The unintended consequence of bailing out the banks.

SpaceTime wrote: »

Largely because the Germans have a very long-held fear of inflation that almost borders on the irrational which has hamstrung the ECB by not giving it the power to do anything approaching a devaluation or serious quantitative easing programme.

Politically, this is just not sustainable in the medium term. Spain for example will either leave the Euro or have a massive social and political mess on its hands very soon.

True, that is certainly the case with Germany - I just don't get all of the posters online, holding mutually contradictory views regarding effective (internal) devaluation, vs actual devaluation, especially as we can logically see precisely why internal devaluation just harms the economy even further

You'd be engaging in a race-to-the-bottom in wages, which harms demand, to compete for providing exports, where almost every country in the world is trying to export more, and almost none importing more - which is just stupid because someone needs to increase imports for anyone to increase exports.

If you sum up the exports vs imports of all countries in the world, you get "World Exports - World Imports = 0", which is a factually true accounting identity, so it's really obvious that countries can't just export their way out of this crisis.

It's just plain bad economics, which seems to show a lack of understanding of international trade and macroeconomics, and a kind of narrow/insular attitude of "we'll compete with other countries to take their share of existing exports" - without realizing just how stupid and self-defeating that is.

Geuze wrote: »

High competitiveness does not necessarily require low wages.


Switz, Denmark, Sweden, Austria, Germany - all reasonably successful economies (mostly), but not with low wages.

A successfuly economy should have strong wages, as a reflection of strong productivity.

Bear in mind that Greeks work the longest hours in Europe for almost the lowest pay and look where they are!

It's all about productivity per unit of labour and having valuable exports or internationally demanded services.

Well, hours worked ≠ productivity.

You'll notice the most developed countries in Europe have the fewest working hours.

It's also about value-added products / value-added internationally traded services. A country like Greece is hugely reliant on low-value added products and tourism. Where as say Denmark, or Ireland is the other extreme where a very large % of the income is made from very high value added products with very little reliance on tourism.

A lot of the lumping economies together into handy and insulting acronyms i.e. PIGS is pretty pointless as other than being in a crisis and having big debts, they don't share a lot else in common and got there for quite different reasons.

There's been quite a lot of lazy, tabloid reporting of the Eurozone crisis over the last few years.

The German insistence on internal devaluation by squeezing wages is only going to make a crisis worse by making private debts even more unpayable and it's not really going to make those countries any more competitive either. All it will do is cause their domestic economies to implode by driving up unemployment and driving down consumer spending.

The other thing I think that's being completely forgotten about is that we Ireland, Spain, and the UK too have a history of quite high inflation and devaluations. If you consider people who bought their houses in the 1970s/80s tended to borrow to the pin of their collar and then within a decade or so, inflation reduced their mortgages to very affordable levels.

There was a notion in Ireland and Spain that this is how things always work, because this is how they have always worked to date.

However, we bolted our selves to Germany and France two countries with a history of decades of price stability. Then when we entered our usual property bubble mode, there was no prospect of inflation / devaluation to deal with the excess heat.

I think we've basically plugged two completely incompatible systems together with rather disastrous consequences.

Ireland basically runs a UK/US axis economy and always has with boom/bust cycles and relatively high inflation over the past 30+ years.
Spain, Italy, Portugal and Greece run a Southern European approach to things which tends to be about inflation and devaluation as a tool. There's also a long history of very heavy state involvement in their economies with public-expenditure driven job-creation having been quite normal.

Spain for example, had huge levels of state involvement in its economy both during and after the dictatorship during the Spanish Miracle (1959-74)

While Germany and France tended to run a system of low inflation and price stability since WWII.

It seems to me that we've been shoehorned into a single model which is very much the central European / German one and I'm not sure that it fits all sizes very well at all.

You can see exactly why the UK, Sweden and Denmark opted out.

Actually, there's more to it than just Irish tendencies.

In any given population, a relatively small % of people will tend to go into computer science's hard-core coding areas.
So, within the Irish population (which is very small) only a relatively small number of people will ever have the ability to go into that area.

We should improve science education and computer science at second and primary level if we want to encourage more people into sciences. There should definitely be more focus on areas like pure science and engineering though. I would definitely agree with that.

On the language issues. That's one you're not really going to be able to address for two reasons.

1) The companies in general want (and can easily get) native speakers / near native level by just recruiting EU-wide.

2) Because Ireland speaks a very major language i.e. English, people don't really grow up speaking two or three languages like they would in a small country like say Belgium or the Netherlands or parts of Scandinavia. We are just not exposed to that and we generally don't have any need to speak other languages to access pop culture.

If you grow up speaking English or Spanish which are two major world languages, everything's at your disposal in your native language. French also has a huge media and pop culture which tends to mean that French speakers also tend to exist in their own bubble.

If you speak German for example, you're more likely to have to reach out to English pop culture / movies / tv / books etc than a French speaker might.

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Unfortunately, I don't really think that we're going to see Irish people suddenly becoming multi-lingual.

We should definitely improve language teaching and I think we need to introduce modern languages (other than Irish) at primary level from day one. They are much easier to teach too as there's just so much pop culture to use if you're teaching Spanish or French or German kids can actually watch TV, film, read really good books etc etc.

So, they'll learn quickly.

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I also think we need to be actively recruiting Eastern European residents who have degrees in say Polish or Russian to become teachers here. There's a huge untapped resource and Polish is a HUGE language in terms of how big Poland is and how economically significant it will become.

It seems daft to be focusing on French almost exclusively when we've a big population of native speaking Polish people and we now have loads of direct ties with Eastern Europe via people living here.