We need to discuss the euro

[Mechanicalsalvation]

Strangely Greeks seems to be attached to €uro quite a bit. Especially the older generations who remember the old drachma like the stronger currency with much less inflation. It seems to be an important symbol of economic strenght and prosperity while the drachma represents perifery and provincionalism of Europe.

 

[Timsup2nothin]

Okay, let's assume this is the reality of the situation (it's not, but whatever). How is Germany still the bad guy? I was taught as a child that scammers can only succeed when there are people out there willing to let themselves be scammed. The promise of universal wealth and prosperity offered by the EU should have immediately thrown up red flags in the periphery states before they even joined. However, they allowed themselves to be tempted by those promises of wealth and prosperity without any concern for any of the possible consequences.

First off, where did I say Germany is a "bad guy"? They are the beneficiaries at the top of the pyramid. That's life, not morality.

Plus, did you ever stop to think that the reason the bottom members don't ditch the Euro is because they are still better off now than when they had their own currency? Before the Euro Spain, Greece and Ireland had some of the lowest standards of living of the European nations that were not former-Soviet republics. Once they adopted the Euro however, their standard of living greatly increased. So it seems they feel getting kicked around a little by Germany and France is a fair price to pay to maintain the lifestyle they now enjoy.

And they still do. The pyramid basically locks in the established positions. Those at the top when the pyramid was established are still at the top and always will be. Those who were in the lowest tier when the pyramid was established remain there until some new even lower tier gets pulled into the scheme. That's how a Ponzi scheme works, and it is how the Euro works. Now, is being in the bottom tier of the pyramid better than being on your own? Maybe it is, but that doesn't mean that it isn't still the bottom tier.

Also, to label the EU a Ponzi scheme, you would have to demonstrate how membership in the Eurozone is compulsory for all members that are not Germany and France. Last I checked, membership in the EU was completely voluntary and members are free to leave at any moment they so choose. For this to be a Ponzi scheme you have to show that the so-called victims have absolutely no recourse to change their circumstances, and this simply is not the case. Just because the bottom feeders choose not to change their circumstances, does not mean they are being forced to remain in the Eurozone by Germany and France.

I said the Euro is a Ponzi scheme, not the EU...though differentiating the Euro from the EU is not always a clean line. As to being "forced to stay" that is in no way a defining characteristic of Ponzi schemes. The bottom of the pyramid is usually filled with an ever shifting cast of bottom dwellers giving their support in turn to the higher tiers. They all hope that an even lower tier will form underneath them during their time, but they are mostly held in place by that hope, not by any constraint against leaving.

 

[Mechanicalsalvation]

The US is a single country, despite having states. One monetary policy for one country may not have absolutely uniform benefits across the entire country, but having a single monetary policy established across multiple countries that have economic policies that are otherwise independent just doesn't work.

"Fiscal union" could be a path to making it work, but I see no hope in heck of it actually happening. The proposal will get watered until it is the current unified monetary policy plus some tiny sops thrown in to make it "we can call it fiscal since it is more than just monetary".

There are rudiments of fiscal union in EZ already in place and French propose to enlarge it through proper common budget which now is only about 1% as opposed to federal US budget which is 20% (?).

 

[Timsup2nothin]

There are rudiments of fiscal union in EZ already in place and French propose to enlarge it through proper common budget which now is only about 1% as opposed to federal US budget which is 20% (?).

The proposal is one thing...how it stands when (if) it is enacted is another.

 

[Commodore]

Now, is being in the bottom tier of the pyramid better than being on your own? Maybe it is, but that doesn't mean that it isn't still the bottom tier.

And this statement defeats your own argument. You say every country being used by the Euro needs to wake up and ditch it, but why would they? If being used by the Euro has ultimately given their people a better life, then I would contend that those governments have a duty to their people to do everything possible to remain in the Eurozone.

It's kind of the same reason people stick with crappy jobs instead of trying to go into business for themselves. Sure, going into business for themselves may offer more freedom and allow you to "be your own person", but chances are most people's living standards would go way down if they went into business for themselves. At the same time, sticking with an employer who treats you like garbage may make you miserable, but at least it provides you with the financial stability that allows you to have a better standard of living.

 

[Timsup2nothin]

And this statement defeats your own argument. You say every country being used by the Euro needs to wake up and ditch it, but why would they? If being used by the Euro has ultimately given their people a better life, then I would contend that those governments have a duty to their people to do everything possible to remain in the Eurozone.

Your original statement was that they were "the lowest in Europe" before. Now they are not only the lowest in Europe, but they are permanently locked in place while allowing the gap between themselves and the upper tiers to expand endlessly. What is the benefit of that?

It's the old "rising tide lifts all boats" argument. Yeah, it does, but if I'm in a rowboat and the tide is only rising because you are dumping the sanitary tanks on your yacht into the bay I'm still not getting a good deal.

 

[Mechanicalsalvation]

Some of the absurdities of Euro shines particulary during the Greek crisis righ now.
Greece was given "help" from EZ for last five years through austerity programmes which increased its debt and lessened its GDP. In referenda the Greeks rejected any more of this help but were presented with even harsher conditions of a new help which everybody knows is completely absurd but becouse of non-existence of official fiscal union everybody pretends it can work. The Greeks seem to be poised to accept this new even worse deal becouse there is a great hope that in fact most of the debt will be eventually written off but no one can admit it oppenly just yet becouse right now it will create greate trouble mainly in Germany. Clearly implementing some form of fiscal union is perhaps the best way out of it while for now Germany has to remember its nazi past for a while.
If this doesnt get implemented and Greek debt doesnt get written off it will be better for Greece to leave EZ as soon as gets into good enough shape to do so.

 

[Commodore]

Your original statement was that they were "the lowest in Europe" before. Now they are not only the lowest in Europe, but they are permanently locked in place while allowing the gap between themselves and the upper tiers to expand endlessly. What is the benefit of that?

It's the old "rising tide lifts all boats" argument. Yeah, it does, but if I'm in a rowboat and the tide is only rising because you are dumping the sanitary tanks on your yacht into the bay I'm still not getting a good deal.

But their lives are still better than before and that's why they stay in the Euro. If you are going to be on the bottom no matter what you do, you might as well pick the bottom that gives you the best life. And for the nations at the bottom of the Eurozone, that means keeping the Euro instead of going back to their old worthless currency.

 

[Timsup2nothin]

But their lives are still better than before and that's why they stay in the Euro. If you are going to be on the bottom no matter what you do, you might as well pick the bottom that gives you the best life. And for the nations at the bottom of the Eurozone, that means keeping the Euro instead of going back to their old worthless currency.

Yeah, I'm in favor of rowing over to the yacht and holing their hull myself.

 

[El_Machinae]

The one quibble up there is 'allowed to leave'. The mechanisms to freely leave are not in place, nearly intentionally so.

 

[Commodore]

Yeah, I'm in favor of rowing over to the yacht and holing their hull myself.

That's why I like you Tim. And I'm pretty sure that's what Greece was trying to do, but didn't have much success.

 

[ParkCungHee]

And this statement defeats your own argument. You say every country being used by the Euro needs to wake up and ditch it, but why would they?

See, that's the very thing I think the Germans are afraid of.

 

[CavLancer]

Don't forget US nuclear bombers.

 

[Timsup2nothin]

That's why I like you Tim. And I'm pretty sure that's what Greece was trying to do, but didn't have much success.

Gotta think the long game my friend. Even if Greece and their rowboat sink into the muck of the bay, when all the other rowboat owners realize that one of them is going to have to take the next turn at the bottom of the barrel mucking the German bilges there might be an organized effort. The "economic unity" that would actually make sense for the vast majority of Europe would be an organized boycott of Germany. Once there was a little parity established the EU and Euro might actually work.

 

[Verbose]

The one quibble up there is 'allowed to leave'. The mechanisms to freely leave are not in place, nearly intentionally so.

No one and nothing really stopping it. It's rather that no obvious mechanism exists for doing this in a controlled and orderly fashion, and so doing it constitutes a jump into the dark. Doable, not constrained, but massively uncertain.

 

[Verbose]

See, that's the very thing I think the Germans are afraid of.

If they are, there's a bunch of things Germany can enact to change the dynamics of the situation.

 

[Timsup2nothin]

No one and nothing really stopping it. It's rather that no obvious mechanism exists for doing this in a controlled and orderly fashion, and so doing it constitutes a jump into the dark. Doable, not constrained, but massively uncertain.

That's why they all need to jump together. No trade with Germany. Moratorium on all payments to German banks. Could even go with fixed exchange rates among their various currencies if they felt more comfortable. That should be enough to shove at least a more than fair share of the uncertainty off to Germany.

 

[ParkCungHee]

If they are, there's a bunch of things Germany can enact to change the dynamics of the situation.

Yes, but I think they're making a terrible blunder of it. They're doing things that don't make economic sense, even from the position of getting their money back, because they don't want that scenario happening.

It looks from here that they want to establish a principle. You hear it in the subtext and in this thread all the time. "Well if Greece gets a good deal, that'll just encourage them!"

They want any Grexit to be messy, so Greece can be an example. Because they are very afraid that someday these smaller states will actually start examining this EU deal. The French and British are already getting restless.

 

[Hygro]

"Forced into one economic model designed for Germany"? No, that is not even close to being an accurate statement. Why? Because there is not a single nation in the EU that was forced into the Eurozone against its will. I asked this question in the thread about Greece and not a single person was able to give a satisfactory answer to it, so I'll ask it again: If the EU is so terrible and economically oppressive, then why were all you smaller European nations so anxious to join? I mean, it seems quite stupid to join an organization you think is disadvantageous to your nation, no?

You were answered. They didn't understand the problems with the euro and made the mistake of adopting it.

I make no attempt to understand or interpret snarky responses.

And I get that states don't always act rationally, but it really bothers me when states don't act rationally and then try to blame others for the inevitable poop-storm that follows their irrational decisions.

It would have been plenty rational had the EU fixed the euro the moment the flaws were discovered. I.e. it would have been rational for Greece had the EU itself acted rationally. Indeed German policy is not acting rationally. In this regard, if Greece is acting rationally on the assumption that their union partners would act rationally to everyone's mutual interests and somehow that's a fault of Greece, what basis of reasonability are you arguing from that isn't "blame the victim for annoying me"?

Okay, let's assume this is the reality of the situation (it's not, but whatever). How is Germany still the bad guy? I was taught as a child that scammers can only succeed when there are people out there willing to let themselves be scammed. The promise of universal wealth and prosperity offered by the EU should have immediately thrown up red flags in the periphery states before they even joined. However, they allowed themselves to be tempted by those promises of wealth and prosperity without any concern for any of the possible consequences.

Universal wealth and prosperity was a reasonable outcome if their money was half as efficient as their real economies. But their money is inefficient, with the inefficiencies hurting everyone in the long run but benefiting the top few countries' relative positions against the US (they want our dollars, their cheap euro pushes our firms to buy their stuff with our dollars).

 

[Commodore]

Yes, but I think they're making a terrible blunder of it. They're doing things that don't make economic sense, even from the position of getting their money back, because they don't want that scenario happening.

It looks from here that they want to establish a principle. You hear it in the subtext and in this thread all the time. "Well if Greece gets a good deal, that'll just encourage them!"

They want any Grexit to be messy, so Greece can be an example. Because they are very afraid that someday these smaller states will actually start examining this EU deal. The French and British are already getting restless.

And what's wrong with establishing the principle that fiscal irresponsibility will not be rewarded and will only lead to suffering?

Also, it really doesn't matter if the UK pulls out of the EU, at least in the context of any discussion about the Euro. They haven't adopted the Euro so if they pull out of the EU it would hurt the EU politically, but it shouldn't really impact the Euro all that much.