Is this going south? Was the Nobel Peace Prize an admission of the end? Seems unbelievable that "working on it" until 2020 is actually a serious strategy, given the declining GDPs, emigration, bankruptcies, unemployment and suicides that have marked the early work! There's an apropos maxim in political-economics research, "Do your experiments on the institutions, NOT the electorate."
Will there be political upheaval in multiple countries? Or just turnover of leaders in existing parties?
So why didn't Germany allow Greece to escape, before so many were bankrupted, impoverished & even committed suicide?
Rodger Mitchell (RMM) makes a lot of sense in a segment from his latest article.
And now, for (at last) THE TRUTH:
Spiegel online: Top German Economists Say Greece Is Lost
Chancellor Angela Merkel had been hoping that her trip to Athens earlier this week would help demonstrate Germany's solidarity with Greece as it struggles to overcome its debt crisis. Just two days later, however, leading economic institutes in Germany have darkened the mood considerably. The institutes presented their autumn economic forecast on Thursday, and cast doubt on whether Greece would be able to remain part of the euro.
"We believe that Greece cannot be saved," said Joachim Scheide from the Kiel Institute for the World Economy, one of several top economic institutes tasked by the German government with examining the state of the country's economy twice a year.
Oliver Holtemöller, of the Halle Institute for Economic Research, was also pessimistic at the Thursday press conference called to present the evaluation. He said it is unlikely that Greece will ever be able to free itself from its debt burden -- and called for a new debt haircut for the country.
RMM: O.K., that almost was the truth. The real truth would have been:
"Let's face it. Giving up our Monetary Sovereignty was giving up our freedom. It's dooming us to endless unpayable debt and economic misery for our citizens (except for the richest ones, of course).
"The euro was our ill-considered attempt at unity, which has resulted in our being united -- in poverty.
"If Greece leaves the euro, and readopts its own sovereign currency, it will be able to pay all its debts, past, present and future, while investing money to grow its economy.
"Within a couple years, Greece can be (if it handles its Monetary Sovereignty correctly) one of the wealthiest nations on the continent, while the rest of us keep laboring under the yoke of monetary non-sovereignty."
Now that would be the real truth, but don't hold your breath waiting for the EU to admit it.
13 comments:
"If Greece leaves the euro, and readopts its own sovereign currency, it will be able to pay all its debts, past, present and future, while investing money to grow its economy."
It still wont be able to repay its euro denominated debt.Which is exactly why its no use leaving the euro.
Maybe a dumb question. Why pay euro denominated debt?
DAB,
Very good question. They should not. Both creditors and debtors should take the brunt. But this era sees an unprecedented shift of power to creditors - now supposedly only debtors are supposed to pay the price of a bad loan being made.
http://www.nakedcapitalism.com/2012/09/michael-hudson-on-how-finance-capital-leads-to-debt-servitude.html
That is the answer to Crossover: it is of perfect use for Greece to leave the euro. Debt that can't be repaid, won't be repaid. Period. You can recognize it now and leave or destroy your economy and leave anyway, but later.
Greece has already benefited from a 70% haircut on its public debt and there is talk of a second haircut, presumably referring to the new debt accumulated as a result of the ECB/EC/IMF so-called "aid" package.
After these two write-downs Greece could exit the euro with a manageable low debt-to-GDP ratio, even if the new drachma devalued by 40 or 50% versus the rump euro.
Another technique available for would-be dropouts from the eurozone would be an aggressive, once-and-for-all-use of the TARGET2 mechanism.
Say a peripheral country has a 100% debt-to-GDP ratio, with half the debt held abroad by foreign creditors.
It could pay off this debt with new bonds placed at a government-owned bank, whose corresponding deposits would be transferred to the creditors abroad. The 50% of the country's public debt would thus end up safely in the books of its NCB as a "due to" the eurosystem, with no need of restructuring after the exit with troublesome private creditors.
The country could thus leave the euro with a rosy future ahead, since the remaining public debt would now be entirely owed to internal creditors that would have no choice but to accept redenomination in the new currency.
The thing is, Greece's current debt is comprised by: a) english law bonds that replaced the bonds that received a haircut (and which were issued under Greek Law), b) debt directly owed to governments.
If Greece manages to swap this debt with debt denominated in drachma then its all good.If Greece manages to default on debt owed to governments and debt under english law and still get away with no consequences/reprecussions then its all good again.But i personally dont see this happening.
Dont get me wrong, i wasnt in favor of Greece (or any country for the matter) enter the euro.I just dont believe that abandoning it is the exact opposite procedure of adopting it.For the reasons i spoke about above,i think that the former is a lot more painfull than the latter.
Crossover,
Let Greece benefit from a 70% write-off of its debt do foreign public entities. Just like the one it got with private creditors, courtesy of Angela Merkel. Appeal again to Merkel's superior sense of statesmanship or womanship - whatever.
Then leave the euro. Even if the remaining, not written-off debt stays in euros, it would still be manageable under any scenario, including a large depreciation of the new drachma.
Who paid for German reunification ?
PIIGs
"Who paid for German reunification ?
PIIGs"
Shhhhh, don't say that to Germans. They were importing jobs by exporting goods & the credit to buy these goods. And still had to endure serious deflationary policies for the majority of the population.
More like: "who paid the merchantilists germans hard money & balanced budget obsession?".
And the answer to that is "the german & PIIGs population". Who were subsidiaries of these policies "financiers and capitalists in the importing nations".
Truth is 99% of the population was fooled by a 1% both in Germany and in periphery nations.
And how about this ...
PRESENTING THE NOBEL PEACE PRIZE TO THE EU FOR CHOOSING CREATIVE DESTRUCTION WHICH IS IMPALING SPAIN AND GREECE - CAUSING VIOLENCE IN THE STREETS.
YES, LET'S PUT A HAPPY FACE ON THE HORSE THAT WE ARE KICKING AROUND.
???
What a bunch of hypocrisy.
Yep. A crazy cynical decision by a bunch of white northern Protestant Norwegians to pat fellow white northern Protestant Europeans on the back for driving brownish Catholic Spaniards and brownish Orthodox Greeks into penury to satisfy white German creditors and the Lutheran minister's daughter Frau Merkel. This is sick, sick, racism and chauvinism at work in Europe.
F-ing fanatical Germans wrecking Europe again. Even if Greece cuts loose from the EZ debtor's prison and walks away to start making drachmas, the EZ power play has created a new fascist movement in Greece and a lost generation in Spain.
On a different note, and I thought Mike or Tom might want to post a reply on this blog.
http://krugman.blogs.nytimes.com/2012/10/12/on-the-non-burden-of-debt/
Been through it already with him. Krugman disagrees with MMT's position since it doesn't admit the difference between a sovereign issuer of a non-convertible floating rate currency and users of the currency is operative in the case of US. He seems to think that the political restraints mean that the govt is actually revenue constrained.
" THE NOBEL PEACE PRIZE TO THE EU "
Good catch Goog... as if on cue:
"what is high among men is an abomination in the sight of God." Luke 16:15
rsp,
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