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[Fenderputty]

For greece:
1. stay in the Euro

You sure that's an upside lol

 

[Machspeed007]

The problem is that the deal was economically stupid because it is just more austerity and austerity doesnt work.

"Austerity" is such a fuzzy term being thrown around that it lost all meaning. The 3rd bailout program has an investment component as well, is that austerity too? Is pension system reform austerity? Is privatisation austerity? I mean that's not like other countries don't do reforms because "austerity".

 

[Fenderputty]

"Austerity" is such a fuzzy term being thrown around that it lost all meaning. The 3rd bailout program has an investment component as well, is that austerity too? Is pension system reform austerity? Is privatisation austerity? I mean that's not like other countries don't do reforms because "austerity".

What's the invesent? How much of the bailout is marked toward paying previous debt?

 

[Piecake]

"Austerity" is such a fuzzy term being thrown around that it lost all meaning. The 3rd bailout program has an investment component as well, is that austerity too? Is pension system reform austerity? Is privatisation austerity? I mean that's not like other countries don't do reforms because "austerity".

Well, considering that the deal involves raising taxes and spending cuts for the purpose of reducing debt, then yea, that is pretty much the definition of austerity.

And what investments?

 

[pigeon]

"Austerity" is such a fuzzy term being thrown around that it lost all meaning.

Not really. Are you increasing taxes or reducing government spending during a recession? That's austerity.

The 3rd bailout program has an investment component as well, is that austerity too?

If it represents cutting Greek government spending in order to "invest" in repayment of debt, then yes, austerity.

Is pension system reform austerity?

If the result is government outlays via the pension system are reduced, yes, austerity.

Is privatisation austerity?

No, that's just colonialism.

https://en.wikipedia.org/wiki/Washington_Consensus

I mean that's not like other countries don't do reforms because "austerity".

Yes, lots of countries were and are poorly governed. But that doesn't mean it's a good idea!

 

[tmarg]

And what investments?

I believe a portion of the 50 billion euro public asset fund is supposed to go towards some sort of investment, though there are no details regarding what that might entail.

 

[CyclopsRock]

Not really. Are you increasing taxes or reducing government spending during a recession? That's austerity.

Hehehe, it seems pretty detached from its etymological roots, eh?

 

[Joni]

Not really. Are you increasing taxes or reducing government spending during a recession? That's austerity.

Austerity and recession are unrelated concepts. You can practice austerity both inside and outside recession as it is just the act of reducing government deficits.

 

[pigeon]

Austerity and recession are unrelated concepts. You can practice austerity both inside and outside recession as it is just the act of reducing government deficits.

I mean, sure, if you want to argue that, but in practice "austerity" as a policy idea re-emerged as a reaction to the recent financial crisis. The procyclical rather than countercyclical nature of the reforms are key to understanding the problem with the concept.

 

[jorma]

Comparing average salaries (are you basing that off GDP or some other metric) isn't the best metric as Germany has a high concentration of wealth at the high end and it is not equally spread amongst its population.

Germany has a lower GINI score than Greece. Meaining they have a higher income AND a better income distribution.

 

[Theonik]

But you would still have to ask for help and the closest friend you've got is Europe and it will always be that way. I know, I know, Greek pride and all that, it's just that the economic realities are harsher than idealistic concepts.

I agree. Austerity doesn't work. At all. Especially during a recession. It conflicts economic consensus.
Yet it is offered on an idealistic, moralist basis and enforced in countries in trouble in the Eurozone. What a crock of shit.

 

[Piecake]

Hehehe, it seems pretty detached from its etymological roots, eh?

I feel like economists enjoy confusing everyone with all of their jargon.

 

[Fenderputty]

I feel like economists enjoy confusing everyone with all of their jargon.

I got called a neoliberal for saying austerity is a tool to use to curb excessive and unwanted growth that leads to inflation because production can't meet demand. You know, the opposite of a recession.

 

[CyclopsRock]

Osborne (UK finance minister) is adamant that the UK won't pay any of the bail out, not unsurpringly. I wonder if he would actually go as far as to torpedo the whole thing if that's what it can to? I can't imagine it would over "just" £1bn but eh, GO's one sexy fucker, he'll charm his way out of it.

 

[Condom]

I agree. Austerity doesn't work. At all. Especially during a recession. It conflicts economic consensus.
Yet it is offered on an idealistic, moralist basis and enforced in countries in trouble in the Eurozone. What a crock of shit.

Conservatives had no other way of keeping people voting for them so they collectively propagandized the lie that is austerity.

 

[Piecake]

I got called a neoliberal for saying austerity is a tool to use to curb excessive and unwanted growth that leads to inflation because production can't meet demand. You know, the opposite of a recession.

That sounds like good old bubble-popping contraction right there. Something that Greece definitely does not have to worry about in the near future. Their bubble has been popped and popped and then someone dug a ditch and threw the dead bubble in there. Not quite sure why you'd be called a neoliberal for saying that, or was that person just confused by the misused term?

Of course, austerity does cut growth, but no one was trying to do that!

 

[Theonik]

Conservatives had no other way of keeping people voting for them so they collectively propagandized the lie that is austerity.

I will concede that there are situations where austerity makes sense but not in a crisis. The intent is completely misunderstood.

I got called a neoliberal for saying austerity is a tool to use to curb excessive and unwanted growth that leads to inflation because production can't meet demand. You know, the opposite of a recession.

Would the neoliberal approach not be "Let the market faeries sort em' out"

 

[Fenderputty]

That sounds like good old bubble-popping contraction right there. Something that Greece definitely does not have to worry about in the near future. Their bubble has been popped and popped and then someone dug a ditch and threw the dead bubble in there. Not quite sure why you'd be called a neoliberal for saying that, or was that person just confused by the misused term?

Of course, austerity does cut growth, but no one was trying to do that!

Someone just saw the term and didn't read the content of my post. People on both sides just react to the term now.

Would the neoliberal approach not be "Let the market faeries sort em' out"

Considering how a neoliberal thinks, I dount they would ever be in support for the government spending needed to get an economy booming to the point were austerity actually makes sense.

 

[Joni]

I mean, sure, if you want to argue that, but in practice "austerity" as a policy idea re-emerged as a reaction to the recent financial crisis. The procyclical rather than countercyclical nature of the reforms are key to understanding the problem with the concept.

In practice, most Eurozone countries practiced austerity to get into the Eurozone in the first place.

I agree. Austerity doesn't work. At all. Especially during a recession. It conflicts economic consensus.

If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that. You'd typically do in years with economic growth, when you can afford to because the government doesn't have to support the economy.

 

[Conan-san]

Osborne (UK finance minister) is adamant that the UK won't pay any of the bail out, not unsurpringly. I wonder if he would actually go as far as to torpedo the whole thing if that's what it can to? I can't imagine it would over "just" £1bn but eh, GO's one sexy fucker, he'll charm his way out of it.

You know, I was wondering when Osbrone, the money grubbing shit that he is, would shove his nose into procedings

 

[Theonik]

If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that. You'd typically do in years with economic growth, when you can afford to because the government doesn't have to support the economy.

Take a look at the US running deficits for the past 50 years. There is some merit for austerity on times when the economy is not on a recession, when the private sector can pick up the excess demand. But even then it doesn't make sense in many cases but that is a disputed point. Unlike austerity in a recession that most economists think is a bad idea.
Edit: I thought I'd tone down the anti-austerity tune.

 

[Fenderputty]

Take a look at the US running deficits for the past 50 years. There is some merit for austerity on times when the economy is not on a recession, when the private sector can pick up the excess demand, but in most cases you will not get to the point where it makes sense.

Yeah that Clinton surplus worked out well for us ... Ohhh wait

 

[Piecake]

In practice, most Eurozone countries practiced austerity to get into the Eurozone in the first place.


If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that. You'd typically do in years with economic growth, when you can afford to because the government doesn't have to support the economy.

Not really. A government can pay down its debts wtihout raising taxes or deliberately cutting spending because an period of economic growth can do that for you. Government spending will be reduced because more people are working and need less welfare assistance. Government tax revenue goes up because the economy is booming. No austerity policies were implemented, but you could still pay down your debts.

And why does it matter if deficits continue to rise so long as the GDP continues to increase? What matters is the interest rate on the debt, not how large the debt is. I guess you could get to the point where the debt is so large that the interest payment is eating too big of a chunck of your budget, but you'd have to experience a lot of debt and shit growth to get to that point.

 

[jimbor]

You know, I was wondering when Osbrone, the money grubbing shit that he is, would shove his nose into procedings

Political leanings aside, the UK isn't involved in the € and so shouldn't be expected to cough up when it goes tits up.

 

[pigeon]

If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that.

It's called capitalism?

Governments can either spend money paying down their debts or spending money into the economy. If they don't pay down their debt, they're effectively borrowing more money to service it -- so the choice is whether to borrow money to invest in services and spending.

If they expect a rate of return from those services and spending higher than the rate of interest on the debt, then it's a good investment. The deficit will shrink as a percentage of GDP, because GDP will grow faster than the interest rate. This is the basis of capitalism.

 

[TheLaughingStock]

Austerity and recession are unrelated concepts. You can practice austerity both inside and outside recession as it is just the act of reducing government deficits.

It is directly related to economic expansions, reversals of economic activity, and recessions. Tax increases and spending cuts results in fiscal drag.

 

[QuicheFontaine]

You know, I was wondering when Osbrone, the money grubbing shit that he is, would shove his nose into procedings

How is that shoving his nose into proceedings? Sounds like the opposite to me, we're not involved in proceedings at all, nor should we be

 

[Conan-san]

How is that shoving his nose into proceedings? Sounds like the opposite to me, we're not involved in proceedings at all, nor should we be

It's not like we're a member of the EU or anything.

 

[KingSnake]

It depends on what you believe the Chinese or Russians would have asked in exchange for 80bn euros. My bet? This European deal is pretty much charity indeed.

The fact that worse options exist still doesn't make it a charity. Or solidarity for that matter. It's just politics and a bad business. It helps the Greeks the next months and it fucks them for years while keeping them in the same awful situations.

 

[QuicheFontaine]

It's not like we're a member of the EU or anything.

What?

 

[jimbor]

It's not like we're a member of the EU or anything.

We're not in the euro €.

 

[Deleted member 125677]

Interview with Varoufakis

But then inside the Eurogroup [there were] a few kind words and that was it: back behind the parapet of the official version. … Very powerful figures look at you in the eye and say ‘You’re right in what you’re saying, but we’re going to crunch you anyway’.

 

[KingSnake]

If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that. You'd typically do in years with economic growth, when you can afford to because the government doesn't have to support the economy.

But there is a middle way between austerity (as it is defined in Europe and spending spree. It's called fiscal responsibility and means trying to keep your budget close to 0 deficit in average. Ideally by having surplus in the good years and deficit in the bad ones. But targeting a surplus of 3.5% in a deep recession is quite criminal.

 

[Unknown Soldier]

Take a look at the US running deficits for the past 50 years. There is some merit for austerity on times when the economy is not on a recession, when the private sector can pick up the excess demand. But even then it doesn't make sense in many cases but that is a disputed point. Unlike austerity in a recession that most economists think is a bad idea.
Edit: I thought I'd tone down the anti-austerity tune.

The US can run eternal deficits because it's the US. Nobody is going to call the US out and demand we pay back our debts because we're the US, not only is the US "too big to fail" we um also have 10 aircraft carriers. Come at us bros.

Essentially, if you're a superpower, you can do what you want. Greece is not a superpower. RIP.

 

[Theonik]

The US can run eternal deficits because it's the US. Nobody is going to call the US out and demand we pay back our debts because we're the US, not only is the US "too big to fail" we um also have 10 aircraft carriers. Come at us bros.

Essentially, if you're a superpower, you can do what you want. Greece is not a superpower. RIP.

It doesn't work that way. The US is actually paying their debts and is in fact constitutionally obliged not to default on its debts. The thing is, you outgrow your debts.
Running eternal deficits is one of the ways you do so. Sure your debt grows, but not in relation to your GDP fast enough for it to be a problem.

 

[Unknown Soldier]

It doesn't work that way. The US is actually paying their debts and is in fact constitutionally obliged not to default on its debts. The thing is, you outgrow your debts.
Running eternal deficits is one of the ways you do so.

Well we are obligated to pay the interest on our debts. If we were actively paying our debt down, the debt would not be continuously increasing. Which it is. Quite a lot in recent years I might add.

What's interesting about the US National Debt is that even now, at it's highest point in history, as a percentage of GDP it's quite small compared to a lot of other nations and technically as a percentage of GDP, the US National Debt is still not quite as high right now as it was during World War II. The GDP of the US is just that enormous.

However at some point the US will need to rein in it's deficit spending because there really does come a point where too much public debt kills economic growth, see Japan for further information. The politics of the US are now as sclerotic as the politics of Japan now though, so I'm not very hopeful someone will pull their head out of their ass anytime soon regarding our public debt.

 

[PdotMichael]

The difference between USA and Greece (or any other countries which are trying to run a massive deficit) is that the USA proved to be trustworthy and don't forget its interest payments.

Low risk investments for all the foreign creditors.

 

[Theonik]

Well we are obligated to pay the interest on our debts. If we were actively paying our debt down, the debt would not be continuously increasing. Which it is. Quite a lot in recent years I might add.

What's interesting about the US National Debt is that even now, at it's highest point in history, as a percentage of GDP it's quite small compared to a lot of other nations and technically as a percentage of GDP, the US National Debt is still not quite as high right now as it was during World War II.

However at some point the US will need to rein in it's deficit spending because there really does come a point where too much public debt kills economic growth, see Japan for further information.

The debt doesn't decrease because you are borrowing more money to compensate. Though another point is that you owe a big portion of your debt. (bonds held by federal institutions)

Japan is also a really bad comparison it wasn't just the the debt became too large. Their economy contracted making them end up in a debt trap.

The difference between USA and Greece (or any other countries which are trying to run a massive deficit) is that the USA proved to be trustworthy and don't forget its interest payments.

Low risk investments for all the foreign creditors.

Nobody is comparing Greece with the US as they shouldn't. This is about the comment claiming you can't systematically run a deficit which you certainly can.

 

[EloKa]

I believe a portion of the 50 billion euro public asset fund is supposed to go towards some sort of investment, though there are no details regarding what that might entail.

there are some vague details:
if greece manages to get those called 50 billion assets, or better lets call the amount X (maybe 50, maybe 35, maybe 40, maybe 60, who knows):

25 billion to recapitalize the bank sector
50% of what is left to invest into the economy
the other 50% to repay old debts

 

[M°°nblade]

If austerity doesn't work at all, you're basically advocating for a continuing rise of government deficits. I'd like to see the economical model for that. You'd typically do in years with economic growth, when you can afford to because the government doesn't have to support the economy.

Even anti-austerity economists like Krugman warn that rising deficits are not maintainable long term.

It’s true that you can’t run big budget deficits for ever (although you can do it for a long time), because at some point interest payments start to swallow too large a share of the budget. But it’s foolish and destructive to worry about deficits when borrowing is very cheap and the funds you borrow would otherwise go to waste."

 

[Unknown Soldier]

Nobody is comparing Greece with the US as they shouldn't. This is about the comment claiming you can't systematically run a deficit which you certainly can.

My statement was that the US can run deficits that Greece cannot, in reply to your statement that the US has been running deficits for 50 years. The person who brought the US into the conversation was you.

In the specific case of Greece, they most certainly cannot systematically run a deficit and they shouldn't try. They are bound by certain rules as members of the Eurozone which do not allow this.

The whole austerity thing with Greece is a joke and they should have left the Euro rather than accept this terrible agreement but that is unrelated to endless deficit spending like what the US engages in.

 

[Theonik]

Even anti-austerity economists like Krugman warn that rising deficits are not maintainable long term.

There is an argument to be made on the meaning of long-term and even so, the second part of your quote states that worrying about deficits is a silly notion. And as long as your debt isn't high in proportion to your GDP, you can keep doing this for a pretty long time without the interest payments taking a large portion of the budget.

Edit:

My statement was that the US can run deficits that Greece cannot, in reply to your statement that the US has been running deficits for 50 years. The person who brought the US into the conversation was you.

In the specific case of Greece, they most certainly cannot systematically run a deficit and they shouldn't try. They are bound by certain rules as members of the Eurozone which do not allow this.

The whole austerity thing with Greece is a joke and they should have left the Euro rather than accept this terrible agreement but that is unrelated to endless deficit spending like what the US engages in.

The statement was that there is no economic model for long term deficit spending. The US is a good example of the contrary. Greece is in a different situation obviously as they are in the Eurozone, are not in control of their monetary policy, and are not borrowing as cheaply as the US among other things. This isn't advocacy for Greece to run deficits the size of the US.

 

[M°°nblade]

No, that's just colonialism.

https://en.wikipedia.org/wiki/Washington_Consensus

Yes, lots of countries were and are poorly governed. But that doesn't mean it's a good idea!

Do you really think a country like Belgium is considered to be 'poorly governed' because the harbor of Antwerp is not a state property?
The idea of treating state properties as if they are they are crown jewels makes no sense when the state fails to use them properly to create productivity and jobs.

There is an argument to be made on the meaning of long-term and even so, the second part of your quote states that worrying about deficits is a silly notion. And as long as your debt isn't high in proportion to your GDP, you can keep doing this for a pretty long time without the interest payments taking a large portion of the budget.

As long as ...

This is not the case with Greece. Also note how Krugman isn't able to give a solution for this situation.

 

[KingSnake]

In your comparisons you forget that US has the control of its own currency. Having euro only makes things worse, especially when ECB acts like a financial police and not as a central bank.

Anyhow, the solution is not to have big deficits year after year. You should have decent deficits in times of recession and decent surpluses in times of expansion.

 

[PdotMichael]

Nobody is comparing Greece with the US as they shouldn't. This is about the comment claiming you can't systematically run a deficit which you certainly can.

And how many countries do have the adventage of running a stable economy and currency?
The USA provives a security for foreign investments which are quite unique in the world.

 

[Joni]

The statement was that there is no economic model for long term deficit spending. The US is a good example of the contrary.

And it is basically: keep your debt under control.

 

[Theonik]

As long as ...

This is not the case with Greece. Also note how Krugman isn't able to give a solution for this situation.

Once you get to the point Greece got themselves into it is very difficult to get out. Austerity isn't the answer definitely because it makes the problem worse, you would at the very least need major debt restructuring to avoid a default. (25% drop in the GDP)
Applying austerity in a recession is probably the most insane notion from all this as you are essentially deepening the recession.

 

[East Lake]

Do you really think a country like Belgium is considered to be 'poorly governed' because the harbor of Antwerp is not a state property?
The idea of treating state properties as if they are they are crown jewels makes no sense when the state fails to use them properly to create productivity and jobs.

They'd be poorly governing if they sold it off during a depression at firesale prices with few bidders and no promise of economic development.

This is not the case with Greece. Also note how Krugman isn't able to give a solution for this situation.

Krugman's solution is Grexit.

 

[M°°nblade]

They'd be poorly governing if they sold it off during a depression at firesale prices with few bidders and no promise of economic development.

Desperate situations ask for desperate actions. Belgium as well sold Dexia/Belfius bank, mainly to France in order so save it.

Krugman's solution is Grexit.

That would be interesting to see. But since Tsipras didn't opt for this, result = ... ? At least for now.

 

[KingSnake]

Do you really think a country like Belgium is considered to be 'poorly governed' because the harbor of Antwerp is not a state property?
The idea of treating state properties as if they are they are crown jewels makes no sense when the state fails to use them properly to create productivity and jobs.

This would be true if those properties would be loss inducing. As far as I understand most of the assets supposed to be included in that fund are profitable. So they are creating productivity and jobs. Maybe not as efficient as a private owned ones, but still they are a plus on balance. It's stupid to sell profitable properties in deep crisis and under pressure because no one will pay you a good price for them, because getting them out of the state portfolio impacts negatively your GDP, because you give away an income source in your most desperate times for a potential income source in the future (which in theory is big taxes paid to Greece, in practice is tax optimized to the hell and back).