ghenghisclown wrote on 07/19/12 at 00:23:33:

Germany never really needed the EU and the euro for the trade surpluses. The main reason they are in (and most other north-western just blindly followed them) is the guilt feeling about WW2. If they had had a really smart economic motive, they would have stayed out and put their billions of dollars in other investments then Italy and Greece such as tax reductions or social projects in Duisburg.
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It is not the early retirement itself, it is that the government is paying people and not getting their return (or in the case of retirement vice versa), whether through early retirement, hiring redundant jobs, overpaying on projects, subsidising and tax reductions prior to elections. Every country has these problems, it is just much bigger in the south.
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The regional Spanish banks are a different kettle of fish as the Goldman Sachses. The regional banks are/were being run by political motives in particular on regional projects. The Goldmans are running the politics unfortunately. So it would seem we actually agree here.
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No it can not happen to everybody, as everybody also knows it is a bad idea. There is a big difference between putting you money in a savings account in Iceland, taking a mortgage on the edge or buying a car and wrecking it the next day
and on the other hand loaning your ass off or trying to be smart and get into stocks and finances with other peoples money, where you no clue if what you are doing. Basically it is the equivalent of betting based on the horse tips of a shady guy.
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Ok I think I misunderstood your point. My point was that indeed, Germany paid enough. Not the banks, they charge an interest to cover their risks, so they are already compensated.  

With the opposite end I meant that Germany and other countries should stop with the ESM entirely. As you say putting the money into it and then demanding drastic cuts will not help at all. It will wreck those economies even more, the nothern govs will just lose money and the average Nikos and Franz will pay for the whole sharade.

Touching on the subject labour costs are indeed a growing problem in the west. The costs are way higher on average and currently only competing on service jobs and high end jobs with the rest of the world. Heck your average Renault, Opel or in your case Chrysler has a very big chance of being produced outside the EU and the US. Even the more high tech industry is moving away. It is not Americans that are signing anti-suicide contracts for Apple.

Okay, here goes

1) The German policy is on purpose. They planned it this way in order to achieve trade surpluses (success) and higher employment (not such a big success). Also, East German labor has also helped to keep labor costs lower. This is in fact, a return to 19th century policies. You know, Say's law and all that nonsense. But keeping a lid on labor costs ultimately does you in. Some one has to go into debt in order to keep the whole thing running. In Europe, that was the Southern Countries. Here in the States, it's the middle class. 


There's nothing wrong with early retirement, especially since the Greeks work longer and harder than the Germans who actually get a better deal from their government. Also, that cannot cause debt on this scale. If it were so, one would expect to see bankruptcies in Sweden, Costa Rica, or France after Mitterrand - or Germany for that matter. I well understand that Greece's early retirement is a bit too early - but is that the main problem? I mean, seriously, the Irish retire at 65, don't they? And their government is still mired in debt. So clearly, there is something else going on. 

2) The banks are not politically run. Banks and their officers are in it for the money. Nothing special about that. It's when we elevate this to untouchable God-like status, and allow them to gamble with public monies, and shroud their con games in complicated schemes, that the banks' greed becomes a problem. The reason the Banksters are not sitting in jail is a little outside the scope of this thread. It's safe to say, the Banks/Corporations have intellectually and financially captured most Western gov'ts. That, and since the fall of the Berlin wall there is no competing model of development.

3) Tax cheating/spending is a problem, but a relatively minor one. I mean, if you're paying an impossible mortgage on your house with a variable rate, steep balloon payments or an ever growing principle caused by only paying the interest (such that the whole deal is crooked), it may not matter that you only work part-time. The deals these countries were given were inherently a bad idea. Just look at Casino, Italy. Were they "politically motivated" to get screwed on interest default swaps? No. The City Council was well-meaning but naive. But then again, Bernanke had to refi his house so it can happen to anybody.

"...furthermore I think they have paid far more than their fair share already. " I find this a curious statement. I'm talking about the banks and investors taking the hit. It's clear the German gov't is representing that position mostly. Of course, the Neo-liberal view is that if you just stick with austerity/keeping labor costs down, you will be successful. Actually, the course is unsustainable. And there is NO WAY to get the loans paid for. Shrinking the Greek or Spanish economies won't get the debt paid, nor will it sell off more German exports to those countries. So the German banks must in the long run eat the debt. 
Perhaps you need to specify what you mean by "imo they should go for the opposite end. "

http://bilbo.economicoutlook.net/blog/?p=20176

A lot of text with some references, but worth reading imo.

I don't understand why we always go off on tangents. I understand some people need to argue theory (because Libertarians/Austrians can't live without it) ...but can we please get back to reality NOW? We know what caused the meltdown in Greece.

1) Account deficits generated by Germany keeping its labor costs down (which itself is a combination of Neo-liberal policies, cooperation between technocrats and the labor unions, and crucially East German labor which after reunification was a steady supply of labor willing to work for less) so that Greece and other countries became net debtors to Germany.

2) The role of the banks in "selling" tricky nonsense such as interest rate swaps (particularly to Greece and Italy) that allowed these countries for a time to hide the real size of their debt.

3) Spending sprees such as the Athens Olympics combined with a tolerance for tax cheating. 

The only realistic approach is to stop being dishonest. Default is unavoidable - the only question is : Who should bear the brunt ? Should it be the people of Europe, pensioners, students, children? I don't think so. The banks, first and foremost, should eat it.

The second bit of honesty is to admit that the German approach is unsustainable. These countries cannot continue to simply trade with Germany so that it gets trade surpluses and the expense of the rest of Western Europe. Oh, and austerity will only make things worse.

Mortal Games was correct when he pointed out the hypocrisy of the German position.

MNb wrote on 07/09/12 at 12:45:14:



I'm sorry, could you clarify this part?

Jupp53 wrote on 07/09/12 at 06:25:27:


Good luck arguing on the first sentence, as it relies entirely on the definition of State and company. Companies do not have the power to tax, therefore they cannot have the monopoly on power the State does.

And I'd love to see your historical examples of slavery that wasn't State sanctioned, but rather just arose as a natural result of human behavior independent of government. Even in biblical Israel it was a State-sanctioned enterprise, same with just about every other significant example of slavery that can be found in history.

Then, of course, there is the less literal versions of slavery such as oppressive regimes, which again come back to the State and the sociopaths drawn to the power it offers.

Markovich wrote on 06/28/12 at 19:58:10:


The State's taxation ability, the root of all its power, is a violation of the NAP (Non-Aggression Principle), meaning by definition it is a coercive entity that is inherently unethical.

People don't have to live in company towns, nor does said company make a claim to the worker's production should he go elsewhere. The State does, as it denies self-ownership of the individual by claiming ownership of the individual's production.

It's intellectually disingenuous to conflate the two. A company will never enjoy the monopoly on power the State does.

The problem with Hayek is the oversimplification of the issue - most accurately put the State is the most convenient tool used to enslave people, making it the most popular. In a stateless society, or a state (note the small "s") collectives can enslave others, but historically this is far less likely.

Markovich wrote on 06/28/12 at 19:58:10:

No the markets were already in decline. Amongst others due to overcontrol by the empire. I said nothing about the downfall itself.
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Of course,it is all about balance. A market completely devoid of any outside interference will not work (let alone that it is fiction), the opposite also doesnt work. So somewhere in between there is a dynamic optimum. I maintain that currently the outside interference is too heavy, so it should be less. Pouring billions into broke banks and prescribing how exactly work can be executed is too much.
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Try the markets on the internet. There are a lot of cases of direct involvement of (potential) customers. Companies on the internet that ignore their customers usually dont do well there.

And yes less government intervention would be beneficial in a big number of cases. Very often they are at the detriment of other cases where it would be beneficial. Just take the pork barrel projects, the influence on the curriculum or giving money to the piggs. On the other hand privatising the power supply and war effort is imo majorly stupid.
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Of course it is a pipe dream and luckily it will never happen. However imo it is a very good abstract goal for which direction you want to go as a society. Ie as an environmentalist your ideal would for example be completely clean air, however impossible. It gives you an aim.
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Rather wall off the politics from the markets
The combination of government intervention along with political power of big companies (and lobbies) is what is distorting both the market and society.
Every big company talks about the beauties of the free market, unless of course the competition is cheaper or they go bankrupt, then they demand the government to intervene. Unfortunately politics is blindly following them.
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Idealists usually have a lot of blind spots.
Walmart is doing its best to achieve this btw