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Asunto: »Political & economic ideologies (communism, capitalism et
[i]One of the most frequently used words in economics, and in popular and political discussions of it, is “competitiveness”[&i]
That's 50% true: it is frequently used in popular an political discussions, but seldom in actual economics. Moreover, in popular and political discussions "competitiveness" is given a vague and multiple meaning, only partially related to the meaning economist give to it when using it in a more technical context.
That's 50% true: it is frequently used in popular an political discussions, but seldom in actual economics. Moreover, in popular and political discussions "competitiveness" is given a vague and multiple meaning, only partially related to the meaning economist give to it when using it in a more technical context.
the greece problems were created by PRIVATE debt.
It's a failure of market caused by the fact they got euro currency.
A lot of money were borrowed versus greeks, because nobody should fear nomore for dracma's devaluation.
Even if a country doesn't join the EU, it happens anyway. People can borrow money based on foreign currency, and they borrow as much as banks want to lend. In Hungary HUF based interest rates were very high, CHF, EUR, etc based ones were quite low, it seemed that everyone could afford that. So banks pushed out as much loans as they could into the private sector. Households didn't think that HUF would devaluate that much, or they weren't even informed properly. But companies (and even government) were also borrowing foreign currency based loans mostly, they were so much better than HUF based ones. That's why devaluation risk didn't hold back neither people, nor companies, and not even government from foreign loans.
And as far as I know, this happened in Poland and the Czech Rep. too, but the greatest proportion was in Hungary. Now the debt/gdp ratio is not that high as in Greece, but it's devaluating, lots of people lost everything, companies are still strained and government figures out a now kind of tax day by day, yet our debt didn't lower at all, because we don't have EUR and while our GDP keeps devaluating, our debt doesn't. Of course many of these loans were changed (or were rather forced to change) into HUF based ones by now.
So it's actually a big advantage for Eurozone, that they don't have to deal with this.
It's a failure of market caused by the fact they got euro currency.
A lot of money were borrowed versus greeks, because nobody should fear nomore for dracma's devaluation.
Even if a country doesn't join the EU, it happens anyway. People can borrow money based on foreign currency, and they borrow as much as banks want to lend. In Hungary HUF based interest rates were very high, CHF, EUR, etc based ones were quite low, it seemed that everyone could afford that. So banks pushed out as much loans as they could into the private sector. Households didn't think that HUF would devaluate that much, or they weren't even informed properly. But companies (and even government) were also borrowing foreign currency based loans mostly, they were so much better than HUF based ones. That's why devaluation risk didn't hold back neither people, nor companies, and not even government from foreign loans.
And as far as I know, this happened in Poland and the Czech Rep. too, but the greatest proportion was in Hungary. Now the debt/gdp ratio is not that high as in Greece, but it's devaluating, lots of people lost everything, companies are still strained and government figures out a now kind of tax day by day, yet our debt didn't lower at all, because we don't have EUR and while our GDP keeps devaluating, our debt doesn't. Of course many of these loans were changed (or were rather forced to change) into HUF based ones by now.
So it's actually a big advantage for Eurozone, that they don't have to deal with this.
Even if a country doesn't join the EU, it happens anyway. People can borrow money based on foreign currency, and they borrow as much as banks want to lend. In Hungary HUF based interest rates were very high, CHF, EUR, etc based ones were quite low
Yes, history is full of examples of foreign currency debt. But there is also substantial evidence of exchange rate pegging being and high inflows of funds, which are the ones driving the foreign currency interest rate down. Such inflows allow the peg to survive, i.e., the domestic currency is typically overvalued with respect to the exchange rate that would make the current account balance equal to zero. The interest rate remains low as long as expected depreciation remains low. However, the country becomes very vulnerable to international liquidity shocks - which may be completely unrelated to what is happening inside the country. For emerging economies, it is usually sufficient for one of them to get into trouble for international investors fleeing away from most of them simultaneously. Whatever the cause, this reversal of financial flows is what the economic literature calls a "sudden stop" episode. As soon as the net inflow of fund ceases, the fixed exchange rate becomes unsustainable, interest rates skyrocket and a combination of currency devaluation and debt restructuring ensues.
The Euro case has in principle the difference of being a currency union instead of an exchange rate peg. However, in practice it worked as a peg: the euro replaced the German mark, and smaller economies behaved as if pegging to the German mark. The key is that the real economy never was as integrated as financial markets, and ECB's monetary policy mimicked that of the Bundesbank, following the central (Germany, France) cycle. Peripheral economies like Greece or Spain went through the experience of Latin American economies pegging to the dollar: first, a phase of low interest rates and substantial capital inflows that fueled gdp growth without productivity growth (including a housing bubble in the spanish case, not sure about the greek). Then, with the 2007-2009 global financial crisis, they suffered their own "sudden stop". But being a currency union instead of a peg, the devaluation did not take place, although partial "exits" of the euro were discussed. The huge recession that came next (>20% unemployment in both countries) is equivalent to the experiences of emerging economies "entrenched" in the fixed exchange rate, trying to delay any devaluation. Such "entrenchments" can never be sustained by the country alone, sonce no amount of reserves would withstand an attack on the currency (ask Soros :P). In Latin America, it was usually the IMF who was supporting the countries as they delayed the unavoidable (in all -100%- of the cases the peg had to be abandoned and the debt restructured, since adjustment through economic depression is extremely slow and politically unfeasible). In Europe, it is the "Troika", and the Greek elections just prove that the recessive solution is as unfeasible in Europe as it was elsewhere.
Now, there could be a different ending to the European case, but it seems unlikely to happen. In a truly "European economy", Greece would not be a problem at all. It represents 2% of the European gdp. If any state of a comparable relative size within the US was in a similar situation, it wouldn't even need to be discussed. But there is no European fiscal policy to talk about, the ECB is barely, timidly starting to think a little be as a European central bank (as opposed to a core central bank with peripheral countries pegging to it), and Greek problems (and discussions of "grexit" etc) remain very much the problems of a fixed exchange rate country who is holding to the peg too long :-/
Yes, history is full of examples of foreign currency debt. But there is also substantial evidence of exchange rate pegging being and high inflows of funds, which are the ones driving the foreign currency interest rate down. Such inflows allow the peg to survive, i.e., the domestic currency is typically overvalued with respect to the exchange rate that would make the current account balance equal to zero. The interest rate remains low as long as expected depreciation remains low. However, the country becomes very vulnerable to international liquidity shocks - which may be completely unrelated to what is happening inside the country. For emerging economies, it is usually sufficient for one of them to get into trouble for international investors fleeing away from most of them simultaneously. Whatever the cause, this reversal of financial flows is what the economic literature calls a "sudden stop" episode. As soon as the net inflow of fund ceases, the fixed exchange rate becomes unsustainable, interest rates skyrocket and a combination of currency devaluation and debt restructuring ensues.
The Euro case has in principle the difference of being a currency union instead of an exchange rate peg. However, in practice it worked as a peg: the euro replaced the German mark, and smaller economies behaved as if pegging to the German mark. The key is that the real economy never was as integrated as financial markets, and ECB's monetary policy mimicked that of the Bundesbank, following the central (Germany, France) cycle. Peripheral economies like Greece or Spain went through the experience of Latin American economies pegging to the dollar: first, a phase of low interest rates and substantial capital inflows that fueled gdp growth without productivity growth (including a housing bubble in the spanish case, not sure about the greek). Then, with the 2007-2009 global financial crisis, they suffered their own "sudden stop". But being a currency union instead of a peg, the devaluation did not take place, although partial "exits" of the euro were discussed. The huge recession that came next (>20% unemployment in both countries) is equivalent to the experiences of emerging economies "entrenched" in the fixed exchange rate, trying to delay any devaluation. Such "entrenchments" can never be sustained by the country alone, sonce no amount of reserves would withstand an attack on the currency (ask Soros :P). In Latin America, it was usually the IMF who was supporting the countries as they delayed the unavoidable (in all -100%- of the cases the peg had to be abandoned and the debt restructured, since adjustment through economic depression is extremely slow and politically unfeasible). In Europe, it is the "Troika", and the Greek elections just prove that the recessive solution is as unfeasible in Europe as it was elsewhere.
Now, there could be a different ending to the European case, but it seems unlikely to happen. In a truly "European economy", Greece would not be a problem at all. It represents 2% of the European gdp. If any state of a comparable relative size within the US was in a similar situation, it wouldn't even need to be discussed. But there is no European fiscal policy to talk about, the ECB is barely, timidly starting to think a little be as a European central bank (as opposed to a core central bank with peripheral countries pegging to it), and Greek problems (and discussions of "grexit" etc) remain very much the problems of a fixed exchange rate country who is holding to the peg too long :-/
Now, there could be a different ending to the European case, but it seems unlikely to happen. In a truly "European economy", Greece would not be a problem at all. It represents 2% of the European gdp. If any state of a comparable relative size within the US was in a similar situation, it wouldn't even need to be discussed. But there is no European fiscal policy to talk about, the ECB is barely, timidly starting to think a little be as a European central bank (as opposed to a core central bank with peripheral countries pegging to it), and Greek problems (and discussions of "grexit" etc) remain very much the problems of a fixed exchange rate country who is holding to the peg too long :-/
I'm starting to think that there's no real problem at all. I Greece doesn't pay it debts, everyone will be upset and it is, arguably, not fair to citizens in Western Europe, but I really doubt that it will have a big economic effect. The effect will mostly be political.
I'm starting to think that there's no real problem at all. I Greece doesn't pay it debts, everyone will be upset and it is, arguably, not fair to citizens in Western Europe, but I really doubt that it will have a big economic effect. The effect will mostly be political.
I'm starting to think that there's no real problem at all. I Greece doesn't pay it debts, everyone will be upset and it is, arguably, not fair to citizens in Western Europe, but I really doubt that it will have a big economic effect. The effect will mostly be political.
There's no danger at all from Greece to euro.
Tsipras is only another Hollande. more radical in his critics, but he will end as the France p.m..
Doing what Germany needs.
Germany now needs an expansion of budgets in their buyers markets, or their export-doped economy is at risk, so we'll have a little more air to breathe...
Welcome to Europe, the land of brotherhood between countries..
:(
There's no danger at all from Greece to euro.
Tsipras is only another Hollande. more radical in his critics, but he will end as the France p.m..
Doing what Germany needs.
Germany now needs an expansion of budgets in their buyers markets, or their export-doped economy is at risk, so we'll have a little more air to breathe...
Welcome to Europe, the land of brotherhood between countries..
:(
Maybe you should blame yourself the Greek people for electing idiots for so many years, who made a complete mess of your country and not the ones who are helping.
of course!
and you can blame yourself for electing idiots that gave your money to save mostly German and France banks... ;)
of course!
and you can blame yourself for electing idiots that gave your money to save mostly German and France banks... ;)
Now, there could be a different ending to the European case, but it seems unlikely to happen. In a truly "European economy", Greece would not be a problem at all. It represents 2% of the European gdp. If any state of a comparable relative size within the US was in a similar situation, it wouldn't even need to be discussed. But there is no European fiscal policy to talk about, the ECB is barely, timidly starting to think a little be as a European central bank (as opposed to a core central bank with peripheral countries pegging to it), and Greek problems (and discussions of "grexit" etc) remain very much the problems of a fixed exchange rate country who is holding to the peg too long :-/
Here you show what is missing to EU to stand the euro currency:
a strong political will of creating a state (and leaving our national states).
Here you show what is missing to EU to stand the euro currency:
a strong political will of creating a state (and leaving our national states).
Greeks economy is ill. sad fact.
Greeks reforms are stoped.
Greeks debts are still here.
And what is solution get out of crises?
Read about it here :-D
http://www.zerohedge.com/news/2015-01-28/barricades-are-down-syriza-already-rolling-back-austerity-reforms
I dont know who will pay it, but I know that greeks are able to make new debts every day, the heros !
Greeks reforms are stoped.
Greeks debts are still here.
And what is solution get out of crises?
Read about it here :-D
http://www.zerohedge.com/news/2015-01-28/barricades-are-down-syriza-already-rolling-back-austerity-reforms
I dont know who will pay it, but I know that greeks are able to make new debts every day, the heros !
When central bank losses matter
what's the only conclusion we can add?
Imho here it is:
The indipendence of central banks from govs is an ENORMOUS problem for democracy.
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what's the only conclusion we can add?
Imho here it is:
The indipendence of central banks from govs is an ENORMOUS problem for democracy.
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Today the central bank is government owned but separate from the country's ministry of finance. Although the central bank is frequently termed the "government's bank" because it handles the buying and selling of government bonds and other instruments, political decisions should not influence central bank operations. Of course, the nature of the relationship between the central bank and the ruling regime varies from country to country and continues to evolve with time.
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You posted one of the worst of those economists of the past, that were wrong, but still continue to influence today's deflactonary ideology.
Btw.. If you think at it .. it's only a distribution problem.
Btw.. If you think at it .. it's only a distribution problem.
I wonder on what you base this idiocy of Hayek being "wrong" since his ideas, policies have never been implemented fully.
The indipendence of central banks from govs is an ENORMOUS problem for democracy.
No it is not, central banks are the effect of government policy, and they are owned by government. They are not "independent"... in the sense you imply. If anything corruption is a problem for democracy.
And most importantly its not the currency or the system that is "wrong" itself, its the people (in government) that implement them, central banks (despite theories...) are not forcing governments to loan (it is the last resort, which is being overused... due to gov.overspending - a insane gov.policy we are accustomed to, for some reason) ...and multiply the unpayable debts, its a question of balance and understanding the flaws of the best economic system we have, so far - again which has never been fully implemented, not discarding it completely because of misunderstanding and overuse - which seems to be the current trend...
...on Understanding Hayek:
PS: Down with Legal Tender
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The indipendence of central banks from govs is an ENORMOUS problem for democracy.
No it is not, central banks are the effect of government policy, and they are owned by government. They are not "independent"... in the sense you imply. If anything corruption is a problem for democracy.
And most importantly its not the currency or the system that is "wrong" itself, its the people (in government) that implement them, central banks (despite theories...) are not forcing governments to loan (it is the last resort, which is being overused... due to gov.overspending - a insane gov.policy we are accustomed to, for some reason) ...and multiply the unpayable debts, its a question of balance and understanding the flaws of the best economic system we have, so far - again which has never been fully implemented, not discarding it completely because of misunderstanding and overuse - which seems to be the current trend...
...on Understanding Hayek:
PS: Down with Legal Tender
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Well, I think that is useless to try debating about facts with fundamentalists.
Ideological fundamentalists are similar IMHO to religious fanatics. They have ONE truth. End.
A funny fact in your post is the accusation of not knowing/understandig Hayek.. but still writing this:
its not the currency or the system that is "wrong" itself, its the people (in government) that implement them, central banks (despite theories...) are not forcing governments to loan (it is the last resort, which is being overused... due to gov.overspending - a insane gov.policy we are accustomed to, for some reason) ...and multiply the unpayable debts, its a question of balance and understanding the flaws of the best economic system we have, so far - again which has never been fully implemented, not discarding it completely because of misunderstanding and overuse - which seems to be the current trend...
Finally.. the link from Mises institute says it all! I've should read it at first! :|
Ideological fundamentalists are similar IMHO to religious fanatics. They have ONE truth. End.
A funny fact in your post is the accusation of not knowing/understandig Hayek.. but still writing this:
its not the currency or the system that is "wrong" itself, its the people (in government) that implement them, central banks (despite theories...) are not forcing governments to loan (it is the last resort, which is being overused... due to gov.overspending - a insane gov.policy we are accustomed to, for some reason) ...and multiply the unpayable debts, its a question of balance and understanding the flaws of the best economic system we have, so far - again which has never been fully implemented, not discarding it completely because of misunderstanding and overuse - which seems to be the current trend...
Finally.. the link from Mises institute says it all! I've should read it at first! :|
I don't see your point, my statement is about blaming capitalism and EU or the euro currency for the Greek problems... and the effect on their democracy (mostly different capitalism to what Hayek is advocating, or nearly completely different) my paragraph which you highlighted was a critic of Greek gov.(people) not on understanding Hayek!?! (by you) that was only the wiki picture quote ;-p
To me it seems corruption of the system by people in (legislative) power is more of a issue or the cause for the mess, and not the so called independence of central banks themselves, which are hardy independent. I might have mixed the to together a bit too much, that is possible... my bad. :-]
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To me it seems corruption of the system by people in (legislative) power is more of a issue or the cause for the mess, and not the so called independence of central banks themselves, which are hardy independent. I might have mixed the to together a bit too much, that is possible... my bad. :-]
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