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Things still not looking good for eurozone
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03-04-2013 3:05am#119.07 Million people unemployed :eek: and last month it rose by 33,000 people. Will it ever improve :mad:
http://www.rte.ie/news/2013/0402/379397-eurozone-unemployment/0
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...it's a recession. They don't go away overnight.
cordially,
Scofflaw0 -
...it's a recession. They don't go away overnight.
cordially,
Scofflaw
But...my husband did not come to Ireland until his late forties spent his life in north wales, his is an engineer in the construction industry, the construction industry is very sensitive to any down turn in the economy he has seen two recessions in the UK in his working life,.. this is the point of my post both recession in the UK were effectively over in less that a year and then things went back to normal.
How come this recession is going on so long.
How come Ireland always appearers to be a recession and the periods when Ireland has not been in a recession have been very short and seem to be more irrational exuberances than any real changes or have I got that wrong.0 -
mariaalice wrote: »But...my husband did not come to Ireland until his late forties spent his life in north wales, his is an engineer in the construction industry, the construction industry is very sensitive to any down turn in the economy he has seen two recessions in the UK in his working life,.. this is the point of my post both recession in the UK were effectively over in less that a year and then things went back to normal.
How come this recession is going on so long.
How come Ireland always appearers to be a recession and the periods when Ireland has not been in a recession have been very short and seem to be more irrational exuberances than any real changes or have I got that wrong.
UK recessions are usually briefer than Irish ones, but not over in a year, whatever your husband's experience. The usual duration of UK recessions since the 1970s has been closer to 2 years on the basis of continued contraction, with recovery to pre-recession GDP taking 3-4+ years.
And the UK isn't coming out of this one at any speed, either. While sources briefly cheered the "recovery" of the UK in 2010, the UK has effectively been in recession since 2008. Calling it a "double dip" - or now a "triple dip" recession acknowledges that it's all part of the same recession.
The problem this time seems to be partly that we should have had a global recession in 2001, and Greenspan pumped the US through it, carrying us all along for the ride, and partly the deregulation of the financial industry, which provided enormous but unsustainable increases in wealth through the Nineties and early Noughties. If this depression turns out to be similar to the Great Depression of the 1930s, it will probably be a result of the latter (lax financial regulation), as it was then.
cordially,
Scofflaw0 -
mariaalice wrote: »But...my husband did not come to Ireland until his late forties spent his life in north wales, his is an engineer in the construction industry, the construction industry is very sensitive to any down turn in the economy he has seen two recessions in the UK in his working life,.. this is the point of my post both recession in the UK were effectively over in less that a year and then things went back to normal.
How come this recession is going on so long.
How come Ireland always appearers to be a recession and the periods when Ireland has not been in a recession have been very short and seem to be more irrational exuberances than any real changes or have I got that wrong.
Any given country will experience economic cycles.....this will see periods of strong growth and periods of weak growth or recession.
Some countries manage this process well. Arguably Britain is one of these. It manages the economy so that the boom times dont get too overheated, and that the recessions are difficult but not disastrous.
In Ireland, we don't have a long period of history to evaluate.....but its fairly safe to say that our government has not historically led us well in this regard.
When we have recessions, they tend to be made far worse by the actions of our government.
In the 2000s.....when the economy was getting overheated due to low interest rates and should have been tempered, instead the Ahern govt ratcheted up government spending on health and social welfare, and fuelled the construction boom to pay for this (via huge stamp duty tax revenues).
In the 1970s and 1980s, the Irish governments under Haughey and Fitzgrald went into denial about a recession and borrowed massively, and was caught out by a spike in interest rates.
In the 1930s, the De Valera led 'economic war' with Britain was a self inflicted blow to the Irish economy.
In the 1950s, the lack of change away from an agri economy when the rest of the Europe and the US were industrialising meant huge emigration.
So there it goes in Ireland.
In Britain, I dont know the economic history so well, but it seems that country has a much stronger Central bank/ Treasury and has a much stronger tradition in sophisticated economic thought than is evident here. The Bank of England has had a strong influence on economic performance that counteracts the sometimes negative influence of politicians.
Finally, dont confuse the performance of the economy with the performance of an industry. You husband might have found the recession in North Wales muich more severe if he worked in mining. Construction here is very difficult, on the other hand there is no recession if you work in IT.0 -
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On the plus side. Greater unemployment therefore reduced demand and inflation. Hopefully an ECB cut and reduce tracker repaymebts0
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uncle_sam_ie wrote: »They use to call it a Depression and your correct this one won't being going away overnight.
A depression is a recession lasting two or more years. Recessions (2 or more consecutive quarters of negative GDP growth) end when there is any quarter of growth.
Even here in Ireland we are seeing low levels of growth, so it's probably fairer to say we're in period of economic stagnation (i.e. stabilised but not really going up or down much) when we need sustained growth.On the plus side. Greater unemployment therefore reduced demand and inflation. Hopefully an ECB cut and reduce tracker repaymebts
With the ECB lending rate so low (0.75%), there's not an awful lot of room for lowering that rate.0 -
...it's a recession. They don't go away overnight.
cordially,
Scofflaw
What we have is a depression in many parts of Europe, thanks largely to the Euro and the Troika. People tend not to be able to recognise a depression these days, because thats the things with soup kitchens, bread lines and such, like in the great depression.
Recessions typically don't last 5 years...by the time they are a few years old, the system has cleansed itself.
We are still deteriorating....further from the end of the tunnel than we were last year, or the year before. The confiscatory desperation of the Eurocrats should be proof enough of that.0 -
What we have is a depression in many parts of Europe, thanks largely to the Euro and the Troika. People tend not to be able to recognise a depression these days, because thats the things with soup kitchens, bread lines and such, like in the great depression.
Recessions typically don't last 5 years...by the time they are a few years old, the system has cleansed itself.
We are still deteriorating....further from the end of the tunnel than we were last year, or the year before. The confiscatory desperation of the Eurocrats should be proof enough of that.
While people do regularly trot out the line that this is the fault of the euro, very few seem to be able to substantiate it other than by references to other people saying the same thing. And while austerity is undeniably unpopular, it is the choice of the governments, not the eurocrats (who have only the job of overseeing the agreed measures). Finally, while some are certainly suggesting debt-based stimulus as a silver bullet to end a debt overload crisis, the general view appears to be that this is inherently contradictory, although possibly that's the result of the prevailing neo-liberal doctrinal framework and the rejection of Keynesianism.
cordially,
Scofflaw0 -
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although possibly that's the result of the prevailing neo-liberal doctrinal framework and the rejection of Keynesianism.
So why aren't we seeing a rise in political support for far right economic policies in Ireland or the rest of Europe (with the exception of the UK perhaps)? If it makes economic sense why aren't we doing it?0 -
And while austerity is undeniably unpopular, it is the choice of the governments, not the eurocrats (who have only the job of overseeing the agreed measures).
cordially,
Scofflaw
Show me ONE, just ONE case, where the medicine of choice of the IMF hasn't been austerity?
Remember...just ONE...then I'll shut up.0 -
Honestly, you're not patronising.
Well, all you have to do is substantiate the claim. After all, why would you be making the claim if you couldn't support it?Amberman wrote:Show me ONE, just ONE case, where the medicine of choice of the IMF hasn't been austerity?
Remember...just ONE...then I'll shut up.
Er, are the IMF eurocrats? And how would it being IMF policy contradict it being Member State policy?
cordially,
Scofflaw0 -
Gloomtastic! wrote: »So why aren't we seeing a rise in political support for far right economic policies in Ireland or the rest of Europe (with the exception of the UK perhaps)? If it makes economic sense why aren't we doing it?
Because "neo-liberal" isn't the same as "far right"? Otherwise I'm not sure what the question means - who says either neo-liberal or far right economic policies necessarily make sense?
cordially,
Scofflaw0 -
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What?
No, the troika are different from the Eurocrats. I never said they were the same.
Still, ONE instance of where the IMF medicine wasnt austerity seems to have escaped you.
And for good reason...
Well, yes, because the IMF certainly like austerity as a policy. But that has nothing to do with what you originally said, and the contradiction I gave.
On the other hand, the IMF have recommended stimulus/fiscal expansion in the current depression:Let me start with what happened in 2008. Some may recall 2008 as the year when Lehman collapsed; others as the year of the largest drop in the Dow Jones since the 1930s. But there was an even more unusual event: the IMF, for the first time in its history, called for a global fiscal expansion across all countries that could afford it. It had never happened before. Monetary policy had been seen as the tool to respond to a deceleration in economic activity, not fiscal policy.
http://www.imf.org/external/np/speeches/2013/010613.htm
Although of course there's a caveat there of "countries that could afford it".
cordially,
Scofflaw0 -
Do you not view the Euro, and how its current configuration allows political/economic deadlock during crisis, as perhaps the primary fault impeding recovery?While people do regularly trot out the line that this is the fault of the euro, very few seem to be able to substantiate it other than by references to other people saying the same thing. And while austerity is undeniably unpopular, it is the choice of the governments, not the eurocrats (who have only the job of overseeing the agreed measures). Finally, while some are certainly suggesting debt-based stimulus as a silver bullet to end a debt overload crisis, the general view appears to be that this is inherently contradictory, although possibly that's the result of the prevailing neo-liberal doctrinal framework and the rejection of Keynesianism.
To try and substantiate that:
If we had our own currency we could have taken a whole range of other options to deal with the crisis and to bring our country back to competitiveness; without going into detail just yet, you'd agree there?
Also, while we do not have control over our own currency, and while the EU is deadlocked without being able to agree recovery policies, effectively our government can't choose any alternatives other than austerity, and thus it's not a choice? (unless you were referencing all EU governments collectively)
I don't put fault on Eurocrats there mind, more collective fault on the member states.
With the point on debt: The only real debt-based solution within the Euro, I think is Eurobonds and (as politically impossible as it is to implement them) that would basically be treating Europe like one big country (depends on how it's configured of course, stating it this way for simplicity); so long as the EU's overall public debt vs GDP stayed within sustainable levels, it could provide quite an enormous stimulus EU-wide, and bring recovery.
There's also Post-Keynesian monetary reform, bringing money creation under government control (potentially removing private bank access), which can be used both with or without the Euro.0 -
KyussBishop wrote: »Do you not view the Euro, and how its current configuration allows political/economic deadlock during crisis, as perhaps the primary fault impeding recovery?
Not really - if it were, everyone else would be recovering, while the eurozone wouldn't, and that doesn't seem to be the case.KyussBishop wrote: »To try and substantiate that:
If we had our own currency we could have taken a whole range of other options to deal with the crisis and to bring our country back to competitiveness; without going into detail just yet, you'd agree there?
I'd agree that there are things we could try, certainly.KyussBishop wrote: »Also, while we do not have control over our own currency, and while the EU is deadlocked without being able to agree recovery policies, effectively our government can't choose any alternatives other than austerity, and thus it's not a choice? (unless you were referencing all EU governments collectively)
I don't put fault on Eurocrats there mind, more collective fault on the member states.
Well, we signed up for the Stability Treaty, by referendum, and that would seem to be an agreement on our part to shrink public spending, rather than grow it.KyussBishop wrote: »With the point on debt: The only real debt-based solution within the Euro, I think is Eurobonds and (as politically impossible as it is to implement them) that would basically be treating Europe like one big country (depends on how it's configured of course, stating it this way for simplicity); so long as the EU's overall public debt vs GDP stayed within sustainable levels, it could provide quite an enormous stimulus EU-wide, and bring recovery.
There's also Post-Keynesian monetary reform, bringing money creation under government control (potentially removing private bank access), which can be used both with or without the Euro.
Eurobonds are a euro-level solution, though - it's not really possible to envisage them in any other scenarios. I'm not sure how bringing money creation under government control helps particularly.
Part of the problem here seems to be that there's an assumption that if only the EU Member States weren't opposed to a fiscal stimulus, then we could have a big fiscal stimulus, and everything would be all right again. But that assumes that spending/inflating your way out of the crisis is both possible and the best method for doing it. My own recollection of the last time this was seriously tried, which is basically the Seventies/Eighties, is that it not only didn't work, but that it made things worse. Why is that not the case now?
I should clarify that I'm entirely behind fiscal stimulus where you can afford it, but that obviously those countries that can't afford it would need to take - take, rather than borrow - money from wealthier countries in order to do it, and that those wealthier countries taxpayers' have both an objection to that and a right to object, while there is also no guarantee that they will continue to be prosperous during the depression.
cordially,
Scofflaw0 -
The EZ17 un rate is rising, now at 12%.
Both the US and EU rates were at 10% during the worst stages of the recent recession.
Yet the US rate has fallen to 8%.0 -
The ECB should act by cutting the refinancing rate from 0.75% to 0.25%.
OK, some people say that it'll be ineffective, as it won't be passed on to retail lending rates.
But it would give some relief, surely.0 -
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Sorry for the length and multiple posts here; not intending to barrage with text, just hard to avoid explaining some things adequately, without going into it at-length:
That assumes those other places do not have alternative policy options that could be enacted though, that the Euro (effectively) prohibits?Not really - if it were, everyone else would be recovering, while the eurozone wouldn't, and that doesn't seem to be the case.
Neoliberal/neoclassical doctrines seem to dominate, both inside and outside of the EU, but while that imposes an ideological hurdle to enacting recovery policies, the Euro imposes a near-impenetrable physical, political and economic barrier, where countries have to jump off a cliff (exit the Euro), to be able to enact alternative policies.
Yes, but that level of choice did not allow an option for recovery policies, it was basically 'Austerity vs Austerity + Lose access to bailout funds', so we would be screwed if we needed another bailout.Well, we signed up for the Stability Treaty, by referendum, and that would seem to be an agreement on our part to shrink public spending, rather than grow it.
Yes, Eurobonds would be a Euro-level solution, requiring something very akin to a federal EU; a political impossibility for sure, but (short use of money creation) is, from what I can tell, the only real option for recovery rather than austerity in the EU.Eurobonds are a euro-level solution, though - it's not really possible to envisage them in any other scenarios. I'm not sure how bringing money creation under government control helps particularly.
Bringing money creation under government control, is the Post Keynesian solution that pretty much obsoletes Eurobonds (though I only mention it in passing due to the controversy around it).
Instead of private banks putting created money into the economy with credit, and taking it out with debt repayments + interest (unsustainable because the economy can't handle more debt), government puts created money into the economy by spending (limited by inflation targets), and takes it out with taxes (inherently sustainable as there is no debt; don't even need bonds/public-debt to finance spending).0 -
On issues with the 70's/80's and spending:
Well, spending/stimulus doesn't mean inflation though; inflation is largely caused by resource bottlenecks (such as a shortage of labour or essential goods), so government can keep spending so long as the money isn't running up against a supply shortage (i.e. up to the point of full employment, because there will usually be some kind of abundant resource to put people to work with, until labour itself becomes scarce).Part of the problem here seems to be that there's an assumption that if only the EU Member States weren't opposed to a fiscal stimulus, then we could have a big fiscal stimulus, and everything would be all right again. But that assumes that spending/inflating your way out of the crisis is both possible and the best method for doing it. My own recollection of the last time this was seriously tried, which is basically the Seventies/Eighties, is that it not only didn't work, but that it made things worse. Why is that not the case now?
So, you would want to spend your way out of the crisis, but definitely not inflate your way out.
The problem with the 70's was that inflation in oil prices (an unavoidable resource, a bottleneck) caused economic disruption and knock-on inflation all throughout world economies, pushing governments into deficit and debt to maintain previous spending levels, and in Ireland FF pushed our level of debt to silly levels.
In the 80's, my understanding is that Ireland's problem then was largely the debt-loads we had taken on from the 70's, and right at the end of the 70's was the second oil embargo, which set up our problems for the 80's.
So, you definitely don't want so much stimulus, that public debt becomes unsustainable; the EU-wide public debt though, would allow significant room for spending before sustainability became a threat.
All of this is what makes the Post-Keynesian money creation policies so powerful: With it you don't use public debt at all; keeping within inflation targets and managing public policy plus the balance of trade, are the main concerns.
The 'Keynesian' economics from that period actually didn't represent Keynes thinking/views very well; Post-Keynesian economics stays far closer to the original spirit of his views.0 -
On Eurobonds:
With Eurobonds and something close to a federal EU (which of course isn't politically possible), the Eurobonds could be put out on the markets and the funding generated could be provided to the European Investment Fund; the EIF would then invest that money in infrastructure (and other worthy projects) all around the EU, including Germany and such.I should clarify that I'm entirely behind fiscal stimulus where you can afford it, but that obviously those countries that can't afford it would need to take - take, rather than borrow - money from wealthier countries in order to do it, and that those wealthier countries taxpayers' have both an objection to that and a right to object, while there is also no guarantee that they will continue to be prosperous during the depression.
This wouldn't be an inter-nation transfer of money in itself (because it is debt, that would get repaid), but the repayment of these bonds would be a bit like that, because all EU nations would be repaying them proportionally (depending on how the bonds are used and how payment of them is agreed, but lets say proportional for simplicity).
The powerful thing about this though, is that for countries (like Ireland) that wouldn't currently be able to afford to pay their share of the bonds, other EU countries can pick up the slack for us, and we can repay it later at our own pace when we get back on our feet; by keeping tally internally within the EU, we can stretch out our repayments over extremely long periods, or temporarily suspend them completely, while still being able to meet our debt obligations in the end.
The primary important thing then, is that the EU's overall public debt vs GDP remains within sustainable levels; everything else can sustainably be handled internally within the EU.
I'm still developing my understanding, arguments and explanations regarding Eurobonds, so not sure if I've explained it well, but the way I look at it, is as treating Europe like a single country, like the US and its states (with the overall US spending and national debt being the important thing, and issues with inter-state finances being fairly manageable).
Again, worth noting that public use of money creation, 100% eliminates all of these concerns about states accounting for bond debts (it is a silver bullet in a sense, just even more politically impossible than Eurobonds).0 -
Well, yes, because the IMF certainly like austerity as a policy. But that has nothing to do with what you originally said, and the contradiction I gave.
On the other hand, the IMF have recommended stimulus/fiscal expansion in the current depression:
http://www.imf.org/external/np/speeches/2013/010613.htm
Although of course there's a caveat there of "countries that could afford it".
cordially,
Scofflaw
Talk is cheap. The worst of this crisis has been behind us for years, according to Eurocrats. Don't look at what they say, look at what they DO.
Again, just show me ONE place where expansionary fiscal policy has actually happened where an IMF bailout has been involved.
Remember...just ONE.
The answer is that it hasn't happened...ever.
Every economy the IMF has ever "bailed out" has crashed viciously, depressing asset values across the board and forcing privatisations of state assets.
John Perkins, in confessions of an economic hitman, says that this is the goal...to allow insider corporations to swoop and grab productive assets for pennies on the dollar.
I'm not so sure...but their near 100% track record of success kinda makes me wonder....and I find Perkins to be quite credible. He seems to lay out the consequences of the playbook of the IMF and World bank pretty well.0 -
KyussBishop wrote: »On Eurobonds:
With Eurobonds and something close to a federal EU (which of course isn't politically possible), the Eurobonds could be put out on the markets and the funding generated could be provided to the European Investment Fund; the EIF would then invest that money in infrastructure (and other worthy projects) all around the EU, including Germany and such.
This wouldn't be an inter-nation transfer of money in itself (because it is debt, that would get repaid), but the repayment of these bonds would be a bit like that, because all EU nations would be repaying them proportionally (depending on how the bonds are used and how payment of them is agreed, but lets say proportional for simplicity).
The powerful thing about this though, is that for countries (like Ireland) that wouldn't currently be able to afford to pay their share of the bonds, other EU countries can pick up the slack for us, and we can repay it later at our own pace when we get back on our feet; by keeping tally internally within the EU, we can stretch out our repayments over extremely long periods, or temporarily suspend them completely, while still being able to meet our debt obligations in the end.
The primary important thing then, is that the EU's overall public debt vs GDP remains within sustainable levels; everything else can sustainably be handled internally within the EU.
I'm still developing my understanding, arguments and explanations regarding Eurobonds, so not sure if I've explained it well, but the way I look at it, is as treating Europe like a single country, like the US and its states (with the overall US spending and national debt being the important thing, and issues with inter-state finances being fairly manageable).
Again, worth noting that public use of money creation, 100% eliminates all of these concerns about states accounting for bond debts (it is a silver bullet in a sense, just even more politically impossible than Eurobonds).
But wouldnt the interest rate on the bonds be applied across the EU as a single entity? Therefore, German borring costs would soar, while weaker countries costs would fall.
To say that this isnt an inter country transfer is a stretch IMO.0 -
Talk is cheap. The worst of this crisis has been behind us for years, according to Eurocrats. Don't look at what they say, look at what they DO.
Again, just show me ONE place where expansionary fiscal policy has actually happened where an IMF bailout has been involved.
Remember...just ONE.
The answer is that it hasn't happened...ever.
Every economy the IMF has ever "bailed out" has crashed viciously, depressing asset values across the board and forcing privatisations of state assets.
John Perkins, in confessions of an economic hitman, says that this is the goal...to allow insider corporations to swoop and grab productive assets for pennies on the dollar.
I'm not so sure...but their near 100% track record of success kinda makes me wonder....and I find Perkins to be quite credible. He seems to lay out the consequences of the playbook of the IMF and World bank pretty well.
Sure - having been about to say that I'd be surprised to ever find the IMF recommending anything other than austerity, I just thought I'd check, and found the above, which duly surprised me slightly.
Still no idea what it's supposed to have to do with the point we were originally discussing.
cordially,
Scofflaw0 -
The troika policies have caused this long, drawn out depression. Thats the point I was making.
There is nothing even resembling a recovery in sight of the horizon.
I personally can't see how Europe gets out of this without a war...and neither can Kyle Bass, Marc Faber (who lives in the same city as me) and many others.
That's why I moved to Thailand.0 -
The troika policies have caused this long, drawn out depression. Thats the point I was making.
There is nothing even resembling a recovery in sight of the horizon.
I personally can't see how Europe gets out of this without a war...and neither can Kyle Bass, Marc Faber (who lives in the same city as me) and many others.
That's why I moved to Thailand.
Ah, I see - and my point was that the policies aren't just "troika policies" but the policies of the majority of Member State governments as well. In our case, austerity is genuinely something the public have voted for, given the successful passing of the Stability Treaty by referendum.
And, as I said, the adherence to such policies is most likely the outcome of historical experiments with the spend/inflate model of depression exit. Nobody enjoys austerity, least of all politicians, and nobody expects it to work quickly, which is why there need to be penalties for not sticking the course - but the silver bullet alternatives at best don't address the underlying problems, and at worst make things worse.
cordially,
Scofflaw0 -
Ah, I see - and my point was that the policies aren't just "troika policies" but the policies of the majority of Member State governments as well.
I think I see the point you are making now.In our case, austerity is genuinely something the public have voted for, given the successful passing of the Stability Treaty by referendum.
Its not going down so well elsewhere though. Greece, Italy and Spain come to mind.And, as I said, the adherence to such policies is most likely the outcome of historical experiments with the spend/inflate model of depression exit.
Thats why I predict war. Austerity without fixing structural issues is self defeating. There is no real appetite to cleanse the toxic European banking system.Nobody enjoys austerity, least of all politicians, and nobody expects it to work quickly, which is why there need to be penalties for not sticking the course - but the silver bullet alternatives at best don't address the underlying problems, and at worst make things worse.
The current austerity is making things worse. It is self defeating.
What silver bullet alternatives are you talking about?0 -
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There's not directly any inter-country transfer, and where there would effectively be some indirect transfer, it can be setup so it's only in the short-term, with it being balanced out in the long term when countries get back on their feet and repay their share.But wouldnt the interest rate on the bonds be applied across the EU as a single entity? Therefore, German borring costs would soar, while weaker countries costs would fall.
To say that this isnt an inter country transfer is a stretch IMO.
The cost of borrowing would increase for Germany alright, yes, but you could even do a special agreement with them to have the rest of the EU add that extra burden onto their internal EU 'tally' of debts, and pay it at their leisure (so they can keep running their economy sustainably).0 -
Sounds pretty far fetched to me0
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That's not true though, we were never given the option of choosing recovery policies; as I said, we had the vote options of 'Austerity' vs 'Austerity + Lose bailout fund access', so there wasn't really any choice involved.Ah, I see - and my point was that the policies aren't just "troika policies" but the policies of the majority of Member State governments as well. In our case, austerity is genuinely something the public have voted for, given the successful passing of the Stability Treaty by referendum.
And, as I said, the adherence to such policies is most likely the outcome of historical experiments with the spend/inflate model of depression exit. Nobody enjoys austerity, least of all politicians, and nobody expects it to work quickly, which is why there need to be penalties for not sticking the course - but the silver bullet alternatives at best don't address the underlying problems, and at worst make things worse.
Also, in fairness, you dismiss the alternatives there, without actually addressing them; fair enough if you if you don't want to get into discussing the alternatives, no problems there, but it is a low standard where things are dismissed without finding fault in them.
I think what leads to dismissal of alternatives like this, is that people still think the current mainstream economics (which, just to give it a name, can be termed 'neoclassical'), that is taught in college, and which is in textbooks; people still mistakenly think it is respectable/credible, even after almost all the economists who align with neoclassical economics, failed to spot the current crisis coming, when all they had to do was look at 'private debt vs GDP'.
This neoclassical economic theory has huge unrecoverable flaws in it (which are well documented in books and online), but people still use it to judge alternative theories, and think "that's just not right, that doesn't fit what I learned", even though they are comparing it to the flawed neoclassical theory.
It basically rules out all alternatives which don't contain neoclassical economics flaws, because they are going to be judged in comparison to neoclassical economics and its flaws.0 -
KyussBishop wrote: »That's not true though, we were never given the option of choosing recovery policies; as I said, we had the vote options of 'Austerity' vs 'Austerity + Lose bailout fund access', so there wasn't really any choice involved.
Also, in fairness, you dismiss the alternatives there, without actually addressing them; fair enough if you if you don't want to get into discussing the alternatives, no problems there, but it is a low standard where things are dismissed without finding fault in them.
I think what leads to dismissal of alternatives like this, is that people still think the current mainstream economics (which, just to give it a name, can be termed 'neoclassical'), that is taught in college, and which is in textbooks; people still mistakenly think it is respectable/credible, even after almost all the economists who align with neoclassical economics, failed to spot the current crisis coming, when all they had to do was look at 'private debt vs GDP'.
This neoclassical economic theory has huge unrecoverable flaws in it (which are well documented in books and online), but people still use it to judge alternative theories, and think "that's just not right, that doesn't fit what I learned", even though they are comparing it to the flawed neoclassical theory.
It basically rules out all alternatives which don't contain neoclassical economics flaws, because they are going to be judged in comparison to neoclassical economics and its flaws.
I'm not arguing the alternatives to mainstream economics - which are theoretically infinite - because they're mostly not on the table or even likely to be, and because while we can argue about them in extremely simple terms, whether they work or not has not been tested at anything even approaching the scale we're talking about.
I agree with you that neoclassical economic theory is awful stuff, but like pre-Copernican astronomy, it works to some extent, albeit with a hell of a lot of patching and twiddling.
cordially,
Scofflaw0 -
Fair enough, though it's worth noting that Post-Keynesian stuff actually has a better empirical basis, and is not really 'theoretical' in the untested sense, as it's insights are directly drawn from actual events and data, not built up in a rickety framework from abstract theory and microfoundations.
It's very much a "this is what we see happening, this explanation best fits that" set of theory, and not a "this is what our theory says, lets fit the data to it, ignoring what won't fit" kind of thing; since it's evidence based (as far as macroeconomics can be anyway), and really a collection of individual insights that observably fit the evidence better than anything else (like 'endogenous money' for one), it's actually better able to be applied for real world use than current neoclassical theory (since that ignores far too many incredibly important things).
Alternatives won't ever be on the table in the EU due to politics (don't think anything other than austerity ever will be), but it's important to recognize the very real economic alternatives and how readily they can solve the crisis, because even if politics will prevent their use within the EU, they'll become important when the Euro breaks up (and it is also the standard with which to judge the policy failures of Europe and its member states).0 -
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That's not correct.The problem this time seems to be partly that we should have had a global recession in 2001, and Greenspan pumped the US through it
The question is why Europe is coming through the aftershocks comparatively worse than other regions, or worse than the US itself. At this point, the problem begins. At this point it stops being about Greenspan.
I was walking down Dame Street yesterday and saw a protest by a group of young Spaniards, protesting at how failed responses to the economic crisis have caused them to leave Spain. Try telling them that their emigration was partly caused by a man who left his job before some of these people were teenagers.0 -
I wouldn't call the IMF 'Eurocrats' as they're an international organisation of which the US is a huge contributor. Also only 2 of the executive board are in the Eurozone (Germany and France).Show me ONE, just ONE case, where the medicine of choice of the IMF hasn't been austerity?
Remember...just ONE...then I'll shut up.
The IMF has been criticised for its anti-developmental policy since it was started. If anything, the 'Eurocrats' have a softer view on austerity.0 -
The IMF have constantly emphasized the need for growth-friendly austerity, of reviewing the effectiveness of austerity, and have even said that the Government should refrain from implementing further consolidation to make up the numbers this year if growth is disappointing.FreudianSlippers wrote: »The IMF has been criticised for its anti-developmental policy since it was started. If anything, the 'Eurocrats' have a softer view on austerity.
The real divisions are on the risk sharing tools of monetary union, and that is where most economists and the IMF would come down against the "Eurocrats".0 -
Cody Pomeray wrote: »That's not correct.
It's widely regarded as part of the explanation, I'm afraid, as is the move to financial deregulation through the Nineties and the resulting financial boom. If Spanish teenagers have difficulty with the idea that part of the explanation for their emigration has its roots before they were even born, that's an issue with their comprehension rather than having any bearing on the explanation.Cody Pomeray wrote: »The question is why Europe is coming through the aftershocks comparatively worse than other regions, or worse than the US itself. At this point, the problem begins. At this point it stops being about Greenspan.
I was walking down Dame Street yesterday and saw a protest by a group of young Spaniards, protesting at how failed responses to the economic crisis have caused them to leave Spain. Try telling them that their emigration was partly caused by a man who left his job before some of these people were teenagers.
Europe is generally slower to leave recessions for a variety of reasons which have been researched fairly extensively, but which boil down in essence to less flexible labour markets - less movement of people between countries and within countries, greater protection of jobs in some industries, fewer entry-level jobs, better welfare systems, and so on.
Having said that, while a lot of attention is paid to European woes, the US is hardly booming, while Japan is frankly desperate. Overall, it's hard to think of anywhere much that's really doing well, which is part of the problem.
cordially,
Scofflaw0 -
It's widely regarded as part of the explanation, I'm afraid, as is the move to financial deregulation through the Nineties and the resulting financial boom.
In the same way that if you want to make apple pie from scratch you have to first create the universe.
The important part for most people is the present economic reality which separates us from better faring international counterparts. The US went through deregulation, so did the Ireland, and the wider European Union a pretty long time ago.
We have to ask ourselves why is the USA seeing increased productivity and manufacturing investment, yet Ireland the Eurozone are actually seeing falling investment in manufacturing? Why is unemployment rising in Europe and falling in the USA?
Most people take the view that the answer lies in opposing fiscal policies. The US policy is expansionary, the Eurozone policy is uniformly restrictive, with policies actively promoting deleveraging and falling real wages not just in the troubled economies of Europe, but across the zone.
This is a structural factor to be overcome in Europe. Nobody seriously believes it is the main reason for the divergence of fortunes between the USA and the Euro.Europe is generally slower to leave recessions for a variety of reasons which have been researched fairly extensively, but which boil down in essence to less flexible labour markets - less movement of people between countries and within countries, greater protection of jobs in some industries, fewer entry-level jobs, better welfare systems, and so on.
The US is booming compared to Europe. Its short and medium term prospects are very positive with high potential growth of about 2.7% per annum.Having said that, while a lot of attention is paid to European woes, the US is hardly booming, while Japan is frankly desperate. Overall, it's hard to think of anywhere much that's really doing well, which is part of the problem.
The Japanese are moving along unremarkably but that has little to do with the sort of fiscal restrictions we see in Europe, they have their own idiosyncracies like negative inflation to concern themselves with. The USA is a better comparison for the European economy.0 -
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Cody Pomeray wrote: »In the same way that if you want to make apple pie from scratch you have to first create the universe.
The important part for most people is the present economic reality which separates us from better faring international counterparts. The US went through deregulation, so did the Ireland, and the wider European Union a pretty long time ago.
We have to ask ourselves why is the USA seeing increased productivity and manufacturing investment, yet Ireland the Eurozone are actually seeing falling investment in manufacturing? Why is unemployment rising in Europe and falling in the USA?
Most people take the view that the answer lies in opposing fiscal policies. The US policy is expansionary, the Eurozone policy is uniformly restrictive, with policies actively promoting deleveraging and falling real wages not just in the troubled economies of Europe, but across the zone.
This is a structural factor to be overcome in Europe. Nobody seriously believes it is the main reason for the divergence of fortunes between the USA and the Euro.
The US is booming compared to Europe. Its short and medium term prospects are very positive with high potential growth of about 2.7% per annum.
The Japanese are moving along unremarkably but that has little to do with the sort of fiscal restrictions we see in Europe, they have their own idiosyncracies like negative inflation to concern themselves with. The USA is a better comparison for the European economy.
I'm not sure why the US is necessarily a better comparison for the European economies (I don't think there's actually a "European economy" yet), and I'm not sure that the US is doing better. Where are the projected growth figures for the US from?
cordially,
Scofflaw0 -
the US is a better comparison because although Japan is seeing growth, its growth is built on a very special, dangerous kind of fiscal policy. Nobody is suggesting that Europe follow the Japanese formula of exposing its banking sector to such enormous interest rate risk and potentially worsening the banking crisis.I'm not sure why the US is necessarily a better comparison for the European economies (I don't think there's actually a "European economy" yet)
I'm not sure why anyone would compare Japanese economic policy with European or US policy for that reason. The Japanese economy is too special.
I can't remember. It's within the range of the Fed's official forecasts of 2.3% - 2.8% in 2013, and 2.9% - 3.4% next year and works out at about the average over a 2 year timeframe.Where are the projected growth figures for the US from?
Really economic growth forecasts are something of a mirage. If we want to get down to the nitty gritty and look and PMI and productivity gains in the US economy compared to the European economy, that tells of a proportionally even bigger, clearer and unambiguous disparity. There is an undeniable divergence in fortunes.
Whether you believe in a European economy or not is an epistemological question and not a more realistic economic one. I'm not interested in the semantics of the first kind. The fact is there is a monetary confederation and an institutional structure in place in Europe and I don't think I know of any economist that doesn't think its policies are impeding economic growth across the zone.0 -
Cody Pomeray wrote: »the US is a better comparison because although Japan is seeing growth, its growth is built on a very special, dangerous kind of fiscal policy. Nobody is suggesting that Europe follow the Japanese formula of exposing its banking sector to such enormous interest rate risk and potentially worsening the banking crisis.
I'm not sure why anyone would compare Japanese economic policy with European or US policy for that reason. The Japanese economy is too special.
Fair point, but that doesn't make the US necessarily a good comparison either! They're also a structurally different economy in a lot of ways.Cody Pomeray wrote: »I can't remember. It's within the range of the Fed's official forecasts of 2.3% - 2.8% in 2013, and 2.9% - 3.4% next year and works out at about the average over a 2 year timeframe.
Really economic growth forecasts are something of a mirage. If we want to get down to the nitty gritty and look and PMI and productivity gains in the US economy compared to the European economy, that tells of a proportionally even bigger, clearer and unambiguous disparity. There is an undeniable divergence in fortunes.
Whether you believe in a European economy or not is an epistemological question and not a more realistic economic one. I'm not interested in the semantics of the first kind. The fact is there is a monetary confederation and an institutional structure in place in Europe and I don't think I know of any economist that doesn't think its policies are impeding economic growth across the zone.
I wouldn't disagree, but then as far as I'm aware the current policies are not intended to produce growth, but to produce deleveraging, retrenchment, reduced unit costs and smaller public deficits. They're not intended to be pro-growth policies but cleanup ones.
Whether that's the right thing to do is obviously open to question, but it's not simply the case that we should look at what the US is doing and immediately emulate it because hey they've got growth! We did more or less that when the US last grew its way out of a recession in 2001, and that didn't really work out all that well. Whether what the US is doing to produce growth at this point is right in the medium to long term is not any kind of open and shut question.
What Germany did in the early part of last decade when the rest of us were partying was derided across the financial press as boring silly old hat stuff that restricted their growth - and now everybody's claiming they somehow cheated their way to their current economic strength using the euro, even though the euro was cited at the time as holding them back. It strikes me that the US is doing again what it did in 2001, and it strikes me that perhaps this time doing what the Germans did back then rather than going along with the US might be a better long-term option, even though all we want to do is to get back to the party.
cordially,
Scofflaw0 -
Yep we're not economic twins at all.They're also a structurally different economy in a lot of ways.
But if anything, the structural differences you mention make austerity less likely to succeed as a Eurozone policy than a US one.
For example you mentioned price stickiness as one difference. That's a big one so lets go with that. What happens when fiscal tightening causes a fall in real salaries and prices 'stick'? National economic activity declines. Imports from within the Eurozone decline. Eurozone economic output declines. Worse than that industry responds by holding off on investment.
Another characteristic of the Eurozone: the big fiscal multiplier. Again, lets be rational, the size of the multiplier makes austerity less helpful and makes targeted public investment attractive, because we know that public capital not only benefits consumption but industrial productivity.
This is why Europe needs alternative policies, like the ECB driving down yields, like a targeted stimulus package. Where do we see those measures? the US. is it working there? Yes. Could it work here? Absolutely, just give it a shot.
Mission accomplished. But here's where you lost me.as far as I'm aware the current policies are not intended to produce growth
Leaving aside the economics for a moment, you have to remember we're talking about peoples actual lives here.it strikes me that perhaps this time doing what the Germans did back then rather than going along with the US might be a better long-term option, even though all we want to do is to get back to the party.
I don't like the moralizing tone of asking young people like the Spanish protesters I mentioned to sit back, wait and suffer years of high unemployment at a crucial time in their lives when the economic merit of that penitent tone is very doubtful.
I disagree that we want to get back to the party too. Those Spanish young people came from a society with 55% youth unemployment. They don't want a party. They just want a job.
Sitting back and waiting is all very well if you're a middle aged German MP with most of your life behind you. The rest of us have futures to establish.0 -
Cody Pomeray wrote: »Yep we're not economic twins at all.
But if anything, the structural differences you mention make austerity less likely to succeed as a Eurozone policy than a US one.
For example you mentioned price stickiness as one difference. That's a big one so lets go with that. What happens when fiscal tightening causes a fall in real salaries and prices 'stick'? National economic activity declines. Imports from within the Eurozone decline. Eurozone economic output declines. Worse than that industry responds by holding off on investment.
Another characteristic of the Eurozone: the big fiscal multiplier. Again, lets be rational, the size of the multiplier makes austerity less helpful and makes targeted public investment attractive, because we know that public capital not only benefits consumption but industrial productivity.
I don't think I mentioned price stickiness, or the fiscal multiplier, and I'd need to check that those factors are the way round you have them, although I can see various reasons why price stickiness might be more of an issue in Europe.Cody Pomeray wrote: »This is why Europe needs alternative policies, like the ECB driving down yields, like a targeted stimulus package. Where do we see those measures? the US. is it working there? Yes. Could it work here? Absolutely, just give it a shot.
Driving down yields on what, sovereign debt? Er, that is a policy, and seems to be working.Cody Pomeray wrote: »Mission accomplished. But here's where you lost me.
Leaving aside the economics for a moment, you have to remember we're talking about peoples actual lives here.
I don't like the moralizing tone of asking young people like the Spanish protesters I mentioned to sit back, wait and suffer years of high unemployment at a crucial time in their lives when the economic merit of that penitent tone is very doubtful.
There's no 'penitence' involved, just bad luck. I had the bad luck to graduate in the late Eighties, when there were no jobs here (and not many elsewhere either). It sucks, but it's not being done as some kind of punishment, it's just what's happening when you're entering the workforce. If you'd come out ten years before, it would have been happy days, and you'd have done nothing to deserve that either.
But Ireland's austerity policies in the late Eighties/early Nineties, which drove me to emigrate, produced an economy which meant I could come back and start a company here in the latter half of the Nineties.Cody Pomeray wrote: »I disagree that we want to get back to the party too. Those Spanish young people came from a society with 55% youth unemployment. They don't want a party. They just want a job.
Sitting back and waiting is all very well if you're a middle aged German MP with most of your life behind you. The rest of us have futures to establish.
Actually, a serious downturn is a heck of a lot worse if you're middle-aged. If I were in my early twenties again, I'd be sleeping on friend's couches, or piled 12 to a house in London sleeping in shifts, as I was then. But I can't really ask my family to do that. If I was in my twenties I'd be able to make enough money to have a social life whether I was on part-time work or on the dole, and an entry-level job would make me prosperous, whereas now it wouldn't begin to put a dent in my outgoings. The middle-aged tend to be protected at the expense of the young during recessions for exactly that reason - and suicide rates tend to rise amongst the middle-aged in recessions rather than the young, also for that reason.
And if the policies that are currently in place do produce a cleaned up economy with real growth rather than another bout of fiscally-stimulated expansion followed by another bust, then I'd be able to have a decent career by my early thirties - again - whereas if I was a pensioner whose savings had been wiped out in bank shares, I'd probably be dead before the current policies pay off.
I'm not saying the policies will work, and I doubt they're the best of all possible policies, but I don't see any magic wand waving as likely to do better in the longer term.
cordially,
Scofflaw0 -
My mistake you mentioned inflexible labour markets not sticky prices. But the fiscal multiplier, poor competition and price stickiness are the things that distinguish the eurozone in terms of leaving a recession slowly, and are the reasons why we should be appalled at someone someone along with an austerity prescription for the entire bloc.I don't think I mentioned price stickiness, or the fiscal multiplier, and I'd need to check that those factors are the way round you have them, although I can see various reasons why price stickiness might be more of an issue in Europe.
It's vaguely in there yes. But yields haven't come down far enough. I'm talking about bringing cost of borrowing down to the same level as the pace of growthDriving down yields on what, sovereign debt? Er, that is a policy, and seems to be working.
I think the one place nobody can criticise austerity is in Ireland. We break the rules on that front because we are more competitive, so historically we tend to respond well to austerity. The Government are pursuing the right policy here, and they did so in the late 80s too.But Ireland's austerity policies in the late Eighties/early Nineties, which drove me to emigrate, produced an economy which meant I could come back and start a company here in the latter half of the Nineties.
If the Government had somehow managed to pursue a more irresponsible economic and fiscal policy when you were starting off as an adult, you may not have had that opportunity to return years later.
That's what Southern Europeans are looking at, just from the other side of the coin.
I take your point about this not being a pleasure cruise across the age groups.
I don't think Eurozone peripheral governments can cope with a fiscally stimulated expansion.And if the policies that are currently in place do produce a cleaned up economy with real growth rather than another bout of fiscally-stimulated expansion followed by another bust,
A improved version of Hollande's proposals of EIB funding would be more ideal.
http://www.businessweek.com/news/2012-05-15/eu-investment-bank-seeks-more-capital-as-leaders-tilt-to-growth0 -
Where does the idea come from that a fiscally-stimulated expansion is a bad thing? It was the expansion of private debt (recklessly put into an unsustainable property boom) which caused the crisis, and the subsequent deleveraging of it now which is holding the crisis in place.And if the policies that are currently in place do produce a cleaned up economy with real growth rather than another bout of fiscally-stimulated expansion followed by another bust, then I'd be able to have a decent career by my early thirties - again - whereas if I was a pensioner whose savings had been wiped out in bank shares, I'd probably be dead before the current policies pay off.
I'm not saying the policies will work, and I doubt they're the best of all possible policies, but I don't see any magic wand waving as likely to do better in the longer term.
Since private expansion isn't possible or desirable right now, fiscal expansion (put into sustainable areas) is precisely what is needed to solve the unemployment and public services issue, and to help the private sector deleverage and get back on its feet.
Fiscal expansion doesn't have to be based on unsustainable private industry (like housing/construction related taxes were), and it can be disconnected entirely from private industry concerns, by utilizing monetary policy.
We can't do that on our own (unless the Euro falls apart; which is probably what it will take), but well managed fiscal expansion is pretty much the only actual solution there is to the crisis (and when I say crisis, I talk not just of the narrowly-defined economic crisis, but the human crisis in worsened services and unemployment).
Austerity just involves letting the crisis take its course, without really trying to deal with the human part of the crisis at all.0 -
KyussBishop wrote: »Where does the idea come from that a fiscally-stimulated expansion is a bad thing? It was the expansion of private debt (recklessly put into an unsustainable property boom) which caused the crisis, and the subsequent deleveraging of it now which is holding the crisis in place.
Since private expansion isn't possible or desirable right now, fiscal expansion (put into sustainable areas) is precisely what is needed to solve the unemployment and public services issue, and to help the private sector deleverage and get back on its feet.
Fiscal expansion doesn't have to be based on unsustainable private industry (like housing/construction related taxes were), and it can be disconnected entirely from private industry concerns, by utilizing monetary policy.
We can't do that on our own (unless the Euro falls apart; which is probably what it will take), but well managed fiscal expansion is pretty much the only actual solution there is to the crisis (and when I say crisis, I talk not just of the narrowly-defined economic crisis, but the human crisis in worsened services and unemployment).
Austerity just involves letting the crisis take its course, without really trying to deal with the human part of the crisis at all.
That's mostly but not quite entirely true, since attempts are made to deal with the human part of the crisis, but, yes, within the limits imposed by overall letting the crisis work its way out of the system - although, again, it's not simply being left to do so at its own pace either, but being actively pushed forward.
As far as I can see, this is not being done for lack of conceivable alternative policies, or for the pleasure of prolonging public misery, or for any lizard man plans of financial enslavement, but because while everyone would like to concentrate on dealing with the human part of the crisis (that's where the votes are, quite aside from ordinary decency), and everyone would like to "solve the crisis", there doesn't seem to be a way of doing that which doesn't carry the downside risk of making things worse, and requiring deeper and even less voluntary austerity further down the line.Even the least risky solutions generally involve just shifting the pain to someone else, usually those countries which have already undergone painful (or at least uncomfortable) restructurings and fiscal tightenings of their own some time ago.
cordially,
Scofflaw0 -
Because demand is already weak due to falling real wages and you risk not achieving anything by hitting wages further.KyussBishop wrote: »Where does the idea come from that a fiscally-stimulated expansion is a bad thing?
It would be more sensible to stimulate the troubled economies using an agency like the EIB which can maximise a stimulus as a multiple of whatever capital base is applied. It also encourages private sector banks to participate in the stimulus, which probably wouldn't happen under a fiscally stimulated expansion.0 -
Well, if we're considering alternatives on their economic and human merit (not discarding them on the ideological/political difficulties), then the policies are available which can resolve the crisis, while in the long run, not putting an undue burden on other countries.That's mostly but not quite entirely true, since attempts are made to deal with the human part of the crisis, but, yes, within the limits imposed by overall letting the crisis work its way out of the system - although, again, it's not simply being left to do so at its own pace either, but being actively pushed forward.
As far as I can see, this is not being done for lack of conceivable alternative policies, or for the pleasure of prolonging public misery, or for any lizard man plans of financial enslavement, but because while everyone would like to concentrate on dealing with the human part of the crisis (that's where the votes are, quite aside from ordinary decency), and everyone would like to "solve the crisis", there doesn't seem to be a way of doing that which doesn't carry the downside risk of making things worse, and requiring deeper and even less voluntary austerity further down the line.Even the least risky solutions generally involve just shifting the pain to someone else, usually those countries which have already undergone painful (or at least uncomfortable) restructurings and fiscal tightenings of their own some time ago.
If (skipping over the meat of the tangled Eurobonds discussion for a second) you treat the EU as a single country, like the US, the EU-wide public debt vs GDP allows all of the space Europe needs to reach recovery, using Eurobonds, and all countries can meet their debt-obligations in the long run, with temporary assistance for individual countries (to be balanced later) where that would be unsustainable in the short run.
There is also the public use of money creation, which would obsolete Eurobonds entirely (as well as all of their political problems); this is usable (within inflation targets), without negatively impacting any EU member states in either the short or long term. (a good link I posted on the issue of private money creation, on another thread)
These solutions don't exhibit the problems you describe there; you could argue Eurobonds might, but only in the short-run, and the money creation obsoletes those concerns entirely.
I know this is likely to switch to pointing out the political impossibility of either of these options, but your post was discussing this purely on economic merits.0 -
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