Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.

How the Euro Crisis was resolved

by Frank Schnittger Mon May 30th, 2011 at 01:39:13 PM EST

Also available in Orange where it will doubtless disappear without trace into the maelstrom of Memorial Day diaries.

There is an ancient Greek proverb, often attributed to Euripides, which states that "whomsoever the Gods seek to destroy, they first make mad." Whether the Eurozone crisis of 2011 was some kind of karmic revenge for those who sought to destroy Greece, we shall never know: what is clear, however, is that the actions of the ECB throughout that crisis more closely resembled those of a madman whom the Gods had chosen to destroy.

Heaping ever greater austerity measures on an economy already in free-fall, insisting on interest rates which the Greek economy had demonstrably no capacity to pay, and finally, withholding further loans required simply to roll over previous loans could only have had one outcome: And the great surprise is that that outcome came as a surprise to the ECB at all.

Perhaps it was all part of a devilish clever scheme to force a default when a default could never be officially countenanced: To force a resolution that all had to officially condemn as unthinkable. But reality has an awkward way of rethinking the unthinkable to the point where it becomes the most obvious outcome of all: a solution blindingly obvious in hindsight, yet utterly unpredictable to those who should have had the expertise to predict and counteract just such a thing.

Whatever the dynamic in the weeks and months leading up the D(efault) day, the events of the day itself were alarmingly simple and straightforward.  The Greek Government announced three things:

  1. It was unable to meet the ECB/IMF terms for the issuance of further Euro loans.

  2. As a consequence it was unable to meet debts now falling due in Euros, and

  3. As a consequence, it was repaying those debts in full in new Drachmas, officially valued as 1 new Drachma = 1 Euro, and would issue sufficient new Drachmas to meet all its future obligations in like manner as well as provide for the orderly running of the Greek economy and Government.


It was then "a matter for the international currency markets", the official statement noted, "as to whether the official 1:1 exchange rate would hold, and the new currency would be convertible at whatever exchange rates those markets would determine".  The Greek Government was "Officially agnostic" the statement went on, "as to what the new floating exchange rate would eventually turn out to be".

In the event, no one was surprised that the markets went into a wild selling frenzy, to the point where the New Drachma was worth less than €0.20, and only recovered many months later to reach today's rate of €0.40 Euro to the New Drachma - a rate which most economists regard as sustainable given the underlying strengths and competitiveness of the Greek economy.

The actions of the Greek Government had several huge and utterly predictable consequences:

  1. Greece's National debt was discounted by as much as 80% and most of its creditors - chiefly German banks - lost their shirts as a result. The Greek Government's finances were almost immediately placed on a much more even keel by the huge reduction in their interest burden and the gross debt repayable.

  2. Greece's economy recovered its competitiveness to the point that it quickly returned to growth and job creation mode. Imports became hugely expensive and diminished rapidly, whereas exports grew rapidly to achieve a positive trade balance.  Provided Greeks managed to avoid those expensive imports, their standard of living wasn't effected over-much and at least they now had some prospect of a job.

  3. [Addition]The Greek tourist industry, in particular, expanded by 50% in a declining global market, and now represents 20% of Greek GDP compared to 15% pre-devaluation. Numbers employed in tourism expanded from 17% of the workforce pre crisis to 22% now and that 5% increase in numbers employed made the major contribution to the subsequent reduction in the Greek unemployment rate.[End Addition]The hugely increased cost of imported cars and petrol also gave a huge fillip to the nascent Greek solar energy industry, to the point that the Greek sustainable energy industry (largely solar and wind) now provides 80% of Greek energy needs and also provides c. 100,000 relatively well paid jobs.

  4. Further afield the Eurozone banking industry was once again in crisis, with Merkel having to do precisely what she said she wouldn't do - bail-out German banks with taxpayers money.  Initially, of course, Merkel flailed about threatening to expel Greece from the EU, until her officials pointed out that there was, in fact, no legal mechanism for doing any such thing. Her defeat by the Greens and the SDP at the subsequent election was a foregone conclusion the moment that realisation struck home.

  5. The newly elected Portuguese government also seized the moment to distance itself from its "socialist" predecessor and announced its intention to let the "markets decide" the value of the Portuguese national debt - widely interpreted as a thinly veiled threat to also secede from the Eurozone. The ECB almost fell over itself in its haste to offer almost unlimited loans at a nominal rate to avert that possibility.  

  6. Spain, too, nervously looking over its shoulder at its Portuguese liabilities (and potential loss of relative competitiveness) made similar noises, and thereafter seemed to have no difficulty obtaining ECB funds to ensure its banks remained liquid despite a 50% peak to trough fall in Spanish property prices.

  7. Ireland had pre-empted the issue of penal ECB interest rates by "privately" negotiating a deal with the Obama administration to obtain a borrowing facility with the Fed which obviated the need to draw down any ECB funds. The statement by the "hapless" Irish Premier, Enda Kenny, that Ireland would not be drawing down any loans "at unsustainable interest rates" was widely misinterpreted as a threat to go down the Greek road.  In fact the Irish government used the Fed funds to buy back Irish Government debt on secondary debt markets at an average discount of 50% because of the panic in Sovereign debt markets as the Greek crisis unfolded.  Apparently Goldman Sacks, a key Obama donor, made a killing in fees acting behind the scenes buying back Irish debt at huge discounts on behalf of the Irish Government. Observers at the time often wondered why the Irish Government seemed to develop a knack of making statements which unsettled the markets whenever a sense of calm was being restored.  It turned out the Irish Government managed to reduce the Irish national debt by c. €70 Billion by recyling it almost entirely through secondary markets.  In addition, that debt is now largely denominated in US$ which looks a good move now that the Euro has achieved a 30% trough to (current) peak revaluation against the dollar since the Greek exit from the Eurozone.

The irony of the crisis is that the Eurozone economy as a whole has done exceptionally well throughout this crisis - first because the crisis kept the Euro artificially undervalued, and then because the crisis forced the systematic reform of the key EU institutions.  The European commission was forced to develop, belatedly, a properly funded industrial and energy policy which resulted in a huge increase in infrastructural spending throughout the Eurozone.  

The ECB, for its part, was almost dismantled and rebuilt on an entirely new foundation.  Many had likened the Irish Government's decision to appoint Stiglitz and Krugman as economic advisers as just a fit of pique at the refusal of the ECB to grant it a sustainable interest rate on its loans - one in the eye for the "Austrian School" economists who seemed to dominate ECB thinking.  But in the end, their role was more akin to that of Keynes at the Bretton Woods conference - completely recasting the way in which Eurozone monetary policy is run.

Gone are the days when the ECB can freely comment on EU Members fiscal policy (where it has little competence) and neglect its primary responsibilities of regulator of European banking activities, market maker, and lender of last resort.  Gone are the days when the Eurozone has a monetary authority but no fiscal authority.  It is perhaps a particularly sweet irony that the EFTA (European Fiscal transfer Authority) is funded almost entirely from the Tobin taxes brought in on the banking transactions which had, in the past, done so much to destabilise the European banking system in the first place.

And so here we are in 2015 in a situation where the EU economic situation has gone from strength to strength. Irish debt peaked at 109% of GDP in 2013 thanks to a combination of secondary market repurchases and the dollar devaluation, and is expected to decline to as little as 75% of GDP within 2 years.  The Greek economy has thrived to the point where it might be welcomed back into the Eurozone - except that the Greeks have absolutely no intention of rejoining.  

The substantial increases in EFTA funded infrastructural spending - agreed as a condition of the Irish Government agreeing to a referendum on ECB and financial regulatory reform - have benefited not only the heavily oil dependent PIIGS countries, but the Eurozone as a whole. The underlying strengths of the Spanish and Portuguese economies, allied to a thriving sustainable energy sector, huge EFTA funded infrastructural projects, and almost unlimited access to Euro liquidity from the new ECB have managed to contain the crisis in property prices and even managed to reduce youth unemployment substantially - the other spark which threatened to undermine the whole Euro concept.  

The neo-liberal argument, that economic progress required reduced "Government interference" and greater "free-market reforms" has been comprehensively and devastatingly defeated. The monetarist argument that "printing money" must always lead to inflation has been thoroughly debunked. Even Germany has (slightly) overcome its fear of the inflation monster. Now even the US Government is championing the state led "Migeruan" economics which have made this turnabout possible.  Hats off to the pioneers of the European Tribune TARA project which helped to make these changes possible. The Alternative economics have become a Reality.  Such a pity that the European Tribune has just been sold to a Murdoch led consortium for €700 Million...

Display:
if only.
by rootless2 on Mon May 30th, 2011 at 01:57:24 PM EST
And now for the dystopian diary...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 03:47:59 PM EST
[ Parent ]
... that a "fit of peak" should be spelled that way, no matter how seemingly clever, since its more a fit of trough, so would prefer "fit of pique".

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon May 30th, 2011 at 10:42:35 PM EST
[ Parent ]
My interest is piqued by your peeky comment even if I am not piqued by your peek at my text suggesting that my spelling powers were not at their peak. I can speak the speech but when the French get involved my picnic becomes a pique-nique and people get picky at my prose

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 03:37:20 AM EST
[ Parent ]
...I hope :-)

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue May 31st, 2011 at 03:53:56 AM EST
[ Parent ]
So say we all.

(And at least we know that most of those €700 Million will be invested in windpower and cancer research.)

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

by A swedish kind of death on Mon May 30th, 2011 at 02:31:00 PM EST
Though you left out the part about the explosion of tourism and the wealth diversity it created.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Mon May 30th, 2011 at 02:48:50 PM EST
I thought everyone new that Ireland had been selected to be the first Obamaland theme park...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 03:46:19 PM EST
[ Parent ]
I have added a sentence to para. 3. on the consequences for Greece in homage to your sagacious observation...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 08:07:49 AM EST
[ Parent ]
the "debt crisis" rather than the "euro crisis?"

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:08:50 PM EST
No, because it's a currency crisis and not a debt crisis.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:11:09 PM EST
[ Parent ]
What is at issue is the future of the Euro, not the future of debt - although, arguably, both are being recast in more sustainable terms according to the very optimistic scenario I have outlined.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 05:23:18 PM EST
[ Parent ]
is the currency of the core. That's not in doubt.
What's the issue is the nature of the political relationship between the core and the periphery.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:38:00 PM EST
[ Parent ]
That is an interesting way of putting it.

Europe in One Country?

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 05:48:23 PM EST
[ Parent ]
To end up with the Deutsche Mark we didn't have to spend 20 years in this pointless exercise drawn up by the French Bureaucracy.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:48:39 PM EST
[ Parent ]
It wasn't pointless.

The political point was - and as far as the French are concerned, still is - political union.

The economic point was and is - through neo-liberal hegemony by and for the corporate sector - the withering of the State.

But the Austerian agenda embodied in the ECB constitution did not emanate from the French, I think.

We must thank the Germans for that.

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

by ChrisCook (cojockathotmaildotcom) on Mon May 30th, 2011 at 06:41:39 PM EST
[ Parent ]
What a wretched deal.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 06:43:15 PM EST
[ Parent ]
... "Faustian bargain."

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:54:19 PM EST
[ Parent ]
The Germans wanted to dominate the EU through increased corporate dominance, and the French wanted to contain that threat through increased political direction? Then the Brits weighed in behind corporate dominance and the French lost the battle - partly because Sarkozy doesn't know which side he's on anyway?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 07:01:34 PM EST
[ Parent ]
Best summary I've seen of the last twenty years of European history.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 07:08:02 PM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Tue May 31st, 2011 at 05:08:27 AM EST
[ Parent ]
that more than a few of the French elites have now joined the corporate gravy train (leaving the administration/policial side of the world) and weakening France's political ambitions from the inside.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Tue May 31st, 2011 at 05:09:59 AM EST
[ Parent ]
The Reagan/Thatcher revolution, the "pensée unique" and later the social-democrat "third way" have coincided with an erosion of the ethic of public service. The cultural effect of the last 30 years may be more lasting and damaging than the economic effect.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 05:27:59 AM EST
[ Parent ]
Migeru:
an erosion of the ethic of public service.

and a corresponding diminution of public trust in their government spokesmen.

The cultural effect of the last 30 years may be more lasting and damaging than the economic effect.

it's quicker to whip up a bubble than educate a child... the yawning gap between rich and poor, 3 generations of entitlement, and the paucity of employment opportunity leads to intense cynicism amongst the youth, and a rejection of even the most basic of social pacts. a cocktail of reasons for dissent, but the PTB, in their flawless wisdoom, have decided that a please state is one where renewables are ignored, suppressed, defamed and otherwise hobbled, when a switch would guarantee umpteen responsible jobs for the unemployed and reduce social tensions no end*, in favour of coal/gas/nuke top down oligarchy where no-one in their right mind would want to work, just to keep those freaking utility bills coming in.

*and just for kicks possibly save our species from mass extinction.

yes, we have no bananas.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Tue May 31st, 2011 at 05:57:54 PM EST
[ Parent ]

   Indeed.  To say the least.  The idea that France's power élite are, were, or wanted to be some sort of counterweight to a supposed German-led penchant "to dominate the EU through increased corporate dominance" strikes me as strange and fanciful.  Certainly not "the world we live in."

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Tue May 31st, 2011 at 07:18:37 AM EST
[ Parent ]
  Not sure there's really in fact what appears to be some incongruency, implied or expressed, there.

   For true-believers in the neo-lib faith, there's no such thing as a distinction between "inside" and "outside" (the nation)  or "public" and "private" administration.  All administration, properly seen, is to be (or become, eventually) privately held whether in appearance or not.

    So, while political ambitions there are, they aren't "french" or any other nationality; they're "purer" than that.  This test of strength is at least in part a struggle over the question of who "owns" and directs the "Euro" as a currency and the monetary policies which are attached to it--- shall it "Europe", its member states, or, as corporate interests would have it, banks and their clientele interests?

    It's almost not even a question at all since there doesn't seem to be much force on the side of "Europe" except that which is to be seen in the streets and public squares of Spain, Greece, etc.--though, of course, that may change and in fact, I think one way or another, it must.  People have a strong aversion to starving to death.

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

by proximity1 on Tue May 31st, 2011 at 07:48:43 AM EST
[ Parent ]
Since a currency owes its values to the system of rules under which it has privileged uses, the crisis of the political relationship between the core and the periphery and whether the ECB should be so governed so that the periphery can survive within the Eurozone is a Euro crisis.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon May 30th, 2011 at 10:48:23 PM EST
[ Parent ]
 
 

 "the euro is the currency of the core. That's not in doubt."

 

     I find that a rather amazing statement to assert under the circumstances.  It seems to suggest that there isn't and simply cannot be any conceivable higher priority than that of maintaining the Euro.  It seems that we are now very close to the stage at which desperate people resort to ritual chanting in hopes of warding off some dreaded evil.

    I wish economists were required to study history, psychology, sociology and anthropology in addition to advanced calculus and quantitative analysis.  Then they might have a prayer of recognizing something very much at the heart of our current dilemma is simply the fact that very, very, important high officials made terribly mistaken decisions about the way in which the Euro currency could and should be instituted--i.e. without the necessary prerequisite authorities and operating issues resolved sensibly.   And, further, the study of these humanities would help economists recognize that now, these same very, very important high officials are before the stubborn facts of their errors and they want to do, to try, anything, no matter how dangerous or delusional, rather than face and admit their blunders--which, after all, had been very clearly pointed out to them well before they went ahead.

   At some point, don't even the highest world banking decision-makers, even European ones, and even with all their tremendous prestige at stake--don't they at some point have to admit that there just may be higher human priorities than the maintenance of the Euro currency at all costs?

     With everything else that this is, it's now also a deeply serious moral issue, the sort of issue which is at the heart of the humanities as disciplines.  Economics and economists must recover some of that before much greater harms are done out a blind and fear-driven denial which hopes to save very, very important faces.

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

by proximity1 on Wed Jun 1st, 2011 at 01:26:53 PM EST
[ Parent ]

It seems to suggest that there isn't and simply cannot be any conceivable higher priority than that of maintaining the Euro.

It's not a priority, it's a reality. Germany will continue to have a currency, and that currency will continue to behave as the euro does, and be governed like the DM and the euro have been for the past 60 years - by inflation hawks (or gold bugs, if you prefer). Various countries nearby will continue to use the same currency. France will likely stick around.

That's a reality - that currency (with or without France, euro or new-DM) will exist. Its not a priority, or a statement of desires or wishes, it's a fact.

That such a fact is incompatible with the EU as it currently is built is a possibility, hich means that the EU cannot continue as it is built.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:03:25 AM EST
[ Parent ]
Burt the EU has existed for a long time with multiple currencies; after all even now it is a economic area with multiple currencies. Why should a core euro or whatever change that?
by IM on Thu Jun 2nd, 2011 at 11:35:56 AM EST
[ Parent ]
It has coexisted first with the Bretton-Woods gold standard and then with the European Exchange Rate Mechanism. Both systems were punctuated by devaluation crises, as they couldn't fail to be. The Euro is an attempt to eliminate the possibility of a devaluation without moderating the macroeconomic imbalances that lead to devaluations.

EU countries outside the Euro are still committed to stable eschange rates and a structure similar to the old ERM. It has failed, too, as Hungary and some of the Baltics have experienced devaluation crises and/or depressions. The economy of Croatia, an accession country, is breaking under the weight of the Euro exchange rate peg without access to EU markets as it remains outside the EEA but has implemented free movement of capitals and opened its market to an extent.

It's a disaster.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 11:42:52 AM EST
[ Parent ]

   So, in much the same way that a noose around one's neck would "emliminate the possibility of a devaluation" (i.e. falling down) "without moderating the macroeconomic imbalances that lead to devaluations" (while one's crutches are removed), "it works"!   The operation was a success.  Unfortunately, the patient died. and---->

   "ERM. It has failed, too, as Hungary and some of the Baltics have experienced devaluation crises and/or depressions."  ....

  ...  Your bill for the hospitalization and surgery.  Please pay in full.   The hospital management extend their condolences to the family of the deceased.

 

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

by proximity1 on Thu Jun 2nd, 2011 at 12:00:32 PM EST
[ Parent ]
Yanis Varoufakis: THE EURO CRISIS AS A TWIN RECYCLING PROBLEM (3 May 2011)
Europe's crisis is caused by its institutional failure to confront two recycling problems: A debt recycling problem and a surplus recycling problem.

  • The debt recycling problem emerged after the Crash of 2008. Banking losses, following the implosion of the market in securitised derivatives, led to increased government deficits which in turn (aided and abetted by the panicky credit rating agencies' downgrades) caused (i) doubts on the capacity of some peripheral countries to fund their debt, and (ii) uncertainty on the capacity of banks exposed to the stressed governments' debt (on top of pre-existing holdings of toxic debt) to survive under the strain of a hypothesised sovereign default. The rest, as they say, is the sad history of the euro crisis.

  • The surplus recycling problem has been a permanent feature of the eurozone from its very inception. Its nature is simple: In every currency union there will always co-exist regions (or member-states) that are permanently in surplus with the rest and others that will be deficit regions. Given that the deficit regions cannot devalue as a means of keeping their deficits in check, some mechanism must exist by which the surpluses are recycled from the surplus regions and into the deficit regions not as fiscal transfers but as productive investments that lessen the divergence and help with cohesion. The eurozone has always lacked such a surplus recycling mechanism (click here for a paper that explains this argument fully).

These two problems, or challenges, are not being addressed by the European Union, the result being a euro crisis that is spiralling out of control. The debt recycling problem is causing a vicious cycle between the government debt crisis and the banking losses crisis. Meanwhile, at a time where growth is more needed than ever, the debt recycling problem is highlighting, and boosting, the surplus recycling problem. The trick is how to deal with both problems at once. It is a trick that the Modest Proposal for Resolving the Euro Crisis (put together some months ago by Yanis Varoufakis and Stuart Holland) is well suited to perform.
(Focus on the surplus recycling problem and how it's a currency problem)

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:21:40 PM EST
[ Parent ]
And thus the explanation for German banks buying up shaky bonds and speculating on US mortgages.
by rootless2 on Mon May 30th, 2011 at 05:34:48 PM EST
[ Parent ]
I'm just fighting propaganda with propaganda. Who evr said it needed to be true? It's narratives...

You could call it the German crisis, too.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:36:11 PM EST
[ Parent ]
Oh, dear.

Is that what you're now, a propagandist.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:39:24 PM EST
[ Parent ]
light-heat threshold breached or something?

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:47:55 PM EST
[ Parent ]
Yeah, sure.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:49:20 PM EST
[ Parent ]
is that if you need to resort to ad hominem, it's not helping your case.

Over the past several months, you've repeatedly thrown nasty insults at me on this forum. All I can say is that your reasoned posts stand a better chance of convincing me than these.

I see this as a political crisis, one of not enough Europe and too much nationalism, and I still fail to see how this is incompatible with what you say. You want to get rid of the Maastricht straightjacket, and I want a EU budget. Maybe it's not politically realistic today, but is it wrong?

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 06:00:22 PM EST
[ Parent ]
If we do not get rid of the Maastricht straitjacket, there is a realistic possibility that you will not have a European Union to spend an EU budget in.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:05:00 PM EST
[ Parent ]
It's not about the Maastricht straitjacket, it's about Keynes' negative feedback loop on surpluses.

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 06:37:21 PM EST
[ Parent ]
Lifting the Maastricht straitjacket would impose a negative feedback on surpluses. Unless the surplus countries enjoy getting paid for their exports with their own money.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:53:36 PM EST
[ Parent ]
But that's what they have been doing. The German export surplus gets loaned back to the deficit countries so they can continue to import.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:29:13 AM EST
[ Parent ]
No, that's not what they've been doing.

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 01:35:47 AM EST
[ Parent ]
Of course they were always going to be paid in the ECB's money, given that the Euro is a fiat currency. The real problem is that the Germans and the ECB are Aust[e]rian gold bugs.

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


Austerity can only be implemented in the shadow of a concentration camp.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 01:41:04 AM EST
[ Parent ]
Sending in the bailiffs to take away some sun-drenched islands and perhaps an Acropolis (or more mundane goods) is a way of getting paid in Greeks' money.
by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:10:58 AM EST
[ Parent ]
Or just buying up even more holiday homes, businesses and other property assets in Greece. The Greeks get an Aldi near them by way of recompense.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:28:57 AM EST
[ Parent ]
PS an Aldi is about yo be built just up the road from my home...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:29:40 AM EST
[ Parent ]
In rural France, I don't have far to go to two Lidls and an Aldi. I don't consider them evidence of German colonisation, just part of an even cheaper crap food distribution subsystem of large-corporate supermarketry in general.

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

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:49:51 AM EST
[ Parent ]
... if they get to keep them.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:02:59 AM EST
[ Parent ]
Just like to note for clarification that "they" are not a consistent group.

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

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

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

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

by A swedish kind of death on Tue May 31st, 2011 at 04:44:37 PM EST
[ Parent ]
If instead of excess German capital going to Greek bonds, Irish real-estate banking, US mortgage backed bonds and so on, the money had been paid out to German workers for vacations in the South, the world economy would have been on a more solid footing and German workers would have been happier.
by rootless2 on Tue May 31st, 2011 at 06:37:09 PM EST
[ Parent ]
Yes but if everyone was happy with their lot, why would we need banks? People wouldn't have to borrow.  We need pain and suffering to make the system work.  How else can we extract "value" from the have nots to make sure the have mores have more.  Isn't that the point of economics?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:30:44 PM EST
[ Parent ]
the problem is not so much the euro as the robber baron policies of all of our elites, including the Germans.

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:06:23 AM EST
[ Parent ]
The design of the Euro, like the gold standard before it, encourages mercantilist inflation policies by allowing the mercantilists to externalise the unemployment caused by their irresponsible policy.

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

- Jake

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

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

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

 

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

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

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

by proximity1 on Thu Jun 2nd, 2011 at 11:28:28 AM EST
[ Parent ]
A swedish kind of death:
The German financial system has then loaned the money back to the deficit countries,

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

send in the clowns.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Jun 1st, 2011 at 02:03:57 PM EST
[ Parent ]
I thought we were discussing the best way of framing the problem:
a) from a theoretical/analytical perspective, and
b) from a populist/propagandist perspective

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

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:17:27 PM EST
[ Parent ]
I see this as a political crisis, one of not enough Europe and too much nationalism, and I still fail to see how this is incompatible with what you say. You want to get rid of the Maastricht straightjacket, and I want a EU budget. Maybe it's not politically realistic today, but is it wrong?

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

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

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

Back in January (of 2011), DSK was being interviewed by a BBC Radio journalist in the context of a documentary on the history of the IMF. Toward the end of the program, I heard the distinctive voice of DSK responding to a journalist's question about how the global economy ought to be reconfigured in the aftermath of the 2008 Crisis. His astonishing answer was:
Never in the past has an institution like the IMF been as necessary as it has been today... Keynes, sixty years ago, already foresaw what was needed; but it was too early. Now is the time to do it. And I think we are ready to do it!
This was, in my estimation, a bombshell of a programmatic statement by the IMF's Managing Director. What was he referring to? He was, of course, referring to Keynes' powerfully put argument (in the context of the 1944 Bretton Woods conference) that a system of fixed exchange rates cannot survive for long without an automated mechanism that treats (a) systematic trade surpluses and (b) systematic trade deficits as the different sides of a problematic coin.

...

As I have explained in some detail (see here for example) the poignancy of an SRM [Surplus Recycling Mechanism] (and of its absence), I shall desist from repeating it here. Suffice to point out the political and economic significance of DSK's endorsement of Keynes' suggestion and, in particular, the determined statement that Keynes was ahead of his time but not, after the Crash of 2008, "Now is the time to do it. And I think we are ready to do it!"

...

Within Europe, the prospect of a French President who believes strongly (and is prepared to back up his convictions with a formidable analytical panoply) that the eurozone cannot survive without a Surplus Recycling Mechanism (which channels German surpluses to the deficit countries in the form of productive investment) had the potential radically to alter the political and economic agenda of the continent. It would, in particular, offer an invigorating counterpoint to the current mental incapacity to come to terms with the deeper causes of the euro crisis and to, at long last, recognise that the debt crisis is a symptom, not the cause of the string of failures that threaten the eurozone's very existence.

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

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 06:34:45 PM EST
[ Parent ]
The problem - in Ireland's case - was that German banks were recycling their surpluses not in productive investment, but into an asset price bubble which rendered Ireland's economy still less competitive.

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

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

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

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

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:49:21 PM EST
[ Parent ]
It's not as if SG and DB and the landsbanks didn't have profitable investment opportunities in the home countries either. But the big money and bonuses came from speculation in real-estate and in junk bonds.
by rootless2 on Mon May 30th, 2011 at 07:18:55 PM EST
[ Parent ]
This dysfunctionality was exacerbated by the fact that banks, as surpluses recyclers, were predisposed to "safe" financialisation or property investments rather than "risky" productive investments, or long term infrastructural investments which might have rendered the irish economy more competitive.

Bingo!

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:34:20 AM EST
[ Parent ]
And the EU has been becoming incompetent as a result of the Reagan/Thatcher revolution and the hollowing out of Economics education by Friedman followers (and worse) since the 1980s.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:35:52 AM EST
[ Parent ]
I think that Keynes' Gesellian approach at Bretton Woods to his Bancor/International Clearing Union was spot-on and is a key insight which I have referred to here many times.

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

I like to distinguish between:

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

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

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

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

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

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

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

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

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

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

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

by ChrisCook (cojockathotmaildotcom) on Mon May 30th, 2011 at 07:32:13 PM EST
[ Parent ]
But the central issuance of a fiat Bancor by the ICU quasi-IMF/World Bank institution he had in mind required global government and global taxation to back it.

Yes.

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 07:36:50 PM EST
[ Parent ]
In addition, the EU (unlike the World as a whole) could have federal level fiscal policy...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:31:32 AM EST
[ Parent ]
Which presumably was the plan by the Euro founders - who had a strategic vision unlike their successors today who couldn't think their way backwards out of a paper bag.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 02:54:37 AM EST
[ Parent ]
Hmm, they already knew Germany wouldn't go for it 20 years ago...

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:43:09 AM EST
[ Parent ]
Migeru:
they already knew Germany wouldn't go for it 20 years ago

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

Can you write a diary explaining this?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:40:43 AM EST
[ Parent ]
there still was momentum for "ever closer union." This died somewhere in the late-90s/early 00s and was killed off by France's NON to the EU Constitution, which basically set in stone the message that there would be no increase to the political legitimacy of the Brussels institutions, ceding the ground to national governments.

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:09:44 AM EST
[ Parent ]
Stop blaming the political left for the sins of Third-Way social democrats.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:19:24 AM EST
[ Parent ]
where did you see me blame the political left in my comment above?

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:33:27 AM EST
[ Parent ]
France's NON to the EU Constitution

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:40:09 AM EST
[ Parent ]
I did indeed, but in this case I was making a more general point about the overall loss of desire for "ever closer union." Maybe it was generational change, maybe it was the focus on enlargement (which as we know the Brits did see, rightly or wrongly, as a distraction from deepening tendencies), maybe it was having a fundamentally eurosceptical French president (Chirac), maybe it was the cost and change in perspective(s) from  Germany' reunification it was the scandinavians and the more utilitarian view of the EU, or (more likely) a combination of all that.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:23:21 AM EST
[ Parent ]
Well if it's populist propaganda you want, then "Euro Crisis" is the more evocative term - because it is a crisis for all in the Eurozone.  Sovereign debt crises are for politicians, bankers and economists to worry about.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 05:48:21 PM EST
[ Parent ]
Yes. Yes you could.

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 05:48:33 PM EST
[ Parent ]
Let's have some commentary that Jerome can dismiss off-hand because of the nationality and language of the source.

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

"We have to follow our path with the Greeks, too, even if it costs us something," argued Dr Helmut Kohl last week in Berlin, an observation as self-evident as it is out of place in the era of his political protege.

...

Alarmed, the German old guard, from philosopher Jürgen Habermas to ex-chancellor Helmut Schmidt, have come back into the fray to explain Germany's place in Europe and its role in the crisis. With the passion of life-long Europeans, they try to explain the potential cost of loans to Greece, Portugal or Ireland against the certain cost to Germany of not providing loans, namely a collapse of the euro zone as we know it.

"We are making mistakes without even realising it," wrote Schmidt in the Die Zeit weekly. "Our huge trade surplus happened unintentionally but it annoys our neighbours . . . In addition, we behaved very badly in the Greek debt crisis and Libya crisis."



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:53:07 PM EST
[ Parent ]
well, yes, "German crisis" would be more accurate than "euro crisis" - my suggestion was not dismissive, it was a serious proposal.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:55:40 PM EST
[ Parent ]
But the Germans have written their position into the constitutional rules of the European Union.

The German crisis is a euro crisis.

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:02:57 PM EST
[ Parent ]
to call it a German crisis you would have to believe that the Austrian economists in the ECB are not there. They are there, I think they are not necessarly influenced by Germany; They are really stupid , nuts and fundamentally religious.

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

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

A pleasure

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

by kcurie on Tue May 31st, 2011 at 06:51:27 AM EST
[ Parent ]
The euro does not behave differently than the DM did. The only difference is that instead of one big crisis, you had smaller crisis every few years, with devaluation, austerity (yes, already back then, that was the unavoidable result of a devaluation) and loss of wealth for all. It just happened in 10% increments rather than the 30-40% increment that seems needed today.

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

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

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

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:20:31 AM EST
[ Parent ]
The euro does not behave differently than the DM did. The only difference is that instead of one big crisis, you had smaller crisis every few years,

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

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

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:45:50 PM EST
[ Parent ]
   That sounds like a home-owner who refinances his home at a higher interest rate, pays penalties for late payments, bank charges on the over-drafts from penalty payments, and then, on top of it, pays a monthly rent on the same dwelling.

   So, let's review:

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

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

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

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

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

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

by proximity1 on Thu Jun 2nd, 2011 at 03:22:14 PM EST
[ Parent ]
You're not suggesting Jerome dismisses me because of my nationality and language?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 05:58:20 PM EST
[ Parent ]
Only if you criticise the EU.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 30th, 2011 at 05:59:22 PM EST
[ Parent ]
The problem is not too much EU, it's too little. And yes, English speakers are the main proponents of less EU. And, surprise, the EU has stalled right at the time everybody in Brussels switched to English.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 06:02:37 PM EST
[ Parent ]
So if the Germans spoke less English and more German the problems would be resolved? I thought it was "Austrian" economics which were the main problem?

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

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

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 30th, 2011 at 06:11:55 PM EST
[ Parent ]
I'm not close to UK politics/media commentary, but what I have found surprising is the lack of British shadenfreude at the Euro Crisis many Brits predicted.  It's almost that they seem to miss the prospect of not having the Euro to kick around any more.  I don't get the sense that they want the Euro to fail, just that they are relieved not to be part of the current Euro systems failure. There must also be millions of British expats who would love their pensions to be in the same currency as their expenditure...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:24:04 PM EST
[ Parent ]
where exactly do you think the "financial brain rot" comes from?

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

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

And don't forget that Keynes was British.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 08:46:59 AM EST
[ Parent ]
Henry George: American
Veblen: American
Fisher: American
Keynes: British
Kalecki: Polish
Galbraith: American
Minsky: American
Steve Keen: Australian

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

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

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

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

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:14:23 AM EST
[ Parent ]
there's been more critics in English because they were closer to the problem...

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

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:38:46 AM EST
[ Parent ]
And maybe there are so few critics from Europe because they don't believe there's a problem at all.

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 09:42:46 AM EST
[ Parent ]
And which part of the "Anglo-Saxon" economic thought has been taken up by the Eurozone economic policy elites? Market fundamentalism or the macroeconomics of Veblen-Fisher-Keynes-Kalecki-Minsky? The menu was there and they did their picking.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:43:20 AM EST
[ Parent ]
I've never said that our continental elites had not been largely infected in the past 2 decades.

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:48:38 AM EST
[ Parent ]
The combination of the two leads to
  1. a, yes, flawed design of the Eurozone
  2. policy inability to devise solutions to the macroeconomic crisis
  3. political wilingness to IMF fellow EU member states

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

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 10:00:20 AM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:11:07 AM EST
[ Parent ]
You do know that Stark and Weber were hardly the whole governing council and executivge board.

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

So this is hardly a german affair.

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

by IM on Thu Jun 2nd, 2011 at 12:00:40 PM EST
[ Parent ]
Stark and Weber famously broke collegiality and spoke in public against ECB council decisions in May/June 2010.

They also spoke demonstrably factually wrong.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 01:35:24 PM EST
[ Parent ]
that the ECB is hardly german-dominated.

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

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

by IM on Thu Jun 2nd, 2011 at 06:41:19 PM EST
[ Parent ]
I call them gold bugs because they manage the Euro as if it were on the Gold standard and not a fiat currency.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 06:55:59 PM EST
[ Parent ]
Entertaining but nothing more. The obsession of german central bankers with inflation is odd, but a gold standard it isn't. Their intellectual background is neoliberal; Weber did go to Chicago, after all.
by IM on Thu Jun 2nd, 2011 at 07:19:34 PM EST
[ Parent ]
I happen to be in good company: The eurozone was supposed to be an updated version of the classical gold standard. says Martin Wolf.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 07:25:26 PM EST
[ Parent ]
you base your unfounded claims on the unfounded claims of Martin Wolf. Who hardly was a architect of the eurozone. And who is claiming that - unsourced n. b. - now.
by IM on Thu Jun 2nd, 2011 at 07:52:06 PM EST
[ Parent ]
The Eurozone operates like on a gold standard in that the ECB refuses to create fiat money.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 07:55:55 PM EST
[ Parent ]
Not enough money. That is not quite the same. A too strict monetary policy is exactly that, not a gold standard. Words have meaning, after all

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

by IM on Thu Jun 2nd, 2011 at 08:01:30 PM EST
[ Parent ]
Are you familiar with "bond purchase sterilization"?

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

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

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 08:12:12 PM EST
[ Parent ]
It's not their neo-liberalism. It's their gold-buggery.

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

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 01:36:51 PM EST
[ Parent ]
Curious. But thinking about it: Does academic economics play any part in German public debate? The mass media is usually dominated by a couple of think tanks shilling for the usual suspects and sending out their talkshow economists, but I don't have the slightest idea what the state of the rest of German economics is.

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
by generic on Thu Jun 2nd, 2011 at 07:12:13 PM EST
[ Parent ]
The problem at the moment is neither too much nor too little EU. The problem is that the EU is pushing policies that are objectively insane.

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 06:24:32 PM EST
[ Parent ]
Which goes back to Migs point that criticising the EU is not the same as being anti-EU (and, in any case, it is not the British who are causing the Euro crisis).

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:31:27 PM EST
[ Parent ]
This isn't some high-minded debate about possibilities, J.  This is really happening.

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

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

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

by Drew J Jones (pedobear@pennstatefootball.com) on Tue May 31st, 2011 at 07:03:21 AM EST
[ Parent ]
Though  the Anglo-Disease was largely originally an illness of the Anglo-Saxon mind it has become endemic throughout Europe and the rest of the world.

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

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

by Colman (colman at eurotrib.com) on Tue May 31st, 2011 at 08:16:33 AM EST
[ Parent ]
  "an illness of the Anglo-Saxon mind"?--- no, thank you.  I'll pass.

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

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

    That's quite good, in my opinion.

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

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

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

by proximity1 on Tue May 31st, 2011 at 08:49:41 AM EST
[ Parent ]
It's not so much the Anglo-Saxon mind as missionary work for the Anglo-Saxon class system.

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

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

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 09:32:33 AM EST
[ Parent ]
  Funny you mentioned that.  I just read this from you, having posted, meanwhile, the comment here:

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

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

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

by proximity1 on Tue May 31st, 2011 at 09:38:16 AM EST
[ Parent ]
It's interesting that none of the PIIGS are protestant states, while the ECB does very much seem to be dominated by Calvin's humourless spiritual heirs.

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

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 12:09:46 PM EST
[ Parent ]
If ECB doctrines may be characterised as "Austrian"... Austria is overwhelmingly Catholic. Germany has equal proportions of Protestants and Catholics. The Netherlands has more Catholics than Protestants. It has been suggested here that France, if you scratch its secular paint-job, is deeply Catholic - in any case, it isn't Protestant.
by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 12:45:38 PM EST
[ Parent ]
Its all the fault of the Anglos again! - except even the Church of England has a large Anglo-Catholic wing - and church going Catholics in England are more numerous that their Church of England equivalents.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 12:50:44 PM EST
[ Parent ]
Austria was overwhelmingly Catholic numerically, but there's an excellent chance that Hayek's noble ancestors were Lutheran hold-outs rather than fervent Papists.

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 03:21:47 PM EST
[ Parent ]
ThatBritGuy:
France is somewhat tangential to the ECB. Germany and Protestant Scandinavia are in the driving seat, and Merkel is certainly Protestant.

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

Index of Frank's Diaries

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

  It's a Pope-mobile?

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Tue May 31st, 2011 at 03:34:04 PM EST
[ Parent ]
Okay - I was thinking about Finland's contribution to the debate, while trying to finish four thousand words about servers at the same time.

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

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 04:39:21 PM EST
[ Parent ]
I look forward to your four thousand words... I think your point is a bit of a stretch given the size of Finland (which is not normally considered part of Scandinavia) and the unlikehood of it dominating the ECB.

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

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 05:16:43 PM EST
[ Parent ]
Thinking about this, I'd see the ECB/IMF and the Austrians as the natural heirs of joyless Calvinist morality blended with dogmatic Catholic Scholasticism.

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

Anything with this kind of pedigree can only be reactionary.

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

As for Finland -

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 31st, 2011 at 06:04:50 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 06:17:50 PM EST
[ Parent ]
The word these days is 'Nordic', which sometimes also includes the states around the Baltic, other than Scandinavia + Finland. If you want to refer to Estonia, Lithuania and Latvia as a bloc, then it's the Baltics. The long term Nordic grouping is Hanseatic - it includes N. Germany and Russia.

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

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:38:58 PM EST
[ Parent ]
The religious roots of Socialism, if there are any, is a different - interesting - topic.

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 2nd, 2011 at 09:48:59 AM EST
[ Parent ]
If Hayek's ancestors are relevant, let me point out that Merkel is quarter-Polish, i.e. Catholic....
by gk (g k quattro due due sette "at" gmail.com) on Tue May 31st, 2011 at 03:35:26 PM EST
[ Parent ]
We've gone from politics to economics to religion and now genealogy.  Is there any sphere of human knowledge we can't cover in the course of one conversation?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:19:34 PM EST
[ Parent ]
  Yes.  http://en.wikipedia.org/wiki/Chess_boxing

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Tue May 31st, 2011 at 04:27:34 PM EST
[ Parent ]
According to Wikipedia, Hayek was "nominally catholic but nonpractising". He hailed from Austrian nobility.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 04:38:01 PM EST
[ Parent ]
  "It's interesting that none of the PIIGS are protestant states, while the ECB does very much seem to be dominated by Calvin's humourless spiritual heirs."

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

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

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

by proximity1 on Tue May 31st, 2011 at 03:05:29 PM EST
[ Parent ]
"All A is B" does not imply "All B is A".

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

Fill in the rest yourself as an exercise.

by Colman (colman at eurotrib.com) on Tue May 31st, 2011 at 11:27:57 AM EST
[ Parent ]
  But "All A is B" doesn't represent the syllogism in dispute.

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

  So, it's represented as

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

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

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

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

by proximity1 on Tue May 31st, 2011 at 03:21:33 PM EST
[ Parent ]
Colman:
It needs to become a different EU and it's hard to see how that's going to happen in the current political environment without serious damage to the institutions.

Good summary.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 09:03:33 AM EST
[ Parent ]
the language thing is a red herring.

banksters are multilingual, after all.

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

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

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Tue May 31st, 2011 at 07:53:11 PM EST
[ Parent ]
   But I think Colman's point was not so much a matter of what language is in predominant daily use as it is that the "illness of the Anglo-Saxon mind" (that wooly-mammoth) is an important source of  TVHTBN-thinking or, TIOTASM --> Protestant Ethic --> TVHTBN.

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

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

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

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

 ----------

 abbreviations:

  TIOTASM: the illness of the anglo-saxon mind

  TVHTBN : the virgins have to be naked

  JEP : The Journal of Economic Psychoses

   

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

by proximity1 on Wed Jun 1st, 2011 at 07:33:40 AM EST
[ Parent ]
Could be a diary there somewhere, but my Germanic mind and anglo-Irish conditioning have left me in too confused a state to discern just where the virgins come in...

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

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

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Wed Jun 1st, 2011 at 08:02:52 AM EST
[ Parent ]
Assuming that there is a supply of Icelandic virgins - a rare species according to my knowledge of that culture.

You can't be me, I'm taken
by Sven Triloqvist on Wed Jun 1st, 2011 at 09:10:08 AM EST
[ Parent ]
The extent of your knowledge of Iceland virgins would, though, make for a rare and interesting diary....

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 1st, 2011 at 09:48:45 AM EST
[ Parent ]
It'll be in the book ;-)

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

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

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 11:07:01 AM EST
[ Parent ]
I'm toying with the idea of doing my autobiography as a series of podcasts, making up, if you will, a 'talking book'.

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

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

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

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

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 11:26:16 AM EST
[ Parent ]
I can't wait!

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Jun 1st, 2011 at 11:45:22 AM EST
[ Parent ]
will the book have pictures of the naked virgins?

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

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

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jun 1st, 2011 at 11:46:23 AM EST
[ Parent ]
I don't really have a pitch outside of Finland,  except amusing stories of 40 years in media of various types, in the mould of Patrick Campbell and other laid back short essayists. Vignettes, if you will, with a Kaurismäki flavour.

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

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

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:11:37 PM EST
[ Parent ]
You have an interesting problem in that you have a potentially viable book project, but you don't currently have what publishers call a platform - which is a recognisable name and following, and/or academic tenure.

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

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

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

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jun 1st, 2011 at 01:34:31 PM EST
[ Parent ]
Quite. That's the reason I'm looking for alternatives that will also motivate me to finish the damn thing.

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

You can't be me, I'm taken

by Sven Triloqvist on Wed Jun 1st, 2011 at 02:18:43 PM EST
[ Parent ]
Migeru:
that Jerome can dismiss off-hand because of the nationality and language of the source

Say what?

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

What shred of evidence do you have for it?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 07:34:17 AM EST
[ Parent ]
In fairness Jerome did raise the language issue - in the context of things going to pot when Brussels switched to speaking English - and his Anglo-Disease thesis does imply that there is a peculiarly Anglo-phone or British American plot to undermine the EU. The fact that some Brits/Americans where actually right in some of their criticisms of the Euro doesn't imply they where part of some anti-EU conspiracy and we have to be careful about dismissing (or not taking seriously) criticisms from Anglo sources because they come from Anglo sources.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:53:22 AM EST
[ Parent ]
Jerome is one of the top recommended bloggers on DKos - in English - and founded this place - in English - six years ago. As a native English-speaker myself, I have often expressed the idea that the English-language media tend to dominate the content and standpoint of much of international media, spreading neoliberal ideology (which has proved itself much more effective in undermining the European project than anti-EU broadsides). But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

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

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:09:20 AM EST
[ Parent ]
But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:27:43 AM EST
[ Parent ]
JakeS:
if it were in English and critical of EU policy

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

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

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

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:54:05 AM EST
[ Parent ]
Agreed on all of the above. I am not aware of any adverse history between Mig and J and perhaps you are reading the comments in that light. In the context of the discussion here I didn't notice any comments meriting a down rating - as a serious ad hominem should.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 08:29:26 AM EST
[ Parent ]
But the notion that anyone is dismissed offhand on this forum because they are native English speakers is ludicrous.

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

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

remember my quip about this being an English language article about France, Europe and Germany
"Never believe anything you read in English about Europe" is Jerome's wholly predictable rejoinder. When marco answers
no doubt.  but then what is the bias of Jacques-Pierre Gougeon, a French professor writing in Le Monde?
there's no answer from Jerome.

This is not an isolated incident.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 08:54:26 AM EST
[ Parent ]
Then you might take care about how you phrase that kind of aside in a comment that didn't call for it.
by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 08:58:33 AM EST
[ Parent ]
Another dismissal in this very thread. Jerome doesn't tell us why the analysis is flawed, just that "unsurprisingly the new FT Brussels bureau chief" disagrees with him. Then, in response to an article by Marshall Auerback that
So far, most of the people who call for Germany to exist the eurozone are, unsurprisingly, people keen to break Europe.
ignoring people like Jörg Bibow or Yanis Varoufakis. Or claiming (as pointed out by Drew repeatedly) that Krugman or Stiglitz have an anti-EU agenda when they criticise the macroeconomic construction of the Eurozone.

I don't know what your

Jerome is one of the top recommended bloggers on DKos - in English - and founded this place - in English - six years ago.
has to do with Jerome's habitual dismissal of English-language commentary on the EU on the grounds that English language commentary is generally biased, often without addressing the merits or lack thereof of the commentary at hand.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 09:10:40 AM EST
[ Parent ]
I'll illustrate the point in what I hope is a succinct way:

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

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

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

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

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

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

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

Wind power

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

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:17:37 AM EST
[ Parent ]
It was designed for the core, and it would have worked for the core. It was not designed to include the periphery without additional political gimmicks.

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:31:14 AM EST
[ Parent ]
the discipline stopped as soon as they were in

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

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

No fiscal rule would have constrained the Spanish housing bubble and its consequences.

And they say, "Thank you for your contribution. Clearly, this was about fiscal irresponsibility, and we need to enforce much stricter rules."

...

... The blue line is Germany; the red line is Spain.

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

The Euro has three flaws at least:

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


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:38:15 AM EST
[ Parent ]
Well, that might have meant that, in the existing framework, the periphery should have been running large surpluses to prevent the external imbalances. Not the best policy, admittedly, but one that was possible.

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

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:06:57 AM EST
[ Parent ]
Well, that might have meant that, in the existing framework, the periphery should have been running large surpluses to prevent the external imbalances. Not the best policy, admittedly, but one that was possible.

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

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

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

The eurozone was supposed to be an updated version of the classical gold standard. Countries in external deficit receive private financing from abroad. If such financing dries up, economic activity shrinks. Unemployment then drives down wages and prices, causing an "internal devaluation".
Münchau calls "internal devaluation"
a euphemism for a depression
Strong money regimes such as the Gold standard cause depressions. We thought the lesson had been learned in the 1930s and the economic theory for it existed.

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

The idea was pure brilliance: Combine a twin (trade and government) deficit with a strong capital account surplus. Suck into the US other people's exports and a tsunami of other people's capital. Thus my term for the period after 1971: The Global Hoover: From the late 1970s until 2008 the US acted as a gargantuan vacuum cleaner that sucked in the trade surpluses of Germany, Japan and, later, China while, at the same time, attracting into Wall Street something in the order of $3 to $5 billion net on each working day.

...

The euro, it must be remembered, was conceived at the height of the Grand Hoover's reign. Germany thought that it could extend its growth model to the eurozone. Convinced that the Grand Hoover would continue to suck in its surpluses, Germany thought that its surpluses could expand further within Europe if deficit countries like Greece, Spain, Italy etc. were given a strong DM-linked currency. Germany's condition for sharing its currency with the rest was that nothing else would be shared except for the common currency: Debt, taxes, government expenditure would be all nation-state-specific. Each euro of debt would belong to one country only and no surplus recycling mechanism would be set up.

...

Of course, while the Grand Hoover worked its magic, sucking up the German surpluses and keeping alive the worldwide glut of cheap private money, all seemed well. While the imbalances within Europe were getting larger, cheap private money allowed deficit states to cover the gap by borrowing. But when the Grand Hoover splattered and died, Europe's underlying imbalances came to the fore.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 10:26:58 AM EST
[ Parent ]
Well, that might have meant that, in the existing framework, the periphery should have been running large surpluses to prevent the external imbalances.

That's the IMF recommendation.

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:46:40 PM EST
[ Parent ]
  So, though you don't seem to want to admit it, apparently the upshot of your comments is, we're going to see the European Union reduced to what you call "its core"-- and that this will in effect resemble what was once the case, the power-center, Germany, with one to three others big enough to hold their own, playing along in a situation where Germany's economic predominance effectively sets the terms.  The rest may watch.

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

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

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

  Have I missed something?

    Lovely.

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

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

by proximity1 on Thu Jun 2nd, 2011 at 09:48:27 AM EST
[ Parent ]
When forced to bite the bullet, Euro apologists seem happy to fall back on "the EU is France and Germany, the rest is negotiable". I think we're all about ready to wake up from the European dream.

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

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

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Thu Jun 2nd, 2011 at 10:22:12 AM EST
[ Parent ]
No, it would not have worked for the core because the core would have had to contend with strong revaluation pressures on their currencies vis-a-vis the non-Euro currencies.

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

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

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 09:48:44 AM EST
[ Parent ]
  "It was designed for the core, and it would have worked for the core."

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

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

by proximity1 on Thu Jun 2nd, 2011 at 09:57:53 AM EST
[ Parent ]
China wants to revalue its currency just to make some smaller european countries happy.
by IM on Thu Jun 2nd, 2011 at 12:49:05 PM EST
[ Parent ]
Uh, no.

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:54:42 PM EST
[ Parent ]
Has the countries in the core balanced trade with each others? Otherwise, I doubt very much that it could work for the core either.

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

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

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

by A swedish kind of death on Thu Jun 2nd, 2011 at 03:24:15 PM EST
[ Parent ]
Can we fashion that argument into an LTE to be sent to newspapers in surplus countries having a deficit within the group of surplus countries?

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

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

    I like it.

   Please also see my query at:

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

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

by proximity1 on Thu Jun 2nd, 2011 at 04:21:22 PM EST
[ Parent ]
European Tribune - Submit New Story
I say yes, we can.


A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Fri Jun 3rd, 2011 at 12:58:46 PM EST
[ Parent ]
That linked wrong. New try:

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

I say yes, we can.


A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Fri Jun 3rd, 2011 at 01:30:50 PM EST
[ Parent ]
Has the countries in the core balanced trade with each others? Otherwise, I doubt very much that it could work for the core either.

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

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

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 04:04:55 PM EST
[ Parent ]
"balanced budget, generally" and "lower taxes" are NOT the same thing.

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

Balanced budgets. Economic growth. Pick at most one.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:46:26 PM EST
[ Parent ]
(Repeat) What you actually wrote did not say that, it said "the nationality and language of the source".

And it was a sideswipe that was not otherwise relevant to your post.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue May 31st, 2011 at 12:51:02 PM EST
[ Parent ]
are not about my "suspect the English" lines: he's right on this (in pointing out that I'm consistently holding this line - let's leave the debate on whether the line itself is right to elsewhere) and I certainly don't blame him for pointing out this particular bias of mine.

But he's had a number of rather nasty comments to me in the past few months which I don't consider useful nor helpful, and I've pointed them out over time. I don't want to labor the point, but I will continue to call him out when he uses ad hominems (especially as he has more than enough substantial arguments to make his points)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 08:32:48 AM EST
[ Parent ]
I'm sorry to see two people who have contributed so much to ET being at loggerheads to the where their animosity effects the quality of debate in third party diaries/conversations because disagreements come to be seen as personal criticisms or ad hominems. I have no idea what caused this and thus no contribution to make to its resolution.  Can I respectfully suggest you guys have a private conversation to see if your differences can be overcome?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 10:26:57 AM EST
[ Parent ]
  "Never believe anything you read in (the) English (& U.S. press) about Europe," exaggerations aside, as a loose rule of thumb, this would work pretty well for me.

    I'd just shorten it to, "Never believe anything you read in (the U.S., Australian &) English (press & television)."

    Less because it's in English and mainly because it's probably owned by Rupert Murdoch.  Oh, yeah, I never believe much of anything I read in the French press, either, and for the same sort of reasons.

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

by proximity1 on Tue May 31st, 2011 at 09:10:26 AM EST
[ Parent ]
Very funny, p1.

The point is that on this here site when people quote things, particularly in diaries, it is usually not uncritically, but for debate and for perceived quality. So dismissing the quotes without addressing the substance, on the "quip" that "never believe what your read in English" or, in your case "never believe anything you read in the press" is not really up to standard. And it really comes too close for comfort to Jerome telling ET regulars "here you are being gullible again about the EU".

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 09:14:00 AM EST
[ Parent ]
Narratives based on nation will end in a single way: with bullets and blood.

This is, by the way, how narrative is developing: Greeks versus Germans, Portuguese versus Finnish. Core versus periphery. North versus South. Creditors versus Debtors.

This will end precisely as it did during the 20th century.

by cagatacos on Tue May 31st, 2011 at 05:53:25 AM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Mon May 30th, 2011 at 05:09:42 PM EST
because it is?

This is a start-up euro crisis. This is a monetary crisis if it ever was one. You can also call it an ECB crisis, but what is not, it is a debt crisis. In TINA world, yes, this is a debt crisis, and the euro is the new gold standard. But in the normal Say-Keynnes-Fisher-Galbraith-Minsky-Friedman world, this is a monetary crisis which has been made an euro-crisis by the sheer stupidity of the ECB and the Austrians.

A pleasure

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

by kcurie on Tue May 31st, 2011 at 06:43:48 AM EST
[ Parent ]
   "This is a start-up euro crisis. This is a monetary crisis if it ever was one. You can also call it an ECB crisis..."

  with, lurking not far beneath it--where it has operated patiently since the 1500s--the protestant ethic in the spirit of capitalism.

  Though he didn't say it, Clinton ought to have said "It's the protestant ethic, stupid!" except that Clinton is very protestant-ethic-steeped just like the whole class of fresh-water thinkers.

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

by proximity1 on Tue May 31st, 2011 at 09:23:53 AM EST
[ Parent ]
Anybody got any criticisms of the relatively optimistic and benign scenario I have painted?  I was expecting a lot more criticism of the substance of my diary, whereas discussion to date has been about points not directly made in the diary.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 07:08:12 PM EST
Well, your timeline is overly optimistic. Even if Greece defaults tomorrow, it will not have recovered by 2015, let alone become a competitive beacon of industry.

You also left out the years of fuel rationing and the dead coal miners in Greece when they were cut off from fuel imports. And the years of agricultural command economy, as they ran a crash programme to convert cash crops to food crops. And the attempted fascist coup d'etat sponsored by the former owners of those cash crops (and foreign banksters). And the humiliating concessions Turkey extracted while Greece was cut off from European diplomatic support.

On the positive side, you left out the Spanish funnelling of part of the hard currency it obtained on favourable terms from the ECB to alleviating the food shortages during the winter of '11/12. Most contemporary historians believe that if the rationing system had resulted in actual hunger during that first winter, the democratic state would have lost its legitimacy, potentially leading to open civil war between communist and fascist militias. As it were, the Athens Food Riots saw only three protesters killed and a few dozen police officers wounded.

Unfortunately, the European project remains shaky even to this day, with a generation of conservative politicians in Germany, France and the Netherlands having been brought up on a Dolchstosslegende in which the Greek default caused the Panic of 2011 and subsequent industrial depressions, as the EPP-PES governments of those countries embraced AusterityTM and appeals to the Confidence Fairy when their banks crumbled. And even in the reconstituted ECB, the BuBa remains an obstructionist voice of "sound money" ideology.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 07:32:51 PM EST
[ Parent ]
I don't see why the Greeks can't continue to import food and fuel - it will just cost 3 times as much and so a rapid programme of switching to home produced alternatives will be heavily incentivised. No need for a command economy. In practice they will run older cars, and eat less expensive imported branded and processed products.  Is Greece a huge net food importer?  The tourist and property industries should be hugely boosted by the devaluation and could result in a very immediate economic kick start without any expensive retooling required.

I'm also not convinced that a Greek default will totally destabilise the EU banking system - sure some politically unpopular bail-outs may be required, but ultimately a heavy dose of quantitative easing should solve the problem.  (Economists who are dead against QE to save the profligate Greeks and Irish will achieve a Damascene conversion when it is German banks which have to be baled out.

The bailing out of Spain, Portugal and Ireland at affordable rates combined with increased infrastructural investment will also boost the EU economy still further and increase the overall growth rate substantially.

Don't forget the ECB will be blamed for forcing the Greek default and subsequent German banking problems and Merkel will be history - to be replaced by an SDP/Green coalition.  The neo-lib intellectual bubble will have burst and a new generation of policy-makers will come to the fore - ok - 2015 may be a bit early, but these things can happen surprisingly quickly.

BuBa?


Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 07:53:07 PM EST
[ Parent ]
I don't see why the Greeks can't continue to import food and fuel

With what hard currency?

The tourist and property industries should be hugely boosted by the devaluation and could result in a very immediate economic kick start without any expensive retooling required.

The tourist industry will not recover until the rest of Europe recovers. Which, given current German policies, will not happen in the foreseeable future.

Sure, housing could boom, but I thought the point of leaving the Euro was to avoid having a repeat performance ten years down the road...

I'm also not convinced that a Greek default will totally destabilise the EU banking system

It does not have to. But the Franco-German response almost certainly will.

sure some politically unpopular bail-outs may be required, but ultimately a heavy dose of quantitative easing should solve the problem.

QE is basically a fancy word for discount window operations, invented by people who don't like the discount window. Like all discount window operations, it requires collateral. It is possible to overvalue this collateral, but pretending that Greek bonds are viable collateral becomes tenuous when they have been explicitly defaulted on.

(Economists who are dead against QEbailouts to save the profligate Greeks and Irish will achieve a Damascene conversion when it is German banks which have to be baled out.

Probably. But if the banksters panic and send the real economy into a tailspin while they're being bailed out, you'll need Keynesian stimulus. And the EPP-PES prefers AusterityTM, so they won't do that.

Don't forget the ECB will be blamed for forcing the Greek default

You have a lot more faith in the public's and the press' ability and willingness to connect the dots than I do.

A Greek default will be blamed on the moral turpitude of brown people who speak funny. That's the narrative that's been pushed since this crisis started, and it's a comfortable one for TPTB in Germany and the other cargo cult countries.

BuBa?

BundesBank.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 08:14:29 PM EST
[ Parent ]
With what hard currency?

Emergency food supplies from Turkey? Just imagine the reaction in Germany....

by gk (g k quattro due due sette "at" gmail.com) on Tue May 31st, 2011 at 02:13:33 AM EST
[ Parent ]
Yeah, that would be a lot easier to see happening if the Turkish-Greek relationship had been one of sunshine, happiness and mutual trust.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 02:22:05 AM EST
[ Parent ]
Recall UpstateNY's Greece and Turkey: a major peace initiative (October 26th, 2010)
The article is so short that I'll just paraphrase: Greece and Turkey agreed in principle to compromise on the International Law of the Sea. Rather than Greece taking what is allowed to Greece by International Law, a proper sea buffer, Greece has reduced its buffer around the islands by half, while Turkey will respect a full buffer off the Greek mainland.
I was skeptical, but here we are 6 months later...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:37:05 AM EST
[ Parent ]
And there are some signs that Turkish businessmen see the opportunities.
In the face of serious risks, the debt-ridden country plans rapid privatizations which Göktuna believes would create a good opportunity for Turkish businesspeople. Papaconstantinou said Greece will "immediately" start selling state assets in several major enterprises and take more than 6 billion euros in additional fiscal measures this year to tackle its debt crisis after a seven-hour emergency cabinet meeting on Monday. Among the sectors it is planning to privatize are telecom firms, ports, lottery companies and airports. Part of the state companies planned to be privatized are the OTE telecoms company, Hellenic Postbank, the ports of Thessaloniki and Piraeus and the Thessaloniki water company.

At this point, the best method to invest in Greece for Turkish firms is to go into partnership with Greek counterparts, Göktuna says. "I was present during Prime Minister Recep Tayyip Erdoğan's visit to Greece where Greek business people invited Turkish firms to invest in their country," Göktuna recalls.

The Germans may not like this....
by gk (g k quattro due due sette "at" gmail.com) on Tue May 31st, 2011 at 05:12:02 AM EST
[ Parent ]
gk:
The Germans may not like this....

The Germans will be the first to invest when Greek asset prices are further reduced by devaluation.  What else can Germany do with its surpluses?  What fascism couldn't do corporatism sure as hell can.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 05:34:26 AM EST
[ Parent ]
The Germans should like it if they know what's good for them.

Because it will massively complicate Putin'ing the new foreign owners of Greek national interests.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:02:24 AM EST
[ Parent ]
But it would not be the first time:

SS Kurtuluş - Wikipedia, the free encyclopedia

Greece experienced the "Great Famine" (Greek: Μεγάλος Λιμός) during the time the country was occupied by Nazi Germany starting April 1941, as well as a sea blockade by the Royal Navy at the same time. The famine is reported to have caused the death of 70,000 people according to the official, Nazi-controlled, Greek sources of the period and over 300,000 according to the historian Mark Mazower.[1]

The National Greek War Relief Association, an organization formed in October 1940 by the Greek Orthodox Church, started to raise funds in the United States and to organize relief efforts to supply the population with food and medicine. The British were initially reluctant to lift the blockade since it was the only form of pressure they had on the Axis Powers. However, a compromise was reached to allow shipments of grain to come from the neutral Turkey, despite the fact that it was within the blockade zone.

Turkish president İsmet İnönü signed a decision to help the people whose army he had personally fought during the Turkish War of Independence 19 years previous. The people of Turkey thus became the first to lend a helping hand to Greece. Foodstuffs were collected by a nationwide campaign of Kızılay (Turkish Red Crescent), and were sent to the port of Istanbul to be shipped to Greece. SS Kurtuluş was prepared for her voyage with big symbols of the Red Crescent painted on both sides.



A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
by A swedish kind of death on Tue May 31st, 2011 at 04:57:22 PM EST
[ Parent ]
The Drachma, being a convertible currency, will be as hard as the Euro.  It just won't be worth as much, and that value will take a while to be established at a stable level.

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

The housing boom would be caused by foreigners buying up holiday homes at (for them) knock down prices - and also by wealthy Greeks repatriating their money to buy up assets (of all kinds) at very cheap prices for their (Euro) assets.

One of the negative consequences of devaluation - at least in the short term - is to exacerbate the relative inequality between foreigners and Greeks, and between wealthy Greeks (with foreign assets) and local Greeks. However the repatriated wealth should increase the tax base available to a (progressive) Greek Government.

My suggestion is that the Euro Crisis also spells the end of of the dominance of EPP politics/Austrian economics.

I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 03:10:41 AM EST
[ Parent ]
I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...
Well, there's that recent story from the Irish Times, which starts with
IF GERMAN chancellor Angela Merkel still reads the German newspapers, this was a good week to stop.

The bad reviews she has picked up around Europe in the first year of the euro zone crisis have finally begun to appear in the domestic media. "A boss without a vision" was the headline on a particularly bruising critique suggesting that, under Merkel, "Europe's largest and most economically successful country is afraid of a leadership role".

However, at the end, there's
It may be too late. Germany's relationship with the EU has deteriorated to such an extent that, among Berlin watchers, a popular parlour game is guessing who will try to scoop up Germany's new EU critical voters in the 2013 general election. A year into the euro zone crisis, the feeling around the continent is that Germany is falling out of love with Europe. But what if we are dealing with a problem of perception? Merkel has picked up the nickname "Madame Non" for her habit of stalling on bailout deals. At home critics could dub her "Frau Ja" for talking tough ahead of EU meetings and, in their eyes, returning home after apparently caving on every point.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:41:07 AM EST
[ Parent ]
Yea - I read that piece - Derek Scally generally writes well - but my impressions of shifts in German political sentiment are based on too small an evidence base for me to make confident assertions (contrary to habit and rumour!)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:52:44 AM EST
[ Parent ]
The Drachma, being a convertible currency, will be as hard as the Euro.

"Hard currency," in this context, means "foreign currency."

You buy your imports in foreign currency, and since you can't print it yourself, you have to trade for it. And at the moment, they're running a trade deficit.

Hence, "with what hard currency?"

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

But in a shrinking market, as long as the recession drags on.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 03:56:39 AM EST
[ Parent ]
Global tourism has been declining by 2-6% in the last couple of years, but Greek Tourism has been growing rapidly (even before devaluation) and now represents 15% of GDP and 16.5% of the workforce.

Tourism is a very dynamic market which can respond very quickly to changes in fashion or price competitiveness. Given the scale of the Greek devaluation I have envisaged, I wouldn't be surprised if Greek tourism grew by 50% (restricted primarily by transport capacity constraints) on a once off basis even in a declining global market.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:49:00 AM EST
[ Parent ]
before there was ibiza, there was greece as beacon magnet for low budget travellers.

europe needs more options for young people and small-pensioned retirees to go visit. if greece repicks up that role then a lot of american and european backpackers too will go fill their bars and beaches, who now go to asia.

zero snob value, but hey... it'll pay for a few wind turbines and solar panels.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Jun 1st, 2011 at 01:22:11 PM EST
[ Parent ]
Keynes on Hayek - "example of how, starting with a mistake, a remorseless logician can end up in Bedlam".
by rootless2 on Tue May 31st, 2011 at 11:03:46 AM EST
[ Parent ]
The only criticism is that it is optimistic.

That point 5 made me laugh. Our conservatives will use the EU demands to impose massive cuts on the social programmes and NHS that they desire, but that the populace would never accept.

They will say: "we did not want this, but the EU is forcing us, all because the Socialists left this in a disarray".

Shock doctrine.

by cagatacos on Tue May 31st, 2011 at 05:47:18 AM EST
[ Parent ]
That may be so, but it doesn't invalidate my central thesis that greatly expanded ECB lending to Portugal at low interest rates will enable Portugal to avoid Euro exit and recover, to some extent, in the context of an initially under valued Euro and a re-envigorated Eurozone more generally.  German surpluses have to be invested somewhere, and the trick is to channel them into productive investment rather than another property bubble.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 07:24:53 AM EST
[ Parent ]
  The part that made me smile and say, "if only," was this:

    "The neo-liberal argument, that economic progress required reduced "Government interference" and greater "free-market reforms" has been comprehensively and devastatingly defeated."

   Who said, "[there] ain't nothin' 'over' " ?

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

by proximity1 on Tue May 31st, 2011 at 07:57:50 AM EST
[ Parent ]
ok - perhaps a teeny weeny bit over-optimistic.  But you have to paint a future history narrative with broad brush strokes...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 08:00:59 AM EST
[ Parent ]

  Reporter: And, then, what is your view of the French Revolution?

  Ho Chi Mihn:  It's too soon to tell.

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

by proximity1 on Tue May 31st, 2011 at 08:03:30 AM EST
[ Parent ]
by wu ming on Tue May 31st, 2011 at 01:49:59 PM EST
[ Parent ]
And it may be apocryphal. But it's definitely Zho Enlai, whether or not it's apocryphal.
by gk (g k quattro due due sette "at" gmail.com) on Tue May 31st, 2011 at 02:00:32 PM EST
[ Parent ]

  Ooops.  Sorry.  Of course! zhou en lai, not Ho Chi Mihn.   Thank you for the correction.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Tue May 31st, 2011 at 03:44:41 PM EST
[ Parent ]
2011: Rather than take any losses whatsoever Europe's bankers sell European organs at cut-rate prices to the Chinese.
by tjbuff (timhess@adelphia.net) on Tue May 31st, 2011 at 10:42:11 AM EST
You guys don't get it. The Greeks are purposely hurting Europe in order to forestall investment in clean energy. Greece figures China only needs 10 years max to impact the climate enough to create 9 month summers in Greece, thereby boosting the tourist season, and allowing all Greeks to get rich.
by Upstate NY on Tue May 31st, 2011 at 11:50:56 AM EST
Oooh, a cunning plan!

All I can say is that I hope they change to the New Drachma and massively collapse prices before we get there for our holidays ...

by Colman (colman at eurotrib.com) on Tue May 31st, 2011 at 11:54:17 AM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 12:08:14 PM EST
[ Parent ]
Upstate NY:
Greeks are purposely hurting Europe in order to forestall investment in clean energy.

whoa... you just might have hit a bullseye there.

cripple them so much they don't have the wherewithal to incentivise solar/wind (plenty of both), then put the Areva gun to their heads and force them into nuke-debt-slavery till the cows come home.

like italy but worse!

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Tue May 31st, 2011 at 08:13:15 PM EST
[ Parent ]
"PIIGS countries"

We will see what are the piigs countries in the end. Netherlands and Denmark have household debt of 200% of GDP -> obviously huge housing bubble. Hardly AAA-countries.

by kjr63 on Tue May 31st, 2011 at 12:49:34 PM EST
Indeed, and countries such as Ireland, with very high levels of home ownership (often mortgaged to the hilt) are always going to have higher levels of private debt than countries where it is more normal to rent your home.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 12:53:42 PM EST
[ Parent ]
Doesn't matter to a currency crisis. That's all soft currency debt.

What does matter to the risk of a currency crisis is that Denmark is gonna go back into structural hard currency outflow pretty soon, because the North Sea oil is scheduled to peak in '12.

And then we're fucked.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 03:00:02 PM EST
[ Parent ]
but Kohl and Mitterand were giants.

Schrödi and Chichi were ordinary people.

I'll stop there, because it gets worse.

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

by eurogreen on Wed Jun 1st, 2011 at 09:43:36 AM EST
 RE :  "the problem is not so much the euro as the robber baron policies of all of our elites, including the Germans."

http://www.eurotrib.com/story/2011/5/30/133913/924#169

   But "the Euro" itself and, moreover, its implementation, are an integral part of the policies of "all of our elites"--we "had the elites" (as a problem) before the Euro currency appeared, yes, that is true; but we did not have the special set of difficulties which the implementation of the Euro has (as predicted) seen come about.

   For me, your comment evokes the picture of a person who, in reviewing a student's school-work--which is replete with mathematical errors--sees only the discrete computational faults on the pages and not, behind these faults, a student who, by all indications, has failed to grasp and master the material.  

    We might ask, in other words, whether, if these elites--so very manifestly a band of robber-barons--are a given of the political landscape, why and how  can the case for the Euro's be soundly made?

   We could ask other interesting questions:

  "In what important respect does the Euro, in and of itself, ameliorate various intractable problems in the larger, wider, isssues of a politico-financial elite run amok?"  If the fairest honest answer is, "None at all," then we might ask, "Well, then, how is the Euro, in and of itself, a useful tool in hindering the continuing abusive behavior of these elites?"  Again, if the fairest honest answer is, "It doesn't in any significant way hinder their harmful behavior," then where are we in the line of reasoning which asserts, ""the problem is not so much the euro as the robber baron policies of all of our elites" ?

   

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

by proximity1 on Thu Jun 2nd, 2011 at 08:47:55 AM EST
  Damn!  I should have just asked,

   "If one of your parents is an alcoholic, do you, if you can help it, allow liquor in the house?  Do you let him/her have the car keys when he's/she's drunk?"

   We have a robber-baron elite.  Soit!  Pourquoi, donc, souffrirons-nous, en plus, les dégâts inutiles du Euro qui vont de pair?

   

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

by proximity1 on Thu Jun 2nd, 2011 at 09:00:40 AM EST
[ Parent ]

if these elites--so very manifestly a band of robber-barons--are a given of the political landscape

Then there's no hope.

Germany's gold buggery existed before the euro and did not prevent social-democratic policies in the past.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 09:28:28 AM EST
[ Parent ]
   You lack imagination.  Others, gathered in public squares, won't settle for "then there's no hope".

   You know what?  That phrase neatly sums up what the robber-baron elite have told much of the world's 25-and-under population about their future and their prospects for prosperity beyond the level of a life of serfdom.  And, faced with such a prognosis, these youth have decided to respond, "Oh, yeah?  We're gonna see about that."

   Oligarchies are now on notice and that is not just in North Africa.  If elites can't manage to come to terms that include a decent survival for the mass public, those elites will discover that they're mortal and that their days are numbered.  And that, no matter what one may say about it, is also "just one of those facts" and will have to be reckoned with.

 

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

by proximity1 on Thu Jun 2nd, 2011 at 10:20:15 AM EST
[ Parent ]
You're the one who said that this was an unavoidable fact, not me.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 10:38:23 AM EST
[ Parent ]
   I think you mistook my point.

   I did include an "if" in there before the "these elites--so very manifestly a band of robber-barons--are a given of the political landscape"....

   That's important.  I do not fatalistically accept that the elite will always be a band of robber-barons such as we see today.  While, true, human society has never achieved perfection (so, please, don't anyone tell me, "Nobody's perfect!") there have been periods where the elite have been better curbed and controlled, when the middle-class and poor had a significantly better share of the wealth and had very reasonable expectations of that being true.

   There aren't that many unavoidable facts; so, a corrupt elite such as seems prevalent today is not, as history shows, an unavoidable fact.  Closer to unavoidable is the fact that no people revolt without cause and that, when pushed beyond the limits of their endurance, people will resort to violence.  If they're offered no other resort, they'll take the only course left to them.

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

by proximity1 on Thu Jun 2nd, 2011 at 10:54:44 AM EST
[ Parent ]
Germany used to be a net importer in those days. Having your entire industrial plant blown up does tend to do that to you. Which means that they weren't offloading their unemployment on other people, they were taking one for the team.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 02:48:51 PM EST
[ Parent ]
When exactly was Germany a net importer? Hasn't been the case since the fifties. (Current account is different story)
by IM on Thu Jun 2nd, 2011 at 07:26:01 PM EST
[ Parent ]
For as long as the Marshall plan operated, Germany was building its economy with the help of the then exporter of last resort, the US. That was actually a shift in policy, the original intent was to destroy German industry forever. Then in 1971 when Nixon killed Bretton Woods, the US turned to absorbing Germany's trade surplus.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 07:30:27 PM EST
[ Parent ]
You want to claim that Germany had a trade deficit from 1947 to 1971?

That is peculiar view of west german economic history.

I won't to quiblle about years, but west germany moved into a trade surplus during the Korea war or so.

The other big exporter who got a start during the Korea war was Japan.

by IM on Thu Jun 2nd, 2011 at 07:43:18 PM EST
[ Parent ]
Indeed. The original comment should have said "current accounts deficit" not "net importer." After all, as long as one is not analysing a default scenario, it's the current accounts that's the important variable.

My bad.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 10:57:31 PM EST
[ Parent ]
Until some years ago Germany either had current account deficit (much of the nineties) or a balanced current account or a small surplus.
by IM on Mon Jun 6th, 2011 at 06:25:01 AM EST
[ Parent ]
Trichet calls for euro zone finance ministry - The Irish Times - Thu, Jun 02, 2011
Mr Trichet said today that while any single finance ministry would "not necessarily" administer "a large federal budget," it would "exert direct responsibilities in at least three domains." These would include "first, the surveillance of both fiscal policies and competitiveness policies" and "direct responsibilities" for countries in fiscal distress, he
said.

It would also carry out "all the typical responsibilities of the executive branches as regards the union's integrated financial sector, so as to accompany the full integration of financial services, and third, the representation of the union confederation in international financial institutions."

Mr Trichet said that any new form of fiscal governance would need to be "decided by the people of Europe" and that the EU president, the European Commission and the German finance ministry are sure to have their own views.


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 10:44:09 AM EST
Trichet calls for EU-level official with authority to impose shock doctrine on member state governments?

No, thanks.

The only finance minister that would solve the problem is necessarily one which would administer a large federal budget and fund EU-level industrial policy where mamber states are barred from doing so by "illegal state aid" rules.

The EU's budget is currently about 1% of GDP and a large fraction of that is used for structural funds. It should be increased to maybe 5% of GDP with most of the increase going into structural funds and used to fund productive investment in countries experiencing below-EU-median economic growth and where the central government is already at the 3% deficit threshold.

Of course, tax harmonization is the only way to prevent free-riding of such a system. You cannot be running an excessive deficit because of low taxes and then go asking for EU stimulus.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 11:00:37 AM EST
[ Parent ]
He seems to be anticipating opposition from the Germans to even this limited proposal and so it is naturally couched in terms that might appeal to them.  However there is no way such a proposal would pass (e.g.) an Irish referendum unless it included a lot in the way of structural, industrial, transport, regional and fiscal transfers, and it at least is a recognition that Euro monetary policies cannot work in the absence of Euro fiscal policies.

We need to reframe this discussion away from Germany versus Greece to rich versus poor and the need for more accountable EU wide structures to address those problems. The ECB appears to be almost totally unaccountable to anyone other than BuBa.  Who would a Euro Finance Minster report to?  President of the European Commission?  Initially the post might be organisational similar to Dame Ashton's foreign affairs gig, although hopefully a lot more effective.

I may be dreaming, but would a Tobin tax on banks - a levy for the costs of providing them with a pan-European playground - not be an ideal way of proving a meaningful federal finance budget?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 11:34:19 AM EST
[ Parent ]
The Tobin tax is not a revenue raising instrument but a financial speculation froth removing mechanism.

The EU budget should be funded from trade imbalances. Keynes envisioned charging interest on both positive and negative trade balances. For instance, imagine if interest were charged on both the positive and negative values in the upper-left chart of Wolf's FT piece:



Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 11:45:27 AM EST
[ Parent ]
I don't see a chart with trade balances?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 01:02:51 PM EST
[ Parent ]
Gah, wrong chart:

The top left is not trade balances. But imagine that teh ECB charged interest to the national central banks on their net balances, both positive and negative, and then transferred the proceeds to the "EU finance minister" for funding of an industrial policy component of the structural funds.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 01:34:03 PM EST
[ Parent ]
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 01:44:13 PM EST
[ Parent ]
imagine that the ECB charged interest to the national central banks on their net balances, both positive and negative, and then transferred the proceeds to the "EU finance minister" for funding of an industrial policy component of the structural funds.

That's a cross-subsidy. Mind you, a cross subsidy in which activities we don't like are going to pay for activities we do like. But still a cross subsidy, which means that if you're doing it right it's a funding source that will shrink over time.

So that implies that the European federal budget will be tasked with no expensive policy aside from killing trade imbalances.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 03:02:08 PM EST
[ Parent ]
Or else its a self liquidating fund which liquidates itself in the unlikely event of it achieving its objective, which is zero trade imbalances, and increases the larger those trade imbalances become - as it should do.

The problem is that it is difficult to plan for long term infrastructural projects if you don't know what your income is going to be - however if those infrastructural projects are designed to help overcome structural imbalances, the need for them will diminish as they achieve their objectives. In practice some kind of hedging or smoothing strategy will have to be employed to reduce the uncertainty of income relative to the certainty of committed expenditure on formally approved projects/programmes.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 03:40:02 PM EST
[ Parent ]
The existing structural funds fund infrastructure. This is for industry.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 2nd, 2011 at 03:43:46 PM EST
[ Parent ]
In which case the need to support industrial activity in a trade deficit region should decline as it achieves a trade balance and thus, rightly, the supports should decline.

For the EU to develop susch a policy, three heresies have to be embraced:

  1. All trade imbalances within the Eurozone are a bad thing and should be discouraged by differential taxation and reduced through differentiation expenditure.

  2. The EU should actively promote economic equality in all regions within the Eurozone

  3. Optimised capacity utilisation = full employment should be a primary goal of economic policy and not some kind of residual remainder effect or collateral damage of "correct policies".


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 03:53:12 PM EST
[ Parent ]
In which case the need to support industrial activity in a trade deficit region should decline as it achieves a trade balance and thus, rightly, the supports should decline.

Indeed.

But that is only one role of a traditional federal administration.

The federal European level may wish to also have a policy on health care, income equality, homelessness, transportation, armaments, pensions and so on and so forth. Such policies cannot be sustainably funded out of cross-subsidies. So if you make "[t]he EU budget should be funded [exclusively] from trade imbalances," then you are implying certain things about the scope and nature of the European federal bureaucracy.

I'll reserve judgement on whether these implications are good or bad, but they are there and should be kept in mind.

All trade imbalances within the Eurozone are a bad thing and should be discouraged by differential taxation and reduced through differentiation expenditure.

Well, technically speaking it's only trade imbalances in excess of sustainable growth in the actual ability of a country to honour hard-currency obligations that's unsustainable. The system is not so fragile that it will blow up unless you go all the way to zero.

The EU should actively promote economic equality in all regions within the Eurozone

At a countries level, at least. As noted above, while a policy like this promotes intra-country income equality, it is not by itself sufficient to achieve it (nor is it the point of the policy).

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 04:16:02 PM EST
[ Parent ]
What we're discussion here is specifically and only how an EU finance Ministry should be funded if it is to be effective in ameliorating structural imbalances within the Union at a trade level.

However if you concede the principle that all EU regions should harmonise/converge to some form of equality, that brings all sorts of other policy and service areas into play.  

We are so far off even trying to achieve equality at any level, I would settle for an EU Finance Ministry funded by a tax on trade imbalances and promoting greater economic equality at a macro level as a first step.

A Common EU public health service?  Yes, we can dream.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jun 2nd, 2011 at 04:35:44 PM EST
[ Parent ]
   RE  http://www.eurotrib.com/story/2011/5/30/133913/924#204

   That's a compelling indictment.  Against it, I think that there has to be a better answer than,

   "Hey! By God!, I wanna a drink!  What?  Whaddaya mean "we're outta booze"?  How can we be outta booze when there's still a kid or two we can pawn or sell?"

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

by proximity1 on Thu Jun 2nd, 2011 at 10:44:23 AM EST
   
  "Back To The Future" ---

    So, an actual question now, and apropos of F.S.'s
 How the Euro Crisis Was Resolved, never mind for a moment that the EPTB (economic powers that be) are rumored in the press to be close to (or concluded in) a "deal" by which, for a further €6 bn., Greece's society is kicked and beaten even further,

  what I'd like to ask is:

   Do you think Merkel is, by virtue of Germany's place and role, actually able to virtually dictate terms to the rest of the E.U. on the issues of relief to Greece (and, let's suppose, to others as they come into need)?

   In answering, if you please, take account of both Merkel's own political strengths or weaknesses, the Euro states which she could expect to back her, and those who, if they had sense and solidarity, could refuse to cooperate with plans that they view as Draconian.

    Which states, together, could face her down?  If there are such, why, for pity's sake (other than reasons of local political imperatives for each of the various heads of state) wouldn't, couldn't the sort of far more reasonable terms as have been described and argued for in this thread occur to the states who it seems should have every self-survival reason to join in requiring Merkel to accept their saner terms?

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

by proximity1 on Thu Jun 2nd, 2011 at 04:13:12 PM EST
Do you think Merkel is, by virtue of Germany's place and role, actually able to virtually dictate terms to the rest of the E.U. on the issues of relief to Greece's creditors (and, let's suppose, to others as they come into need)?

FIFY.

And to answer the substantial question, no. Merkel cannot dictate European policy by virtue of Germany's place and role. Even the BuBa cannot do that.

In the absence of a coherent coalition in opposition to the German line, they can, of course, dictate policy. But that is not quite the same thing.

Which states, together, could face her down?

Spain plus France plus the victims would be a coalition that had a sporting chance of winning. Actually, Spain and France would probably have a sporting chance even without the victims, but the victims would have to have their heads up their asses not to join.

In principle, any two of Britain, France or Spain, plus the loose change, could probably pull it off. But Britain has no dog in that fight.

If there are such, why, for pity's sake (other than reasons of local political imperatives for each of the various heads of state) wouldn't, couldn't the sort of far more reasonable terms as have been described and argued for in this thread occur to the states who it seems should have every self-survival reason to join in requiring Merkel to accept their saner terms?

Divide et impera.

And, of course, Sarko has delusions of grandeur and thinks he can beat the Germans at their own game.

First they came for Greece, but I was not a Greek, so I did not speak up.
Then they came for Portugal, but I was not a Portuguese, so I did not speak up.
Then they came for Spain, but I was not a Spaniard, so I did not speak up.
And then they came for France, and there was no-one left to speak up for me.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jun 2nd, 2011 at 04:32:10 PM EST
[ Parent ]
  RE : FIFY

   An how!  Thank you.  As Twain said, about the difference between the right word and the almost right word....

    The all-important fact you focus upon---Greeks are suffering to comfort a bunch of creditors who resemble a well-dressed band of thugs.

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

by proximity1 on Fri Jun 3rd, 2011 at 07:22:35 AM EST
[ Parent ]
"The only function of economic forecasting is to make astrology look respectable." - John Kenneth Galbraith.

Many thanks to all commentators here for giving my economic forecasts (well really blue sky speculations) perhaps more respect than they deserved...

"The purpose of envisaging better futures is not to predict the future but to enliven the present and open up new possibilities for the future which may or may not come to pass"- (Frank Joachim Gustav Schnittger).

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jun 3rd, 2011 at 07:54:10 AM EST


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]