tag:blogger.com,1999:blog-2546602206734889307.post255032876870249697..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Eurozone AsymmetriesMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger46125tag:blogger.com,1999:blog-2546602206734889307.post-88304200384576813482014-12-20T13:16:57.055+00:002014-12-20T13:16:57.055+00:00Won't looser monetary policy at the ECB level ...Won't looser monetary policy at the ECB level (e.g helicopter money) reduce the euro's value and make German (and Eurozone) exports more competitive? Combine with structural reforms (my idea was a EU wide land value tax, legalise drugs and prostitution to tackle the Mafia and be tough on crime, flexible labour markets.)Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90439315416692619422014-10-07T16:47:47.625+00:002014-10-07T16:47:47.625+00:00Check out Germany's NIIP. Mainly the result of...Check out Germany's NIIP. Mainly the result of Germany's current account balance.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-54300759522733843482014-10-07T13:15:17.449+00:002014-10-07T13:15:17.449+00:00I do not see how QE is increasing the debt levels ...I do not see how QE is increasing the debt levels as such?<br />It is an asset-swap on the banks' books which increases the money supply.<br />Is no economic growth no worry to you? 25% unemployment?blubnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71449798623823625202014-10-07T12:50:42.704+00:002014-10-07T12:50:42.704+00:00'' Do not tell them this fact, they might ...'' Do not tell them this fact, they might figure out who profitted from the boom ;-) and that in the end we are all saving banks and their private savings at these banks.''<br /><br />in the end nobody did profit from this boom, and banks in the Northern countries did need to be saved too.<br />If the worst comes to the worst, the Northern countries will be able to save themselves, in or outside the eurozone, and that's what voters in these sovereign countries expect from their politicians.<br />But can the Southern countries save themselves? This whole discussion gives me the impression that it's the job of Germany and other creditor nations to save the troubled countries. Well, it's not. This was not agreed in the Lisbon treaty and at the launch of the eurozone, In fact, the biggest worry of Northern taxpayers was, and still is, having to pay for other countries. Economists on this blog claim that monetary or fiscal stimulus is a free lunch, voters in those Northern countries simply do not believe this, they have no confidence that debt will ever go down or be repaid and some day in the future it will be payday.<br />You can continue as long as you want putting the blame on Germany, or call them stupid, but if I tell you that over 90% of voters, and politicians from left to right, hold this opinion, than I think continuing the blame game won't bring you very far, you need to win over confidence of taxpayers in those countries first. Goodluck with that.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-52204943795932927612014-10-07T12:50:17.134+00:002014-10-07T12:50:17.134+00:00"Credits in exchange for goods it's not.&..."Credits in exchange for goods it's not."<br />Worser than that is exchange of credits for future goods, which are not deliverd.<br />Even worser are credits exchanged against flops!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68708112422476048012014-10-07T10:02:55.192+00:002014-10-07T10:02:55.192+00:00"Debtors have been allowed to save face too.&..."Debtors have been allowed to save face too."<br />The current option is the worst outcome for debtors in the periphery because they are not allowed to default and cannot pay back their debt because the economy has restrained growth (due to wrong fiscal policy and a central bank which was for far too long more like a currency board and not like a real central bank) or outright deflation which increases the debt problem.<br />In Germany it is never discussed that "over borrowing" goes together with "over lending" and that German (and French, Dutch, ...) banks directly (the big banks like Deutsche, Commerzbank and Landesbanken) or indirectly (Sparkassen, etc. which finance the larger banks) participated in this mess.<br />The current policy is optimal for creditors as long as the current equilibrium is stable, which I do not believe it is but we might disagree on this point.<br /><br />From a moral point of view I prefer the defaults and bank nationalizations but it is impossible to bail the banking sector in the Eurozone (without additional ecb financing) since the banks are much too big relative to GDP (in contrast to the American banks) and I am strongly against a chain of defaults. We discovered in the Great Depression that "binge and purge" is not the best option to save a banking system (if the market participants are too big) because it drags down the entire economy (including healthy companies). Thankfully, the head of the Fed was someone who had studied the Great Depression in great detail. But I am quite sure that we will disagree on this point.<br /><br />The money given to Greece has not been lost, it was paid to creditors in the private sector (including some German banks).<br /><br />I do not think the public support for the Euro would erode if the real story would be told. Especially if there was clear communication along the lines:<br />-We are in this mess together because we created it together<br />-We cannot reintroduce the former currencies because we do not know how the existing debts would be distributed across the Eurozone countries, our own economy is far too dependent an exports to introduce a new Deutsche Mark and we do not know what will be left of the EU after the MOAB.<br />-A collection of 18 countries with 80% US GDP is more like a large economy. and not like a collection of small open economies and therefore we need different economic policies<br /><br />This may not be true for the FAZ-Wirtschaft and AfD crowd but for a majority in the population. And most importantly this would breaks with the long tradition of German economic policy of a "late developing nation". Of course this would also lead to much stronger support for something like Brown-Kaufman to regulate banks in Europe which might not be desired by certain politicians and parts of the economic establishment.<br /><br />But I do not believe this will happen. In my view Merkel has understood the problem by now (as usual much too late) but she has cornered herself (due to bad economic advisers) into such a corner that she cannot leave. She is strangled by the conservative professors/media and especially by the Bundesverfassungsgericht which more or less is deciding the monetary policy currently although it has not understood financial markets or the rule of a central bank.<br />blubnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79403210473475045912014-10-07T05:50:55.284+00:002014-10-07T05:50:55.284+00:00They made a big mistake. Which is not a reason not...They made a big mistake. Which is not a reason not to correct it now.Marco Cattaneohttps://www.blogger.com/profile/07573325708700347277noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63101310692517419792014-10-07T05:49:41.183+00:002014-10-07T05:49:41.183+00:00Not German Investments. It's just German finan...Not German Investments. It's just German financial credits. A balanced trade means you take goods in exchange for goods, which is sustainable. Credits in exchange for goods it's not.Marco Cattaneohttps://www.blogger.com/profile/07573325708700347277noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-72072657402861543902014-10-06T16:33:24.215+00:002014-10-06T16:33:24.215+00:00We are aware of the fact, believe me. We are aware...We are aware of the fact, believe me. We are aware that banks have been saved. But not just the banks. Debtors have been allowed to save face too.<br /><br />Personally, I would have rather seen a chain of defaults and bank nationalizations. I simply want to see the shareholders of said banks to be completely disowned of their shares. That should avoid moral hazard in the future. Also, the final tally is still outstanding. As far as I can see, most of the money given to Greece has been lost. <br /><br />German politicians are trying to hide the losses from the public to not completely erode support for the Euro. Are YOU aware of that?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64727798618392525922014-10-06T16:28:35.209+00:002014-10-06T16:28:35.209+00:00That may be because the mirror side of the trade s...That may be because the mirror side of the trade surplus are net capital exports and a lot of countries wouldn't want to see a reduction of German investments.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-59673263178079503092014-10-06T15:32:38.680+00:002014-10-06T15:32:38.680+00:00@Marco: Do not tell them this fact, they might fig...@Marco: Do not tell them this fact, they might figure out who profitted from the boom ;-) and that in the end we are all saving banks and their private savings at these banks.blubnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79101429098013149272014-10-06T14:08:30.313+00:002014-10-06T14:08:30.313+00:00Come on, you can't be serious. Rules have been...Come on, you can't be serious. Rules have been changing continuously since we have the euro. The euro contract is an incomplete one, which is adjusted according to bargaining power. By not doing anything to correct the external surplus Germany is breaking the rules on imbalances, and still nobody seems to care.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-40707881963192079112014-10-06T13:21:07.466+00:002014-10-06T13:21:07.466+00:00Northern countries provided the financing to fuel ...Northern countries provided the financing to fuel the boom, and they were very happy at that time, too...Marco Cattaneohttps://www.blogger.com/profile/07573325708700347277noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82357939256268023712014-10-06T12:14:32.032+00:002014-10-06T12:14:32.032+00:00''Germany kept inflation near zero when PI...''Germany kept inflation near zero when PIIGS had 5-6%''<br /><br />You are talking Spain, and it was aprox 4%.<br /><br />If Germany ''kept'' inflation near zero as you claim, why didn't keep Spain inflation near zero too?<br />The answer is Spanish inflation was caused by a housing boom, a boom Spain could have prevented but was very happy with. I didn't hear anyone complain at that time that inflation was too high, After it turned out that the boom was nothing but a bubble, suddenly the blame is put on Northern countries who don't want to co-operate with higher inflation or bending the fiscal rules even more.<br />Why would they? They are sovereign countries. If you really want this, ask for full political and fiscal union first. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46883977202905025202014-10-06T11:55:35.995+00:002014-10-06T11:55:35.995+00:00''Last big crisis I can remember for Italy...''Last big crisis I can remember for Italy was in the early '90s. Italy devalued Lira by almost 50%, and economy soon recovered and grew quickly. ''<br /><br />What were those same politicians that did do this devaluation thinking when <br />they signed up for the impossibility to do this again? <br /><br />you blame politicians, but how large is the support of the general public to leave the eurozone in those countries?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9296315185715113372014-10-06T11:48:33.580+00:002014-10-06T11:48:33.580+00:00sorry, this was in reply to Massimo D'Antonisorry, this was in reply to Massimo D'AntoniAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67069343406710844822014-10-06T11:47:04.021+00:002014-10-06T11:47:04.021+00:00''Without any "planning", as you...''Without any "planning", as you call it, there is no point in having a common currency, ''<br /><br />can you please show the articles in the Lisbon treaty that define this planning? (apart from the no bailout clause)<br /><br />'' except that it allows Germany to exploit is superior ability to control wage inflation and obtain unduly competitive advantages at the expenses of peripheral countries.''<br /><br />right. What about ''superior'' ability of education, innovation, structural reforms, good governance, tax planning, natural resources, access to capital, etc, etc. Maybe they would help with obtaining ''unduly competitive advantages at the expenses of peripheral countries'' too? what do you propose? A central eurozone government that is going to run the governments of all eurozone countries that are too competitive?<br /><br />''if countries are required to compete in a noncooperative way, much better that each keeps its own currency and its own central bank''<br /><br />You are absolutely right. And what continues to amaze me is that the people now complaining should have been aware of what they signed up to. You can't change the rules afterwards, if it becomes clear they don't suit you. At least not with a democratic vote in all eurozone countries. And that vote is going to be no, and this makes this a pointless discussion. <br /><br />The euro = D-mark, everybody knew this, and everybody wanted this. If it turns out it doesn't work for you, why not just leave?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89368881191122345402014-10-06T11:43:34.977+00:002014-10-06T11:43:34.977+00:00Great political capital spent by the ruling partie...Great political capital spent by the ruling parties. Every country in Europe is ruled by those who were, mostly unquestioningly, for EU and Euro. Saying "you know what, Euro is actually bad" would mean political suicide for every politician who defended Euro.<br />Last big crisis I can remember for Italy was in the early '90s. Italy devalued Lira by almost 50%, and economy soon recovered and grew quickly. If PIIGS had the method available, they would be recovering now.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6759996442347702042014-10-06T11:30:16.282+00:002014-10-06T11:30:16.282+00:00Germany kept inflation near zero when PIIGS had 5-...Germany kept inflation near zero when PIIGS had 5-6%, thereby getting around 20% competitive advantage. Now Germany wants to continue keeping inflation near zero, and wants to force PIIGS to deflate, cumulatively, around 20%. And Germany ignores all the previous theories, as well as the data from the last six years, that spending contraction in near-zero-bound situation means contraction of economy, not expansion, as some like to dream.<br />Zero inflation (and wage inflation) when others have 5-6% wage inflation is uncomfortable. 20% real (and nominal) wage deflation when inflation is kept near zero is near-riot condition.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21804207708893779892014-10-06T11:23:50.536+00:002014-10-06T11:23:50.536+00:00The Northern countries would simply leave the euro...The Northern countries would simply leave the eurozone.<br />Your question ''why other Eurozone countries allow Germany to get away with it'' should be re-phrased into: why do the current deficit countries with high unemployment not leave the eurozone?<br /><br />There must be something that makes it attractive for them to stay in the eurozone otherwise they would have left already.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-84917289397213579522014-10-06T11:16:35.758+00:002014-10-06T11:16:35.758+00:00to SWL: You seem to think the crisis caused the pr...to SWL: You seem to think the crisis caused the problems, have you looked at the Spanish unemployment before it entered the eurozone (and they let in millions of immigrants)? Have you looked at the growth rate of the Italian economy before the crisis hit? And how large do you estimate the black economy to be? You need to dig deeper into the different country characteristics first.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-43679416544702575162014-10-06T08:39:25.851+00:002014-10-06T08:39:25.851+00:00Massimo D'Antoni:
Dear Sir, you are making a f...Massimo D'Antoni:<br />Dear Sir, you are making a few claims that require substantiation.<br /><br />- Why is there no point to the common currency beyond the supposedly "benign and enlightened" engineering all the EZ countries? The German public has been sold the Euro to this day on the assumption that the Euro would reduce transaction costs. If you're saying that this is not the real motivation, this invalidates the legitimation given to the Euro project to a degree. (If we ignore for a moment that the real reason for the Euro's existence is that European elites have usurped european democracies and try to impose their vision of a united Europe on the masses. The Euro represents a forced marriage into a top-down Europe; this Europe today is not bottom-up by a long shot.)<br /><br />- What are you referring to with Germany's "superior ability to control wage inflation"? Germany's approach to wage negotiations? I heard of a study that said that Europe's different ways of settling on wages contributed differently to wage growth/inflation.<br /><br />- Please define briefly non-cooperative competition in the EZ context, why it applies to the current situation and why it should be prevented.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-52018648248188672522014-10-06T05:47:12.440+00:002014-10-06T05:47:12.440+00:00Anonymous 5 October 2014 15:02
"But then the...Anonymous 5 October 2014 15:02<br /><br />"But then there is the no-bailout restriction which was blatantly and deliberately shattered, just ask Madame Lagarde. So rules can be broken at any time, anything goes."<br /><br />Sure: a lot of rules were broken. And many more will. The fiscal compact is arithmetically impossible to be fulfilled.<br /><br />Rules were just conceived based on wrong assumptions - such as expansionary austerity - and not taking into account the outcome of a world financial crisis (demand depression, liquidity trap etc.)<br /><br />Rules have to be thoroughly rewritten. Germany is likely to be unhappy about any kind of workable solution, in which case she should leave the Eurozone asap.Marco Cattaneohttps://www.blogger.com/profile/07573325708700347277noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-52614829868857856602014-10-06T05:38:03.767+00:002014-10-06T05:38:03.767+00:00Anonymous 5 October 2014 14:08 - source Wikipedia:...Anonymous 5 October 2014 14:08 - source Wikipedia:<br /><br />The primary objective of the European Central Bank, as laid down in Article 127(1)[12] of the Treaty on the Functioning of the European Union, is to maintain price stability within the Eurozone. The Governing Council in October 1998[13] defined price stability as inflation of around 2%, “a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%” and added that price stability ”was to be maintained over the medium term”Marco Cattaneohttps://www.blogger.com/profile/07573325708700347277noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53396962363611473142014-10-05T22:18:19.295+00:002014-10-05T22:18:19.295+00:00Without any "planning", as you call it, ...Without any "planning", as you call it, there is no point in having a common currency, except that it allows Germany to exploit is superior ability to control wage inflation and obtain unduly competitive advantages at the expenses of peripheral countries. Without "planning", if countries are required to compete in a noncooperative way, much better that each keeps its own currency and its own central bank Anonymoushttps://www.blogger.com/profile/03161702852028804118noreply@blogger.com