Devaluation Thread Continued

[pauper]

Where are you from Ed?

His wikipedia page says he's from Oakland.

 

[Joe]

Excellent chart Joe.

See how the debt/GDP ratio reacts as austerity is applied in each country?
1: Expenditures are cut, meaning less demand in the economy
2: Less demand means GDP goes down, and
3: As a result of decreased GDP, the debt ratio rises again.

Excellent Keynesian dialectic, but you didn't answer my point that increasing debt levels does not equate with austerity.And you talk about expenditures being cut when in fact they are rising demonstrated by the increased debt levels.

The standard Keynesian response would be that the debt levels are not increasing fast enough. You see Cristina as the model of money printing that Europe should follow?

 

[gusgutier]

Excellent chart Joe.

See how the debt/GDP ratio reacts as austerity is applied in each country?
1: Expenditures are cut, meaning less demand in the economy
2: Less demand means GDP goes down, and
3: As a result of decreased GDP, the debt ratio rises again.

The best example is Greece: look at your chart. Why does it have that dip in 3Q 2011 followed by an abrupt increase? Because GDP contracted due to the austerity measures. The braindead policy does not work and the IMF admitted as much, but the same policies continue to be pushed not only in Europe, but by the same clowns here that call for cutting deficits.

Austerity means: killing demand by reducing government expenditures. This is done in the name of reducing deficits and preventing inflation, but given the decreased demand in the economy it has the opposite effect. You cannot kill the demand side of your economy and then expect growth. And who suffers from there being no growth? Ask the millions of Greeks who are struggling to feed their families just so some wealthy investors can enjoy 0% inflation.



And note on the chart: no money for milanesas in Cyprus.

An additional data to your analysis. Austerity is established in order to pay the re-finnanced external debt, and that´s why the ratio debt/gdp grows. ( and old question, what amount of public debt is private debt ?)

 

[EdRooney]

Excellent Keynesian dialectic, but you didn't answer my point that increasing debt levels does not equate with austerity. And you talk about expenditures being cut when in fact they are rising demonstrated by the increased debt levels.

This is exactly the point you do not seem to be understanding.

Debt to GDP is a ratio.

If GDP stays the same and debt goes down, the ratio goes down.
If the both stay the same, the ratio stays the same.
If GDP decreases but debt stays the same, then the ratio goes up.

Or as is happening in Europe:
If GDP decreases more than debt decreases, the ratio goes up.

 

[Joe]

I believe the subtext of what you're saying is that Neo-Keynesian government spending is the solution to the problem of middling GDP growth instead of deregulation of labor markets as occurred in Germany under Schroder.

 

[Dublin2BuenosAires]

Chart stops at 2011 ! Just a comment, Italy's debt continues to rise, Greece now has a contracting debt. Not much cheer there for the average greek I am guessing, but just saying.

Austerity was a horrible side effect of a horribly mismanaged, overspending, income negative economy which should have never been crow barred into a currency union which only ever benefited the hungry markets of their northern lenders aided and abetted by Goldman Sachs and criminally by a corrupt greek govt. The EU currency union was rushed for political gains, the northern european countries ignored their own fiscal rules to expand their (and international partners) debt markets.

Shame Greece didnt stick with the drachma until they met the "real" conditions for entry, by which point the crisis would have hit and they would have been on the sidelines.

 

[sesamosinsal]

I believe the subtext of what you're saying is that Neo-Keynesian government spending is the solution to the problem of middling GDP growth instead of deregulation of labor markets as occurred in Germany under Schroder.

What? Are we reading the same posts?

 

[dennisr]

The government also sold dollar-linked bonds domestically to finance spending in November. That helped drain liquidity and further depress devaluation expectations. The peso in non-deliverable peso forwards due in six months has remained nearly unchanged in the past two months.

http://www.bloomberg.com/news/2014-12-23/currency-dumping-triggers-move-to-drain-pesos-argentina-credit.html

 

[Dublin2BuenosAires]

What? Are we reading the same posts?

One of you is reading the posts, the other reading from a script.

Any way, labour deregulation is about as likely as a white Xmas this year, not sure why you would mention that Joe....

 

[Joe]

[/font]

Not only we are doing shit, but we aren't even doing the best shit. I so wish I could wash away being Italian!

"Even when spending cuts are made -- and hotly contested -- in Italy, the whole public spending system's glaring inadequacy is not affected. The Economist recently served up an egregious example: The ushers at the Italian Parliament, whose job is to carry messages in their imposing gold-braided uniforms, made $181,590 a year by the time they retired, but will only make as much as $140,000 after Renzi's courageous cut. If you wonder what on earth could be wrong with getting rid of them altogether and just using e-mail, you just don't get European public expenditure. It's about preserving old inefficiencies as venerable traditions."

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