Financial fuckery thread

[Jenne]

It'd be intriguing to watch the last 4 happen, but the first 2 are more likely.

[Cain]

I'm all for full political-economic-military integration, with a heavy dose of military Keynesianism to offset the financial crisis. 

But no-one ever listens to me.

[Jenne]

  Well, little wonder as to why. 

But seriously, how very sad if the endgame here is the destruction of the EU.  Pretty sure that spells doom for Eurozone's prospects globally, and a gee, the market's now well and FUCKED everywhere else.  Especially here. 

I think my headache just got worse.

[Cain]

The EU's the largest market in the world. 

If it goes down, there is no telling what will follow.

[Scribbly]

I'm going to keep my fingers crossed for the UK integrating into the Euro.

Not because I necessarily think it is a good idea, or because I think it is even likely to happen, but purely because I want to see my Thatcherite father's head explode. 

[Jenne]

...that's one of the less-likely scenarios to my mind.  The UK would become like Germany.  They really do NOT want the headaches and the choices that Germany faces since it started this whole thing.

Personally, I think it'd make the UK stronger.  But autonomy's at a premium these days, I guess.

[Cain]

http://www.bbc.co.uk/news/business-13896201

David Cameron has told European Union leaders that the UK will oppose using EU-wide money to bail-out Greece.

The current 110bn euros ($156bn; £98bn) Greek rescue package is a combination of funds from fellow eurozone nations and the International Monetary Fund.

Yet, after eurozone countries agreed in principle to give Greece an extra 120bn euros, there is a suggestion that cash from EU-wide funds may be used.

The prime minister said such funds should not be used in any way.
Key vote

Mr Cameron made the comments at the summit of EU leaders in Brussels. They reiterate previous statements by Chancellor George Osborne.

At present the UK government has contributed to the existing bail-out for Greece through the funds it gives the IMF.

The eurozone money being given to Greece currently comes from the European Financial Stability Facility, to which only the 17 eurozone nations contribute.

The UK contributes to the wider European Financial Stabilisation Mechanism, which covers the whole of the EU.

The Greek parliament will vote next week on the government's latest round of spending cuts.

If the vote goes through, then Greece will get the next 12bn euros instalment of the current 110bn euros of eurozone and IMF funds.

Greece needs this month by 15 July, or else it will default on its loan payments.

However, many economists think that even if Greece gets the latest 12bn euros it will still default at some time in the future.

[Jenne]

This part was interesting to me:

While Greece's continuing debt woes are dominating the EU summit, the question of who exactly contributes to any second giant Greek bail-out fund later in the year is unlikely to be decided.

Instead, the 27 EU leaders are expected to reaffirm their more general determination to help Greece sort out its problems, while defending the single currency.

How exactly they propose to do that will be interesting.

[Cain]

David Cameron has won his battle to limit the amount of money the UK will have to contribute towards a second financial bail-out for Greece.

The current 110bn euros ($156bn; £98bn) Greek rescue package is a combination of funds from fellow eurozone nations and the International Monetary Fund.

With a second bail-out due in the autumn, there had been a suggestion cash from EU-wide funds may be used.

This will now not happen, but the UK will still contribute via the IMF.

"This is the right outcome for the British taxpayer," a Downing Street source told the BBC after the vote.

The confirmation that the European contribution to the second Greek rescue package will again be limited to eurozone countries - those that use the single currency - was made in Brussels by European Council President Herman Van Rompuy.

That aside, the most amusing thing about all of this is watching one of the great debtor nations of the 20th century, in fact the industrialised country which has defaulted the most, EVER, and manipulated it's own currency just before the introduction of the Euro to turn itself into an exporting nation with other EU countries expected to import its goods (and stimulate economic growth but stall wage increases), bitch out Greece concerning economic management.

Credibility knocking, we'd like to remind you 100 years of German economic fuckups.

[Rumckle]

Croatia is still looking to join the EU, but Croatia is a fucking backwater anyway (consistently underrated football team, though).

Wait, isn't football performance how you measure economies in Europe?


Anyway, I found this article interesting, suggesting that Germany should leave the EU. The reasoning is that a slightly weakened EU economy, is better than a rather unequal economy, plus it may be easier to get Germany to leave than getting PIGS to leave. What are your thoughts on this? It seems kind of reasonable to me, but I think the author is underestimating how screwed up some of those countries are.

[Cain]

There's an element of logic to what he says.  It doesn't solve the immediate, underlying problem with the PIIGS, but it removes aspects of the Euro which make it so vulnerable to this kind of systemic risk.  And a devalue is needed to help those countries, and cannot be achieved without Germany.

This also ties into German currency/productivity manipulation in the lead up to the introduction of the Euro, although that is an insanely complicated topic.  Suffice to say, some of the German productivity boom is due to devaluing the D-mark in the lead up to the introduction of the Euro, allowing wages to stagnate while improving prospects for export.  Because of the complicated way in which Euro values were determined, this manipulation ran over once the currency changed.  But as German productivity rose, the value of the Euro rose in line with it, leaving lesser economies high and dry.

[Rumckle]

I was just looking at some data about Greece from the World Bank's website, here are a couple of interesting graphs (I added in US, UK and Aus for comparison):

http://data.worldbank.org/indicator/SL.TLF.CACT.ZS/countries/GR-US-AU-GB?display=graph

http://data.worldbank.org/indicator/SL.UEM.LTRM.ZS/countries/GR-US-AU-GB?display=graph

http://data.worldbank.org/indicator/SP.POP.0014.TO.ZS/countries/GR-US-AU-GB?display=graph

http://data.worldbank.org/indicator/SP.POP.65UP.TO.ZS/countries/GR-US-AU-GB?display=graph

[LMNO]

A bit more Krugman:

http://krugman.blogs.nytimes.com/2011/07/11/monetary-rage/

(Edited)

There's something about money, it turns out, that sends many people into blind rage — usually of the kind... described as "Ron Paul plus"...

So what is it about money? I don't have a full explanation, but here's a thought: monetary economics is inherently about market imperfections. In a frictionless, perfect-information, costless-calculation world we wouldn't need money, and it wouldn't matter how prices were listed.

Monetary theory — and monetary policy — are, then, all about dealing with an imperfect, frictional world. As a consequence, sensible policy is based around trying to figure how to reduce the costs of these frictions and imperfections.

So why the rage? I suspect that it's because a certain sort of person wants more purity than the real world is willing to supply. They want to believe in perfect markets, delivering perfect outcomes if only the government would stay out of the way. And so they want to believe that money too can be perfect if only we take it out of human hands, and make it good as gold, literally.

And when you point out that it doesn't work that way, that money is a social convention meant to deal with an imperfect world, and that dealing with that imperfect world sometimes means that central banks need to take exceptional action, they fly into a rage.

That is to say, they aren't doing enough SCIENCE.

[LMNO]

http://krugman.blogs.nytimes.com/2011/07/14/obama-moderate-republican/

Nate looks at polling, and extracts the following implied preferences for the mix between tax increases and spending cuts in a debt deal:

What Obama has offered — and Republicans have refused to accept — is a deal in which less than 20 percent of the deficit reduction comes from new revenues. This puts him slightly to the right of the average Republican voter.

Overton Window, much?

[Cain]

Well, I certainly feel much safer now

http://thinkprogress.org/yglesias/2011/07/17/271218/what-could-go-wrong/

Madelyn Antoncic moved from the above named position to Vice President and Treasurer for the World Bank.