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I am amazed that so few of the comments even mention that the source of the submitted article is a newspaper in Ireland, where all the same arguments about 1)

I am amazed that so few of the comments even mention that the source of the submitted article is a newspaper in Ireland, where all the same arguments about 1) governments always being able to bail themselves out and 2) excessive investment in buildings that no one can afford to occupy being a good idea are a recent and painful memory. Ireland is still a long way from recovering from its real estate bubble, as are Spain and many parts of the United States. Commentary that suggests that China is somehow different and special and exempt from general economic principles should refer to more real-world historical examples.

crdoconnor 12y ago
Ireland was prevented from enacting any kind of stimulus by the ECB. In fact, it was told in no uncertain terms to do the complete opposite - bail out the banks and enact austerity at the exact time when she had plunging demand. This caused spiraling GDP contraction. Ireland dutifully obeyed, because the ECB controls her money supply and so holds a metaphorical loaded gun to her head. The ECB cannot order China to implement self destructive austerity, however. China is still sovereign in her own currency. In principle Ireland could bail herself out too, but it would involve leaving the Euro, defaulting and a spectacular political showdown that she really doesn't have the heart for.
- waps 12y ago
  You know, I doubt that's the case. Greece and Cyprus have crossed the EU, lied to them, and committed acts that should have meant getting kicked out of the EU. Nothing happened. If anything the EU keeps giving them more money. So now everybody knows : clearly the EU is more interested in expanding their membership and maintaining power than it is interested in financial sense and applying treaties. So while Ireland certainly seems to think the EU has a gun to their heads, this is only true if Ireland's parliament cooperates. Ireland's parliament could simply order it's banks to print Euros, lie to the ECB (they're already doing that, after all. That's what the Euro crisis was about). Ireland's parliament could simply vote to do that, and while they're at it, vote a law that this does not violate the European treaty. Then it'd be up to Brussels to kick them out, and they've already shown that they won't do that, no matter what. They're sovereign, there's a million ways they could do this. So in short : you're right, in theory. In practice, the law is simply what parliament votes to be law, and they could shortcut your reasoning at any point. Given what's already happened in the PIGS, I think they will at some point in the not-too-distant future show us that theory and practice are very different indeed.
  - crdoconnor 12y ago
    >You know, I doubt that's the case. Greece and Cyprus have crossed the EU, lied to them, and committed acts that should have meant getting kicked out of the EU. Nothing happened. If anything the EU keeps giving them more money. The ECB doesn't want them gone. In both cases (and in Italy too) parties or individuals that have genuinely expressed a desire to renegotiate their deal with the ECB or leave the Euro if that failed have been destroyed. In Italy's case, Berlusconi was replaced with an unelected technocrat the second he made a move in that direction. They did a lot of behind the scenes dirty work to make that happen on the day it happened. I'm not sure how they made him resign, but it seems like blackmail might have been involved. In Greece's case there were TWO parties that promised to renegotiate their deal with the EU and the vote was basically split between them. The EU backed one and said that disaster would strike if the other got elected. The former won and promptly broke its promise. In Cyprus's case, the ECB offered an ultimatum that threatened to blow up the Cypriot economy literally 2 hours after the new prime minister had been elected into office. If he didn't cram down losses on depositors, they'd yank OMT. This one is perhaps the most shameful of all. They targeted him at that point because they knew they could make him panic, force his hand and get him to react the way they wanted. Cyprus was most likely a test to see how European citizens would react to cramdowns (they're tiny; bailing them out would have been trivial, so it wasn't about the cost of making them whole). The ECB is run by an unelected commission who work largely behind the scenes. They work only for the benefit of European banks, and against the interests of all EU citizens, whether in the core or the periphery.

crdoconnor 12y ago

Ireland was prevented from enacting any kind of stimulus by the ECB. In fact, it was told in no uncertain terms to do the complete opposite - bail out the banks and enact austerity at the exact time when she had plunging demand. This caused spiraling GDP contraction. Ireland dutifully obeyed, because the ECB controls her money supply and so holds a metaphorical loaded gun to her head. The ECB cannot order China to implement self destructive austerity, however. China is still sovereign in her own currency. In principle Ireland could bail herself out too, but it would involve leaving the Euro, defaulting and a spectacular political showdown that she really doesn't have the heart for.

waps 12y ago
You know, I doubt that's the case. Greece and Cyprus have crossed the EU, lied to them, and committed acts that should have meant getting kicked out of the EU. Nothing happened. If anything the EU keeps giving them more money. So now everybody knows : clearly the EU is more interested in expanding their membership and maintaining power than it is interested in financial sense and applying treaties. So while Ireland certainly seems to think the EU has a gun to their heads, this is only true if Ireland's parliament cooperates. Ireland's parliament could simply order it's banks to print Euros, lie to the ECB (they're already doing that, after all. That's what the Euro crisis was about). Ireland's parliament could simply vote to do that, and while they're at it, vote a law that this does not violate the European treaty. Then it'd be up to Brussels to kick them out, and they've already shown that they won't do that, no matter what. They're sovereign, there's a million ways they could do this. So in short : you're right, in theory. In practice, the law is simply what parliament votes to be law, and they could shortcut your reasoning at any point. Given what's already happened in the PIGS, I think they will at some point in the not-too-distant future show us that theory and practice are very different indeed.
- crdoconnor 12y ago
  >You know, I doubt that's the case. Greece and Cyprus have crossed the EU, lied to them, and committed acts that should have meant getting kicked out of the EU. Nothing happened. If anything the EU keeps giving them more money. The ECB doesn't want them gone. In both cases (and in Italy too) parties or individuals that have genuinely expressed a desire to renegotiate their deal with the ECB or leave the Euro if that failed have been destroyed. In Italy's case, Berlusconi was replaced with an unelected technocrat the second he made a move in that direction. They did a lot of behind the scenes dirty work to make that happen on the day it happened. I'm not sure how they made him resign, but it seems like blackmail might have been involved. In Greece's case there were TWO parties that promised to renegotiate their deal with the EU and the vote was basically split between them. The EU backed one and said that disaster would strike if the other got elected. The former won and promptly broke its promise. In Cyprus's case, the ECB offered an ultimatum that threatened to blow up the Cypriot economy literally 2 hours after the new prime minister had been elected into office. If he didn't cram down losses on depositors, they'd yank OMT. This one is perhaps the most shameful of all. They targeted him at that point because they knew they could make him panic, force his hand and get him to react the way they wanted. Cyprus was most likely a test to see how European citizens would react to cramdowns (they're tiny; bailing them out would have been trivial, so it wasn't about the cost of making them whole). The ECB is run by an unelected commission who work largely behind the scenes. They work only for the benefit of European banks, and against the interests of all EU citizens, whether in the core or the periphery.