Euro Doomed! Euro Doomed!

by Colman
Thu Mar 1st, 2007 at 03:52:23 AM EST

Our dear, dear, fiends at the "non-partisan" US "think tank" the American Enterprise Institute (published in the FT.com) are terribly concerned about the prospects for the Euro, afraid that though it's doing well at the moment, pride comes before a fall - a saying they must have at the front of their attention these days - and that disparities in trade balances and loss of competitiveness to Germany will destroy us all. Or something.
The opening up of divergences in relative trade performance between individual European countries would be of little moment if the eurozone were a properly functioning currency union with real labour market mobility and true wage and price flexibility. After all, large differences in trade performance between individual states in the US do not lead to great unemployment variations between states as wages adjust and as labour moves.
Chant the mantra! "Reform! Flexibility! Reduced share of proceeds to the workers!"

Uh, forget that last bit.

As a result, Italy’s public debt has remained above 100 per cent of GDP. More worrying still is the fact that its public debt to GDP ratio is again on a rising path. This has to raise serious questions about the long-run sustainability of Italy’s public finances, especially if one considers that markets are unlikely to remain forever forbearing in the way they price Italy’s public debt.
Yup, Italy is a basket case.

Does anyone have any idea of much of this drivel should be taken seriously? The article is a series of statements, not a connected argument, so it's not clear that even the author is taking it seriously.


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Did the FT get a job lot of AEI articles or something?
by Colman (colman at eurotrib.com) on Thu Mar 1st, 2007 at 03:54:20 AM EST
AEI used to have some reasonable researchers and tried to do research instead of write polemics. This is what separated it from The Heritage Foundation. Unfortunately,  AEI has been slipping as of late.

In any case, isn't this a classic case of the pot calling the kettle black? Meaning...for any USD backer to criticize the Euro right now is nuts. Most of the fundamentals are all in the Euro's favor, despite the fact that the Italian budget is out of whack. Well, hello AEI, isn't the US budget also out of whack? And who put it there? Why those staunch defenders of all that's good in capitalism...the Republican Party and Pres. Bush. They are the one's who have threatened the dollar's stability.

by gradinski chai on Thu Mar 1st, 2007 at 04:06:12 AM EST
let's see, italy, a dwindling industrial base, corruption seeping out of telecom, parmalat etc etc, overtaxed artisans, crushing byzantine bureaucracy and a huge black economy.

what else?

oh yeah, 5 years of rule by trash-media and sports-team-politics under the sleazy hand of the man who was already 5th richest man in the world before taking the job -thanks to a legup from the mob-, and who tripled his loot during his tenure as chief conman.

where's the calculator?

italy needs to stop fooling itself that it can run as a modern industrial economy.

focus on slow food (and quick service) instead.

develop the most hospitable country possible, and respectfully organise the magificent cultural and artistic patrimony so as to be enjoyably experienced in a sustainable way.

prodi's not quite there yet!

"Two wrongs don't make a right, but three lefts do." Jim Hightower

by melo (melometa4(at)gmail.com) on Thu Mar 1st, 2007 at 04:23:42 AM EST
[ Parent ]
Italy has been running an industrian economy just fine for 60 years. In fact, by looking at it you would think it couldn't possibly work, but if does. There is something wonderfully anarchic about the way Italian small businesses go about their, er..., business, and it (amazingly) works.

Ok, so inflation and public debt are out of whack with the rest of the EU. So what? The single market will found ways to restore "equilibrium" that will make up for the inability to devalue the currency every 10 years.

Who are they trying to fool? Regular devaluation wasn't "a good thing" but it didn't kill Italy. Now that monetary policy levers are not available, other things will have to happen, which will be as "bad" for the italians as devaluations were.

The only ones that need worry are the Germans, but they have made sure the ECB works like the bundesbank used to, so what do they have to worry about?

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 04:31:51 AM EST
[ Parent ]
Exactly!
The political independence of the ECB forces politicians to get there policies in order and doesn't allow them anymore to take the easy way out of the mess they made.
by rz on Thu Mar 1st, 2007 at 03:02:43 PM EST
[ Parent ]
well, migeru, i agree with you that the italians are brilliant at surfing anarchy, and that small business 'works' to an amazing degree, especially compared to state functions.

however while this makes ferrari a good example of successful entrepreneurship (sorry, planet!), it seems that when firms get as big as fiat, say, the really heavy duty problems kick in.

small businesses work locally because everyone is scratching each others' backs, and because everyone dodges taxes and doesn't want any anonymous 'denuncia', so pay their debts and treat each other very civilly, united in existential complicity against the 'thieves in rome' who don't deserve the tax money and spend it so corruptly.

also it's a well-known secret around here, that no small business will be busted for not paying taxes until it gets to the point of being worth taxing.

so people have a few years under the radar.

if they acted otherwise no-one would be able to make ends meet while investing themselves in the 'new' economy, haha

so compassionate huh?

of course they have meanwhile earned your undying enmity by making you jump through bureaucratic hoops and creaming you every step of the way with different cute little 'bollos' (stamps) that are needed for every document, and no of course you can't buy one at the counter, so you lose your place in the queue to go to the tabacchi.

and the queues move really slow because the real action is behind the curtain, happening to the cousin or 'well-recommended' person who never had to bother with the queue at all.

then there's the rage of all the 'statali' ((civil (sometimes, if they feel like it) servants)) who have a grudge against the entrepreneurs, because the former have their taxes docked from their paychecks and feel bad because they know that if the small businesses paid their due taxes, then theirs would be lower-

never mind that they spend half the mornings in the bar chatting and drinking so many coffees that they get cranky and hypoglycemic as mealtimes approach.

as they do so religiously...

never mind that they can retire at 40 and get pensions and settle down and grow grapes, make sausages, forage mushrooms with the family, play cards and bowls.

i once saw a 'stale' waiting in a queue at a bank, and he was ranting about this very subject of compulsory taxation, and what was hilarious was seeing how no-one agreed with him, they were all busily studying their shoes, or gazing into the middle distance as if they were trying to recall a line of dante or something.

the poor man was furious, and alone in his misery.

he sure had their attention!

and i'm sure he took his sweet revenge daily, pouring sand into gears and spanners into works all his, or her- (shortish) working days, with full and collegial support from all his colleagues-in-confusioneering.

little moments, when the veil is drawn back...

and a fundamental conflict of interests is revealed that is repeated millions of times till the cumulative effect is italy as we see it now.

so you speak the truth, it's a miracle anything works AT ALL, and italians are masters at rolling with the punches, having been trained from early on to expect the unexpected, and work around....and around....and around....

there is tremendous talent out the yin-yang, but so much slipperyness and wheel-spinning you have to take a l-o-n-g view, and pray to the madonna, vocally, intemperately, and often.

gnashing of teeth is the only other option.

luckily there are compensations, or the whole country would have snapped by now.

oh wait!

flexibility is a wonderful thing, i really do love it here, warts and all, i'm grateful for the good things i don't snark about.

watching the face off about vicenza and frejus and the tau, i feel torn too.

"Two wrongs don't make a right, but three lefts do." Jim Hightower

by melo (melometa4(at)gmail.com) on Thu Mar 1st, 2007 at 09:09:04 PM EST
[ Parent ]
Or a case of the right wing´s complete brain-drain, or sour grapes, and other anti-social attitudes.  These "experts" are the ´acclaimed advisors´ to a government whose currency has become worth... a whole 0.7582€/117.54Yen and still sliding.  

Not exactly people to trust or teach any lessons.  On to better reading.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Thu Mar 1st, 2007 at 03:48:41 PM EST
[ Parent ]
large differences in trade performance between individual states in the US do not lead to great unemployment variations between states

Yeah, right.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 04:14:27 AM EST
Sure there is no difference in unemployment rates between states!

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Thu Mar 1st, 2007 at 07:15:56 AM EST
[ Parent ]
Surely, the US has perfect mobility of labour. People just uproot themselves from Illinois and Oregon and move to Nebraska.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 07:21:57 AM EST
[ Parent ]
Gaah, I just called Michigan "Illinois".

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 07:23:26 AM EST
[ Parent ]
Ah, all those middle states look alike anyway....
by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Mar 1st, 2007 at 07:25:56 AM EST
[ Parent ]
I should know better.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 07:31:11 AM EST
[ Parent ]
Minor snark, given that Michigan cannot be accused of looking even remotely like any other state... since it has that big lake in the middle and all.
by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Mar 1st, 2007 at 08:03:35 AM EST
[ Parent ]
I mean, it's broken into two!

My thought process was... Oh, okay, that's where Detroit is... D'oh!!!

If I were a coffee drinker I could claim I hadn't had my morning coffee yet.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 08:08:32 AM EST
[ Parent ]
I have said it before and I'll say it again: the Eurozone needs a collective labour and redistributive policy to balance the ECB's monetary policy and the free movement of capital.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Thu Mar 1st, 2007 at 04:15:45 AM EST
I think it is time to openly crack up about their nonsense mythology.

SHould I become more flexible? Yoga maybe?

It's sickening sometimes.

A pleasure

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

by kcurie on Thu Mar 1st, 2007 at 06:45:49 AM EST
I take it "Our dear, dear, fiends" is a typo?
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Mar 1st, 2007 at 07:04:34 AM EST
Oh, I think not...
by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Mar 1st, 2007 at 07:22:47 AM EST
[ Parent ]
He'll accuse me of demonising them next.
by Colman (colman at eurotrib.com) on Thu Mar 1st, 2007 at 07:54:51 AM EST
[ Parent ]
If someone or something is actually demonic, than it's not really demonizing, is it?
by the stormy present (stormypresent aaaaaaat gmail etc) on Thu Mar 1st, 2007 at 08:02:16 AM EST
[ Parent ]
Yeah, funny. The same "pride comes before a fall" can be said about Bush-economy. But they are very good in applying reverse projection a la 2000: accuse the other side of character or "fall" problems, so that no one would even think that you had those problems yourself.

In facto, the economy of the 1920's was very similar to the currebt "boom":

"Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade".

The same factors are at work today except that the speculation is in real estate rather than stocks. Just as in the 1920's the equity bubble was not created by wages keeping pace with productivity (the healthy formula for growth) but by the expansion of personal debt. Also, one could buy stocks without the money to purchase them, just as one can buy a $600,000 or $700,000 house today with zero-down and no monthly payment on the principle for years to come. [...]

"(The income disparity) between the rich and the middle class grew throughout the 1920's. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income. A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing. During that same period of time average wages for manufacturing jobs increased only 8% (This ultimately causes a decrease in demand and leads to growth in credit spending)

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge's (pro business) administration passed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically.

As Einstein would say again: Insanity is doing the same things again and expecting different results. Bush is repeating every mistake, and more.

How did it happen in 1929?

On Monday October 21, 1929, the over-valued stock market began its downward plunge. It managed a brief mid-week comeback, but 7 days later on Black Tuesday it plummeted again; 16 million shares were dumped and there were no buyers.

"Reforms" can surely wait another week. Isn't it remarkable that yesterday's NYSE was so sensitive to Shanghai's correction (after stupendous 130% growth last year), or Greenspan's word "recession", or what else? The huge volume at the sell-off moment shows a lot of bad anticipation lurking.

by das monde on Thu Mar 1st, 2007 at 07:48:24 AM EST
AEI is a "so-called" non-partisan think tank, but it is plain to see that its not and it have to be treated accordingly.  

Bitsofnews.com Giving you the latest bits.
by Gjermund E Jansen (gjans1@hotmail.com) on Thu Mar 1st, 2007 at 09:37:14 AM EST


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