Greece 'far right' rejects austerity after 'socialists' capitulate!

[Beet]

Anything more than Greece and Portugal out of the Euro and you likely have a systemic collapse, depression, and lost generation.

Not true. Simply not true.

Do you think the banking system of Spain or Italy can survive being kicked out of the euro? Or that, given the sure devaluation of the peseta and lira, the countries' external debts would not become unbearable?

[ag]

Anything more than Greece and Portugal out of the Euro and you likely have a systemic collapse, depression, and lost generation.

Not true. Simply not true.

Do you think the banking system of Spain or Italy can survive being kicked out of the euro? Or that, given the sure devaluation of the peseta and lira, the countries' external debts would not become unbearable?

Depends on how it is done. What seems increasingly obvious, though, is that Greek economy and Greek democracy might not be able to survive STAYING in the euro.

[Beet]

Perhaps. But default comes first. Default is highly popular in Greece, whereas exiting the Euro is still unpopular (I think the last poll 66% of Greeks still support it). The latter may come eventually, but not before the former.

If they can break things up in an orderly way, that would obviously be best. But I don't see it.

Rather, I see you chasing at phantoms. America dealt with 5-10% inflation in the 1970s, it was bad, but not nearly what Greece or Spain face today, with their 50% unemployment rates for youth. And it's far off. And not certain. The Fed has printed trillions... US inflation today has not exploded. What level of inflation is unacceptable? 6%? Well let them print some, and if inflation starts to get to that level, then let them reverse policy and do it your way. But you are willing to drive the car into the ditch now to avoid a pothole 10 miles down the road, which is only predicted to exist.

What's needed is obvious- expansionary policies. It doesn't matter how you do expansionary policies, just do it somehow. Instead of bailing the Greeks out, get them working for the Germans. Print the money, but don't give it to the Greeks, give it to the Germans... to buy from Greece. Say every German family that vacations in Greece gets their vacation paid for. Germans get free vacations, Greeks get employment. Expansionary, see? Because it gets the economy going. It gets people to work. Such is the nature of these things... you scratch my back, I scratch yours. It's simply a question of coordination. When that fails, is when you get what we see now, and will be seeing.

[ag]

What you call "expansionary policies", really, is debt repudiation through inflation. Unless they generate inflation they won't work - their point is to get out of the debts that cannot be paid, and if there is no inflation, the debts will still be impossible to pay. I agree that Greece has reached a point at which debts have to be effectively abandoned, and doing this through inflation is, probably, least painful. The problem is, Germany does not need to repudiate its debts - it does not need inflation, thank you very much.

The "expansionary policies" won't be adopted - and won't work, if they are adopted - because there is no political mechanism that would make them sustainable. What you call "expansionary policy" will really be a transfer from the North (primarily, though not exclusively, Germany) to the South. There is NO support for this politically - and for a reason. If you start printing money, within a few years you will chase the Germans (and not only the Germans) out of the euro. Once this happens, France will be the next one to go.

If there existed greater political integration, inflating Greece out of the debts would not be necessary: fiscal transfers would have done the trick more efficiently. However, the lack of political integration means that monetary policy won't be sustainable either here.

The main problem is that, once you start printing money to save one country, EVERY national government would be irresponsible towards its own populace, if it behaves fiscally responsibly. If you borrow to the hilt, you can force the ECB to inflate out of your debts - spreading the cost of your borrowing. If you don't, you still suffer from the inflation, forced by other member-states. And there is no pan-European political authority that can internalize what each and every member will be doing. The result will be that the "new euro" will become weaker than the weakest european currency would be on its own. Of course, you could have all member-states pass balanced-budget constitutional amendments (not very efficient, but, ok), to prevent that - but, I am afraid, even then the incentives to misbehave would be strong enough for these to be circumvented. Before long, cutting zeros off the euros will become a common thing to do. Except that, of course, long before it happens, many, if not all, countries simply reintroduce their own currencies.

[ag]

As for the free vacations for the Germans amid the Greek strikes... It would be a lot easier to import the Greeks to Germany to work as domestic help. And, in fact, keeping Greece in euro will do that admirably: since, as long as Greece stays in euro, there will be no jobs in Greece, traveling up north will be the main safety valve  - and will have the added advantage that those who travel won't strike.

The key problem, though, is, Germany is doing fine w/out a "stimulus" as it is. You don't, surely, suggest that Germans be paid in euros only expendable in Greece? You know, money's fungible.

[Beet]

The main problem is that, once you start printing money to save one country, EVERY national government would be irresponsible towards its own populace, if it behaves fiscally responsibly. If you borrow to the hilt, you can force the ECB to inflate out of your debts - spreading the cost of your borrowing. If you don't, you still suffer from the inflation, forced by other member-states. And there is no pan-European political authority that can internalize what each and every member will be doing. The result will be that the "new euro" will become weaker than the weakest european currency would be on its own. Of course, you could have all member-states pass balanced-budget constitutional amendments (not very efficient, but, ok), to prevent that - but, I am afraid, even then the incentives to misbehave would be strong enough for these to be circumvented. Before long, cutting zeros off the euros will become a common thing to do. Except that, of course, long before it happens, many, if not all, countries simply reintroduce their own currencies.

That's a marvelous theory you have there - Europe turning into Zimbabwe- but rather fantastical, and frankly, incredible. It would never happen.

Governments wouldn't borrow to the hilt, because then it would be obvious what they were doing, and the ECB wouldn't help them. There's a difference between a basically stable and growing economy with a government that increases budget deficits 'just for the heck of it' versus a country in the 4th year of recession which can't reduce its deficit despite the self-destruction of the ruling political party because revenues are shrinking too fast and automatic stabilizers from a collapsing labor force are kicking in. Your story doesn't allow for that vast and obvious difference. It's like, if we save the life of this heart disease victim who has been desperately trying to get healthy for years but can't because he was too far gone to begin with ,then every person in the world will start eating Big Macs three times a day. If you disallow for common sense, then of course we're screwed.

On contrast to your fantastical story - I point to the present situation in Greece, and the present social situation in Europe as a whole, taking care to note the widespread disillusionment, slow growth, and youth unemployment - and point to the clear and present dangers ahead if the whole thing were to break up. It's crazy to me at least, how anyone could take your fantastical world as more of a threat than what I'm pointing to, which is happening before our very eyes.

Of course there are many other things I disagree with - expansionary policies do not necessarily mean transfers (unless you mean transfers in both directions), and while they may lead to more inflation than the alternative, their essential character isn't inflation. The essential character is activity. For the Germans complain the Greeks are lazy, yet their austerity policies are putting Greeks out of work -- in other words, making them more lazy. You can't solve a problem of laziness by adding more laziness. If a person is in debt to others, the natural thing to do is for that person to do something to repay others, in as much as he or she is able. That is common sense. This requires activity. What the contractionary policies being pursued now result in the opposite - less activity, less work, less production, less wealth, and less ability to handle debt.

[opebo]

The belief of the Germans (and apparently from above posts ag as well) in 'inflation' as a threat, in the middle of an enormous worldwide deflation is.. well.. I suppose faith is always just that.

[Хahar 🤔]

Has there been much emigration to Cyprus? That would seem to be a logical course of action.

[ingemann]

Anything more than Greece and Portugal out of the Euro and you likely have a systemic collapse, depression, and lost generation.

Not true. Simply not true.

And if you believe it is true, then the only way out is forward: at the very least, give the European Parliament direct taxation authority over the eurozone member states. Create a powerful European government, politically responsible primarily to the European Parliament. Create pan-European political parties and run elections on European issues. Have the first-rate politicians go into European politics - national politics can survive w/ the young and the second-rate.  Otherwise, this is not going to be sustainable - every crisis will be ending up like this. This is merely the consequence of putting the cart before the horse and going blindly into the monetary integration before the political integration. As it is, the whole architecture is simply unsustainable. Even if it doesn't collapse now, it will eventually.

May I suggest that you throw out the American Constitution tomorrow? because what you suggest would be as likely to happen as the 2nd amendment being removed tomorrow. You have to work with what you have, not what you wish you had. You won't get a parliament which can raise taxes for decades into the future, and yes we have seen some expansion of the EU's power versus the states, but your suggestion is still too radical.

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Yes Germany is more or less the heart of the Euro for the simple reason the it's the main trading partner for the much of the core of the Euro countries.

[ag]

Has there been much emigration to Cyprus? That would seem to be a logical course of action.

I don't know. My Turkish friends have noted they started noticing Greeks working in Turkey )

[ag]

You have to work with what you have, not what you wish you had. You won't get a parliament which can raise taxes for decades into the future, and yes we have seen some expansion of the EU's power versus the states, but your suggestion is still too radical.

That was, actually, exactly my point.

BTW, what does US constitution have to do w/ it? I am not an American, in case you wonder ))

[ag]

That's a marvelous theory you have there - Europe turning into Zimbabwe- but rather fantastical, and frankly, incredible. It would never happen.

Of course it will never happen: long before it could, the French and Italian euros will have a floating exchange rate between them )

[ag]

The belief of the Germans (and apparently from above posts ag as well) in 'inflation' as a threat, in the middle of an enormous worldwide deflation is.. well.. I suppose faith is always just that.

Your Lordship must be living in a charmed world, in which prices have been dropping. I live in the real world, in which they are still growing.

[ag]

Of course there are many other things I disagree with - expansionary policies do not necessarily mean transfers (unless you mean transfers in both directions), and while they may lead to more inflation than the alternative, their essential character isn't inflation. The essential character is activity.

There won't be any activity, except for strike activity, in Greece if it stays in the euro for years and years to come. But the German economy will have all activity it needs even without the "expansionary policies".  Germany will suffer the inflation it does not need. Greece won't be helped, unless that inflation is high enough to allow it to get rid of the impossible to pay obligations. The countries need very different things, and there is no political space in which these needs can be reconciled.

[opebo]

The belief of the Germans (and apparently from above posts ag as well) in 'inflation' as a threat, in the middle of an enormous worldwide deflation is.. well.. I suppose faith is always just that.

Your Lordship must be living in a charmed world, in which prices have been dropping. I live in the real world, in which they are still growing.

Please dispense with the personal attack, ag.  I have no recourse here as you are the moderator, so I'd like to appeal to you openly.  My posts here are respectful and to the point, I think it is reasonable to expect the same in return.

The prices of housing are plummeting, as well as many cheap consumables still cheapening.  The only things I've noticed going upward are food, fuel, and cars.  And ultimately, the most important falling price is that of wages - wages are falling hard.

[Beet]

But the German economy will have all activity it needs even without the "expansionary policies".  Germany will suffer the inflation it does not need.

Not as much as Germany will suffer if the euro area breaks up.

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I concede Greece may to be too far gone to stay on the Euro. But anyway, the point isn't for Greece to have inflation so it can get rid of obligations. Greece is going to hard default, and get rid of its obligations like that. The point is to get the Greek economy going again. That's the only thing that will help Greece.

[Gustaf]

The belief of the Germans (and apparently from above posts ag as well) in 'inflation' as a threat, in the middle of an enormous worldwide deflation is.. well.. I suppose faith is always just that.

Your Lordship must be living in a charmed world, in which prices have been dropping. I live in the real world, in which they are still growing.

Please dispense with the personal attack, ag.  I have no recourse here as you are the moderator, so I'd like to appeal to you openly.  My posts here are respectful and to the point, I think it is reasonable to expect the same in return.

The prices of housing are plummeting, as well as many cheap consumables still cheapening.  The only things I've noticed going upward are food, fuel, and cars.  And ultimately, the most important falling price is that of wages - wages are falling hard.

Ag has acted like a moderator should when his posts are reported on his own board - he asked other moderators to step in and judge it in his place. Since the above is not a personal attack it was not infracted.

Anyway, you seem confused as to what inflation is. The price of one commodity rising/falling does not constitute inflation/deflation. It refers to the general price level, of which there are measures available.

[Gustaf]

Here are some yearly inflation figures from a number of countries: as you can see only Japan and Switzerland have negative inflation (=deflation) on a yearly basis.

http://www.global-rates.com/economic-indicators/inflation/inflation.aspx

[ag]

I concede Greece may to be too far gone to stay on the Euro. But anyway, the point isn't for Greece to have inflation so it can get rid of obligations. Greece is going to hard default, and get rid of its obligations like that. The point is to get the Greek economy going again. That's the only thing that will help Greece.

Expansionary euro monetary policy will do very little, if anything, for Greece. You can print euros till Kingdom comes - in the next few years very little will go to Greece. Greek government won't get access to financial markets for years - and few Greek businesses will. It will have to be Germany sending money to Greece. Private money (even Greek private money) will go where it is profitable to invest - to Germany, where it will cause inflation. To make any difference for Greece the thing will have to be beyond huge.

And, don't foget, that foreign debts are only part of the problem. You also have pensions - that, unless there is inflation, will have to be cut and wage contracts, that will still have to be cut. The need for "astureity" will still be there - and the strikes and riots will still be there. Not a great environemnt to invest.

[ag]

Anyway, you seem confused as to what inflation is. The price of one commodity rising/falling does not constitute inflation/deflation. It refers to the general price level, of which there are measures available.

Actually, he does have a point: in some countries (though not in all) housing costs (which are very difficult to measure accurately) are not included in usual inflation measures. I don't know, if he were aware of that, but this could, indeed, be an issue.

[Beet]

Expansionary euro monetary policy will do very little, if anything, for Greece.

Rubbish. What Greece needs is money, and printing creates it.

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Actually, Greece has more potential than Germany, so if the conditions were right (i.e., contractionary policies replaced with expansionary ones), Greece would be more profitable than Germany, and private money would go there.

In any case, I have no problem for profitable investments that cause inflation. Without profitable investments, we would still be throwing stones at each other in Africa, so the Austrians/Ordoliberals will just have to suck it on that one. They can masturbate to low prices in the privacy of their own bedrooms.

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Not at all - nothing needs to be cut, the Greeks just need a chance to earn what they spend. And really, it's possible - the Greek government primary deficit is quite low - about 2 or 3 percent, compared to many other advanced countries.

[opebo]

Ag has acted like a moderator should when his posts are reported on his own board - he asked other moderators to step in and judge it in his place. Since the above is not a personal attack it was not infracted.

Obviously it is a personal attack since it is an attack on the character of his interlocutor rather than statement of an argument about the issue, Gustaf.  But I'm not surprised that you all never infract one another.  My appeal was to him personally to remove the offense.

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It is precisely the dubiousness of this 'general price level' which is the point, Gustaf.  Obviously whoever is calculating it is severely underweighting things like wage rates and the cost of a house. 

[Seattle]

Has there been much emigration to Cyprus? That would seem to be a logical course of action.

I don't know. My Turkish friends have noted they started noticing Greeks working in Turkey )

My father's bestman's brother and wife now have an apartment in Istanbul were they do the majority of their business. They are probably some of the few people who actually are better off now. My uncle is thinking of moving a large part of his business to Turkey and I have heard of many people looking into investing/working in Turkey. As soon as money was involved they completely forgot that they 'hate' all things Turkish .

As to migration to Cyprus... Only so many can go, as there isn't really much in Cyprus....

[Politico]

Now, I happen to suspect that reintroduction fo the drachma is the least bad of the bad options. But they don't have good options.

I agree, and I believe the sooner this happens, the better. The world needs to be sent a signal about what happens when your government operates like Enron. And the Opebos of the world need a lesson in what really happens when you increase your monetary base by a spectacular margin.

[Хahar 🤔]

You have to work with what you have, not what you wish you had. You won't get a parliament which can raise taxes for decades into the future, and yes we have seen some expansion of the EU's power versus the states, but your suggestion is still too radical.

That was, actually, exactly my point.

BTW, what does US constitution have to do w/ it? I am not an American, in case you wonder ))

Now that there are Mexican avatars, you don't have an excuse for not wearing one.