Talk Elections

General Politics => Economics => Topic started by: Beet on October 28, 2011, 06:57:37 AM



Title: The Day After... Italy.
Post by: Beet on October 28, 2011, 06:57:37 AM
Well that (1 day rally) was fun while it lasted. Now back to reality...

"Italy paid the most since joining the single currency to sell new 10-year debt on Friday in the first euro zone bond auction after European leaders agreed new steps to tackle the debt crisis.
...
The auction yield on Italy's March 2022 BTP bond rose to 6.06 percent from 5.86 percent a month ago.
...
The yield on a three-year BTP maturing in July 2014 rose to 4.93 percent, at its highest since November 2000, compared to 4.68 precent at an end-September sale."

Link (http://www.cnbc.com/id/45073055)

As I have said before... either Germany will sign off on unlimited monetization or all the countries under pressure will default (and I consider any kind of monetary separation between Germany and the subject country a default). There is no other way. The movement of the markets are steady, swift and inexorable.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 28, 2011, 11:27:19 AM
Well that (1 day rally) was fun while it lasted. Now back to reality...

"Italy paid the most since joining the single currency to sell new 10-year debt on Friday in the first euro zone bond auction after European leaders agreed new steps to tackle the debt crisis.
...
The auction yield on Italy's March 2022 BTP bond rose to 6.06 percent from 5.86 percent a month ago.
...
The yield on a three-year BTP maturing in July 2014 rose to 4.93 percent, at its highest since November 2000, compared to 4.68 precent at an end-September sale."

Link (http://www.cnbc.com/id/45073055)

As I have said before... either Germany will sign off on unlimited monetization or all the countries under pressure will default (and I consider any kind of monetary separation between Germany and the subject country a default). There is no other way. The movement of the markets are steady, swift and inexorable.

Agreed. By the way, Beet what do you do for a living?


Title: Re: The Day After... Italy.
Post by: Beet on October 28, 2011, 03:28:53 PM
I work in computers... there are a couple others here in these boards who work in economics and finance who know more than me but they are pretty taciturn.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 28, 2011, 03:42:51 PM
I work in computers... there are a couple others here in these boards who work in economics and finance who know more than me but they are pretty taciturn.

I see. I'm actually pretty sure that ag is an econ professor if I'm not mistaken.

What sparked the interest in finance/econ to a level that you are actually making posts about changes in sovereign credit default swaps?


Title: Re: The Day After... Italy.
Post by: Beet on October 28, 2011, 03:48:09 PM
I have been interested in this for as long as I have been interested in computers, if not longer. So I presume that you do work in the industry?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 28, 2011, 04:17:32 PM
I have been interested in this for as long as I have been interested in computers, if not longer. So I presume that you do work in the industry?

Yep!


Title: Re: The Day After... Italy.
Post by: Gustaf on October 29, 2011, 03:20:39 AM
Ag is an Economics professor. I'm getting my master's degree in economics this summer (hopefully). Phnk is getting some degree in economics, I think, but I forget which.

I'm really not very impressed by the EU "solution". My impression is that they're trying to pass the buck into some vague nothingness.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 29, 2011, 04:10:53 AM
Ag is an Economics professor. I'm getting my master's degree in economics this summer (hopefully). Phnk is getting some degree in economics, I think, but I forget which.

I'm really not very impressed by the EU "solution". My impression is that they're trying to pass the buck into some vague nothingness.

Its like they are trying to make their "solution" as vague and complicated as a structured finance product to confuse the markets just like they accused all of those "greedy bankers" of doing a couple years ago.


Title: Re: The Day After... Italy.
Post by: Beet on October 29, 2011, 04:22:45 AM
Well, there's an article in the latest edition of Foreign Affairs that lays out the theoretical goal.


Title: Re: The Day After... Italy.
Post by: Gustaf on October 29, 2011, 06:08:21 AM
Ag is an Economics professor. I'm getting my master's degree in economics this summer (hopefully). Phnk is getting some degree in economics, I think, but I forget which.

I'm really not very impressed by the EU "solution". My impression is that they're trying to pass the buck into some vague nothingness.

Its like they are trying to make their "solution" as vague and complicated as a structured finance product to confuse the markets just like they accused all of those "greedy bankers" of doing a couple years ago.

Yep, exactly. That's why I'm so wary of it.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 29, 2011, 12:30:08 PM
Ag is an Economics professor. I'm getting my master's degree in economics this summer (hopefully). Phnk is getting some degree in economics, I think, but I forget which.

I'm really not very impressed by the EU "solution". My impression is that they're trying to pass the buck into some vague nothingness.

Its like they are trying to make their "solution" as vague and complicated as a structured finance product to confuse the markets just like they accused all of those "greedy bankers" of doing a couple years ago.

Yep, exactly. That's why I'm so wary of it.

But even then for those of us that do read all of the terms as they come out, its piece of crap delaying mechanism anyway.


Title: Re: The Day After... Italy.
Post by: Sam Spade on October 29, 2011, 03:03:05 PM
()

Yep, this will work...


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 29, 2011, 11:26:37 PM

So I just followed along that whole diagram seeing if there is anything I or that sheet is missing and Wow that is a very concise way explain the whole package. I couldn't put all of that in 10 paragraphs and whoever drew that was able to cover at least money flow through the whole plan.

I will say that diagram doesn't cover the 2 legal changes that are occurring though as well. New issuance is now written in English Common Law because it is more friendly to the bondholder yet another thing that will create a spread between old and new issuance. And the other is the retroactive destruction of sovereign CDS contracts by making defaults "non credit events".


Title: Re: The Day After... Italy.
Post by: Beet on October 30, 2011, 01:26:21 AM
Quote
And the other is the retroactive destruction of sovereign CDS contracts by making defaults "non credit events".

Does this mean that CDS spreads will start to become an unreliable indicator of sovereign default risk? I've been looking mostly at yields anyway, but mostly because of what timely data I've been able to find on my own. I imagine this is a useful market because it would send signals more reliably than credit rating agencies.


Title: Re: The Day After... Italy.
Post by: Gustaf on October 30, 2011, 04:05:15 AM
Quote
And the other is the retroactive destruction of sovereign CDS contracts by making defaults "non credit events".

Does this mean that CDS spreads will start to become an unreliable indicator of sovereign default risk? I've been looking mostly at yields anyway, but mostly because of what timely data I've been able to find on my own. I imagine this is a useful market because it would send signals more reliably than credit rating agencies.

Are they really doing the credit event thing? I read that there was discussion on it, but if they go through with that they essentially kill that market (at least for government debt) because they're essentially saying that they will never let a state fail in a way that will allow the insurance to work.

It's scary how most eurozone leaders display a total ignorance of how markets work. They really seem to not get it.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on October 30, 2011, 07:26:33 AM
It's scary how most eurozone leaders display a total ignorance of how markets work. They really seem to not get it.

I think it's quite understandable that they don't. But their senior civil servants (or at least some of them) and some of their advisors, well, maybe they should know better.


Title: Re: The Day After... Italy.
Post by: Gustaf on October 30, 2011, 08:03:05 AM
It's scary how most eurozone leaders display a total ignorance of how markets work. They really seem to not get it.

I think it's quite understandable that they don't. But their senior civil servants (or at least some of them) and some of their advisors, well, maybe they should know better.

Oh, right. I get that they might not have been educated on it originally, but once you reach the position of head of government you should have learnt a bit, imo. And even if you haven't, like you say, their advisors should be able to give them briefs.

I mean, it's one thing when Mugabe prohibited inflation but prohibiting credit ratings, which has been suggested by leading European politicians is at least as stupid (in a sense, probably even more so).


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 30, 2011, 01:42:16 PM
Quote
And the other is the retroactive destruction of sovereign CDS contracts by making defaults "non credit events".

Does this mean that CDS spreads will start to become an unreliable indicator of sovereign default risk? I've been looking mostly at yields anyway, but mostly because of what timely data I've been able to find on my own. I imagine this is a useful market because it would send signals more reliably than credit rating agencies.

It appears to be the case. CDS spreads are now more unreliable because they now have to carry the intrinsic risk of the likelihood of a credit event not being called a credit event triggering the CDS contracts.

People are switching back to good old yields as their indicator of a choice now.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on October 30, 2011, 01:44:10 PM
Quote
And the other is the retroactive destruction of sovereign CDS contracts by making defaults "non credit events".

Does this mean that CDS spreads will start to become an unreliable indicator of sovereign default risk? I've been looking mostly at yields anyway, but mostly because of what timely data I've been able to find on my own. I imagine this is a useful market because it would send signals more reliably than credit rating agencies.

Are they really doing the credit event thing? I read that there was discussion on it, but if they go through with that they essentially kill that market (at least for government debt) because they're essentially saying that they will never let a state fail in a way that will allow the insurance to work.

It's scary how most eurozone leaders display a total ignorance of how markets work. They really seem to not get it.

Yep they already have. They already ruled on it.


Title: Re: The Day After... Italy.
Post by: Beet on October 31, 2011, 04:32:32 PM
Italian yields hit another record high today (http://www.theglobeandmail.com/globe-investor/markets/markets-blog/the-new-pessimism-italian-bonds/article2219953/)

“The European rescue plan is falling apart even faster than I expected,” Mr. Krugman said on his blog. “[If] the debt must be rolled over at [above] 6 per cent, given the size of Italy’s debt, that vastly increases the primary (non-interest) budget surplus Italy needs to stabilize its position. And that difference is quite plausibly the difference between paying its debts and defaulting. So we’re deep into self-fulfilling pessimism territory here. Either the ECB moves in with big purchases, or the euro is crostini.”

Germany: The cards are in the air. Make your choice. The idea that Spain and Italy will go down the Greek path and succeed where Greece has failed is sheer lunacy. Paul Krugman and the Anglo economists are right on this one. ECB must either step up or all of Europe must prepare for a cascade of sovereign defaults now.


Title: Re: The Day After... Italy.
Post by: Beet on November 06, 2011, 07:45:36 PM
Italian expenses are about 600 billion euros and about 200 billion euros in debt are coming due in the next year. Under the worst case scenario, Italy is shut out of the markets, it will have to pull off a fiscal adjustment of 200 billion euros in the next year, on top of what will surely be surging unemployment and collapsing banks that will need recapitalization. That means a 1/3 cut in total spending in the context of a collapse of the economy, all in one year. Even if Italy were not completely shut out of the markets, it would be foolish to issue debt at prohibitive yields, for this will only result in an ever-increasing spiral.

Politically, the best move for the next government is not to enact specific cuts upfront but to enact 'automatic' adjustments that legally mandate the government will reach its debt targets. The problem in Greece is that each new round of cuts needed a new vote. Instead, they should just pass one will that will contain with it automatic cuts whenever targets are not met. This way, the cuts are insulated from the political system. I think the focus should be on spending cuts, not tax increases, because taxes all face collection risk, whereas spending cuts only involve turning off the spigot. The government must assume strikes and massive civil disobedience and be prepared to crush them.

Alternatively, the new government can come into office on Day 1 and say 'f--k you' to Brussels, restore the lira. If they have the guts to do this (which I doubt) they will initially face near revolution, but if they can survive for 6-12 mo. eventually become the Kirchners of Italy and still be enjoying glory after 10 years.


Title: Re: The Day After... Italy.
Post by: TheDeadFlagBlues on November 06, 2011, 08:15:31 PM
Italian expenses are about 600 billion euros and about 200 billion euros in debt are coming due in the next year. Under the worst case scenario, Italy is shut out of the markets, it will have to pull off a fiscal adjustment of 200 billion euros in the next year, on top of what will surely be surging unemployment and collapsing banks that will need recapitalization. That means a 1/3 cut in total spending in the context of a collapse of the economy, all in one year. Even if Italy were not completely shut out of the markets, it would be foolish to issue debt at prohibitive yields, for this will only result in an ever-increasing spiral.

Politically, the best move for the next government is not to enact specific cuts upfront but to enact 'automatic' adjustments that legally mandate the government will reach its debt targets. The problem in Greece is that each new round of cuts needed a new vote. Instead, they should just pass one will that will contain with it automatic cuts whenever targets are not met. This way, the cuts are insulated from the political system. I think the focus should be on spending cuts, not tax increases, because taxes all face collection risk, whereas spending cuts only involve turning off the spigot. The government must assume strikes and massive civil disobedience and be prepared to crush them.

Alternatively, the new government can come into office on Day 1 and say 'f--k you' to Brussels, restore the lira. If they have the guts to do this (which I doubt) they will initially face near revolution, but if they can survive for 6-12 mo. eventually become the Kirchners of Italy and still be enjoying glory after 10 years.

Fascism in the name of our glorious GDP Gods, wonderful!


Title: Re: The Day After... Italy.
Post by: Beet on November 06, 2011, 08:18:28 PM
Even as I was typing that, I knew that a 200 billion euro adjustment in 1 year simply isn't impossible. If Italy is effectively shut out of the markets there is absolutely no way it will avoid some sort of default.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 07, 2011, 10:03:59 AM
Just look at the Italian BTP numbers today! Unbelievable. The only thing that stemmed it for a little bit was the false rumor that Berlusconi was going to resign today.

Italy is screwed!!!!!


Title: Re: The Day After... Italy.
Post by: Torie on November 07, 2011, 10:47:55 AM
How can this euro thing work without a common fiscal policy?  And if all of this lending by banks to the sickie countries had not occurred, would it be a problem to just let them default?  Someone needs to educate me on this. I feel at sea.


Title: Re: The Day After... Italy.
Post by: opebo on November 07, 2011, 11:24:01 AM
How can this euro thing work without a common fiscal policy?  And if all of this lending by banks to the sickie countries had not occurred, would it be a problem to just let them default?  Someone needs to educate me on this. I feel at sea.

How would the lending 'not have occurred'?  I suppose if it hadn't occurred then there would be nothing to default upon, right?

Actually the don't really need to have a fiscal union, just 100% responsibility for each others bonds.


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 11:32:32 AM
Torie- basically it's a big disaster. I don't think they need fiscal union *necessarily* but they also aren't going to make it with their current mentality.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 07, 2011, 02:37:55 PM
How can this euro thing work without a common fiscal policy?  And if all of this lending by banks to the sickie countries had not occurred, would it be a problem to just let them default?  Someone needs to educate me on this. I feel at sea.

If the EU was going to be structured as a fiscal union decades ago or if they tried to pull that today countries like Germany would give them the finger and walk away because it would invariably be just a constant stream of transfer payments from countries like Germany to countries like Greece, Spain, Slovakia, etc. That is like asking the United States to go into a fiscal union with Mexico. The people in the US would be rioting in the streets at even the notion of the idea by the US government.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 07, 2011, 02:38:22 PM
As I've been saying before, I think a part of the fiscal union discussion misses the point.

Any solution that means a (in practice) permanent obligation from Germany to pay for the Club Med countries MEANS fiscal union, simply becaue Germany can't accept such a solution without also getting to run the public finances of these countries.

That's why I think solutions like Eurobonds or starting the printing presses won't get around the fiscal union issue.

Torie: the problem was that the euro lent credibility to the bad countries. Had Greece been on their own investors would never have entrusted them with this much debt at such low rates. The markets messed up on this one.


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 03:27:16 PM
Gustaf,

But that depends on what you mean by Germany 'paying' for the Club Med countries. Arguably, simply by being in a currency union with the Club Med countries, Germany is paying for them already, because it is supporting their purchasing power and they are leeching off Germany's purchasing power. Also, the EU has a ton of agricultural subsidies, etc. etc. The free trade zone, movement of labor agreements, even the forced austerity and restructuring are all forms of German subsidy to the weaker countries. So if that's the principle you're after, it's been violated long ago.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 07, 2011, 04:46:53 PM
Gustaf,

But that depends on what you mean by Germany 'paying' for the Club Med countries. Arguably, simply by being in a currency union with the Club Med countries, Germany is paying for them already, because it is supporting their purchasing power and they are leeching off Germany's purchasing power. Also, the EU has a ton of agricultural subsidies, etc. etc. The free trade zone, movement of labor agreements, even the forced austerity and restructuring are all forms of German subsidy to the weaker countries. So if that's the principle you're after, it's been violated long ago.

True, but that seemed to them at least to be a worthy deal like it was for China and the US. Where they draw the line is when they can actually force Germany to make a direct transfer payment or sign up for a future direct transfer payment.


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 05:01:14 PM
Gustaf,

But that depends on what you mean by Germany 'paying' for the Club Med countries. Arguably, simply by being in a currency union with the Club Med countries, Germany is paying for them already, because it is supporting their purchasing power and they are leeching off Germany's purchasing power. Also, the EU has a ton of agricultural subsidies, etc. etc. The free trade zone, movement of labor agreements, even the forced austerity and restructuring are all forms of German subsidy to the weaker countries. So if that's the principle you're after, it's been violated long ago.

True, but that seemed to them at least to be a worthy deal like it was for China and the US. Where they draw the line is when they can actually force Germany to make a direct transfer payment or sign up for a future direct transfer payment.

What? China or the US never signed up to any such thing. And the Common Agricultural Policy is direct transfer payment.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 07, 2011, 05:15:27 PM
Gustaf,

But that depends on what you mean by Germany 'paying' for the Club Med countries. Arguably, simply by being in a currency union with the Club Med countries, Germany is paying for them already, because it is supporting their purchasing power and they are leeching off Germany's purchasing power. Also, the EU has a ton of agricultural subsidies, etc. etc. The free trade zone, movement of labor agreements, even the forced austerity and restructuring are all forms of German subsidy to the weaker countries. So if that's the principle you're after, it's been violated long ago.

It isn't about what principle I'm after, but what the Germans want.

I don't think agricultural subsidies is relevant because that is a specific program that exists independently of the economy in general.

With purchasing power I assume you mean the fact that the euro is overvalued for the Club Med? That hasn't necessarily been a blessing for them, as we've discussed before (I think you've been hammering this point a lot). Anyway, as we see now, it is hard to maintain a high degree of divergence in economic development/performance within a currency area without creating a lot of political tension. The difference in purchasing power seems to me to be just another aspect of the same underlying issue. 

Basically, the payment wasn't obvious to Germany until now (although I agree with you that it's been there from the start, at least implicitly).


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 05:28:29 PM
It isn't about what principle I'm after, but what the Germans want.

Oh I'm not saying anything about what Germans want. I agree that they don't like these subsidies... I mean who would? I'm just saying that it's hypocritical to draw the line at subsidy as a principle because it's already been violated several different, major ways.

Quote
I don't think agricultural subsidies is relevant because that is a specific program that exists independently of the economy in general.

Again, that depends on what you means of 'exists independently of the economy in general'. Agriculture is certainly a part of the economy, and it is indeed a huge subsidy, and quite real. But the other things I mentioned: free trade zone, free labor movement, common currency, and certain common governance rules are also a form of subsidy. Not to mention, the ECB subsidizes the national banks of the Club Med countries by giving them risk-free overnight loans.

Quote
With purchasing power I assume you mean the fact that the euro is overvalued for the Club Med? That hasn't necessarily been a blessing for them, as we've discussed before (I think you've been hammering this point a lot). Anyway, as we see now, it is hard to maintain a high degree of divergence in economic development/performance within a currency area without creating a lot of political tension. The difference in purchasing power seems to me to be just another aspect of the same underlying issue.  

Basically, the payment wasn't obvious to Germany until now (although I agree with you that it's been there from the start, at least implicitly).

Yes, it's been there from the start in a big way. And it's an important point, because, the only reason why Germany must complete the circle to avoid catastrophe is because it began drawing the circle in the first place.

Germany is like a human that finds a cute baby pet in the forest, takes it home to raise it. After a few months it has grown big and no longer cute, but since it has been coddled for so long it can no longer raise itself. The choice is to keep raising it, or throw it out into the woods to die. Had it been allowed to remain in the wild in the first place, it would be able to survive on its own, but now it cannot...


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 07, 2011, 05:36:03 PM
Gustaf,

But that depends on what you mean by Germany 'paying' for the Club Med countries. Arguably, simply by being in a currency union with the Club Med countries, Germany is paying for them already, because it is supporting their purchasing power and they are leeching off Germany's purchasing power. Also, the EU has a ton of agricultural subsidies, etc. etc. The free trade zone, movement of labor agreements, even the forced austerity and restructuring are all forms of German subsidy to the weaker countries. So if that's the principle you're after, it's been violated long ago.

True, but that seemed to them at least to be a worthy deal like it was for China and the US. Where they draw the line is when they can actually force Germany to make a direct transfer payment or sign up for a future direct transfer payment.

What? China or the US never signed up to any such thing. And the Common Agricultural Policy is direct transfer payment.

Come on you what I mean. China keeping its currency devalued causes their population to subsidize our population through purchasing power so that their exporters can benefit. China elected for the same thing the Germans wanted in creating the EU. The only difference is that Germany signed up for a combined currency and China just pegged theirs.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 07, 2011, 05:37:46 PM
It isn't about what principle I'm after, but what the Germans want.

Oh I'm not saying anything about what Germans want. I agree that they don't like these subsidies... I mean who would? I'm just saying that it's hypocritical to draw the line at subsidy as a principle because it's already been violated several different, major ways.

Quote
I don't think agricultural subsidies is relevant because that is a specific program that exists independently of the economy in general.

Again, that depends on what you means of 'exists independently of the economy in general'. Agriculture is certainly a part of the economy, and it is indeed a huge subsidy, and quite real. But the other things I mentioned: free trade zone, free labor movement, common currency, and certain common governance rules are also a form of subsidy. Not to mention, the ECB subsidizes the national banks of the Club Med countries by giving them risk-free overnight loans.

Quote
With purchasing power I assume you mean the fact that the euro is overvalued for the Club Med? That hasn't necessarily been a blessing for them, as we've discussed before (I think you've been hammering this point a lot). Anyway, as we see now, it is hard to maintain a high degree of divergence in economic development/performance within a currency area without creating a lot of political tension. The difference in purchasing power seems to me to be just another aspect of the same underlying issue.  

Basically, the payment wasn't obvious to Germany until now (although I agree with you that it's been there from the start, at least implicitly).

Yes, it's been there from the start in a big way. And it's an important point, because, the only reason why Germany must complete the circle to avoid catastrophe is because it began drawing the circle in the first place.

Germany is like a human that finds a cute baby pet in the forest, takes it home to raise it. After a few months it has grown big and no longer cute, but since it has been coddled for so long it can no longer raise itself. The choice is to keep raising it, or throw it out into the woods to die. Had it been allowed to remain in the wild in the first place, it would be able to survive on its own, but now it cannot...

What I mean is that there is a difference between paying X amount of euros to farmers every year (costly as that is) and paying, in general, for whatever debts other countries may accumulate.

Of course, the Germans aren't happy about agriculture either.


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 11:18:58 PM
True but by starting the 'printing presses' Germany isn't technically paying anything because it isn't German money. It's just currency created out of nothing. The impact on Germany comes from only secondary sources-- by increasing or decreasing the euro exchange rate.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 07, 2011, 11:51:09 PM
True but by starting the 'printing presses' Germany isn't technically paying anything because it isn't German money. It's just currency created out of nothing. The impact on Germany comes from only secondary sources-- by increasing or decreasing the euro exchange rate.

But since Germany is the biggest economy and since its "currency" was the most undervalued by switching to the Euro you and me both know that inflation would be particularly bad in Germany and they don't even get to benefit from the ECB bond purchases.


Title: Re: The Day After... Italy.
Post by: Beet on November 07, 2011, 11:59:52 PM
But since Germany is the biggest economy and since its "currency" was the most undervalued by switching to the Euro you and me both know that inflation would be particularly bad in Germany and they don't even get to benefit from the ECB bond purchases.

But that's a secondary effect, not a direct effect. Just like, the Euro is devalued simply by Italy's membership inside of it, is a secondary effect. Plus we don't even know that it would be inflationary at all. The Euro would rally if the crisis were resolved, and that would deflationary.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 08, 2011, 12:27:11 AM
But since Germany is the biggest economy and since its "currency" was the most undervalued by switching to the Euro you and me both know that inflation would be particularly bad in Germany and they don't even get to benefit from the ECB bond purchases.

But that's a secondary effect, not a direct effect. Just like, the Euro is devalued simply by Italy's membership inside of it, is a secondary effect. Plus we don't even know that it would be inflationary at all. The Euro would rally if the crisis were resolved, and that would deflationary.

I think the amounts that we are referring to here make the idea of it being deflationary pretty much impossible. These countries are in excess of 120% of debt to GDP. From my perspective they need to monetize that down to at least 70% or the higher borrowing costs are just going to each them to shreds anyway.

Printing 50% of GDP of a bunch of the Eurozone countries isn't going to be easy on them.


Title: Re: The Day After... Italy.
Post by: Beet on November 08, 2011, 12:32:22 AM
I disagree, but I don't want to get into a long discussion now. Let me just restate that I think there is a strong chance such an action would result in a higher-valued Euro than the alternative of continued deepening of the crisis.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 08, 2011, 12:33:54 AM
I disagree, but I don't want to get into a long discussion now. Let me just restate that I think there is a strong chance such an action would result in a higher-valued Euro than the alternative of continued deepening of the crisis.

I don't want to get in a long discussion either. So I'll just say that increasing the money supply by lets say 30% is going to result in inflation.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 08, 2011, 10:22:37 AM
I disagree, but I don't want to get into a long discussion now. Let me just restate that I think there is a strong chance such an action would result in a higher-valued Euro than the alternative of continued deepening of the crisis.

You really think so? Printing the eurozone out of the crisis would basically be to say that the strategy to deal with this is precisely that. It means abandoning the ECB inflation target and predicate eurozone inflation on budget discipline in Southern Europe.

Unless, of course, it is coupled with some variety of fiscal union to ensure it doesn't happen again in the future. ;)

IMO, what it comes down to is that you simply cannot decouple authority over the budget with responsibility for paying the budget. Either Greece and other such countries must get the responsibility back by exiting the euro, or they must lose their authority via fiscal union. Otherwise there is no way of making the euro project credible.


Title: Re: The Day After... Italy.
Post by: ag on November 08, 2011, 10:43:25 AM
I disagree, but I don't want to get into a long discussion now. Let me just restate that I think there is a strong chance such an action would result in a higher-valued Euro than the alternative of continued deepening of the crisis.

Long term it is going to destroy the euro. Gustaf here is absolutely on the point. In fact, any European (not just Southern European) government that refuses to borrow to the hilt and then blackmail the ECB into printing more would be irresponsible to its own voters: the negatives of such an action would be spread all over the euro zone, while the positives would all be concentrated in the debt-issuing country. The outcome would be to make euro a weaker currency than drachma would be on its own. It's quite likely that euro members will have to borrow in Swiss franks, pounds or dollars. You really think Germany would want to stay in such a euro zone?

And, yes, the only alternatives are either political and fiscal integration (the latter is not possible without the former), or tough balanced budget amendments to euro countries constitutions. Both are pretty difficult and (especially the latter) not necessarily desirable.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 08, 2011, 11:14:08 AM
I disagree, but I don't want to get into a long discussion now. Let me just restate that I think there is a strong chance such an action would result in a higher-valued Euro than the alternative of continued deepening of the crisis.

Long term it is going to destroy the euro. Gustaf here is absolutely on the point. In fact, any European (not just Southern European) government that refuses to borrow to the hilt and then blackmail the ECB into printing more would be irresponsible to its own voters: the negatives of such an action would be spread all over the euro zone, while the positives would all be concentrated in the debt-issuing country. The outcome would be to make euro a weaker currency than drachma would be on its own. It's quite likely that euro members will have to borrow in Swiss franks, pounds or dollars. You really think Germany would want to stay in such a euro zone?

And, yes, the only alternatives are either political and fiscal integration (the latter is not possible without the former), or tough balanced budget amendments to euro countries constitutions. Both are pretty difficult and (especially the latter) not necessarily desirable.

Yeah, balanced budget amendments strike me as quite dodgy. Having automatic stabilizers stepping in during times of crisis is a good thing, imo.

Also, we already have the SGP and that hasn't had any effect at all.

I'd agree that political integration is required for fiscal integration. That's the underlying problem of course - Germans simply don't want to pay for Greeks, because the latter aren't Germans. That is the essential problem of the EU. They're forcing something on the peoples of Europe which lacks fundamental resonance within those peoples.


Title: Re: The Day After... Italy.
Post by: Beet on November 08, 2011, 11:59:05 AM
But what evidence is there that European governments would "borrow to the hilt" as you say, and then "blackmail the ECB"? You talk as if European governments were rabid animals without restraint or intellect. I give them more credit than that. Surely they would see that what you describe is a tragedy of the commons scenario and not do what you say.

I mean, is it not fair to say that during the first seven years of the euro, no European governments felt any fear of bond vigilantism? And during this time, they did indeed run up deficits. But not nearly so much as you say here. Further, the Euro during this time did not depreciate to a value 'less than the drachma' would be worth. It actually appreciated from about par to the dollar to well more than the dollar. And certainly this crisis has focused the minds of Europe's democracies on the problem of debt more than they had been before.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 08, 2011, 12:18:02 PM
But what evidence is there that European governments would "borrow to the hilt" as you say, and then "blackmail the ECB"? You talk as if European governments were rabid animals without restraint or intellect. I give them more credit than that. Surely they would see that what you describe is a tragedy of the commons scenario and not do what you say.

I mean, is it not fair to say that during the first seven years of the euro, no European governments felt any fear of bond vigilantism? And during this time, they did indeed run up deficits. But not nearly so much as you say here. Further, the Euro during this time did not depreciate to a value 'less than the drachma' would be worth. It actually appreciated from about par to the dollar to well more than the dollar. And certainly this crisis has focused the minds of Europe's democracies on the problem of debt more than they had been before.

Is it just me Beet or did you change into a completely different person since like a week ago!

I mean prior to a week ago you were in agreement with us that the Euro had to break up, that bailouts and money printing wasn't going to work, didn't like ECB actions, etc.

All of sudden your defending the idea of the ECB printing by saying that you think it would actually come to a better result than now, a year ago, break up of the monetary union, defaults, and actually it if they just printed it would be all bunnies and rainbows.

What happened man? Did someone hack into your account or something and start acting as you?


Title: Re: The Day After... Italy.
Post by: Beet on November 08, 2011, 01:29:51 PM
No, I think you were misinterpreting me. I said breakup of the Euro with the northern countries leaving would be a good outcome. This discussion is obviously assuming that does not happen (there is no sign of it happening). I said default was inevitable given the curren path, and I still think so. But they could avoid it with an ECB guarantee backed by printing.

The key problem is the behavior of democracies and whether they can be trusted to maintain discipline within a multicountry currency union if the threat of default is taken away by the central bank. Perhaps there can be a compromise: In exchange for the ECB agreeing to buy as much Italian debt as necessary to end the crisis, Italy will agree to either a law or a Constitutional amendment (this would require a referendum) mandating some version of the SGP, replacing the 3% deficit limit with a balanced budget requirement across a business cycle; and the 60% debt limit to something closer to Italy's historical average in the past 20 years. Also as part of this law/amendment, it will supercede the annual budgeting process and implement automatic fiscal adjustments in the case the legislature is not able to comply. To break the rule, the legislature would have to take positive action. The ECB would naturally monitor the legislature and inform it if it were about to break its own domestic law or Constitution, and if it chose to do so would dump all of the country's bonds into the open market. In the face of such a structure I am confident that even a special-interest controlled, corrupt legislature would not "cross the Rubicon" and would maintain fiscal discipline.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 08, 2011, 04:56:33 PM
But what evidence is there that European governments would "borrow to the hilt" as you say, and then "blackmail the ECB"? You talk as if European governments were rabid animals without restraint or intellect. I give them more credit than that. Surely they would see that what you describe is a tragedy of the commons scenario and not do what you say.

I mean, is it not fair to say that during the first seven years of the euro, no European governments felt any fear of bond vigilantism? And during this time, they did indeed run up deficits. But not nearly so much as you say here. Further, the Euro during this time did not depreciate to a value 'less than the drachma' would be worth. It actually appreciated from about par to the dollar to well more than the dollar. And certainly this crisis has focused the minds of Europe's democracies on the problem of debt more than they had been before.

I will gladly accept that position. :P


Title: Re: The Day After... Italy.
Post by: ag on November 08, 2011, 07:52:36 PM
But what evidence is there that European governments would "borrow to the hilt" as you say, and then "blackmail the ECB"? You talk as if European governments were rabid animals without restraint or intellect. I give them more credit than that. Surely they would see that what you describe is a tragedy of the commons scenario and not do what you say.

They'd see the tragedy of commons, but you will have taken from them the only mechanism out there to prevent falling into it. That mechanism right now is the merciless ECB, that won't budge no matter what and the implicit threat that the "misbehaving" country will be treated like Greece is treated now. Take those away without providing other mechanisms (i.e., political and fiscal integration) and you create the situation in which any "responsible" government would, in fact, be grossly irresponsible to its own voters - it would be letting the others to suck them dry.


Title: Re: The Day After... Italy.
Post by: Beet on November 08, 2011, 08:22:04 PM
But what evidence is there that European governments would "borrow to the hilt" as you say, and then "blackmail the ECB"? You talk as if European governments were rabid animals without restraint or intellect. I give them more credit than that. Surely they would see that what you describe is a tragedy of the commons scenario and not do what you say.

They'd see the tragedy of commons, but you will have taken from them the only mechanism out there to prevent falling into it. That mechanism right now is the merciless ECB, that won't budge no matter what and the implicit threat that the "misbehaving" country will be treated like Greece is treated now. Take those away without providing other mechanisms (i.e., political and fiscal integration) and you create the situation in which any "responsible" government would, in fact, be grossly irresponsible to its own voters - it would be letting the others to suck them dry.

But Italy will be punished now even when it is not misbehaving. All of the reforms they need take time. They need to change the entire structure of their economy, if not their entire national culture. They'll need longer than the couple of weeks the bond markets will give them to do it, and because of their size, a Greece-style bailout seems out of the question (and poorly advised).

Also, what do you think of my proposal of 1:29 pm?


Title: Dolce far niente
Post by: opebo on November 09, 2011, 01:23:26 PM
They need to change the entire structure of their economy, if not their entire national culture.

The rule of the neo-liberal world is that all pleasant cultures are to be destroyed and made Calvinist racks of misery.

But after all that is completely unnecessary:

The European Central Bank, the only effective bulwark against market attacks, wasted no time intervening to buy Italian bonds in large amounts.

"The ECB is buying aggressively," one trader said. (http://beta.finance.yahoo.com/news/italian-borrowing-costs-reach-breaking-113500631.html)


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 09, 2011, 02:12:09 PM
Ouch!!! That margin hike certainly did a number on the BTPs and the rest of the world today.

I think its finally dawning on people around the globe today that this $hit is real, its not going away, and new developments as the situation gets worse can really, really hurt!


European politicians are absolutely delusional to think they're getting themselves out of this. I've switched my outlook from Italy is more than likely to default to it will default.


Title: Re: The Day After... Italy.
Post by: Swing low, sweet chariot. Comin' for to carry me home. on November 09, 2011, 02:14:54 PM
Dow down 400 points...


Title: Re: The Day After... Italy.
Post by: © tweed on November 09, 2011, 02:17:57 PM
European politicians are absolutely delusional to think they're getting themselves out of this. I've switched my outlook from Italy is more than likely to default to it will default.

after this from the Wonkish1 rating agency bond yields are expected to soar even high tomorrow.


Title: Re: The Day After... Italy.
Post by: Beet on November 09, 2011, 02:26:37 PM
Italy must refinance 200 billion euros in the next year, while revenues and expenses are roughly 600 billion euros. Italy has about 75 billion euros worth of gold bullion. If it sells all of its gold bullion, refinancing remains 125 billion euros. If one expands beyond gold to all foreign exchange reserves, Italy has 125 billion in foreign exchange reserves. Refinancing costs fall to 75 billion euros. If the IMF and the EFSF can be persuaded to cover the remaining 75 billion, Italy is solvent for the next year with no revenue-adjusted fiscal adjustment.


Title: Re: The Day After... Italy.
Post by: opebo on November 09, 2011, 03:12:18 PM
Italy must refinance 200 billion euros in the next year

So.. all of this is over a piddling amount like that?  The ECB could print that in a nanosecond, and everything would be fine.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 09, 2011, 03:43:47 PM
Italy must refinance 200 billion euros in the next year, while revenues and expenses are roughly 600 billion euros. Italy has about 75 billion euros worth of gold bullion. If it sells all of its gold bullion, refinancing remains 125 billion euros. If one expands beyond gold to all foreign exchange reserves, Italy has 125 billion in foreign exchange reserves. Refinancing costs fall to 75 billion euros. If the IMF and the EFSF can be persuaded to cover the remaining 75 billion, Italy is solvent for the next year with no revenue-adjusted fiscal adjustment.

I'm aware of that.

Didn't say its going to be soon. Your not accounting for bank recap though either! They will scrounging every Euro they can out of those places just to make good on the Eurowide "no Lehman's" promise. After that its just simply looking at the cost of capital issue and I don't see how you can come to the conclusion that potentially 9%+ 10 years next year isn't going to eventually catch up to Italy given its quantity of sovereign debt.


Title: Re: The Day After... Italy.
Post by: SPQR on November 09, 2011, 03:52:35 PM
Italy must refinance 200 billion euros in the next year, while revenues and expenses are roughly 600 billion euros. Italy has about 75 billion euros worth of gold bullion. If it sells all of its gold bullion, refinancing remains 125 billion euros. If one expands beyond gold to all foreign exchange reserves, Italy has 125 billion in foreign exchange reserves. Refinancing costs fall to 75 billion euros. If the IMF and the EFSF can be persuaded to cover the remaining 75 billion, Italy is solvent for the next year with no revenue-adjusted fiscal adjustment.

...and ZERO reserves whatsoever?
From bad to worse.

Unless I got your point completely wrong,and you were not suggesting that Italy should indeed sell its reserves,but merely stating what its needs are.


Title: Re: The Day After... Italy.
Post by: Beet on November 09, 2011, 03:54:36 PM
@opebo: The ECB is not allowed to buy debt directly from governments. Unlike some of its other, errr, unusual traits, that one is actually fairly standard among world central banks. It can only buy on secondary markets.

Italy must refinance 200 billion euros in the next year, while revenues and expenses are roughly 600 billion euros. Italy has about 75 billion euros worth of gold bullion. If it sells all of its gold bullion, refinancing remains 125 billion euros. If one expands beyond gold to all foreign exchange reserves, Italy has 125 billion in foreign exchange reserves. Refinancing costs fall to 75 billion euros. If the IMF and the EFSF can be persuaded to cover the remaining 75 billion, Italy is solvent for the next year with no revenue-adjusted fiscal adjustment.

...and ZERO reserves whatsoever?
From bad to worse.

So what's your proposal, Italian? It's your country. (and yes. I've thrown out about five different proposals. I have certain preferences and beliefs, but right now I'm not completely wedded to any one solution, including this one).


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 09, 2011, 04:04:06 PM
@opebo: The ECB is not allowed to buy debt directly from governments. Unlike some of its other, errr, unusual traits, that one is actually fairly standard among world central banks. It can only buy on secondary markets.

Italy must refinance 200 billion euros in the next year, while revenues and expenses are roughly 600 billion euros. Italy has about 75 billion euros worth of gold bullion. If it sells all of its gold bullion, refinancing remains 125 billion euros. If one expands beyond gold to all foreign exchange reserves, Italy has 125 billion in foreign exchange reserves. Refinancing costs fall to 75 billion euros. If the IMF and the EFSF can be persuaded to cover the remaining 75 billion, Italy is solvent for the next year with no revenue-adjusted fiscal adjustment.

...and ZERO reserves whatsoever?
From bad to worse.

So what's your proposal, Italian? It's your country. (and yes. I've thrown out about five different proposals. I have certain preferences and beliefs, but right now I'm not completely wedded to any one solution, including this one).

Simple(from Italy's perspective) now that they are in it deep they do what Greece is doing. More austerity, try to get every single Euro you can out of the overly generous European core, and then go through painful debt restructuring when the Euro money runs out. People act like sovereign default is the end of the world. Its not! It sucks really, really, really bad, but give it a few years and you wont even be able to tell.

And if your looking at it from the European core(like Germany) the best thing is to figure out that the rest of Europe is going to keep on using you and suck you dry unless you tell them they are on their own. Since they are likely going to restructure their debts when the money turns off Germany is better to not be in a currency union with a bunch of countries going through debt restructuring. So they need to get the hell out of there.


Title: Re: The Day After... Italy.
Post by: Beet on November 09, 2011, 04:21:56 PM
Sovereign default is not the end of the world (who said it was?), but it's still pretty bad. To restate the obvious, Italy is a G-7 nation, part of the core of not only Europe but world capitalism. A default would be the biggest economic failure in the capitalist world for 65 years. It's bad enough to consider lots of different alternatives to see if any would be better. Keep in mind what Greece has been through in the past couple years, and they haven't even really defaulted yet. To Greece's 300 billion euros of debt, Italy has 2.5 trillion euros of debt.

Further, from a political standpoint, I don't agree that Italy should keep stringing along the IMF/EU and then default when the money runs out. If default is inevitable, I argue it would be better off defaulting straight away for the following reasons. First, it already has a primary budget surplus, so delaying default only means more interest payments that disappear into nowhere. Second, the IMF/EU will try to force through massive structural changes that the Italian people will not be able to decide upon democratically. It is better to keep economic decisions under the purview of Italy's democratic institutions. Third, look at what has happened to the Papandreou government. It has lost all popularity and credibility. A new government coming in straight off an election with a solid majority, would do better by defaulting straight away and taking as much economic pain as possible in the first year, so that by the third or fourth year when new elections are coming up, a recovery is already visible, as you hinted.

Finally, it is unclear whether or not even a hard default would resolve the problems here. The main examples pointed to (Argentina, Russia, Iceland) all combined default with a currency devaluation. Even after a hard default, is the country were still using the euro, it may not be able to avoid a hard internal adjustment, difficulty which is unpredictable. I cannot think of any historical examples.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 09, 2011, 04:49:23 PM
Sovereign default is not the end of the world (who said it was?), but it's still pretty bad. To restate the obvious, Italy is a G-7 nation, part of the core of not only Europe but world capitalism. A default would be the biggest economic failure in the capitalist world for 65 years. It's bad enough to consider lots of different alternatives to see if any would be better. Keep in mind what Greece has been through in the past couple years, and they haven't even really defaulted yet. To Greece's 300 billion euros of debt, Italy has 2.5 trillion euros of debt.

Further, from a political standpoint, I don't agree that Italy should keep stringing along the IMF/EU and then default when the money runs out. If default is inevitable, I argue it would be better off defaulting straight away for the following reasons. First, it already has a primary budget surplus, so delaying default only means more interest payments that disappear into nowhere. Second, the IMF/EU will try to force through massive structural changes that the Italian people will not be able to decide upon democratically. It is better to keep economic decisions under the purview of Italy's democratic institutions. Third, look at what has happened to the Papandreou government. It has lost all popularity and credibility. A new government coming in straight off an election with a solid majority, would do better by defaulting straight away and taking as much economic pain as possible in the first year, so that by the third or fourth year when new elections are coming up, a recovery is already visible, as you hinted.

Finally, it is unclear whether or not even a hard default would resolve the problems here. The main examples pointed to (Argentina, Russia, Iceland) all combined default with a currency devaluation. Even after a hard default, is the country were still using the euro, it may not be able to avoid a hard internal adjustment, difficulty which is unpredictable. I cannot think of any historical examples.

Fair point about the primary surplus already. But keep in mind that a large portion of those interest payments are to domestic banks the more you get in handouts the more you can ween your domestic banks off of holding that debt and onto a different country that your about to screw over. Also keep in mind that the bank issue is why countries don't default and repudiate the entire amount. They always restructure the debts based on their ability to pay. So that does mean that help from other low cost of capital sources makes it easier to restructure with a little less damage to your financial system.

Since I can't think of an example of a country defaulting in a currency union I'll pass on speculating about the issue of devaluation.


Title: Re: The Day After... Italy.
Post by: SPQR on November 09, 2011, 07:24:06 PM
What I think it's best?
A tecnhocratic government lead by Mario Monti,which can approve the measures asked by the EU (not all of them,since some of them are nonsense),reassure the markets (what kind of credibility did a Berlusconi government have? and one with a 2 votes "majority"?) and change the electoral law,so that after the next elections (presumably in Spring 2012) the majority will not be just "big",but actually stable.

I don't see how defaulting or selling all of our foreign money reserves+gold would help. Especially the second option,would just make us weaker against any speculative attack,and make us depend even more on the ECB.

The default is not inevitable. This is the occasion to solve some of our economic structural problems. What we need is for the markets to trust us in the meanwhile. That is why we need Berlusconi to step down ASAP.


Title: Re: The Day After... Italy.
Post by: Beet on November 09, 2011, 07:34:18 PM
And what if the markets are not reassured, despite enacting some of the measures asked by the EU? What then?


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 09, 2011, 07:58:38 PM
And what if the markets are not reassured, despite enacting some of the measures asked by the EU? What then?

We hang them from lamp-posts.


Title: Re: The Day After... Italy.
Post by: Хahar 🤔 on November 09, 2011, 09:40:20 PM
The markets are jealous gods, and their wrath is not easily assuaged.


Title: Re: The Day After... Italy.
Post by: opebo on November 10, 2011, 03:28:50 AM
The markets are jealous gods, and their wrath is not easily assuaged.

Actually they are an illusion.  Behind them are specific government policies, not some kind of 'natural forces' independent of the State.


Title: Re: The Day After... Italy.
Post by: SPQR on November 10, 2011, 09:27:29 AM
And what if the markets are not reassured, despite enacting some of the measures asked by the EU? What then?
A default is not the end of the world.


Title: Re: The Day After... Italy.
Post by: Link on November 10, 2011, 11:01:44 AM
A default is not the end of the world.

()


Title: Re: The Day After... Italy.
Post by: opebo on November 10, 2011, 11:24:24 AM
@opebo: The ECB is not allowed to buy debt directly from governments. Unlike some of its other, errr, unusual traits, that one is actually fairly standard among world central banks. It can only buy on secondary markets.

Interesting, Beet.  That is a predictable limitation, I suppose, but it seems it would be one that could be easily gotten 'round - if the ECB bought up the existing debt at such a rate that it drove up the price, and if 'the markets' had confidence that they would continue to do so with alacrity, then private investors would happily buy all the bonds the Italian government could issue, in order to re-sell them to the ECB at a profit.  Problem solved.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 01:42:00 PM
And what if the markets are not reassured, despite enacting some of the measures asked by the EU? What then?
A default is not the end of the world.

Again, no one said it was the end of the world, but it is a lot of money. I mean, we're talking about an Italian default here. This isn't peanuts. Come on, guys.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 06:13:13 PM
And what if the markets are not reassured, despite enacting some of the measures asked by the EU? What then?
A default is not the end of the world.

Again, no one said it was the end of the world, but it is a lot of money. I mean, we're talking about an Italian default here. This isn't peanuts. Come on, guys.

No question about that! But given the sheer amount of total credit market debt in the world today and the fact that the real deleveraging anywhere is in default, wouldn't you agree that if to much debt = bad that there are some good things that come when defaults occur?

To much debt puts too much of a damper on your ability to grow so I think many people in the world will see a few years after a cluster of sovereign defaults that those countries are doing quite alright given the lack of the public debt drag on their economies.


Title: Re: The Day After... Italy.
Post by: SPQR on November 10, 2011, 06:53:20 PM
Of course there are better things than a default,and I still believe that it can be avoided...but as long as it's "controlled",there is no reason to believe that Italy will suddenly become like Sudan or Zimbwabwe.

My only fear is on the reaction at an European level.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 06:55:35 PM
Sure, there are some good things that come when defaults occur. I just think the costs outweigh the benefits on this particular default. There may be a time when that is no longer true, but at the present time it is certainly very true, IMO.

Quote
Of course there are better things than a default,and I still believe that it can be avoided...but as long as it's "controlled",there is no reason to believe that Italy will suddenly become like Sudan or Zimbwabwe.

Oh there is no chance Italy will become like Sudan or Zimbabwe. Perhaps Argentina is more like it. But, because you have surrendered your monetary independence to Frankfurt, Italy does not have the power to defend itself from an uncontrolled default.


Title: Re: The Day After... Italy.
Post by: SPQR on November 10, 2011, 06:59:39 PM
Sure, there are some good things that come when defaults occur. I just think the costs outweigh the benefits on this particular default. There may be a time when that is no longer true, but at the present time it is certainly very true, IMO.

Quote
Of course there are better things than a default,and I still believe that it can be avoided...but as long as it's "controlled",there is no reason to believe that Italy will suddenly become like Sudan or Zimbwabwe.

Oh there is no chance Italy will become like Sudan or Zimbabwe. Perhaps Argentina is more like it. But, because you have surrendered your monetary independence to Frankfurt, Italy does not have the power to defend itself from an uncontrolled default.
And it's not in the European interest to have an uncontrolled default.


Title: Re: The Day After... Italy.
Post by: Insula Dei on November 10, 2011, 07:32:55 PM
The Markets are athirst, or so it seems.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 07:38:49 PM
Sure, there are some good things that come when defaults occur. I just think the costs outweigh the benefits on this particular default. There may be a time when that is no longer true, but at the present time it is certainly very true, IMO.

Quote
Of course there are better things than a default,and I still believe that it can be avoided...but as long as it's "controlled",there is no reason to believe that Italy will suddenly become like Sudan or Zimbwabwe.

Oh there is no chance Italy will become like Sudan or Zimbabwe. Perhaps Argentina is more like it. But, because you have surrendered your monetary independence to Frankfurt, Italy does not have the power to defend itself from an uncontrolled default.
And it's not in the European interest to have an uncontrolled default.

I certainly don't think so... ...


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 07:42:57 PM
Sure, there are some good things that come when defaults occur. I just think the costs outweigh the benefits on this particular default. There may be a time when that is no longer true, but at the present time it is certainly very true, IMO.

Quote
Of course there are better things than a default,and I still believe that it can be avoided...but as long as it's "controlled",there is no reason to believe that Italy will suddenly become like Sudan or Zimbwabwe.

Oh there is no chance Italy will become like Sudan or Zimbabwe. Perhaps Argentina is more like it. But, because you have surrendered your monetary independence to Frankfurt, Italy does not have the power to defend itself from an uncontrolled default.
And it's not in the European interest to have an uncontrolled default.

I would dispute the notion that there has ever really been a "controlled default". Maybe Iceland, but if you look at them today you know that they are going to default again because the first round wasn't even close to sufficient.

Countries and businesses that are going through painful debt restructuring try to default on just enough to put them on strong footing, but no more than that because of the damage it will do its creditors(for countries its their own banks and people-- for businesses creditors own the business during bankruptcy). So there is damage mitigation through the process. But if you mean "controlled" in the sense that any entity can prevent systemic risk spreading through all of those that have exposure I can't think of any example in history. Bankruptcies/defaults/debt restructurings are very uncontrolled by their very nature(if there was an answer that allowed the entity to avoid doing it they would be doing it).



And Beet, I hope your not coming to the conclusion that having almost every major developed country in the world at 100%+ Debt to GDP is somehow a good thing for growth or systemic risk. I mean we can run around the world and say well "that country defaulting hurts" or "that country default hurts", and therefore we should take the pain away by continuing to transfer the risk and the debt to more solvent and stable parties. That looks like a seductive answer when you look at it from a case by case basis, but lets take a step back for a minute...

Having every major country in the world at 100%+ debt to GDP means that there are officially no more sufficiently solvent and stable parties left to transfer the risk and debt to. Now can you honestly tell me that from a systemic point of view that things get easier when a new problem develops at that standpoint? From my view the sheer quantity of debt across the board means that painful debt restructuring in many, many locations is already "baked into the cake". You can't avoid it. The ultimate question isn't whether its going to happen, but to how many countries and trust me its not just localized to Greece and Portugal. Mark my wards its going to be a lot more than that.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 07:48:09 PM
What ever happened to balancing the budget and paying off your debts? Has that become unthinkable? I'm such an old fuddy duddy.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 09:07:51 PM
What ever happened to balancing the budget and paying off your debts? Has that become unthinkable? I'm such an old fuddy duddy.

There are a few reasons as to why that can't be the answer when you look at constantly transferring risk and debt to the more solvent and stable party.

1) Large quantities of debt hinder growth. When you transfer just enough of it to another party it to avoid default the debt doesn't go away.

2) Debt servicing on high public debt have large drags on public budgets and your ability to balance the budget going forward.

3) If this kind of crisis doesn't cause the political will to end many welfare promises that these countries have made I don't know what will produce that political will. From the politicians stand point better to default and cutoff our access to new debt and let that be the pressure going forward on further austerity than to have absolutely huge spending cuts that would make default impossible.

4) If risk and debt does get transferred from you to someone else it has become clear to you that the other party has blinked and will likely continue to blink so might as well not take austerity seriously. Better to just wait until 1 of 2 things happen 1) the country bailing you out gets sick of it and then whoever is in charge then can make the tough decisions of what gets seriously cut or 2) some growth returns to your country and you can start returning to profligate spending again because you know said country will blink when the $*** hits the fan once more.


For many countries its going to have to be default and dealing with that pain and for others its going to be the realization in watching this that debt matters and they will cut spending and start balancing budgets. That is what started happening in the late 30s and 50s. Watching other countries default(many people forget their was a cluster of sovereign defaults starting in the 30s) allowed the US to care about making sure it wouldn't happen here and Eisenhower aggressively tried to balance the budget and get public debt down in the 50s because had realized that debt matters. Today people in the US seem to not have learned that lesson, but trust me watching the pain of others on the TV is going to force most people to ask themselves what is more important this program or that program or avoiding *that*!


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 09:23:14 PM
There are a few reasons as to why that can't be the answer when you look at constantly transferring risk and debt to the more solvent and stable party.

1) Large quantities of debt hinder growth. When you transfer just enough of it to another party it to avoid default the debt doesn't go away.

Actually, technology and innovation are what determine growth, not debt levels. After the Napoleonic wars, Britain had the highest government debt levels the advanced world has ever seen, then or since, at 250 percent of GDP. What followed? The industrial revolution.

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2) Debt servicing on high public debt have large drags on public budgets and your ability to balance the budget going forward.

Certainly, but the only reason to balance the budget is to avoid default, and if you are advocating default, the entire point is moot.

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3) If this kind of crisis doesn't cause the political will to end many welfare promises that these countries have made I don't know what will produce that political will. From the politicians stand point better to default and cutoff our access to new debt and let that be the pressure going forward on further austerity than to have absolutely huge spending cuts that would make default impossible.

The problem is not welfare. In fact, the precise danger is that the welfare state is un-democratically destroyed on a needless basis. Sweden has a welfare state, and it has no crisis. Germany still has a welfare state. The UK still has a welfare state. Even the US has elements of a welfare state. None of these countries have sovereign debt problems. The problem is not the debt level, the problem is the euro currency and the inability of the multiple parties to reach an agreement.

The precise danger and worst outcome from all of this is that the neo-liberals use the crisis to smash whatever economic security the lower and middle classes have left under the guise of the 'welfare state has failed' when it is their own foolishness that has caused the catastrophe.

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4) If risk and debt does get transferred from you to someone else it has become clear to you that the other party has blinked and will likely continue to blink so might as well not take austerity seriously. Better to just wait until 1 of 2 things happen 1) the country bailing you out gets sick of it and then whoever is in charge then can make the tough decisions of what gets seriously cut or 2) some growth returns to your country and you can start returning to profligate spending again because you know said country will blink when the $*** hits the fan once more.

First of all, just because 'the other party has blinked' it does not mean they 'will likely continue to blink' in the face of continued intransigence. This is the kind of thinking that leads to all diplomatic and political failures. Give an inch and they'll take a mile, etc. I say, give an agreement a chance to work, for a while. Make it clear what will happen if the other party does not follow through on its commitments. Italy and France are not Greece. Their economies are in better shape and they have better prospects for success.

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For many countries its going to have to be default and dealing with that pain and for others its going to be the realization in watching this that debt matters and they will cut spending and start balancing budgets. That is what started happening in the late 30s and 50s. Watching other countries default(many people forget their was a cluster of sovereign defaults starting in the 30s) allowed the US to care about making sure it wouldn't happen here and Eisenhower aggressively tried to balance the budget and get public debt down in the 50s because had realized that debt matters. Today people in the US seem to not have learned that lesson, but trust me watching the pain of others on the TV is going to force most people to ask themselves what is more important this program or that program or avoiding *that*!

If I believed that, I would have no problem with default. The difference is that I think a default by Italy or France would be far worse economically than anything that happened in any non-WWII years between the late 30s and 50s. It is not the end of the world, but it could potentially be very, very, very bad and I would like to avoid it if at all possible. I think there are many alternative, achievable paths besides this that would result in more wealth for everyone.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 10, 2011, 09:45:37 PM
After the Napoleonic wars, Britain had the highest government debt levels the advanced world has ever seen, then or since, at 250 percent of GDP. What followed? The industrial revolution.

Well, the second wave of it anyway. But, yeah, that's a good point; I'm just being a pedant for the sake of pedantry.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 10, 2011, 09:45:59 PM
What ever happened to balancing the budget and paying off your debts? Has that become unthinkable? I'm such an old fuddy duddy.

Hysteria?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 09:59:04 PM
There are a few reasons as to why that can't be the answer when you look at constantly transferring risk and debt to the more solvent and stable party.

1) Large quantities of debt hinder growth. When you transfer just enough of it to another party it to avoid default the debt doesn't go away.

Actually, technology and innovation are what determine growth, not debt levels. After the Napoleonic wars, Britain had the highest government debt levels the advanced world has ever seen, then or since, at 250 percent of GDP. What followed? The industrial revolution.

Quote
2) Debt servicing on high public debt have large drags on public budgets and your ability to balance the budget going forward.

Certainly, but the only reason to balance the budget is to avoid default, and if you are advocating default, the entire point is moot.

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3) If this kind of crisis doesn't cause the political will to end many welfare promises that these countries have made I don't know what will produce that political will. From the politicians stand point better to default and cutoff our access to new debt and let that be the pressure going forward on further austerity than to have absolutely huge spending cuts that would make default impossible.

The problem is not welfare. In fact, the precise danger is that the welfare state is un-democratically destroyed on a needless basis. Sweden has a welfare state, and it has no crisis. Germany still has a welfare state. The UK still has a welfare state. Even the US has elements of a welfare state. None of these countries have sovereign debt problems. The problem is not the debt level, the problem is the euro currency and the inability of the multiple parties to reach an agreement.

The precise danger and worst outcome from all of this is that the neo-liberals use the crisis to smash whatever economic security the lower and middle classes have left under the guise of the 'welfare state has failed' when it is their own foolishness that has caused the catastrophe.

Quote
4) If risk and debt does get transferred from you to someone else it has become clear to you that the other party has blinked and will likely continue to blink so might as well not take austerity seriously. Better to just wait until 1 of 2 things happen 1) the country bailing you out gets sick of it and then whoever is in charge then can make the tough decisions of what gets seriously cut or 2) some growth returns to your country and you can start returning to profligate spending again because you know said country will blink when the $*** hits the fan once more.

First of all, just because 'the other party has blinked' it does not mean they 'will likely continue to blink' in the face of continued intransigence. This is the kind of thinking that leads to all diplomatic and political failures. Give an inch and they'll take a mile, etc. I say, give an agreement a chance to work, for a while. Make it clear what will happen if the other party does not follow through on its commitments. Italy and France are not Greece. Their economies are in better shape and they have better prospects for success.

Quote
For many countries its going to have to be default and dealing with that pain and for others its going to be the realization in watching this that debt matters and they will cut spending and start balancing budgets. That is what started happening in the late 30s and 50s. Watching other countries default(many people forget their was a cluster of sovereign defaults starting in the 30s) allowed the US to care about making sure it wouldn't happen here and Eisenhower aggressively tried to balance the budget and get public debt down in the 50s because had realized that debt matters. Today people in the US seem to not have learned that lesson, but trust me watching the pain of others on the TV is going to force most people to ask themselves what is more important this program or that program or avoiding *that*!

If I believed that, I would have no problem with default. The difference is that I think a default by Italy or France would be far worse economically than anything that happened in any non-WWII years between the late 30s and 50s. It is not the end of the world, but it could potentially be very, very, very bad and I would like to avoid it if at all possible. I think there are many alternative, achievable paths besides this that would result in more wealth for everyone.

Wow you certainly added a lot to everything I wrote that I never said.

1)I said that large debt hinders growth I didn't say it was impossible to have growth with large debt. The reason why it hinders growth is because most of capital that would be made available to spark the next industrial revolution is sitting in government debt. Are you trying to say that any amount of debt has no affect on growth rates? Can you as a person produce the same net worth growth with 80% DTI vs. 20% DTI? Why do you think its all that different for a nation?


2)The point of balancing a budget is to avoid the pain for your country that comes with a default. I'm advocating default because for some of these countries they've already crossed the point of no return.


3)You act like all welfare states are created equal. There is a big difference between Germany and the US with some basic levels of a safety net and a country like Greece where everybody is trying to get onto the public dole as best they can and where every new government is trying to hand out the most government jobs and benefits to their supporters. These promises and this way of doing business doesn't work. And instead of for example cutting half of the government employees and cutting half of the pension benefits to completely alter the budgetary position of Greece they just engage in the bare minimum austerity to get debt bailouts from Europe.

And that is your opinion of the "worst outcome" my opinion would be that it would be the best outcome, but if would take at least 10 pages to move either one of us a tiny bit on the issue so lets just not go there.


4)I fully expect that countries like Germany wont "blink" in perpetuity, but any notion that a country like Greece is going to take the help seriously and actually try to right its situation went down the tubes when they continue to only agree to the bare minimum of austerity to get the new debt bailout. Any notion that they will all of sudden be responsible stewards in the future is a joke.

And look at the austerity measures in Italy and France. I don't call them that serious. And if we have to go down this road of constantly trimming the welfare state around the edges because real budget restructuring is to politically challenging than so be it, but the notion that Italy and France are stable for the long term without large changes to its budget is a laughable joke. Its not looking at reality.


I agree, but the difference between me and you is that I acknowledge the reality that it has to happen and you haven't hit that point yet.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 10:11:18 PM
1)I said that large debt hinders growth I didn't say it was impossible to have growth with large debt. The reason why it hinders growth is because most of capital that would be made available to spark the next industrial revolution is sitting in government debt. Are you trying to say that any amount of debt has no affect on growth rates? Can you as a person produce the same net worth growth with 80% DTI vs. 20% DTI? Why do you think its all that different for a nation?

Sure. If the person has 80% DTI, they can grow their net worth faster because if they invest the money they borrowed, any capital appreciation will add proportionately more than if they had not leveraged up.

But the entire exercise is silly. Comparing people to nations is silly. Yes, there is plenty of capital available for ventures even in countries with high debt. When is there no capital available for new ventures? When the markets have collapsed due to sovereign default, that's when. But I stick to what I said before about technology and innovation.

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2)The point of balancing a budget is to avoid the pain for your country that comes with a default. I'm advocating default because for some of these countries they've already crossed the point of no return.


3)You act like all welfare states are created equal. There is a big difference between Germany and the US with some basic levels of a safety net and a country like Greece where everybody is trying to get onto the public dole as best they can and where every new government is trying to hand out the most government jobs and benefits to their supporters. These promises and this way of doing business doesn't work. And instead of for example cutting half of the government employees and cutting half of the pension benefits to completely alter the budgetary position of Greece they just engage in the bare minimum austerity to get debt bailouts from Europe.

Nope. The Greek model was perfectly sustainable on the drachma. They've just traded and honest and democratic form of welfare state for an unstable, dishonest and disastrous form of "currency welfare" where Germany subsidies them by propping up their currency, while the rest of their society goes to pieces. However, they're so determined to remain in the euro that they may make it yet, after completely defaulting. Or not. We'll see.

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And that is your opinion of the "worst outcome" my opinion would be that it would be the best outcome, but if would take at least 10 pages to move either one of us a tiny bit on the issue so lets just not go there.


4)I fully expect that countries like Germany wont "blink" in perpetuity, but any notion that a country like Greece is going to take the help seriously and actually try to right its situation went down the tubes when they continue to only agree to the bare minimum of austerity to get the new debt bailout. Any notion that they will all of sudden be responsible stewards in the future is a joke.

And look at the austerity measures in Italy and France. I don't call them that serious. And if we have to go down this road of constantly trimming the welfare state around the edges because real budget restructuring is to politically challenging than so be it, but the notion that Italy and France are stable for the long term without large changes to its budget is a laughable joke. Its not looking at reality.

I agree, but the difference between me and you is that I acknowledge the reality that it has to happen and you haven't hit that point yet.

Italy and France could be plenty sound under their own currencies. Italy, for one, has a very small overall deficit, and has run a primary surplus for years. France has a relatively small deficit. Both are wealth nations with diversified, productive economies. Both are facing liquidity attacks. Unfortunately, under such circumstances even fundamentally sound economies can go down, hard. We agree on what will likely happen (in fact I've been warning about it for over a year now on these boards), but I strongly disagree with you that it has to happen.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 10:22:24 PM
1)I said that large debt hinders growth I didn't say it was impossible to have growth with large debt. The reason why it hinders growth is because most of capital that would be made available to spark the next industrial revolution is sitting in government debt. Are you trying to say that any amount of debt has no affect on growth rates? Can you as a person produce the same net worth growth with 80% DTI vs. 20% DTI? Why do you think its all that different for a nation?

Sure. If the person has 80% DTI, they can grow their net worth faster because if they invest the money they borrowed, any capital appreciation will add proportionately more than if they had not leveraged up.

But the entire exercise is silly. Comparing people to nations is silly. Yes, there is plenty of capital available for ventures even in countries with high debt. When is there no capital available for new ventures? When the markets have collapsed due to sovereign default, that's when. But I stick to what I said before about technology and innovation.

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2)The point of balancing a budget is to avoid the pain for your country that comes with a default. I'm advocating default because for some of these countries they've already crossed the point of no return.


3)You act like all welfare states are created equal. There is a big difference between Germany and the US with some basic levels of a safety net and a country like Greece where everybody is trying to get onto the public dole as best they can and where every new government is trying to hand out the most government jobs and benefits to their supporters. These promises and this way of doing business doesn't work. And instead of for example cutting half of the government employees and cutting half of the pension benefits to completely alter the budgetary position of Greece they just engage in the bare minimum austerity to get debt bailouts from Europe.

Nope. The Greek model was perfectly sustainable on the drachma. They've just traded and honest and democratic form of welfare state for an unstable, dishonest and disastrous form of "currency welfare" where Germany subsidies them by propping up their currency, while the rest of their society goes to pieces. However, they're so determined to remain in the euro that they may make it yet, after completely defaulting. Or not. We'll see.

Quote
And that is your opinion of the "worst outcome" my opinion would be that it would be the best outcome, but if would take at least 10 pages to move either one of us a tiny bit on the issue so lets just not go there.


4)I fully expect that countries like Germany wont "blink" in perpetuity, but any notion that a country like Greece is going to take the help seriously and actually try to right its situation went down the tubes when they continue to only agree to the bare minimum of austerity to get the new debt bailout. Any notion that they will all of sudden be responsible stewards in the future is a joke.

And look at the austerity measures in Italy and France. I don't call them that serious. And if we have to go down this road of constantly trimming the welfare state around the edges because real budget restructuring is to politically challenging than so be it, but the notion that Italy and France are stable for the long term without large changes to its budget is a laughable joke. Its not looking at reality.

I agree, but the difference between me and you is that I acknowledge the reality that it has to happen and you haven't hit that point yet.

Italy and France could be plenty sound under their own currencies. Italy, for one, has a very small overall deficit, and has run a primary surplus for years. France has a relatively small deficit. Both are wealth nations with diversified, productive economies. Both are facing liquidity attacks. Unfortunately, under such circumstances even fundamentally sound economies can go down, hard. We agree on what will likely happen (in fact I've been warning about it for over a year now on these boards), but I strongly disagree with you that it has to happen.

1) Debt is previously spent money. It can't be invested. If you are talking about new debt that would be a different story, but its not that easy to take on new debt when your at 80% DTI already.

Why is there no capital when a sovereign default occurs? There is obviously a lot less available capital when there is a lot of debt already out there. You disagree with this?


2) I would point to Greece's numerous defaults in the past as key evidence that the Greece model wasn't sustainable for the Drachma.


3) You honestly think given both France and Italy's current public debt amounts plus the future public liabilities in their budgets that they can continue as is in perpetuity without any changes to their budget whatsoever? Because if you actually believe that then there really isn't any point in discussing this anymore. I mean how do you think these countries amassed this public debt? Or maybe you think public debt can explode with revenues being equal or higher to expenditures. The fact is that these countries budgets were a little to high for many years and this stuff just accumulated overtime. And looking forward the expenditure side of equation is looking worse not better just like it is in the United States.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 10:28:15 PM
1) Debt is previously spent money. It can't be invested. If you are talking about new debt that would be a different story, but its not that easy to take on new debt when your at 80% DTI already.

Why is there no capital when a sovereign default occurs? There is obviously a lot less available capital when there is a lot of debt already out there. You disagree with this?

Are you serious? In a sovereign default, the capital markets are collapsed. If you are a start-up you will not get VC funding because your country will be in crisis and all the banks will likely be kaput.

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2) I would point to Greece's numerous defaults in the past as key evidence that the Greece model wasn't sustainable for the Drachma.

I would point to Greece's glorious 170-year run from 1830 to 2000 when it went from a backward agrarian province of the Ottoman Empire to a modern, industrialized country with a per capita GDP of 90% of France as evidence that not only was the Drachma sustainable, the modern Drachma era was by far the best in the entire history of Greece.

Edit: And as to default, Greece did not default under the Drachma either since WWII.

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3) You honestly think given both France and Italy's current public debt amounts plus the future public liabilities in their budgets that they can continue as is in perpetuity without any changes to their budget whatsoever? Because if you actually believe that then there really isn't any point in discussing this anymore. I mean how do you think these countries amassed this public debt? Or maybe you think public debt can explode with revenues being equal or higher to expenditures. The fact is that these countries budgets were a little to high for many years and this stuff just accumulated overtime. And looking forward the expenditure side of equation is looking worse not better just like it is in the United States.

I think economics is complicated but that fundamentally, the problem with France and Italy is their currency membership, not their debt level.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 10:52:24 PM
1) Debt is previously spent money. It can't be invested. If you are talking about new debt that would be a different story, but its not that easy to take on new debt when your at 80% DTI already.

Why is there no capital when a sovereign default occurs? There is obviously a lot less available capital when there is a lot of debt already out there. You disagree with this?

Are you serious? In a sovereign default, the capital markets are collapsed. If you are a start-up you will not get VC funding because your country will be in crisis and all the banks will likely be kaput.

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2) I would point to Greece's numerous defaults in the past as key evidence that the Greece model wasn't sustainable for the Drachma.

I would point to Greece's glorious 170-year run from 1830 to 2000 when it went from a backward agrarian province of the Ottoman Empire to a modern, industrialized country with a per capita GDP of 90% of France as evidence that not only was the Drachma sustainable, the modern Drachma era was by far the best in the entire history of Greece.

Edit: And as to default, Greece did not default under the Drachma either since WWII.

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3) You honestly think given both France and Italy's current public debt amounts plus the future public liabilities in their budgets that they can continue as is in perpetuity without any changes to their budget whatsoever? Because if you actually believe that then there really isn't any point in discussing this anymore. I mean how do you think these countries amassed this public debt? Or maybe you think public debt can explode with revenues being equal or higher to expenditures. The fact is that these countries budgets were a little to high for many years and this stuff just accumulated overtime. And looking forward the expenditure side of equation is looking worse not better just like it is in the United States.

I think economics is complicated but that fundamentally, the problem with France and Italy is their currency membership, not their debt level.

1) How long does that last for? It surely doesn't forever! ....Btw, who tries to raise capital in the middle of sovereign default?

2) Who in Europe didn't go from an agrarian society in the 1800s to an industrialized country by 2000?

3) Even if we looked at the United States which is in a better position than France and Italy and isn't in a European style currency union it would be quite obvious that there will be sizable changes in the budget going forward just by taking into account future social security and medicare liabilities alone. To say that Italy and France's budgetary problems are caused by the Euro is I think a pretty hard case to make. Also since Germany's currency devalued as a result of joining the Euro and made their budget situation better are you saying that France's currency appreciated like Greece as a result of joining the Euro?



At some point it becomes in the interest of the Democrats to realize that this stuff is real its not made up, and so that they can save their welfare state they are going to have to prioritize the list of government programs they care about and draw in the line in the sand based on the numbers what is acceptable to lose and what isn't. Because if they don't it will just be a constant and never ending deterioration in benefits as the upper limit of public debt becomes a never ending pressure on the welfare state and over time dismantles more programs than what would occur if you got the problem under control today. But instead many on the left choose to act as though debt, budgets, earnings, and income are all infinite.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 11:01:13 PM
1) How long does that last for? It surely doesn't forever! ....Btw, who tries to raise capital in the middle of sovereign default?

2) Who in Europe didn't go from an agrarian society in the 1800s to an industrialized country by 2000?

Well, Eastern Europe lagged far behind. But the point is Greece was fine under the Drachma.

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3) Even if we looked at the United States which is in a better position than France and Italy and isn't in a European style currency union it would be quite obvious that there will be sizable changes in the budget going forward just by taking into account future social security and medicare liabilities alone. To say that Italy and France's budgetary problems are caused by the Euro is I think a pretty hard case to make. Also since Germany's currency devalued as a result of joining the Euro and made their budget situation better are you saying that France's currency appreciated like Greece as a result of joining the Euro?

Yes, I have no doubt the franc would be worth less than $1.35-$1.40 today.
However, it is also true that the United States has a much larger deficit than France or Italy or Spain. Our current account position is far more negative. The reason why we're not facing a sovereign debt crisis is because we have our own currency, plus it's the reserve currency of the world. Kind of unfair, which the French have never failed to point out (h/t DeGaulle)

That's why my new plan has the Chinese selling dollars to buy euros in exchange for the ECB creating euros to buy Italian government bonds. You do know who pays the cost of that plan, right? Us! But we deserve it! :)

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At some point it becomes in the interest of the Democrats to realize that this stuff is real its not made up, and so that they can save their welfare state they are going to have to prioritize the list of government programs they care about and draw in the line in the sand based on the numbers what is acceptable to lose and what isn't. Because if they don't it will just be a constant and never ending deterioration in benefits as the upper limit of public debt becomes a never ending pressure on the welfare state and over time dismantles more programs than what would occur if you got the problem under control today. But instead many on the left choose to act as though debt, budgets, earnings, and income are all infinite.

Well, duh. That's what Al Gore's lockbox was all about. That's why I support lots of the austerity measures. But that's another discussion. It has nothing to do with this current crisis.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 11:12:54 PM
Yes, I have no doubt the franc would be worth less than $1.35-$1.40 today.
However, it is also true that the United States has a much larger deficit than France or Italy or Spain. Our current account position is far more negative. The reason why we're not facing a sovereign debt crisis is because we have our own currency, plus it's the reserve currency of the world. Kind of unfair, which the French have never failed to point out (h/t DeGaulle)

That's why my new plan has the Chinese selling dollars to buy euros in exchange for the ECB creating euros to buy Italian government bonds. You do know who pays the cost of that plan, right? Us! But we deserve it! :)

The exact exchange rate isn't an example of appreciation or depreciation because you have to take into account the starting values given the supply and denominations. Beet come on this is pretty basic, but don't worry you've proven your knowledge elsewhere so I'll let that slide.

The determination of whether or not France has devalued or appreciated as a result of the Euro is based on the movement before and during the switch not what the initial Franc exchange rate was.

While the Fed and the dollar being the reserve currency of the world are factors they are definitely not the 2 biggest factors as to why the US doesn't have to deal with these kinds of problems.

The real reasons are because the US had a much lower starting point in regards to debt to gdp before the crisis, and because US treasuries are considered the worlds ultimate safe haven at least for now.


Title: Re: The Day After... Italy.
Post by: Beet on November 10, 2011, 11:25:02 PM
Yes, I have no doubt the franc would be worth less than $1.35-$1.40 today.
However, it is also true that the United States has a much larger deficit than France or Italy or Spain. Our current account position is far more negative. The reason why we're not facing a sovereign debt crisis is because we have our own currency, plus it's the reserve currency of the world. Kind of unfair, which the French have never failed to point out (h/t DeGaulle)

That's why my new plan has the Chinese selling dollars to buy euros in exchange for the ECB creating euros to buy Italian government bonds. You do know who pays the cost of that plan, right? Us! But we deserve it! :)

The exact exchange rate isn't an example of appreciation or depreciation because you have to take into account the starting values given the supply and denominations. Beet come on this is pretty basic, but don't worry you've proven your knowledge elsewhere so I'll let that slide.

The determination of whether or not France has devalued or appreciated as a result of the Euro is based on the movement before and during the switch not what the initial Franc exchange rate was.

All correct. I would revise my statement, then. :)

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While the Fed and the dollar being the reserve currency of the world are factors they are definitely not the 2 biggest factors as to why the US doesn't have to deal with these kinds of problems.

The real reasons are because the US had a much lower starting point in regards to debt to gdp before the crisis, and because US treasuries are considered the worlds ultimate safe haven at least for now.

Spain and Ireland had very low government debt to gdp before the crisis. Lower than the US. Of course it was a different picture if you looked at total debt to gdp.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 10, 2011, 11:37:00 PM
Spain and Ireland had very low government debt to gdp before the crisis. Lower than the US. Of course it was a different picture if you looked at total debt to gdp.

It was also true in Iceland.

All the examples can show that you can either have a small starting point and an explosion in deficits against a shrinking economy that can cause a sovereign debt crisis or you can have a high  starting point(like Italy and France) and run medium sized budget deficits and also have sovereign debt crisis.

The US had a lower starting point than Italy and France *and* they have smaller deficits than Ireland and Portugal.


Title: Re: The Day After... Italy.
Post by: opebo on November 11, 2011, 05:12:59 AM
I would point to Greece's glorious 170-year run from 1830 to 2000 when it went from a backward agrarian province of the Ottoman Empire to a modern, industrialized country with a per capita GDP of 90% of France as evidence that not only was the Drachma sustainable, the modern Drachma era was by far the best in the entire history of Greece.

Edit: And as to default, Greece did not default under the Drachma either since WWII.

Precisely, Beet.  The responsibility for the destruction of Greece lies with the Germans, not with the Greeks.

The Euro and the accompanying neoliberal leaning policies have destroyed much of Europe, just as neoliberalism applied though other mechanisms throughout the world has destroyed most of the world economy.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 11, 2011, 06:43:35 AM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 11, 2011, 06:49:04 AM
Also I don't think anybody can really dispute the fact that the ECB just broke the law and intervened in the Italian debt auction.


Title: Re: The Day After... Italy.
Post by: © tweed on November 11, 2011, 09:31:08 AM
all the way down to 6.51.


Title: Re: The Day After... Italy.
Post by: opebo on November 11, 2011, 09:52:55 AM
Also I don't think anybody can really dispute the fact that the ECB just broke the law and intervened in the Italian debt auction.

Sweet!  Finally, an actual solution is implemented.


Title: Re: The Day After... Italy.
Post by: SPQR on November 11, 2011, 10:21:48 AM
I expected stronger austerity measures as well.

But,the thing is,this is just an additional measure. So many cuts have been done in the last years (that you don't know of since we weren't under the spotlight).


Title: Re: The Day After... Italy.
Post by: Link on November 11, 2011, 12:50:44 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Tax evasion in Greece is a major part of why they are in the predicament they are in.  If the wealthy paid taxes at the same rate that public sector employees do that would certainly help.  It makes no sense to implement austerity measures on the people who have been dutifully paying taxes all this time while the wealthy who are the biggest evaders are given a free pass.  If you take that into consideration those riots you have been seeing on TV might make a little more sense.

() (http://www.nytimes.com/2011/02/21/world/europe/21greece.html?pagewanted=all)


Title: Re: The Day After... Italy.
Post by: Beet on November 11, 2011, 02:35:55 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Well it's a first step. I don't think Mario Monti is coming in, in order to sit on his lap and do nothing further to reform the Italian economy and budget.

As to your proposals, whether they are effective or not depends on what the Italian budget is, no? In the case of Greece, they cut the public employees but the bigger problem was employees of government-owned enterprises, and even more than that, social security payments, so merely cutting the public employees was not sufficient.

Do you have a breakdown of the budget of the Italian republic?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 11, 2011, 06:25:15 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Tax evasion in Greece is a major part of why they are in the predicament they are in.  If the wealthy paid taxes at the same rate that public sector employees do that would certainly help.  It makes no sense to implement austerity measures on the people who have been dutifully paying taxes all this time while the wealthy who are the biggest evaders are given a free pass.  If you take that into consideration those riots you have been seeing on TV might make a little more sense.

() (http://www.nytimes.com/2011/02/21/world/europe/21greece.html?pagewanted=all)

I guess you have problems reading because that austerity package isn't for Greece its for Italy! Beet and Italianboy figured that out, but gee who would have guessed that you wouldn't figure that out?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 11, 2011, 06:29:52 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Well it's a first step. I don't think Mario Monti is coming in, in order to sit on his lap and do nothing further to reform the Italian economy and budget.

As to your proposals, whether they are effective or not depends on what the Italian budget is, no? In the case of Greece, they cut the public employees but the bigger problem was employees of government-owned enterprises, and even more than that, social security payments, so merely cutting the public employees was not sufficient.

Do you have a breakdown of the budget of the Italian republic?

Fair enough, but you can see that I was just making a point about how laughable this "austerity package" is. I didn't give those as examples of the *best* options by a long shot.


Title: Re: The Day After... Italy.
Post by: Link on November 11, 2011, 11:32:34 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Tax evasion in Greece is a major part of why they are in the predicament they are in.  If the wealthy paid taxes at the same rate that public sector employees do that would certainly help.  It makes no sense to implement austerity measures on the people who have been dutifully paying taxes all this time while the wealthy who are the biggest evaders are given a free pass.  If you take that into consideration those riots you have been seeing on TV might make a little more sense.

() (http://www.nytimes.com/2011/02/21/world/europe/21greece.html?pagewanted=all)

I guess you have problems reading because that austerity package isn't for Greece its for Italy! Beet and Italianboy figured that out, but gee who would have guessed that you wouldn't figure that out?

Does tax evasion mean something different in Italian?  You do realize it is okay if there are similarities between financial reforms in different countries?


Title: Re: The Day After... Italy.
Post by: Gustaf on November 12, 2011, 03:08:07 AM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Tax evasion in Greece is a major part of why they are in the predicament they are in.  If the wealthy paid taxes at the same rate that public sector employees do that would certainly help.  It makes no sense to implement austerity measures on the people who have been dutifully paying taxes all this time while the wealthy who are the biggest evaders are given a free pass.  If you take that into consideration those riots you have been seeing on TV might make a little more sense.

() (http://www.nytimes.com/2011/02/21/world/europe/21greece.html?pagewanted=all)

I guess you have problems reading because that austerity package isn't for Greece its for Italy! Beet and Italianboy figured that out, but gee who would have guessed that you wouldn't figure that out?

Does tax evasion mean something different in Italian?  You do realize it is okay if there are similarities between financial reforms in different countries?

You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 08:03:33 AM
You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?


Title: Re: The Day After... Italy.
Post by: Gustaf on November 12, 2011, 10:02:30 AM
You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?

So...why did you lecture someone talking about Italy with evidence from Greece then? That doesn't make much sense?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 11:22:10 AM
You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?

So...why did you lecture someone talking about Italy with evidence from Greece then? That doesn't make much sense?

Because he does it all of the time. He shoots his mouth off on something he doesn't have a clue about then gets into trouble and doesn't take responsibility for it. How Link isn't a *complete and universal* joke(as opposed to just a joke) on these forums already I have no idea.


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 03:49:03 PM
You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?

So...why did you lecture someone talking about Italy with evidence from Greece then? That doesn't make much sense?

Because he does it all of the time. He shoots his mouth off on something he doesn't have a clue about then gets into trouble and doesn't take responsibility for it. How Link isn't a *complete and universal* joke(as opposed to just a joke) on these forums already I have no idea.

Disagreeing with Wonkish1=shooting your mouth off on something you don't have a clue about


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 03:55:20 PM
You really can't admit making a mistake, can you? You explicitly said that that the tax evasion was the main reason why Greece was in their predicament. You gave no reason for believing that the same is true for Italy.

Cracking down on tax evasion is but one reform.  I do not know to what degree it plays are role in Italy's current woe's but in a country that gave us the mafia I have to imagine it will do some good.  I do not think that is unreasonable.

By the way Gustaf the thread is titled Italy and my post clearly says Greece.  Where exactly is the confusion?

So...why did you lecture someone talking about Italy with evidence from Greece then? That doesn't make much sense?

Sometimes things that happen in Greece may also occur in Italy.  Some have proposed they may even happen in the United States...

() (http://www.bayoubuzz.com/buzz/latest-buzz/295758-economy-of-downscales-us-becomes-the-next-greece-crises)

It doesn't necessarily make the countries 100% analogous, but when I pick out one reform and suggest it may have merit I don't think that is a reason for you to come unglued.  Just present your evidence showing that it is in no way analogous and doesn't happen in Italy and we will move on.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 05:05:25 PM
Disagreeing with Wonkish1=shooting your mouth off on something you don't have a clue about

This is so funny you got caught red handed not even knowing which country I was referring to and now you can't even admit it. Your just making yourself look like a bigger hack and a liar every time you post.


This is definitely not the first time either. You've done it numerous times in the past. Remember this one: https://uselectionatlas.org/FORUM/index.php?topic=141747.30 (https://uselectionatlas.org/FORUM/index.php?topic=141747.30)? You got caught not even understanding that I was criticizing people in my own party and then acted like it was me that changed positions. That was I believe the first of numerous times you've embarrassed the he!! out of yourself on here.

Keep digging buddy!


Title: Re: The Day After... Italy.
Post by: Beet on November 12, 2011, 05:11:51 PM
Apparently this passes for an austerity package today:

"The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

-An increase in VAT, from 20% to 21%
-A freeze on public-sector salaries until 2014
-The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
-Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
-There will be a special tax on the energy sector

Seriously?

I mean I figure when a politician says "pass this and I'll resign to all of your enjoyment" that you would expect something a little stronger than this. How about maybe:

-20% public sector layoffs?
-20% reduction in public employee pay
-Or adding 50-100 euro co-pays for hospital visits?

I mean at least some real austerity would be something. And we are supposed to expect that the countries are going to cut government spending when things get better? Please!

Well it's a first step. I don't think Mario Monti is coming in, in order to sit on his lap and do nothing further to reform the Italian economy and budget.

As to your proposals, whether they are effective or not depends on what the Italian budget is, no? In the case of Greece, they cut the public employees but the bigger problem was employees of government-owned enterprises, and even more than that, social security payments, so merely cutting the public employees was not sufficient.

Do you have a breakdown of the budget of the Italian republic?

Fair enough, but you can see that I was just making a point about how laughable this "austerity package" is. I didn't give those as examples of the *best* options by a long shot.

That wasn't a rhetorical question. You seem to have a lot of detailed information about this stuff. Does anyone here have a link to an English language Italian budget?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 05:28:37 PM
That wasn't a rhetorical question. You seem to have a lot of detailed information about this stuff. Does anyone here have a link to an English language Italian budget?

I may have a decent amount of detailed information, but everybody's got their limits. I've never seen what the Italian budget looks like. I could probably guess what a few areas look like, but I'm not positive. Since I know that most of Italian police are national police not local police if that is true in other public functions I bet that their is a lot of payroll in the Italian budget relative to other countries(a lot of payroll shows up in other countries in local budgets and 'aid to so and so' locality shows up on the federal budget).

But other than that I bet your guess is as good as mine.


Title: Re: The Day After... Italy.
Post by: Beet on November 12, 2011, 05:32:14 PM
I found some national accounts information here.

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

It seems fairly standard. A quick glance at the broad line items nothing particularly jumps out at me. It's not clear what "general public services" consists of, however.


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 05:40:20 PM
Disagreeing with Wonkish1=shooting your mouth off on something you don't have a clue about

This is so funny you got caught red handed not even knowing which country I was referring to and now you can't even admit it. Your just making yourself look like a bigger hack and a liar every time you post.


My post quite clearly says Greece in bold letters.   If you choose not to read that I can't help.  What I have noticed is that you have not offered any evidence to refute the assertion that perhaps cracking down on tax evasion in Italy is not a bad idea.  Your unwillingness in multiple posts to address this point tells me that it has some merit.  You can type as many belligerent posts calling people stupid and idiots as you want.  That isn't debating.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 06:03:49 PM
My post quite clearly says Greece in bold letters.   If you choose not to read that I can't help.  What I have noticed is that you have not offered any evidence to refute the assertion that perhaps cracking down on tax evasion in Italy is not a bad idea.  Your unwillingness in multiple posts to address this point tells me that it has some merit.  You can type as many belligerent posts calling people stupid and idiots as you want.  That isn't debating.

I don't care if its a good or bad idea! The point is that you thought I posted the austerity package of Greece not Italy, and now your lying to cover it up just like you always do. You are a liar and a hack and every time you post on here without admitting that you mistakenly thought that package was Greece's you dig yourself into a bigger and bigger hole and make yourself out to a bigger and bigger liar and hack.


As to the tax evasion proposals they're probably not going to do much for 2 reasons. 1) The real money is in accumulated tax evasion from the past, but people  don't keep the amount of money they committed tax evasion with around they treat it like its theirs(obviously) so most times if you find it they don't have the money to pay. 2) Limiting cash transactions to 2,500 euros I doubt will net much because most tax evasion in Europe and the US occurs for small things such as: server cash tips(US), lawn care and handyman stuff, taxi's and transportation, etc. While a 2,500 euro limit will cut back on transactions where 1 party doesn't know the problem is that it will do nothing to affect transactions where both parties are okay with tax evasion.

^^This answer still has nothing to do with the fact that you are a liar and hack who wont admit that you thought that austerity package was for Greece.


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 06:58:08 PM

I don't know who appointed you the final arbiter on everything connected to this forum.  Due to lack of clarity I have had my posts misinterpreted and I have misinterpreted other people's posts.  What I have never seen is when there is a simple misunderstanding anyone doggedly go after another person claiming to know what they actually meant and calling them a liar.  There are times I have misinterpreted other people's posts and jumped all over them and when it was pointed out I apologized.  Other times I have asked for clarification prior to jumping all over them.  Sometimes I have asked three or four times until they finally unambiguously say exactly what they meant.  I do not then call them liars.  Frankly this is the first time I have seen this type of extreme behavior, but sadly I know it won't be the last.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 07:02:13 PM
I found some national accounts information here.

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

It seems fairly standard. A quick glance at the broad line items nothing particularly jumps out at me. It's not clear what "general public services" consists of, however.

Some observations here!
1) If you use general government its total government expenditure on there with states, provinces, municipalities, etc. added in(that is why you don't see differences between countries that have particular services handled locally vs. nationally)
2) Once you click 'central government' only then you start to see where the problems are relative to other countries. As I guessed before their public payroll is really high relative to other countries(I used Belgium, Denmark, and Spain and didn't count social security funds) Italy has over 20%, Belgium is 4%, Denmark is 12% and Spain is about 11%.
3) Just like most countries its the social security system that is really a huge chunk of the central budget(since its the federal government that takes care of it you have to add central and social security together). Its about 50% in Italy, its about 50% in France, its about 40% in Belgium, its 18% in Sweden, and 32% in the US.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 07:10:17 PM

I don't know who appointed you the final arbiter on everything connected to this forum.  Due to lack of clarity I have had my posts misinterpreted and I have misinterpreted other people's posts.  What I have never seen is when there is a simple misunderstanding anyone doggedly go after another person claiming to know what they actually meant and calling them a liar.  There are times I have misinterpreted other people's posts and jumped all over them and when it was pointed out I apologized.  Other times I have asked for clarification prior to jumping all over them.  Sometimes I have asked three or four times until they finally unambiguously say exactly what they meant.  I do not then call them liars.  Frankly this is the first time I have seen this type of extreme behavior, but sadly I know it won't be the last.

What crap! I'm not going after you for making a mistake! I'm going after you because you never admit it you just continue along trying to BS your way through so that you never have to admit you were wrong! When I make a mistake I admit it. Remember when I made a mistake about the corporate tax revenue in Ireland and admitted that it was mistake? What did you do, you remember? You turned into a d*ck and tried to null and void everything I had ever said on the topic because I recollected the Irish total revenues as the corporate ones. You think that is how your supposed to treat someone that admits a mistake(to rub it in their face and blow it up)?

Your emphasis is completely wrong! The key is to admit mistakes when you make them and the other side should be gracious enough to accept them as mistakes and move on. You instead never admit mistakes and then turn into a d*ck when someone else admits a mistake to you.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 07:21:00 PM
If you would have just said "Oops my mistake, but who's to say this isn't an issue in Italy as well" I would have left you alone. But instead you try to act like you didn't make one so now I'm going after you for being a liar unwilling to admit any mistakes!


Title: Re: The Day After... Italy.
Post by: Insula Dei on November 12, 2011, 07:48:53 PM
If you would have just said "Oops my mistake, but who's to say this isn't an issue in Italy as well" I would have left you alone. But instead you try to act like you didn't make one so now I'm going after you for being a liar unwilling to admit any mistakes!

Oh, the irony.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 07:52:17 PM
If you would have just said "Oops my mistake, but who's to say this isn't an issue in Italy as well" I would have left you alone. But instead you try to act like you didn't make one so now I'm going after you for being a liar unwilling to admit any mistakes!

Oh, the irony.

Really how so?


Title: Re: The Day After... Italy.
Post by: Link on November 12, 2011, 08:12:06 PM
You instead never admit mistakes and then turn into a d*ck when someone else admits a mistake to you.

1) The thread you linked to quite clearly has me saying I'm sorry   to you.

2) You need to take it easy on calling people on this forum "d*cks."  I'm not the one that continually goes into profanity laced tirades and calls other forum posters "stupid" and "idiots."

3) There are other people that would like to enjoy the economics forum.  Everything that can be politely said on this topic has been said.  I have nothing further to add.  Until the next misunderstanding... Adieu.



Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 08:45:14 PM
You instead never admit mistakes and then turn into a d*ck when someone else admits a mistake to you.

1) The thread you linked to quite clearly has me saying I'm sorry   to you.

2) You need to take it easy on calling people on this forum "d*cks."  I'm not the one that continually goes into profanity laced tirades and calls other forum posters "stupid" and "idiots."

3) There are other people that would like to enjoy the economics forum.  Everything that can be politely said on this topic has been said.  I have nothing further to add.  Until the next misunderstanding... Adieu.


1) Nice apology you also blamed me for the misunderstanding by incorrectly saying that I had "180ed"

2) Fair enough, but you'll also notice that there are a large number of people on these forums(including tons of Democrats) that I treat politely and a small group of about 7-8 people that I frequently slap around because they are posting things that deserve it.

3) Well if you don't want to go through this again and again I'll point out the 3 things that if you didn't do these types of things wouldn't be so common.
-When you don't know much about a topic just post your link and say "How would you respond to this" and I'll do so. But when you post something about a topic you don't know much about and say the other person is wrong using a link you don't understand then your inviting embarrassment for yourself and ridicule from me.
-When you make a mistake admit it and move on


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 09:33:24 PM
I found some national accounts information here.

http://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE11

It seems fairly standard. A quick glance at the broad line items nothing particularly jumps out at me. It's not clear what "general public services" consists of, however.

Some observations here!
1) If you use general government its total government expenditure on there with states, provinces, municipalities, etc. added in(that is why you don't see differences between countries that have particular services handled locally vs. nationally)
2) Once you click 'central government' only then you start to see where the problems are relative to other countries. As I guessed before their public payroll is really high relative to other countries(I used Belgium, Denmark, and Spain and didn't count social security funds) Italy has over 20%, Belgium is 4%, Denmark is 12% and Spain is about 11%.
3) Just like most countries its the social security system that is really a huge chunk of the central budget(since its the federal government that takes care of it you have to add central and social security together). Its about 50% in Italy, its about 50% in France, its about 40% in Belgium, its 18% in Sweden, and 32% in the US.

Beet, curious about your comments on this. At first I thought that "total" was just federal budget. Did you make the same error? Then I figured out that it combined federal, state, and local and then once you clicked 'central' you get just the federal budget(which is the issue when your talking Italian sovereign debt) you start seeing large differences between various countries.


Title: Re: The Day After... Italy.
Post by: SPQR on November 12, 2011, 11:39:08 PM
That wasn't a rhetorical question. You seem to have a lot of detailed information about this stuff. Does anyone here have a link to an English language Italian budget?

I may have a decent amount of detailed information, but everybody's got their limits. I've never seen what the Italian budget looks like. I could probably guess what a few areas look like, but I'm not positive. Since I know that most of Italian police are national police not local police if that is true in other public functions I bet that their is a lot of payroll in the Italian budget relative to other countries(a lot of payroll shows up in other countries in local budgets and 'aid to so and so' locality shows up on the federal budget).

But other than that I bet your guess is as good as mine.
BTW,the cuts on the police budget have already been ridicolous.
Policemen can't even afford to pay for the car's gas. They often have to pay with their own money.


Title: Re: The Day After... Italy.
Post by: Beet on November 12, 2011, 11:53:33 PM
Already complaining about cuts? italianboy8, the cuts have just started! Have you been paying attention at all? The only way you can avoid cuts is to exit the euro, and you've already said no to that. Sometimes I really wonder if a foreigner understands Italy's predicament better than Italians themselves.

wonkish1: I read your post. I did see the difference between central government and general government expenditures. I did see that if you look at general government expenditures, Italy's public employee salary is 19%. But it is lower than Spain. Where did you get your figures? Also, how did you come up with the figures for social security?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 12, 2011, 11:59:58 PM
BTW,the cuts on the police budget have already been ridicolous.
Policemen can't even afford to pay for the car's gas. They often have to pay with their own money.

I have no idea how many police per capita you guys have relative to other countries, but assuming its similar amount(which it does look like you do) I find it odd that making cuts to police in a county like Italy and in municipalities in the US is more politically feasible than cutting the large amount of bureaucrats, cutting public sector compensation, privatizing administrative functions when its cheaper, selling government assets, and making small changes in public benefits including in areas such as welfare, social security, and healthcare. I mean in the US certain violent cities will cut police before they close a library.

That said right now any cuts are a good thing in a country like Italy because the only dispute your country is having right now is between a lot of cuts today or even a ton more tomorrow and yes those police officers will be screaming really hard down the road if you pick the latter.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 12:13:40 AM
Already complaining about cuts? italianboy8, the cuts have just started! Have you been paying attention at all? The only way you can avoid cuts is to exit the euro, and you've already said no to that. Sometimes I really wonder if a foreigner understands Italy's predicament better than Italians themselves.

wonkish1: I read your post. I did see the difference between central government and general government expenditures. I did see that if you look at general government expenditures, Italy's public employee salary is 19%. But it is lower than Spain. Where did you get your figures? Also, how did you come up with the figures for social security?

When you live in a country and are affected by particular changes it can be a lot easier to look at those particular changes with disdain instead of taking a step back looking at the big picture here and realize how much crap your in. For people without a personal attachment to avoiding those kinds of changes its much easier to look at the issue holistically.

I used central government numbers because unless I'm missing something I don't care about Spain's local government spending on government employees because it shouldn't affect the national budget and the sovereign debt picture.

Click central government(because that is what we are looking at) and this is what you should see:

Italy: 2009 total expenditure--459 billion, total compensation--96 billion, 96/459= 20%
Spain: 2009 total expenditure--210 billion, total compensation--24 billion, 24/210 = 11%.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 12:16:44 AM
privatization is never cheaper.  the private is only interested in the functions that can turn a profit.  sticking the public for the bill on the non-profitable essentials.  privatization is a myth


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 12:21:55 AM
privatization is never cheaper.  the private is only interested in the functions that can turn a profit.  sticking the public for the bill on the non-profitable essentials.  privatization is a myth

That is very naive. You assume that public bureaucracies are as efficient as a private company is. There are 2 components to the public vs. private situation. The first is profit which is very small. The second is efficiency which can be absolutely huge!

If your statement was true that we might as well just nationalize everything because if the public sector can be as efficient and innovative as the private sector than you could avoid non reinvested profits(dividends/buybacks) being taken out everywhere and reduce cost, but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

I mean come on there are still many bureaucracies in the US even that are still in the 100% paper era. The notion that they are even close to as efficient as a private company is a joke.


Title: Re: The Day After... Italy.
Post by: SPQR on November 13, 2011, 04:35:49 AM
Already complaining about cuts? italianboy8, the cuts have just started! Have you been paying attention at all? The only way you can avoid cuts is to exit the euro, and you've already said no to that. Sometimes I really wonder if a foreigner understands Italy's predicament better than Italians themselves.
I'm "already complaining about cuts" becaus I actually know what has been going on recently,and don't just look Italy as a bunch of numbers. You are making the  same mistake that ECB did with Greece.
You can't just look at what costs more and say CUT IT. It makes no sense. You need to make cuts where needed,sure,but mostly you need incentives for economic growth.
Now,what kind of an incentive would a State with nil-police be? Those 300 millions you saved with cuts will certainly be lost with less security and less growth.

Economic reform doesn't just mean "cut here and there".


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 06:17:13 AM
I'm "already complaining about cuts" becaus I actually know what has been going on recently,and don't just look Italy as a bunch of numbers. You are making the  same mistake that ECB did with Greece.
You can't just look at what costs more and say CUT IT. It makes no sense. You need to make cuts where needed,sure,but mostly you need incentives for economic growth.
Now,what kind of an incentive would a State with nil-police be? Those 300 millions you saved with cuts will certainly be lost with less security and less growth.

Economic reform doesn't just mean "cut here and there".


Well I would agree that the first place you look for cuts is probably not the quantity of police(especially since its a pretty small part of the budget), but you and me both know that Italy isn't going to cut the entire national police.

But let me be clear Italianboy, Italy is well beyond the point of trying to use the budget for economic growth. Your 10 year is over 6% and rising; there is no way in hell Italy will post even close to a 6% growth rate any time in the near future. The size of the cuts your country is going to have to do to avoid even bigger cuts in the future are going to come from a lot places that piss off the Italian population. Your beyond the point of being able to just knock out the low hanging fruit(which your government hasn't even done yet) and think it will be enough.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 09:05:56 AM
but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

this is totally and demonstrably untrue.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 09:36:11 AM
but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

this is totally and demonstrably untrue.

Really? As I've said before if the public sector was as efficient as the private sector it would be true for every business in an economy as well and the Soviet Union, North Korea, Cuba, etc. would have worked.

Also, explain to me how that fits with the fact that states that have outsourced their medicaid administration to the private sector pay significantly less administration costs and a tiny fraction of the fraud than states that haven't.

Then explain to me how its a good deal for the median individual in this country to only receive approximately a 2% return a year on the money they put into social security? And if its a couple earning $100k it drops to less than .75% a year return on the money put in and if they are married at the poverty level they get a whopping 3% on their money. And if they are single all of those numbers are worse. Treasury bonds will return you more than that over the long term.

Then explain to me how CMS being a 100% paper based bureaucracy for handling all of government healthcare claims is an efficient entity.

Then explain to me how Richard Branson is currently engaging in test flights into space with the ability of sending low orbit satellites to space for a very, very tiny fraction of the cost that NASA spends and charges in doing so and that isn't including the enormous capital investment in NASA which if divided over every flight would make Richard Branson's cost of flight look like pocket change in comparison.

Then explain to me why we spend many times the amount of most countries for a traffic control system that is technologically out of date by about 20 years.

Then explain to me what company in the world spent several hundred million dollars to develop a handheld computer for data collection and announces after several years that they probably wont be able to deliver it for at least another half decade or so like the US census tried to develop for people in the field collecting census information. Particularly funny since their are many industries with a very similar device already invented.


I don't get what world your living in. Compare the fact that the vast majority of government entities can't take debit or credit cards with the fact that you can walk into many restaurants in a developing country and they will accept both of them. I mean the level of blindness to the world and history you have to have in order to make a statement like that is absolutely amazing.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 09:49:02 AM
but as history has shown us the public sector and public enterprise has never, ever been close to as efficient nor as innovative as the private sector and private enterprise is.

this is totally and demonstrably untrue.

I mean this is just an example of beliefs that if you went around the real world saying that to different people you met, people would just laugh you out of the room. Nobody would take you seriously except maybe a majority at an OWS protest.

I mean I just can't possibly understand how someone could be so blind and so absolutely clueless. You're pretty much guaranteeing me that you are a kid that hasn't held a serious private sector job before because otherwise I just don't see how you could post something like that.


Title: Re: The Day After... Italy.
Post by: opebo on November 13, 2011, 10:08:42 AM
Really? As I've said before if the public sector was as efficient as the private sector it would be true for every business in an economy as well and the Soviet Union, North Korea, Cuba, etc. would have worked.

Does every business in the capitalist world 'work'?  No, I believe many of them fail.

Then explain to me how its a good deal for the median individual in this country to only receive approximately a 2% return a year on the money they put into social security?

That's a fantastic return, Wonk.  Risk-free because it comes from the State.

Compare the fact that the vast majority of government entities can't take debit or credit cards with the fact that you can walk into many restaurants in a developing country and they will accept both of them.

Why should they accept those things, Wonk?  It isn't necessary and doesn't add any benefit.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 10:12:04 AM
I'm not going to go through a blow by blow thing with you like Al did, for a variety of reasons.  just a few general points.  first 'efficiency' is a loaded term designed to give basis to all of those liberal economic models that 'prove' unions are the devil, water should be priced out of reach of vast segments of the population, etc.  usually I don't even bother to engage in market logic driven discussion for this reason (and for other reasons) but a few fairly obvious things here can be said, without getting my hands dirty.

the US private pension system is grossly inefficient, however we can reasonably define the term, compared to the public system.  Social Security's administrative costs are about 1% of total money handled.  contrast this with the mass of fiduciaries, investment advisers, lawyers, etc. that have to be paid off in the private system, it's stark.

the elephant in the room is the US health care system.  here 'efficiency' as a loaded term can be stretched so many ways, but one simply look at US health care costs as a share of GDP, which already dwarf that of the other Western liberal democracies, and at the other end look at the outcomes.  millions go without coverage, infant mortality, 37th according to the WHO, etc, etc.  


Title: Re: The Day After... Italy.
Post by: Gustaf on November 13, 2011, 10:42:03 AM
I'm not going to go through a blow by blow thing with you like Al did, for a variety of reasons.  just a few general points.  first 'efficiency' is a loaded term designed to give basis to all of those liberal economic models that 'prove' unions are the devil, water should be priced out of reach of vast segments of the population, etc.  usually I don't even bother to engage in market logic driven discussion for this reason (and for other reasons) but a few fairly obvious things here can be said, without getting my hands dirty.

the US private pension system is grossly inefficient, however we can reasonably define the term, compared to the public system.  Social Security's administrative costs are about 1% of total money handled.  contrast this with the mass of fiduciaries, investment advisers, lawyers, etc. that have to be paid off in the private system, it's stark.

the elephant in the room is the US health care system.  here 'efficiency' as a loaded term can be stretched so many ways, but one simply look at US health care costs as a share of GDP, which already dwarf that of the other Western liberal democracies, and at the other end look at the outcomes.  millions go without coverage, infant mortality, 37th according to the WHO, etc, etc.  

You demonstrate quite clearly that you have no idea what economic research looks like. Great Scott.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 10:46:37 AM
I'm not going to go through a blow by blow thing with you like Al did, for a variety of reasons.  just a few general points.  first 'efficiency' is a loaded term designed to give basis to all of those liberal economic models that 'prove' unions are the devil, water should be priced out of reach of vast segments of the population, etc.  usually I don't even bother to engage in market logic driven discussion for this reason (and for other reasons) but a few fairly obvious things here can be said, without getting my hands dirty.

the US private pension system is grossly inefficient, however we can reasonably define the term, compared to the public system.  Social Security's administrative costs are about 1% of total money handled.  contrast this with the mass of fiduciaries, investment advisers, lawyers, etc. that have to be paid off in the private system, it's stark.

the elephant in the room is the US health care system.  here 'efficiency' as a loaded term can be stretched so many ways, but one simply look at US health care costs as a share of GDP, which already dwarf that of the other Western liberal democracies, and at the other end look at the outcomes.  millions go without coverage, infant mortality, 37th according to the WHO, etc, etc.  

You demonstrate quite clearly that you have no idea what economic research looks like. Great Scott.

No kidding! Not only that, but apparently he's oblivious to all of the items that populate his universe provided by private businesses and how advanced those businesses operate.


Title: Re: The Day After... Italy.
Post by: opebo on November 13, 2011, 11:01:16 AM
Guys, this 'efficiency' you honk on about is bought at the cost of 1) lack of access to the products or services for people without money, 2) misery and even death for the toilers within such organizations, and 3) enormous social problems disrupting society as a whole.  Your case is not made (even if it were true that 'privates' are more efficient than 'publics', which is very dubious in the first place).


Title: Re: The Day After... Italy.
Post by: opebo on November 13, 2011, 12:05:08 PM
It is absurd to suggest that technology comes from the 'private sector'.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 01:53:35 PM
It is absurd to suggest that technology comes from the 'private sector'.

the windfall profits go to the private sector while the public absorbs the downside risk, standard practice.


Title: Re: The Day After... Italy.
Post by: Beet on November 13, 2011, 02:32:52 PM
Already complaining about cuts? italianboy8, the cuts have just started! Have you been paying attention at all? The only way you can avoid cuts is to exit the euro, and you've already said no to that. Sometimes I really wonder if a foreigner understands Italy's predicament better than Italians themselves.
I'm "already complaining about cuts" becaus I actually know what has been going on recently,and don't just look Italy as a bunch of numbers. You are making the  same mistake that ECB did with Greece.
You can't just look at what costs more and say CUT IT. It makes no sense. You need to make cuts where needed,sure,but mostly you need incentives for economic growth.
Now,what kind of an incentive would a State with nil-police be? Those 300 millions you saved with cuts will certainly be lost with less security and less growth.

Economic reform doesn't just mean "cut here and there".


Well sure, I agree with you. But that's now how your masters in Frankfurt, Berlin and Washington DC see it.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 04:16:42 PM
It is absurd to suggest that technology comes from the 'private sector'.

the windfall profits go to the private sector while the public absorbs the downside risk, standard practice.

Unbelievably naive. At least when a company is allowed to fail it ceases to impact the country. When the public sector does business they end up producing loss after loss after loss that just get picked up by taxpayers via unlimited access to the treasury.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 04:24:44 PM
Well sure, I agree with you. But that's now how your masters in Frankfurt, Berlin and Washington DC see it.

Incorrect! Creditors are demanding cuts. That's it because they can do simple math showing that Italy isn't going to get a 6%+ growth rate to keep up with the interest. And if you don't heed their demands than they bail on you and the situation gets worse. Creditors aren't the masters they were willing to lend their money to Italy to sustain its spending.

Instead while creditors set the number its the Italian government that says where cuts are made. So if they decide to start with things like police than that's their own problem not those in Frankfurt, Berlin, or DC.


Title: Re: The Day After... Italy.
Post by: opebo on November 13, 2011, 05:01:41 PM
It is absurd to suggest that technology comes from the 'private sector'.

the windfall profits go to the private sector while the public absorbs the downside risk, standard practice.

Unbelievably naive. At least when a company is allowed to fail it ceases to impact the country. When the public sector does business they end up producing loss after loss after loss that just get picked up by taxpayers via unlimited access to the treasury.

Um.. Wonk, he was talking about the fact that most technology is developed by the State and then 'private industry' just makes off with it risk free.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 13, 2011, 05:28:27 PM
Um.. Wonk, he was talking about the fact that most technology is developed by the State and then 'private industry' just makes off with it risk free.

First that is unbelievably stupid. Every single day there are thousands of little innovations occurring in the private sector because by definition anything that you do, create, or change that allows you to be more efficient is an innovation even if its a tiny change in a system(aka way of doing things).

Second, what does "downside risk" have to do with technology? No instead he was referring to bailouts as if to act like TARP is universal throughout all failures in capitalism instead of a very unique situation that almost never happens(and I didn't even agree with). 99.999% of all businesses that fail are allowed to fail without any absorption of the "downside risk" by the American tax payer.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 06:46:20 PM
I never get better at doing anything in life unless I stand to profit from it.


Title: Re: The Day After... Italy.
Post by: © tweed on November 13, 2011, 06:47:46 PM

Second, what does "downside risk" have to do with technology? No instead he was referring to bailouts as if to act like TARP is universal throughout all failures in capitalism instead of a very unique situation that almost never happens(and I didn't even agree with). 99.999% of all businesses that fail are allowed to fail without any absorption of the "downside risk" by the American tax payer.

actually this isn't what I was talking about.  the downside risk of r & d is that you won't get anywhere, or at least not far enough to cover the initial investment.


Title: Re: The Day After... Italy.
Post by: SPQR on November 13, 2011, 09:06:42 PM
The basic problem is keeping on thinking that the interests on our debt will be at 6% in the long term.
Of course we can't suddenly achieve a 6% GDP growth rate. But,at the same time,the interest rate will go down by quite a bit.


Title: Re: The Day After... Italy.
Post by: Beet on November 14, 2011, 12:39:15 AM
The basic problem is keeping on thinking that the interests on our debt will be at 6% in the long term.
Of course we can't suddenly achieve a 6% GDP growth rate. But,at the same time,the interest rate will go down by quite a bit.

What makes you think Germany will agree to that?


Title: Re: The Day After... Italy.
Post by: opebo on November 14, 2011, 05:22:41 AM
First that is unbelievably stupid. Every single day there are thousands of little innovations occurring in the private sector because by definition anything that you do, create, or change that allows you to be more efficient is an innovation even if its a tiny change in a system(aka way of doing things).

And all those little cheap, minor innovations are based on the incredibly expensive basic research and development carried out by the State.  (that's what I was getting at with the 'make off with' comment).

Second, what does "downside risk" have to do with technology?

Um, are you kidding me?  Obviously the risk of investing large amounts in technologies that don't 'pay off'.  This investment risk is borne by the State, not the rip-off corporations (in most cases).


Title: Re: The Day After... Italy.
Post by: Gustaf on November 14, 2011, 05:39:16 AM
This is a confused off-topic discussion, but it's true that there is a problem of externalities involved in scientific research. That is why we have intellectual property rights.

Really, people.


Title: Re: The Day After... Italy.
Post by: opebo on November 14, 2011, 06:10:22 AM
This is a confused off-topic discussion, but it's true that there is a problem of externalities involved in scientific research. That is why we have intellectual property rights.

However, intellectual property rights to most technological innovations should by rights be held by the US government.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 07:37:07 AM

Second, what does "downside risk" have to do with technology? No instead he was referring to bailouts as if to act like TARP is universal throughout all failures in capitalism instead of a very unique situation that almost never happens(and I didn't even agree with). 99.999% of all businesses that fail are allowed to fail without any absorption of the "downside risk" by the American tax payer.

actually this isn't what I was talking about.  the downside risk of r & d is that you won't get anywhere, or at least not far enough to cover the initial investment.

Further demonstration that you have no clue what your talking about. Downside risk has absolutely nothing to do with that.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 07:39:13 AM
I never get better at doing anything in life unless I stand to profit from it.

No, but in a competitive environment your forced to because your competition is to. When your not in a competitive environment like in the public sector you can get by doing the same routine barely changing anything for 50 years.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 07:51:31 AM
The basic problem is keeping on thinking that the interests on our debt will be at 6% in the long term.
Of course we can't suddenly achieve a 6% GDP growth rate. But,at the same time,the interest rate will go down by quite a bit.

That is just coming from someone that doesn't get this situation at all. Interest rates are r*(risk free rate) + duration + default risk. Now if you can get your default risk down because you are able to grow at a faster rate than the interest since your in debt at 120% of GDP than you may have a shot(but its not going to happen). Otherwise the only way to reduce your default risk is much stronger austerity to cut your deficit by having a large enough primary surplus large enough to cover almost all of the debt service.

If neither of those things happen than the interest rate isn't going to come down a bit they are going to get worse because your default risk is continually higher. There is no way that your interest rate will fall as your country goes from 120% debt to GDP, to 130% debt to GDP, to 140% debt to GDP, etc. If you were creditor how wouldn't you demand more and more interest to continue to roll over that debt. Because each day in that situation the risk continues to get worse.

If Italy can only produce enough austerity to cause a very, very small drop in debt to GDP than than creditors will think that if they kept the budget the same as that the debt to GDP picture will continually get better and they'll cut their interest rate considerably.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 07:52:11 AM
First that is unbelievably stupid. Every single day there are thousands of little innovations occurring in the private sector because by definition anything that you do, create, or change that allows you to be more efficient is an innovation even if its a tiny change in a system(aka way of doing things).

And all those little cheap, minor innovations are based on the incredibly expensive basic research and development carried out by the State.  (that's what I was getting at with the 'make off with' comment).

Second, what does "downside risk" have to do with technology?

Um, are you kidding me?  Obviously the risk of investing large amounts in technologies that don't 'pay off'.  This investment risk is borne by the State, not the rip-off corporations (in most cases).

You have no idea what your talking about!


Title: Re: The Day After... Italy.
Post by: Gustaf on November 14, 2011, 08:18:05 AM
This is a confused off-topic discussion, but it's true that there is a problem of externalities involved in scientific research. That is why we have intellectual property rights.

However, intellectual property rights to most technological innovations should by rights be held by the US government.

There is no reason why the government should have IPRs, since it isn't needed, presumably.


Title: Re: The Day After... Italy.
Post by: SPQR on November 14, 2011, 09:17:39 AM
The basic problem is keeping on thinking that the interests on our debt will be at 6% in the long term.
Of course we can't suddenly achieve a 6% GDP growth rate. But,at the same time,the interest rate will go down by quite a bit.

That is just coming from someone that doesn't get this situation at all. Interest rates are r*(risk free rate) + duration + default risk. Now if you can get your default risk down because you are able to grow at a faster rate than the interest since your in debt at 120% of GDP than you may have a shot(but its not going to happen). Otherwise the only way to reduce your default risk is much stronger austerity to cut your deficit by having a large enough primary surplus large enough to cover almost all of the debt service.

If neither of those things happen than the interest rate isn't going to come down a bit they are going to get worse because your default risk is continually higher. There is no way that your interest rate will fall as your country goes from 120% debt to GDP, to 130% debt to GDP, to 140% debt to GDP, etc. If you were creditor how wouldn't you demand more and more interest to continue to roll over that debt. Because each day in that situation the risk continues to get worse.

If Italy can only produce enough austerity to cause a very, very small drop in debt to GDP than than creditors will think that if they kept the budget the same as that the debt to GDP picture will continually get better and they'll cut their interest rate considerably.
First of all,just like I am not judging you,you should not judge me or my "knowledge" of the situation.
I know perfectly what the interest rate comes from. And I know perfectly that with a bigger debt/GDP ratio would come a higher rate.
What I was saying is that,given the current situation AND the austerity plan that's gonna be put in place,that 6,5% rate does not reflect our actual situation.
Is our debt that much worse than France's to justify such a big difference in interest rates? No.
The actual rate is at 6% because of the "default risk",but that is NOT an objective factor. The rate was going up because people feared we would not pay back,and so our situation worsened and so did the fears,and so on.
Am I saying we don't need reforms? Not at all. We wasted the last 3 years because of Berlusconi saying that "our economy was great",and got stuck in the actual situation. Now,instead, we're even amending the Constitution so that it includes a balanced budget...

What I am saying basically is: the rate kept going up because people didn't believe the old gov't would put in place the reforms needed to improve our debt/GDP ratio. It did not reflect the situation of the economy in that moment,but was rather a bet on its future.
Now there is going to be a new gov't,new majority,reforms,austerity,everything you want...and so there is no reason to believe that we will just slowly slide towards default,and so the default risk should not be as high.


Title: Re: The Day After... Italy.
Post by: SPQR on November 14, 2011, 09:30:05 AM
Here's a piece of an article of the FT that explains in a clearer way what I meant:
"Consider the example of Italy: the net public debt is 120 per cent of gross domestic product;
average maturity is seven years; and the fiscal deficit is 4 per cent of GDP. So its
government needs to raise a fifth of GDP each year. Every creditor knows this. Suppose
creditors feared that the government might be unable to borrow such vast sums. Could Italy
survive by slashing spending? No. If the country tried to redeem its debt out of revenue, it
would need to slash spending by far more than a fifth of GDP, overnight, since the very
attempt would tip the country into a depression. No sane creditor imagines that a country
could roll over its debt in this situation.
Government debt markets are lifted by their own bootstraps: the willingness to lend
depends on the perceived willingness of others to do so, now and in future. Such markets
are exposed to self-fulfilling runs and so need a credible buyer of last resort: the central
bank. The UK has one. Your members do not. In effect, they borrow in foreign currency."


Title: Re: The Day After... Italy.
Post by: © tweed on November 14, 2011, 09:41:16 AM

Second, what does "downside risk" have to do with technology? No instead he was referring to bailouts as if to act like TARP is universal throughout all failures in capitalism instead of a very unique situation that almost never happens(and I didn't even agree with). 99.999% of all businesses that fail are allowed to fail without any absorption of the "downside risk" by the American tax payer.

actually this isn't what I was talking about.  the downside risk of r & d is that you won't get anywhere, or at least not far enough to cover the initial investment.

Further demonstration that you have no clue what your talking about. Downside risk has absolutely nothing to do with that.

turns out I didn't use the preferred neoliberal term -- should still be elementary to discern what I'm talking about.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 09:53:37 AM
First of all,just like I am not judging you,you should not judge me or my "knowledge" of the situation.
I know perfectly what the interest rate comes from. And I know perfectly that with a bigger debt/GDP ratio would come a higher rate.
What I was saying is that,given the current situation AND the austerity plan that's gonna be put in place,that 6,5% rate does not reflect our actual situation.
Is our debt that much worse than France's to justify such a big difference in interest rates? No.
The actual rate is at 6% because of the "default risk",but that is NOT an objective factor. The rate was going up because people feared we would not pay back,and so our situation worsened and so did the fears,and so on.
Am I saying we don't need reforms? Not at all. We wasted the last 3 years because of Berlusconi saying that "our economy was great",and got stuck in the actual situation. Now,instead, we're even amending the Constitution so that it includes a balanced budget...

What I am saying basically is: the rate kept going up because people didn't believe the old gov't would put in place the reforms needed to improve our debt/GDP ratio. It did not reflect the situation of the economy in that moment,but was rather a bet on its future.
Now there is going to be a new gov't,new majority,reforms,austerity,everything you want...and so there is no reason to believe that we will just slowly slide towards default,and so the default risk should not be as high.

You made a statement that the interest rate would go down in the future(you never said anything about it doing so because of austerity). Also you have decried some of the austerity already taking place. So it looked like you were saying that the interest rate would just magically go down on its own without very large changes in the budget. That is false. If you didn't mean that fine. But if you did than I would be right in saying you don't understand the situation.

Of course after strong austerity 6%+ will no longer be the interest rate. That is why I'm advocating strong austerity.

Actually there is a huge difference between your country and France. Italy is in 120% of GDP in debt and France is about 85% of GDP in debt. Actually, a lot of their interest rate increases over the last year has had more to do with situation in the rest of the Eurozone (including your country) dragging them down because of the impact an Italian default(for example) would have on their economy and their banking system.

There are 2 parts to the equation. The first is the fundamental debt picture in Italy which is very ugly. And the second is the confidence creditors have in the government to implement the necessary austerity to right that fundamental picture. It has nothing to do with the confidence in the leadership to 'pay' while the fundamental picture deteriorates(if that is what you sold creditors they would start demanding 20% interest rates... instead they wanted Berlusconi gone because they didn't think he could push through the tough austerity). If you think that Mario Monti will be easily able to cut government expenditure by more than 20% so Italy can fix its fundamental picture I've got some swampland to sell you. Who knows maybe he can pull something like that off, but it certainly isn't going to be easy and the public will be squealing like you wouldn't believe as he single handedly saves your country from the cliff. A cliff that much of your public doesn't even realize how bad it is or they wouldn't be freaking out after every single cut.

The balanced budget amendment is a good thing, but the result of that is going to be very, very tough austerity get ready for it.

Everything in your last paragraph is correct! But don't think that it will be easy, and don't think you wont be ticked by more austerity measures far more difficult than police officers paying for their gas out of their own pocket.


Title: Re: The Day After... Italy.
Post by: © tweed on November 14, 2011, 09:54:58 AM
up to 6.72% today.  there's still hope.  I believe one of my overnight nightmares was that the Euro crisis had been sorted out, Greece wasn't going to end up worse than an 'orderly default', Italy would be fine, etc.  this is the second time I'm dreamt about the Euro debt issues, my unconscious must have a dog in this fight.  the other dream of note had me reading the rantings of some neo-fascist protestant on the employment relationship at the home of a girl I used to hang out with in high school, in front of her father.  they were big Christians, she is even married now (for Christ's sake), at age 20.  the car they gave her to drive around came complementary with a bumper sticker: 'The Big Bang Theory: God Said 'Bang' And it Happened!'  poor girl, but, more importantly, poor me.  the scars cut deep.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 10:02:43 AM
turns out I didn't use the preferred neoliberal term -- should still be elementary to discern what I'm talking about.

"neoliberal term" please you just don't have a clue as to what your saying. Its like watching an episode of Its Always Sunny with Charlie throwing out words like "filibuster" at random points of a conversation.

And I don't think anybody could have figured out what you meant because "downside risk" has nothing to do with "public r&d expenditure". First "downside risk" isn't government spending. Assuming a future bailout it can only mean possible future spending so it takes place later not before. Government expenditure in R&D happens before implementation. It is spending. It isn't risk. And it doesn't result in any future spending once the project is complete.

Your just absolutely clueless and you seem intent on digging yourself deeper in a hole.


Title: Re: The Day After... Italy.
Post by: © tweed on November 14, 2011, 10:06:10 AM
do you think class action lawyers are production?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 10:20:12 AM
Here's a piece of an article of the FT that explains in a clearer way what I meant:
"Consider the example of Italy: the net public debt is 120 per cent of gross domestic product;
average maturity is seven years; and the fiscal deficit is 4 per cent of GDP. So its
government needs to raise a fifth of GDP each year. Every creditor knows this. Suppose
creditors feared that the government might be unable to borrow such vast sums. Could Italy
survive by slashing spending? No. If the country tried to redeem its debt out of revenue, it
would need to slash spending by far more than a fifth of GDP, overnight, since the very
attempt would tip the country into a depression. No sane creditor imagines that a country
could roll over its debt in this situation.
Government debt markets are lifted by their own bootstraps: the willingness to lend
depends on the perceived willingness of others to do so, now and in future. Such markets
are exposed to self-fulfilling runs and so need a credible buyer of last resort: the central
bank. The UK has one. Your members do not. In effect, they borrow in foreign currency."

The Financial Times is f**king clueless. Printing money has never gotten any country out of a sovereign debt crisis when their debt is over 100% of GDP. Creditors just end up demanding more interest because of the inflation. And god forbid you print enough to substantially reduce the total debt to less than 70% of GDP than you would have been better to just default because the rampant hyper inflation does more damage to your economy over the long term than the default could.

If you were to believe that the FT's analysis that sizable austerity would bring on a Depression than you might as well just default. Its the simplest point between A to B as you can get and while your economy goes to $hit overnight at least you'll have some strong growth prospects for the future and wont be burdened by debt as much. Of course than your banking sector, and your public and private pensions blow up, but then you'll be forced into either letting them fail or bailing them out at the expense of lets say 1/4 of  social security payments because nobody will lend to you then.

Painful spending cuts doesn't bring on a depression, FT is full of $hit! Trade has to almost shut down for a depression to occur. A complete collapse of the money supply can almost shut down trade by cutting off the amount of available money to trade with. Extremely high tax rates can almost shut down (non black market) trade by removing any profitability in engaging in it. Painful spending cuts doesn't even come close to shutting down trade because people not dependent on taxpayer money still have excess money to spend and companies can still sell to those people plus sell outside of the country.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 10:32:46 AM
do you think class action lawyers are production?

LOL, I was a little disappointed he didn't continue the conversation because nobody got to see where I was going with that.

Our GDP data classifies class action lawyers as production. Its interesting because all they do is engage in the business of transferring money from one party to another. Since this is an industry than so is anything the government does in transferring money from one party to another(even if that industry wouldn't exist outside of government). That means that everything the government is doing falls under the standard poli sci definition of "production and distribution of capital" within the poli sci definition of socialism(the one Polnut posted and Siboleth agreed with).

Based on what I just posted the public sector is ~40% of the economy so the economy is 40% socialist in nature(using Polnut's definition). Does that make the US socialist? How about when its at 50%? Or 60%? etc. At what point does the government control enough means of production to define the country as a socialist nation? That is why you have to get into a discussion about the % of GDP because all government spending is the government controlling the means of *that* production.


Tweed I don't expect you understand this because of how lost you are already, but hopefully you understand why the class action lawyer question was very pertinent to the discussion.


Title: Re: The Day After... Italy.
Post by: © tweed on November 14, 2011, 10:42:33 AM
you again show that you have no idea what socialism is.  you can try to hide behind the (Polnut's definition) disclaimer but you offered this idea of sectoral, proportional definition in the first place.  the British nationalizations of the 40s can be understood as defeats for socialism because they did nothing to expand worker control over production, always understood to be the core of any meaningful definition of socialism before the bourgeois and Leninist propagandists took over in the 1910s and 1920s.  a public sector workplace that remains hierarchical and totalitarian in nature has no more relation to socialism than a sweatshop.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 10:48:39 AM
you again show that you have no idea what socialism is.  you can try to hide behind the (Polnut's definition) disclaimer but you offered this idea of sectoral, proportional definition in the first place.  the British nationalizations of the 40s can be understood as defeats for socialism because they did nothing to expand worker control over production, always understood to be the core of any meaningful definition of socialism before the bourgeois and Leninist propagandists took over in the 1910s and 1920s.  a public sector workplace that remains hierarchical and totalitarian in nature has no more relation to socialism than a sweatshop.

Well now who ^^^ is changing the definition from the standard accepted poli sci definition of socialism?

My proportional definition grew out of the definition Polnut posted. It has to when you realize that public spending is "production and distribution of capital".


Who f**king cares anyway? Pick whatever definition you want out of a hat. It doesn't change the fact that in real world issues like what we are talking about today in regards to efficiency, technology, innovation, markets, the Eurozone, etc. you are bumbling idiot.


Title: Re: The Day After... Italy.
Post by: © tweed on November 14, 2011, 11:01:59 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 14, 2011, 11:31:57 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

LOL, "limits of discussion set by elite circles" again your absolutely clueless. Things like interest rates, growth, efficiency, budgets, etc. aren't topics picked because they are "limits of the elite". They are picked because they are reality! They may not have meaning to most people, but they have huge consequence to most people(and some people here actually care about helping people in reality not in theory).

You seem intent on having a theoretical discussion. Well when you want to produce positive change for people there are 2 things you need. 1 is idealism(which you clearly have a lot of) and 2 is an understanding of reality(which you have none of). Where they can meet together  you may just be able to do something about it and actually impact peoples lives in a positive way(instead of spending your days dreaming about an unrealistic utopia with more holes than a sponge). Sure I would love it if wealth and supply were infinite and the government could give everybody everything they wanted so we all could go "trala la la la through candy land", but in the real world you actually have to spend time learning about these "limits of discussion" that actually focus on how to grow wealth and supply so that people can have more of what they want and so that you can actually make progress on the idealistic goals you care about.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 14, 2011, 01:38:53 PM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

I trust you don't believe in the above yourself, do you?


Title: Re: The Day After... Italy.
Post by: opebo on November 14, 2011, 02:05:43 PM
...Things like interest rates, growth, efficiency, budgets, etc. aren't topics picked because they are "limits of the elite". They are picked because they are reality!

No, they're State policies.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:00:13 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

LOL, "limits of discussion set by elite circles" again your absolutely clueless. Things like interest rates, growth, efficiency, budgets, etc. aren't topics picked because they are "limits of the elite". They are picked because they are reality! They may not have meaning to most people, but they have huge consequence to most people(and some people here actually care about helping people in reality not in theory).

they're 'picked' because they're the issues that govern the affairs of relations between elite groups.  while they of course have tangential effects on large amounts of people, this is immaterial, as there is no avenue for the people to have an impact on interest rates, the Eurozone crisis, etc.  no avenue except to resist, which is exceedingly dangerous when taken to its limits, and after working 70 hours a week in dead end jobs they're unlikely to have the time or energy to form any opinion at all.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:04:32 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

I trust you don't believe in the above yourself, do you?

what's not to believe?


Title: Re: The Day After... Italy.
Post by: Gustaf on November 15, 2011, 09:14:27 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

I trust you don't believe in the above yourself, do you?

what's not to believe?

The whole cliché...I find it hard to believe that a real person would think of themselves that way. Sticking it to the man!

The idea that economic realities do not matter for people is also ridiculous, but I'm well aware that many think so, unfortunately.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:21:08 AM
I didn't say they don't matter to people, I said 1) they're not designed with the general population in mind, and 2) there is no way for the general population to impact economic policy while remaining within the system, so it may as well not.


I'm obviously not 'sticking it to the man' by posting on a message board, but plan to in the future, by defending terrorists, murderers, etc for a living.  maybe something else, who knows.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 15, 2011, 09:27:09 AM
I didn't say they don't matter to people, I said 1) they're not designed with the general population in mind, and 2) there is no way for the general population to impact economic policy while remaining within the system, so it may as well not.


I'm obviously not 'sticking it to the man' by posting on a message board, but plan to in the future, by defending terrorists, murderers, etc for a living.  maybe something else, who knows.

Well, that is less ridiculous, but potentially contradictory and still rather ridiculous.

See, I get that the second paragraph is decent self-parody but it was hard to tell with that previous post.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:30:06 AM
I think what you're picking up on is that the gap between my enjoying making an argument and believing it is true or correct or whatever is very small or even non-existent.  this shouldn't be taken to mean that I don't 'actually believe' what I say.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 15, 2011, 09:33:14 AM
I think what you're picking up on is that the gap between my enjoying making an argument and believing it is true or correct or whatever is very small or even non-existent.  this shouldn't be taken to mean that I don't 'actually believe' what I say.

This isn't about arguments, it's about, say, perceptions.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:38:04 AM
sure.  and what one perceives is highly dependent on where one is situated.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 09:40:09 AM
btw I feel great right now.  for the first time since I got on this new medication I've had roughly full nights sleep of natural sleep for two nights in a row.  plus I'm buzzed on some iced coffee.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 15, 2011, 09:48:52 AM
sure.  and what one perceives is highly dependent on where one is situated.

I don't really buy that type of fatalism, I'm afraid.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 15, 2011, 11:24:36 AM
I'm not an idiot, I'm just not self-circumscribed within the limits of discussion set by elite circles.  granted this will limit my career prospects if I don't give it up; but that's fine, and I have no intention of doing so.  nearly all of your Serious discussion have absolutely no meaning to the majority of the people on the planet, because it isn't intended to care about them.  I don't necessarily care about them either, but I get a high out of it, and I find them on the whole far more interesting.

This just shows you have no clue!

LOL, "limits of discussion set by elite circles" again your absolutely clueless. Things like interest rates, growth, efficiency, budgets, etc. aren't topics picked because they are "limits of the elite". They are picked because they are reality! They may not have meaning to most people, but they have huge consequence to most people(and some people here actually care about helping people in reality not in theory).

they're 'picked' because they're the issues that govern the affairs of relations between elite groups.  while they of course have tangential effects on large amounts of people, this is immaterial, as there is no avenue for the people to have an impact on interest rates, the Eurozone crisis, etc.  no avenue except to resist, which is exceedingly dangerous when taken to its limits, and after working 70 hours a week in dead end jobs they're unlikely to have the time or energy to form any opinion at all.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 15, 2011, 11:29:59 AM
I didn't say they don't matter to people, I said 1) they're not designed with the general population in mind, and 2) there is no way for the general population to impact economic policy while remaining within the system, so it may as well not.


I'm obviously not 'sticking it to the man' by posting on a message board, but plan to in the future, by defending terrorists, murderers, etc for a living.  maybe something else, who knows.

They aren't "designed" they are mathematics. What your essentially saying is that you refuse to believe that 2+2=4 is beneficial for society and so wouldn't it be so much more awesome if 2+2=5. The only difference is with an economy this math spans a lot more areas and is more complicated. I mean you apparently have no desire to have a clue as to what is reality in the world and instead just want continue to say that you believe in economic unicorns.


Title: Re: The Day After... Italy.
Post by: opebo on November 15, 2011, 05:29:41 PM
They aren't "designed" they are mathematics. What your essentially saying is that you refuse to believe that 2+2=4 is beneficial for society and so wouldn't it be so much more awesome if 2+2=5. The only difference is with an economy this math spans a lot more areas and is more complicated. I mean you apparently have no desire to have a clue as to what is reality in the world and instead just want continue to say that you believe in economic unicorns.

The legal structure (the force behind) capitalist economy is an act of the State, Wonk.  Nothing about the economic affairs and events you see before you today is a 'natural' phenomenon, and it has no similarity to a mathematical equation.  It is simply political choice - the bad choices of the neo-liberal era since Reagan.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 07:15:13 PM
I didn't say they don't matter to people, I said 1) they're not designed with the general population in mind, and 2) there is no way for the general population to impact economic policy while remaining within the system, so it may as well not.


I'm obviously not 'sticking it to the man' by posting on a message board, but plan to in the future, by defending terrorists, murderers, etc for a living.  maybe something else, who knows.

They aren't "designed" they are mathematics. What your essentially saying is that you refuse to believe that 2+2=4 is beneficial for society and so wouldn't it be so much more awesome if 2+2=5. The only difference is with an economy this math spans a lot more areas and is more complicated. I mean you apparently have no desire to have a clue as to what is reality in the world and instead just want continue to say that you believe in economic unicorns.

"...'pure' economic theory, that is economic theory which abstracts from a specific social structure, is impossible.  It would be similar to 'pure' anatomy, abstracted from the specific species which is to be examined."  -Ernest Mandel, 1976

the 'objective' economic logic is, of course, a battlefield of its own.



Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 15, 2011, 07:31:01 PM
I didn't say they don't matter to people, I said 1) they're not designed with the general population in mind, and 2) there is no way for the general population to impact economic policy while remaining within the system, so it may as well not.


I'm obviously not 'sticking it to the man' by posting on a message board, but plan to in the future, by defending terrorists, murderers, etc for a living.  maybe something else, who knows.

They aren't "designed" they are mathematics. What your essentially saying is that you refuse to believe that 2+2=4 is beneficial for society and so wouldn't it be so much more awesome if 2+2=5. The only difference is with an economy this math spans a lot more areas and is more complicated. I mean you apparently have no desire to have a clue as to what is reality in the world and instead just want continue to say that you believe in economic unicorns.

"...'pure' economic theory, that is economic theory which abstracts from a specific social structure, is impossible.  It would be similar to 'pure' anatomy, abstracted from the specific species which is to be examined."  -Ernest Mandel, 1976

the 'objective' economic logic is, of course, a battlefield of its own.

Well first of all your not even arguing with economic practice, but instead with economic measurements calling them "limits of the elite". Even if you wanted to (rather stupidly) argue that you somehow possessed more understanding of the issues to be a better decider of economic policy you wouldn't be able to change the objective realities existing in the world. The current interest rate on a 10 year Italian bond is an objective reality, the current total budget is an objective reality, the total GDP in any country is an objective reality, efficiency is an objective reality, etc. you can't change those things by just willing them to be different. The only thing you can do is change policy that impacts those things.

But since you can't even tell the difference between objective economic metrics and economic theory I don't doubt anybody should take you posting that quote seriously because you don't even understand what he meant.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 07:33:26 PM
you're familiar with Ernest Mandel?


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 15, 2011, 07:40:00 PM

Yes he was a Marxist!

Which by the way its particularly odd that you would quote a man who's economic school of thought has been thrown in the ash heap of history. Its funny though that I doubt you could even grasp the arguments made by famous Marxist economists.

And its quite telling as to how "out there" you exactly are.


Title: Re: The Day After... Italy.
Post by: © tweed on November 15, 2011, 07:58:20 PM
there has actually been a large-scale academic revival of Marxism since the fall of the USSR.


Title: Re: The Day After... Italy.
Post by: Wonkish1 on November 15, 2011, 08:19:45 PM
there has actually been a large-scale academic revival of Marxism since the fall of the USSR.

I wouldn't call it "academic" and instead call it wishful thinking by clueless idiots.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 16, 2011, 04:10:44 AM
there has actually been a large-scale academic revival of Marxism since the fall of the USSR.

Haha! Not in economics, there hasn't. Not that Marx didn't contribute back in the day, but referring to him in modern economics is like referencing Freud in modern psychology (well, worse actually).


Title: Re: The Day After... Italy.
Post by: opebo on November 16, 2011, 11:26:44 AM
there has actually been a large-scale academic revival of Marxism since the fall of the USSR.

Haha! Not in economics, there hasn't. Not that Marx didn't contribute back in the day, but referring to him in modern economics is like referencing Freud in modern psychology (well, worse actually).

Whether or not a particular school of thought is in fashion, or not, need not effect our own preference for that philosophy, Gustaf.

I deplore most 'modern' thought, and after all that is a sign of good taste, humanity, and a healthy skepticism.  I suggest you cultivate the same qualities, and you may be able to grow up into a worthy man.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 16, 2011, 11:55:47 AM
there has actually been a large-scale academic revival of Marxism since the fall of the USSR.

Haha! Not in economics, there hasn't. Not that Marx didn't contribute back in the day, but referring to him in modern economics is like referencing Freud in modern psychology (well, worse actually).

Whether or not a particular school of thought is in fashion, or not, need not effect our own preference for that philosophy, Gustaf.

I deplore most 'modern' thought, and after all that is a sign of good taste, humanity, and a healthy skepticism.  I suggest you cultivate the same qualities, and you may be able to grow up into a worthy man.

You forget that I, being less fashionable than you, do not subscribe to that sort of relativism (at least not when it comes to matters like economics).


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 16, 2011, 03:42:48 PM
Marxism in academia never went away (hey, the most respected English language historian pretty much ever - at least within the profession - is a Marxist). Of course... it's questionable (to put it mildly) whether contemporary academic Marxism is something that would have been understood as 'Marxist' (say) fifty years ago, or whether it has much to do with Marxism as usually understood on the internet or (alas) by undergraduates.

I am, of course, not a Marxist in any sense. Just to make that absolutely clear.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 16, 2011, 04:03:17 PM
Marxism in academia never went away (hey, the most respected English language historian pretty much ever - at least within the profession - is a Marxist). Of course... it's questionable (to put it mildly) whether contemporary academic Marxism is something that would have been understood as 'Marxist' (say) fifty years ago, or whether it has much to do with Marxism as usually understood on the internet or (alas) by undergraduates.

I am, of course, not a Marxist in any sense. Just to make that absolutely clear.

Yes, yes, I'm well aware. But I think there is a very big difference between Marxism as a theory to explain politics or sociology or things like that and as an economic theory.

I can't really speak for its viability in those other fields (and given their nature I would guess that it is very hard to define objectively anyway) but I'd be rather confident in saying that Marxism as a theory in economics is almost completely irrelevant. This is not to say that Marx was an idiot or anything, but economics was very nascent back in his day. There was a lot of important stuff they didn't get back then, which means that his framework cannot really be used to analyze the economy today.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 16, 2011, 04:06:25 PM
Yes, yes, I'm well aware. But I think there is a very big difference between Marxism as a theory to explain politics or sociology or things like that and as an economic theory.

I think there's probably an even bigger difference between Marxism as a theory that explains (on its own) anything, and the better forms of academic Marxism. I actually don't think the former has much (any?) use these days, the latter would be different.


Title: Re: The Day After... Italy.
Post by: Gustaf on November 16, 2011, 06:41:49 PM
Yes, yes, I'm well aware. But I think there is a very big difference between Marxism as a theory to explain politics or sociology or things like that and as an economic theory.

I think there's probably an even bigger difference between Marxism as a theory that explains (on its own) anything, and the better forms of academic Marxism. I actually don't think the former has much (any?) use these days, the latter would be different.

Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 16, 2011, 07:17:51 PM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D


Title: Re: The Day After... Italy.
Post by: Gustaf on November 17, 2011, 03:14:22 AM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D

Since we aren't marxists the outcomes aren't pre-determined, so no. ;)


Title: Re: The Day After... Italy.
Post by: © tweed on November 17, 2011, 08:57:55 AM
Marxism in academia never went away (hey, the most respected English language historian pretty much ever - at least within the profession - is a Marxist).

who is this referring to?  Hobsbawm?


Title: Re: The Day After... Italy.
Post by: opebo on November 17, 2011, 09:32:03 AM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D

Since we aren't marxists the outcomes aren't pre-determined, so no. ;)

Oh good lord.  You think you right-wingers don't bring your pre-conceived agenda to your 'studies'?


Title: Re: The Day After... Italy.
Post by: Gustaf on November 17, 2011, 09:34:50 AM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D

Since we aren't marxists the outcomes aren't pre-determined, so no. ;)

Oh good lord.  You think you right-wingers don't bring your pre-conceived agenda to your 'studies'?

I prefer to call them "studies". 'studies' makes them sort of halfway between dubious and proper.

And I always avoid pre-conceiving. At the most, I'll consider post-conceiving when appropriate.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 17, 2011, 10:09:38 AM
Marxism in academia never went away (hey, the most respected English language historian pretty much ever - at least within the profession - is a Marxist).

who is this referring to?  Hobsbawm?

Of course.


Title: Re: The Day After... Italy.
Post by: Filuwaúrdjan on November 17, 2011, 10:11:14 AM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D

Since we aren't marxists the outcomes aren't pre-determined, so no. ;)

lol

You should have a look at some of the cruder stuff from the Marxist revival in the 1970s. Most has aged really badly...


Title: Re: The Day After... Italy.
Post by: Gustaf on November 17, 2011, 10:19:31 AM
Well, you're moving in territory that is largely alien to me. In economics all theories try to explain something. ;)

Sort of like painting-by-numbers? :P ;D

Since we aren't marxists the outcomes aren't pre-determined, so no. ;)

lol

You should have a look at some of the cruder stuff from the Marxist revival in the 1970s. Most has aged really badly...

Sure, PM me a link.

(I remember reading some text from the 70s by one of my philosophy professors where he argued in favour of terrorism against innocents, as long as it was directed against imperialism)