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Depression also implies destruction of businessess and employment.
There are ways and ways of reducing the wage bill, if that's what one wants to do. tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
I mean, seriously, we need to stop protecting speculation by idle money. tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
Now, I could talk about the corrosive effects of serial devaluations in the long run (reduced competitive pressure etc), but I won't as those thing clearly are not relevant in the current situation. or rather, worrying about them right now would be like worrying about a blocked up toilet when the house is on fire. Peak oil is not an energy crisis. It is a liquid fuel crisis.
"But I do think you might have noticed something about the price of food, gasoline, and so on"
As for profits: take tourism. Salaries in tourism (not uncompetitive vis a vis the real competitors to begin with) have plummeted while the "opening" of professions has reduced what was once jobs you could make a living off to hobbies... At the same time the large units that work with foreign tourism, are not seeing any decrease in revenues (internal tourism is a different issue, it has been wiped out). So the big hotel owners are making money at the expense of their workers... The road of excess leads to the palace of wisdom - William Blake
Frankly, Greece and especially Athens could stand a revamp on that score since there are far too many cars on the road.
But food?
Greece went from 20% imports to 80% in a decade. Greece is the largest importer of French beef, and 15 years ago, Greeks were not beef eaters at all (relatively). In other words, the dynamic has very quickly changed Greek eating habits as well as Greek agriculture. Greece would revert in any devaluation.
Oil is a big concern, of course.
Funny you should say that.
tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
We want devaluation. Devalutation means lower real wages.
True, but misleading. Suppose that price levels are 34 % above where they need to be for balanced trade. Wages are approximately 67 % of GDP. Assuming an import quota of 1/3, achieving balanced foreign trade through wage suppression alone means that nominal wages have to drop by just a hair over 50 %, of which a quarter or so is recouped by the deflationary impact, for a real wage drop of 30-35 %. Add to this the total homeowner and business insolvency that is virtually guaranteed all debt loads are suddenly increased by 34 % in real terms.
For a country which imports to the tune of 1/3 of its GDP, depreciating your way out of a 34 % price level gap reduces real wages by something on the order of 15-20 %. However, the debt load is lightened in compensation, by approximately a full third of the previous real value.
So just in the real wage reduction depreciation is a full 15 percentage points better in this example. And the way the debt load behaves under the two scenarios reinforces this conclusion. And this is before the higher-order costs of imposing a generalised industrial depression are booked to the "wage suppression" option.
- Jake Friends come and go. Enemies accumulate.
Which is always.
Right now it's patently clear that the moneyed class in Spain is getting ready to milk the working population for what they can. When the country implodes, they'll move to Monaco or Miami or something. tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
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