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Some obvious (or should be obvious) realities of our beloved currency area: -All countries can't be net exporters at the same time. If Germany want to be a net

Some obvious (or should be obvious) realities of our beloved currency area: -All countries can't be net exporters at the same time. If Germany want to be a net exporter, somebody have to be a net importer. -High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic. -For the same import/export ratio, if you reduce public expenditure, or the GDP will fall, or the private debt will grow. That's mathematics. -The current agreements of the Euro-Area forbid investment in industrial policies. If Spain wanted to spend money in creating some kind of industry that compete with Germany and protect it until is competitive, it would not be allow to do that. -Government spending in Spain could be better (if it was allowed, that it's not), but it's better than nothing, at least that you want the economy to collapse after a high grow of private debt. -The program of support of the PIGS(1) public debt of the ECB is not to help the PIGS, is for protecting the Euro. The moment they stop doing it, the Euro is done. That's how well this currency union was designed, that if follows its rules it disintegrate. (1) -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing.

legulere 4y ago
There’s a lot of subsidies for chip production in eastern Germany. So it seems like you can do something like that under the EU rules.
- RobertoG 4y ago
  -Public subsidies come from public expenses. If you are already importing more than exporting, you will have a public deficit. Public deficit are not allowed beyond a limit. So, if you are already a successful export economy, you have the resources to invest, otherwise you don't. -It's a common market, so not import taxes are allowed. That means that any new industry will have to compete with developed companies already established. -Public companies are encourage to be privatized, so, you can't keep an industrial base that it's not, for now, competitive. -The result is desindustrialization. Then those desindustrialized countries are accused of not being competitive. -In some cases, at the European level they realize that they are losing the strategic edge to other blocks, and some kind of program at the federal level is created. Like the current thing with the chips. Of course this programs never will result of giving the edge to one of the PIGS.
- ulfw 4y ago
  Of course you can. There's tons of subsidies all over Europe as there is in many other places. He is talking out of his ass.
  - toyg 4y ago
    It's a complex matter. Subsidizing single companies, like say, a national airline, is explicitly forbidden, under the principle of "level playing-field"; but subsidizing an entire sector is typically not forbidden, as long as the market is open and subsidies don't discriminate. In practice this is gamed in many ways, and there have been winners and losers.
throwawaymanbot 4y ago
petre 4y ago
> it seems that we can call 120 million person PIGS and nobody think is a bad thing I do think it's a bad thing because it needlessly creates a North/South divide. If these countries are in trouble, the whole Euroblock is in trouble.
toyg 4y ago
> -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing. I've had this convo before on HN: under the guise of brevity, it's an example of literal casual racism. But folks here refuse to accept it, even when supported by the fact that all serious mainstream publications have forbidden its use in print.
- sawmurai 4y ago
  Well, actually (muhahaha) I would call it nationalism… and yes, it’s a childish to make up such a demeaning term. Hating on Southern Europe for their bad financial situation seems so 2008 to me - it was stupid then, it is stupid now.
ssl232 4y ago
This is why UK politicians particularly on the right have said for a long time that the Eurozone supports a sort of status quo with France and Germany benefitting from selling industrial goods to your so-called "PIGS" (tbh I've never heard that term before). This aspect has in my experience never fully been discussed in an unemotional way in public across the EU. Single market and freedom of movement are wonderful but as a pro-Remain Brit I'm thankful we kept out of the Eurozone.
- toyg 4y ago
  The Eurozone as originally set up produced that situation, but it's slowly being tweaked with things like the TPI. The endgame is having a US-like setup, with trasfers and all. But for political reasons, it has to be sold to the public piece by piece. The Eurozone is like Asimov's Foundation, periodically going through predictable crisis to modify its equilibriums while going from strength to strength.
  - fdsafdsfdsa 4y ago
    The US has significantly more cultural and economic cohesion than the EU, and there's a good chance it won't last my lifetime either.
    - desindol 4y ago
      We just got a common enemy in the EU the US only real enemy is itself.
      - fdsafdsfdsa 4y ago
        That's an excellent point. The US is a prime example of a nation-state that is too good to last. Humans just can't take it.
    - harperlee 4y ago
      Yes, the main issue in Europe is that we don’t have a shared language. From that stems less exposure to other countries politicians, press, politics, tv… which makes most cross-frontier social organizations impossible, slows cross pollination of cultures, etc.
weatherlite 4y ago
> High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic. In your opinion. Many economists don't agree, in fact I'd say most of them say it probably leads to inflation eventually (as we see now ahem...)
- RobertoG 4y ago
  Many other economists agree. Those that disagree should explain the last 30 years of Japan to all of us. If after a pandemic, an energetic crisis, a global politic crisis and a war in Europe, the explanation for inflation is "public debt", maybe there is some bias there to be examined.
  - weatherlite 4y ago
    You're actually right high public debt could also lead to disinflation as the economy crumbles. Which economists say high public debt doesn't matter? Its mostly politicians. I've never heard a serious economist says it doesn't matter. There is consensus that above 100% debt to GDP is no good. If public debt doesn't matter btw, why does private debt matter? Simply publicly print away all private debt and viola problem solved. In fact why can't we all be billionaires?
    - RobertoG 4y ago
      All debt is somebody asset. Public debt is a private asset. https://realprogressives.org/back-to-mmt-basics/ https://realprogressives.org/back-to-mmt-basics/
      - weatherlite 4y ago
        Yep looks like a serious economist alright...
  - origin_path 4y ago
    The explanation for inflation is always money printing (mostly via issuance of state bonds), because that's literally the only way to get a general rise in prices, which is what inflation is meant to mean. In practice, measuring literally all prices is very hard, so governments measure a small subset and then call a change in that basket "inflation". The baskets were perhaps once a reasonable proxy but now it leads to problems, because it causes people to lose sight of what inflation really is. Higher gas prices is not inflation, it's just higher gas prices. Higher everything prices is inflation, but unless the money supply increases it's impossible for all prices to rise. With a stable monetary base a price rise in some essentials will cause other products to lower prices to try and juice demand that's falling away, or they will disappear entirely as society gets poorer (i.e. price = infinity) but companies going bankrupt because they can no longer sell their products doesn't affect statistical measures of prices. So these are very imperfect proxies. Suffice it to say that high public debt means economic activity is being distorted in favour of the state's priorities over those of the citizens. History provides many examples of where that leads when taken too far.
mitjam 4y ago
> High public debt in your own currency supported by your central bank it's not problematic. Yes but the Euro is not an own currency of any single country which is why a country in Eurozone can potentially go bancrupt. this led to players betting against Italy in the last Euro crisis until the „whatever it takes“ bailout guarantee. Challenge is there now is unbounded spending across Euro countries with no end in sight. It all just feels like a race of who can spend faster until the party is over.
- RobertoG 4y ago
  >>"is there now is unbounded spending across Euro countries with no end in sight" That's simply not true. Just look to the data. If it was true, you would see grow in those countries. And also look to the difference in economic indicators between the countries that are in the € and those that are not. Being in the Euro is not so good deal like they try to sell us. The "whatever it takes" didn't saved Italy or the PIGS, it saved the €. And it was a direct monetization of public debt that it's against the treaties (at least in spirit). Think about it, in order to save the €, the ECB had to go against the treaties that define the Euro. If that don't tell you that the problem is the treaties and not in specific countries, nothing will do.

legulere 4y ago

There’s a lot of subsidies for chip production in eastern Germany. So it seems like you can do something like that under the EU rules.

RobertoG 4y ago
-Public subsidies come from public expenses. If you are already importing more than exporting, you will have a public deficit. Public deficit are not allowed beyond a limit. So, if you are already a successful export economy, you have the resources to invest, otherwise you don't. -It's a common market, so not import taxes are allowed. That means that any new industry will have to compete with developed companies already established. -Public companies are encourage to be privatized, so, you can't keep an industrial base that it's not, for now, competitive. -The result is desindustrialization. Then those desindustrialized countries are accused of not being competitive. -In some cases, at the European level they realize that they are losing the strategic edge to other blocks, and some kind of program at the federal level is created. Like the current thing with the chips. Of course this programs never will result of giving the edge to one of the PIGS.
ulfw 4y ago
Of course you can. There's tons of subsidies all over Europe as there is in many other places. He is talking out of his ass.
- toyg 4y ago
  It's a complex matter. Subsidizing single companies, like say, a national airline, is explicitly forbidden, under the principle of "level playing-field"; but subsidizing an entire sector is typically not forbidden, as long as the market is open and subsidies don't discriminate. In practice this is gamed in many ways, and there have been winners and losers.

throwawaymanbot 4y ago

petre 4y ago

> it seems that we can call 120 million person PIGS and nobody think is a bad thing I do think it's a bad thing because it needlessly creates a North/South divide. If these countries are in trouble, the whole Euroblock is in trouble.

toyg 4y ago

> -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing. I've had this convo before on HN: under the guise of brevity, it's an example of literal casual racism. But folks here refuse to accept it, even when supported by the fact that all serious mainstream publications have forbidden its use in print.

sawmurai 4y ago
Well, actually (muhahaha) I would call it nationalism… and yes, it’s a childish to make up such a demeaning term. Hating on Southern Europe for their bad financial situation seems so 2008 to me - it was stupid then, it is stupid now.

ssl232 4y ago

This is why UK politicians particularly on the right have said for a long time that the Eurozone supports a sort of status quo with France and Germany benefitting from selling industrial goods to your so-called "PIGS" (tbh I've never heard that term before). This aspect has in my experience never fully been discussed in an unemotional way in public across the EU. Single market and freedom of movement are wonderful but as a pro-Remain Brit I'm thankful we kept out of the Eurozone.

toyg 4y ago
The Eurozone as originally set up produced that situation, but it's slowly being tweaked with things like the TPI. The endgame is having a US-like setup, with trasfers and all. But for political reasons, it has to be sold to the public piece by piece. The Eurozone is like Asimov's Foundation, periodically going through predictable crisis to modify its equilibriums while going from strength to strength.
- fdsafdsfdsa 4y ago
  The US has significantly more cultural and economic cohesion than the EU, and there's a good chance it won't last my lifetime either.
  - desindol 4y ago
    We just got a common enemy in the EU the US only real enemy is itself.
    - fdsafdsfdsa 4y ago
      That's an excellent point. The US is a prime example of a nation-state that is too good to last. Humans just can't take it.
  - harperlee 4y ago
    Yes, the main issue in Europe is that we don’t have a shared language. From that stems less exposure to other countries politicians, press, politics, tv… which makes most cross-frontier social organizations impossible, slows cross pollination of cultures, etc.

weatherlite 4y ago

> High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic. In your opinion. Many economists don't agree, in fact I'd say most of them say it probably leads to inflation eventually (as we see now ahem...)

RobertoG 4y ago
Many other economists agree. Those that disagree should explain the last 30 years of Japan to all of us. If after a pandemic, an energetic crisis, a global politic crisis and a war in Europe, the explanation for inflation is "public debt", maybe there is some bias there to be examined.
- weatherlite 4y ago
  You're actually right high public debt could also lead to disinflation as the economy crumbles. Which economists say high public debt doesn't matter? Its mostly politicians. I've never heard a serious economist says it doesn't matter. There is consensus that above 100% debt to GDP is no good. If public debt doesn't matter btw, why does private debt matter? Simply publicly print away all private debt and viola problem solved. In fact why can't we all be billionaires?
  - RobertoG 4y ago
    All debt is somebody asset. Public debt is a private asset. https://realprogressives.org/back-to-mmt-basics/ https://realprogressives.org/back-to-mmt-basics/
    - weatherlite 4y ago
      Yep looks like a serious economist alright...
- origin_path 4y ago
  The explanation for inflation is always money printing (mostly via issuance of state bonds), because that's literally the only way to get a general rise in prices, which is what inflation is meant to mean. In practice, measuring literally all prices is very hard, so governments measure a small subset and then call a change in that basket "inflation". The baskets were perhaps once a reasonable proxy but now it leads to problems, because it causes people to lose sight of what inflation really is. Higher gas prices is not inflation, it's just higher gas prices. Higher everything prices is inflation, but unless the money supply increases it's impossible for all prices to rise. With a stable monetary base a price rise in some essentials will cause other products to lower prices to try and juice demand that's falling away, or they will disappear entirely as society gets poorer (i.e. price = infinity) but companies going bankrupt because they can no longer sell their products doesn't affect statistical measures of prices. So these are very imperfect proxies. Suffice it to say that high public debt means economic activity is being distorted in favour of the state's priorities over those of the citizens. History provides many examples of where that leads when taken too far.

mitjam 4y ago

> High public debt in your own currency supported by your central bank it's not problematic. Yes but the Euro is not an own currency of any single country which is why a country in Eurozone can potentially go bancrupt. this led to players betting against Italy in the last Euro crisis until the „whatever it takes“ bailout guarantee. Challenge is there now is unbounded spending across Euro countries with no end in sight. It all just feels like a race of who can spend faster until the party is over.

RobertoG 4y ago
>>"is there now is unbounded spending across Euro countries with no end in sight" That's simply not true. Just look to the data. If it was true, you would see grow in those countries. And also look to the difference in economic indicators between the countries that are in the € and those that are not. Being in the Euro is not so good deal like they try to sell us. The "whatever it takes" didn't saved Italy or the PIGS, it saved the €. And it was a direct monetization of public debt that it's against the treaties (at least in spirit). Think about it, in order to save the €, the ECB had to go against the treaties that define the Euro. If that don't tell you that the problem is the treaties and not in specific countries, nothing will do.