Specifically ... - The ECB, which bought totally into the doctrine of expansionary austerity, despite overwhelming evidence that it was false, and proceeded to raise rates in the face of a deeply depressed economy — possibly the straw that breaks the euro’s back.posted by delmoi at 7:45 PM on September 24, 2011 [3 favorites]
Ideally, the 'austerity measures' imposed on Greece should've simply been tax collectors from Germany and Scandinavia, but that might inconvenience someone important.Or gotten someone shot.
I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?Yup, and not only that Brittan's interest rates are super-low, which means that they can maintain huge Debt/GDP ratios forever, without spiraling into an out of control situation where interest payments are higher then revenues.
What the Western countries have done is to turn on the spending taps during both good times and bad as if there would be no consequence. Now the "Keynesians" advocate more government spending on top of unprecedented debt levels. This won't help because at some point lenders will balk at trying to swallow an ocean of promissory notes.In the U.S the fed can buy as many treasuries as it likes. You're essentially arguing about what Krugman calls the 'bond vigilantes' lenders who cut their purchase of government debt because they don't like government policy. The problem though is that in real life those people don't really exist. People don't really think about the government's ability to repay debt, they worry about inflation -- and right now there's no sign of inflation at all, because we're in a liquidity trap.
I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?Hmm, now that I've actually looked at the tables, this is wrong. You linked to 'external' debt which is both public and private debt to people outside of the countries. One of the highest on that chart is Hong Kong, which is actually the lowest non-zero value on the table of government debt.
All over the developed world, governments are desperately trying to hack out fiscal austerity programs before midnight strikes on long evenings of profligacy and their credit ratings turn into pumpkins.Fuck 'em all.
This is obviously bad news for the current generation of politicians. Poor things, they finally arrive atop the greasy pole only to find nothing there but debt and the unappealing prospect of saying ‘no’ to everyone for years. It’s not good for electorates, either, many of whom are accustomed to a good helping of pork from their leaders. They’ll have to learn to do without.
However, the sound of coffers snapping shut in the Treasuries of the West ought to be Beethoven’s Fifth to the ears of equity investors. For the evidence suggests that stocks do rather well in times like these.
Often very well indeed.
I really don't understand what this means. You're saying we owe debts to people from a century ago. Dead people. How is this possible? Money is a shared fiction. The only debt we owe today is the debt we agree to owe today, or that can be forcibly extracted from us todayThe thing a lot of debt-haters don't understand is that anything that's not literal cash is a debt. When you deposit money in a bank you are lending the bank the money your bank balance is the amount of money your bank owes you. So, of course the total amount of 'debt' is going to be really high. Almost all value in the world is debt.
Germans get stuck with the bill, which might cause a few German suicides instead.I fucking doubt it.
It's one of those mathematical rules of economics. "Benefits" is a distributive quantity, whereas "pain" is an associative quantity.Is this some kind of metaphor? because mathematically it makes no sense at all. For one thing the distributive property and the associative property are properties of operators not 'quantities' And operators, such as multiplication can be both associative and distributive.
as the sovereign debt bubble bursts, we're bailing it out by the largest economies basically pumping in ever more cheap money via the ECB, fed and bank of england. Are we steadying the markets and keeping the system running, or just setting ourselves up for even bigger collapse in a few years when the US or chinese economies collapse, with no-one left to bail them out. I don't know any more.Compare the situation in Iceland, where no bailouts happened to other countries that did bail out their banks. It wouldn't have even been remotely possible for Iceland to bail out it's banks, so it just didn't. Other countries were upset, but it just wasn't possible.
maybe everyone decides 2012 should be debt jubilee year and the debt holders can just thank us for not getting the guillotinesThis might not even be a grossly immoral idea for government debt - didn't we agree at one point that loans only impose obligations on their recipients? So why are we trying to squeeze the recipients' kids and neighbors?
A reasonable estimate would be that Spain and other peripherals need to reduce their price levels relative to Germany by around 20 percent. If Germany had 4 percent inflation, they could do that over 5 years with stable prices in the periphery — which would imply an overall eurozone inflation rate of something like 3 percent.posted by delmoi at 8:51 PM on September 25, 2011 [2 favorites]
But if Germany is going to have only 1 percent inflation, we’re talking about massive deflation in the periphery, which is both hard (probably impossible) as a macroeconomic proposition, and would greatly magnify the debt burden. This is a recipe for failure, and collapse.
Another way to say this is that the euro is going to have a chance of working only if the ECB delivers much more expansionary and, yes, inflationary policies than the market now expects. If you don’t think that’s a possibility, say goodbye to the euro project.
"A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable." .. accusation that German leaders are conspiring with EU officials to emasculate the Bundestag.. "The sovereignty of the German state is inviolate.." calls for a new Constitution (!)He is angry. As Mish says, "the German court has had enough of Chancellor Angela Merkel, her cronies, and all the politicians who want to rob German taxpayers". Damn right. Of course, this means we are edging closer to the abyss if Germany doesn't put a barrier around the defaulting countries with a trillion or two.
European Union governments will spend the next six weeks building a financial firewall to protect their fragile banking systems against what is now seen as an inevitable Greek default.The world's most expensive firewall, 2 trillion, largely paid for by German taxpayers, who won't have any say in it, since it's being decided by American and EU officials. It would be sort of like Canadian and British officials deciding spend a few trillion dollars of American taxpayer money to bail out Mexican banks (for our own good of course).
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posted by crayz at 6:08 PM on September 24, 2011 [5 favorites]