tag:blogger.com,1999:blog-5882645467378797266.post4396735788364739845..comments2023-07-17T11:55:51.363+02:00Comments on ObservingGreece: Olympic Errors Since Greece Joined the Eurozonekleinguthttp://www.blogger.com/profile/12491174042954678023noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5882645467378797266.post-62715323039382700002014-08-26T21:02:19.823+02:002014-08-26T21:02:19.823+02:00Of cause Pangalos was right "mizi ta fagame&q...Of cause Pangalos was right "mizi ta fagame".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-56653048673851090602014-08-22T14:46:52.172+02:002014-08-22T14:46:52.172+02:00It was not a shower of money that trickled down, i...It was not a shower of money that trickled down, it was a deluge that showered all with money. If a perfunctory check by SDOE reveals 16000 Greek bank account with more than 1 million EURO;s (Greek Reporter, 5 August, 2014) it did not trickle, it poured. Now, we are not talking of the account holder's net worth, we are talking about cash only. We are also not talking about the smarter account holders who have tranferred the money abroad.<br />I have never subscribed to the myth about the underprivileged Greek middle class, farmers and wage earners who were the victims of 300 politicians and 10 oligarchs. It was a silent collusion of the majority of voters, "we are onto something good, let's ride this train as long as we can".<br />As for how the money was distributed, I see that as a greek internal problem. BTW, it was most likely distributed as fair as in any major bank.<br />Lennard<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-88110731026021517492014-08-16T10:09:51.820+02:002014-08-16T10:09:51.820+02:00I remember being stunned at the statement which yo...I remember being stunned at the statement which you quote at the time I read the Macropolis article. In fact, I inquired at Macropolis what the basis for that statement was but never got an answer. Today, we know that those 'healthy by-products' were the cause of all the trouble.<br /><br />Regarding current accounts: there is nothing wrong with a current account deficit per se unless it becomes huge and structural. Developing economies normally require current account deficits because they need to import so much machinery/equipment and other goods to get their economies developed. Over time, these imports will generate more domestic output and self-achieved growth. The other extreme would be an economy which takes up long-term debt to finance the imports of consumption products. That's like taking up a loan to finance the vacation. When the vacation is over, the loan is still there. A huge and structural current account deficit is normally a sign for big trouble, not only financially, because it means the the domestic economy is far from being able to produce the products/services which the domestic consumers want to have. Actually, when you import products which you could just as well make at home, you are exporting jobs, wage/income taxes and social contributions, all revenues for the state.<br /><br />BTW, I recently saw figures about Turkey's current account deficits. Staggering! But I don't know what causes it. Perhaps they are importing so many capital goods. Perhaps they are financing it not with debt but with foreign investment. But if the cause is consumption imports and if they are financing it with longer term debt, they are headed for trouble sooner or later.<br /><br />I guess I don't have to talk about the other two, real effective exchange rate appreciations and higher South/North inflation, because whoever said that wasn't playing with a full deck of cards.<br /><br />I really would like to know who are 'those who created the Euro and felt that way'!kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-28572086231472234562014-08-16T00:03:16.587+02:002014-08-16T00:03:16.587+02:00You have to look at this the following way: if at ...You have to look at this the following way: if at the end of 10 years, foreign debt is 283 BEUR higher than it was at the beginning, then a net additional amount of 283 BEUR has come into the country.<br /><br />What the country did with that is largely explained through the current account whose deficit absorbed 197 BEUR during the period. Interest expense and EU subsidies are in the current account. Perhaps the following link can explain this better:<br /><br />http://klauskastner.blogspot.co.at/2011/11/greece-current-account-and-foreign-debt.htmlkleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-9058112569407550482014-08-15T23:56:32.257+02:002014-08-15T23:56:32.257+02:00I have a few observations.
1) It wasn't just ...I have a few observations.<br /><br />1) It wasn't just the cheap capital, but rather the cheap capital combined with the strong exchange-rate. Put simpply, had Greece attempted such a credit binge during the drachma era (with the resulting trade deterioration, a whopping 15% of GDP) the drachma exchange-rate would collapse. With the euro, not only it didn't collapse, but rather it strengthened.<br /><br />2) It wasn't just Greece. The same thing happened to a number of Eurozone countries, albeit to a lesser degree, but with no less dire effects.<br /><br />3) Monetary union prohibits the usual treatments for such a crisis, namely external devaluation and inflationary debt relief. In the meantime, internal devaluation has proven to be inadequate.<br /><br />4) Global wise, we are at a crossroads. Japan has been stagnating for decades now. The recovery in the US and the Great Britain is humble. Core Eurozone countries like Germany, France and Italy are relapsing into recession. Why is that? It's because of record private-debt which hampers demand. It's also because surpluses aren't invested back into deficit regions. The system is broken. My guess is that the global monetary system will change at some point, just like it changed in the mid-70's.<br /><br />5) Pan-european deleveraging is the wrong policy. That much should be admitted and changed. If not, then the monetary union should dissolve in an orderly manner. At least then each country would follow the economic policy it desires. It won't be the first time that a European project fails. The ERM famously failed in the early 90's.<br /><br />6) You can't have a monetary union without fiscal transfers of some sort. That much should be admitted also. The Eurozone is fighting a battle it can't win.<br /><br />7) Let us remember that imbalances in the Eurozone were initially seen as a good thing.<br /><br />http://www.macropolis.gr/?i=portal.en.the-agora.1400<br /><br />I quote:<br /><br />"Those who created the euro were promoting it on the basis that balance of payments constraints would disappear at the national level and that capital flows would lead to a convergence of income levels within the euro area. Current account deficits, real effective exchange rate appreciations and higher inflation between periphery and core would be healthy by-products, they claimed."<br /><br />8) The euro is still overvalued for many Eurozone countries while undervalued for others. The Eurozone imbalances might have receded, but the ones with the rest of the world remain. It's absurd that the currency that Greece uses is stronger than the dollar.Jim Sliphttps://www.blogger.com/profile/15325962115410722474noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-34119880207512561712014-08-15T23:52:12.773+02:002014-08-15T23:52:12.773+02:00Does this calculation exclude the outflows due to ...Does this calculation exclude the outflows due to interest paid? That should be about 130 BEUR (assuming linearly increasing debt). A billion here, a billion there and soon we are talking about real money I guess.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-48827603032409283052014-08-15T23:19:47.590+02:002014-08-15T23:19:47.590+02:00Greece's foreign debt increased from 121 BEUR ...Greece's foreign debt increased from 121 BEUR at Y/E 2001 to 404 BEUR at Y/E 2010, i. e. plus 283 BEUR. That's only the debt part. Add to that EU subsidies and perhaps a little foreign investment and you get quickly to 300 BEUR, probably even more.kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-1490496465677397022014-08-15T21:49:55.481+02:002014-08-15T21:49:55.481+02:00The fact that the middle class cannot become multi...The fact that the middle class cannot become multi-millionaires when their salaries are doubled or tripled does not mean that the money did not go there. They (middle class) spent the money on vacations, shopping, private schools for the kids, Universities for the kids and on and on. They had no chance of becoming millionaires because they were not very frugal (to put it mildly).<br /><br />An extra 200 Euros per household means:<br />3 mill homes * 10 years * 12 months * 200 Euros = 72 Bill;<br /><br />Not exactly cheap change. My guess is that it was way more than 200 Euros/Household. Pagalos was right after all.<br /><br />PS: Any reference on the 300 BEUR?Anonymousnoreply@blogger.com