Your country became more prosperous today.

[bankside]

Today the citizens of Greece voted to make all of our countries more prosperous by denying the insane leftists the opportunity to pull out of the euro.

Greece’s New Democracy party will launch coalition talks Monday after placing first in a hard-fought election that pitted supporters of the German-inspired bailout and austerity programs against millions of voters who condemned them as economy killers.

from the Globe and Mail

A complete abandonment of financial discipline as promoted by Syriza would have resulted in no euros for Greece, and they would have had no choice but to begin using their own monopoly money. I still cannot understand why bondholders had to take any discount on the amount owed. Seizing greek property would have been an effective way to redeem the debt. Instead a country (not some misguided pensioner...not some small business person whose customers weren't as loyal as he thought) but an entire country, with all the access to accountants and economists that implies, has been allowed to steal part of the money it borrowed by not paying it back. And the mad bastards in opposition wanted more.

Fortunately they were denied power.

Thus the Euro has a chance to stay together. Spain will have it's spine reinforced by the Greek example. Italy will be dragged kicking and screaming into responsibillity. The improvements in Europe will allow the United States to avoid a double-dip, or at least only graze it. And that might just allow the chinese property bubble to subside gently instead of imploding.

So no matter which country you live in, today was a good day for your economy.

Three cheers for Greece, who gave us civlization and by the simple act of paying just some of their bills, might also have saved it.

 

[JayHawk]

Thank God for that. We do not need another shoe to drop in this economy saga.

 

[broadshoulder]

M
As far as Greece, there is no Hollande there. And I don't see the situation improving.

Have to agree with this. All eyes are on Hollande and the French to see if his measures work.

What a surprise the Mail is clapping its hands. That right wing rag has a lot to answer for...

 

[Benvolio]

I fear the day the Europeans get their act together. The dollar has been strong lately as a safer haven because of the uncertainty of the Euro. We have exploited the situation with trillions of dollars of borrowing. But if the Euro begins to look safer, the trend will reverse with a dramatic loss in value of the dollar, more difficulty borrowing, higher interest rates and inflation. I don't want to wish bad luck on the Europeans, but I hope they take their time.

 

[T-Rexx]

Today the citizens of Greece voted to make all of our countries more prosperous...

This is most emphatically NOT true.

Austerity has not let to "prosperity" anywhere in Europe. It has been an absolute economic disaster for every country which has attempted it.

What you meant to say was "Today the citizens of Greece voted to make Germany more prosperous..."

 

[Kulindahr]

Aren't the guys who came out on top austerity advocates? More austerity will sink Greece's economy -- how is that good for anyone?

 

[bankside]

It's the principle of the thing. (no pun intended). I do not accept that modern nation states are naively taken advantage of by exploitative creditors. If a country doesn't like the terms on offer, they needn't borrow the money. I also hold the view that any country worthy of a seat at the EU table is sufficiently sophisticated to rate its own credit and thus offer unequivocal guarantees of repayment. If there is ever any credible doubt in a country's self-confidence in the ability to repay, they mustn't borrow the money. To do otherwise is a kind of theft.

It could be said that countries pay a premium built in to their borrowing cost which is designed to induce the borrower to accept a risk of default. I do not accept that governments in particular should borrow money on that basis. Moreover it has not applied here. Greece pines for Eurobonds, saying it isn't fair that they can't borrow as cheaply as Germany. In fact, even without Eurobonds they have managed to benefit from interest rates more suited to German creditworthiness over the last decade. All while making no reforms during that time to merit that creditworthiness in their own names. All while indulging tax evaders and corruption. All while allowing their self-entitled citizens to retire years before the citizens of countries now chided to pay for the Greek Mess.

What if the Germans brought out their chequebook? What reforms should they demand to taxation and governance? All of the reforms that would have allowed Greece to sail through this on their own if only they had shown the internal leadership to accomplish it.

Ditching the euro and using monopoly money instead will not only fail to initiate reform, it will just hit the snooze bar on reform, for a pleasant nap in the Mediterranean sun. The cost of inputs required for economic growth will remain priced in real currency - the euro - and they won't be able to afford the prohibitive exchange rate between the euro and monopoly money.

That would be fine except in this interconnected world we can't afford to grant them the luxury of their indolence. It could wreck the euro and then every other interconnected global economy takes a hit.

All that said, I would actually accept no cuts to government expenditures, with the proviso that expenditures per capita never rise again until revenue growth closes the deficit and reduces the debt to a sustainable level: the limit at which Greece should have stopped borrowing in the first place.

Incidentally I have no financial holdings in Greece beyond the interest that is common to us all.

 

[maxpowr9]

Aren't the guys who came out on top austerity advocates? More austerity will sink Greece's economy -- how is that good for anyone?

This is "kicking the can down the road" while the contagion gets worse in other countries. Throwing more and more good money after bad helps nobody. If Germany doesn't hardline the Euro (France is a lost cause too), it will unravel.

 

[T-Rexx]

This is "kicking the can down the road" while the contagion gets worse in other countries. Throwing more and more good money after bad helps nobody. If Germany doesn't hardline the Euro (France is a lost cause too), it will unravel.

I think the euro will fail because Germany insists on "hardlining" it.

As you have correctly pointed out, only Germany stands to benefit from the current policies. Of the four big economies in the eurozone (Germany, France, Italy, and Spain), only Germany can possibly benefit (although I doubt that she will). Austerity has caused 25% unemployment in Spain, 22% in Greece, and 15% in Ireland. None of those countries have any growth. That is a depression. Further austerity measures (which is what is being demanded) will drive those countries further into depression, and will probably force France and Italy deeper into recession.

As you have also correctly pointed out, the austerity measures do little to solve the problem. Austerity only worsens the economies of the member states of the eurozone, driving the contagion into ever more countries.

It is hardly in Germany's interest to force the rest of Europe into depression (or deeper depression, as the case may be). Moreover, how long do you think the member states of the EU are going to tolerate a monetary system that benefits only a single member, at enormous expense to themselves?

What needs to happen is for the euro to be devalued, which Germany is preventing because of unreasonable fear of what happened to the Deutschmark before WWII. Germany is doing everything it can possibly do to destroy the euro, of which it has been the primary beneficiary.

 

[JB3]

Aren't the guys who came out on top austerity advocates? More austerity will sink Greece's economy -- how is that good for anyone?

They're not austerity advocates in the same way as Merkel is. They're just not stupid enough to think they're more important than the rest of the EU, as Tsipras did. The ejection of Greece from the EU, and the possible collapse of the Euro, would be good for no one and bad for everyone, including the US.

Pick your poison: a collapse of the Euro and a contagion that drags the world back into deep recession, or austerity measures that could stave that off long enough for the world to get its financial house in order.

 

[JB3]

The austerity measures are not getting anything in order and are just spiraling countries deeper into recession. Austerity is making things worse and pushing nations towards double dip recessions. France is going to defy that. Spending appropriately is the only way to get out of this crisis.

And yet the alternative, a withdrawal of austerity measures, would force the entire developed world back into a recession. Unfortunately, many of these countries are feeling the repercussions of their own poor decisions. The US will be there in a couple decades as well. Spending isn't going to fix the problem, because the problem, frankly, is that these countries have already spent far beyond their means.

 

[Kulindahr]

Krugman demolishes the austerity fantasy. So does current experience: those countries which went with some social spending are doing better economically.

This is one instance where a country has to think like a business: you take out a loan to improve things so you can pay back the loan when things are better. Austerity in the US would turn this recession into a depression, something that would thrill the bankers because they'd end up richer as property fell into their laps. But they're about the only ones who would enjoy or benefit from it.

 

[Just_Believe18]

All value of currency is imaginary. The Fed can literally produce trillions of dollars and make it disappear again. The initial stimulus is what saved us from another Great Depression. Since then, austerity measures all across U.S. state budgets has slowed and stagnated growth as a nation when the stimulus money dried up.

The Euro is a strong currency and can handle stimulating the continent rather than forcing the poorer nations to cut back through austerity. We think it's bad here, but in Spain the unemployment rate is about 25%! 25%! That's insane. No wonder nations like Greece and France are rioting in the streets. You can cut too much, you know.

 

[bankside]

Krugman demolishes the austerity fantasy. So does current experience: those countries which went with some social spending are doing better economically.

This is one instance where a country has to think like a business: you take out a loan to improve things so you can pay back the loan when things are better. Austerity in the US would turn this recession into a depression, something that would thrill the bankers because they'd end up richer as property fell into their laps. But they're about the only ones who would enjoy or benefit from it.

I agree that if it is a worrisome failure for a corporation to lay off 20 000 staff, then it is equally bad for a government to lay off 20 000 staff. A country thinking like a business will be looking forward to hiring new staff for all the new work they're bringing in. The trouble is they need paying customers for that work (ie taxpayers) or there is no point borrowing to set it all up.

 

[Kulindahr]

All value of currency is imaginary. The Fed can literally produce trillions of dollars and make it disappear again. The initial stimulus is what saved us from another Great Depression. Since then, austerity measures all across U.S. state budgets has slowed and stagnated growth as a nation when the stimulus money dried up.

That's where Ron Paul is right: the Fed can control the country because it controls the value of the currency.

 

[Kulindahr]

I do.

Maybe you don't realize the culpability of the banks in this whole mess. JP Morgan, as I understand it, stood front and center in Greece's debacle. Not only did they know about the severity of the situation in Greece, they didn't care. The people who wrote the loans got their bonuses, their origination fees, and so on, and didn't care who they hurt.

Bankside, I know you live in Canada, so perhaps you don't fully appreciate the gravity of the situation in terms of the culpability of the United States banks. Our bankers, fueled by some foolish deregulation, wrote toxic finantial instruments on purpose, with malice aforethought, and have pretty nearly derailed the economies of the entire world, including Greece.

Or the bankers did it on purpose. After all, they're the ones -- primarily the central banks -- who invent money and its value, so they're the ones everyone will turn to. So they profit while we all crash (especially with bailouts) and profit while we struggle and profit when we're back on our feet.

 

[Kulindahr]

The buying power of fiat currency is not imaginary.

What props it up is the government's guarantee that dollars will legally satisfy debts.

I think what you mean is that is has no corporeal value.

The value of fiat money is what the central banks want it to be.

 

[Just_Believe18]

The buying power of fiat currency is not imaginary.

What props it up is the government's guarantee that dollars will legally satisfy debts.

I think what you mean is that is has no corporeal value.

Yes, I see your point.

 

[Kulindahr]

There's evidence that big banks actually maneuvered to contribute to those crises/recessions. Why? Because that made small banks fail, and they could either buy them up cheap or move into their territory themselves. That also should teach Republicans a lesson: banks "too big to fail" are too big to be trusted -- they are enemies of liberty because they have the power to jerk the economy around at will.

And that leads to the Federal Reserve, which just happens to be run by people who are high in the ranks of the big banks, who could thus, if they wanted to, manipulate the economy on a grand scale -- for example, if they suddenly decided that all banks had to raise their cash reserves to 33%, with little time to get it done. That's why the 'Paulites' fear and hate the Fed -- and they have good reason, because it really has no oversight.

Odd that the Republicans come down on opposite sides of the bank issue....

 

[bankside]

People usually compare the value of fiat money against that of the gold standard, as though gold is inherently valuable. But the value of gold is set by fiat as well. What is gold worth unless people wanted it for something?