European Politics Thread

Actually currency devaluation is exactly what Greece needs (or needed since I don't know if that will still work now) if debt relief or true transfer payments are not going to be a thing. A weaker currency would allow Greeces exports to be more competitive relative to other economies (especially Germany), and it would be a lot less painful and damaging then trying to achieve the same effects via austerity and economic reforms.

Which Greek exports? Greece economy is mainly based on tourism and the shipping industry (and both are undertaxed, btw)....also fishing and agriculture. And I guess some mining, but overall, not much to write home about.

The tourism industry might get a boost from a weaker currency as more people would be tempted to visit. But yeah in the end Greece has a lot of root issues that need to be addressed, we need to see people talking in Greece about things like the shipping industry being undertaxed.

edited 18th Dec '16 8:19:18 AM by Silasw

I think Greece (and the USA, and the UK, and...frankly a lot of countries) have some serious issues of the soul that need to be addressed.

Since when was the Euro associated with austerity?Since when was austerity good?Cause we sure had looooots of that so far.And we're totally fine by now.

YES,I know it'll take time,but please no "Eat their cake and have it too".

Reforms are all well and good, but if the economy is still shrinking/ stagnating then it really doesn't matter.

Since pro-Austerity groups have been in charge of the Euro, so for a while now.

It's not, but that doesn't change the fact that it's Euro policy.

Greece doesn't get to dictate policy for the entire Euro-zone and most of said zone has bought into the Austerity lie, Greece can't change the policy, so it needs either accept the horrors of austerity or leave the Euro.

edited 18th Dec '16 11:06:51 AM by Silasw

Actually, most countries didn't really have austerity, least of all Greece. What austerity actually means is to organize your state budget in a way that you have a reasonable balance of expenses and investments. For example, pensions, social help and so are expenses, but the biggest expense is actually the government in itself. First step is to ensure that you don't pay more for those expenses than you have in tax revenue (and please don't start with the "but part of the money comes back in taxes" nonsense, yes, it will, but then it will be needed to pay the next round of expenses). Here is problem number one with Greece:

1. A lot of money never ends with the Greek government due to the biggest industries and the richest land owner paying next to no taxes.

2. The government structure itself is unwieldy, with a lot of incompetent people who were hired out of Nepotism and should be replaced with younger and more effective employees.

So far the Greek government has addressed none of those issues (despite actually required to do so) and instead cut down money at places where it actually makes less sense, but hits the "normal" people.

Most countries get at least this part of austerity right...but they fail with the second part (which actually includes Germany in some aspects): Investments. It is actually totally okay if a state has debts, if the debts are the result of an investment. For example the state "invests" into a new street, knowing that said street will allow a town to flourish which will eventually lead to higher tax revenue down the line....and a smart government (and here is were most fail) doesn't pay for the whole street immediately or in a regular pattern, but for work which is done to its satisfaction.

It's a little bit more complicated than that, but that is more or less the difference between "good" and "Bad" debt. Greece has "bad" debt because it spends all its money on stuff the state actually can't afford...like paying the church for conducting a marriage, what kind of nonsense is that? There are thousands places where changes could be made which sound like lump sums, but once you put them together, well, as we would say in Germany "Kleinvieh macht auch Mist".

Anyway, what I meant by there not being austerity in a lot of states is that many simply save money at the "easy" places instead of making the basic changes they need to do, while ignoring investments which should be made.

The UK is a particular glaring example for that, it has been using the "austerity" excuse for years in order to cut down spending at places which couldn't afford it. Take the NHS, the issue with the NHS is largely that the money it gets is not spend wisely. There is next to no money spend on prevention, which leads to a much higher bill when a patient gets ill.

And easy example: A patient doesn't feel good. A doctor looks at him, figures out what is wrong, the patient is send to a hospital and operated as fast as possible and then send immediately into aftercare, problem solved. That is not what happens in the UK. There are people who wait for their operation for years, and in all those years they need medicaments to even make it through the day. And when they finally get what they need, the operation is often more difficult and the recovery time longer.

edited 18th Dec '16 11:02:57 AM by Swanpride

Eh, the primary issue with the NHS specifically, is that it just doesn't get enough money. The UK has the cheapest healthcare system in the developed world as measured in percentage of gdp. It gets decent results which is some kind of miracle of efficiency, but.. it's not well funded. Not even close. Sometimes that shows.

As for austerity, the primary problem is that public debts are private wealth - which means that running surpluses entails the inevitable destruction of private fortunes. Sometimes this doesn't matter -if you go on a massive enforcement spree and pull a few billion out of tax shelters where they were sitting doing bugger-all and next to nothing, that doesn't impact the economy. But if you balance the budget on the back of people who actually work for living, you choke the economy to death.

Outstanding government bonds are money. Having fewer of them outstanding while keeping the amount of actual money the same is exactly the equivalent to taking a mountain of cash and lighting it on fire. It's generally not something that's good for the economy.

Quite frankly, I'm of the opinion that the national debt and private banking both are just bad ideas, and the state should just nut up and explicitly manage the monetary supply directly, because doing it at a remove and via the issuance of paper may help obfuscate the fact that money only has value because the government says it does but it also makes it nearly impossible to think anywhere near clearly about what taxes and government spending is actually *for*.

This also goes for fighting government waste. You don't do it because the government will somehow run out of money if you don't. You do it because the government is part of the economy, and having an efficient government makes your economy more efficient as a whole - it's about productivity - Both in the sense that you want your state workers to produce a decent amount of value each, and in the sense that everyone working for the state is a worker not available for the private sector, so it's important to not waste manpower. But none of this is about balancing the budget! That's not why you do it!

edited 18th Dec '16 11:22:30 AM by Izeinsummer

I always look at stuff like Cancer rates aso to judge a welfare system, and the ones for the UK are terrible. There isn't enough money spend in prevention, which leads to higher costs down the line. Something as simply as a healthcare card could safe a lot of cost.

I agree though that until those changes are implemented, the NHS can't afford even more cuts.

... What, the incidence or the survival rate? Because how many people get cancer is not related to your health care system at all, it's down to your levels of pollution and number of smokers.

They're not trying to do this. They're engaging in a power-grab while pretending to deliver this.

Austerity is just the excuse the Tories needed to go overboard on their very long-existing ideology of cutting spending and taxes, and privatising everything. The Tories have loathed the NHS from the moment it was set up and spent decades trying to defund it and privatise it. Their methods have been getting more extreme with every new Tory government. If we didn't have austerity, they'd just be using some other excuse. The defunding would continue regardless.

However, on prevention versus treatment, the Welsh Government does focus on a prevention strategy. That's one of several reasons why Westminster keeps trying to kill the Welsh budget — by focussing on prevention and community care, Wales is worse at meeting targets than the rest of the UK, which the Government exploits shamelessly. Hover, sacrificing the Westminster targets (which the NHS hates anyway) was a deliberate decision based on a lot of discussions with the Welsh health service... and, as you say, it's actually done a hell of a lot of good. The Westminster government really hates that.

I think you mean "that is sometimes not what happens in the UK", because this issue is different in different places in the country. Solely as an example, I know eight people, living in different parts of the UK, who were all diagnosed with cancer this year (seriously, what the hell is going on with 2016 and cancer). Every single one of them had their operations within a short space of time, and have now either finished their treatment or are well into the treatment, depending on stage of cancer at diagnosis. The same is true of people I know who have needed heart operations, hip replacements, and so on.

Yes, there are some areas of the UK which are really struggling, and people have waited a ridiculous length of time, but that's not universally the case. It is becoming more common, but that's in line with the increasingly drastic defunding the Tories are doing.

edited 18th Dec '16 5:27:45 PM by Wyldchyld

I was talking about the cancer survival rates. In other countries, groups which are at risk (meaning if they already had a number of cases in the family) are monitored more closely, so the cancer usually is discovered earlier and therefore more readily.

Anyway, my point is that the problem is not austerity in itself which is the problem, that is a good concept. The problem is that too many government cut the spending at the wrong places.

That is however, wrong. Austerity is fundamentally a misunderstanding of how the economy works.

Okay, simple: There are two economies, one of goods and services, and one made up of money. Every time a service is preformed or a good is sold, money changes hands. The limit to how rich a nation can theoretically be has absolutely nothing to do with anything involving money - money is just numbers. The limit is the size and skill of the labor force and the physical and social tools available.

However, it is impossible for the economy to operate at that limit unless there is the right amount of money flowing through the economy, because people will not cut your hair or sell you bread if you don't give them money. Money isn't real, but without it, the parts of the economy which are real stops working.

If there is more money available than the real economy can actually put to good use, you get inflation - each unit of currency drops in value until things match up again. If there is less, you get deflation - money rises in value until things match. But the second of these is terrible because that process takes lots of time, and until the balance matches, huge parts of your economy stand idle for absolutely no good reason. People go hungry, not because the harvest has failed, but because the central bank is run by idiots.

The amount of money in circulation is controlled by various factors, but the main ones are money creation, bank leverage and state debt. IOU's from the government are universally treated as if they're money. Banks can lend out more money than they have deposited, and those loans are also treated as money. Note how all of these create money out of nothing. That's unavoidable. You can't put money into the economy in exchange for anything, or you would be throwing goods and services out of the economy, destroying them. This is inherently unjust because whoever gets their account credited with this money did nothing whatsoever to earn it, but it's also necessary. The best solution I ever saw to this is the suggestion to only ever do monetary easing by crediting everyone's bank accounts with the same amount of money..

Thus, the government running a surplus means the government is taking money out of circulation and destroying it. So that there is less of it. That is a perfectly sensible thing to do if inflation is too high and you want to bring it down, tough generally, it would be more sensible to tell the banks to knock it off with the increasing leverage.

It's a fucking terrible response to an economic crisis in which huge parts of your labor force is sitting around doing nothing for want of money.

The correct way to fix things would be to "print" an appropriate amount of euros and hire people to do something sensible. Anything sensible. Or possibly to build something silly. The primary goal is to get them working again so that they produce value, because the economy is not better of for them sitting on their asses growing depressed.

edited 18th Dec '16 11:41:40 PM by Izeinsummer

Nobody says that a government has constantly running a surplus. But our governments have run a constant deficit in the last decades, and that is a problem, because the debt a lot of them have piled up is not based on investments, but on overspending. Meaning we are now paying the price for what the previous generation mucked up by upsetting the balance.

The monetary system of any country is based on trust. Trust that any debt will eventually paid off, that it is actually worth to buy bonds and that investments in the country will yield positive results. If a state keeps piling up debt, it will reach a tipping point eventually - and then you get either Greece or Hyperinflation (the only reason Greece doesn't already have Hyperinflation is because its currency is connected to other more trustworthy economies).

The surplus our governments currently make is not "saved", it is used to pay off debts (or at least that's what it should be used for), meaning it goes back in circulation.

Hyper inflation happens when the productive machinery of a nation is smashed to bits. And only then. You can pay off enormous debts by just printing money and the result will be a brief spike of high, but in no way "Hyper" inflation. Hyper inflation happens due to things like the occupation of the Ruhr or the Zimbabwan confiscation of the commercial lands - the problem isn't that too much money is created, the problem is that production comes to an abrupt stop and then there is an attempt to maintain the same standard of living by financing imports with the printing press - which does not work.

That is in no way, shape or form the situation in Greece- The problem is that people panicked over the debt. And frankly, financing state deficit spending via debt is pretty silly. The deficit is a tool for increasing the monetary supply - since the entire point is to put more money into circulation, it should be funded by the printing press. But the Greek government was running deficits because Greece was getting richer. Trying to pay off those debts with actual tax collections amounts to an attempt at making Greece poor again. Which is, indeed what is happening. It's enormously stupid.

edited 19th Dec '16 12:21:24 AM by Izeinsummer

Also, the post-war German hyperinflation was an early attempt to dodge the reparations from the Versailles treaty. The minister of the economy at the time artificially induced it with bad fiscal policies.

It's what led to the Ruhr occupation - France didn't trust Germany to deal in good faith because, well, it wasn't.

Independent from the reason, the Hyperinflation happened because the government kept printing money which was rapidly loosing its worth because it basically stood for nothing, and the people knew it, they kept spending the money the moment they had it in hand, thus devaluing it even further. Like I said, lack of trust. And since nobody kept his money at the bank, the banks had no capital to work with.

Money is nothing but a number printed on paper, or some digital digits. It has next to no worth in itself, the only worth it has is based on how the government which prints it is perceived. And if said government is not perceived as trustworthy by its own population, than the whole state will eventually break down.

Japan can afford to do this little currency scheme because the Japanese debt isn't hold by foreign investors. Other countries could play this little game a while longer if they wanted to, but sooner or later this little Ponzi scheme will break down.

A country's demography also plays a part. You can't run up a deficit forever if you have an ageing and declining population. Again, Japan is a special case, but even they are going to run into problems down the line.

Not due to the debts. The demography might fuck them over directly - that is, having a dire shortage of working age people and a lot of retirees is not a recipe for a booming economy, but that is a problem in and off itself, and would be exactly as big a problem if their national debt was zero.

The use of "helicopter money" (which seems to be what you're describing here) is still politically non-viable pretty much everywhere, which is why you have the round-about debt-financing which is fine for states like the US, UK, and Japan since they control their currency, hold most of their debt in their own currency, and reliably pay interest.

Unfortunately Greece has none of that. They could have that if they leave the Eurozone, it would hurt initially, but being able to control their own monetary policy would be a huge boon to them.

Right now they pretty much beholden to whatever their creditors and the EU (primarily Germany) demand, and frankly they seem to care more about getting their money then the condition of Greece.

Which is enormously stupid on their part also. The creditors are all states. To a state, money means nothing, while Greece thriving is at least somewhat useful. If Germany wants to be repaid in some form for the various goods they have shipped to Greece, they should bloody well take the bonds and issue travel vouchers against them and lottery them off or something. Because crushing the economy of the greeks in no way, shape or form makes Germany better off.

If Greece gets away with this, why should other states act responsible with their money. That is the issue here. Once one state gets away with it, other will follow and the states which have to keep picking up the bill will then say "wait, why should we? Why should we work and produce for those other countries which keep devaluing our currency and make us poorer by forcing their debt on us".

Greece can leave whenever it wants. The offer is on the table, the transition is planed. But there is no article on which Greece can be thrown out of the Euro, they have to go on their own. And they don't want to.

And keep in mind that it is not only Germany who'd be paying the billd. Greece's creditors include countries that are significantly poorer than Greece, and subsequently have been even more hawkish on them (which gets often overlooked by the press who instead focus on Germany).

https://www.theguardian.com/world/2015/jul/09/poorer-than-greece-the-eu-countries-that-reject-a-new-athens-bailout

Of course it is convenient to paint the whole crisis as Germans brutally opressing poor Greeks, while you could just as well paint them as Greeks trying to get money from poorer countries to pay for social services those countries cannot afford themselves.

Funnily, it was Slovenia who first advocated an exclusion of Greece from the Euro.

http://www.nytimes.com/2015/07/30/world/europe/how-germany-prevailed-in-the-greek-bailout.html?_r=0

4x

A country's demography can also make creditos question its' capability to pay them back. I have no doubt that particulary Italy might face such problems in the future.

edited 19th Dec '16 9:32:47 AM by Zarastro

Japan has had demographic problems for some it has still been able to secure credit for exactly the reasons I said above.

I think you underestimate how difficult not to be in control of your own monetary policy is.