your own countries.

What on earth makes you think that the various Eurozone nationals participating in this thread are not fighting wrong policies in our own countries? There is ample evidence to the contrary. Why do you persist in your patently absurd assertions that "everyone" on ET ascribes blame exclusively to German policies and policymakers? Is it your assertion that commenters may only criticize policymakers of their own nationality? How, then, may we comment EU affairs?

On my topic :

The Merkel/Sarkozy line is hugely damaging to Europe, I think we can agree on that. But there is worse : the FDP wrecking-ball approach. Genscher is pleading for a return for an at least ostensibly pro-European approach from the FDP, like in his days; but I'm afraid that party doesn't exist any more.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu Sep 8th, 2011 at 05:14:05 AM EST
[ Parent ]
Then perhaps you and others should say it and not silenty accept the use.

One frequent poster here uses terms like Gleichschaltung and untermenschen. Another one is so obsessed that he can't talk about the real ECB and the real Euro. but talks about the defunct Bundesbank and the abolished Mark. A third did post a picture of Hitler and Petain and compared them to Merkel and Sarkozy.

Patently absurd?

"Is it your assertion that commenters may only criticize policymakers of their own nationality? How, then, may we comment EU affairs?"

No, but only blaming politicians elsewhere, using every op-ed by some german as an expression of german policy, talking about "Frankfurt", arguing like Merkel is some kind of dictator, assuming she is not just one out of 27 head of governments but the only one is nationalistic blame shifting, scape goating and not really the behaviour of federalist europeans.

Re: FDP: They seem indeed to be the most anti-european party in Germany right now and compared to them Genschers op-ed was indeed gradually better.

by IM on Thu Sep 8th, 2011 at 05:46:59 AM EST
[ Parent ]
arguing like Merkel is some kind of dictator, assuming she is not just one out of 27 head of governments but the only one

Over the past 18 months, increasingly Merkel and Sarkozy have been dictating EU Council policy, and organizing a string of bilateral summits (starting with Deauville last Autumn) where the next step in EU policy is announced to the world (and the Council).

In the case of the July market crisis, when it first flared up Sarkozy wanted to organize a summit to discuss Spain and Italy (yes, Italy is under Market attack and has been for nearly 2 months, at least as far as Sarko is concerned) and Merkel first 1) said she wouldn't attend because there was nothing to discuss; 2) hid behind Greece (she said she wouldn't even attend a second summit a week later unless a deal for Greece had been hammered out by then; 3) then ensured that the 21 July summit discussed nothing but Greece so it had to wait until the market meltdown of August 5 before Merkel and Wiedmann agreed to even acknowledge that the market was now attacking Spain and Italy and that the EFSF was dead in the water.

I said in mid-July that the Council should have called Merkel's bluff and met without her...

But whatever.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 05:53:39 AM EST
[ Parent ]
HOW DARE YOU ACCUSE MERKEL OF BEING HITLER!?!?!? YOU'RE JUST LIKE STALIN!!!!
by Colman (colman at eurotrib.com) on Thu Sep 8th, 2011 at 05:55:51 AM EST
[ Parent ]
Oh come on. I just said that this kind of rhetoric is obscuring rather then illuminating.

Or do you actually think Sarkozy is some sort of Quisling?

by IM on Thu Sep 8th, 2011 at 06:08:18 AM EST
[ Parent ]
No, I just think he's the conductor on the right-wing Conventional Wisdom bus that Merkel is driving. The passengers could get off, but they're too chicken-shit to do so or they basically agree with the driver's choice of route.
by Colman (colman at eurotrib.com) on Thu Sep 8th, 2011 at 06:10:36 AM EST
[ Parent ]
"or they basically agree with the driver's choice of route."

That is my point. Most european countreis are governed by right-wingers, they enact right-wing policies. That is all.

Or do you think a different german government could all of its own force the EU in another direction?

by IM on Thu Sep 8th, 2011 at 06:26:42 AM EST
[ Parent ]
I asked you about the SPD supporting the 2009 debt brake amendment and you said "so what?"

This diary is about the PSOE panicking and adopting the PP's proposal (from 2010) to do the same, to general shock among the Spanish left public opinion.

So what? Do you think the Party of European Socialists provides a credible alternative? Do you think the SPD is not responsible for enabling the 2-year drive to EU wide constitutional debt brakes?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:30:59 AM EST
[ Parent ]
Now not only the government, but the opposition in Germany is all powerful? Impressive.

By the way I already told what the opposition in Germany wants Eurobonds - transaction tax - Marschall plan financed by said transaction tax.

But you didn't listen. As usual

by IM on Thu Sep 8th, 2011 at 12:47:02 PM EST
[ Parent ]
For the umpteenth time: the German opposition could have stopped this nonsense in 2009 but they didn't.

That's not being all powerful, it's being stupid.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 01:12:43 PM EST
[ Parent ]
By the way I already told what the opposition in Germany wants Eurobonds - transaction tax - Marschall plan financed by said transaction tax.

In the first place, if you can fund a Marshall plan type of project with a transaction tax, then your transaction tax isn't high enough. Because the whole point of a financial transaction tax is to kill the noise traders stone cold dead. Which, if it works as desired, also kills the base for that tax stone cold dead.

In the second place, even if they design a financial transaction tax to extract the maximum possible receipts, rather than impose the maximum possible harassment on noise traders consistent with not harassing productive businesses, revenues will not suffice to fund a Eurobancor. Even in the most optimistic possible estimate (where the Eurozone financial sector is assumed to contribute roughly half of the £ 250 bn that the Robin Hood Tax people guesstimate could be raised globally), it will fall short of plugging even the German CA imbalance (currently around $ 180 bn), to say nothing of the aggregate imbalances.

So while a Tobin tax is an excellent idea that will solve a great many problems, the biggest problem is not one of them.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 9th, 2011 at 10:13:44 AM EST
[ Parent ]
In the first place, if you can fund a Marshall plan type of project with a transaction tax, then your transaction tax isn't high enough. Because the whole point of a financial transaction tax is to kill the noise traders stone cold dead. Which, if it works as desired, also kills the base for that tax stone cold dead.

ATTAC and others make the mistake of seeing the Tobin Tax as a revenue generating mechanism which was never Tobin's intention when proposing it...

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Sat Sep 10th, 2011 at 04:51:16 AM EST
[ Parent ]
I don't know what Sarkozy is thinking. In May 2010 he reportedly threatened to quit the Euro right there and then if Merkel didn't play ball and managed to extract the creation of the (flawed) EFSF as a result. Since then, he's been soft like a kitten.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:14:06 AM EST
[ Parent ]
I still don't think that any of them are thinking, exactly. They're fighting for their own political survival and their legal survival after they leave power. What are the odds that an unfriendly successor government couldn't find lots of grounds to prosecute a worm like Sarko?
by Colman (colman at eurotrib.com) on Thu Sep 8th, 2011 at 06:15:19 AM EST
[ Parent ]
That is another thing I try to explain from time to time. The current german government isn't strong, but rather quite weak. And weak governments tend to plan from day to day, in other words not at all. They don't really think about other european countries, they think about the next state election.

So I tend to protest if I read analyses of the sort, Germany is planning this and wanting that. The current isn't planing and wanting mostly negative things, like to be left alone or to kick the can down the road so that they can concentrate on the coalition crisis.

Not that policy by drift can't be harmful.

by IM on Thu Sep 8th, 2011 at 06:32:51 AM EST
[ Parent ]
And I think this is an important reason why many Europeans, especially on the left, currently identify "German policies", or even (shudder) "Germany", as the villains in the current crisis, rather than blaming Merkel and Sarkozy, for example.

Bear with me for a minute : Merkel, who visibly doesn't have any ideas of her own on macroeconomic policy or currency governance, muddles along making non-decisions, digging her heels in stupidly, delaying then accepting the inevitable, but too late to stop the crisis getting worse... but all the while working within the framework of conventional economic wisdom in Germany.

And as Germany is the economic hegemon within the Eurozone (as largest economy, and most "virtuous", since they are on the credit side of the imbalances), German conventional wisdom, in all its majestic stupidity, is the EU orthodoxy.

It's the madness of this conventional wisdom that we must fight. You are quite right that the conventional wisdom is widely shared by economic policy makers and political elites in other countries (though we may note that the French PS has rejected the "golden rule" that the SPD embraced).

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu Sep 8th, 2011 at 08:29:07 AM EST
[ Parent ]
 "3) then ensured that the 21 July summit discussed nothing but Greece so it had to wait until the market meltdown of August 5 before Merkel and Wiedmann agreed to even acknowledge that the market was now attacking Spain and Italy and that the EFSF was dead in the water."

But the initially german line - no summit - had be abandoned. Hardly a proof of dictatorship.

 "I said in mid-July that the Council should have called Merkel's bluff and met without her..."

Well, that is their problem, right? Any way it wasn't necessary; Merkel did give in.

by IM on Thu Sep 8th, 2011 at 06:04:11 AM EST
[ Parent ]
So she's an idiot dictator? You're arguing that because ordering the tide to stay out didn't work that she's not pivotal in setting policy? What?
by Colman (colman at eurotrib.com) on Thu Sep 8th, 2011 at 06:08:43 AM EST
[ Parent ]
pivotal in setting policy - and germany was always pivotal in setting policy in the EU - is not same as dictator.

Regarding the idiocy: Have I created the impression that I am a Merkel fan?

by IM on Thu Sep 8th, 2011 at 06:36:40 AM EST
[ Parent ]
Markel did give in to what? To meet and talk about nothing but Greece's second loan tranche when everyone else was worried about whether the EFSF would die of indigestion from having to swallow Spain and Italy?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:16:19 AM EST
[ Parent ]
IM:
One frequent poster here uses terms like Gleichschaltung and untermenschen. Another one is so obsessed that he can't talk about the real ECB and the real Euro. but talks about the defunct Bundesbank and the abolished Mark. A third did post a picture of Hitler and Petain and compared them to Merkel and Sarkozy.

We have now beaten the Nazi terminology complaint into the ground. It is clear that the use of such terms is not accepted without debate on this blog.

The "real ECB and the real euro" are simply your version of them. Others have a right to have a different version.

The picture of Hitler and Pétain, you well know, was not accepted and was troll-rated.

Give it a rest.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 8th, 2011 at 05:58:09 AM EST
[ Parent ]
>We have now beaten the Nazi terminology complaint into the ground. It is clear that the use of such terms is not accepted without debate on this blog.>

It would be better if the use of such terms were without debate not accepted.

>The "real ECB and the real euro" are simply your version of them. Others have a right to have a different version.<

But there is an objective reality. The ECB is the central bank, not the bundesbank.

>Give it a rest.<

Ok. But the next time this problems crops up, I will remember you of your assertions that there is no problem here.

by IM on Thu Sep 8th, 2011 at 07:04:41 AM EST
[ Parent ]
It would be better if the use of such terms were without debate not accepted.

The fact that Migeru is objectively correct on the substance and has been making accurate predictions on this matter since 2008 makes most people here willing to tolerate antics that would not be tolerated from less valuable contributors.

Because being objectively, empirically correct actually matters around here.

>The "real ECB and the real euro" are simply your version of them. Others have a right to have a different version.<

But there is an objective reality.

Which is that the ECB is handling this entire crisis in precisely the same way the BuBa handled the 1993 crisis.

The law is a statement of intent, not an objective reality. The European Council can propose a treaty change that repeals the law of gravity, it can pass referenda in every single member state and be adopted with the force of national constitution everywhere on the subcontinent...

... but rocks still fall down when you drop them, and the BuBa still has an influence that is out of all proportion to the value of its contributions.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:26:50 AM EST
[ Parent ]
"makes most people here willing to tolerate antics that would not be tolerated from less valuable contributors."

Quod licet jovi, non licet bovi? Perhaps I am just to egalitarian for such maxims.

"Which is that the ECB is handling this entire crisis in precisely the same way the BuBa handled the 1993 crisis."

The ECB is doing what it is doing because its member countries did pack it full of right wing ideologues.
A fact you tend to ignore.

 "The law is a statement of intent, not an objective reality.""

No, most laws, especially the laws that create institutions do create an objective reality.

 "The European Council can propose a treaty change that repeals the law of gravity, it can pass referenda in every single member state and be adopted with the force of national constitution everywhere on the subcontinent...

 ... but rocks still fall down when you drop them, and the BuBa still has an influence that is out of all proportion to the value of its contributions."

You really are the last believer - and it seems to be theology with you - in the myth of the bundesbank. The supposed influence of the Bundesbank is a natural law now? Oh, you are not a orthodox believer, but a heretic: The Bundesbank is in your mythology not an angelic, but rather a satanic power. But in the kingdom, the power and the glory of the Bundesbank you still believe. EWven the people at the Bundesbank temselves are probably not that fervent believers.

A question: If the Bundesbank is all powerful, why did Weber resign? He was frustrated not getting his way at the ECB after all and did give the chance to lead the ECB away. Is he clinically insane? Or did he indeed did not get his way time after time at the ECB, leading to frustration?

by IM on Thu Sep 8th, 2011 at 08:00:41 AM EST
[ Parent ]
"makes most people here willing to tolerate antics that would not be tolerated from less valuable contributors."

Quod licet jovi, non licet bovi?

shrug

There's a single rule for everybody: Thou shalt improve the signal to noise ratio of the site. Posting puerile Nazi comparisons alongside insightful deconstructions of prevailing policy is a net improvement in signal to noise ratio compared to posting nothing. Posting puerile Nazi comparisons with no offsetting contribution of positive value is a net loss of signal to noise ratio compared to posting nothing.

Posting insightful deconstructions of prevailing policy without puerile Nazi comparisons improves the signal to noise ratio compared to posting them with puerile Nazi comparisons. But people are not paid to contribute, so if they insist on reducing the value of what they freely give by shitting on it, then we have very little sanction that can be gainfully applied as long as the final contribution remains net positive value.

The ECB is doing what it is doing because its member countries did pack it full of right wing ideologues.
A fact you tend to ignore.

Because clearly the European right wing is a monolithic hive mind that has no internal class and national conflicts?

Now who's talking conspiracy theories here?

If the Spanish plutocrats have as much influence on ECB policy as the German plutocrats, then why does all the money end up in Frankfurt?

No, most laws, especially the laws that create institutions do create an objective reality.

That does not mean that the objective reality they create can be divined from the text of the law.

A question: If the Bundesbank is all powerful, why did Weber resign?

His arrogance and mental instability made him many enemies. When he went and contradicted something Merkel had said publicly, "many" turned into "too many."

He was frustrated not getting his way at the ECB after all and did give the chance to lead the ECB away. Is he clinically insane? Or did he indeed did not get his way time after time at the ECB, leading to frustration?

Is a homeopath who truly believes in his nostrums clinically insane? Does it matter?

Weber was accommodated far beyond any reasonable limit. But when you insist on attempting to repeal the rules of arithmetic and throw an infantile tantrum every time someone points out that this might be a bad idea, then eventually enough people get tired of you that you are purged. This is less proof of Weber's lack of influence than of his inability to function outside his Hayekian echo chamber.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:30:55 AM EST
[ Parent ]
No, but only blaming politicians elsewhere, using every op-ed by some german as an expression of german policy, talking about "Frankfurt", arguing like Merkel is some kind of dictator, assuming she is not just one out of 27 head of governments but the only one is nationalistic blame shifting, scape goating and not really the behaviour of federalist europeans.

You mean someone who has decided to bully the other members (with the exception of France) into writing economic insanity clauses into their constitutions isn't acting like a dictator?

The fact that there's a remarkable lockstep on both sides of the Atlantic hardly absolves Merkel of quasi-imperial drooling tin pot idiocy.

But you seem to think Germany has nothing to do with this and is barely even a side player.

Your entire world view seems oddly counterfactual.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Sep 8th, 2011 at 05:59:13 AM EST
[ Parent ]
Nobody's "Blaming 'Germany' for everything" - I always say who said what that is being objected to. But, taken as a whole, a lot of the people calling the shots are German. For instance, I blame Merkel for a bunch of things. Just today:
"We must make it very clear to people that the current problem, namely of excessive debt built up over decades, cannot be solved in one blow, with things like euro bonds or debt restructurings that will suddenly make everything okay. No, this will be a long, hard path, but one that is right for the future of Europe."
According to reports, she actually proposed to introduce a Constitutional Debt Brake at the EU level.

In any case, the insistence that the current problem [is] excessive debt built up over decades is demonstrably false. But debating this point is like talking to a dining room table

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.

And, yes, this is mostly coming from Germany and it's coming from everyone who is anyone in Germany. Hey, even you agree that the problem is debt. More Krugman
A correspondent informs me that Wolfgang Schaeuble, the German finance minister, has just given a speech asserting that excessive public debt caused the 2008 crisis. In fact, I'm told, he said that
It's actually undisputed among economists worldwide that one of the main causes - if not the main cause - of the turbulence - not just now, but already in 2008 - was excessive public debt everywhere in the world.
OK, we can prove that wrong immediately: I dispute it, Brad DeLong disputes it, Christy Romer disputes it, and I think we fall into the category of "economists worldwide".
As Wolfgang Münchau put it in 2009: Berlin weaves a deficit hair-shirt for us all - yeah, that's right, none of this forced march to constitutional balanced budget reforms would have happened if Germany hadn't gotten the ball rolling and, moreover, continued to argue for its necessity and used the Euro crisis as a stick to force other countries to do it.
A decision was taken recently in Berlin to introduce a balanced-budget law in the German constitution. It was a hugely important decision. It may not have received due attention outside Germany given the flood of other economic and financial news. From 2016, it will be illegal for the federal government to run a deficit of more than 0.35 per cent of gross domestic product. From 2020, the federal states will not be allowed to run any deficit at all. Unlike Europeâ€TMs stability and growth pact, which was first circumvented, later softened and then ignored, this unilateral constitutional law will stick. I would expect that for the next 20 or 30 years, deficit reduction will be the first, second and third priority of German economic policy.

...

I am a little surprised not to hear howls of protests from France and other European countries. Germany has not consulted its European partners in a systematic way. While the Maastricht treaty says countries should treat economic policy as a matter of common concern, this was an example of policy unilateralism at its most extreme.

...

While the balanced budget law is economically illiterate, it is also universally popular. ...

This general level of debt-aversion is bizarre. Many ordinary Germans regard debt as morally objectionable, even if it is put to proper use. They see the financial crisis primarily as a moral crisis of Anglo-Saxon capitalism. The balanced budget constitutional law is therefore not about economics. It is a moral crusade, and it is the last thing, Germany, the eurozone and the world need right now.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:01:33 AM EST
[ Parent ]
"Hey, even you agree that the problem is debt."

Do I now? Where?

Do you confuse me with Merkel?

By the way did you realize that Merkel was speaking to the opposition, especially regarding eurobonds? A fact you tend to ignore.

by IM on Thu Sep 8th, 2011 at 04:51:33 AM EST
[ Parent ]
Haven't you been insisting all over the thread that the Euro crisis is a debt crisis, not a currency crisis?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:57:03 AM EST
[ Parent ]
In this case you surely have no problem to find that comment or comment.

Bonus point: Find where I said anything about public debts.

by IM on Thu Sep 8th, 2011 at 05:27:36 AM EST
[ Parent ]
Ask and ye shall recieve.

I said: Ireland was a debt crisis. A private debt crisis. Which should not be news to anybody reading these pages.

You replied: But that is my point. Not a currency crisis. Doesn't fit your narrative.

The casual reader could be forgiven for believing that your point was that Ireland had a debt crisis, and that this had something to do with the continental crises.

But if you presented your own analysis of what the problem is and what solutions are possible and desirable, then there would be much less grounds for such misunderstandings...

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:50:34 AM EST
[ Parent ]
And it is a bit boring to read the same Krugman blog post again and again. After all I and the rest of the readers of this blog too already did read it at the source.

Reagrding Münchau:
"While the balanced budget law is economically illiterate, it is also universally popular"

Universally popular all over the world. I already did mention the US. The popular support for austerity in the us and the UK is hardly "forced" by german pressure. The same is true in the rest of the world. Balanced budget laws and constitutional balanced budget amendments are always popular. I doubt there are many countries where public opinion is different.

That is a problem and we should deal with it. And not seek the fount of all evil somewhere over the border in "Frankfurt".

by IM on Thu Sep 8th, 2011 at 05:00:41 AM EST
[ Parent ]
It's not nearly as boring as 'top economists and bankers' and other weasels pushing the same self-interested but ultimately suicidal policies again and again.

Your comments are trivially short, loaded with emotive insinuations, and entirely oppositional to the preceding comment with no further scope - all of which suggest trolling.

But just in case you're here to make a more positive contribution - perhaps you'd care to explain what you think the solution to the Eurozone crisis should be?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Sep 8th, 2011 at 06:03:46 AM EST
[ Parent ]
Have you never been in an argument before?

They are oppositional to the preceding comment because we are debating. Are you so used to echo-chambers that you can't see the difference between debating and trolling? And length of a comment has nothing to with its quality. Look: I have read Krugman, you have read Krugman, probably most here have read the latest Krugman. No need to cite him again and again.  

"It's not nearly as boring as 'top economists and bankers' and other weasels pushing the same self-interested but ultimately suicidal policies again and again."

What kind of non sequitur is that?

"But just in case you're here to make a more positive contribution "

I would like to make a positive contribution. But I fear nobody would listen. I actually wanted to write a diary about the latest state elections here, but the current climate on this blog dissuaded me. Perhaps the next one.

by IM on Thu Sep 8th, 2011 at 06:23:07 AM EST
[ Parent ]
I've been trying to understand the substance of your opinions on the subjects we are ostensibly debating, with no luck, I'm afraid. A number of others seem genuinely confused as to what your positions are. It would greatly improve the signal to noise ratio if you would care to lay them out.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Sep 8th, 2011 at 08:44:30 AM EST
[ Parent ]
Seconded. I'm still trying to figure out IM's views and recommendations here, but so far I can't see anything.

Beyond the denunciation of bad taste WW II comparisons (and most of us agree), the only impression remaining (unfortunately) is him taking taking exception when someone blames the German leadership (politicos, bankers, etc...), for the current mess.

And no, I disagree that we are driving German contributors out: if French ETribbers were reacting that way each time Sarkozy, the UMP or the PS politics is criticized here, there wouldn't be any single French person left. Germany is no different.

And yes I would really welcome a diary about the latest state elections and generally speaking about German politics as it affects EU policies.

by Bernard on Thu Sep 8th, 2011 at 09:21:40 AM EST
[ Parent ]
But in your perspective of th world somehow everybody n the world calling the shots is a german.

Follow the money.

Current policy sends the money, or at least the overwhelming part of it, to Frankfurt. It is not unreasonable, to low order at least, to assume that this is because Frankfurt is disproportionally calling the shots. It is, after all, uncommon for the people who are calling the shots to unilaterally decide to send money to somewhere that contains nobody who is calling the shots.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 03:49:19 PM EST
[ Parent ]
I don't know where you come from, but where I come from people who make interesting and accurate predictions tend to enjoy a great deal of leeway in their rhetoric. Certainly compared to ignorant pseudo-Keynesian third-wayers like Bofinger, who couldn't build a reality-based economic model if his career depended on it (which, of course, it never will).

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 07:46:35 AM EST
[ Parent ]
Poor bofinger, found wanting by a blog ayatollah.

And no,  just because you predicted something in your imagination, you don`t get special rights. The normal rules of discourse obligate verybody. At least were I come from.  (Lower Saxony. Got a problem with that?)

by IM on Wed Sep 7th, 2011 at 07:51:33 AM EST
[ Parent ]
Your own attitude is now way more offensive than any Godwinism about Germany.

Do you have the faintest idea of how Germany appears right now to the rest of Europe? I mean, the faintest?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:05:56 AM EST
[ Parent ]
Fine. I thought you did see here and on other threads the same problem.

"Do you have the faintest idea of how Germany appears right now to the rest of Europe? I mean, the faintest?"

Honestly, I don't know. Do you have a poll? You should really not confuse the opinion of half a dozen posters on ET with the public opinion of europe.

I really don't understand your attitude. You (collectively) have driven down the amount of german posters on ET to almost zero and  you still don't see a problem?

It is really shooting the messenger.

by IM on Wed Sep 7th, 2011 at 08:21:48 AM EST
[ Parent ]
Bofinger's curriculum vitae speaks for itself. My predictions and analysis here and elsewhere do likewise. And so would yours, if you had actually made any that I could not have gotten from Frankfurter Allgemeine Zeitung (a process that would have involved considerably less sniping at my personal habitus).

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:24:37 AM EST
[ Parent ]
FAZ? I didn't make any predictions.
by IM on Wed Sep 7th, 2011 at 08:34:24 AM EST
[ Parent ]
 "Portugal, Spain, Italy, France, with Belgium either just before or just after Italy, depending on how much being white and speaking decent English counts for. And lo and behold, it happened exactly as predicted. "

But of course that is not what happened.

And if all of this is a currency thing, what about Ireland? They have a current account surplus, after all.

(And the current account deficit of Italy is quite small)

by IM on Wed Sep 7th, 2011 at 07:39:51 AM EST
[ Parent ]
That would make Ireland the lipstick on the pig, no?
by Colman (colman at eurotrib.com) on Wed Sep 7th, 2011 at 07:41:07 AM EST
[ Parent ]
That is not really much of an answer, right?
by IM on Wed Sep 7th, 2011 at 07:47:49 AM EST
[ Parent ]
Ireland was a debt crisis. A private debt crisis. Which should not be news to anybody reading these pages.

And while the Irish private debt crisis was not a currency crisis on the Continental model, I do note that the ECBuBa did not precisely cover itself with glory in Ireland. To put it very delicately.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:09:14 AM EST
[ Parent ]
But that is my point. Not a currency crisis. Doesn't fit your narrative.
by IM on Wed Sep 7th, 2011 at 08:30:51 AM EST
[ Parent ]
Because clearly an Irish debt crisis prevents Spain from having a currency crisis.

That is a novel and interesting analysis. Blatantly false, but novel and interesting.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:46:26 AM EST
[ Parent ]
No. You have a analyses fitting for Spain and Portugal -current account deficits - and then you force the other countries with a current account surplus or small deficit in this box.

That is my point. Don't build a straw man.  

by IM on Wed Sep 7th, 2011 at 08:52:41 AM EST
[ Parent ]
All the countries under attack or being ECB'ed (except Ireland which it has been duly noted innumerable times is a different story) are internal CA deficit countries.

That their deficits are "small" (by what metric?) does not matter when nominal growth has flatlined. In the absence of nominal growth, any CA deficit is unsustainable.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:56:36 AM EST
[ Parent ]
In the absence of nominal growth, any CA deficit is unsustainable.

A tall claim. Do you really think a CA deficit of 1.0% gdp is unsustainable?

Germany e. g. did run a small CA deficit for most of the second half of the 20th century. That did include years without growth. Wasn't really unsustainable.

Perhaps more to the point Italy has now run a small CA deficit and very low growth for twenty years. After twenty years can you really still say unsustainable?  

by IM on Wed Sep 7th, 2011 at 09:05:36 AM EST
[ Parent ]
A tall claim. Do you really think a CA deficit of 1.0% gdp is unsustainable?

Which part of "in the absence of nominal growth" did you find it difficult to parse?

Of course having a 1 % deficit is unsustainable if you have 0 % growth.

Germany e. g. did run a small CA deficit for most of the second half of the 20th century. That did include years without growth. Wasn't really unsustainable.

It most certainly did not. Nominal growth was never below 4-5 per cent per year between 1950 and 1980 - and usually it was somewhat above that level.

And in any event there is a major difference between a year of flatlining nominal growth and a decade of same. Which is what we're looking at if governments don't start spending money to prop up employment.

Perhaps more to the point Italy has now run a small CA deficit and very low growth for twenty years. After twenty years can you really still say unsustainable?

Yes.

Past performance is not a guarantee of future performance. We have been extracting and burning oil on an industrial scale for nearly fifteen decades. Nobody of sound mind would presumably argue that this is sustainable.

In the absence of negative feedback loops on CA surpluses, current accounts imbalances continue right up until they don't. And then you have a crash.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 09:18:16 AM EST
[ Parent ]
 "Nominal growth was never below 4-5 per cent per year between 1950 and 1980 - and usually it was somewhat above that level."

I was more thinking of the years past 1980.

 "And in any event there is a major difference between a year of flatlining nominal growth and a decade of same."

Now you are shifting the goalposts a bit.

Is there even zero nominal growth in any european country?

So if assume zero nominal growth for  a decade, then even a small current account deficit year after year is not sustainable. But that rest on two assumptions. How is this relevant regarding France or Belgium or even Italy?

by IM on Wed Sep 7th, 2011 at 09:26:59 AM EST
[ Parent ]
I was more thinking of the years past 1980.

Germany no longer had a CA deficit by then.

Now you are shifting the goalposts a bit.

No. If conditions change, what is unsustainable can become sustainable, and vice versa. But given no growth, any CA deficit is unsustainable.

Is there even zero nominal growth in any european country?

On average over the past half decade? Yes.

But of course the peak-to-trough part of the business cycle is an outlier...

So if assume zero nominal growth for  a decade, then even a small current account deficit year after year is not sustainable. But that rest on two assumptions. How is this relevant regarding France or Belgium or even Italy?

It's relevant because you have an implicit assumption of zero interest rates stuffed in there. The actual sustainability condition is that total hard currency liabilities normalised to GDP must not diverge when time goes to infinity. It is not difficult to derive the sustainable CA deficit given exogenous nominal growth rates and nominal interest rates, but I have a train to catch now so I'll leave the algebra to the reader.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 09:35:53 AM EST
[ Parent ]
Germany no longer had a CA deficit by then.

Germany had a CA deficit until a few years ago. (unification).

by IM on Wed Sep 7th, 2011 at 09:44:55 AM EST
[ Parent ]
Far as I can understand Germany's Current Acccount was mostly balanced in the 70ies, deficit in early 80ies, surplus in late 80ies, deficit in 90ies and surplus in 00ies. Not that I am sure what either of you is trying to prove, but I figured you should at least have the right numbers.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES!
by A swedish kind of death on Wed Sep 7th, 2011 at 03:26:03 PM EST
[ Parent ]
Is not the immediate issue here that a CA deficit, under EMU rules (and with an ECB ready to destroy the economy or if they are not allowed to do that attack the banking system), creates a target for attack by the financial heavyweights?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES!
by A swedish kind of death on Wed Sep 7th, 2011 at 03:30:12 PM EST
[ Parent ]
That is the immediate question. I say that isn't the case and Jake tries to disprove this by talking about what happens with a CA deficit and no nominal growth in infinite time period.

A straw man, since I am talking about right now. And of course a small CA deficit is sustainable about a long time period. The data you researched regarding Germany show that Germany had a CA deficit from 1990 until 2002 without any trouble.

So my thesis is that a moderate CA deficit like France or Slovakia or Italy is no reason for worry.      

by IM on Wed Sep 7th, 2011 at 06:33:50 PM EST
[ Parent ]
That is the immediate question. I say that isn't the case and Jake tries to disprove this by talking about what happens with a CA deficit and no nominal growth in infinite time period.

It would really make this discussion a lot easier if you would make the effort to recall the chain of reasoning back more than three posts when you play these annoying "gotcha" games.

A straw man, since I am talking about right now.

Which just proves you don't know the first thing about how to look at macroeconomic data. To obtain an estimate of the structural surplus/deficit, you have to average over at least a couple of business cycles.

You are arguing like a climate change denier who says "but we had a really cold winter in 1992, so global warming isn't happening!"

And of course a small CA deficit is sustainable about a long time period. The data you researched regarding Germany show that Germany had a CA deficit from 1990 until 2002 without any trouble.

From 1991 to 2001, actually. And that's not a long time period. It's the trough-to-peak of the 1990s business cycle.

It would also be more informative to look at the CA position of the former West Germany only, since there was a considerable exodus of industry from the former Eastern Bundesländer under the Kohl Ostmark peg that strongly resembles the exodus from the European periphery under the Schröder Drachma peg.

So my thesis is that a moderate CA deficit like France or Slovakia or Italy is no reason for worry.

And since France and Italy are already under attack, your hypothesis was falsified even before you proposed it.

As fail goes, that's a really impressive example.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:30:02 AM EST
[ Parent ]
Under attack? Define that. You use such a loose word that you can prove anything with that.

And you are destroying your own argument. I won't even mention that as usual you don't know the slightest thing about german economic history. If we look at structural deficits and surpluses, the german CA surplus you obsess about vanishes. More importantly, there isn't much of a CA deficit in France or Italy. Or Ireland.
And before you start again babbling - climate science? Case of physics envy? -  if we are only talking about six or seven countries, two or three countries are more then an isolated data point.

by IM on Thu Sep 8th, 2011 at 04:36:20 AM EST
[ Parent ]
Under attack? Define that.

Where have you spent the month of August?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:38:35 AM EST
[ Parent ]
Under attack? Define that.

You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero.

In a unified currency zone, all subunits should be operating under the same risk-free rate. If they aren't, there is an implied exchange rate risk.

I won't even mention that as usual you don't know the slightest thing about german economic history. If we look at structural deficits and surpluses, the german CA surplus you obsess about vanishes.

In which fictional alternative universe?

Try averaging over the last three business cycles and get back to me.

More importantly, there isn't much of a CA deficit in France or Italy. Or Ireland.

I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith.

And France and Italy have structural CA deficits, which means, given that the ECBuBa is pursuing a long rate in excess of nominal growth, that they are vulnerable to Soros attacks.

if we are only talking about six or seven countries, two or three countries are more then an isolated data point.

But you only have one country. Not two, nevermind three.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:59:07 AM EST
[ Parent ]
"You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero."

In other words, everybody is attacked.

"In a unified currency zone, all subunits should be operating under the same risk-free rate."
Why? What about default risk?

"In which fictional alternative universe?

 Try averaging over the last three business cycles and get back to me."

You really seem to think germanys economic history started in 2002. It hasn't. And prior to that the CA tended to be balanced.

"I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith."
You can't handle dissent well. You claimed a perfect prediction record for your hypothesis, I pointed out that Ireland doesn't fit your hypothesis and you then grudgingly admitted that. Where exactly is the bad faith? You just omitted Ireland in your first comments.

by IM on Thu Sep 8th, 2011 at 08:19:41 AM EST
[ Parent ]
"You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero."

In other words, everybody is attacked.

No. Finland is not under attack.

"In a unified currency zone, all subunits should be operating under the same risk-free rate."
Why? What about default risk?

Only relevant to the private part of the foreign debt, which is why I was talking about the "risk-free" rate.

"In which fictional alternative universe?

Try averaging over the last three business cycles and get back to me."

You really seem to think germanys economic history started in 2002.

"The last three business cycles" is 1985 to 2008 (approx.).

You do know what "business cycle" means, right?

"I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith."
You can't handle dissent well. You claimed a perfect prediction record for your hypothesis, I pointed out that Ireland doesn't fit your hypothesis and you then grudgingly admitted that.

There was nothing grudging about that. I pointed out from the first day that Ireland and Greece were totally and fundamentally different. This is not a problem for my hypothesis, any more than the existence of suicide is a problem the prosecutor in a case against a suspected serial killer.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:39:21 AM EST
[ Parent ]
"In a unified currency zone, all subunits should be operating under the same risk-free rate."

Why? What about default risk?

1. What about the Eurozone's "no-default rule"?

You can't have your cake an eat it, too. The combination of the following is an example of having your cake and eating it, too:

  1. The GSP
  2. Growth and Jobs
  3. No default
  4. No bailout
  5. No fiscal transfer
  6. Beggar-thy neighbour neomercantilism
  7. Subordinating fiscal policy to the financial markets

Something has to give. The first thing to give was the GSP (violated by the Francogerman axis which then went on to convince the Council to change the rules) followed by "growth and jobs", then "no bailout" and "no fiscal transfers". Soon the "no default" rule will be breached, too. And then we may not have a Euro any more.

All of this could have been solved very simply and cheaply in February 2010 but it wasn't.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 09:11:51 AM EST
[ Parent ]
Which part of "after Greece" did you find it difficult to parse?

At the time the prediction was made, Ireland and Greece had already happened. I don't know what epistemology you subscribe to, but in the one I subscribe to you don't get points for predicting events that are already known to have occurred.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:03:16 AM EST
[ Parent ]
Wait a moment didn't you just brag about two years ago? Nothing happened then in Ireland, at least concerning bail-outs.
by IM on Wed Sep 7th, 2011 at 08:32:43 AM EST
[ Parent ]
And that would be wrong.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:47:49 AM EST
[ Parent ]
Well, yes, the crisis started in Ireland or became obvious in autumn 2008.

I was talking about european bail-outs, the so called euro crisis. The NAMA is a national institution.

by IM on Wed Sep 7th, 2011 at 08:54:43 AM EST
[ Parent ]
Ireland - the sovereign, not the banks - came under attack in early Winter 2009, almost immediately after NAMA was announced (for obvious reasons, since NAMA was always suicidally insane).

That it took until mid-2010 before their foreign creditors were bailed out is neither here nor there, since the only reason you brought up Ireland (aside from your obsession with the quaint notion that since Ireland was a debt crisis, Spain, Portugal, Greece, Italy, France and Belgium must also be debt crises) was to make a cheap shot at my 2009 prediction of the order in which Southern Europe was attacked.

(Note, incidentally, that by your definition, the current Spanish crisis is an entirely domestic affair.)

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 09:03:49 AM EST
[ Parent ]
"aside from your obsession with the quaint notion that since Ireland was a debt crisis, Spain, Portugal, Greece, Italy, France and Belgium must also be debt crises"

I would be obliged if you don't make up my positions for me.

"Ireland - the sovereign, not the banks - came under attack in early Winter 2009, almost immediately after NAMA was announced (for obvious reasons, since NAMA was always suicidally insane)."

Bail-out was only in autumn 2010.

I still think the problem was not NAMA but the guarantee in 2008. Taken without the involvement of any outsiders.

You take countries with large CA deficits: Spain, Portugal, Greece and then mix them together with other countries: France, Italy, Belgium there the CA deficit is quite small. And you just hand wave Ireland away.

by IM on Wed Sep 7th, 2011 at 09:15:26 AM EST
[ Parent ]
I would be obliged if you don't make up my positions for me.

And I would be much obliged if you would refrain from tossing around red herrings. Such as the chronology of bailouts in a discussion of the chronology of attacks.

You take countries with large CA deficits: Spain, Portugal, Greece and then mix them together with other countries: France, Italy, Belgium there the CA deficit is quite small. And you just hand wave Ireland away.

If this were a debt crisis, Germany and France would have been attacked more or less at the same time - the two have roughly equal levels of debt to GDP, and if anything France has outperformed Germany in the growth department over the past two decades.

They weren't, so it isn't.

This is called deriving a testable hypothesis from your theory. When your testable hypothesis does not hold up to empirical scrutiny, the hypothesis is deemed to have been falsified. A large enough number of falsified hypotheses derived from a given theory casts doubt on the validity of the theory.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 09:25:07 AM EST
[ Parent ]
And Ireland hasn't falsified your theory?
by IM on Wed Sep 7th, 2011 at 09:28:29 AM EST
[ Parent ]
In a word, no.

My claim is that the €-Mark is experiencing a currency crisis due to the BuBa being unwilling to pay to defend its currency policy. Your claim is that the €-Mark is experiencing no such crisis.

To disprove my claim, you have to demonstrate that debt is the dominant causative factor in every case (formally speaking - informally, you only have to demonstrate that it is so in the overwhelming majority of cases). To disprove your claim, I only have to demonstrate that current accounts are the dominant factor in a single case (again, if we stand on formalism - for practical purposes, I have to demonstrate that the test case is of at least moderate significance).

The former is a significantly more daunting proposition than the latter.

Or, to put it in slightly less formal terms, I am claiming that a suspect murdered his wife. You are claiming that the suspect did not murder anybody, and as proof of this you note that he did not murder his neighbour, who is known to have committed suicide.

I hope you can see why this is not a viable defense strategy.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 03:37:03 PM EST
[ Parent ]
Well, no. I don't . You have put a hypothesis and now you are not able to defend it. I have pointed out that CA deficits don't matter in some cases and all you have as an answer is to decree abritary rules.
by IM on Wed Sep 7th, 2011 at 06:39:59 PM EST
[ Parent ]
sigh

You are not even looking at my hypothesis, which is that this is a currency crisis, not a debt crisis. You are playing silly gotcha games based on nothing but your total ignorance of elementary econometrics.

I did dare to assume that since you were arguing a point on economics, you possessed at least rudimentary schooling in, y'know, actual economics. But this is not in evidence anywhere in your argument - you argue more like a lawyer or a theologian than a scientist (or even an economist).

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:48:01 AM EST
[ Parent ]
Appeal to authority? I really try to argue with you, but all  I get back is insults and shouts" Look I am an economist."

Pounding on the table.

by IM on Thu Sep 8th, 2011 at 04:08:34 AM EST
[ Parent ]
Furthermore, if what you say is right, countries should have been attacked in order of their CA deficits. Didn't happen, so it isn't a current account crisis.
by IM on Wed Sep 7th, 2011 at 09:30:50 AM EST
[ Parent ]
Furthermore, if what you say is right, countries should have been attacked in order of their CA deficits.

Um, no. That does not follow. At all. CA deficits are far from the only determinant in vulnerability to Soros attacks, whereas debt levels relative to asset levels are (almost definitionally) the overwhelmingly dominant component in vulnerability to bankruptcy.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 03:36:42 PM EST
[ Parent ]
"CA deficits are far from the only determinant in vulnerability"

Shifting the goal posts again? You claimed CA deficits are the start and end of this crisis.

by IM on Wed Sep 7th, 2011 at 06:41:29 PM EST
[ Parent ]
No, I said that this was a currency crisis.

Currency crises are caused by structural CA imbalances (note: Imbalances include CA surpluses - the surplus country is as responsible for the imbalance as the deficit country).

They are triggered by all sorts of things, and there is a substantial component of black magic in divining when a vulnerability to a currency run will translate into an actual run (though in this case it was real easy: Just sort the structural CA deficit countries in ascending order of political power).

Really, the distinction between fundamental and proximate cause is not a novel concept or arbitrary imposition. It has been a recognised concept in every school of epistemology (except perhaps the radical social constructivists) since Aristotle. And I did dare to presume - wrongly, apparently - that you had paid attention to epistemology at some point in the last three or four thousand years.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:42:59 AM EST
[ Parent ]
LOL

Nice straw man.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 04:14:13 PM EST
[ Parent ]
"Such as the chronology of bailouts in a discussion of the chronology of attacks."

Because there is obviously no connection.

by IM on Wed Sep 7th, 2011 at 09:33:50 AM EST
[ Parent ]
Of course not: Dexia and Fortis were among the first Eurozone banks to be bailed out but France, the Netherlands and Belgium will be among the last countries to be attacked.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:37:09 AM EST
[ Parent ]
We are talking about bailouts of countries. At least I hope we do.
by IM on Wed Sep 7th, 2011 at 09:41:21 AM EST
[ Parent ]
You keep bringing up NAMA...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:42:34 AM EST
[ Parent ]
No, JakeS did.

 I said Ireland was bailed out in 2010, he said NAMA late 2009, I said that I meant states, not banks. And then said he meant "attacks" and that the Eurozone bailouts are red herring. And then I pointed out that attacks and bail outs go together like a horse and carriage.

And then you brought up the rescued banks by Belgium/Netherlands/France.

I hope everything is clear.

by IM on Wed Sep 7th, 2011 at 09:49:08 AM EST
[ Parent ]
I noted that I had correctly predicted the sequence of attacks. Specifically, I wrote:

We even called the order in which they would come for Eurozone countries after Greece: Portugal, Spain, Italy, France, with Belgium either just before or just after Italy, depending on how much being white and speaking decent English counts for.

You then tried to play gotcha by noting that Ireland's creditors were not bailed out until 2010, and therefore Ireland should have been included in any prediction made in 2009.

Which is completely irrelevant, since the bailouts of Ireland's creditors were Act 3 of the Irish Assisted Suicide, and Act 2 - which was the first one that involved international economic hit men - took place in 2009 (Act 1 was in 2008-9, but as you correctly note that part involved only Irish economic hit men, not foreign ones).

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 04:15:00 PM EST
[ Parent ]
You didn't mention Ireland at all probably because it didn't fit your model. As far as being white an d decent english speaking it isn't fitting your secondary model either. That you take refuge in a weasel word like attacks is telling.
by IM on Wed Sep 7th, 2011 at 06:46:35 PM EST
[ Parent ]
For the last goddamn time: I didn't mention Ireland because Ireland was already under attack when I made my prediction about which countries would come under attack and in which order the attacks would happen.

I may be a sad existence, but I'm not sad enough to brag about being able to predict events that are already part of the public record. That you seem to think that this is a failure is less telling of any failure of mine than it is of your insistence on extrapolating wildly from a single data point to reach a conclusion that goes against the overwhelming weight of the remaining data.

That's called "cherry picking," and it's a denialist tactic.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:52:49 AM EST
[ Parent ]
A bailout of a country involves guaranteeing non-usurious interest rates on new issues during the 18-24 months it takes for the hysterical children to calm down after a sovereign default.

A bailout of the bondholders involves having other countries roll over the bonds so the current bondholders get their money back.

I will leave it to the reader to decide which of the two descriptions is the more apt for what the ECBuBa, EFSF, et al have been doing

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 03:49:33 PM EST
[ Parent ]
You take countries with large CA deficits: Spain, Portugal, Greece and then mix them together with other countries: France, Italy, Belgium there the CA deficit is quite small. And you just hand wave Ireland away.
Euro Crisis scorecard:
GDP rank Country       CAB/GDP status
--------------------------------------------
17	 Romania	-5.13% under IMF
22	 Bulgaria	-3%
 7	 Poland 	-2.41%
 3	 UK		-2.23%
16	 Czech Republic -1.21%
--------------------------------------------
12 (8)	 Greece        -10.84% under EFSF
14(10)	 Portugal	-9.98% under EFSF
25(15)	 Cyprus 	-7.92% under attack
27(16)	 Malta		-5.39% 
 5 (4)	 Spain		-5.23% under attack
 4 (3)	 Italy		-2.86% under attack
15(11)	 Ireland	-2.73% under EFSF
 2	 France 	-1.79% under attack
19(12)	 Slovakia	-1.36%
21(14)	 Slovenia	-0.73%
--------------------------------------------
 8 (6)	 Belgium	+0.5%
13 (9)	 Finland	+1.43%
10 (7)	 Austria	+2.31%
26(17)	 Estonia	+4.21%
 6 (5)	 Netherlands	+5.72%
 1	 Germany	+6.06%
20(13)	 Luxembourg	+6.91%
--------------------------------------------
18	 Hungary	+0.51% under IMF
23	 Lithuania	+1.86%
11	 Denmark	+3.42%
24	 Latvia 	+5.49% under IMF
 9	 Sweden 	+5.95%
I don't see any reason at all not to "mix" France, Ireland and Italy with Spain, Portugal and Greece.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:32:16 AM EST
[ Parent ]
Greece        -10.84% under EFSF
14(10)     Portugal    -9.98% under EFSF
25(15)     Cyprus     -7.92% under attack
27(16)     Malta        -5.39%
 5 (4)     Spain        -5.23% under attack
 4 (3)     Italy        -2.86% under attack
15(11)     Ireland    -2.73% under EFSF
 2     France     -1.79% under attack
19(12)     Slovakia    -1.36%
21(14)     Slovenia    -0.73%
--------------------------------------------
 8 (6)     Belgium    +0.5%

There is a difference between 10.00% and 2.86 or 1.79%. Gradual differences matter.

Belgium isn't fitting either. Are the irish numbers current?
So you two predict a "attack" on Slovakia? Then Slovenia?

by IM on Wed Sep 7th, 2011 at 09:40:02 AM EST
[ Parent ]
Belgium hasn't been attacked yet. Part of it is because, not having a government, it hasn't been able to implement damaging austerity plans. Though that might change soon or not... The Belgian issue is complicated by the "fact" that Flanders "belongs" in the Neuro and Wallonia in the Seuro.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:48:12 AM EST
[ Parent ]
And Slovakia?
by IM on Wed Sep 7th, 2011 at 09:49:51 AM EST
[ Parent ]
Hasn't happened yet?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 09:50:28 AM EST
[ Parent ]
There is a difference between 10.00% and 2.86 or 1.79%.

But the Greek CA deficit was not 10 % of GDP when Greece was attacked. It is 10 % of GDP after the ECB-led Troika has destroyed the Greek domestic economy (and thereby cratered GDP) and imposed usurious interest rates on its foreign debts.

You are using a snapshot of different points in the business cycle to say something about the relative magnitude of structural variables. That's nonsense. If you want to make structural arguments (which you implicitly are here) then you need to look at cycle-averaged variables.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 04:11:47 PM EST
[ Parent ]
"But the Greek CA deficit was not 10 % of GDP when Greece was attacked. It is 10 % of GDP after the ECB-led Troika has destroyed the Greek domestic economy (and thereby cratered GDP) and imposed usurious interest rates on its foreign debts."

(This whole usurious debt is nonsensical. Greece still pays whatever interest rate it did got quite prior to the crisis on most of its debt. Even you can't assume that the new interest rates have already influenced its CA.)

Wait a moment. You are saying all the time that everything depends on CA deficits. But whatever, lets say it was only 8.0% in 2007. So what?

"You are using a snapshot of different points in the business cycle to say something about the relative magnitude of structural variables. That's nonsense."

Of course it is nonsense! Tell that to Migeru and his famous table! Tell that to your reflection in the mirror!

But lets talk about structural CA deficits. All I claimed is that structural CA deficits in Italy and France - not to talk about Ireland and Belgium - are low. A lot lower than in Spain and Greece and Portugal. Isn't that a bit of a problem to your CA hypothesis?

by IM on Wed Sep 7th, 2011 at 06:58:01 PM EST
[ Parent ]
But lets talk about structural CA deficits. All I claimed is that structural CA deficits in Italy and France - not to talk about Ireland and Belgium - are low. A lot lower than in Spain and Greece and Portugal. Isn't that a bit of a problem to your CA hypothesis?

No, the prediction is that the endgame in all this is that all the deficit countries including France will end up on the other side of the fracture from Germany when the Euro blows up. (Cue in the discussion of Jerome's Niemöller moment)

The only reason why France migth be included in "core Europe" is the political prejudice of the Francogerman axis, but if France insists on hoisting itself to a new faux gold standard alongside Germany and the Netherlands, their economy will first suffer a private debt bubble and then get blown out of the water in the next business cycle.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:10:17 AM EST
[ Parent ]
Fine. Lets talk again when - or if - the euro blows up.
Any month now, if I remember your last prediction it was June.

 "all the deficit countries"

I still claim that calling a country with a CA deficit of 0.1 gdp and a country with 10.00 of gdp both deficit countries doesn't make sense.

by IM on Thu Sep 8th, 2011 at 05:08:35 AM EST
[ Parent ]
The stability condition for a structural CA deficit country in a fixed-rate regime without a BanCor is that nominal growth must exceed nominal interest rates on the foreign debt. If the ECBuBa were pursuing a zero risk-free interest rate policy, this would be possible. But it isn't, so it isn't.

If you don't believe me, just derive the convergence criterion yourself.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:03:45 AM EST
[ Parent ]
(This whole usurious debt is nonsensical. Greece still pays whatever interest rate it did got quite prior to the crisis on most of its debt.

That is an extraordinary claim - you are arguing that the bulk of Greek foreign debt had a maturity greater than two years in 2009. I find that very difficult to believe, but perhaps you are better informed?

Wait a moment. You are saying all the time that everything depends on CA deficits. But whatever, lets say it was only 8.0% in 2007. So what?

Structural CA deficits. And more like 5 %, since in 2007 the ECBuBa hadn't destroyed a quarter of the Greek GDP yet.

Of course it is nonsense! Tell that to Migeru and his famous table!

I did. You missed the part where I noted that Ireland did not belong in the table?

Oh right, you didn't. You used it to play silly gotcha games with Mig.

But lets talk about structural CA deficits. All I claimed is that structural CA deficits in Italy and France - not to talk about Ireland and Belgium - are low. A lot lower than in Spain and Greece and Portugal. Isn't that a bit of a problem to your CA hypothesis?

No. Italy has had a cycle-averaged nominal GDP growth in the ballpark of 3 % of GDP, and a structural CA deficit in the ballpark of 1½ % of GDP, and the ECBuBa is targeting a "long-run" overnight rate in the ballpark of 1-2 %. This is at risk of blowing up if the average markup over the risk-free rate exceeds 1½ percentage points for any length of time.

If the banks that are lending to Italy are gearing 10:1 and require 7½ % nominal return on their equity, then all other overheads can amount to no more than 75 basis points before the whole edifice becomes unstable.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:07:41 AM EST
[ Parent ]
Greece and CA deficit:
-6,5% 2003    -5,8% 2004      -7,6% 2005     -11,2% 2006     -14,4% 2007     -14,7% 2008     -11,0% 2009    -10,4% 2010     -8,6% 2011

OECD numbers. I don't know what is the structural deficit but it seems to be  lot larger then in Italy or France or indeed even Spain.

by IM on Thu Sep 8th, 2011 at 07:40:28 AM EST
[ Parent ]
When last we looked at these numbers, they differed considerably from Eurostat numbers.

I asked Yanis Varoufakis point blank if he had any internal insight into official Eurostat/OECD numbers and the Greek economy. He replied that the numbers were absolutely not to be trusted. Greece neither reported them accurately, nor did Eurostat seem to care.

by Upstate NY on Thu Sep 8th, 2011 at 03:36:49 PM EST
[ Parent ]
And according to the economist the average maturity of greek debt was about seven years.
by IM on Thu Sep 8th, 2011 at 12:58:23 PM EST
[ Parent ]
Foreign or sovereign?

It's the foreign debt (public and private) that's relevant for the CA imbalance, not the sovereign.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 9th, 2011 at 10:29:58 AM EST
[ Parent ]
sovereign. I doubt anybody has numbers on the average maturity of foreign hold private greek debt.
by IM on Wed Sep 14th, 2011 at 11:24:41 AM EST
[ Parent ]
The Greek regulators should have. But they're probably not telling.

I would be very surprised if the average maturity was not substantially shorter on the total foreign debt than on the sovereign debt.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 14th, 2011 at 03:26:09 PM EST
[ Parent ]
Ireland doesn't belong in that group - it has a structural CA surplus. The current CA deficit is a temporary aberration caused by the usurious seigniorage the ECB is extorting at the moment.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 04:13:38 PM EST
[ Parent ]
Ireland doesn't belong in that group - it has a structural CA surplus.

You don't say. But how does that fit Ireland in your CA deficits are everything model?

by IM on Wed Sep 7th, 2011 at 06:48:23 PM EST
[ Parent ]
Ireland fits in the small country with large internationally active banking sector category alongside Iceland and Switzerland (which, in case you haven't noticed, is in a panic over the spillover from the Euro crisis into the macroeconomic and financial stability of its tiny economy). That's why Ireland's banks blew up in 2008, just like the Icelandic ones and the Belgian (Dexia and Fortis) did.

Oh, and don't forget Cyprus. They're a hedge fund too, and are duly under market attack.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:14:54 AM EST
[ Parent ]
No, no. Everything is peachy in Switzerland! They still have their own currency after all and didn't join the cursed euro!

"Ireland fits in the small country with large internationally active banking sector category alongside Iceland and Switzerland"

Yes. Nothing to do with CA deficits.

I didn't mention Cyprus because there seems to be an genuine non-economic reason: the power plant explosion.

by IM on Thu Sep 8th, 2011 at 05:14:32 AM EST
[ Parent ]
Everything is peachy in Switzerland!
Do you really have your head up one of your bodily orifices, or are you trolling?
I didn't mention Cyprus because there seems to be an genuine non-economic reason: the power plant explosion.
Yeah, the "external shock" cop-out of neoclassical economics.

About Cyprus: they have become an offshore appendage of the City of London where the banking sector has grown to 7xGDP. Were that not the case, an accident at a power plant would not have spelt economic disaster.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 05:55:19 AM EST
[ Parent ]
No, no. Everything is peachy in Switzerland!

That remains to be seen, but the Swiss central bank is actually behaving intelligently in this crisis.

They still have their own currency after all and didn't join the cursed euro!

And that is why the Swiss CB still has the power to behave intelligently.

They may not be doing enough, and it may not be possible to do enough. But I wouldn't bet money on that in the way that I would without hesitation bet money on the non-viability of the Spanish balanced budget rule.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:43:19 AM EST
[ Parent ]
By noting that "CA imbalances (not deficits) are everything" is not my model. My model is that an unsustainably overvalued currency is the fundamental cause of the attacks on all the countries that were attacked after Ireland.

The structural CA imbalances are evidence that they have an overvalued currency, not the cause of the overvaluation.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:12:18 AM EST
[ Parent ]
IM:
afew tried to point out to you that you were once again talking tacky nonsense

LOL. I most certainly did not.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:07:12 AM EST
[ Parent ]
Well, then what were you doing? You did oppose the  use of term denoting fascism for the current crisis and its actors here and on the other thread. It#s not useful to compare everything to fascism and I do think it unseemly. Don't you agree?
by IM on Wed Sep 7th, 2011 at 08:46:09 AM EST
[ Parent ]
Just read what I said to see if I agree.

But don't put words in my mouth.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:48:25 AM EST
[ Parent ]
Oh yes, I did.

migeru:

"When the American Neocons or the Bush Administration described in detail what they intended to do, people dismissed it as extreme rhetoric, only to be shocked, shocked when they went on to do exactly what they said they would do. You are now making the same mistake with the German establishment (Merkel, Schäuble, Issing, Wulff, Weber, Stark, and the list goes on and on...)

 And you tell me drawing parallels with the 1930s is out of place."

And then you, instead of challenging this minimizing of fascism and conspirational thinking, just did give in:

" But whatever. The circumstances are such that it doesn't matter what we shout as long as we're shouting."

No, I don't think "just shouting" is a good thing.

by IM on Wed Sep 7th, 2011 at 06:21:40 AM EST
[ Parent ]
Perhaps I should have indicated that my comment was ironical. I do happen to think it matters what we shout, and I'd have thought that evident from my entire line of argument.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 07:16:14 AM EST
[ Parent ]
Looked like resignation to me. You did argue for some sense and against the godwinning of discourse, but then you just seemed to give up. That anything goes as long as you  show the right spirit is an all to commmon attitude on left wing blogs and so I did mistake your irony for that attitude.
by IM on Wed Sep 7th, 2011 at 07:24:02 AM EST
[ Parent ]
I don't know or care what is all too common on what you choose to call left-wing blogs. In any case, that comment was not my last in that thread.

And while you're looking at the "Henkel" discussion, look at this exchange.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:15:21 AM EST
[ Parent ]
Spare me your arrogance. I use the usual definition of left wing blogs. I mean, how do you think I did find ET? On orders of the Bundesbank?

And since you rightly pointed out that using terms like untermenschen, implying that Merkel is a fascist is wrong, why do deny that there is a certain language problem here?

by IM on Wed Sep 7th, 2011 at 08:26:46 AM EST
[ Parent ]
I'm denying there's a certain language problem?

Or have I not argued that there was?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Sep 7th, 2011 at 08:46:43 AM EST
[ Parent ]
You lost me there.
by IM on Wed Sep 7th, 2011 at 09:17:49 AM EST
[ Parent ]
Did the SDP vote for the German debt brake Constitutional amendment in 2009? Where does the SDP stand on the Merkel/Sarkozy demand for constitutional debt brakes EU[rozone] wide by mid-2012?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:02:36 AM EST
[ Parent ]
Yes. So what?

Regarding Europe it is:

  1. partial default for greece

  2. euro-bonds

  3. european investions for poorer countries, financed partially by a european financial transaction tax.

(As far as I understand that is more or less the position of the greens too)

Here:

http://www.spd.de/aktuelles/Eurobonds/

Ein Gesamtkonzept für die Eurozone besteht kurzfristig aus folgenden zentralen Elementen:
Wir brauchen eine wirkungsvolle Umschuldung für Griechenland. Griechenland hat eine Staatsverschuldung in Höhe von 160 Prozent des Bruttoinlandprodukts (circa 340 Milliarden Euro), und muss mehr als 10 Prozent des Bruttoinlandprodukts für die Schuldentilgung ausgeben. Ein Schuldenschnitt in Höhe von circa 60 Prozent der Schulden würde Griechenland in die Lage versetzen, endlich wieder auf einen nachhaltigen Wachstumspfad zu gelangen. Ein Schuldenschnitt ist ein Akt gesamteuropäischer Solidarität. Noch halten private Gläubiger circa 60 Prozent der Schuld. Doch das ändert sich schnell. Mitgliedsstaaten und Private müssen gemeinsam handeln.

Wir brauchen gemeinsame europäische Anleihen (Eurobonds).

Es muss ein Investitionsförderungsprogramm (im Rahmen der notwendigen engeren Wirtschafts- und Finanzpolitik) für Mitgliedsländer der Währungsunion geben, die ökonomisch nicht mithalten können. Zur Finanzierung sollen Teile der Einnahmen aus einer europäischen Finanztransaktionssteuer dienen.

Wir reden immer nur über die Gefahren einer Umschuldung, die Gefahren von Eurobonds. In Anbetracht der dramatischen Lage der Eurozone müssen wir aber nicht ängstlich sein - wir müssen endlich mutige Entscheidungen treffen. Die Rettung der Eurozone wird es nicht zum Nulltarif geben. Es geht jedoch darum, eine Lösung zu finden, die Deutschland nicht überfordert, und eine Perspektive zur Ankurbelung des Wachstums in der Eurozone bietet. Europäische Anleihen können Teil einer solchen Lösung sein.

by IM on Wed Sep 7th, 2011 at 06:29:05 AM EST
[ Parent ]
Did the SDP vote for the German debt brake Constitutional amendment in 2009?

Yes. So what?

So if the SPD hadn't supported this "popular nonsense" we wouldn't be having a conversationshouting match about the Spanish Socialists following their lead.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:32:30 AM EST
[ Parent ]
Sure, They take orders from Germany. I have to disappoint you, but the SI is not working that way. The SPD likes to claim they had a lot of influence on the SPOE in the first post Franco years. (helping build democracy in spain etc.) Perhaps that is true.

But certainly not nowadays.

Do you want to claim the last debt ceiling crisis on the US was caused by german influences too? Or austerity in the UK, is Cameron just a german puppet?

by IM on Wed Sep 7th, 2011 at 06:45:21 AM EST
[ Parent ]
No, I'm just talking about the management of the Euro crisis.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:49:46 AM EST
[ Parent ]
I don't think it's unreasonable to ask the question "qui boni?"

Right now, the answer to that question is "Joseph Ackerman."

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 07:24:38 AM EST
[ Parent ]
Ah yes. Wall Street is starving.
by IM on Wed Sep 7th, 2011 at 07:36:47 AM EST
[ Parent ]
While I quite like herring, I do not usually eat them red.

Wall Street has fuck all to do with the breakup of the €-Mark.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:10:53 AM EST
[ Parent ]
And the same is true of Deutsche Bank. Especially in your account of the crisis; after all it is currency not debt, right? Or do you now think Deutsche Bank is the central bank of europe?
by IM on Wed Sep 7th, 2011 at 08:29:02 AM EST
[ Parent ]
The debt is the tail, the current account imbalances are the dog, and the problem is that the tail is wagging the dog.

Ackerman is the biggest flea on the tail, so he is the one who benefits the most from the tail wagging the dog.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 7th, 2011 at 08:40:48 AM EST
[ Parent ]
The American debt ceiling isn't a debt brake though. It incorporates absolutely no relationship between debt and GDP. It's just an arbitrary nonsensical number. Whereas a eurozone debt brake calibrates the proper amount of debt to GDP. Or else budget deficit.

There's a big difference in that the American one cannot but be broken repeatedly whereas in principle, one might never break through the eurozone barrier.

by Upstate NY on Wed Sep 7th, 2011 at 04:58:39 PM EST
[ Parent ]
The newer republican proposals on a balanced budget amendment also included a arbitrary gdp number on spending.

But that is neither here or there. I just wanted to use this example to demonstrate that debt brakes and similar proposals are very popular everywhere.

No need to search for a german genealogy...  

by IM on Wed Sep 7th, 2011 at 07:03:48 PM EST
[ Parent ]
But for the eurozone countries, it has been launched as a proposal for all eurozone countries, by Merkel, in January:

An Economic Government for the Euro Zone? Merkel's Plan Could Transform the European Union - SPIEGEL ONLINE - News - International

Fast-Tracking Measures

In order to achieve these objectives as quickly as possible, Merkel is seeking support for an immediate program "that will be implemented on the national level within 12 months" (see graphic). This would entail the member countries adapting "the retirement age to demographic trends" and introducing financial policy rules that are modeled after Germany's so-called debt brake (an amendment to Germany's constitution that requires the government to virtually eliminate the structural deficit by 2016). Furthermore, within one year the countries would have to mutually recognize each other's educational and professional qualifications, as well as introducing a standardized means of assessing corporate tax to avoid so-called tax dumping (i.e. when countries try to attract companies by having an artificially low tax rate).

My bold.

It does not absolve other euro country leaders from liking cuts anyway - or being idiots - but as far as I can see, introducing debt brakes in the eurozone originated with the German government.

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

by A swedish kind of death on Thu Sep 8th, 2011 at 04:15:28 AM EST
[ Parent ]
No need to search for a german genealogy...

We're not searching for ways to blame Germany for stuff, that's an interested reading on your part. We're observing what happens and the order in which it happens and who tells whom to do what.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:18:26 AM EST
[ Parent ]
"We're not searching for ways to blame Germany for stuff, that's an interested reading on your part."

An obvious reading. We are commenting on a post titled Gleichschaltung, after all. And that purports to comment on spanish politics. But I learned nothing about spnaish politics -I would have liked too, isn't that the purpose of a place like ET? - but only about your german obsession.

by IM on Thu Sep 8th, 2011 at 05:19:42 AM EST
[ Parent ]
  1. Excuse me for not titling my post The forcible legal realignment of Spain.
  2. It purports to put a Spanish political event in its European context
  3. "I leaned nothing" is a statement about yourself

After all, there's this
The impression that something is afoul here is based in part on the fact that as late as August 18, the conventional wisdom in Spain was that it was difficult to carry out the Constitutional reform that Sarkozy and Merkel demanded by mid-2012, and that the government's position was officially that the existing Law on Budget Stability (introduced by Aznar's PP government in 2001) was sufficient. ...

...

Only two days after this was published, ZP announced his intention to introduce a constitutional spending ceiling during an extraordinary plenary session of the Parliament convened to discuss the recent financial turbulence. The reform will be carried out with two further extraordinary sessions this coming Tuesday and Friday, as the Parliament would normally be adjourned at this time.

And, sorry, it is not me. I'm quoting and translating news reports from ElPais in which Germany's 2009 debt brake is mentioned as a blueprint and motivation, and Merkel's (with Sarkozy tagging along haplessly) demand for forcible legal realignment of the whole Eurozone by next Summer.

I even volunteered a couple of reasons why the reform is being carried out in a rush and in alleged (by opponents) violation of parliamentary procedure. And the move cannot be universally popular when the PSOE parlamentarians vote for it like they're going to a funeral while PP parlamentarians cheer.

Zapatero is being strongarmed into doing all of this. We don't know how exactly or who's delivering the orders, but there are strong hints.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 05:33:42 AM EST
[ Parent ]
Oh, and 4. Oh, and excuse me for not saying that Merkel is insufferably arrogant and ethnocentric.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:05:02 AM EST
[ Parent ]
Oh she is.
by IM on Thu Sep 8th, 2011 at 06:43:27 AM EST
[ Parent ]
But if I say Untermenschen that's a no-no.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:46:16 AM EST
[ Parent ]
Can't you really see the difference? Merkel isn't a fascist and certainly not a nazi. Words have meanings.
by IM on Thu Sep 8th, 2011 at 06:51:27 AM EST
[ Parent ]
"Excuse me for not titling my post The forcible legal realignment of Spain."

What force? We are not talking about law on a euroepan level. What other force?

"It purports to put a Spanish political event in its European context"

Of course. But in your case it is always germany made us do it. Not a very illuminating context. The old excuse of politicians everywhere was Brussels made us do it; no it's Berlin made us do it. Still an excuse.

"I leaned nothing" is a statement about yourself

You really are a bit of an asshole sometimes. And that is a statement about you. Or at least your blog persona.

"Zapatero is being strongarmed into doing all of this. We don't know how exactly or who's delivering the orders, but there are strong hints."

That is the interesting part and I wish you would have written more about that.

by IM on Thu Sep 8th, 2011 at 06:50:21 AM EST
[ Parent ]
"Zapatero is being strongarmed into doing all of this. We don't know how exactly or who's delivering the orders, but there are strong hints."

That is the interesting part and I wish you would have written more about that.

I wrote all that was possible to write about it without pulling it out of my arse.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 06:54:04 AM EST
[ Parent ]
IM:
What force? We are not talking about law on a euroepan level. What other force?

Interesting question. Since ECB has threathened to sink the Greek banking systems if the government did not accept killing of their own economy, we know that there are other forces then law at play. Which exactly, are often hard to figure out in time.

Eurointelligence:

Lorenzo Bini-Smaghi, the most prolific campaigner against default, told il Sole24 ore that the ECB had carried out an analysis on the potential impact of a Greek debt restructuring, and found it would imply the failure of a large part of the Greek banking system, as the Greek banks hold a large portion of the Greek sovereign debt. (Another reason is that Greeks would transfer all their deposit to foreign banks, a process that is already partially under way). At the point the Greek banks would no longer have access to ECB liquidity, and would have to end their support for the corporate sector. He said that since Greece does not have a primary balance, a default at this time would lead to the cessation of pension and other social payments. The Greek economy would collapse, with devastating economic and social consequences. He said the other countries should stop pushing Greece into a catastrophe. In what we would understand to be an indirect reference to Wolfgang Schäuble, he said that talk about restructuring had seriously negative effects on market sentiment.

Original Eurointelligence source appears to have been broken, and the Googlecache of it too. But it was quoted on ET on April 15th so probably written shortly before that.

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

by A swedish kind of death on Thu Sep 8th, 2011 at 07:18:36 AM EST
[ Parent ]
Since ECB has threathened to sink the Greek banking systems if the government did not accept killing of their own economy, we know that there are other forces th[a]n law at play.

And apparently they strongarmed Ireland into accepting a "rescue" within days of the Irish finance minister claimin that the Irish government was funded on a cash-basis for over half a year.

The ECB has also famously sent a letter to Italy's government with a shopping list of legislative reforms that must be enacted or the Italian banking system will be killed. There are contradictory stories about similar demands on Spain.

Trichet, when accepting the Charlemagne Prize for "contributions to European Unity", suggested an EU finance minister without a budget but the power to interfere with member state budgets. This has now been picked up by the Dutch Prime Minister.

This is really looking like rule by Central Banker.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 07:29:14 AM EST
[ Parent ]
And Italy's government has just approved the balanced buget amendment
"Un ok rapido in Parlamento è nell'interesse del Paese", ha detto ancora Tremonti. Aggiungendo che il principio varrà anche per gli enti locali. Per garantire il pareggio di bilancio, saranno modificati tre articoli della Carta: non solo l'articolo 81, che fino ad oggi prevedeva l'obbligo di copertura delle leggi, ma anche l'articolo 53 (sulla contribuzione dei cittadini) e il 119 (sul federalismo fiscale). Il testo del disegno di legge prevede: "Non è consentito ricorrere all'indebitamento, se non nelle fasi avverse del ciclo economico nei limiti degli effetti da esso determinati, o per uno stato di necessità che non può essere sostenuto con le ordinarie decisioni di bilancio".
There's an exception for adverse economic conditions, but no details that I can find.
by gk (gk) on Thu Sep 8th, 2011 at 07:33:51 AM EST
[ Parent ]
That's pretty stringent: recourse to debt is not allowed, except in adverse phases of the economic cycle within the bounds of the effects determined by the cycle, or due to a state of necessity that cannot be sustained with ordinary balance decisions.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 07:39:00 AM EST
[ Parent ]
An unemployment rate above zero per cent is a state of necessity that cannot be legitimately sustained with ordinary balance decisions.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 09:01:37 AM EST
[ Parent ]
And it should be noted that the implicit refusal to rediscount new Greek bonds after a default event is pure blackmail that is totally unjustified by any sane economic standard, left, right or centre.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:59:32 AM EST
[ Parent ]
What force?

The threat of a currency crash.

Do you have any comprehension - any comprehension at all, even the faintest shadow of a hint - of what a currency crash does to a country that is a net importer of food and fuel?

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:48:18 AM EST
[ Parent ]
Now you are just making things up. Currency crash?
by IM on Thu Sep 8th, 2011 at 01:01:14 PM EST
[ Parent ]
When googling for a definition of currency crash, Google helpfully suggest that I look to the definition of  suggest Currency Crises instead.

Currency Crises, Krugman

There is no universally accepted definition of a currency crisis, but most would agree that they all involve one key element: investors fleeing a currency en masse out of fear that it might be devalued, in turn fueling the very devaluation they anticipated. Although such crises--the Latin American debt crisis of the 1980s, the speculations on European currencies in the early 1990s, and the ensuing Mexican, South American, and Asian crises--have played a central role in world affairs and continue to occur at an alarming rate, many questions about their causes and effects remain to be answered.

I think the scenario goes like this:

  1. ECB denies euros to banks of CA deficit country, as they have threathened to, effectively trying to kill the banking sector of that country.
  2. CA deficit country must change currency in order to have the banking system working.
  3. That currency falls sharply against the euro, worsening the CA deficit. This is the crash part.
  4. CA deficit country must balance their CA quickly. This will probably include rationing and other drastic actions.


A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES!
by A swedish kind of death on Thu Sep 8th, 2011 at 03:24:11 PM EST
[ Parent ]
Mechanically speaking, a currency crash is a run on a country's hard currency reserves. Since the €-Mark is hard currency for €-zone members (thanks to the ECBuBa's idiocy), a systemic bank run would be a currency crisis in every way that matters.

Of course, once you have to ration hard currency anyway, you might as well take the opportunity to repudiate your hard currency debts completely and exit from the €-zone. But that's a consequence rather than a cause of the run on the country's hard currency reserves.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 9th, 2011 at 10:21:26 AM EST
[ Parent ]
So the currency crisis occurs in 1.

Am I wrong to assume that the exit would (likely) trigger a continued run for some time - say at least a couple of months? Markets appear a lot like herd animals to me, hard to stop once they get stampeeding in one direction or another.

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

by A swedish kind of death on Fri Sep 9th, 2011 at 12:44:07 PM EST
[ Parent ]
An exit from the €-Mark would involve some pretty epic defaults. If the Russian and Argentinian experiences are anything to go by, it takes 12-18 months for the hysterical children to calm down after something like that.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Sep 10th, 2011 at 03:09:45 AM EST
[ Parent ]
Mechanically speaking, a currency crash is a run on a country's hard currency reserves. Since the €-Mark is hard currency for €-zone members (thanks to the ECBuBa's idiocy), a systemic bank run would be a currency crisis in every way that matters.

May I point out that the run is already underway and has been for many months?

Back in May 2011:

German banks target worried Greeks in Germany

Greeks worried about a debt restructuring or a euro exit increasingly transfer their money to banks abroad, Bild-Zeitung reports. According to the mass circulation tabloid German banks such a savings bank in Munich have posted signs in their windows advertising in Greek and German that Greek costumers will be advised in Greek. According to the paper €30bn have already been transferred from Greece abroad since the crisis started.

Of course this puts a strain on the Greek banks which only increases their dependence on the ECB. For Greeks, another of the refuges, apart from Germany, was Cyprus which has always acted as an offshore banking center for Greece. Now Cyprus is in its own crisis.

But it's not just Greece and it's not just since last year. Remember these charts by Martin Wolf?

The top left chart indicates that the ECB has accumulated large claims on other central banks - this is the result of money flowing from the periphery to the core. Nothing surprising there, as the trade imbalances are structural and have persisted over the entire life of the Euro. However, the top-right chart indicates that the claims among central banks have developed only since the financial crisis started in 2007/8. So it's not  result of trade imbalances as one might have guessed, but of flight to safety.

And now, as we know, not even Euro assets in Germany are "safe" enough and people are piling on the Swiss Franc or (after the Swiss National Bank had enough of the Eurozone exporting deflation to it) to the Norwegian Krone.

So, yes, the run on the Eurozone banking system is well underway. It was bad enough in April already for

Bundesbank open to capital controls as a last line of defence

Bundesbank board member Andreas Dombret told Börsenzeitung that capital controls can be introduced by countries as "a last line of defence". "If they are used, it should be done temporarily and in a transparent and targeted manner", Dombret said. In combating high inflows of capital countries need to define a hierarchy of things to do. "If after that the inflows persists, capital controls can be considered", Dombret said. Capital controls were up until very recently a taboo and have only been proposed last week by the IMF in a position that was controversial among certain member states.

But he's talking about inflows of capital. Is he talking about Switzerland, rather than, say, Greece?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Sat Sep 10th, 2011 at 04:49:39 AM EST
[ Parent ]
The top left chart indicates that the ECBBundesbank has accumulated large claims on other central banks

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Sat Sep 10th, 2011 at 05:18:24 AM EST
[ Parent ]

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