Thursday, February 26, 2015

Bill Mitchell — Don’t mention the war! er the Troika …

“Don’t mention the war”! was a classic line from the episode – The Germans – in the comedy Fawlty Towers. Basil Fawlty implored his meagre staff to stay silent in case they offended some German tourists staying at his hotel. His attempt at self-censorship failed and led to hilarious consequences. I was reminded of the sketch (see it below) when I was reading the – Greek finance minister’s letter to the Eurogroup (February 24, 2015). Apparently, it is now a case of ‘Don’t mention the Troika’, ‘Don’t mention the Memorandum’ and never ever talk about the ‘Lenders’. The bullying threesome (European Commission, ECB and the IMF) are now known as “the institutions” and the “Memorandum” (the bailout package) is now to be called “The Agreement” and the “Lenders” have been recast as the “Partners”. Okay, and that is progress. The Reform package surely lets the Greeks choose which nasty policy they will implement but it is still nasty. Yes, it “buys them time”. The damage from massive unemployment and poverty eats into people every day. 4 months is a long time when you are on the street starving. …
Bill Mitchell – billy blog
Don’t mention the war! er the Troika …
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

4 comments:

Ignacio said...

"Radical left!"

Matt Franko said...

"What is the current volume (supply) of new Drachma in the foreign exchange markets? Answer: zero – it doesn’t exist.
If the Greek government restricted its supply..."

This (to me) is monetarism.... rsp

Neil Wilson said...

Matt,

Then you'd be wrong.

It is just a natural consequence of a public monopoly and a functional market. Supply is controlled by the government, and through the banks.

Restrict that system from supplying the currency and massively increase the demand and the price will change.

Run through the transactions by hand. Find out how any currency trader can *settle* at 10pm in a new currency.

Funds to settle are not a given. You have to get them from somebody.

Matt Franko said...

Neil to me that is like saying that how much money is wagered on a team can effect the outcome of the game...

The way I look at it, it is always "about price not quantity..." and "all prices are necessarily a function of what the govt pays for things and what they let their banks lend against things...."

These assertions are either true or they are not... they cannot be selectively applied (if they are true.... which I think they are...)

If the Greeks were to start with 1 drachma = 1 EUR, and immediately Greek exporters started to reduce their prices (in EUR) to EUR export customers, then the drachma would go down immediately..

Likewise if they immediately started to pay more for EUR products imported into Greece, the drachma would go down vs EUR...

Its "about price not quantity..." (to me)...

rsp,