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Germany has resisted efforts by other countries to extract even more money from the German taxpayers.

If Germany does not like paying for keeping the Euro, then Germany must pay its workers enough that they can import as much from other Eurozone countries as Germany wishes to export to them.

It was clear from the very beginning that the Euro was not supposed a wealth transfer mechanism.

Current accounts surplus; no wealth transfer. Pick one.

You are basiscally whining about not beeing able to steal more from us.

No, you're whining about basic arithmetic:

Total exports to other countries
+ total wealth transfers from other countries to you
=
total imports from other countries
+ total wealth transfers to other countries.

And that's really not negotiable unless you want to abolish double-entry bookkeeping.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 04:18:29 PM EST
[ Parent ]
i am so fed up with this constant fake math.

Everbody has his own made up economic theory to explain why the most simple tenets of bsusiness, simple addition and subtraction don't apply any more.  Instead we get drowned in fuzzy make-belive mathg that explains away basic tenetes.

You work hard and live frugal, you create wealth. You have wealth.

You spend and waste and idle and don't work - you go bankrupt and die poor.

What applies to your house applies, by simple iterative logic, also to a village, a city, a nation.

Thats the simple reality. Everything else is panicking make-believe and charlatanery.

by cris0 on Tue Feb 14th, 2012 at 04:50:48 PM EST
[ Parent ]
Once again, if it makes you feel better, that's the main thing, isn't it?
by afew (afew(a in a circle)eurotrib_dot_com) on Tue Feb 14th, 2012 at 04:54:19 PM EST
[ Parent ]
You work hard and live frugal, you create wealth. You have wealth.

Money is not wealth. It is not even a token representing wealth.

If Germany had accumulated real physical wealth instead of money claims on other people, we wouldn't be having this problem.

Instead it accumulated money, which has no value beyond the political power it commands, and is now attempting to claim a value that it believes the money should represent.

What applies to your house applies, by simple iterative logic, also to a village, a city, a nation.

Swabian Housewife Economics.

A house that has a suitcase full of money in its basement but no car is richer than a house that has a car but no money. A country that has a vault full of money in its vault but no factories is poorer than a country full of factories but with no money.

This should not be difficult to understand, but apparently Swabian Housewife Economists have difficulty grasping it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 05:05:42 PM EST
[ Parent ]
the basis of international trade is actually the mutual agreement that money actually does represent value, and thus, wealth.

So, now, we abolish trade as well?

And your proverbial Swabian Housewife does not have the money in her basement - she has it in the bank. Where she gets decent interest. Which is practically the definition of wealth.

by cris0 on Tue Feb 14th, 2012 at 05:42:33 PM EST
[ Parent ]
the basis of international trade is actually the mutual agreement that money actually does represent value, and thus, wealth.

No, the basis of international trade is comparative advantage. International trade does not require that money retain its purchasing power any longer than it takes the exporter to exchange his foreign currency with the importer's domestic currency.

For the purposes of foreign trade, you only need money to retain its value for longer than that if you want to run an aggregate current accounts surplus. Which your trading partners have no particular obligation to support or encourage.

Running a trade surplus is a form of industrial subsidy. Other people don't have any obligation to pay your industrial subsidies.

And your proverbial Swabian Housewife does not have the money in her basement - she has it in the bank. Where she gets decent interest.

In other words, the state pays her a subsidy for doing fuck all with her money. That policy creates no wealth. Not a single meter of railway is built because she has money in the bank. Not a single ball bearing is cast because she has money in the bank. Not a single ship is launched because she has money in the bank. Money in the bank has, quite literally, no economic function until it is spent.

Tell me again why money in the bank should pay interest at all?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 05:51:39 PM EST
[ Parent ]
you are abolishing any single element of basic economics.

That money in the bank is money the bank does lend to someone who needs money to create wealth. Economy needs credit.

And comparative advantage doesn't create trade any more than gravity creates rivers. Yes, it is a necessary precondition, but in real life, without money there is only very very limited trade actually happening.

Money is the abstraction of wealth and value, and a great facilitator for every kind of economics.

Denying money's existence or value is a sure sign of crackpot economics.

by cris0 on Tue Feb 14th, 2012 at 06:21:21 PM EST
[ Parent ]
Economy needs credit so credit is created. Then credit may circulate as money. But credit is a precondition for money, and not the other way around.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Tue Feb 14th, 2012 at 06:24:06 PM EST
[ Parent ]
That money in the bank is money the bank does lend to someone

Loanable funds fallacy.

In the real world, banks create credit when someone borrows from them. They then turn around and get the central bank to sign off on that credit, thus turning it into legal tender.

There is no reason, save atavistic tradition, to even house deposit-taking and lending in the same institution.

Money is the abstraction of wealth and value, and a great facilitator for every kind of economics.

Money is an abstract representation of state power. An important point of being a sovereign state is that you reserve the right to revoke this power from foreign parties (either through strategic default or inflation) arbitrarily and without notice.

That's what "sovereignty" means: That you reserve the right to revoke political commitments to foreign entities.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 14th, 2012 at 06:29:38 PM EST
[ Parent ]
Welcome to ET, cris0.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 15th, 2012 at 12:33:15 PM EST
[ Parent ]
See fallacy of composition.

The very first example from the above wiki link:

In Keynesian macroeconomics, the "paradox of thrift" theory illustrates this fallacy: increasing saving (or "thrift") is obviously good for an individual, since it provides for retirement or a "rainy day," but if everyone saves more, Keynesian economists argue that it may cause a recession by reducing consumer demand. Other economic schools, such as the Austrian School, disagree.[

The Austrian School appears to subscribe to a view of wealth similar to that of the mythical German Dragon Joseph Campbell described, which stayed in its cave guarding its horde of wealth, for which it had no conceivable use.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 15th, 2012 at 12:43:16 PM EST
[ Parent ]
The Austrian School, it should be noted, is not a school of economic thought, as it refuses as a matter of dogma to submit to empirical testing.

Insofar as economics is a scientific endeavor, therefore, Austrian moral theology does not qualify.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 15th, 2012 at 01:09:20 PM EST
[ Parent ]
Unfortunately that critique largely applies to all of "mainstream" economics, which considers itself a branch of moral philosophy and employs deductive reasoning from stated axioms.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 15th, 2012 at 01:23:18 PM EST
[ Parent ]
If Germany had accumulated real physical wealth instead of money claims on other people, we wouldn't be having this problem.

Like, as I've argued several times earlier, channeling all that surplus cash into buying out ENI, Iberdrola, Santander, UniCredit, all the Greek shipping companies et cetera et cetera.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Feb 16th, 2012 at 08:13:38 PM EST
[ Parent ]
So, Greece must be rich because Greeks work harder than a great many Europeans and they have a very high savings rate (low private debt i.e. no credit card spending).
by Upstate NY on Tue Feb 14th, 2012 at 05:32:41 PM EST
[ Parent ]
Apparently Economics 101 never happened?

What applies to the finances in your house, village, and city does not apply to a nation, because the nation prints its own currency. It is a completely different situation, as is explained in tedious detail to thousands of college freshmen every year.

by asdf on Tue Feb 14th, 2012 at 05:52:59 PM EST
[ Parent ]
The solution to that problem is to for states to legislate their own money-printing privilege out of existence. Eurozone member states don't print their own currency, problem solved. We need new Economics 101 textbooks.

In fact, not even the Eurozone as a whole prints its own currency, because each Euro in existence is the result of the ECB president shitting a gold ingot. The Euro gold hoard is kept in Frankfurt by the Nibelungen.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Tue Feb 14th, 2012 at 06:00:37 PM EST
[ Parent ]
"You work hard and live frugal, you create wealth. You have wealth"

That is the most evidence-free statement about wealth I have ever heard. I know plenty, and I mean plenty of people who did exactly that and are now subsisting on 400 Euro pensions. This sort of way to create wealth, in the real world, is so rare as to be irrelevant. If you want to have wealth you inherit it, or steal it from someone, or set up fancy con-artist schemes such as Nth order derivatives etc. I mean take the Fortune 500 list of the wealthiest people on the planet, and see how many of those fit your description

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Tue Feb 14th, 2012 at 06:14:44 PM EST
[ Parent ]
You work hard and live frugal, you create wealth. You have wealth.

Of course not. You may create wealth to markets, but there is no guarantee, that the market returns you the wealth you created. You may i.e. pay all your surplus to a landlord.

by kjr63 on Wed Feb 15th, 2012 at 08:48:12 AM EST
[ Parent ]
One suspects he is talking about Germany. He works hard, he lives frugally, he creates wealth, and Germany has wealth. He has pride in the Top Nation status, and this apparently compensates from the lack of accrual of material benefits to those who create the wealth.

Or something.

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

by eurogreen on Wed Feb 15th, 2012 at 09:00:05 AM EST
[ Parent ]

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