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Debts, promises and the erosion of democracy | 423 comments (422 topical, 1 editorial, 0 hidden)
Re: Debts, promises and the erosion of democracy (none / 1)
There's a huge difference.

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

by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 12:52:47 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Well, you know I agree entirely with you on that point. But let's not pretend some holier-than-thou attitude. We want devaluation. Devalutation means lower real wages. Period.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 01:13:08 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
Would this put pressure on the bottom line of German companies? Sure! But what use is those profits when Düsseldorf just blows them on US mortage-backed securities anyway?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 01:20:47 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 1)
Hey, MBS are fixed income. What "investor" in their right mind wants equity risk?

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

by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:11:01 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (4.00 / 2)
Devaluation means lower wages and lower profits denominated in a hard currency.
I've lived through two major devaluations. The effect on the ostensible quality of life was negligible. This time it is worse than war.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Feb 20th, 2012 at 01:44:58 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Well, if you don't have much trade I suppose that might be the case. But I do think you might have noticed something about the price of food, gasoline, and so on. Furthermore, profits denominated in hard currency do not matter to corporations, as their owners usually have costs in the same currency as the corporation sells in. Further, furthermore, corporations are the main winners in devaluations as they can mark prices up for domestic consumers to compensate for imported goods, while become more competitive in the export markets. Indeed, boosting corporate profits is the main idea behind devaluations.

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.

by Starvid on Mon Feb 20th, 2012 at 01:59:49 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
"But I do think you might have noticed something about the price of food, gasoline, and so on"

Compared to now, it was minimal, at the time people whined about it, sure. But unemployment wasn't much affected (or it was absorbed in the black economy - now even that is dwindling), regressive taxes didn't shoot up the roof, rents were not much affected, streets were not emptied of shut down shops etc. Now we live, I repeat, through a disaster of a scale one usually associates with a war.

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

by talos (mihalis at gmail dot com) on Mon Feb 20th, 2012 at 05:45:15 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 1)
Price of gas, yes. That gets more expensive.

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.

by Upstate NY on Tue Feb 21st, 2012 at 10:10:26 AM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (4.00 / 2)
Devaluation means lower wages and lower profits

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

by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:09:38 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
A nice illustration on what labor reform means. Where is the chart from?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Wed Feb 22nd, 2012 at 12:45:29 PM EST
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Re: Debts, promises and the erosion of democracy (none / 1)
It accompanied an article in the Spanish pink-sheet newspaper Cinco Días.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Wed Feb 22nd, 2012 at 01:06:33 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Data from Spain's INE (National Institutute of Statistics).

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Wed Feb 22nd, 2012 at 01:07:37 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (4.00 / 2)
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.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 02:24:48 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
I'm not saying nominal wage suppression is good, or that devaluation isn't a lot better, because it is. I'm just saying, let's not forget devaluations also mean lower wages, and lower wages are needed. Just not in nominal terms.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 02:28:22 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Not necessarily lower wages relative to domestic prices tough.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:07:19 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Except when your domestic production uses imported raw materials or intermediate goods.

Which is always.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 20th, 2012 at 03:16:52 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
Still, crucial things like rents do not increase.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 03:22:46 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
There's always rent-seeking.

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

by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:31:09 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
If people can't pay the rents, you'll lose tenants, and eventually you'll reduce rents so as to fill your houses to capacity.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 03:32:23 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
You know how many dwellings are empty in Spain already because owners will rather not rent them out?

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:34:27 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
In the long run, they will. And yes, yes, in the long run etc...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Feb 20th, 2012 at 03:37:33 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
The answer, already, is a whole lotta.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:38:39 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
probably because it's almost impossible to evict someone, like in France
by stevesim on Mon Feb 20th, 2012 at 03:40:32 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
On the other hand, I hear that in Germany there are renters' neighbourhood associations set up to protect unwary renters from the predation of landlords.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 03:56:43 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
there are these associations to protect renters but the proprietors often rip off the renters of their Kaution.

 

by stevesim on Mon Feb 20th, 2012 at 04:10:00 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
That's also normal in Spain.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 04:10:57 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
interesting.  I had never come across that until recently.
by stevesim on Mon Feb 20th, 2012 at 04:19:54 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
I mean, what recourse does the renter have?

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Carrie (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 04:21:07 PM EST
[ Parent ]
Re: Debts, promises and the erosion of democracy (none / 0)
suing the owner in Germany is the norm, with the renter's association giving free legal advice and typing up the forms.
by stevesim on Mon Feb 20th, 2012 at 04:47:29 PM EST
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recourse of the renter (4.00 / 2)
Er, when the kaution was 3 rents, I used to stop paying rent 3 months before I moved out. Just to save the owner the trouble of transferring the money. I thought it's only a problem if the kaution is so high that an eviction would take less time. More than 3 rents wasn't allowed, though, and I believe this hasn't changed.
by Katrin on Mon Feb 20th, 2012 at 05:11:43 PM EST
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Re: recourse of the renter (none / 1)
In Bavaria, they take it out of your bank account. And they don't stop even after you leave.....
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Feb 21st, 2012 at 02:13:38 AM EST
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Re: recourse of the renter (none / 1)
"Lastschriftverfahren", I know. Too few people know that the bank transfers the money back to you if you only raise a finger. It's a method that is based on trust: the bank transfers money from your account to someone who claims you allowed that without asking questions. If you protest, they transfer it back, and again without questioning if the other party might be entitled to the money.
by Katrin on Tue Feb 21st, 2012 at 06:08:56 AM EST
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Re: recourse of the renter (none / 0)
Which is exactly what I did. Only problem was that I had left enough money in my account to cover my last electricity and phone bills. The landlord took an additional month's rent, despite the fact that there was not enough money in the account for this. They then refused to pay the other bills, as my balance was negative....
by gk (gk (gk quattro due due sette @gmail.com)) on Tue Feb 21st, 2012 at 06:18:54 AM EST
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Re: recourse of the renter (none / 0)
Oh shit. I hope you raised hell and the landlord's standing with the bank was not too good.
by Katrin on Tue Feb 21st, 2012 at 06:26:29 AM EST
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Re: Debts, promises and the erosion of democracy (none / 1)
And in the U.S. Germany is just like stevesim says (though my experience was with Bavaria....) But I had no problem getting mine back in Belgium. I've no idea if this is typical, or whether this was because the owner was grateful to me for staying until the end of the lease, the previous tenant having broken it unexpectedly to move to the local jail.....
by gk (gk (gk quattro due due sette @gmail.com)) on Mon Feb 20th, 2012 at 04:26:37 PM EST
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Re: Debts, promises and the erosion of democracy (none / 0)
It's known to happen in France.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Feb 20th, 2012 at 04:28:01 PM EST
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Re: Debts, promises and the erosion of democracy (none / 1)
This must surely be the reason why tenants in France never pay the rent. They can't be evicted, so why bother?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Feb 20th, 2012 at 04:02:49 PM EST
[ Parent ]

Debts, promises and the erosion of democracy | 423 comments (422 topical, 1 editorial, 0 hidden)
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