Sovereign debt bubble thread

[Tamas]

Yeah, interventionalists don't want to bend reality. NOT ONE BIT!

Not nearly to the same extent, not least of which because their theory actually does have some predictive power as an economic theory, especially during a crisis.

Right. Much good it is doing to us.

The Great Depression has not been renamed the World Depression I yet, has it?  And to the extent that the risk is still there, it is there because of misguided and utterly predictable austerity-led disaster.

That thing ended for good only when the war broke out. We might have the same conclusion this time as well but let's try not to.

And the risk is from the inbalance of direct or implied government intervention, be it artifical credit around, or just the "the government won't let us fail".

[DGuller]

That thing ended for good only when the war broke out. We might have the same conclusion this time as well but let's try not to.

And the risk is from the inbalance of direct or implied government intervention, be it artifical credit around, or just the "the government won't let us fail".

Sure it is, sure it is. 

[Tamas]

That thing ended for good only when the war broke out. We might have the same conclusion this time as well but let's try not to.

And the risk is from the inbalance of direct or implied government intervention, be it artifical credit around, or just the "the government won't let us fail".

Sure it is, sure it is. 

This debate of ours is much more well done here:

http://www.youtube.com/watch?v=GTQnarzmTOc

[alfred russel]

That thing ended for good only when the war broke out. We might have the same conclusion this time as well but let's try not to.

A major difference between the 1930s and today is that there is much more debt today. The US is just a few years away from the debt / GDP ratio at the end of WWII. If that global war were to break out now, we might end up throwing rocks at each other because there won't be money for guns.

[Zanza]

Yes. But you have to keep in mind that just German TARGET2 claims are already over half a trillion € and growing.

I found what Sheilbh posted a few pages ago on how it doesn't matter compelling.

[Zanza]

On the Euro-crisis apparently there's some hope before the summit (as usual), but from what I can see Hollande's proposal of Eurobonds have been shot down by three separate senior German figures and were called a 'nonsense proposal' by Austria's Finance Minister (who does she think she is? ) and Germany's opposing allowing the EFSF or ESM to recapitalise banks.  On the upside it looks like a deal's being agreed on project bonds - which I think'll be a disaster and are the worst of the proposals floating around, but hey-ho.

Hasn't Germany said that for several years now? Why should our position change just because France gets a new government? 

[Sheilbh]

Hope springs eternal.

Edit:  More practically the German government's style all through this crisis has been to be unyielding right until the point when everything'll fall apart and damage is already done, at which point they agree to an unsatisfactory compromise that doesn't resolve things but delays the next crisis.  I hope the anti-Eurobond position might go the same way as the anti-inflation, the anti-bailout and the anti-haircut position.

[Admiral Yi]

Well so far the bailouts of Greece, Ireland and Portugal have hit around €400 billion.

That's 400 billion in credit.  The bazooka is a gift.  Alms.  Charity.  A handout.  Free money.

[Admiral Yi]

But politics generally isn't Keynesian.  That's why, in response to the crash, there was talk about the 'return of Keynes'.  His wasn't the dominant economic school of the last 30 years.

Clinton ran a small surplus for 2 years.  Other than that it's been consistent deficit spending.  Europe too AFAIK.

[DGuller]

But politics generally isn't Keynesian.  That's why, in response to the crash, there was talk about the 'return of Keynes'.  His wasn't the dominant economic school of the last 30 years.

Clinton ran a small surplus for 2 years.  Other than that it's been consistent deficit spending.  Europe too AFAIK.

The more I think about it, the more I think that the concept of budget surplus/deficit is unhelpful for anything except a talking point.  Yes, it's simple, as long as you have the skill and experience to tell a negative number from a positive one, but it doesn't seem that useful. 

It seems like the real neutral point, or at least the approximation of one, where one side is good, and the other side is not good, is the point where debt/GDP change is zero.  The point where actual debt change is zero is overly conservative, and only makes sense in a zero growth environment.

[Admiral Yi]

The point where actual debt change is zero is overly conservative, and only makes sense in a zero growth environment.

The problem with this thinking is you end up either reducing deficit spending in recessionary times, which exacerbates rather than counteracts the business cycle, or you end up running small deficits in good times and larger ones in bad times.  Repeat the second enough times and you run out of credit.

[Sheilbh]

Well so far the bailouts of Greece, Ireland and Portugal have hit around €400 billion.

That's 400 billion in credit.  The bazooka is a gift.  Alms.  Charity.  A handout.  Free money.

That's assuming it works out and the overall costs of, say, a disorderly exit don't cost a lot more.  I'm doubtful.

But  I think the Eurozone's overemphasised moral hazard at the expense of confidence.

[Admiral Yi]

That's assuming it works out and the overall costs of, say, a disorderly exit don't cost a lot more.  I'm doubtful.

But  I think the Eurozone's overemphasised moral hazard at the expense of confidence.

Talk to Joan, it's his bazooka.  After it's fired, everyone lives happily ever after.

[Razgovory]

But politics generally isn't Keynesian.  That's why, in response to the crash, there was talk about the 'return of Keynes'.  His wasn't the dominant economic school of the last 30 years.

Clinton ran a small surplus for 2 years.  Other than that it's been consistent deficit spending.  Europe too AFAIK.

So?

[Admiral Yi]

So?

So politics is generally Keynesian.