[DaveO]

Re: German inflexibility of thinking : Mon Feb 13, 2012 10:17 am  

Dally wrote:

Are any of those founding fathers of the Euro still in serious office? But in any event, is that my point - they are not seeing the bigger picture and are stuck in yesterday's thought process?

The stubborn desire to prevent a Greek default is not just down to stubborn adherence to a failed (in some peoples eyes) idea of monetary union. It is also down to self interest. If Greece, Portugal and even Spain dropped out of the Euro the Euro would overnight become a very strong currency as its value would reflect the economic strength of Germany, Holland and the other remaining Eurozone countries. That would instantly harm German competitiveness which benefits from the Euro being kept lower in value due to the fact countries like Greece are still in it.

The increasing value of the Euro if the likes of Greece did exit would possibly force other countries not as strong as Germany to exit as well as they simply could not cope with a higher valued Euro as they would become even more uncompetitive than they already are with the Euro at is current value.

So I do not think German stubbornness or pro-Euro stubbornness from officials and politicians is what is driving the desire to shore it up. I think the main factor is a Euro only used by a small number of economically competent countries would make those countries far less competitive than they are.

Would this be a good thing? I think so. Germany has benefited from a currency that is artificially weak relative to its economic strength ever since it the Euro came into existence.

Re: German inflexibility of thinking : Mon Feb 13, 2012 10:24 am  

DaveO wrote:

The stubborn desire to prevent a Greek default is not just down to stubborn adherence to a failed (in some peoples eyes) idea of monetary union. It is also down to self interest. If Greece, Portugal and even Spain dropped out of the Euro the Euro would overnight become a very strong currency as its value would reflect the economic strength of Germany, Holland and the other remaining Eurozone countries. That would instantly harm German competitiveness which benefits from the Euro being kept lower in value due to the fact countries like Greece are still in it.

The increasing value of the Euro if the likes of Greece did exit would possibly force other countries not as strong as Germany to exit as well as they simply could not cope with a higher valued Euro as they would become even more uncompetitive than they already are with the Euro at is current value.

So I do not think German stubbornness or pro-Euro stubbornness from officials and politicians is what is driving the desire to shore it up. I think the main factor is a Euro only used by a small number of economically competent countries would make those countries far less competitive than they are.

Would this be a good thing? I think so. Germany has benefited from a currency that is artificially weak relative to its economic strength ever since it the Euro came into existence.

I appreciate that. That's why it is hideous that Germany refuse to take the hit. It's morally regugnant. Look at the UK - policy is aimed at supporting mortgage holders / debtors and therefore banks at the expense of those with savings or capital. So, the prudent and those who did well in good times are paying and the others benefitting, largely because the debtors and poor can't pay directly (although will by virtue of a reduction in State support). The Germans are rigidly sticking to making the debtors suffer - in one sense morally sound - which ultimately must fauil as they will never have the means to prop up the Eurozone.

[DaveO]

Re: German inflexibility of thinking : Mon Feb 13, 2012 10:58 am  

Dally wrote: I appreciate that. That's why it is hideous that Germany refuse to take the hit. It's morally regugnant. Look at the UK - policy is aimed at supporting mortgage holders / debtors and therefore banks at the expense of those with savings or capital. So, the prudent and those who did well in good times are paying and the others benefitting, largely because the debtors and poor can't pay directly (although will by virtue of a reduction in State support). The Germans are rigidly sticking to making the debtors suffer - in one sense morally sound - which ultimately must fauil as they will never have the means to prop up the Eurozone. Well there is another side to this which could be used as moral justification to defend the Eurozone by doing everything to keep Greece in it and that is what happens to the Greek peoples personal wealth if they exit and end up with a New Drachma? For a transition period the only practical proposition is 1 Eruo = 1 New Drachma but it would take about five minutes for devaluation to occur so Greek "Euros" would be say worth half a real one pretty quick. So if you were Greek you would be mad to keep your personal wealth in Greece in a Greek bank because at some point it would would probably be converted to a currency worth half what it was before. So you move it abroad and a run in the Greek banks results. Does the Greek government close the border and introduce currency control to prevent Greek's moving Euros into German banks? That is probably illegal in the EU. What is more if Greece withdraws then if you are Portuguese and see this happen then you to would also be mad to keep your Euros in a Portuguese bank because you would (probably correctly) assume Portugal was next for the same treatment. So we get a run on the Portuguese banks. And so on. In short chaos results and so while it would be a good thing if the Euro found its right value because the weaker countries exited from it, the price for a Greek default would be chaotic and a disaster for lots of ordinary people in many countries. This is all discussed in a very good article here: http://www.bbc.co.uk/news/business-16981897 If the Euro had been set up and limited to just a few northern European counties with similar economies I reckon it would have been a great success. If joining the club required strict entry rules and so the likes of Greece had never been made a member I reckon successive British governments would have wanted to work towards joining. The trouble is as we all know it wasn't just economics that dictated who joined but politics and as such we now see the mess we do.

Dally wrote: I appreciate that. That's why it is hideous that Germany refuse to take the hit. It's morally regugnant. Look at the UK - policy is aimed at supporting mortgage holders / debtors and therefore banks at the expense of those with savings or capital. So, the prudent and those who did well in good times are paying and the others benefitting, largely because the debtors and poor can't pay directly (although will by virtue of a reduction in State support). The Germans are rigidly sticking to making the debtors suffer - in one sense morally sound - which ultimately must fauil as they will never have the means to prop up the Eurozone. Well there is another side to this which could be used as moral justification to defend the Eurozone by doing everything to keep Greece in it and that is what happens to the Greek peoples personal wealth if they exit and end up with a New Drachma? For a transition period the only practical proposition is 1 Eruo = 1 New Drachma but it would take about five minutes for devaluation to occur so Greek "Euros" would be say worth half a real one pretty quick. So if you were Greek you would be mad to keep your personal wealth in Greece in a Greek bank because at some point it would would probably be converted to a currency worth half what it was before. So you move it abroad and a run in the Greek banks results. Does the Greek government close the border and introduce currency control to prevent Greek's moving Euros into German banks? That is probably illegal in the EU. What is more if Greece withdraws then if you are Portuguese and see this happen then you to would also be mad to keep your Euros in a Portuguese bank because you would (probably correctly) assume Portugal was next for the same treatment. So we get a run on the Portuguese banks. And so on. In short chaos results and so while it would be a good thing if the Euro found its right value because the weaker countries exited from it, the price for a Greek default would be chaotic and a disaster for lots of ordinary people in many countries. This is all discussed in a very good article here: http://www.bbc.co.uk/news/business-16981897 If the Euro had been set up and limited to just a few northern European counties with similar economies I reckon it would have been a great success. If joining the club required strict entry rules and so the likes of Greece had never been made a member I reckon successive British governments would have wanted to work towards joining. The trouble is as we all know it wasn't just economics that dictated who joined but politics and as such we now see the mess we do.

Re: German inflexibility of thinking : Mon Feb 13, 2012 12:08 pm  

DaveO wrote:

...
If the Euro had been set up and limited to just a few northern European counties with similar economies I reckon it would have been a great success. If joining the club required strict entry rules and so the likes of Greece had never been made a member I reckon successive British governments would have wanted to work towards joining. The trouble is as we all know it wasn't just economics that dictated who joined but politics and as such we now see the mess we do.

I agree.
And I believe that the Euro will not only survive, it will (eventually) thrive if the right limits and sanctions are applied ... which will, of course, mean ever-closer fiscal union across the Eurozone.

Fiscal union virtually prohibits the UK (with its prevalent island mentality) from joining ... it's ok to moan about petrol taxes being lower on the continent but not ok to harmonise any taxes.

Re: German inflexibility of thinking : Mon Feb 13, 2012 12:13 pm  

Dally wrote:

I appreciate that. That's why it is hideous that Germany refuse to take the hit. It's morally regugnant.

It may be morally repugnant but it's also perfectly rational within the capitalist model (see Friedman and his band of acolytes). The issue here is que bono (who benefits)? Who benefits from Greece collapsing under the weight of debt? Well, it certainly won't be the people occupying the 99% below top of the wage scale. But there's a ton of gold to be had for banks and corporations seeking to buy up Greek state assets on the cheap (as was the case in Russia under Yeltsin's Great Giveaway), which can then be quickly re-tooled to make massive profits.

As I've said for a while. Capitalism might not work out to well for you and me - but the capitalists are making plenty.

[Kosh]

Re: German inflexibility of thinking : Mon Feb 13, 2012 12:20 pm  

Mugwump wrote:

I think you'll find it happens far more often than you believe - especially when there are political drivers at work.

And I think you'll find that it happens significantly less often than 'all the time'.

Re: German inflexibility of thinking : Mon Feb 13, 2012 12:32 pm  

Kosh wrote:

And I think you'll find that it happens significantly less often than 'all the time'.

I'm sorry that you find it impossible to differentiate between an imprecise colloquial term and the very precise and unambiguous word for perpetual continuance - "always".

[Kosh]

Re: German inflexibility of thinking : Mon Feb 13, 2012 12:57 pm  

Mugwump wrote:

I'm sorry that you find it impossible to differentiate between an imprecise colloquial term and the very precise and unambiguous word for perpetual continuance - "always".

And I'm sorry that you fail to understand the commonly understood meaning of the aforementioned colloquial phrase, i.e. with great frequency or regularity.

Re: German inflexibility of thinking : Mon Feb 13, 2012 1:30 pm  

Kosh wrote:

And I'm sorry that you fail to understand the commonly understood meaning of the aforementioned colloquial phrase, i.e. with great frequency or regularity.

I understand it perfectly. I also stand by it. I think there's plenty of evidence to say such happens with "great frequency" or "regularity". I can give you examples such as, say Fred Hoyle's "steady state universe" acolytes, or the host of meteorologists hanging upon the every word of the once pre-eminent - but now hopelessly out of touch - authority on climate, William Gray.

But since neither of us is likely to agree on precise boundaries for the term "great frequency" further discussion is a waste of my time.

Maybe you should read the book?

Re: German inflexibility of thinking : Mon Feb 13, 2012 11:59 pm  

String theory is currently in the same boat, as a dominant theory which its adherents fight tooth and nail to protect. According to Lee Smolin (sp?) in 'The Trouble with Physics', any physicist who wants to work in any field of competing theory has great difficulty getting funding and institutional backing, as funding is largely controlled by string theorists.