What about Greece?

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Oleksij
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Re: What about Greece?

Postby Oleksij » 2011-07-01, 2:39

Leviwosc wrote:
Oleksij wrote:While I won't challenge the notion that every people deserve the government they have and thus the situation that they're in, I think we've heard enough of what you're saying. We're in the middle of a huge surgery operation and you're breaking into the operating room shouting how the patient should have been more careful.


Usually the patient is cooperating, this patient is stubborn and violent! So yes, in this case it's necessary to make the patient aware of the current situation! I'm not a surgeon, though. I'm just a spectator and I feel the need to say that the patient has been an idiot, that he caused his problems himself!

Some patients cannot take anaesthetics, thus they shake violently during procedures.
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Re: What about Greece?

Postby Hoogstwaarschijnlijk » 2011-07-01, 7:59

Oleksij wrote:First, that bullshit myth about 'lazy Greeks who don't want to pay taxes' must be busted once and for all. The Greek private sector is one of the hardest-working in Europe and the world, you will see people working from dawn until the depths of the night in many cases, just to make their business get its ends to meet.

Well, when I think of Greece I do think of little villages where people have to work very hard to get a living... But on the other hand there is this myth and it is everywhere. And I think it's a problem, because how can we be sympathic with people of whom is fairly known they don't want to pay taxes, are corrupt and don't work hard? And I think it's important that the inhabitants of other countries sympathise with the Greek situation, because otherwise they won't understand why they are giving money to them. This is a task not only from Greece itself, but also from the politicians. For example the politicians in the Netherlands, some really try to explain, but not well enough, it seems. At least I mostly feel annoyed when I read how much money we are giving to another country while we need to cut down everything here too... But then I realise I don't know much about economy and assume that I just don't understand it well enough.
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Re: What about Greece?

Postby hlysnan » 2011-07-01, 8:59

Pendragon wrote:A deeper issue is the Euro. It's basic economics that you can't have two areas with very different levels of productivity using the same coin. The euro is too cheap for e.g. Germany: productivity and exports are high in Germany so their currency should have a higher value. And it's too expensive for most Southern European countries: their productivity is lower so they need a currency with a lower exchange value to still be able to have high exports and high employment. Many countries, not just Greece, have seen big wage increases without any productivity increases. Either they have to cut wages permamently (like by a third or so), or they somehow have to start becoming way more productive. That's not an accusation of laziness: it's not about how much you work, it's simply about how much you produce and whether people want to buy it or not. I hope they succeed in becoming more productive but it's hard to see how they could suddenly do this. If productivity doesn't grow and people aren't willing to have big wage cuts then they have to abandon the Euro. I don't see any other way, but if someone knows more about Economics than I do then please correct me.


Australia has a two speed economy. Western Australia and Queensland (mining) are growing at a much faster rate than NSW and Victoria (services), and are also more productive. I don't think the solution needs to require anything about the Euro. In my opinion, Greece needs to default, and it's going to happen sooner or later.

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Re: What about Greece?

Postby Pendragon » 2011-07-01, 9:46

Oleksij wrote:
Pendragon wrote:But in the long run it's the only alternative to either permanent wage cuts or a miraculous rise in Greek productivity (which requires improvements in education, innovation, good entrepreneurs etc, not easy to pull off).

'In the long run, we're all dead.' (c) Keynes

But if the long run is ignored for too long, it can build up to become an urgent short-term problem. We're already at that point: the long run (the moment when structural problems have to be solved) is just a few years down the road. Right now the EU is trying to use short-term measures to postpone the moment to make big decisions but even with the hundreds of billions of euros they're spending now they can only postpone it by a year or two. I think Keynes' key point was that even in good long-term conditions you may need a short-term boom to get things going. But in Greece the long-term conditions are the main problem so a short-term boom wouldn't help much.

Ofcourse this is all very easy for me to say. If you're young you want to have a career, a house, a good life, not after a decade of misery but soon.

Oleksij wrote:In practice, I don't really agree about the reintroduction of Drachma, because I personally believe that fiscal discipline comes before monetary discipline and safeguards it, and Greece really needs to improve its fiscal policies and competitiveness, instead of looking for monetary ways of improving things, which are always nothing more than a short-term, straw solution.

Running a country is no different from running a business or a household. In order to make ends meet, it needs to perform - if it does not, monetary tricks won't save it.

I agree that monetary tricks are not the solution, but right now Greece has the opposite: a monetary barrier that keeps it down. It has an over-valued currency that would make even very decent and attractive Greek products too expensive abroad. If Greece had a currency with a balanced value then further lowering its currency would be a trick (like China does with the RMB), but now it has a way over-valued currency that has to come down to a normal level before Greek firms have a chance to compete. Or Greek firms have to find a way to enormously improve their competitiveness against all odds.

Yasha wrote:
Pendragon wrote:A deeper issue is the Euro. It's basic economics that you can't have two areas with very different levels of productivity using the same coin. The euro is too cheap for e.g. Germany: productivity and exports are high in Germany so their currency should have a higher value. And it's too expensive for most Southern European countries: their productivity is lower so they need a currency with a lower exchange value to still be able to have high exports and high employment. Many countries, not just Greece, have seen big wage increases without any productivity increases. Either they have to cut wages permamently (like by a third or so), or they somehow have to start becoming way more productive. That's not an accusation of laziness: it's not about how much you work, it's simply about how much you produce and whether people want to buy it or not. I hope they succeed in becoming more productive but it's hard to see how they could suddenly do this. If productivity doesn't grow and people aren't willing to have big wage cuts then they have to abandon the Euro. I don't see any other way, but if someone knows more about Economics than I do then please correct me.


Australia has a two speed economy. Western Australia and Queensland (mining) are growing at a much faster rate than NSW and Victoria (services), and are also more productive. I don't think the solution needs to require anything about the Euro. In my opinion, Greece needs to default, and it's going to happen sooner or later.


True, there are more cases of countries/areas with different speed economies using the same currency. Probably Australian services and tourism are hurt by the high value of the Australian dollar. But at least NSW and Victoria have a high education level and a diverse economy so they can compete even though they suffer from an overvalued currency. I guess the mining boom wont last forever, at some point NSW and Victoria may take the lead again.

The problem in Europe is that it's a structural problem. Education levels are much lower in most of the countries that are now in trouble (Ireland is an exception), I'm guessing they also have lower rates of entrepreneurs starting new firms, less improvements from innovation etc. Even if they improve on all these fronts, if "Northern Europe" improves at a faster rate then the currency problem only gets bigger. It would take a Chinese-style growth miracle to get even with the north. In theory everything is possible, the unemployed youth could teach themselves IT skills and conquer the world with killer-aps, or use online materials to become language wizzards and make lots of money with that skill. And I really hope they can pull it off, it would be epic. But it's almost an unfair challenge, and we shouldn't have a currency that can only succeed by a miracle.

A default will release the pressure of the wage-productivity imbalance that built up over the past decade, but such imbalances still remain in several other countries (we can't afford to let them all default). And after a default a new imbalance would simply grow back if the structural problem isn't addressed.

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Re: What about Greece?

Postby Gbelle » 2011-07-01, 10:32

Oleksij wrote:
Gbelle wrote:The root of all problems is inflation. the optimal interest rate is not designed for greece's economy. The sooner greece gets it's sovereignty back the quicker it can target inflation which is an extension of unemployment.

Reintroducing the Drachma will only increase inflation.


Well using the impossible trinity principle you can have a fixed exhange rate, international capital mobility, or control of monetary policy. Greece does not have the latter, and international capital mobility is like trying to fight against the law of gravity when it comes to the euro.

moving to the drachma may cause some inflation but Greece can control and regulate it. Admitedly it would take 3 months before the monetary policies of greece to take into effect, this is usually because it's indirect, and there's all sorts of lags to take into account.

Leviwosc wrote:
ILuvEire wrote:
Leviwosc wrote:Stop being so easily insulted, it's a very annoying habit. Are all Southern Europeans this emotional??
Stop associating everything you don't like with the nationality of the person you're talking to, it's a very annoying habit. Are all Northern Europeans this racist?


Since when is Southern European a race? Since when do races among humans exist!? As far as I've learnt there's only one race for the primate species homo; it's homo sapiens!


Actually eurogenes has researched and found a gap, or a barrier between the two groups, many northern europeans share SNP's that the southern europeans do possess. you can see the gap between spanish and italians to Germans in this graph

Yasha wrote:
Australia has a two speed economy. Western Australia and Queensland (mining) are growing at a much faster rate than NSW and Victoria (services), and are also more productive. I don't think the solution needs to require anything about the Euro. In my opinion, Greece needs to default, and it's going to happen sooner or later.


while that is a fair point, there is a significant difference between Australia and Europe.

For starters Australians only have one national language, and thus the free movement of labour is easier because there isn't culture and language barriers. Not to mention that most states share the same laws, etc.

Europe is different in the respect I stated. While mundell's works on the optimum currency area was used for the argument of a euro, I simply refute it, because it goes against the principle and purpose of what the euro is now.

Mundell stated that if a number of regional economies do not respond in the way to external shock, then they should have their own currency and adopt floating exchange rates. These could act as a buffer and help keep various regional economies stable.

How do we know whether there is sufficient homogenity for a common currency? Mundell proposed five criterias
  • Workers Workers must be ready to move across the region in search of jobs
  • There should be freedom of movement of capital
  • The economies must have similar wants and needs
  • The economy should be diversified
  • and there should be a fiscal system that transfers money from one region to another when it is needed.

on the basis of the external shocks, and the first principle and third principle I don't think half the european nations should be in the euro. Maybe if it was Germany, the low countries, and Austria. but the eurozone is too large for it to be truly effective.
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Re: What about Greece?

Postby loqu » 2011-07-01, 10:48

The first principle is as absurd as can be. If it were for that there should be like 10 different currencies inside Spain itself.

Well, thinking about it, it worked that way in the Middle Ages, maybe it's time they came back. Get ready, sa wulfs!
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Re: What about Greece?

Postby Gbelle » 2011-07-01, 12:18

loqu wrote:The first principle is as absurd as can be. If it were for that there should be like 10 different currencies inside Spain itself.

Well, thinking about it, it worked that way in the Middle Ages, maybe it's time they came back. Get ready, sa wulfs!


Yes, I agree with your notion. it worked very well in the Rhine area as well because money was in the form of gold, and silver, therefore money was less liquid, and more volatile, it meant growth and expansion was slow, but it was nevertheless real. Whereas in todays world, we have to speculate what is real consumption and what is not.

When there's too much loan money it can be mistaken for real actual money which is what can cause recessions, like we have experienced int he last 3 years, because the forecasted real money never really existed in the first place.

however retracing back to regional money... the frist principle and most important principle to Optimum currency area is always "if a number of regional economies do not respond in the way to external shock, then they should have their own currency and adopt floating exchange rates."
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Re: What about Greece?

Postby IpseDixit » 2013-06-03, 11:00

Can anyone tell me why Japan has a staggering public debt of 240% its GDP yet it manages to lend bonds at 0.1% interest rate?

Can anyone tell me why we don't blame the idiocy of being in a sort of new gold standard?

Can anyone explain to me why the ECB cannot print money?

Why can't we devalue?

Can anyone tell me why the euro is still a strong currency even though half (to say the least) of its member states are sinking?

Can anyone tell me why we are still being judged by the very same rating agencies that caused the crisis (because of their wrong calculations of the risk rate of toxic bonds)?

Why did we undertake a path of austerity when modern macroeconomics strongly suggest NOT to undertake that path in a downturn period? Why did we (well, they) decide to deliberately ignore Keynesian teachings that worked just fine in 1929?

---

In Italian we have a saying that goes like this "I point at the moon and you look at my finger"... Sure Greece, Mediterranean countries in general, and quite honestly not just them, have many problems... But maybe we should blame the euro for the way it was constructed instead of blaming Greeks, Italians and Spaniards for being lazy and Germans for being nazis ... Right now this is an economic prison, not a monetary union.

Remember, the European project started because after WW2 we said "never again". We wanted to live in harmony and cooperation. The path lately undertaken by the EU is utterly against this principles and is making tension rise among us.

---

As for Greece, well Greece already is bankrupt even though not officially. The best thing for Greeks would be to leave the euro so to have a competitive devaluation, and finish this disgusting social slaughter. But that would be a nightmare for Germany since German banks are highly exposed to Greek bonds and of course for all the other countries still adopting the euro. So... I really don't know what EU's future will look like. I wouldn't be too surprised if some real revolutions took place and if extremist parties gained many votes, which is already happening in Greece. Quite honestly... I wouldn't even be too surprised about WWIII... but maybe I tend to be too apocalyptic :-)

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Re: What about Greece?

Postby Levo » 2013-06-03, 12:15

Former posters have said many thoughts I have too.

I'm Hungarian.
I belong to the poorer part of EU.
When we see Greeks protesting because they cut 14th month wages, we are like :-O What the hell were they spending on? Have such existed at all?? Here some companies had a 13th month wage which has been eliminated some 5 years ago already. No-one had such as 14th month salary.
Greek incomes (including pensions) are roughly around two-three times over Hungarian ones. Of course prices are not.
So... hmm... And we have to donate money to them.

But I have two additional thoughts to this:
Loosing my job and not having another opportunity to have an income would piss people off wherever they are.

And we are all part of EU.

Why do former EU states agree a and signing the join of a new member if they don't want to help that member later when in need? I am very happy EU helps these states, no matter what fails they made.
The same applies to newjoiners: Why do they sign the joining agreements if they don't want to (or cannot) apply the rules which are clearly given to them?

If everyone agreed once already and signed these, and an equal member of the Union is in trouble, than the worst I could ever imagine was if the rest wouldn't try helping it.

Individualism vs communal needs. You have to take into consideration both.


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