tag:blogger.com,1999:blog-5882645467378797266.post6799630279247601221..comments2023-07-17T11:55:51.363+02:00Comments on ObservingGreece: Seeing the erred ways of my thinking... (9)kleinguthttp://www.blogger.com/profile/12491174042954678023noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5882645467378797266.post-39837453793016089172012-08-23T19:26:56.609+02:002012-08-23T19:26:56.609+02:00Of course such a solution would have to be endless...Of course such a solution would have to be endless or to cover the trade imbalances and productivity imbalances within the EZ.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-69030852974710528152012-08-20T18:25:43.838+02:002012-08-20T18:25:43.838+02:00Like often, i appreciate your intellectual honesty...Like often, i appreciate your intellectual honesty. You finally recognize what many people have been claiming for a while. The main point is that a central bank is not a regular bank. Under its mission of issuing and handling the currency, It cannot comply to the same rules.<br /><br />Thus, a CB's balance sheet is not an accounting tool, this is just a macroeconomic indicator of how the economy is performing.<br /><br />"Who in the world takes the losses when the debtors don't pay their debts?"<br /><br />Wrong question. The first one to wonder is: "what (the hell) is a 'debt' ?"<br /><br />If you read David Graeber's book (Debt, the first 5,000 years), you'll find out that there is not such a debt that should always be paid back. Debt is not what we think it is (an obligation), this is more of a social contract.<br /><br />I cannot tell you much more since 1. it would require more time and 2. i still haven't finished the book; but i really recommend you to acquire it.<br /><br />Regards,Stan Jourdanhttps://www.blogger.com/profile/17432844190269597029noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-45852234012538818282012-08-19T09:44:24.863+02:002012-08-19T09:44:24.863+02:00To save my friend's honor: he did not suggest ...To save my friend's honor: he did not suggest to carry the negative net worth thing to the extreme. He just explained why, at this time and in his view, the buying of sovereign bonds would be recommendable. In fact, his position is that the ESM should do the buying and be given a banking license for that.<br /><br />I carried his point to the extreme for the sake of argument. kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-58919907379791400292012-08-19T01:24:10.062+02:002012-08-19T01:24:10.062+02:00if ecb finances every 0-10 percent budget deficit ...if ecb finances every 0-10 percent budget deficit and it´s no financial problem (only political), why not allow more? 20%,50%,100%? whenever a state has financial problems send the bill to super mario at ecb. a financial perpetuum mobile? this cannot work.<br /><br />such a system must collapse in the long term. how exactly is not important for this discussion.<br />your TINSTAAFL theory is still correct. there is no free lunch. somebody has to pay the bill.<br /><br />what does your friend think about this?. he (central bank official) has much more knowledge about the financial system than me. but i think it does not matter for this discussion.<br /><br /><br />i remember, when somebody argued a mechanical perpetuum mobile does exist. i said "i don´t understand all these complicated calculations and descriptions of special physical principles, but i do not have to understand them. it is sufficient to know, that the principle of conversation of energy is true and was true, so your construction cannot work!"<br /><br />so who is right?<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-11137535388376433692012-08-17T21:22:57.458+02:002012-08-17T21:22:57.458+02:00Well, the article is one more reason why I may hav...Well, the article is one more reason why I may have to re-think the logic which has steered my banking career for 40 years...<br /><br />There is, however, one important aspect which my friend noted. What goes for the ECB does not go for national Central Banks. He said that this was overlooked at the time of the creation of the ECB.<br /><br />National Central Banks of the Eurozone CANNOT run a negative net worth because they cannot print the Euros which would be needed to stay afloat. Thus, if a NCB ever came close to having a negative net worth, the national governments would have to recapitalize them.<br /><br />Why would NCBs face the risk to run a negative net worth? Because the ECB could call for a recapitalization. One more reason that the ECB is unlikely to ever call for a major recapitalization.kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-55502344577594240442012-08-17T21:12:40.355+02:002012-08-17T21:12:40.355+02:00Karl Whelan wrote recently about this issue.
http...Karl Whelan wrote recently about this issue.<br /><br />http://www.forbes.com/sites/karlwhelan/2012/08/06/is-the-ecb-risking-insolvency-does-it-matter/2/Jim Sliphttps://www.blogger.com/profile/15325962115410722474noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-29283996206985172882012-08-17T11:09:04.246+02:002012-08-17T11:09:04.246+02:00Sarcastically: inflation is not the greatest worry...Sarcastically: inflation is not the greatest worry of mine (I have lived in Argentina with MONTHLY inflation of 25-30%! One tends to adapt to that kind of chaos). If a Central Bank has the political strength and will, it can eradicate inflation in a reasonably short period of time. Paul Volcker proved that in the 1980s when he allowed short-term interest rates to go up to 20% and more. Of course, the economic and social cost of that would be enormous which is why I doubt that Europeans would have the guts to do that.<br /><br />Seriously, if the ECB could indeed operate with a huge negative net worth allegedly forever, then it would prove that there is indeed such a thing as a free lunch. Since I have always argued the exact opposite (i. e. there is no TINSTAAFL), I find it mentally frustrating to agree to something whose sense my brain simply cannot understand.<br />kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-57950738476377341802012-08-17T09:20:47.967+02:002012-08-17T09:20:47.967+02:00"Who in the world takes the losses when the d..."Who in the world takes the losses when the debtors don't pay their debts?"<br /><br />Let us put this the other way around: "who would suffer when the debtors pay their debts?". In this case the ECB would have to draw on those who can pay - taxpayers. <br /><br />If the ECB doesn't have to pay its debts, it will just roll along and happily accrue debts until the cows come home. Until now, the EU has shown very little economic/investment intelligence, and certainly no remorse for getting it so wrong. I would think the ECB would be happy to go along with this. After all, if you don't see that there is a problem, there isn't one. <br /><br />Oh, and it gets the German taxpayer off the hook ... <br /><br />The political problems would only come from people who have a moral stand. After all, there is only a problem if you see one. Gemmahttps://www.blogger.com/profile/01544898113676166032noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-77115932740950471062012-08-17T08:54:46.171+02:002012-08-17T08:54:46.171+02:00Klaus, correct me if I´m wrong, but i think the si...Klaus, correct me if I´m wrong, but i think the simple answer is inflation (or hyperinflation, depending on the amount of additinal printed money). <br /><br />Who pays the bill? We all in the long term.<br />Anonymousnoreply@blogger.com