Devaluation Thread Continued

[EdRooney]

Let me clarify Joe's posts since even Joe himself is having a hard time understanding them:

1. Look I have a chart that I think proves my ideological point of view that government spending is Bad.

2. What? you mean my chart shows the opposite of what I thought? OK but I still will stick to my mantra: government spending is Bad, and I'll call you a Keynesian to boot, even though I have no idea what Keynes wrote.

3. OK my chart proves your point. How about if I throw in a Gerhard Schröder red herring to change the subject, you dirty Keynesian!

4. Wait! I have an anecdote about how 0.000006% of the Italian workforce could be streamlined for a net savings of one gazillionth of GDP. Does that make up for the macro chart I showed disproving my point?

.

 

[Gringoboy]

I've just returned from England which is my real home so to speak and it's no bed of roses, although it's not as volatile as here obviously.

Some street lights are turned off at night so the local councils can save money.
Many regions only get their rubbish/refuse collected ONCE every TWO weeks, so consequently rubbish piles up all over the place or people find more devious means to dispose of it.
Charity shops and pound shops abound (charity shops don't pay local taxes) as well as what used to be low end supermarkets, that are now giving the big boys abashing.
The immigration issue is a topic of conversation I thought I'd never have to listen to, but it's now considered to be a major issue thanks to the EU.

A pint of ale is now over £3, which is a serious issue.

 

[Dublin2BuenosAires]

In attempt to start a different fight and get old Joe off the ropes, I am going to say that govt spending is a useful stimulus when said govt can borrow long term at manageable rates.

Greece didn't have that options due to the clusterfvckesque nature of their economy. Overspending, huges gaps in tax intake and a balance sheet propped up by multi billion off the books loans from wall street's finest.

I don't like sweeping cuts, the non-financial consequences are horrible (new dawn on the right, populists elsewhere, serious societal issues) but it's hard to know what the right course of action was for Greece. It's not staring me in the face. They were going to have to sell islands at one stage!

 

[Joe]

The point of the Germany reference is that Germany initiated real reforms that have been successful and yet other Euro countries instead of adopting those reforms are resorting to the worn out idea of government stimulus.

The example of the Italian extravagant public employee salaries is not an exception, Euro public employee work less hours with less skills than private sector workers and get paid more!

***

How does Cristinomics differ from Rooneynomics?

You both advocate money printing to be used for "stimulus" in order to revive the economy.

 

[Dublin2BuenosAires]

"Since the German model, aka Agenda 2010, was successful in Europe GERMANY, why not emulate that instead of trying the worn out ideal of government stimulus, a la Cristinomics or Rooneynomics?"


Germany (and France) created a currency union, The insuing capital flooded around Europe and greedy vote hungry politicians and private property developers spent it with abandon. No effective regulatory regime was put in place to prevent this.

Agenda 2010 balanced the German economy, the Euro created a debt and spending bubble which they capitalised on. Once the crisis hit, wealthy southern europeans drained their own banks and deposited in northern European banks. LTRO refinancing program effectively created new reserves for those southern european banks who used them to...

...settle up with the northern european creditors! None of those reserves are ever legally allowed to become "money" that jose, beppe, sean or stavros ever get their little hands on.

 

[EdRooney]

1. Dude, in no way was my post a personal attack.

2. Does my not being a Crissynomics fan mean that I have to reject everything she does? She likes washing her (abundantly botoxed) face in the morning and I like to wash mine each morning. Does that make me a Crissynomicist?

3. In regard to government spending, the last thread we had on the deficit showed clearly: CFK is not the tax and spender she claims to be.

4. Rooneynomics does not exist. I can only tell you what what has happened in history. Every major economy: US, UK, China, Ancient Rome, you name it, has used money issuance to reverse drops in demand. The are economists at the ECB and the Fed who think that they have some new revolutionary system for escaping a recession by cutting budgets. History (and your chart above) has shown them to be either gravely mistaken or irredeemably corrupt.

5. Magic O'Gonzalez, while I agree with most of your points, even if Greece had waited to join the Euro, it would still be in a position where it did not have control over the fiscal policy for its currency. This is the same situation as the Dollar peg here, and is having the same results. What Greece desperately needs is a devaluation of the Euro so that its exports will become attractive, but don't hold your breath since there is a small group of folks in Brussels and Berlin who just love them some high-value Euros.

 

[Dublin2BuenosAires]

5. Magic O'Gonzalez, while I agree with most of your points, even if Greece had waited to join the Euro, it would still be in a position where it did not have control over the fiscal policy for its currency. This is the same situation as the Dollar peg here, and is having the same results. What Greece desperately needs is a devaluation of the Euro so that its exports will become attractive, but don't hold your breath since there is a small group of folks in Brussels and Berlin who just love them some high-value Euros.

I guess the ironing is that if they had played by the rules, or at least not been encouraged very strongly (by the north & wall st!) to disregard the rules and basic accounting princinples they would never have joined. Even by 2008 the Greek economy would have been out of step with the requirements to join. Would have been better for all parties.

That said, they did have uncomfortable issues with corruption and not paying tax, so they were not exactly paragons of fiscal virtue- I remember shopping in Athens when you got a different price for a receipt and no receipt....kind of like the credit card or cash option here!

ps...Yeah..I took the no receipt price!

pps...is there an argument to say that a special set of circumstances and imbalances in the world economy meant that the money (or really, reserve creation!) was not possible at a local govt level, i.e. the greeks, portuguese or whoever else hit their credit limit, the central banks preserved their own by extending reserves but govts did not get cash injections via the bond market as the risk equation jeopardised the profitability of those loans.

(ramble mode engage) - that's the real long term issue with the global economy. Countries live or die by how they borrow and their ability to pay back with a profit. Bond market profit has become more important than social stability, which is somewhat worrying.

 

[Joe]

I personally think that Keynes has gotten a bad rap and that's why I use the term Neo-Keynesian.

The year after year, endless deficit spending that most world economies are engaging in would, I believe, be anathema to Keynes.

He advocated deficit spending during downturns and no deficits or surpluses during a normal functioning economy.

The Cristinomics, Abenomics, Rooneynomics , aka Neo-Keynesian doctrine advocates perpetual deficit spending. You will never hear them suggest cutting government spending.

 

[EdRooney]

Not a bad point José.

The thing is you have to understand that deficit spending is not a good or an evil in and of itself. It's situational. For example, printing has advantages (increased agg. demand, decreased deflation) and disadvantages (possible inflation, creation of asset bubbles). In the case of the US, for example, printing is not limited by inflation as QE has clearly shown. But what effect has it had on global asset prices? Obviously they need to re-think QE.* In the case of Argentina, money issuance has inflationary effects, so it must be kept in tandem with the demand the economy can support.

The point is, there are some on this forum who seem to infer All debt bad! or All printing good! or vice versa. But all generalisations are false.

Furthermore, Argentines would do well to learn this lesson. The mantra "All inflation bad!" could someday get them into a deeper hole than the one theyre in.


*Here I call QE printing which it isn't technically but it is in effect, or as Bernanke said when axed by the senate if QE is printing: "Sort of."

 

[ajoknoblauch]

The point is, there are some on this forum who seem to infer All debt bad! or All printing good! or vice versa. But all generalisations are false.

Furthermore, Argentines would do well to learn this lesson. The mantra "All inflation bad!" could someday get them into a deeper hole than the one they're in.

Krugman and other realistic Keynesians acknowledge that deficit spending is situational, but Argentina's current government appears to believe it is infinitely sustainable. Argentina has rarely had problems with deflation, but could it be beginning? tinyurl.com/lgy4jnz