Hard News by Russell Brown

Read Post

Hard News: European Horror Stories

100 Responses

First ←Older Page 1 2 3 4 Newer→ Last

  • Angus Robertson, in reply to Russell Brown,

    If you want to be surprised about private debt check out the total debt/GDP ratio on zero hedge and look at the UK compared to anyone.

    Bonus points - NZ, thank goodness we don't have any banks.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Stewart, in reply to Angus Robertson,

    Yeah, especially when it is someone else's austerity...

    Te Ika A Maui - Waitakere… • Since Oct 2008 • 563 posts Report Reply

  • Martin Lindberg, in reply to Angus Robertson,

    Austerity seems preferable to all of those.

    Especially when it's not your austerity, of course...

    Edit: umm yeah, what Stewart said too...

    Stockholm • Since Jul 2009 • 790 posts Report Reply

  • Danyl Mclauchlan,

    Wikipedia has a nice chart illustrating what went wrong.

    Wellington • Since Nov 2006 • 899 posts Report Reply

  • Russell Brown, in reply to Angus Robertson,

    Bonus points – NZ, thank goodness we don’t have any banks.

    Indeed. And, er, wow.

    The degree to which shit is fucked up is really quite hard to grasp.

    Auckland • Since Nov 2006 • 18666 posts Report Reply

  • merc,

    Auckland Council is borrowing more to try to catch up. I wonder whether local govt. borrowing shows up on the central govt. charts?

    Since Dec 2006 • 2471 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    Probably much of southern Europe (Giovanni included) is angling for this print lots of money option, but the Germans have very deep cultural misgivings about it.

    It's an option that is very much worth considering. You don't present any reasonable argument why not.

    It could also work here. Big hat tip to Bernard Hickey for suggesting it in the Herald on the weekend. Yes, it's shades of Social Credit, but that is also not a reasonable argument. They might have been right all along, as up to 20% of NZers felt whilst FPP systematically robbed them of any representation.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • BenWilson, in reply to Russell Brown,

    The degree to which shit is fucked up is really quite hard to grasp.

    Are we allowed to start calling this a depression yet? It's quite an important psychological boundary, because it suddenly unlocks solutions that have been considered impossible since...well, the last depression. It's also very fucking important to recognize that the actual cure for the last depression was a much bitterer pill than anything Angus is worried about. I really don't care to pander to German cultural misgivings, I get enough of that from my father-in-law.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • Aidan, in reply to Angus Robertson,

    The eurozone could monetise their debt (print lots of money) and then in a few years we can have essays looking at the tracking of 10,000 euro notes near to the Swiss border. Probably much of southern Europe (Giovanni included) is angling for this print lots of money option, but the Germans have very deep cultural misgivings about it.

    Austerity seems preferable to all of those.

    They don't have to print the money, just have the option of doing so. This removes a great deal of the risk and their borrowing costs go down. They are in a self-fulfilling debt crisis because the ECB is unwilling to actually be a banker of last resort.

    Get that sorted and then tell those recalcitrant fuckers in the German Finance ministry to suck it up and target the simply ruinous inflation rate of 3-4%.

    Canberra, Australia • Since Feb 2007 • 144 posts Report Reply

  • Stephen R,

    One of the things I try to get my head around is that I think that Germany would not be nearly as well off if it didn't have people to sell it's manufactured goods to.

    Sure, there are jokes about towns in Greece who have the highest per-capita rate of Porsche ownership, but if they didn't buy them, then would anyone? The question is how did they buy them, and the answer is the producer loaned the money to the customer, then booked it as profit. I don't think that's really profit until the people who bought it manage to pay it off.

    Having an economy that is always producing more than it consumes, and then lending money to its customers to buy its excess production is not a long term sustainable situation. There is no way the Greeks can pay back that money unless, as a country, they get to a situation where they are producing more than they consume for an extended period. Worse, since the world is a zero-sum game, there is no way that the Germans can get paid back unless either a) someone else borrows a bunch of money to pay the Greeks for their mythical excess production, which only shifts the problem onto someone else's books, or b) the Germans consume more than they're producing for a while to let their debtors earn some credit back and bring things back into balance.

    I don't think that's going to happen. The Germans appear to be reacting to uncertainty by producing more and spending less.

    The Germans got hit by hyperinflation followed by a depression after WWI. They are currently more scared of the possibility of hyper-inflation than the coming (arrived?) depression, but it's not completely irrational of them.

    The "Greek bail out" doesn't seem to me to be a bail out of the Greeks, but a bail out of the banks that would go down the toilet if the Greek government went bankrupt, and the follow-on problems of the credit default swaps that would be called in if the Greeks defaulted, which might make life difficult for a lot more people.

    Wellington • Since Jul 2009 • 145 posts Report Reply

  • Angus Robertson,

    It's an option that is very much worth considering. You don't present any reasonable argument why not.

    The Germans really don't like it, their existential beliefs equate high inflation with very very bad things happening.

    Auckland • Since May 2007 • 984 posts Report Reply

  • BenWilson, in reply to Stephen R,

    The Germans got hit by hyperinflation followed by a depression after WWI. They are currently more scared of the possibility of hyper-inflation than the coming (arrived?) depression, but it's not completely irrational of them.

    Yes, it is. Their economy went to shit because of the incredibly harsh Versailles terms that forced them pay endlessly for WW1. How can they not see that any country you do that to is likely to turn nationalistic real fast, just like they themselves did? Can they also not understand that the Marshall Plan was what set up their meteoric rise from the ashes of total destruction? Do they really think things would have gone so well for them if a second Versailles had been imposed on them then?

    This was about the only thing that the Allies really learned that was of any use from that war - that throttling a country to death does not lead to peace, and that building it up rapidly is the very best way to gain a powerful and loyal ally. If only the Germans themselves could have learned from any of these lessons.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • Rich of Observationz,

    The "Greek bail out" doesn't seem to me to be a bail out of the Greeks, but a bail out of the banks

    Exactly.

    Back in Wellington • Since Nov 2006 • 4413 posts Report Reply

  • giovanni tiso, in reply to Angus Robertson,

    Really? It might I suppose, but it hasn't actually been tried so we don't know for sure.

    I might have to ask you to take it up - in a non-belligerent fashion - with the papers I cite in my article (which were two of many, but seemed the most lucidly argued). Interestingly, the most compelling research and urgings came from the early days of the crisis, in 2010. When a solution would have been eminently affordable. And by the way if it was still just Greece, it would still be affordable. But certainly the hesitancy and the haircut approach have made things worse.

    There is a shorter, very accessible piece on the "it's not a moral argument" argument, here. It's not quite as strong in many respects as the academic ones, but it's easier to link and quicker to read. And here's Paul Krugman just the other day on the inadequacy of what he calls the Republican and the German narratives. On the actual causes of the crisis, he says this:

    So what does ail Europe? The truth is that the story is mostly monetary. By introducing a single currency without the institutions needed to make that currency work, Europe effectively reinvented the defects of the gold standard — defects that played a major role in causing and perpetuating the Great Depression.

    More specifically, the creation of the euro fostered a false sense of security among private investors, unleashing huge, unsustainable flows of capital into nations all around Europe’s periphery. As a consequence of these inflows, costs and prices rose, manufacturing became uncompetitive, and nations that had roughly balanced trade in 1999 began running large trade deficits instead. Then the music stopped.

    Wellington • Since Jun 2007 • 7349 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    The Germans really don't like it, their existential beliefs equate high inflation with very very bad things happening.

    How is that an argument? Firstly, they're wrong, high inflation is not always bad. Second, even if they're right, they don't have a viable alternative, because they can't/won't control the banks which are the source of the inflation. Third, not all Germans have such dopey faith driven beliefs. Fourth, printing money is not proven to generate high inflation anyway, because it is not the only source of inflation.

    This really is a time to go right back to basics. A great many of the most fundamental beliefs we have about economics need to be examined closely.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • Angus Robertson, in reply to Stephen R,

    + 1

    Auckland • Since May 2007 • 984 posts Report Reply

  • Nathaniel Wilson, in reply to BenWilson,

    Yes, it is. Their economy went to shit because of the incredibly harsh Versailles terms that forced them pay endlessly for WW1. How can they not see that any country you do that to is likely to turn nationalistic real fast, just like they themselves did? Can they also not understand that the Marshall Plan was what set up their meteoric rise from the ashes of total destruction? Do they really think things would have gone so well for them if a second Versailles had been imposed on them then?

    It's a really, really long bow to equate self-inflicted debt with the punitive debt for losing a horriffically brutal and pointless 4 year-long war. Or post WWII reconstruction for that matter, unless you're planning ignoring an awful lot of context.

    This isn't Germany's fault, and I can't help but feel if it were France or England doing the "best" at present the entire narrative would be different. Yes German banks (amongst others) are involved, but that doesn't make the people of Germany responsible anymore than we (New Zealanders) are responsible for the behaviour of finance companies here.

    Auckland, New Zealand • Since May 2009 • 35 posts Report Reply

  • BenWilson, in reply to Nathaniel Wilson,

    Fair enough, my point was simply about the "really bad things happen" angle, that sucking all the wealth out of a nation ruins it and turns it violent, and putting it back in makes it prosperous and peaceful.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • BenWilson, in reply to Nathaniel Wilson,

    This isn't Germany's fault, and I can't help but feel if it were France or England doing the "best" at present the entire narrative would be different. Yes German banks (amongst others) are involved, but that doesn't make the people of Germany responsible anymore than we (New Zealanders) are responsible for the behaviour of finance companies here.

    "Fault" isn't a word I used. I don't care who is at fault. I care about what they're going to do about it and what that might mean. If Germans actually want Europe to work out, they need to consider whether the point of their Union is to punish entire nations. Do they really want a civil war? That's where this shit leads.

    Auckland • Since Nov 2006 • 8305 posts Report Reply

  • Danyl Mclauchlan,

    The “Greek bail out” doesn’t seem to me to be a bail out of the Greeks, but a bail out of the banks

    It is a bail-out of the Greeks. Even if Greece defaults on all its debt, it still can't afford to run its government and its loss of credit would mean instant bankruptcy and force it to implement staggering austerity measures. So they're trying to work towards a compromise where Greece's debt-holders accept a write-off, and Greece continues to borrow while it turns its economy around, with the understanding that its creditors will eventually get some of their money back.

    Wellington • Since Nov 2006 • 899 posts Report Reply

  • John Holley, in reply to Mr Magoo,

    Go to the top right hand corner of the home page and look for "Get John Mauldin’s Newsletter sent directly to your inbox".

    Auckland • Since Nov 2006 • 120 posts Report Reply

  • Christopher Dempsey, in reply to Idiot Savant,

    There's a context to this. the last time the Germans ran the Greek economy, they looted the place so thoroughly that 300,000 Greeks starved to death.

    Explains quite a bit, thanks.

    I say this after living in Quebec, where car licence plates have the words 'Je me souviens' imprinted on it (below in small font). This means "I remember", and directly references the Battle on the Plains of Abraham, in Quebec City, in 1759, where the French were defeated by the English. That is, I remember a battle that took place some 253 years ago.

    Traumatic events for populations persist in people's memories.

    Parnell / Tamaki-Auckland… • Since Sep 2008 • 642 posts Report Reply

  • Martin Lindberg, in reply to giovanni tiso,

    There is a shorter, very accessible piece on the "it's not a moral argument" argument, here.

    Busted link - try this

    Stockholm • Since Jul 2009 • 790 posts Report Reply

  • DeepRed,

    In any case, Greece looks like the fiscal equivalent of Archduke Franz Ferdinand right now. It's in a Catch-22 - it's got a massive debt millstone, but the austerity regime has only aggravated its slump.

    The southernmost capital … • Since Nov 2006 • 4141 posts Report Reply

  • Angus Robertson, in reply to BenWilson,

    This was about the only thing that the Allies really learned that was of any use from that war - that throttling a country to death does not lead to peace, and that building it up rapidly is the very best way to gain a powerful and loyal ally. If only the Germans themselves could have learned from any of these lessons.

    Then it comes down to how do you fix a broken economy?

    Do institute painful austerity conditions upon investment, like the West Germans did to East Germany in the 1990s? A method that succeeded to such an extent that a combined Germany is now being hailed as the potential saviour of Europe.

    Or

    Do you get German taxpayers to give $billions to multi-national banksters to pay off Greeks debts, so that the Greeks can continue to live a marvellous lifestyle? A lifestyle that has resulted in them being so broke it mimics losing a World War.

    Auckland • Since May 2007 • 984 posts Report Reply

First ←Older Page 1 2 3 4 Newer→ Last

Post your response…

Please sign in using your Public Address credentials…

Login

You may also create an account or retrieve your password.