4 ms·

This is an interesting take on things w/ a lot of merit, but I think Vox actually summed it up better here w/ a short video and a longer article: http://www.vox

by lhl 11y ago

This is an interesting take on things w/ a lot of merit, but I think Vox actually summed it up better here w/ a short video and a longer article: http://www.vox.com/2015/6/30/8867939/greece-economic-crisis http://www.vox.com/2015/6/30/8867939/greece-economic-crisis Until/unless the rich European countries are willing to subsidize the poorer countries, as a financial union, the Euro is just a complete non-starter since the fiscal policies these states need are so far apart.

mike_hearn 11y ago
The notion that a country like Greece needs a different currency or fiscal policy to Germany isn't really true. Ultimately whether they print New Drachma and hyperinflate themselves into poverty or whether they accept massive pay cuts/import drops doesn't make much difference - they are two roads that lead to the same outcome. Greece could become competitive without leaving the Euro. However, it means actually telling people they're going to receive large and frequent pay cuts. As nobody likes doing that, easier to ignore the problem until the whole thing comes crashing down. Then when salaries are redenominated in ND and suddenly ND becomes worthless, it's not the bosses fault see - the boss didn't cut anyone's pay. It's just the darn currencies fault. Psychological tricks aren't what Greece needs right now though.
- cgio 11y ago
  On a zero-based forecast the two are equivalent. It is different though to keep your stocks high while taking your flows down as if you keep a euro balance sheet and a de-valued euro p&l. They are two roads in the same direction but with totally different outcomes.
  - mike_hearn 11y ago
    Could you explain a little further? I didn't understand your point, I'm afraid. Sounds like you're saying it affects the accounting.
- lhl 11y ago
  Devaluation actual has real, not psychological impacts in debt repayment and import/export. Whether printing more money would lead to a liquidity trap is above my pay grade, but empirically (the past 5 years, and every single austerity program in history), imposing austerity has been to shown, to not work, and it's a precondition if they want to keep using Euros. Based on current/future loan terms, Greece will never be able to grow their GDP to meet their repayment schedule.
return0 11y ago
Actually there have always been subsidies all across europe, but these are discussed at the EU level and are not related to the euro.
- laurencerowe 11y ago
  These EU regional aid subsidies are too insubstantial to counteract the huge imbalance of payments between the core and periphery. The whole EU budget is only 1% of GDP and half of that goes on farm subsidies.

by lhl 11y ago

mike_hearn 11y ago

The notion that a country like Greece needs a different currency or fiscal policy to Germany isn't really true. Ultimately whether they print New Drachma and hyperinflate themselves into poverty or whether they accept massive pay cuts/import drops doesn't make much difference - they are two roads that lead to the same outcome. Greece could become competitive without leaving the Euro. However, it means actually telling people they're going to receive large and frequent pay cuts. As nobody likes doing that, easier to ignore the problem until the whole thing comes crashing down. Then when salaries are redenominated in ND and suddenly ND becomes worthless, it's not the bosses fault see - the boss didn't cut anyone's pay. It's just the darn currencies fault. Psychological tricks aren't what Greece needs right now though.

cgio 11y ago
On a zero-based forecast the two are equivalent. It is different though to keep your stocks high while taking your flows down as if you keep a euro balance sheet and a de-valued euro p&l. They are two roads in the same direction but with totally different outcomes.
- mike_hearn 11y ago
  Could you explain a little further? I didn't understand your point, I'm afraid. Sounds like you're saying it affects the accounting.
lhl 11y ago
Devaluation actual has real, not psychological impacts in debt repayment and import/export. Whether printing more money would lead to a liquidity trap is above my pay grade, but empirically (the past 5 years, and every single austerity program in history), imposing austerity has been to shown, to not work, and it's a precondition if they want to keep using Euros. Based on current/future loan terms, Greece will never be able to grow their GDP to meet their repayment schedule.

return0 11y ago

Actually there have always been subsidies all across europe, but these are discussed at the EU level and are not related to the euro.

laurencerowe 11y ago
These EU regional aid subsidies are too insubstantial to counteract the huge imbalance of payments between the core and periphery. The whole EU budget is only 1% of GDP and half of that goes on farm subsidies.