2012 May 26 Saturday
Tyler Cowen: Power Vacuum Killing Euro Zone
The debate is raging about whether Greece will leave the euro currency zone. Hard to see how it can manage to stay. But now the debate is starting to shift toward the question of the euro's survival. The Europeans are blowing it on a monumental scale. A grandiose epic mistake.
AS problems mount in the euro zone, it’s increasingly evident that we’ve been witnessing an institutional failure of monumental proportions.
Read the full essay. His conclusion is horrible but likely true: The Euro zone is a failed idea. Given the speculation (see below) about what Greece's exit from the euro zone will do to Greece imaging a larger scale failure of the euro. Many more countries would get thrown into depression.
Financial contagion baby!
What is to be done about Greece? Simply keeping it in the euro zone won’t help much, even if it’s possible. The continuing crisis has sapped confidence in banks not only in Greece, but also in Spain, Italy, Portugal and Ireland, though to varying degrees. Unless there are explicit guarantees to these banks soon, the market will likely take a further turn for the worse.
Government ownership of industries is a major reason for the Greek economic failure.
Aside from shipbuilding, most of Greece’s industrial base has eroded in the 30 years since the government nationalized large areas of industry. Wealth-generating businesses diminished, and tens of thousands of laid-off workers were absorbed by the state to reduce unemployment.
The whole world economy will go into deep recession if the Euro zone falls apart.
Greece will be like Argentina.
There’s no question that quitting the euro would be an easy way for Greece to shrink its unsupportable debt. Yet if Greece does leave or is kicked out of the single currency, it will most probably suffer inflation, layoffs, capital flight, shortages of essential commodities, and civil unrest, judging from what happened in Argentina when that country quit its dollar peg a decade ago.
But Greece will go through this chaos after a few years of economic contraction and therefore already high unemployment and lowered living standards. How bad can things get? The economy of poor pathetic Greece shrank 6.9% in 2011 and will shrink 5% in 2012. The Greek economy also shrank 2% in 2009 and went down 4.5% in 2010.
An exit from the Euro will lop off another 10% from the Greek economy.
The total contraction might exceed a quarter of its 2008 economy once it bottoms out after a return to the drachma.
The International Monetary Fund estimates that a Greek exit from the euro would lop more than 10 percent from Greece’s gross domestic product for at least the first year after a return to the drachma.
That's just one small European country. If many countries exit the euro zone then the disruptions would feed on each other and the downturns would be much worse for each country. So if Tyler's right about the euro as a failed idea Europe is headed for an economic depression and a the rest of the world is headed for a deep recession.
The Euro was an elite driven project - just like massive uncontrolled non-white immigration is.
The usual dirty cunts at 'The Economist' and the WSJ pushed it and dumb-ass politicoes swallowed it hook, line and sinker.
The late, great Enoch Powell, #the only poltician I actually respected#, warned about the Euro decades ago. Actually, Powell always stated that non-white immigration was the more mortal danger than the Euro.
Heed Powell - heed the prophet.
Kick out the darkies whilst you still have a chance.
Milton Friedman also thought the Euro would fail. But you know, the problem can be viewed differently: there is no reason that a common currency wouldn't work, so long as you let member nations' governments default on their debts (or not accrue them in the first place, as is likely when the bondholders know they would have no chance of being bailed out). I find it kind of bizarre that it is now accepted as normal (apparently even essential) for countries to just issue bonds to the tune of 1-10% of GDP every year, instead of running balanced budgets.
Anyway, the Greek government has defaulted on its debts five times already in the past two centuries. I guess this is an interesting test case to see whether the international tax farmers are now powerful enough to actually collect on the bonds the Greeks have issued, despite the opposition of the Greek people. I suspect that if they need to get their money from the Greeks, it won't be happening (not to say that they might not be able to get someone else to pay up instead).
"Government ownership of industries is a major reason for the Greek economic failure."
Even if that were true, that doesn't seem to be the case in every country, does it Randall? Does the same happen with Spain, Italy, Portugal and Ireland? Or Mexico? These countries are pretty messed up too and their industries are not as nationalized as they are in Greece, are they? Mexico -although not in Europe- is in fact an almost failed state due to all the neoliberal practices from the 90's and 2000's that turned it into the Fascist-civilwar state it has become.
The industries all of a country's people depend on should be owned and administered by the government, as they should be everybody's property and as they government is the property of the people.
Oil, electricity, medical care, education and perhaps agriculture should be owned, administered or at least closely monitored by the government to ensure there are no exclusive privileges for the few to carry on business, traffic, or service: Monopolies.
The problem is Capitalism of the very few, whether they are business owners, politicians, religious ministers or dealers of illegal products.
>"just like massive uncontrolled non-white immigration is."
You mean uncontrolled white immigration is OK? Well, that is just too Nazi for my taste.
Should we start writing the word WHITE in capital letters too?
You're not much of a "Left-Winger" there, are you? You only believe that you are because you think that Nazism really was a kind of Socialism, right? I'm sure you are a very religious person, aren't you? Hitler was very catholic. Religious morons usually are very intolerant. In fact, the more religious a person, the more intolerant.
Perhaps the USA should start becomming more concerned with understanding the rest of the world instead of continuing the same agressive, waste and oil-thirst-war of invation attitude it's had for decades.
You haven't noticed that socialism has failed? Government ownership is not efficient.
Other Euro countries doing poorly: Read my post Spain Labor Market Incompatible With Euro. Their labor laws make unions so strong that wages rise so high that their industries lose the ability to compete. They need either inflation or declawed labor unions.
Nazis: Very easy to label someone a Nazi. Not really conducive to rational discourse. I try to refrain from calling people names and instead ask them what their assumptions are. Then argue the assumptions based on evidence.
Greece should give the darkie invaders a choice - Get Out! or be driven into the Aegean Sea at gun-point.
"You haven't noticed that socialism has failed?"
-You mean France failed from 1981 to 1995?
-You mean Mitterrand was not efficient?
-Miterrand was socialist as the recently elected French president is.
I think McNeil was talking about Socialism not Stalinism. However I totally agree with you about how labeling someone a Nazi is not really conductive to rational discourse. I would ask McNeil to make his point without insults and labeling and to Gentle,Bearded Left-Winger to make his point without guns or labeling immigrants as "invaders".
Love reading your posts Randall.
Basically the point of "socialism" is to prevent the growth of large scale predatory monopolies that actually choke productivity and innovation. This kind of monopoly includes distorted forms of capital accumulation that basically impose a "creation tax" and "operating tax" on new small companies.
If money is a store of value, then this store of value owned by "A", somehow forces "B" (new companies or entrepreneurs) to ask for permission to start and run their business by borrowing with interest from the "store of value" of those who have already accumulated this abstract capital: somehow, a new software company that has absolutely nothing to do with the oil industry, must borrow with interest from the store of value of an oil company, for example, just to launch their business and continue borrowing with interest just to run its daily business.
But Germany is the ultimate capitalist country in the western world: there is no minimum salary in Germany, and yet there is a nurturing government that supports education in science and engineering, which is the secret of the German economy. The German socialism is in fact nothing but a form of family capitalism.
German socialism depends on running trade surpluses that are politically dependent on another country willing to accept trade deficits.
You are correct about German dependence on trade surpluses. But note that the impoverished southern European countries are a lot less important for German exports than Asian countries that import massive German technology. High quality goods are key for the survival of any Western country, and this requires governments that nurture high schools and universities to train future engineers and innovators. This is one area the private sector must be supplemented by the government, we can trash the rest, but without supporting science and engineering in high schools and universities, even the military power of the United States will decline in the future.
Note that nearly half the graduate students in engineering PhD programs in the US are foreign nationals. Many of them are returning to their homelands because opportunities have dramatically increased there compared to the US. This is one area Germany is doing better than the United States.
In America (the continent) there's a lesson to be learned in Socialism and Participatory Democracy:
At the beginning of this year, President Hugo Chavez highlighted the government's achievements and gave an outlook on the coming decade. With the Chavez administration, Venezuela has made a great leap forward in many areas.
The United Nations (UN) and the Economic Commission for Latin America and the Caribbean (CEPAL) confirmed that the country is the least unequal in Latin America.
Poverty has been reduced by 26.8 points, extreme poverty by 19.7 points in the past 12 years. University enrollment in Venezuela is the highest on the continent, second only after Communist Cuba, and the fifth highest worldwide. Venezuela's GDP has increased from US$91 million in 1998 to US$328 billion in 2011. Venezuela's debt in 2011 was 23.6% of its GDP. This means a reduction of 43.2% since 1989.
The Venezuelan people are thankful to the Comandante for improving their lives. Hugo Chavez's approval rating in December 2011 was 57%, according to a poll by GISXXI.
In his annual report he furthermore pointed out the areas where improvement is needed, reducing the crime rate and augmenting the employment rate.
A new Security Mission will tackle the problem of crime from a comprehensive point of view, analyzing the social elements and taking a humanistic approach. Vice-President Elias Jaua commented, "The cultural element is the key. We have to keep deepening the promotion of values for life and peace, as opposed to a culture of violence. The role of the media is fundamental"
Venezuela has made great progress in implementing participatory democracy. The country has become the vanguard of "21st Century Socialism," which is based on equality, fraternity, liberty, justice and solidarity. Its Bolivarian form in Venezuela includes the transformation of the economic model by increasing cooperativism and collective property created from the popular bases with the participation of the communities.
In his weekly TV show "Hello President" (Alo Presidente) Hugo Chavez discusses government projects with the Venezuelan people directly, listening to their complaints and taking advice.
In the latest mission, the "Great Knowledge and Work Mission" (Gran Mision Saber y Trabajo), started at the beginning of 2012, more socialist values will be put into practice.
"We want to unleash popular creativity from below, participation and protagonism from the grassroots bases," Chavez said. "It is a constant battle against capitalism. We are not going to carry out the Great Knowledge and Work Mission in order to strengthen capitalist ideas. We must always ask ourselves, where is the socialism in this project?"
The "Great Knowledge and Work Mission" aims at reducing poverty by offering vocational training and jobs. It is part of the government's efforts to reduce the unemployment rate to 3% by 2018, according to Commerce Minister Edmee Betancourt.
The mission will create over 2.8 million new jobs between 2012 and 2018. It is being implemented in four steps: establishment of the legal framework, registration, job training and development of the productive model.
Venezuelans registering in this mission can find training and work in the following areas: agriculture, education, forestry, gasification, housing, medicine, petrol industry, public works, transport.
Half a million new jobs are to be created in the vast oil fields of the Faja del Orinoco, where crude oil is exploited on a grand scale with the help of Chinese and Russian companies.
Chavez announced that houses, hospitals, schools and sports facilities for the families working in the petrol industry will be built in the Faja del Orinoco. These new cities will be developed catering to the needs of the people, ensuring their overall education, health and well-being. Since the beginning of the registration phase on January 14, over 100.000 people have signed up for the "Great Knowledge and Work Mission" in Caracas, the state of Miranda and the state of Vargas. In February, the mobile registration points, which are set up in public plazas, will move west, to the Andean region, then south and east.
In March, the training stage of the mission is due to begin at 140 sites of the National Institute of Training and Socialist Education (INCES) across the country.
President Hugo Chavez's vision for the future of Venezuela is that of "a new fatherland, a happy fatherland." La patria nueva, la patria feliz.
Chavez has achieved most of that by breaking contracts and cannibalizing his own oil industry; he'll be out of money soon despite sky-high world oil prices.
At that point he'll be lucky not to wind up like Ceaucescu or Mussolini.
Well, Chavez is the most popular president in Latin America. If Venezuelans are happy with him, let them have him. The U.S. should respect that country's sovereignty, and that's that.
If Chavez wants his sovereignity to be respected, he should stick to his contracts.
If Venezuelans are happy with him, let them have him. The U.S. should respect that country's sovereignty, and that's that.
Are Venzuelans happy?
Are Syrians happy?
Are Libyans happy?
Are Americans happy?
Are Russians happy?
Are Arabs happy?
Are Chinese happy?
Only th Scandinavians seem to be happy.