4 ms·

Voluntarily accepting conditions attached to a loan is not bullying, particularly as the countries giving the loan are in no way at fault for Greece's dire need

by cjensen 11y ago

Voluntarily accepting conditions attached to a loan is not bullying, particularly as the countries giving the loan are in no way at fault for Greece's dire need for a loan.

hammerandtongs 11y ago
Your moralistic tone might be appropriate in a completely simplistic loan from one villager to another villager. In the context of the very high complexity of the actual international system we have it doesn't really work or provide any explanatory power.
- cjensen 11y ago
  Did you mean to address your comment to the original comment instead of mine? It was the grandparent comment who used the phrase "bullying" to imply immorality. My comment only claims that even if you assume morality in international lending, the particular phrase is not apt.
phreeza 11y ago
'at fault' may be too strong, but Germany surely benefited in the zero-sum game that resulted from the Euro fixing exchange rates within the eurozone: in the old system, Greece could have (and did) increase the exchange rate wrt the Mark to boost exports and keep the economy running. The inability to do this benefited Germany, at the cost of Greece.
- mafribe 11y ago
  (1) In what sense is loosing billions to Greece benefiting Germany? (2) Greece can change its exchange rate. Just declare bankruptcy and leave the Euro.
  - Nimitz14 11y ago
    (1) Germany is profiting billions from the current exchange rate, that's why it isn't losing anything. (2) Which would fuck with the EU a lot more than it would bother Greece, which is why they're making the stand that they are, they know they have less to lose. There's a reason they haven't been kicked out already. ;)
    - mafribe 11y ago
      (1) I see no evidence of this. The ECB's flooding the world with Euros clearly inflates away net savers' wealth. (2) I agree that that's the game Greece has been playing. But it's perfectly compatible with what I said.
      - eli_gottlieb 11y ago
        > (1) I see no evidence of this. The ECB's flooding the world with Euros clearly inflates away net savers' wealth. Germany makes its money on manufactured-goods exports, though, so an artificially cheap currency helps them.
        mafribe 11y ago
        But the artificially cheap currency comes about because savers' savings are being inflated away. Moreover it's unlikely that the money lent to Greece will ever come back. I don't see any evidence that in balance Germany benefits from this. Have you got any?
        eli_gottlieb 11y ago
        German workers trying to save lose. German capitalists making their money on exports and investing it by loaning it out win.
        mafribe 11y ago
        Given that the latter, unlike the former, is a very small number, you've not succeeded in explaining how Germany is benefitting.
- davidgerard 11y ago
  The main problem with the ECB is that it's supposed to be for the Eurozone but operates like it's for Germany.
  - mafribe 11y ago
    I recommend that inform yourself about the decision making process on the ECB board, and who's the majority there. Germany almost always votes against the ECBs decisions but is outvoted by other countries. several German ECB members have resigned because of that. This gives a pretty clear indication in whose interest the ECB works. Namely in the interest of the majority of the board members.
    - coldtea 11y ago
      For many years, the debate about whether the European Central Bank (ECB) was too heavily influenced by Germany was confined to academic papers. As of late, it has become the central policy question of the eurozone. Germany is more influential at the ECB than it should be. In fact, Mario Draghi’s penchant for seeking German approval has been his biggest mistake as head of the ECB. He should end it. (...) The ECB was modelled on the German Bundesbank. As a result, it is one of the world’s most politically independent central banks; its mandate is focused narrowly on price stability; it does not take broader economic goals like unemployment into account in the way other central banks, such as the Fed, do; and it is de facto more restricted than other central banks, since controversial measures can lead to complex political and legal struggles, involving 18 (soon to be 19) countries. Its setup and philosophy are therefore ‘German‘, that is, conservative and cautious. (...) A wide range of studies have so far failed to establish a firm consensus on the influence of various countries on the ECB during the euro’s first decade. However, most studies have found that the ECB behaved like a multinational central bank, in which each country has a weight proportional to the size of its economy. This gave Germany a higher weight than other countries because it is the largest economy in the eurozone. But it is hard to argue that there was a German bias at the ECB before the crisis. In the post-crisis period, the ECB has failed to stabilise the economy, and inflation has fallen to just 0.3 per cent. It is tempting to see this as the product of a German bias, because the German economy has suffered least from the ECB’s hesitation to do more. But it is hard to argue that German pressure prevented the ECB from lowering rates faster during the last two years, for example, or managing the inflation expectations of consumers and investors more aggressively. Rather, the ECB’s misjudgement of the economic dynamic in the eurozone prevented a more timely and aggressive stance. However, now that the ECB has to move further into unconventional territory to correct its previous errors – potentially by buying government bonds – Draghi has taken German resistance into account and delayed quantitative easing (QE). (...) In the governing council of the ECB, all relevant monetary policy decisions are taken by simple majority, with the smaller countries having one vote each, and the larger countries traditionally two (because of the additional votes of executive board members). Some of the more fundamental decisions, like recapitalising the ECB, need a two-thirds majority, based on the ECB’s capital shares, but even then Germany has no veto. What is more, there is currently a clear majority for more aggressive ECB action in the council, which Draghi can draw upon whenever he decides that the time is right. Formally, there is no need for German approval, either from Berlin or from the Bundesbank. Why, then, is Draghi waiting for German approval? There are two possible reasons. First, he might consider it unwise to conduct monetary policy in the face of opposition from the largest eurozone country. There is some merit to this view but it loses validity when the ECB is failing to fulfil its inflation mandate by a wide margin, as it is now. (...) Even the relatively cautious OECD has now come out in favour of further monetary stimulus, and the IMF has been urging the ECB to do more for a while. Given that the Fed and the Bank of England have bought government bonds on a massive scale, the ECB would be well in line with consensus views on monetary policy if it did the same. (...) The second reason why Draghi might want to get Germany’s backing is that he may fear losing the German government’s consent for the ECB’s other operations, which are not strictly monetary policy. The most important of these, of course, is the OMT programme, which was announced during a panic-driven run on eurozone government bonds in the summer of 2012. The ECB declared that it intended to buy unlimited quantities of these bonds if the panic did not subside – which it then duly did. This programme makes the ECB the implicit guardian of the eurozone as the lender of last resort to governments, but the OMT is in part a fiscal operation. Without the support of Germany, the country with the deepest pockets, the OMT might fail. Draghi therefore does not need the Bundesbank’s support but that of Merkel and the German government – which has backed him on the OMT. http://www.cer.org.uk/insights/ecb-not-german-central-bank#sthash.VY9jG4O3.dpuf http://www.cer.org.uk/insights/ecb-not-german-central-bank#s...
- davidw 11y ago
  > increase the exchange rate wrt the Mark Italy pulled this same stunt in the past; mostly as a way to avoid actually fixing the many problems with the economy here. Floating exchange rates are good in some ways, but those kinds of devaluations are problematic in many ways: you're basically stealing wealth from savers in order to goose export industries a bit, until your crappy economic policies come back to bite you yet again and you need to repeat the cycle.
yequalsx 11y ago
Your comment indicates that you think that in the lender/borrower relationship only one side has responsibilities. The Germans via the ECB flooded Greece, Portugal, Spain with easy money in the early 2000s. It is incorrect to say, "...in no way at fault..." Greece was bullied and has been bullied and the average Greek has suffered as a result. They are not blameless by any means but what has happened to Greece is not just.
- mafribe 11y ago
  I'm sorry that's misleading. Germany has one vote on the ECB, the same number as Greece, Spain, Portugal, Malta and every other country. Greece was perfectly happy to get cheap money. Instead of investing it in education, improved prductivity, Greece has been wasting it on an oversized army, extremely early retirement with cushy pensions for government employees, pointless olympic games, hagiographic articles in the NY Times and so on.
  - coldtea 11y ago
    >I'm sorry that's misleading. Germany has one vote on the ECB, the same number as Greece, Spain, Portugal, Malta and every other country. Yeah, if only democracy worked outside of power plays and diplomatic and economic might... Because after all the number of votes is all that counts... >Instead of investing it in education, improved prductivity, Greece has been wasting it on an oversized army, extremely early retirement with cushy pensions for government employees, pointless olympic games, hagiographic articles in the NY Times and so on. I know. Those lazy southerners getting German money are the same kind of vermin that Jews were back in the day, right? Because what you wrote is word by word the same kind of BS propaganda repeated in German popular media, about some lazy, unproductive vermins ("PIIGS") wasting German tax-payers money. Here's some reality: http://www.washingtonpost.com/news/morning-mix/wp/2014/05/16/greeks-work-harder-than-germans-who-knew/ http://www.washingtonpost.com/news/morning-mix/wp/2014/05/16... https://euobserver.com/social/124761 https://euobserver.com/social/124761
    - mafribe 11y ago
      Your incessant racism is tiring. In any case, if Greeks are so hard working, then you are actually agreeing with my point about Greece not investing the huge subsidies that they have recieved wisely into "improved prductivity". As the WaPo article you quote says: "Caveat: Long hours at the office don’t always equate to high productivity".
cynicalkane 11y ago
According to the pre-2008 economic consensus on monetary policy, bad central banking is the dominant force behind recessions. This theory is in no way disproved since central banks during the Great Recession failed to act according to the theoretical recommendations. The US is back on track (kind of) with QE, and perhaps coincidentally, the US economy is doing quite a bit better than the Eurozone. The ECB, which was tasked with maintaining inflation levels and nominal expansion throughout Europe, has completely abandoned this goal to serve the (short-sighted and wrong) interests of Germany and other economic powers. If we are to believe the pre-2008 economic mainstream, it is absolutely the fault of the countries giving the loans, who swamped the Eurozone with expansionary policy then yanked it away when it was needed most. Right now it's not politically convenient to believe in those economic theories, so you don't hear much about them from politicians or mainstream press.
- SovietDissident 11y ago
  It seems to me that if the entire Eurozone was subject to the same monetary policy by the ECB, it leaves a wonderful base for comparison. In other words, we can forget about monetary policy in our analysis and compare the relative health of other economies in the Eurozone based on their governments' fiscal policies and fundamental economic productiveness. Greece, Spain, and Portugal fail the test.
  - cynicalkane 11y ago
    The entire motivation behind monetary economics is that there doesn't exist a "baseline economy" independent of monetary policy. This was the primary argument against the Euro. Developing economies are hurt more in recessions, and benefit more from widely varying monetary policy. This is true no matter how "good" or "bad" a country is, even if the "badness" of a country was justification for economically punishing its citizens in the first place (it isn't).
coldtea 11y ago
>Voluntarily accepting conditions attached to a loan is not bullying, particularly as the countries giving the loan are in no way at fault for Greece's dire need for a loan. Victims of loan-sharks, (one of the most despised kind of scum going back to the antiquity), also "voluntarily accept" the conditions attached to their loans. When you're in need, and even more in "dire need", there's a ton of leverage people have on you, which makes the "voluntarily" part quite meaningless. Not to mention that there are ways to pressure a country to not try other measures ("if you don't work this way and get this loan, and instead seek alternate courses of action we'll make sure we crush you"). E.g. "if you dare default, we'll kick you out of Eurozone" or "we'll kill your tourism industry", etc. And of course the countries deciding the load, namely Germany which acts as E.U's big boss, are very much at fault for Greece's dire need for a loan, as they are for the situation with the rest of the Southern economies. This is again something that has been studied and admitted repeatedly by leading economists and journalists. Germany used its weight and forced the Eurozone (a supposed "economic alliance" for the benefit of all members), to further its own goals, and for its own's economy benefit for decades. E.g. by imposing specific trade rules and plans that disfavor the periphery, using Euro and ECB as monetary instruments to its national advantage, etc.

by cjensen 11y ago

Voluntarily accepting conditions attached to a loan is not bullying, particularly as the countries giving the loan are in no way at fault for Greece's dire need for a loan.

hammerandtongs 11y ago

Your moralistic tone might be appropriate in a completely simplistic loan from one villager to another villager. In the context of the very high complexity of the actual international system we have it doesn't really work or provide any explanatory power.

cjensen 11y ago
Did you mean to address your comment to the original comment instead of mine? It was the grandparent comment who used the phrase "bullying" to imply immorality. My comment only claims that even if you assume morality in international lending, the particular phrase is not apt.

phreeza 11y ago

'at fault' may be too strong, but Germany surely benefited in the zero-sum game that resulted from the Euro fixing exchange rates within the eurozone: in the old system, Greece could have (and did) increase the exchange rate wrt the Mark to boost exports and keep the economy running. The inability to do this benefited Germany, at the cost of Greece.

mafribe 11y ago
(1) In what sense is loosing billions to Greece benefiting Germany? (2) Greece can change its exchange rate. Just declare bankruptcy and leave the Euro.
- Nimitz14 11y ago
  (1) Germany is profiting billions from the current exchange rate, that's why it isn't losing anything. (2) Which would fuck with the EU a lot more than it would bother Greece, which is why they're making the stand that they are, they know they have less to lose. There's a reason they haven't been kicked out already. ;)
  - mafribe 11y ago
    (1) I see no evidence of this. The ECB's flooding the world with Euros clearly inflates away net savers' wealth. (2) I agree that that's the game Greece has been playing. But it's perfectly compatible with what I said.
    - eli_gottlieb 11y ago
      > (1) I see no evidence of this. The ECB's flooding the world with Euros clearly inflates away net savers' wealth. Germany makes its money on manufactured-goods exports, though, so an artificially cheap currency helps them.
      - mafribe 11y ago
        But the artificially cheap currency comes about because savers' savings are being inflated away. Moreover it's unlikely that the money lent to Greece will ever come back. I don't see any evidence that in balance Germany benefits from this. Have you got any?
        eli_gottlieb 11y ago
        German workers trying to save lose. German capitalists making their money on exports and investing it by loaning it out win.
        mafribe 11y ago
        Given that the latter, unlike the former, is a very small number, you've not succeeded in explaining how Germany is benefitting.
davidgerard 11y ago
The main problem with the ECB is that it's supposed to be for the Eurozone but operates like it's for Germany.
- mafribe 11y ago
  I recommend that inform yourself about the decision making process on the ECB board, and who's the majority there. Germany almost always votes against the ECBs decisions but is outvoted by other countries. several German ECB members have resigned because of that. This gives a pretty clear indication in whose interest the ECB works. Namely in the interest of the majority of the board members.
  - coldtea 11y ago
    For many years, the debate about whether the European Central Bank (ECB) was too heavily influenced by Germany was confined to academic papers. As of late, it has become the central policy question of the eurozone. Germany is more influential at the ECB than it should be. In fact, Mario Draghi’s penchant for seeking German approval has been his biggest mistake as head of the ECB. He should end it. (...) The ECB was modelled on the German Bundesbank. As a result, it is one of the world’s most politically independent central banks; its mandate is focused narrowly on price stability; it does not take broader economic goals like unemployment into account in the way other central banks, such as the Fed, do; and it is de facto more restricted than other central banks, since controversial measures can lead to complex political and legal struggles, involving 18 (soon to be 19) countries. Its setup and philosophy are therefore ‘German‘, that is, conservative and cautious. (...) A wide range of studies have so far failed to establish a firm consensus on the influence of various countries on the ECB during the euro’s first decade. However, most studies have found that the ECB behaved like a multinational central bank, in which each country has a weight proportional to the size of its economy. This gave Germany a higher weight than other countries because it is the largest economy in the eurozone. But it is hard to argue that there was a German bias at the ECB before the crisis. In the post-crisis period, the ECB has failed to stabilise the economy, and inflation has fallen to just 0.3 per cent. It is tempting to see this as the product of a German bias, because the German economy has suffered least from the ECB’s hesitation to do more. But it is hard to argue that German pressure prevented the ECB from lowering rates faster during the last two years, for example, or managing the inflation expectations of consumers and investors more aggressively. Rather, the ECB’s misjudgement of the economic dynamic in the eurozone prevented a more timely and aggressive stance. However, now that the ECB has to move further into unconventional territory to correct its previous errors – potentially by buying government bonds – Draghi has taken German resistance into account and delayed quantitative easing (QE). (...) In the governing council of the ECB, all relevant monetary policy decisions are taken by simple majority, with the smaller countries having one vote each, and the larger countries traditionally two (because of the additional votes of executive board members). Some of the more fundamental decisions, like recapitalising the ECB, need a two-thirds majority, based on the ECB’s capital shares, but even then Germany has no veto. What is more, there is currently a clear majority for more aggressive ECB action in the council, which Draghi can draw upon whenever he decides that the time is right. Formally, there is no need for German approval, either from Berlin or from the Bundesbank. Why, then, is Draghi waiting for German approval? There are two possible reasons. First, he might consider it unwise to conduct monetary policy in the face of opposition from the largest eurozone country. There is some merit to this view but it loses validity when the ECB is failing to fulfil its inflation mandate by a wide margin, as it is now. (...) Even the relatively cautious OECD has now come out in favour of further monetary stimulus, and the IMF has been urging the ECB to do more for a while. Given that the Fed and the Bank of England have bought government bonds on a massive scale, the ECB would be well in line with consensus views on monetary policy if it did the same. (...) The second reason why Draghi might want to get Germany’s backing is that he may fear losing the German government’s consent for the ECB’s other operations, which are not strictly monetary policy. The most important of these, of course, is the OMT programme, which was announced during a panic-driven run on eurozone government bonds in the summer of 2012. The ECB declared that it intended to buy unlimited quantities of these bonds if the panic did not subside – which it then duly did. This programme makes the ECB the implicit guardian of the eurozone as the lender of last resort to governments, but the OMT is in part a fiscal operation. Without the support of Germany, the country with the deepest pockets, the OMT might fail. Draghi therefore does not need the Bundesbank’s support but that of Merkel and the German government – which has backed him on the OMT. http://www.cer.org.uk/insights/ecb-not-german-central-bank#sthash.VY9jG4O3.dpuf http://www.cer.org.uk/insights/ecb-not-german-central-bank#s...
davidw 11y ago
> increase the exchange rate wrt the Mark Italy pulled this same stunt in the past; mostly as a way to avoid actually fixing the many problems with the economy here. Floating exchange rates are good in some ways, but those kinds of devaluations are problematic in many ways: you're basically stealing wealth from savers in order to goose export industries a bit, until your crappy economic policies come back to bite you yet again and you need to repeat the cycle.

yequalsx 11y ago

Your comment indicates that you think that in the lender/borrower relationship only one side has responsibilities. The Germans via the ECB flooded Greece, Portugal, Spain with easy money in the early 2000s. It is incorrect to say, "...in no way at fault..." Greece was bullied and has been bullied and the average Greek has suffered as a result. They are not blameless by any means but what has happened to Greece is not just.

mafribe 11y ago
I'm sorry that's misleading. Germany has one vote on the ECB, the same number as Greece, Spain, Portugal, Malta and every other country. Greece was perfectly happy to get cheap money. Instead of investing it in education, improved prductivity, Greece has been wasting it on an oversized army, extremely early retirement with cushy pensions for government employees, pointless olympic games, hagiographic articles in the NY Times and so on.
- coldtea 11y ago
  >I'm sorry that's misleading. Germany has one vote on the ECB, the same number as Greece, Spain, Portugal, Malta and every other country. Yeah, if only democracy worked outside of power plays and diplomatic and economic might... Because after all the number of votes is all that counts... >Instead of investing it in education, improved prductivity, Greece has been wasting it on an oversized army, extremely early retirement with cushy pensions for government employees, pointless olympic games, hagiographic articles in the NY Times and so on. I know. Those lazy southerners getting German money are the same kind of vermin that Jews were back in the day, right? Because what you wrote is word by word the same kind of BS propaganda repeated in German popular media, about some lazy, unproductive vermins ("PIIGS") wasting German tax-payers money. Here's some reality: http://www.washingtonpost.com/news/morning-mix/wp/2014/05/16/greeks-work-harder-than-germans-who-knew/ http://www.washingtonpost.com/news/morning-mix/wp/2014/05/16... https://euobserver.com/social/124761 https://euobserver.com/social/124761
  - mafribe 11y ago
    Your incessant racism is tiring. In any case, if Greeks are so hard working, then you are actually agreeing with my point about Greece not investing the huge subsidies that they have recieved wisely into "improved prductivity". As the WaPo article you quote says: "Caveat: Long hours at the office don’t always equate to high productivity".

cynicalkane 11y ago

According to the pre-2008 economic consensus on monetary policy, bad central banking is the dominant force behind recessions. This theory is in no way disproved since central banks during the Great Recession failed to act according to the theoretical recommendations. The US is back on track (kind of) with QE, and perhaps coincidentally, the US economy is doing quite a bit better than the Eurozone. The ECB, which was tasked with maintaining inflation levels and nominal expansion throughout Europe, has completely abandoned this goal to serve the (short-sighted and wrong) interests of Germany and other economic powers. If we are to believe the pre-2008 economic mainstream, it is absolutely the fault of the countries giving the loans, who swamped the Eurozone with expansionary policy then yanked it away when it was needed most. Right now it's not politically convenient to believe in those economic theories, so you don't hear much about them from politicians or mainstream press.

SovietDissident 11y ago
It seems to me that if the entire Eurozone was subject to the same monetary policy by the ECB, it leaves a wonderful base for comparison. In other words, we can forget about monetary policy in our analysis and compare the relative health of other economies in the Eurozone based on their governments' fiscal policies and fundamental economic productiveness. Greece, Spain, and Portugal fail the test.
- cynicalkane 11y ago
  The entire motivation behind monetary economics is that there doesn't exist a "baseline economy" independent of monetary policy. This was the primary argument against the Euro. Developing economies are hurt more in recessions, and benefit more from widely varying monetary policy. This is true no matter how "good" or "bad" a country is, even if the "badness" of a country was justification for economically punishing its citizens in the first place (it isn't).

coldtea 11y ago

>Voluntarily accepting conditions attached to a loan is not bullying, particularly as the countries giving the loan are in no way at fault for Greece's dire need for a loan. Victims of loan-sharks, (one of the most despised kind of scum going back to the antiquity), also "voluntarily accept" the conditions attached to their loans. When you're in need, and even more in "dire need", there's a ton of leverage people have on you, which makes the "voluntarily" part quite meaningless. Not to mention that there are ways to pressure a country to not try other measures ("if you don't work this way and get this loan, and instead seek alternate courses of action we'll make sure we crush you"). E.g. "if you dare default, we'll kick you out of Eurozone" or "we'll kill your tourism industry", etc. And of course the countries deciding the load, namely Germany which acts as E.U's big boss, are very much at fault for Greece's dire need for a loan, as they are for the situation with the rest of the Southern economies. This is again something that has been studied and admitted repeatedly by leading economists and journalists. Germany used its weight and forced the Eurozone (a supposed "economic alliance" for the benefit of all members), to further its own goals, and for its own's economy benefit for decades. E.g. by imposing specific trade rules and plans that disfavor the periphery, using Euro and ECB as monetary instruments to its national advantage, etc.