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It looks like Greece has accepted a bunch of previous austerity measures though
Also since if Germany isn't required to provide help to Greece, it is literally to their benefit to destroy them, since the worse Greece does the more of an anchor they are on the price of the Euro. Germany has insourced the benefits of a struggling economy and outsourced the disadvantages. At a certainly point it stops working, but Germany thinks they can wring blood from this stone just a little more.
edit - This made no sense. Disadvantages is what I meant.
What? Most of the peripheral countries should have devalued until they were competitive. That they couldn't is a major reason why the Eurozone is still in such bad shape. Price stability is not benefiting them at all.
Croatia, Bulgaria, Greece
to the bolded: that makes no sense to me. none. I cannot even make the logical leap of faith to attempt to address that.
to the unbolded: yes. absolutely. you can make that point. what is the solution here, though? do we hold a referendum as well on whether or not we want out of the Euro? would that benefit anybody?
ok this is approaching chemtrail conspiracy levels and I will tap out for tinight in order to be able to work tomorrow to be able to browse the forums tomorrow.
Being in the Eurozone doesn't help Greece when they don't have the Euros to import anything from the Eurozone, and no one wants to use Euros to buy from or invest in Greece.
"Orkses never lose a battle. If we win we win, if we die we die fightin so it don't count. If we runs for it we don't die neither, cos we can come back for annuver go, see!".
Other countries don't have Greece's debt problem. Italy actually had less debt than Germany going into this. It was bond speculators that hit them.
You don't think that businesses have thrived on price stability, reducing the risk of unforseen currency fluctuations.
A devaluation race can quickly lead to the bottom and thus negate the effect while simultaneously creating an air of economic weakness.
The worst of the ECB's failure is that they waited for fucking ever to sort of announce that they were a lender of last resort. They didn't need to go on massive bond buying sprees, all they needed to do to cut off most of the panic spirals at the knees was to announce that they would if they had to. And then they wouldn't have to! Heck, when they introduced the OMT program to directly buy government debt, euro government debt yields fell and have remained there even though the program has rejected every single candidate to receive OMT funding. All they had to do was announce a program to theoretically spend money and it worked. No actual spending needed to happen. The markets are dumb, panicky animals.
They are democratically entitled to tell Greece to do whatever. They are not entitled to Greek obedience. When you demand permanent economic ruin of a country and to dictate the fine details of their policies, you should not be shocked, shocked, to find that they say no.
Not to mention that when those elected governments created the ECB, they gave it one specific mandate (keep inflation near 2%), at which it is manifestly failing:
This is one of the main reasons why the debt problems across Europe are so bad. It is also the primary cause of Germany's export boom. Stagnant wages + cheap loans to the rest of Europe = profit.
And, hey, as a central bank, the ECB has another job, to keep solvent but illiquid financial institutions afloat, to prevent banking crises. That's why we have central banks. And while it is perfectly willing to support solvent but illiquid banks in Portugal and Italy through its ELA program, it just froze ELA assistance to Greece. This is not cutting off money to the Greek government. This is cutting off money to the Greek banks. Who, unlike the German banks, did not get involved in any of the incredibly stupid investments that brought this crisis on in the first place. Those banks were bailed out by the ECB and IMF.
This is a deliberate attempt to coerce Syriza. And guess what? The ECB governors are appointed. They don't have a democratic mandate to make political decisions like "should we destroy the Greek banking system to force the Greek government out of the eurozone". They don't have the legal authority to do that, either. This is why central banks - including the ECB - are independent, so that the politicians in power cannot use the central bank as a beatstick to force compliance with their ideology.
But Greece currently has the economic weakness without the ability to devalue and even appear competitive.
I disagree. Multiple posts have shown how this has benefited Germany, and will likely continue to do so.
What is your counter? @tbloxham may have used some colorful language, but the point still stands.
To your first sentence: no, I don't. The risks of currency fluctuations for individual countries are managed the same way the Eurozone is: by central banks. Whatever the perceived advantages of tying your currency to richer countries may be, they are outweighed by the disadvantages, as various countries in Central and South America found out the hard way. So far as Greece and Spain are concerned, the Euro might as well be the gold standard. It is just as arbitrary, rigid, and destructive to economic growth.
I don't understand your second sentence. You're worried about some kind of competition to inflate? What effect is negated? And how does inflation create "an air of economic weakness" that bank panics and mass unemployment do not?
Bond speculation isn't really a thing.
What happened to Greece is that they went into the 2008 crash with a debt of 109% GDP, which was the highest at the time, only Italy being close. They also had the highest running deficit going in.
And because of that, they had no tools to combat the crisis, went with "let's keep spending as we were" for 2 years and by 2010 they were at 146% GDP. At which point the markets starting to distrust the Greek ability to pay back loans. At this point their interest rate, which had been close to the rest of the Eurozone before that, exploded, which caused Greece to be unable to loan anew for debts that were maturing, and the price of of insuring existing debt also skyrocketed (which in effect lowers the value of existing bonds)
Faced with going bankrupt in weeks, the Greeks then loaned money from the IMF and from the Eurozone in trade for austerity measures, because the Eurozone didn't trust Greece to pay back these loans either. And these austerity measures backfired, causing way higher fallout than expected. This further sank Greek GDP (increasing their debt into the 200% GDP ratio)
You can talk a lot about why the Greek debt was at 109% GDP going in, but ultimately that is mostly a Greek internal affair. How much of it is on being a Eurozone member? Does it really hurt their economy that much? It already had pretty much the same debt in 1993, even though they were nearly debtfree in 1984. Is it on the Greek economy being notoriously tax avoidant, with an estimated of 30% of all labor being below the table, the highest in Europe and over 2x the average? Is it the weak Greek statistics agency, which has caused Greece to fail European verification of their budget every year since inception, and have budget shortfalls on every budget in the same period? Is it because it has the oldest population of the Eurozone, and the Greek government was unable or unwilling to cut into pensioning plans? Were they smuggled into the Eurozone by the Greek leaders, or by Northern Europe, or both? It is sometimes hard to remember that in the 1990s everyone was very optimistic about economic growth and future forecasts.
Everyone will tell you a different story, which often says more about their political leanings than whatever the truth is.
Yeah I'm seeing this weird thing where Germany is somehow the sole country making decisions about the Euro, which doesn't seem to be how it actually works.
I get it. Germany is the biggest player, so it is natural to just suppose they are the decision maker. But the Eurozone is composed of many countries who all have a vote. Monetary policy benefited them all, it's just that the blueprint was based on the strong countries.
The advantages are tremendous as long as everything is going okay. Which is kind of the point, the long term wasn't considered in anything but the most positive light. It was a political goal, so everyone put the emphasis on the benefits.
and the US is just the biggest player in the world military. Yet nobody seems to struggle with assigning hegemony there...
Bubbles are pretty great until they pop, but I would not count a boom-bust cycle as a net advantage. Especially not when you lose all control of your fiscal policy in the busts.
A more apt analogy would be the UN.
The US is certainly influential in the UN, and nothing happens if they say no, but at the same time just because they say yes doesn't mean something will happen.
If monetary policy had solely benefited Germany then the other countries wouldn't have gone along with it. The power to say no is not the same as the power to say yes.
When was the last time France won in a dispute with Germany WRT monetary policy?
I think the people you'd talk to outside the forums are probably from your field and would thus be more concerned about the international economic implications rather than the wider view.
People here are probably concerned about the Euro, too. For me, I'm more concerned about how the treatment of Greece goes along and what that means for other countries that might face these same problems in the future.
This is also the second big crisis to hit Europe in recent years that has seen its leadership whiffing a bit on that whole leadership thing. As someone who believes in a strong, united Europe, that troubles me as well.
It's really not going to do that much damage to the Euro, though, since it will be a drawn-out process. Short-term, Greek departure could create deflationary pressure because the Greeks are going to gain a large liquidity preference for the old currency while avoiding the new currency except to pay taxes in (at least initially, or the government could pass laws demanding local businesses accept only drachmas), while uncertainty abroad will want to see people divest from Euros, lowering the price.
But since the entire continent is in a liquidity trap, any inflationary panic on the currency would actually be a damn good thing.
Wheras the damage to the Greek people is very real.
That is not a question we can meaningfully speculate on though. It may do no or a very small damage, or it may begin a gradual withdrawal process back to a mix of currencies, which has downsides of its own, or it may cause a rush to leave followed by a collapse and will be a global catastrophe as the highest GDP area on the planet's currency fails. I'm betting on no real effect myself
@elldren
because it's wrong.
hmmm. Okay, let me clarify here. US monetary policy institutional mandates have been remarkably rigid despite surrounding ideological shifts, not least the rise and fall of Keynesianism. The theory of the lender-of-last-resort (especially as applied to sovereign debt), on the other hand, really only dates from the 1990s (somewhere between Latin American crises of the 1980s and the 1997 Asian financial crisis). Especially during the Keynesian era, there was a lot of confusion over how a central bank mandate to assure the stable supply of credit should be reconciled with a central bank mandate to maintain long-term price stability.
so, when we talk about the rationale for the FDIC, there are two kinds of rationale here. One is the reasoning held by New Dealers of the era (who generally conflated assorted kinds of price stability). One is the reasoning held by independent central banks today, especially in the post S&L crisis era. Contemporary monetary authorities claim that they can distinguish fundamentally insolvent banks from banking panics. Likewise, the IMF has adapted from being a mechanism for stabilizing exchange rates to being an international lender of last resort. It did not actually have this role prior to this ideological shift!
The ECB, in particular, is an exceptionally strong example of a central bank whose theoretical role and mandated role are precisely set out (unlike, say, the infamously ambiguous Federal Reserve dual mandate).
@Morat242 is advancing a claim common in certain heterodox circles (stemming from historically divergent intellectuals paths in refining the concept of price stability, glibly speaking), namely that the ideal role of the central bank is to underwrite sovereign debt (to prevent intrinsic instability). This is then confused with, #1 an adaption of post-1997 orthodox thinking on the nature of self-reinforcing debt crises, and #2 wild conspiracy theories that since the ideal role of the central bank is self-evident, clearly the ECB is diverging from this duly appointed role due to corruption with banker buddies. But in actuality the prospect of the ECB protecting the credit lines of member governments is explicitly anticipated and explicitly prohibited in the treaty establishing the ECB:
and extant bond-buying programmes are instead carried out under Article 18
under the claim (if you believe it!) that the ECB does not influence the market price of sovereign debt:
Shoulda stuck with the greenback
I'd worry more about how Europe would respond if China pops, as prospective financial crises go
The banks have been untangled so Greek banks failing shouldn't hurt the rest of the European banks.
The uncertainty about what happens to Greece, with regards to Eurozone, EU membership, currency and banks is very large and immediate, while the impact for the rest of Europe is much more diffuse and long term.
I wouldn't know much about current thoughts, just new dealers
also I really don't have any input on any of the rest of what he is positing so yeah
If Greece continues its approach of barely collecting taxes it doesn't matter if it leaves the euro, stays in or even gets all of its debt forgiven, It will continue to be a failing state. a government has to have an income.
but that's not really the main problem, which is that post-election, SYRIZA rapidly encountered problems reconciling with an apparently widespread belief that the relevant tax evaders are mostly foreign or dubiously connected to the Greek shipping industry. in reality the tax evaded is from the middle classes, often self-employed, hence amazing proposals like #3 in this document: