Sovereign debt bubble thread

[Neil]

Would the destruction of the German economy be a good thing?  That way, all the Europeans could be poor and happy together.

[Admiral Yi]

Would the destruction of the German economy be a good thing?  That way, all the Europeans could be poor and happy together.

Doesn't solve the fiscal issues.

[Sheilbh]

I'm happy that it "does it down."  It's supposed to do it down.  If you propose a policy without considering the obvious repercussions you deserve to be done down.

But this is my point.  You're fighting a straw man.  You're describing the argument made by the rejectionists, the SYRIZA argument and using that to do down the line taken by, as I've said before, Monti, Hollande, the FT, Economist, Guardian, Telegraph and more of less everyone in between.

They aren't arguing for growth, not austerity.  As their ideological diversity suggests it's not a purely ideological reaction.  They do all address the policy repercussions.

[Admiral Yi]

But this is my point.  You're fighting a straw man.  You're describing the argument made by the rejectionists, the SYRIZA argument and using that to do down the line taken by, as I've said before, Monti, Hollande, the FT, Economist, Guardian, Telegraph and more of less everyone in between.

They aren't arguing for growth, not austerity.  As their ideological diversity suggests it's not a purely ideological reaction.  They do all address the policy repercussions.

Oh really?  Have the Guardian and Hollande explicitly stated that the only possible way for this program to work is if the ECB/Bundesbank abandons its antiinflationary hard line?

[Zanza]

I start to wonder if it would have been better to just not do anything about the Euro crisis. Sure, some countries would likely have crashed out, but that might still happen anyway. However, the upside would have been that there wouldn't have been the political fallout, namely Germany being considered the dominant bully. We would still have been blamed for not showing solidarity, but that's easier to stomach than being seen as the Fourth Reich.

[Sheilbh]

Oh really?  Have the Guardian and Hollande explicitly stated that the only possible way for this program to work is if the ECB/Bundesbank abandons its antiinflationary hard line?

Yes.  The Guardian certainly has  in its numerous editorials on the subject.  Hollande's policy, which in terms of austerity takes one year longer than Sarko's, is that Germany should accept Eurobonds or loose monetary policy:
http://www.lemonde.fr/europe/article/2012/05/07/pour-hollande-l-allemagne-doit-accepter-les-obligations-europeennes-ou-le-renflouement-des-etats_1697349_3214.html

[Admiral Yi]

Your link blew up on me.

Eurobonds and loose euro can't be Hollande's policy because he doesn't directly control them.  It's wishful thinking.  I've read a few articles on his campaign in the Economist and elsewhere (mostly dire) and not once did they mention that Hollande thinks his spending plans are conditional on looser money.  That's the crux.

[Sheilbh]

Explain that step-by-step for me.  I don't understand what you're saying.

[citizen k]

Nigel Farage: "The EU Titanic Has Now Hit The Iceberg"

http://www.youtube.com/watch?feature=player_embedded&v=hJ6_Ey_MJV4

[Admiral Yi]

Explain that step-by-step for me.  I don't understand what you're saying.

The question the "growth yes, auserity no" school(1) has to answer is who or what will supply the financing for the increased deficits that will create this growth come from.  The market does not seem interested in doing so.  Germany does not seem interested.  China doesn't seem interested, although they have expressed some interest in buying up real assets if the price is right.  That leaves the ECB.

I agree with Joan that's a consistent and reasonable position.  But unless the ECB agrees to go along with the plan growth first is not an option.  So the only way growth first can be logically defended is if it is conditional on loose money.

(1) Or to be more precise, somewhat less austerity now and a really smashing and delightful amount of austerity just the moment we've achieved the delicious growth that is bound to follow on the heels of relaxing this mindless austerity.

[Sheilbh]

What do you think the growth school are arguing for?

[Tamas]

What do you think the growth school are arguing for?

we keep up deficit spending, growth will commence, we grow out the ever-growing bond interests

[Admiral Yi]

we keep up deficit spending, growth will commence, we grow out the ever-growing bond interests

I wouldn't even go that far. 

That's the problem Shelf.  The arguments I've been hearing from Occupy Growth First have not been economic arguments with cause and effect.  They're more like comp-lit arguments; the economics doesn't matter as long as the rhetoric you use is stirring enough.  To wit, Hollande's comment about not being a slave to the bond market.

[Sheilbh]

But this is the same issue of what you're reading and addressing though.  Are we talking about the 'Occupy Growth First' crowd or are we talking about the pro-growth camp within the EU?

Do you have that quote about being a slave to the bond markets? 

To take the example of Hollande, his policy for example is, fundamentally, austerity in France but growth in the Eurozone.  He wants more taxes than Sarko and a some spending in other areas.  But, as I say, his policies would balance France's budget one year later than Sarko.  With a couple of exceptions (like a youth works program for 150 000) his growth policies are for a Euro 'growth pact' (even Draghi's called for a 'growth compact') like Merkel's fiscal pact.  The article I linked to was Hollande's saying to Germany that the choice in terms of encouraging growth was between QE or Eurobonds (though he also mentioned 'project-bonds' which I think would be a disaster, but which Germany's apparently more keen on).

[Tamas]

austerity in France

like 60k new teachers, right?