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wardd
11-11-2011, 01:02 PM
This is the way the euro ends — not with a bang but with bunga bunga. Not long ago, European leaders were insisting that Greece could and should stay on the euro while paying its debts in full. Now, with Italy falling off a cliff, it’s hard to see how the euro can survive at all.But what’s the meaning of the eurodebacle? As always happens when disaster strikes, there’s a rush by ideologues to claim that the disaster vindicates their views. So it’s time to start debunking.
First things first: The attempt to create a common European currency was one of those ideas that cut across the usual ideological lines. It was cheered on by American right-wingers, who saw it as the next best thing to a revived gold standard, and by Britain’s left, which saw it as a big step toward a social-democratic Europe. But it was opposed by British conservatives, who also saw it as a step toward a social-democratic Europe. And it was questioned by American liberals, who worried — rightly, I’d say (but then I would, wouldn’t I?) — about what would happen if countries couldn’t use monetary and fiscal policy to fight recessions.
So now that the euro project is on the rocks, what lessons should we draw?
I’ve been hearing two claims, both false: that Europe’s woes reflect the failure of welfare states in general, and that Europe’s crisis makes the case for immediate fiscal austerity in the United States.
The assertion that Europe’s crisis proves that the welfare state doesn’t work comes from many Republicans. For example, Mitt Romney has accused President Obama of taking his inspiration from European “socialist democrats” and asserted that “Europe isn’t working in Europe.” The idea, presumably, is that the crisis countries are in trouble because they’re groaning under the burden of high government spending. But the facts say otherwise.
It’s true that all European countries have more generous social benefits — including universal health care — and higher government spending than America does. But the nations now in crisis don’t have bigger welfare states than the nations doing well — if anything, the correlation runs the other way. Sweden, with its famously high benefits, is a star performer, one of the few countries whose G.D.P. is now higher than it was before the crisis. Meanwhile, before the crisis, “social expenditure” — spending on welfare-state programs — was lower, as a percentage of national income, in all of the nations now in trouble than in Germany, let alone Sweden.
Oh, and Canada, which has universal health care and much more generous aid to the poor than the United States, has weathered the crisis better than we have.
The euro crisis, then, says nothing about the sustainability of the welfare state. But does it make the case for belt-tightening in a depressed economy?
You hear that claim all the time. America, we’re told, had better slash spending right away or we’ll end up like Greece or Italy. Again, however, the facts tell a different story.
First, if you look around the world you see that the big determining factor for interest rates isn’t the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy’s 7 percent. Britain’s fiscal prospects look worse than Spain’s, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent.
What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies. In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem.
The other thing you need to know is that in the face of the current crisis, austerity has been a failure everywhere it has been tried: no country with significant debts has managed to slash its way back into the good graces of the financial markets. For example, Ireland is the good boy of Europe, having responded to its debt problems with savage austerity that has driven its unemployment rate to 14 percent. Yet the interest rate on Irish bonds is still above 8 percent — worse than Italy.


The moral of the story, then, is to beware of ideologues who are trying to hijack the European crisis on behalf of their agendas. If we listen to those ideologues, all we’ll end up doing is making our own problems — which are different from Europe’s, but arguably just as severe — even worse.

http://www.nytimes.com/2011/11/11/opinion/legends-of-the-fail.html?_r=1&ref=opinion&pagewanted=print

delecta
11-11-2011, 01:23 PM
Quite insightful as usual from Paul. Spend spend and more spending. Where Paul is confused is that our problems are no different then Greece.

wardd
11-11-2011, 01:37 PM
Quite insightful as usual from Paul. Spend spend and more spending. Where Paul is confused is that our problems are no different then Greece.

our debts are in dollars

delecta
11-11-2011, 01:39 PM
our debts are in dollars

all debt is in dollars

wardd
11-11-2011, 01:45 PM
all debt is in dollars

but our currency is dollars

delecta
11-11-2011, 01:49 PM
but our currency is dollars
LOL

wardd
11-11-2011, 01:50 PM
LOL

where can those dollars be redeemed and how?

delecta
11-11-2011, 02:11 PM
where can those dollars be redeemed and how?

I can show up in any country in the world with 25k in US dollars and buy anything and everything that is available.

If I want to redeem my US dollars, I can always exchange them for euros. LOL

wardd
11-11-2011, 02:18 PM
I can show up in any country in the world with 25k in US dollars and buy anything and everything that is available.

If I want to redeem my US dollars, I can always exchange them for euros. LOL

and how would that adversely affect us at the time?

eventually those dollars will have to be redeemed in the usa

debts between countries are not like a debt between you and me where i owe you money and you can make someone else the beneficiary of those dollars

Soundbounder
11-11-2011, 02:37 PM
Where Paul is confused is that our problems are no different then Greece.Nonsense!
You've been listening to Fox News again; I heard them say that also, and it is completely bogus.

For one thing, the debt-to-GDP ratio in Greece is significantly higher.

2010 numbers:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

RodSBT
11-11-2011, 02:48 PM
Add in promised future expenditures for SS, MC, pensions and the debt to gdp ratio for the US goes through the roof, tens of trillions of dollars. Makes Greece look like a summer picnic.

...and I don't watch Faux news.

RodSBT
11-11-2011, 02:52 PM
Another point. When the gov posts GDP numbers, they add in their total yearly expenditures along with the private sector as a part of the nat. GDP.
When you own the printing press you can cook the books with impunity.

Soundbounder
11-11-2011, 02:59 PM
Add in promised future expenditures for SS, MC, pensions and the debt to gdp ratio for the US goes through the roof, tens of trillions of dollars. Makes Greece look like a summer picnic.

...and I don't watch Faux news.We've been through this before on here.

You can't just add in future expenditures for the next 30 years, along with a fictitious GDP ratio, and claim we will make "Greece look like a summer picnic" or that we are "no different than Greece".

The US debt is a legitimate issue, but the comparisons to Greece are not.

CWSmith
11-11-2011, 03:12 PM
I had a very enlightening discussion with a Canadian friend this week. This is what he told me based on his own experience.

The Canadian health care is good. There are some spot shortages of services, but they have been exaggerated. Daily things are paid out of pocket (dentists and such), but major problems are handled and handled well.

The Canadian banks sailed through the recent crisis without major harm because they had the courage long ago to bring the banks under control of the government and not allow them to spin wildly out of control fueled by their own greed.

He also said that it would help to reduce the crime rate in his home town if we stopped sending illegal guns across the border in exchange for drugs.

His suggestions were:

Allow Greece to drop out of the EU, print some money, get out of their current problem, restructure, and buy back into the EU at a new exchange rate.

We should have nationalized our banks when they threatened to fold, restructured them, broke them up, and then sold them in a way not unlike what we did for the car industry.

We should move forward with national health care and stop listening to the people who cry gloom and doom.

I think he's right on all counts.

wizbang 13
11-11-2011, 05:47 PM
I can show up in any country in the world with 25k in US dollars and buy anything and everything that is available.

If I want to redeem my US dollars, I can always exchange them for euros. LOL
That'l last a week in St Barts.

RodSBT
11-11-2011, 06:00 PM
We've been through this before on here.

You can't just add in future expenditures for the next 30 years, along with a fictitious GDP ratio, and claim we will make "Greece look like a summer picnic" or that we are "no different than Greece".

The US debt is a legitimate issue, but the comparisons to Greece are not.

Yes you can, when they've been mandated by congress.

Tell me where the funding is going to come from to cover the extra trillions (on top of the automatic base line increases in annual budgets that are already driving us into the abyss) needed for those mandated entitlements?

Yes, ultimately we are worse off than Greece.

wardd
11-11-2011, 06:08 PM
Yes you can, when they've been mandated by congress.

Tell me where the funding is going to come from to cover the extra trillions (on top of the automatic base line increases in annual budgets that are already driving us into the abyss) needed for those mandated entitlements?

Yes, ultimately we are worse off than Greece.

would you believe a reasonable tax increase?

delecta
11-11-2011, 06:09 PM
That'l last a week in St Barts.

Ahhhh but what a week it would be...might deserve it's own thread :)

Paul Pless
11-11-2011, 06:10 PM
The one great difference in the situation between Greece and the United States, is that Greece has a body of 27 other countries willing to bail them out. . .

CWSmith
11-11-2011, 06:15 PM
The one great difference in the situation between Greece and the United States, is that Greece has a body of 27 other countries willing to bail them out. . .

Actually, the US can print money while Greece cannot per EU common currency. Greece is like Wisconsin or Ohio in that regard and I don't see the feds bailing them out.

Paul Pless
11-11-2011, 06:22 PM
Unlike Wisconsin or Ohio, Greece may decide to withdraw from the EU. . .

RodSBT
11-11-2011, 06:32 PM
would you believe a reasonable tax increase?

The tax increases necessary to cover the costs being accrued by the fed gov at the current rate and cover future entitlements will be beyond reason, and even then won't be enough to cover the debt created. We're talking tens of trillions of dollars above and beyond the annual base budget expenditures that have an automatic %5 + increase every year over the previous year. And how many other banks and countries should the fed bailout on top of that?
There ain't no mo money!

wardd
11-11-2011, 06:39 PM
The tax increases necessary to cover the costs being accrued by the fed gov at the current rate and cover future entitlements will be beyond reason, and even then won't be enough to cover the debt created. We're talking tens of trillions of dollars above and beyond the annual base budget expenditures that have an automatic %5 + increase every year over the previous year. And how many other banks and countries should the fed bailout on top of that?
There ain't no mo money!

look into the debt accrued during ww2

BrianW
11-11-2011, 06:41 PM
I had a very enlightening discussion with a Canadian friend this week.

He also said that it would help to reduce the crime rate in his home town if we stopped sending illegal guns across the border in exchange for drugs.



First... I'm pretty sure it's a BATF "guns for drugs" deal. So relax, even if an LEO is killed by one of the guns, it's okay.

Second... How come the guns are "illegal" but the drugs aren't?

Third... Where is this lovely section of Canada, where they make drugs and are overrun with guns, so that we can avoid it.

Paul Pless
11-11-2011, 06:44 PM
Third... Where is this lovely section of Canada, where they make drugs and are overrun with guns, so that we can avoid it.Doesn't all of Canada have cheaper prescription drugs than the U.S. Wonder how much lipitor I could get in exchange fopr a gun show purchased saturday night special?

BrianW
11-11-2011, 06:49 PM
Lipitor? Go for the Viagra, or Percocet. ;)

Paul Pless
11-11-2011, 06:51 PM
**** dude, you can get those over the internet.

RodSBT
11-11-2011, 07:43 PM
First... I'm pretty sure it's a BATF "guns for drugs" deal. So relax, even if an LEO is killed by one of the guns, it's okay.

Second... How come the guns are "illegal" but the drugs aren't?

Third... Where is this lovely section of Canada, where they make drugs and are overrun with guns, so that we can avoid it.

Y>Y>

CWSmith
11-11-2011, 08:22 PM
First... I'm pretty sure it's a BATF "guns for drugs" deal. So relax, even if an LEO is killed by one of the guns, it's okay.

Second... How come the guns are "illegal" but the drugs aren't?

Third... Where is this lovely section of Canada, where they make drugs and are overrun with guns, so that we can avoid it.

It's illegally sold guns going north while illegal drugs go south. It's an illegal trade going both ways.

Vancouver.

You comments weren't serious, were they?

RodSBT
11-11-2011, 09:00 PM
look into the debt accrued during ww2

No comparison. The problem today is magnitudes larger with a gov. that refuses to make the drastic cuts necessary (which they did after WWII and even then it took nearly a decade to work their way out of the depression that started in the thirties).

Look into the derivatives market and see how far the banks, gov both state and fed are leveraged. Check on the personal debt, mortgage debt, and future foreclosure rates a show me how this compares to WWII numbers. Not even close.

wardd
11-11-2011, 09:14 PM
No comparison. The problem today is magnitudes larger with a gov. that refuses to make the drastic cuts necessary (which they did after WWII and even then it took nearly a decade to work their way out of the depression that started in the thirties).

Look into the derivatives market and see how far the banks, gov both state and fed are leveraged. Check on the personal debt, mortgage debt, and future foreclosure rates a show me how this compares to WWII numbers. Not even close.

debt to gdp

Soundbounder
11-12-2011, 04:24 AM
Check on the personal debt, mortgage debt, and future foreclosure rates a show me how this compares to WWII numbers. Not even close.To quote that great financial philosopher, Herman Cain, that's an apples and oranges comparison.

You are throwing everything against the wall, including personal credit-card and mortgage debt, and then grouping it with US federal debt.
If millions of Americans defaulted on their mortgages or credit-cards, that would have severe economic ramifications, but it is not the same thing as the US Government defaulting.

Post # 2 on this thread made the following comment:


our problems are no different then Greece.Nearly 30 posts later, I've yet to read a legitimate argument to back up this claim

purri
11-12-2011, 04:53 AM
In short Romney is is Thai parlance a "prik dong" populist. The real world is outside his ken.

WI-Tom
11-12-2011, 12:20 PM
Actually, the US can print money while Greece cannot per EU common currency. Greece is like Wisconsin or Ohio in that regard and I don't see the feds bailing them out.

But Greece is unlike Wisconsin in this regard: it's actually bankrupt, while Wisconsin's budget "crisis" was largely manufactured by the Governor (through tax breaks to wealthy coroporations) as an excuse to impose extreme legislation on the state. The Wisconsin state pension fund was one of the best funded in the nation.

Tom

CWSmith
11-12-2011, 01:09 PM
But Greece is unlike Wisconsin in this regard: it's actually bankrupt, while Wisconsin's budget "crisis" was largely manufactured by the Governor (through tax breaks to wealthy coroporations) as an excuse to impose extreme legislation on the state. The Wisconsin state pension fund was one of the best funded in the nation.

Tom

Very good! I won't defend Wisconsin or Greece - both are making or have made bad decisions and your point is well taken. My only point is that the US is not Greece.