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You're being too harsh here. In the long run, Greek wages will fall enough to make the Greek economy, or whatever is left of it, competitive. Wages are sticky - they aren't solid. They do, eventually, shift downward. In the long run. In which we're all...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 01:24:21 PM EST
[ Parent ]
Every historical attempt to suppress wages by fifty or so per cent has ended with tanks in the streets, rather than with wages actually being suppressed that far.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:30:00 PM EST
[ Parent ]
We have a higher baseline now. Losing X % of GDP isn't as bad now as it was 80 years ago, because back then, people started starving. Hungry people demand tanks on the streets very quickly.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 02:50:16 PM EST
[ Parent ]
Suppressing wages by 50 % in nominal terms will make every owner-occupier in the country homeless.

That's what? Half the adult population and most of the kids?

Yeah, that's gonna happen. And we'll believe in Santa and the Easter Bunny too. But I draw the line at the tooth fairie.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:57:03 PM EST
[ Parent ]
If you're looking at long-term nominal wage cuts (which I still don't support), you'll be looking at falling nominal rent levels as well.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 03:02:11 PM EST
[ Parent ]
Mortgages are 20 to 30 year things. If you're going to cut wages slowly enough to not trigger an insolvency cascade from distressed mortgages, you don't need to cut them in nominal terms at all. Even at the BuBa's neurotic inflation target, simply keeping them stationary in nominal terms for thirty years would do the job.

Of course, if you do that, you're looking at a literal lost generation. Which means, again, tanks in the streets.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 03:10:16 PM EST
[ Parent ]
You think the shock doctrine people are gradualists?

We don't have 50 years to reduce real wages by 1% a year. These people want Greece at 3% deficit in 2009

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 Mon Feb 20th, 2012 at 03:18:31 PM EST
[ Parent ]
Reducing wages by the amount seen as necessary in the Greek case has almost always been a self defeating proposition due to the simple fact that it is highly deflationary and, thus, as wages fall, revenues fall both for businesses and the government and, with reduced revenues, the debt becomes even harder to pay back, which causes and iteration of the process and we end up in a debt-deflation death cycle as first clearly described by Irving Fisher.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 20th, 2012 at 02:58:39 PM EST
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