Update on Greece and thinking about the IMF

[Free Trade is managed by the invisible hand.]

So far it seems that the EU has agreed in "principle" to bail out Greece,but this really doesn't mean anything. Conditions in Greece will probably have to get progressively worse in order for any EU bailout to occur, but this does not mean the IMF won't step in before hand.

The IMF is somewhat controversial, but their actions are not only limited to third world countries. For example south korea in 1997 relied on the IMF, and their economy is pretty decent. http://www.hartford-hwp.com/archives/55a/035.html

what are the pros, and cons of the IMF?

[True Federalist (진정한 연방 주의자)]

The IMF at times pushes fiscal austerity too hard, but in a case like Greece where they were in fiscal trouble before this crisis, it's the right solution, not that the public sector unions will like it.

[Free Trade is managed by the invisible hand.]

The IMF at times pushes fiscal austerity too hard, but in a case like Greece where they were in fiscal trouble before this crisis, it's the right solution, not that the public sector unions will like it.

Spending less may shore up the budget deficit,but if it increases unemployment then the budget deficit may get even larger. This is because economic recessions,downturns, or drops in growth have always hurt tax revenue. For example the 2001 recession destroyed the clinton surplus,much like this global recession destroyed Greece's surplus that they have before this recession.

[Free Trade is managed by the invisible hand.]

The IMF at times pushes fiscal austerity too hard, but in a case like Greece where they were in fiscal trouble before this crisis, it's the right solution, not that the public sector unions will like it.

Spending less may shore up the budget deficit,but if it increases unemployment then the budget deficit may get even larger. This is because economic recessions,downturns, or drops in growth have always hurt tax revenue. For example the 2001 recession destroyed the clinton surplus,much like this global recession destroyed Greece's surplus that they have before this recession.

I mean Spain had a budget surplus, and Greece cooked their books to get into the EU. In either event even a country that has a surplus,can have that surplus disappear when a downturn strikes.

[True Federalist (진정한 연방 주의자)]

The IMF at times pushes fiscal austerity too hard, but in a case like Greece where they were in fiscal trouble before this crisis, it's the right solution, not that the public sector unions will like it.

Spending less may shore up the budget deficit,but if it increases unemployment then the budget deficit may get even larger. This is because economic recessions,downturns, or drops in growth have always hurt tax revenue. For example the 2001 recession destroyed the clinton surplus,much like this global recession destroyed Greece's surplus that they have before this recession.

I mean Spain had a budget surplus, and Greece cooked their books to get into the EU. In either event even a country that has a surplus,can have that surplus disappear when a downturn strikes.

Greece ≠ Spain

It's one thing if a country is legitimately having fiscal problems due to a temporary economic downturn, but Greece was having fiscal problems (that they concealed) long before the current crisis.

[Free Trade is managed by the invisible hand.]

The IMF at times pushes fiscal austerity too hard, but in a case like Greece where they were in fiscal trouble before this crisis, it's the right solution, not that the public sector unions will like it.

Spending less may shore up the budget deficit,but if it increases unemployment then the budget deficit may get even larger. This is because economic recessions,downturns, or drops in growth have always hurt tax revenue. For example the 2001 recession destroyed the clinton surplus,much like this global recession destroyed Greece's surplus that they have before this recession.

I mean Spain had a budget surplus, and Greece cooked their books to get into the EU. In either event even a country that has a surplus,can have that surplus disappear when a downturn strikes.

Greece ≠ Spain

It's one thing if a country is legitimately having fiscal problems due to a temporary economic downturn, but Greece was having fiscal problems (that they concealed) long before the current crisis.

I know and I accidently conflated the two,but whatever. The important thing to remember is that recessions normally increase budget deficits mainly because of a fall in tax revenue, while such things as "Bailouts", or "Stimulus packages" have less of an effect. Right now everyone is worrying about a few countries defaulting,but in the aftermath of a financial crisis sovereign defaults normally occur in low grade countries.

[opebo]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

[Free Trade is managed by the invisible hand.]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

Greece does not have its own central bank, and thus their options are limited. Normally a country in this situation could simply make a money order, and than give X amount of the currencies to the creditor country.

[Beet]

It's hard to gauge the sudden reaction of the markets in the past several weeks to the problems in Greece. The fiscal problems were revealed last year; further, Greece is not in danger of imminent default, even if no support is provided, as long as its borrowing rates remain reasonable. The greatest chance of default, ironically, is the self fulfilling prophecy-- exaggerated worries or speculation build up, Greek borrowing costs become prohibitive, and the country is unable to rollover its debt, leading to default. If, on the other hand, it is able to borrow at reasonable rates, it will probably never default for the foreseeable future. And as it is, it probably will not because of support from Germany or the IMF. But even without Germany or the IMF, it probably would not default for a long time if ever even on its own, provided it was able to borrow. Therefore, my sense is that the cost of insurance on Greek debt is overpriced.

Dubai-- whose credit insurance costs have returned to their November highs, and which has already previously reneged, is a different story.

[Free Trade is managed by the invisible hand.]

It's hard to gauge the sudden reaction of the markets in the past several weeks to the problems in Greece. The fiscal problems were revealed last year; further, Greece is not in danger of imminent default, even if no support is provided, as long as its borrowing rates remain reasonable. The greatest chance of default, ironically, is the self fulfilling prophecy-- exaggerated worries or speculation build up, Greek borrowing costs become prohibitive, and the country is unable to rollover its debt, leading to default. If, on the other hand, it is able to borrow at reasonable rates, it will probably never default for the foreseeable future. And as it is, it probably will not because of support from Germany or the IMF. But even without Germany or the IMF, it probably would not default for a long time if ever even on its own, provided it was able to borrow. Therefore, my sense is that the cost of insurance on Greek debt is overpriced.

Dubai-- whose credit insurance costs have returned to their November highs, and which has already previously reneged, is a different story.

ok, but according to "this time is different: 8 centuries of financial folly", we shouldn't assume that investors are completely irrational because they have been willing to accept pretty high premiums of up 11%.

[Free Trade is managed by the invisible hand.]

http://www.calculatedriskblog.com/2010/02/greece-detailed-action-expected.html

lol, looks like it is still an ongoing story and more will come out in the weeks ahead.

[opebo]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

Greece does not have its own central bank, and thus their options are limited. Normally a country in this situation could simply make a money order, and than give X amount of the currencies to the creditor country.

Yes, but I think it makes even more sense for the EU bank to do this, as it would be a drop in the bucket and since the whole Eurozone is in deflation it is all to the good.

[Bono]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

Greece does not have its own central bank, and thus their options are limited. Normally a country in this situation could simply make a money order, and than give X amount of the currencies to the creditor country.

Yes, but I think it makes even more sense for the EU bank to do this, as it would be a drop in the bucket and since the whole Eurozone is in deflation it is all to the good.

Inflation in the Eurozone was 0.9% in December, and the flash estimate puts it at 1% for January.

[opebo]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

Greece does not have its own central bank, and thus their options are limited. Normally a country in this situation could simply make a money order, and than give X amount of the currencies to the creditor country.

Yes, but I think it makes even more sense for the EU bank to do this, as it would be a drop in the bucket and since the whole Eurozone is in deflation it is all to the good.

Inflation in the Eurozone was 0.9% in December, and the flash estimate puts it at 1% for January.

Those measures are not of much use, bono.  The fact that the economy is poor is 'deflationary', regardless what those inaccurate statistics show.

[Free Trade is managed by the invisible hand.]

Fiscal austerity is almost never the answer, and would only be the answer in the case of a very high inflation full employment economic condition.  Fiscal austerity right now in any country (even China) is absolute idiocy.

Greece does not have its own central bank, and thus their options are limited. Normally a country in this situation could simply make a money order, and than give X amount of the currencies to the creditor country.

Yes, but I think it makes even more sense for the EU bank to do this, as it would be a drop in the bucket and since the whole Eurozone is in deflation it is all to the good.

Inflation in the Eurozone was 0.9% in December, and the flash estimate puts it at 1% for January.

Those measures are not of much use, bono.  The fact that the economy is poor is 'deflationary', regardless what those inaccurate statistics show.

so you think the CPI overstates inflation? how so?

[opebo]

Those measures are not of much use, bono.  The fact that the economy is poor is 'deflationary', regardless what those inaccurate statistics show.

so you think the CPI overstates inflation? how so?

It often wildly over or understates it, Hoff, and, admittedly I'm not much concerned about inflation.

But the point is that the condition of low growth and very slack capacity usage (high unemployment, many firms/plants idle), means that any 'inflation' is not systemic, and most certainly not due to any 'overspending' or 'overstimulation' (charges often leveled against Keynesian policy).