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

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

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

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

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

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

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

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

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

Economics is politics by other means

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

 "all the deficit countries"

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

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

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

- Jake

Friends come and go. Enemies accumulate.

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

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

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

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

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

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

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

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

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

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

- Jake

Friends come and go. Enemies accumulate.

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

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

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

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

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

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

- Jake

Friends come and go. Enemies accumulate.

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

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

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 14th, 2011 at 03:26:09 PM EST
[ Parent ]

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