The Day After... Italy.
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SPQR
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« Reply #75 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.

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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.
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Insula Dei
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« Reply #76 on: November 10, 2011, 07:32:55 PM »

The Markets are athirst, or so it seems.
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Beet
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« Reply #77 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.

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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... ...
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Wonkish1
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« Reply #78 on: November 10, 2011, 07:42:57 PM »
« Edited: November 10, 2011, 07:46:51 PM by Wonkish1 »

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.

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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.
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Beet
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« Reply #79 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.
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Wonkish1
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« Reply #80 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*!
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Beet
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« Reply #81 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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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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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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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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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.
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Filuwaúrdjan
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« Reply #82 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.
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Filuwaúrdjan
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« Reply #83 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?
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Wonkish1
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« Reply #84 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.

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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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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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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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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.
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Beet
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« Reply #85 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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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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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.
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Wonkish1
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« Reply #86 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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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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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.
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Beet
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« Reply #87 on: November 10, 2011, 10:28:15 PM »
« Edited: November 10, 2011, 10:30:49 PM by Beet »

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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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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I think economics is complicated but that fundamentally, the problem with France and Italy is their currency membership, not their debt level.
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Wonkish1
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« Reply #88 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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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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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.
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Beet
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« Reply #89 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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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! Smiley

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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.
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Wonkish1
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« Reply #90 on: November 10, 2011, 11:12:54 PM »
« Edited: November 10, 2011, 11:17:10 PM by Wonkish1 »

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! Smiley

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.
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Beet
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« Reply #91 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! Smiley

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. Smiley

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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.
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Wonkish1
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« Reply #92 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.
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opebo
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« Reply #93 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.
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Wonkish1
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« Reply #94 on: November 11, 2011, 06:43:35 AM »
« Edited: November 11, 2011, 06:45:54 AM by Wonkish1 »

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!
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Wonkish1
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« Reply #95 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.
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Miamiu1027
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« Reply #96 on: November 11, 2011, 09:31:08 AM »

all the way down to 6.51.
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opebo
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« Reply #97 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.
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SPQR
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« Reply #98 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).
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Link
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« Reply #99 on: November 11, 2011, 12:50:44 PM »
« Edited: November 11, 2011, 01:00:38 PM by Link »

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.

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