Sunday, April 22, 2018

Bill Mitchell — Forget European reform – the Germans have anyway


Germans will be Germans, it seems — fiscally conservative.

Bill Mitchell – billy blog
Forget European reform – the Germans have anyway
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

4 comments:

Konrad said...

In regard to the above article, let’s remember the three ways that money enters into any nation’s economy.

[1] GOVERNMENT SPENDING. This applies to the US government, which creates it spending money out of thin air. However it does not apply to the 19 members of the euro-zone, whose governments surrendered their ability to create their own currency out of thin air. The 19 members surrendered their monetary sovereignty to the Troika (ECB, IMF, and European Commission).

[2] SELLING EXPORTS: This does not apply to the USA, since the USA does all its business (foreign and domestic) in US dollars. Therefore the USA is not dependent on money coming in from abroad. However the 19 euro-zone state governments cannot create euros out of thin air. Therefore the euro-zone states that have trade deficits (e.g. France and Greece) must borrow all their euros from banks, and from the Troika.

As a result, euro-zone nations with trade deficits (e.g. France and Greece) have no choice but to go into ever-worsening debt and austerity.

Meanwhile Germany enjoys a whopping trade surplus. As a result, Germany extracts about 38 billion euros per month from euro-zone nations that have trade deficits (e.g. from Greece and France).

Each month on average, another 1.12 billion euros are sucked out of Greece, because of the Greek trade deficit. As a result, people in Greece are literally eating out of garbage dumpsters.

[3] BANK LENDING: European banks create loan euros out of thin air, and they lend those euros to distressed nations like Greece and France. Since Greece and France have no hope of ever paying back these loans, the Troika reimburses the banks, but keeps the debt piled onto Greece. Each “bailout” of Greece is another debt bomb. Since Greece has a huge trade deficit, and since the Greek government cannot create euros out of thin air, the Greek government could not stop privatizing even if it wanted to. The Greek government could not stop imposing more austerity, and not stop going ever deeper into debt even if it wanted to.

For vampire nations with huge trade surpluses (like Germany) the euro scam has been the greatest windfall in European history.

For euro-zone nations with trade deficits (like France and Greece) the euro scam has been the greatest disaster since the world wars.

Therefore Germany will continue to resist any change to the euro scam. And people in nations like Greece will continue to suffer as long as they stupidly cling to the scam.

For Greece the only way out of its death spiral is to miraculously create a trade surplus (which won’t happen) or to dump the euro and go back to using the drachma, which the Greek government can create out of thin air. Greek politicians cling to the euro because they are on the bankers’ payroll, but eventually the politicians will have to relent, since Greece is being destroyed as surely as if it was being carpet-bombed round the clock.

The only “reform” possible for the 19 members of the euro-zone is the total annulment of the monetary union. Germany will do anything to prevent that annulment, including military action. For Germany the euro scam is too fabulously lucrative to ever let go of.

+++++++

Incidentally, many populist politicians in the euro-zone understand all this. They want to dump the euro that is killing their nations (e.g. Marine Le Pen). Therefore the Troika pays politicians to silence them, and pays the corporate media outlets to vilify them as Nazis, racists, extremists, xenophobes, etc.

Sadly, half of the population in the 19-state euro-zone is so stupid that they believe the Troika’s lies.

Matt Franko said...

Then why does Germany’s Deutsche Bank keep going insolvent and needs capital from the govt if Germany has it so good?

Kaivey said...

Excellent post, Konrad. My liberal friends are all pro Europe. They see it as a liberal social democracy full of nice people, but I know it's neoliberal and by the elite for the elite.

It was social democratic, and maybe still is, here and there, but the elite don't like that, they want wages and conditions to be worse, and they can achieve that through the 'market' where they can make 'capitalism' work for them turning people into almost slaves.

And it is the elite that likes mass immigration. It puts pressure on the housing market increases mortgages; it pumps house prices up, good for landlords; more people using the services, like more people using Branson's trains; more competition for jobs lowering wages, etc. Yet the elite have managed to blame the left for it.

Matt Franko said...

“And it is the elite that likes mass immigration. It puts pressure on the housing market increases mortgages; it pumps house prices up, good for landlords; more people using the services, like more people using Branson's trains; more competition for jobs lowering wages, etc. Yet the elite have managed to blame the left for it.”

LOL it’s the loonie left that advocates for mass immigration....spare me...