If I hadn't included the word anarchy, would you have reacted differently to that? That word does provide some knee-jerk reactions. And I think there is point in further discussion, maybe not in this thread. The end result of Marx's revolution is a form of collectivist anarchy. Bakunin, as antisemitic as he was, promoted the same end result without the dictatorship of the proletariat in between. It exists in several places today and has in the past as well, so if your comment is based off of any such community being totally unrealistic, well, you're wrong. Re: Lenin, Do you suggest any specific source on this matter?
I'm generally happy to discuss Bakunin/Lenin (well, not necessarily happy - I don't find them or their philosophy personally interesting or remotely feasible), but in the context of this thread it's not helpful. Especially since I don't see the Greek parties being "Bakuninites" of any kind - they just want more free stuff. Which I understand - I like free stuff. It's just hard to run a government that way. As for Lenin - almost any work on him that focuses on history will do. He was hardly a philosopher king; he was the most fervent advocate of the October revolution, for instance, whereas his colleagues were opposed to it (Kamenev, Zinoviev, etc.), and the Red Terror was far from a small campaign against the Whites. The Soviet state, from its inception and its destruction of unions was despotic by nature. I think you also give Stalin far less credit for being a Marxist than he deserves. While there's no question that Stalin was a paranoid lunatic, he was most certainly a Marxist - his private papers show that. He'd mark up Marxist tracts in his spare time and there was no other reason for collectivization than his devotion to Marxism. (He could have killed all those Ukranians without bothering with the collective farms if he really wanted, after all.)
Potential English or Spanish employees still wouldn't work for a low wage. They literally couldn't make a living otherwise. There could easily be enough jobs for everybody, it's just that given the socio-economic framework, they're not paying well enough. Which leads to the second point: Competitiveness is not solely determined by price. There are lots of other factors as well, like rigid labor laws that can prevent job creation. Or like education, or infrastructure, or social and political stability, or taxes, or know-how, or government interventions like subsidies, or demographics,... So if a society had a base level of unemployed citizens, which the society deems unacceptably high, it has to increase competitiveness. It has to try to make it possible for jobs to pay enough to support a worker while still being competitive. This can be done through all kinds of measures, starting from deregulation to lower taxes or better education. Only if all that is not enough does the society in question have to internally devalue.
Wrong. There are truck loads of young english workers out there who will even work for free. People don't want them. I am not sure you fully grasp this - but in NZ alone - 100s of people apply for a single position. It doesn't matter how much they debase themselves - there is still only one position. Nice is correct when he speaks of the liquidity trap. Bigger Companies I work with have no need of the workers at any price. In fact, they just sacked a whole lot more because of expected weak demand.
And again with this fantasy. NZ already did all this - yet the workers are still unemployed! Now we should take the failed policies of the last 25 years and repeat them?
This is false. There were no large bailouts of Spanish banks or Italian banks. You're pretending this was a bailout problem - it never was. Spain is experiencing a massive economic recession, which drives tax incomes way down. That's the problem, not any bank bailouts. Yes, actually, you do, because when you file your claim in bankruptcy to recover against the bank's estate, what you're really getting are..........spanish bonds! Except that's false. Spain had lower national debt than Germany in 2007 and was running budget surpluses. There was every reason to think it was a very reliable creditor. If, like Greece, its national debt was too high due to misplaced incentives, why was its debt so low?? Beyond that, Spain's problem is a currency problem, not a debt problem. If Spain could devaluate, none of this would be an issue - it would have rebalanced quickly just like the Asian economies after 97; but it can't. Your claim of too much borrowing due to misplaced incentives is just factually incorrect. It's hard to argue with you when you do that. Ireland's an even better example (and we'll get to it shortly). It's competitiveness that's caused by an unnaturally high currency. Spain just asked for money to save its banks because its property prices are crumbling, and that's who made property loans. But you're also badly conflating cause and effect - Spain has been in crisis for 4 years and has just now asked for a bailout. The main focus of the bailouts, by the way, is Spain itself, not the banks. You're simply saying things that aren't true at this point. Their competitiveness problem won't be reduced because you're driving them into the ground. Even if Spain and Italy liberalized to German levels (or to Irish levels), it wouldn't help them out of this crisis today. That's downright idiotic. If countries can enter and leave the Eurozone, why would anyone hold money in the bank of a weaker country? Why would anyone bank in a Spanish or Italian or Portuguese bank when they could turn into pesos, lira or escudos? You'd ensure a banking crisis throughout Europe. Seriously, this is one of the worst things written on this thread. You're honestly suggesting that not being sure what currency your money will be in tomorrow strengthens that currency? Wow. Just wow. No, it's not. Devaluation is fast and internally painless - only imports are badly effected. Liberalizing the labor market takes ages. You can't "regain competitiveness" at the drop of a hat, it takes a lot of time. Spain was a backward dictatorship (no offense to Spain, but it's kinda true) only 35 years ago! You expect them to be able to compete with Germany within a generation and a half, which is nuts. It happens gradually - and a devaluated currency is incentive to catch up in order to have a better standard of living. Meanwhile. Ireland is basically your dream; very open economy, low taxes, they've done everything right. Except that they can't get the economy to grow at all. Even if they got rid of their national debt by defaulting (which I'm sure wouldn't lead to a crisis at all!) they're about as competitive as you're going to get. And yet they're struggling too. This suggests we're in a liquidity trap, not some sort of punishment story. This is completely and totally false. Germany focuses primarily on more value added exports, which is exactly what other countries can't compete with. Why else would Germany be a world leading exporter (including to the rest of Europe) if it had to "trash part of its production"? WE ARE NOT TALKING ABOUT SOVEREIGN DEBT. You constantly try to pretend this is an issue of sovereign lending - that is not at all the case with Spain. You have a story that you think is correct and you try to fit the facts into it. The low interest rates in this case were for German banks - they had low costs of funding but also low returns in Germany. So they made a giant currency play, of a sort, they borrowed in Germany and lent in Spain (and in the US subprime market), and when the Spanish economy went south, they pulled back. This left a giant debt overhang in Spain with no more private lending to take its place. In the US, this would result in Germany transferring funds to Spain via the federal government, but that can't happen. No, they're not. They're subsidizing the natural result of the Euro. Because if everyone suddenly has fewer assets, everyone will spend even less. You can't simply force half the banks (if not all) into bankruptcy and expect everyone to just shrug and say "well, at least the incentives are now set correctly - back to work we go!". In the early 30s the US did exactly what you suggest, as per Mellon's famous "purge everything" maxim. That worked out horrifically. Again, occasionally setting bad incentives, as you call it, is vastly preferable to causing a depression. There is no medal for setting correct incentives. You don't "win" at capitalism. You seem to think debt defaults are painless friendly solutions. What do you think will happen when everyone's holdings of sovereign bonds becomes worthless at once? Krugman has written a lot about this - it simply isn't true. Beyond that, of course, the biggest European success is Iceland, which succeeded by devaluating. Hmmmm...............
Exactly. American companies are awash with cash at the moment and they're still doing layoffs, because they don't see any prospects for growth.
This is basically the same as NZ. We are the poster child for new-right free market liberalism. We have lowered real wages and deregulated the hell out of the labour market. And I actually support a number of those things as it happens. However the problem now is that we've hugely increased inequality, knocked internal demand and created balance of payments problems. Without a real plan for growth, all that 'competitiveness' achieves nothing for most people.
I agree - I generally support those things too, and yes, I'd prefer that Spain liberalize its labor market more. But forcing a European depression just so that Spain and Italy can make some reforms seems.......well......stupid.
In Greece, there have been a whole host of new articles bandying about the idea that the troika and Germany's actions are not meant on helping the Greek economy but on forcing an exit. "The ECB is no longer accepting Greek bonds as collateral as of last week. It has done this before, but only in special situations such as PSI. Greek banks are now borrowing at 3.50% instead of the 1.50% afforded to the rest of Europe." (An imperfect translation) There was also one by the Guardian wondering whether Greece can "pull an Argentina." Instead of the irrational fear that surrounded a Greek exit as a result of certain politicians seeking votes out of fear, a rational discussion on the effects of an exit has developed. Could this sway the ~70% that support staying in the Euro? We'll see.
It was already 'liberalized' way too much in the past with calamitous social and economic consequences. If anything, Italy's labor market needs to become more rigid in order to offer workers better long-term stability (or long-term stability is only good for capital??). We only have one true issue: too much market freedom. We need to curb it. Otherwise we're ********ed.
Wait, where are they? I'd hire a couple of them in a heartbeat...I've always wanted somebody to take care of my paperwork, somebody to clean my apartment, somebody to walk the dog when it rains and somebody to take care of my car. And I'm pretty sure that just like me, everybody and every business would gladly hire lots of people if the price is right. There is an infinity of potential jobs, the challenge is to actualize them. You're approaching this as if the status quo is cast in stone. But that's not how it works. Demand is not set in stone. Again price is an important (but not the only) factor. When I'm able to sell a coffee table for $10, I'll sell more than I would if I had to price them at $100 in order to be profitable.
The economic situation in the United States and other countries is currently proving you completely wrong. My firm just laid people off and we're not hiring other than for very discrete tasks. In fact, even if you had the right qualifications and showed up tomorrow asking to work for free, we wouldn't take you.
Wait, are you saying that the ECB DIDN'T hand out loads of cash for collaterals hardly worth the name? Of course Spain has a massive economic hole to deal with but the bailout only made it deeper while simultaneously exchanging banks for taxpayers on the lender side, meaning that a potential default becomes ever more expensive for all of Europe, threatening the taxpayers everywhere. Which is pretty much what I said, that's why I'd bail out the small savers, not the banks... I really wonder whether or not you intentionally mix this up or whether you're genuine. I was clearly talking about the Spanish bubble, and there obviously was a bubble. Bubble's usually coincide with economic prosperity, that's the nature of a bubble, so obviously everything was looking fine when it really wasn't (although the high private debt should have alarmed some people). The reason for the bubble were false incentives Of course you're right that Spain could solve that problem by devaluing its currency if it still had one. I'm aware of that. But since that's not an option, we have to do something that achieves the same effect, which means internal devaluation and possibly a (partial) default. Simply handing over money will of course be a quick fix, but it will only perpetuate the problem as it does nothing to address the underlying cause, only to cure the symptoms, keeping the bubble alive a little longer. If internal devaluation is not doable, then the only option left would be for Spain to leave the Eurozone. Sure. But why is it "unnaturally high"? Could it be that it has to do with the fact that Spanish wages and prices rose much faster than the EU average with hardly any gains in productivity? And could that have to do with an economic bubble? You know, one like the one that just popped? Ok, here's the timeline: First, there were false incentives, leading to a massive influx of capital into Spain, which inevitably fueled a bubble, in this case a real estate bubble. Everything was fine for a while, for as long as the illusion lasted. Then came the credit crisis of 2007/2008 and suddenly people became aware of the fact that it might not be such a good idea to base an economy on (private) debt and that the collateral might be worth a lot less than thought. So the money stopped pouring in, which caused the economic crisis in Spain. Real state prices remained high for the time being and only slowly started to crumble (and they're still way too high). That's why the banks are now running into problems. But why bail out Spain in the first place? What's the problem with countries going bankrupt? It happens all the time... The answer is: Fear for the banks. 1) In that scenario, you'd have uncertainty regarding individual countries, in your scenario, you'd have uncertainty regarding all of the Euro zone. 2) If what you say was true, then Souther Europe would have been in a constant banking crisis pre-Euro, because nobody could be sure whether or not they'd devalue their currency... Ireland has also enjoyed a bubble leading to "unnaturally high" prices and wages, soaring ahead of any productivity gains. That doesn't really help competitiveness. Sure, Germany exports a lot. My point was that the argument that Germany profits a lot from the Euro and therefore has to hand over money so that the South can still buy their products is stupid. When I have to give you money so that you can buy my stuff, even assuming you spend it all on my stuff, I'm still making a loss. That's what's happening in Europe on a large scale right now. Southern Europe has "bought" German (and other) products on credit, now they can't serve these credits anymore and ask the rest of Europe to help them out by giving them more credit. Sure, the German exporters are happy, just as my suppliers would be in my analogy. They'd make money as well. But I might as well trash my stuff and achieve the same result as paying you to buy it, probably even a better result because in real life you'd also use part that money to buy Chinese plastic crap. Which is exactly what I was saying. Maybe I should have been clearer on that, I though it was obvious what I meant. Interest rates were too low all over Europe (and most everywhere else) while the risks in the Spanish and US housing markets were underestimated. That's what caused the bubble. The thing about risk assessment is of course that you only really know the real deal after the fact. So while people should have known better, you can't 100% prevent it from happening again. What can be done however is to increase interest rates, which prevents bubbles from ever becoming anywhere near as big as the ones we've seen. Same thing. Why would everybody have less assets? Why would they vanish? In a bankruptcy, companies either get reorganized or liquidated, but nothing of value is destroyed. The only problem in the case of a bank is that other businesses may depend on a loan they got which they might have to pay back prematurely, which could force an otherwise healthy company into bankruptcy. But that's why I suggested a temporary public fund taking over these loans. I don't think that at all. I'm well aware of the fact that it's very painful indeed. But the long term consequences are still preferable. I know that he writes a lot about this, but he's dishonest in his use of statistics, comparing post-crisis growth figures to those at the peak of the bubble, like in Estonia: http://www.huffingtonpost.com/2012/06/06/estonia-krugman-toomas-hendrik-ilves_n_1575937.html Or look at Bulgaria where austerity paved the way for sustainable growth: http://www.novinite.com/view_news.php?id=141303 Fact of the matter is that those Eastern European countries are doing much better than Greece et. al.
http://www.guardian.co.uk/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro Interesting article on Mario Monti's main inspiration. Although union plumbers, in Tuscany and all of Italy, never existed, unfortunately. No wonder Italian politicians who banked their whole career on the existance of the EU and the Euro, both far-right (liberal economists turned prime ministers such as Monti, Ciampi or Prodi) or centre-right (Bersani, La Repubblica party), are literally shitting themselves at the blind anti-European fury mounting in Italy. http://www.lettera43.it/economia/macro/bce-bersani-serve-inversione-di-tendenza_4367559924.htm http://www.agi.it/in-primo-piano/no...governo_antieuro_fare_presto_legge_elettorale
Italian politicians have actually soiled themselves? Wow. The Olympics really have caused our red tops to take their eye off the ball elsewhere.
A good article from the Financial Times Deutschland (FTD) on the current crisis. The FTD has so far very much advocated the anglo saxon view on the crisis, so it comes as somewhat of a surprise to read this piece by Ansgar Belke, economist from the DIW Berlin: http://www.ftd.de/politik/europa/:e...keine-schuldenunion-werden-darf/70073404.html I'll try my best to translate: Why Europe must not become a debt-union A mutualization of public debt will not solve the problems of the Euro zone. The investment-drought in Southern Europe will only come to an end once the national governments show strong leadership. Suggestions regarding the mutualization of public debt are currently booming. And that despite the fact that the problems of moral hazard are obvious in virtually all of its variants. But above all, the view of proponents that the countries that are weak today will be strong tomorrow and vice versa is not supported by the macro economic evidence. This is not only due to the long time divergence of governance indicators like quality of governance and law enforcement within the Euro zone. But also in regards to job-market performance, economic growth and current accounts, long term structural differences have been established between the Euro countries - Greece, but also some other Southern countries are lagging behind while the countries that are as of yet still getting AAA ratings are forming the strongest cohort. Looking at it as a whole, the distribution of macro economic risks within the Euro zone is so glaringly uneven, that an efficient process of mutualizing debt is going to be an exceedingly ambitious project. Furthermore, the main problem of the current Euro crisis cannot primarily be solved by a mutualization of debt. Because at the core of the problem is the long term investor-strike regarding Southern Euro countries. That is founded in the important fundamental data, like for example decreasing competitiveness and the ever worsening political governance. In the face of this drought of cross border capital flow, there is by definition no way around closing the current account deficit for some Southern Euro members. For this, they have to reduce private as well as public consumption in the short term. In the long term, it's unavoidable to steer their resources into the export sector through lower wages and structural reforms. Admittedly: Conditions on the financial markets are crucial for the depth of the current recession in the South of the Euro Zone. But here the ECB, lacking other solutions, has been doing its job for quite some time. But since this only makes sense to avoid a crisis of confidence in the short term, the adjustment of fiscal policy in the Euro periphery is unavoidable against the background of investments that run dry. It is therefore imperative that political leadership contains the reduction of public debt. It should concentrate on a minimization of the costs of foreign trade adjustments and the short term loss in output connected to that - and precisely not primarily on mutualizing debt. It's important to understand that the relatively good performance of the Spanish economy in the years 2010 and 2011 can be traced to a slowdown in the adjustment both of the public sector as well as of the real estate sector. The long term costs of this delay are now becoming visible. They are a consequence of a lack of political leadership and not a reason for debt mutualization. The fact that fiscal rules encourage low refinancing costs has become obvious once again recently with the examples of Italy and Spain. Their bond yields shot up immediately after the implementation of structural reforms lost steam. Obviously, the reduced pressure to reform was in part motivated by the two "Big Berthas" of the ECB. This is an example from the textbooks, which rightly attribute only credible monetary policy rules with a resounding positive effect on the eagerness of governments to reform and on the reduction of expected inflation. Against this background, it's obvious that the recent interest rate reduction by the ECB and the push of further unconventional monetary policies hinted at by Draghi will do little to reduce refinancing costs of the countries in trouble. Additionally, conflicts over monetary policy are becoming increasingly likely, as the ECB functions as central counterpart for cross border lending in the Euro zone. It thereby takes different risks along national lines upon itself. This mutualization of risks could - if the rescue via monetary policy should fail - turn into a full blown mutualization of debt. This is a perfect example for why the pooling of unevenly distributed risks can lead to a disintegration of the entire Euro zone. Especially since it is argued that the unlimited emission of freshly printed Euros against securities - whose value will only remain constant given a convincing solution to the current debt- and balance of payments crisis - is only bridge financing. This is obviously not the case, as can be easily seen with the never ending series of ultra expansive monetary measures. The ECB is simply trapped with its unconventional monetary policy. With ever bigger bazookas does the ECB try to prevent that the Big Berthas of the past lead to depreciations on the ECB balance sheet. In order for the banks not to run out of securities with which they can partake in the refinancing business, the ECB ever lowers the standards of quality for securities. At the same time, the pressure for reform decreases. A clear design fault leads to a temporal dependency of monetary policy and to an ever lower probability of a successful exit from this policy. In for a penny, in for a pound. That's why we need to recognize the central lesson of this diagnosis: The individual scope of indebtedness is simply much lower for a country within the Euro zone than for one outside of it. One cannot leverage this scope by mutualizing debt within the Euro zone since the risks are unevenly distributed. Rather it comes down on national political leadership.
A little known fella called George Soros provides an interesting alternative to Greece and everyone ELSE leaving the Euro... http://www.bbc.co.uk/news/19537693 International financier George Soros has called for Germany to "lead or leave the euro" days before a crucial ruling on the eurozone's bailout fund by Germany's constitutional court. Mr Soros argued that the eurozone should target 5% economic growth. That would require the bloc to abandon German-backed austerity measures and accept higher inflation, he says. Still, never heard of the guy... probably just some know-nothing arsehole.
If it came down to it, I would imagine Germany would leave (at least the German voters would want that), I would also imagine The Netherlands and Austria following Germany out the door. I imagine they would be like England, still part of the EU but outside the monetary union. I bet Tony Blair and the English are sating we told you the monetary union was not a good idea.
Some are, (although I'm not sure about Blair because nobody really listens to him any more), but some are like me... they think the idea would be OK IF the people involved knew even schoolboy economics and that you can't CUT your way out of a recession.
Well England is doing the same right, so I guess the English MPs did not take that class. But I was talking about how the English always knew that the monetary Union was a bad idea and they wanted nothing to do with that. I think the Germans must be starting to feel that the British were right.