Staring at the abiss with Paul Krugman | 235 comments (235 topical, 0 editorial, 0 hidden)

other redistribution policies are possible.

That's also true within the euro. It is possible to have policies causing both public and private sector surpluses in intra-deficit countries, they're just not very bank-friendly or business-friendly.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 17th, 2012 at 11:17:31 AM EST
[ Parent ]

Re: in other words (none / 0)

You're ignoring the intra-EU cross-border redistribution problem, the infamous fiscal transfers that are the only way of sustaining persistent intra-EU trade balances. The issue which all the serious people keep running away from.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Mar 17th, 2012 at 01:25:00 PM EST
[ Parent ]

Re: in other words (none / 0)

I'm not ignoring it, I'm saying it should have been solved, as it could have been, through private default.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 17th, 2012 at 06:56:08 PM EST
[ Parent ]

Re: in other words (none / 0)

Given that it wasn't solved and it continues to not be solved and it continues to grow and now, with the breakdown of the interbank lending system, it shows up in internal Eurosystem central bank balances... I think we have a problem.

But never mind, if you think the way to solve a balance of trade imbalance is serial private default once every 10 years or so...

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Mar 17th, 2012 at 07:00:37 PM EST
[ Parent ]

Re: in other words (4.00 / 3)

It just needs to happen once to make the problem much smaller for a much longer time the next time round - i.e. vendor finance because harder to find, and German exports become less attractive.

But basically we still get to the point that growth in some parts of the eurozone was based on unsustainable debt-funded consumption.

We know how to do debt-funded investment (EINB without the need for national co-financing, or not as much), and we know how to make debt funding of consumption painful for the lenders.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 17th, 2012 at 07:09:47 PM EST
[ Parent ]

Re: in other words (none / 0)

But basically we still get to the point that growth in some parts of the eurozone was based on unsustainable debt-funded consumption.

You conveniently gloss over the fact that the Eurozone's institutional makeup restricts public sector debt but leaves private sector debt unrestricted on the premise that the market will provide. Evidently, not only is that legal framework nothing but condensed neoliberal ideology, but unrestricted risks will give rise to profit opportunities that will be exploited by economic agents. So private vendor finance of German exports fuelling a bubble of elephantine proportions was a plausibly predictable outcome of the Eurozone's own institutional construction. And nothing is being made to address that. They're doubling down on the dismantling of the public sector which was a predictable consequence of the Maastricht Treaty.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Mar 17th, 2012 at 07:23:28 PM EST
[ Parent ]

Re: in other words (4.00 / 2)

There is a simple solution to stupid private lending: bankrupcty (ie debt cancellation). Nothing in the European treaties prevented that solution.

And nothing prevented countries from regulating lending more stringently inside their borders. It's "anti-growth" so it usually doesn't happen, but that's the point, isn't it? We can't seem to do the right thing if it costs us anything in the short term.

The grip of our financial world on our politicians (and minds) is what prevented that solution from happening.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Mar 17th, 2012 at 07:32:52 PM EST
[ Parent ]

Re: in other words (4.00 / 3)

It's "anti-growth" so it usually doesn't happen, but that's the point, isn't it?

You seem to forget that there are real people whose livelihoods, why, whose lives, are being ground to a bloody pulp because of "anti-growth" policies currently being imposed by the EU.

If what it takes for people to be able to not starve is nominal GDP growth and some inflation, fuck, why isn't it happening? Why do we have pro-growth policies only when it benefits the oligarchy?

Because sure as hell being "anti-growth" doesn't appear to be a political negative these days.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Mar 17th, 2012 at 07:37:02 PM EST
[ Parent ]

Re: in other words (none / 0)

other redistribution policies are possible.
That's also true within the euro.

Within the Euro you need a qualified majority. Outside the Euro, you can impose such redistribution unilaterally.

The question comes down to whether the state or federal level in Europe is the more effective economic planning unit. And since the federal level has taken a twenty-five-year ride on the "hard money" crazy train, well...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Mar 17th, 2012 at 08:17:14 PM EST
[ Parent ]

Staring at the abiss with Paul Krugman | 235 comments (235 topical, 0 editorial, 0 hidden)

Top Diaries

Shock Election Loss Rutte IV In Senate Race

Honduras Establishes Close Ties with China

A Return to Normalcy?

A Grand Slam for Ireland?

NI Protocol: It's all over bar the shouting?

Chinese peace principles for the war in Ukraine

The Windsor Framework

Twenty years of war in Iraq

Recent Diaries

Settler Extremism Blessed by Jerusalem Leaders

US Interference In Lebanon-Syria-Ira
q

City Agriculture - March 17, 2023

Shock Election Loss Rutte IV In Senate Race

Stalemate Endures, Pessimism Grows, Deaths Mount

Honduras Establishes Close Ties with China

A Grand Slam for Ireland?

Living In Spain and Social-Democracy

USA Censorship Act to Kill Disinformation

Flying Fortresses and Nuclear Threat

Universal Criticism Asylum Threshold EU Fortress

China Trade and Relations

SBU As a Terror Network

A Return to Normalcy?

Georgia and Foreign Agents or Spy Law

Nord Stream Blasts Timeline of Denial

Crimea As Endgame Before Going M.A.D.

Scourge of Joint Alliance USA, KSA and Jihadists

Israel's Fascists Call for Genocide on Palestinians

NI Protocol: It's all over bar the shouting?

Occasional Series