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  • zephyr

    Marxism for banks and policy makers – austerity for the rest. I think I see some parallels…

  • Great vid although he makes an awful lot of assumptions with which a sizable number of economists disagree. “Less debt instead of more debt” is still debt. And debt is still an obligation whether it is owed to banks, rich people, or teacher pension funds. It seems like wishful thinking to believe debt will simply disappear (be forgiven) or the can kicked down the road again for someone else to worry about. We’re it. History has tapped us on the shoulder and dealing with this seemingly intractable problem now is the only realistic option.

    Of course austerity will not lead to growth. This is a convenient lie being promoted by the GOP. But there is still something to be said for it. As I understand the Krugmans of the world, they wish to continue this trillion dollar deficit spending until unemployment falls to a “reasonable” level. This may take another 5 years, at which point any “austerity” measures will be far more painful and perhaps politically impossible.

    What happens if the rioters in Greece get their way and the Greek government simply spends itself into oblivion? They have a debt that is 160% of its GDP and will be unable to get anyone to lend them money once they default. Who pays for the pensions, the health insurance, the subsidies to the middle class? Is the solution funding the overreaching Greek welfare state forever? Or “forgiving” their debt so that they can begin to build it up as fast as they possibly can again?

    I don’t know what the answer is. But re-evaluating what government must do, what it might do, and what it can’t do would be a good place to start.

  • I should have made clear that the question of funding the Greek welfare state forever has to do with EU bailouts to Athens. Should French and German taxpayers subsidize the Greeks forever?

  • Rick
    Should French and German taxpayers subsidize the Greeks forever? No of course not but it was the Germans and the French who benefited from the Euro. But the bottom line is there is trillions of dollars in debt that is never going to be re-payed and throwing the Greeks, Portuguese, Spanish and eventually the Italians into a deep recession or depression only means even less of it will be re-payed. The banks that made the loans are going to suffer sooner or latter and I have very little sympathy for them. They made bad loans and they knew they were questionable loans when they made them.

  • Rcoutme

    One ‘starting’ point would be to eliminate the banks’ interest receipts (in other words, have the countries pay off the principal, not the interest). I know that these are bonds, not installment loans. Maybe they need to be switched to installment loans.

    When private debtors are made solvent through intervention, their debts are (usually) set up as installment loans (i.e. pay back this much each month). It gives them something they can actually accomplish. It is in the interest of both parties to see this happen.

    Meanwhile, austerity is a dual-edged sword. Although the governments can not possibly afford to continue to spend the way they have been, they also have the problem of not knowing which places to cut. In addition, as the video mentioned, when government is the last stimulus…it is the LAST stimulus. Without the government providing stimulus, who will?

    Well…maybe the ‘core’ countries could offer to start buying stuff from the others? I mean, how about allowing the Greeks to make trucks or cars or something that are purchased by the German and French governments? Then they get something for their money, at least. This could go on with other items as well, of course.

    The main problem with Greece, Ireland, et. al. is that they are not competing with the core countries when it comes to labor and other costs. If I borrow, I borrow from someone who has cash. If I start to borrow from the person who is selling me all of his goods–I don’t have a problem, he does. This is the main theme of the video. Eventually, the citizens of the debtor countries will decide that they are better off not paying the debts. At the moment most of the countries are not there yet (i.e. they will be hurt more than helped by defaulting). That will reverse if countries start suffering prolonged depressions.

  • merkin

    The problem with the PIIGS is that they are tied to the Euro. No country has ever or actually can ever pay off sovereign internal debt when they have their own currency. They can create money to pay off the debt, they can roll the debt over, as long as someone will buy it. Or they can raise taxes and or cut spending, austerity. The last choice is the worst because they will reduce the money supply and go into deflation making matters worse than if they had increased the money supply.

    But the PIIGS don’t have the choice to increase the money supply, they don’t have their own currency and they owe the money to interests in other countries, mainly banks in Germany and France. Their only choice is to cut their wages and suffer. The forced austerity will assure that they will increase their debt load. The resulting recession and reduced economic activity will reduce tax receipts faster than they can cut spending or increase taxes.

    The outrage in all of this is that people who are calling for all of this self-defeating austerity are doing it to to save the banks from their own bad behavior. People who are calling for all of this austerity are doing it for the falsehood of not saddling future generations with debt when the best thing that we could be doing for future generations is to be restoring growth and employment to the economy and making sure that we restore the regulatory oversight once again to make sure that the financial industry’s self-destructive speculation doesn’t once again threaten the real economy.

  • Skywalker

    Just two things:
    “Should French and German taxpayers subsidize the Greeks forever? No of course not but it was the Germans and the French who benefited from the Euro.” (Ron)

    What do you mean with “benefited”? If you look at the GDP growth rate from the time the Euro was announced (let’s say 1995/6) until today you’ll see that Germany (and btw Italy) is one of the losers of the common currency. So there was not much benefit until today…
    2) Nice video, but the German flag is drawn wrong twice.

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