BBO Discussion Forums: The future of the Euro - BBO Discussion Forums

There are no winners. As for assigning the blame, Brad DeLong has an instructive blog post here.

The last sentence of his blog post is telling....hand over responsibility to the institutions (banks)? Might just as well send a cheque now

The losers, Rik, as always are the tax-payers and more so now with bail-ins looming, the savers. As long as banks can reserve lend and demand more than the reserve and interest there on, we are obliged to suffer the consequences.

The blog post was of considerable interest. I don't follow economic theory all that much.

To perhaps harp a little on a previous point. History is useful, it is important to note differences as well as similarities. The Post World War II era was different than the present in many ways, the most obvious being that it was in the aftermath of a highly destructive war. The Marshall Plan, referred to in the blog and elsewhere lately, went to Europe generally, as well as simply Germany. Concentrating on Germany for a moment, there was, we could say, a change of direction and a change of leadership there.

At any rate, there were many differences between Post War Europe and the Greek situation today. This doesn't mean that the history of that time is useless but it does suggest that we go easy on a direct transplant of policy.

The Europeans, and the Germans in particular, are imposing changes in the Greek policy. You could say that the allies did something like that with Germany in 1945.

Mostly, I just wish them well. It's worth doing if they can do it. I freely acknowledge that I am not the person to go to for economic advice.

And I did like the blog. The above comments are thoughts about it, not arguments against it.

 y66, on 2015-July-14, 09:24, said:

Very interesting thanks for posting. I note this section:

"...Once more, panic and financial distress are widespread. And, once more, Europe lacks a hegemon – a dominant economic power capable of taking the interests of smaller powers and the operation of the larger international system into account by stabilising flows of finance and spending through the European economy...."

The theory demands a benevolent economic super power willing to sacrifice. The article goes on to say that none exists.
TO put it another way, Europe needs a kindly old sugardaddy.

 mike777, on 2015-July-14, 16:12, said:

Including the package that is on the table right now, I think the Greek have gotten 350 billion euros over the last few years. To put this in perspective: That is 35000 euro per Greek, something like a new car every year for every Greek, including children.

I would say that the Greek have a sugar daddy.

And the point is that the rest of Europe doesn't mind helping out the Greek so much, but the condition is that they need to fix their system. But the Greek are yelling that sugar daddy is blackmailing them for setting conditions to the next two cars that are given.

Rik

 Trinidad, on 2015-July-15, 01:12, said:

But have "the Greek" really gotten that, or have others:

Quote

Gotta love crony capitalism all throughout the world. See original guardian article for the source of the quotes.

 Trinidad, on 2015-July-15, 01:12, said:

You are aware that of this 350 billion euros, 90% (= 315 billion) were used to save European banks, insurances and pension fonds (outside of Greece), which leaves 35 billion euros for Greecewhich were mainly used to save the Greece banks.
If Greece went bankrupt 5 years ago, people who had been saving money for their retirement would have lost a lot of money and they would have know why. Now that the debt was transfered to the ESM. IWF and EZB a bankrupt Greece is no longer a threat. People will still lose the money, but they will lose it over inflation and taxes.
The direct connection between cause and effect is camouflaged, the governments won't have to take the blame for it.

The original lenders lend the Greeks 320 gigaeuro which they are probably not going to pay back. And now the trojka took over most of those loans. So effectively the original lenders gave the Greeks a present and now the trojka reimbursed it.

My Facebook newsfeed is full of people expressing their sympathy with Greece. I am very split on this issue. Several other EU countries have managed to get their deficit under control while implementing an austerity much worse than what Greece has to do - for example Croatia: http://understanding...Greece?share=1. On the other hand, destroying the Greek economy doesn't sound like the creditor's best interest. Then again, this could be said about many other countries, so the discussion should maybe be about austerity in Europe, not about austerity in Greece. Even in the UK, the government has mismanaged the economy, although of course the UK can afford a lot more political stupidity than Greece can.

Yet another case of the transfer of wealth. The banks create money and "loan" it to the country. The citizen works hard to pay off this debt through their taxes and the bank receiving the country's debt-repayment then forwards the payments to share-holders (other banks). Austerity measures are just a bigger squeeze applied to the tax-payer to get more of his money, more quickly. The rest of the shenanigans are part of this financial finagle.

We are awaiting whether the Greek parliament says yes, but meanwhile IMF appears to say no: http://www.theguardi...nalysis-bailout

 Trinidad, on 2015-July-14, 08:33, said:

I assume that this is facetious, and of course this is one of the problems. In the examples you give about American States, people really do identify themselves as American rather than residents of a particular state. Most have, in fact, lived in more than one state during their lives. And if jobs are scarce where they live, they can move to another state with better prospects. Of course retirement age and the like is standardised across the country.

These are only a few of the reasons that Europe is different from the USA. The Germans seem to have believed that huge transfers of sovereignty would do the trick of making people feel more attached to Europe than to their increasingly impotent countries. Instead this loss of sovereignty has engendered only resentment. And economic union lacks freedom of movement of labour, since most people are not going to uproot their families to move someplace where they don't know a word of the language, not to mention other differences like a different culture, important national holidays not being celebrated, inability to get their favourite foods, different school systems etc. Moving abroad is still moving abroad, EU or no EU.

In backgammon there is a concept known as "pay now or pay later". Greece should really "pay now" and get rid of the Euro. This at least will allow them to revitalise their economy.

 helene_t, on 2015-July-15, 01:55, said:

The problem, it seems to me, is that governments should not be in the business of "managing the economy" in the first place.

 blackshoe, on 2015-July-15, 08:52, said:

Well, why have you not yet taken up arms and formed a "well-regulated militia" yet?

 blackshoe, on 2015-July-15, 08:52, said:

Depends on what you mean by "managing the economy", the government enforces some rules for business esp. regarding product safty or laws.

The problem is that the intended impact of rules is sometimes missed by the reality.

 Vampyr, on 2015-July-15, 09:01, said:

Too tired.

Too many failed austerity regimes, not enough guns.

 blackshoe, on 2015-July-15, 08:52, said:

Yes, look what happened under Bush, when the US government decided to allow Wall Street to run with much looser rules. Can you imagine how much MORE fun 2008-2012 would have been had the rules been eliminated completely, and the government had been forbidden to intervene? Wow.....utter economic ruin except for the brave, intelligent men (and they are always men in your favourite novels, aren't they?) who saw their way to riches, and didn't give a damn about how the masses suffered. If people aren't rich enough, smart enough, and sociopathic enough to triumph, then they don't count, do they?

Nice philosophy* you have there, Blackshoe

* cue the attempt to claim that his philosophy is being mis-represented, lol.

 mikeh, on 2015-July-15, 16:43, said:

I thought it was Clinton?

Sommers, Rubin and the Greenspan Randian acolytes. Dismantling Glass-Steagle were their marching orders from Goldman Sachs...Paulsen was the GS henchman that oversaw the biggest heist in the history of bankstering.

 helene_t, on 2015-July-15, 16:45, said:

Clinton started the process, as far as I know, but the process gained momentum under Bush, especially in terms of the ratios by which the financial firms could leverage their assets....my understanding is that the SEC greatly loosened the rules/enforcement and that this was likely politically influenced. In any event, the point I was trying to make wasn't where to place the blame but to reflect on the real-world result of having government attempt to allow the market to govern itself to a greater degree than had been seen, after the Depression, as being a good idea.

Interestingly, the Canadian banking system arguably survived the 2008 meltdown as well as or better than the banking systems of any other industrialized country, precisely because our federal parliament years ago enacted legislation that, in combination with regulatory rules, greatly limited the ability of banks to leverage assets or weaken lending rules. The Canadian experience was so well-perceived that the Bank of England hired away the head of the Bank of Canada, who was treated in Canada as almost a rock star.

So the real world experiments of the last few years, altho admittedly the Canadian economy is dwarfed by that of the US, suggests pretty strongly that government not only can but should have the power to manage. Obviously it is possible to mismanage, but the evidence seems to suggest that governments, if not overly ideologically driven, won't do as much harm as will naked, unrestrained greed, which tends to dominate in the absence of such governmental management (assuming a functioning, largely free-of-corruption society).