SubJeff on 29/11/2012 at 02:02
Quote Posted by jay pettitt
The reason why you'd (hopefully) want to cut Greece free from the Euro is because the Eurozone is hurting Greece, not the other way around.
Maybe they should have paid some taxes. There's a crazy thought.
Pyrian on 29/11/2012 at 18:41
Quote Posted by jay pettitt
All this might be true, but it doesn't alter the fact that Greece isn't what is hurting the Euro (much to speak of). It's the Eurozone hurting Greece (and handling the fallout very badly too). That's not okay, but I can't see how that becomes the big problem to big economies on the international scale.
Greece is small potatoes, it's true. I guess the concern is that where Greece goes, other troubled EU nations could take a hint and follow; most notably Spain, but also Italy, Ireland, and more. It's easy to see how one crack in the dam could widen into a flood. Right now, as I understand it, there's simply
no provision for a nation exiting the Euro. If Greece is forced to blaze that trail, there will at the very least be an example of how
not to do it! And if it goes well, the Euro could quickly become the de facto Deustchmark...
So, why is that a problem for big economies on the international scale? Fiscal shock. The fundamental issues are really quite similar to the problems that created this wide-scale recession in the first place: a lot of things that were assumed to have a given value are quickly revised into having much lower values. Instead of holders of mortgage debt taking the initial hit, it would be holders of bonds - and not just government bonds, but any holdings in Euros that became Lira/whatever. In many cases, these are the same institutions.
In this case the "shock" seems to be better known by the investment community, which hopefully means they'll be better prepared for it if and when it happens, but the converse of that is that the hypothetical effects are
already being felt as investors prepare for the possibility. And indeed, investors preparing for the possibility by divesting themselves of such debt or holding out for higher interest rates on said debt is a strong contributing factor to the problem! I mean, Greece has a problem regardless, but Spain would be fine if its rates weren't so high, and its rates are so high because its not fine
because its rates are so high, potentially turning into a self-fulfilling prophecy.
Quote Posted by jay pettitt
You
Marxist :mad::joke:
Fair cop, I'm a bit of a socialist. :Cheeky:
Yakoob on 29/11/2012 at 21:38
As I read about the recession and the countries in EU affecting each other in this thread I realize... holy crap, I have no idea how any of this works!
I've only taken basic economics in college (supply & demand, guns and butter etc.) so missed out on the big picture. I flat out don't understand how/why Greece doing poorly is affecting other countries in the Eurozone, or even the impact the Eurozone is having on the countrys' economies.
Anyone have any good (but brief and to the point) read basically explaining how all those things work and how they impact each other? I'd appreciate that :p
Quote Posted by Lazarus411
Actually, I don't have a strong opinion on the Eurozone either way, probably because I don't see in what way it affects me directly.
...then why start a thread you have no opnion about :weird:
Pyrian on 30/11/2012 at 00:10
Quote Posted by Lazarus411
Even the top economists don't really know what's going on in reality.
Economics is a bit like weather in that the sheer level of chaos (in the mathematical sense) makes it very difficult to make specific long-range predictions. And it's a bit like the "debate" over global warming/climate change/whatever they're calling CO2 pollution effects now, in that there's a
lot of money invested in getting people in general and policy makers in particular to believe things that are not true.
Still, some consequences and predictions can be made. I follow (
http://krugman.blogs.nytimes.com/) Paul Krugman, whose predictions may not be entirely perfect all of the time, but are a damn sight better than the squealing about hyperinflation and soaring interest rates we keep hearing from the conservatives. Pretty much everything I've posted here is just stuff I've imperfectly regurgitated from somewhere in that link.
faetal on 30/11/2012 at 00:59
From what I can tell, recessions are a natural side-effect of growth. Boom and bust comes from capitalism being built around the idea that all businesses should keep growing. The equilibrium between businesses and consumers hit its peak in the late '70s and since then has been artificially relying on things like increasing credit, which of course drives debt up until defaults start rolling in and the bubble bursts. What I've read seems to suggest that the US and Europe used debt bubbles to keep growth going, whereas, e.g. Japan, used property and have seen similar recesssions driven by property bubbles bursting. It's all way more complex than that though and most of it is beyond me.
jay pettitt on 30/11/2012 at 14:20
Quote Posted by Pyrian
more stuff
I don't have any disagreement with you on that, except that I don't think we're anyway near an international shock because of Greece. The Eurozone can drag Greece's woes out indefinitely if they're minded too. It'd be pretty dumb and akin to shooting yourself in the foot - but they've other feet. I don't think that makes the situation okay, it isn't. But getting over-excited about Greece isn't actually going to have a systemic impact on globalisation any time soon. There'll be flapping. But that's not systemic. It'll make the situation worse than it needs to be. But I still don't see how you get from there to imminent systemic global disaster.
The Euro has several problems. Greece is the one that the gets headlines (and it's being handled very badly) - but the problem that threatens the macro-economics of the rest of the world isn't Greece, it's that all of the Euro states are struggling to achieve traditional economic growth, just like the rest of us.
All of which is moot. The current Greece situation is unacceptable and the Eurozone needs to sort out the way that it's handling it. Macro-economics be damned.
Pyrian on 30/11/2012 at 18:40
Quote Posted by faetal
From what I can tell, recessions are a natural side-effect of growth.
I think they're a natural side-effect of time passing. :p But we don't
have to have them all the time, and certainly not
just because we're growing.
Quote Posted by faetal
Boom and bust comes from capitalism being built around the idea that all businesses should keep growing.
I think you should always consider whether your growth is sustainable. Any unsustainable growth will necessarily end - by definition, I suppose. Some will last longer than others. So, what all is your growth based on, and which of those will run out, and which of
those will run out the soonest?
Quote Posted by faetal
The equilibrium between businesses and consumers hit its peak in the late '70s and since then has been artificially relying on things like increasing credit, which of course drives debt up until defaults start rolling in and the bubble bursts.
Exactly. Unsustainable growth, because consumers can't just keep getting deeper and deeper into debt. Once business succeeded in holding back real wage growth, growth in general became fundamentally unsustainable.
The bubble-bust cycle we've been in for, well, pretty much my entire life, has had
everything to do with too much investment wealth looking for places to make a profit yet chasing too few consumer dollars. Sooner or later, those investment dollars are going to find something to blow up, bloating out of the general economy like a hernia, reaping large profits from what amounts to a pyramid scheme: the early investors make lots of money off the later investors, who find themselves holding worthless assets, blaming everybody but themselves for the situation.
There's this weird notion among investors that capital gains are sacred instead of risky. They really
believe deep-down that they should be paid off before anyone else, damn the consequences.
Xorak on 1/12/2012 at 09:49
Quote Posted by jay pettitt
Don't ask me, but it's possible that the money wasn't there in the first (the housing bubble was a bubble of debt after all) and what we're getting might be a dose of reality.
This is so true. There is no money. There never was any money. Governments everywhere are in debt, half the population in America is in debt. It's the international version of borrowing from one credit card to pay the other. Student loans debts alone are nearing (
http://www.politico.com/news/stories/1011/66347.html) $1 trillion.
But as long as they create the illusion of moving money, and everyone gets a feel as it gets passed around, you can satisfy everyone just long enough until it comes around the next time. But when that stops the whole damn thing gets exposed. Governments are just wasteful monsters, they've always been incapable of balancing their books. And they've always been able to add more taxes to hide their failures. And some people now actually want to pay carbon taxes, purposely choosing to feed that monster. The government needs to be held accountable for what it does, not have more money thrown at it just to further feed the vile mouths of those egomaniacal goons in office. And once the government is held accountable, then it's our turn to do the same, or vice versa, whatever.
It's exactly like the poker economy. Every poker player claims they're winning. A long-term losing player can coast for years as long as they stay one game ahead of the truth. Some players have been coasting since the 90s, drowning in debt. But the illusion of success keeps them afloat forever, essentially. Most of the well known pros, ostensibly making millions, are broke. So it is with the countries of the world.
faetal on 1/12/2012 at 13:30
Quote Posted by Pyrian
I think they're a natural side-effect of time passing. :p But we don't
have to have them all the time, and certainly not
just because we're growing.
I think you should always consider whether your growth is sustainable. Any unsustainable growth will necessarily end - by definition, I suppose. Some will last longer than others. So, what all is your growth based on, and which of those will run out, and which of
those will run out the soonest?
Share holders tend not to like being told that any growth (and commensurate increase in share value) isn't sustainable. It's the kind of talk that leads to 'no confidence' votes to oust CEOs. It is the deification of the bottom line which keeps us in this cycle. Capitalism touts itself as being driven by consumer needs and this beneficial, but the reality is that the consumers are essentially just the 'puzzle' which needs to be configured in order to keep money going from the bottom to the top, which gets harder as wages fall relative to cost of living.
