How the Greek rescue failed

[Zanza]

Considering that Germany used to be the sick man of Europe and it came back precisely because of the Eurozone and lending like crazy to the Southerners, it's a rather funny statement.

The narrative here is that we went into the Eurozone at too high an exchange rate, weren't helped by too high interest rates and capital outflows to the South meant depressed investment in Germany for a decade. That we came back from being the sick man of Europe was - in our narrative - due to cuts to social state, labor costs and slowly regained competetiveness.

[Tamas]

I think the entire German-Greek tension comes from the same phenomenon we discussed recently with respect to growing work efficiency, only the relationship here is not between the upper and lower classes but the rich economies and the poor ones.

Essentially, as the work efficiency and automation increases, we are not able to get full employment anymore. This means that unlike in the past, it's the privileged (and, consequently, the rich) who get gainful employment and the poor who are idle. This creates a new (and somewhat counterintuitive) social contract which demands that the "busy" rich give some of their money to sustain the "lazy" poor. This is why the highflying City bankers have to pay higher taxes to make sure the chav octomoms get their welfare dole, and why Germany has to pay off the Greek debts.

But there is no alternative - except for a bloody rebellion. Deal with it.

That argument screams of "rich-ass lawyer not in touch with realities on ground level", dude

[mongers]

Considering that Germany used to be the sick man of Europe and it came back precisely because of the Eurozone and lending like crazy to the Southerners, it's a rather funny statement.

The narrative here is that we went into the Eurozone at too high an exchange rate, weren't helped by too high interest rates and capital outflows to the South meant depressed investment in Germany for a decade. That we came back from being the sick man of Europe was - in our narrative - due to cuts to social state, labor costs and slowly regained competetiveness.

If you google ' Germany "sick man of Europe" ' you get X results and if you google a certain other country's name instead of Germany you get twice that amount.   

[Martinus]

I think the entire German-Greek tension comes from the same phenomenon we discussed recently with respect to growing work efficiency, only the relationship here is not between the upper and lower classes but the rich economies and the poor ones.

Essentially, as the work efficiency and automation increases, we are not able to get full employment anymore. This means that unlike in the past, it's the privileged (and, consequently, the rich) who get gainful employment and the poor who are idle. This creates a new (and somewhat counterintuitive) social contract which demands that the "busy" rich give some of their money to sustain the "lazy" poor. This is why the highflying City bankers have to pay higher taxes to make sure the chav octomoms get their welfare dole, and why Germany has to pay off the Greek debts.

But there is no alternative - except for a bloody rebellion. Deal with it.

That argument screams of "rich-ass lawyer not in touch with realities on ground level", dude

I don't know. I probably talk to many more people who have an idea about how the economy works than you do.

[Tamas]

Considering that Germany used to be the sick man of Europe and it came back precisely because of the Eurozone and lending like crazy to the Southerners, it's a rather funny statement.

The narrative here is that we went into the Eurozone at too high an exchange rate, weren't helped by too high interest rates and capital outflows to the South meant depressed investment in Germany for a decade. That we came back from being the sick man of Europe was - in our narrative - due to cuts to social state, labor costs and slowly regained competetiveness.

But you must admit that
a) the euro and the EU helped you greatly. The continent would have been about German economic domination anyway, but harder.
b) the line pressed by Merkel is to make sure GERMANY comes out unharmed, not the other EU members. It can still be a better idea than Hollande's, but still.

Regarding point B, Germany has every right to follow her self-interest of course, but there is the problem of being the leader of a community. Yes, irresponsible countries fucked up something the Germans managed to handle well, but we are in this situation and no bickering will take us out, and the thing is such that at least two culprits are nearing the point where they personally would be easier off if they let the whole thing burn down. And when them and the others see that the strongest guy in the team is not wiling to risk injury for the team, they will ask "why should we?"

[Zanza]

I don't know. I probably talk to many more people who have an idea about how the economy works than you do.

Too bad you didn't learn anything from them yet.

[mongers]

I think the entire German-Greek tension comes from the same phenomenon we discussed recently with respect to growing work efficiency, only the relationship here is not between the upper and lower classes but the rich economies and the poor ones.

Essentially, as the work efficiency and automation increases, we are not able to get full employment anymore. This means that unlike in the past, it's the privileged (and, consequently, the rich) who get gainful employment and the poor who are idle. This creates a new (and somewhat counterintuitive) social contract which demands that the "busy" rich give some of their money to sustain the "lazy" poor. This is why the highflying City bankers have to pay higher taxes to make sure the chav octomoms get their welfare dole, and why Germany has to pay off the Greek debts.

But there is no alternative - except for a bloody rebellion. Deal with it.

That argument screams of "rich-ass lawyer not in touch with realities on ground level", dude

I don't know. I probably talk to many more people who have an idea about how the economy works than you do.

Yeah, Tamas is known for not wanting to debate economics on Languish.

[Tamas]

I think the entire German-Greek tension comes from the same phenomenon we discussed recently with respect to growing work efficiency, only the relationship here is not between the upper and lower classes but the rich economies and the poor ones.

Essentially, as the work efficiency and automation increases, we are not able to get full employment anymore. This means that unlike in the past, it's the privileged (and, consequently, the rich) who get gainful employment and the poor who are idle. This creates a new (and somewhat counterintuitive) social contract which demands that the "busy" rich give some of their money to sustain the "lazy" poor. This is why the highflying City bankers have to pay higher taxes to make sure the chav octomoms get their welfare dole, and why Germany has to pay off the Greek debts.

But there is no alternative - except for a bloody rebellion. Deal with it.

That argument screams of "rich-ass lawyer not in touch with realities on ground level", dude

I don't know. I probably talk to many more people who have an idea about how the economy works than you do.

The privileged rich work more and more while the poor are idle? Yes, welfare makes a portion of the population idle, but the rest either works or want to work. But it still takes plenty a poor man's work to let the rich play king.

[Zanza]

But you must admit that
a) the euro and the EU helped you greatly.

Definitely for the EU. As far as the Euro is concerned ...

b) the line pressed by Merkel is to make sure GERMANY comes out unharmed, not the other EU members. It can still be a better idea than Hollande's, but still.

Regarding point B, Germany has every right to follow her self-interest of course, but there is the problem of being the leader of a community. Yes, irresponsible countries fucked up something the Germans managed to handle well, but we are in this situation and no bickering will take us out, and the thing is such that at least two culprits are nearing the point where they personally would be easier off if they let the whole thing burn down. And when them and the others see that the strongest guy in the team is not wiling to risk injury for the team, they will ask "why should we?"

We already risked injury. When all this is over, we will have lost hundreds of billions of Euro. Which in turn makes you wonder about your point A.

[Legbiter]

Which reminds me Legbiter, how are you and how are your fellow Icelanders doing in the new economic reality up there ?

I ask, because I bumped into one of the occupy crowd today, and he was painting a very rosy picture of Iceland, but which wasn't been carried in the mainstream media.

So I said, I know an Icelander or two, I'll ask them; I'd be very interested in you personal view of the travails your country has been through in the last 4 years.

Anyway,
cheers
Mongers

Compared to some other countries we had a pretty good recession. Still pretty terrible by modern standards but last year the economy grew by 2.9pc (according to the OECD) and unemployment is sitting at 7.1pc. Unless Europe blows up like a toilet and no major volcanic eruption hits we should see growth around 3pc a year for 2013-2014. Of course a lot of people and companies will struggle to rebuild their balance sheets but the fundamentals are largely sound.

Plus, we're right next door to Norway so many people who hit the skids in 2008 jumped over the pond at least temporaily. But overall society has held together pretty well as has health and education. You can still have a decent heart attack in Iceland.

As for me I just snapped up a nice...terraced house I think it's called in English for a bargain and the last 3 years have been some of my best, watching Olaf and Volund grow up (they're sitting at 3 and 5 respectively). Of course the exchange rate has restricted the Legbiter household to just 2 trips a year to Norway but we all have to do our bit. 

[mongers]

Which reminds me Legbiter, how are you and how are your fellow Icelanders doing in the new economic reality up there ?

I ask, because I bumped into one of the occupy crowd today, and he was painting a very rosy picture of Iceland, but which wasn't been carried in the mainstream media.

So I said, I know an Icelander or two, I'll ask them; I'd be very interested in you personal view of the travails your country has been through in the last 4 years.

Anyway,
cheers
Mongers

Compared to some other countries we had a pretty good recession. Still pretty terrible by modern standards but last year the economy grew by 2.9pc (according to the OECD) and unemployment is sitting at 7.1pc. Unless Europe blows up like a toilet and no major volcanic eruption hits we should see growth around 3pc a year for 2013-2014. Of course a lot of people and companies will struggle to rebuild their balance sheets but the fundamentals are largely sound.

Plus, we're right next door to Norway so many people who hit the skids in 2008 jumped over the pond at least temporaily. But overall society has held together pretty well as has health and education. You can still have a decent heart attack in Iceland.

As for me I just snapped up a nice...terraced house I think it's called in English for a bargain and the last 3 years have been some of my best, watching Olaf and Volund grow up (they're sitting at 3 and 5 respectively). Of course the exchange rate has restricted the Legbiter household to just 2 trips a year to Norway but we all have to do our bit. 

Thanks for that, good to here the family is blossoming. 

Yes, interesting how real world experience doesn't quite square with the internet meme that somehow Iceland has declared financial UDI from the rest of the world.

[Martinus]

The privileged rich work more and more while the poor are idle? Yes, welfare makes a portion of the population idle, but the rest either works or want to work. But it still takes plenty a poor man's work to let the rich play king.

Yes, but we "chose" (I realize there was little of actual conscious choice, but still) a set-up of widening wealth/wage differences because a situation like this is more efficient from the perspective of the economy.

But the downside is that in a "vertical" economy like that, people at the bottom cannot sustain themselves from their work anymore even if they are willing to work (and I never said they don't "want to work" - it's just that there just isn't enough gainful jobs for all the people willing to work). So it is disingenuous for the rich to now turn around, when the crisis happens, and say that they will no longer help the poor, because the poor don't work - we created the economy model where simply not all willing poor can work, so we have to deal with it now.

[Tamas]

But you must admit that
a) the euro and the EU helped you greatly.

Definitely for the EU. As far as the Euro is concerned ...

b) the line pressed by Merkel is to make sure GERMANY comes out unharmed, not the other EU members. It can still be a better idea than Hollande's, but still.

Regarding point B, Germany has every right to follow her self-interest of course, but there is the problem of being the leader of a community. Yes, irresponsible countries fucked up something the Germans managed to handle well, but we are in this situation and no bickering will take us out, and the thing is such that at least two culprits are nearing the point where they personally would be easier off if they let the whole thing burn down. And when them and the others see that the strongest guy in the team is not wiling to risk injury for the team, they will ask "why should we?"

We already risked injury. When all this is over, we will have lost hundreds of billions of Euro. Which in turn makes you wonder about your point A.

Fair point.

But I am afraid we are drifting closer to experiencing what an EU-less Europe looks like. Like we didn't try it for the past millenias.

Yeah that is melodramatic, probably we just loiter around for a decade struggling than start growing again, but if not, we may very well end up repeating the 1930s, with probably France and Ms. Le Pen taking Germany's role, as the failed strong state.

[MadImmortalMan]

Essentially, as the work efficiency and automation increases, we are not able to get full employment anymore.

I don't think it's automation doing that. The US had periods recently where we achieved it even with high efficiency and automation.

[Zanza]

Fair point.

But I am afraid we are drifting closer to experiencing what an EU-less Europe looks like. Like we didn't try it for the past millenias.

Yeah that is melodramatic, probably we just loiter around for a decade struggling than start growing again, but if not, we may very well end up repeating the 1930s, with probably France and Ms. Le Pen taking Germany's role, as the failed strong state.

I doubt it. Keeping the EU around is beneficial to all involved. The only ones I could see leaving anytime soon are the British. And keeping the EU around has a much lower potential for economic costs than the currency union.