The General Economics Thread

It is a problem when doing this puts you on a net loss, specially when you're making huge projects with the intent of increasing the GPD but have to deal with the issues that not all money spent returns to the economy through employment, some of the projects are rather useless money hogs that stop creating wealth once they are finished and the lingering possibility of creating an inflationary bubble due to the rapid growth and money supply but with sudden growth slow down or recession once the money ends or the works are finished.

In theory by stimulating the job creation through construction jobs could help to raise the other productive sectors, In theory. In practice once the constructions cease, you will have a lot of unemployed contractors and construction workers struggling to find a job because their field of expertise doesn't translate to other fields or the other fields are saturated or didn't grow enough to absorb them.

Or you will have some issues with inflation and stable growth because the other productive sectors couldn't keep up with the sudden demand or had received enough investments to grow and adapt or even be unwilling to adapt and grow due to protectionism and the increased income simply meaning they can charge more for the same stuff.

As seen by the Chinese Ghost cities and the whole economy strategy adopted by the Brazilian government, eventually the money ends and everything goes to shit.

edited 29th May '16 3:58:12 PM by AngelusNox

The United States International Trade Commission published their report on the TPP: "Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors.

The study indicates that in the TPP’s first fifteen years:

• The United States’ global trade deficit would actually increase by $21.7 billion;
• That there would be a decline in output for U.S. manufacturing, natural resources and energy of $10.8 billion

The TPP’s intellectual property chapter would globalize the worst of US copyright law, limit freedom of expression, threaten internet security and privacy, and adopt harsh criminal sanctions that could be used against journalists and whistleblowers.

edited 31st May '16 9:22:55 AM by TheHandle

States can afford to raise their top-level income tax; millionaires won't be rushing to flee.

I note, however, that "millionaires" are not "the 0.1%." I'd indeed like to see more numbers on the guys who can individually cause tax earthquakes just by moving to Florida or Singapore.

edited 31st May '16 11:55:02 PM by Ramidel

(EquiBlog) Must-Read: Simon Wren-Lewis: Greece Under Troika Rule

Pretty much what you'd expect: It's been completely mismanaged and it's a shitshow trying to squeeze blood out of a stone.

Must-Read: Narayana Kocherlakota: There Goes the Fed’s Credibility

The Fed will raise rates regardless of the fiscal and economic reality.

Must-Read: Fred Clark: That Time I Was the Evil Opposite of Neoliberalism

Neoliberalism has come to mean "toxic laissez-faire capitalism", more than "Modern liberals"

(Vox) UBI only makes sense if we can make sure people don't derive all their self respect from work.

edited 1st Jun '16 7:33:44 PM by PotatoesRock

It's still a damn shame what happened to Greece, Syriza has to be as bad as the New Democrats because New Democratic policies, Brussels policies, are all that will be allowed if the country demands to stay on the Euro. The Greek people are at fault not for profligacy, but for seeing the Euro as anything more than a national albatross.

The arguable problem is there's not reason to go off the Euro, as at least it gives them a standard of wealth to buy goods. Since it's likely any Neo Drachma would be worth much less. And Greece's economy, if I remember, is heavily based in Tourism, right?

A weaker currency helps tourism by making stuff the tourists buy cheaper.

But it conversely hurts your ability to buy stuff from the rest of Europe pegged at European prices. Which is probably the issue for a lot of people, they might not want to pay more to buy stuff just to escape the economic albatross.

The reason why Greece would benefit from having its own currency again is precisely that it could adjust, via normal market mechanisms, to the proper point to allow Greek labor costs to be balanced against German labor costs. In other words, it can sell its wares to Europe without being out-competed on price by Germany. Greece desperately needs its currency to devaluate, something that is not possible when it's chained to the euro.

That there will be some pain associated with this is inevitable, but they're already subject to so much anyway that it's hard to imagine things going much worse. It's the difference between lying in the hospital on life support for 20 years or having a dangerous procedure that will let you live a normal life in two years.

Quite frankly, the more pertinent question is whether Greece's governance structures can handle such a transition without falling apart, something that's not guaranteed. It's got deep and abiding problems with corruption and tax evasion, after all; it's barely out of Third World status when it comes to fiscal management. They need an FDR at the helm; instead they've got a Bush, or worse.

edited 2nd Jun '16 12:05:15 PM by Fighteer

It can always get worse. See Venezuela, for example.

You'll be lucky. I doubt there's anyone of FDR's calibre in all of Europe.

British retailer BHS to close with thousands of job losses

edited 2nd Jun '16 12:07:25 PM by Greenmantle

I suppose that my metaphor about being on life support should be amended to note the fact that the doctor who would perform this potentially rejuvenating procedure is infamous for killing patients while drunk.

edited 2nd Jun '16 12:11:16 PM by Fighteer

And he's the only (and not too popular) Doctor in town?

Question: Is Greece's connection to the Euro linked in any way to their access to an open border with Western Europe?

Open borders is part of European Union membership, not Eurozone membership.

edited 2nd Jun '16 1:49:36 PM by Fighteer

So they could re-adopt the Drachma and not lose access to European markets?

Correct. However, European markets might try to freeze them out as a means of retaliation, depending on how acrimonious a Greek exit from the Eurozone ends up being.

In theory. But I bet they've been threatened with bringing down the whole European Project if they did...

Not just markets, possibly EU Membership as well.

edited 2nd Jun '16 1:57:13 PM by Greenmantle

Greece's GDP would be hard pressed to bring down a U.S. state, let alone the European project, if it withdrew from the Eurozone. The bigger issue is confidence: the idea that the EZ is an insoluble, permanent state of affairs is one of the keystones of its existence. If any nation leaves, that creates the possibility of a death spiral of lost confidence in the project itself.

This is part of why Brussels is so crazy about making sure that every single euro of Greek debt is repaid: if they allow it to be written off, either as part of a relief program or as a repudiation that accompanies a hostile EZ exit, it could trigger a general run on the euro.

Of course, the United States couldn't be caught in such a trap, because the federal government is the guarantor of all debt. If Florida defaults on its state bonds, the Federal Reserve steps in and covers the loss. Good luck getting that to happen across the pond.

The problem here is that the unity of the EU (never mind the EZ) is built on a tenuous alliance among very diverse, bitterly independent nations, none of which wants its autonomy subject to a central governing body.

edited 2nd Jun '16 2:12:54 PM by Fighteer

I don't get why we're pretending the Eurozone is synonmous with the EU and that losing one jeopardizes the other. The Scandinavians are all running on their own coin and it's working out fine for them so far.

Then the case for the Drachma is so clear cut one can only suppose a political reason it isn't happening. I get why Brussels (not to mention Berlin) doesn't want this to happen, but I cant see how any of that is Greece's problem...

edited 2nd Jun '16 2:14:09 PM by DeMarquis

Greece's problem is that its domestic governance is so unstable and so riddled with corruption that a move to an independent currency would be more likely than not to fail due to catastrophic mismanagement. As part of the Eurozone, it can at least be presented with a situation where it must reform its institutions as a condition of aid. Of course, its people suffer either way. If Greece were part of a federal union, the central government would be providing fiscal aid to get its consumer economy back on its feet.

edited 2nd Jun '16 2:23:45 PM by Fighteer

It could still work with the IMF (if, in fact, that's what the political elite want).

If wishes were fishes...

The European political elite has made it clear that what they want above all else is to punish imagined Greek profligacy pour encourager les autres... to make an example of its people so that no other nation dares imagine that it might earn debt forgiveness.

edited 2nd Jun '16 2:26:05 PM by Fighteer

Have banks ever gone bankrupt from debt forgiveness? What would be the consequences of a Jubilee?

The example to look at here is Iceland, which nationalized its banks, let the ones that were too insolvent fail, let its currency free-fall to stabilize prices, and then rebuilt its financial system from the ground up. Analysis

Of course, the key difference here is that Iceland is a sovereign currency issuer, so its leaders properly recognized that, no matter how many banks failed, the nation as a whole could not go bankrupt. It created as much money as was needed to repair its domestic economy, telling foreign investors and its financial big-wigs to get bent in the process.

Bernie Sanders should be holding Iceland up as an example of how to fix an economy crippled by an overextended financial sector, but he's apparently too wrapped up in his personal biases to understand the lesson.

edited 2nd Jun '16 3:48:05 PM by Fighteer