Fiscal Treaty Megathread [Poll Reset]

Wibbs

K-9 wrote: »

Saying low interest rates for countries like ourselves was automatically bad ignores that and makes the Euro a rather convenient scapegoat!

One word; Spain. They did build a bigger indigenous export sector, while rolling back public spending, yet look at them today. A few more words; Name another country like ours were it wasn't bad. And no just to be very clear Finland simply does not fit your bill.

Earlier you suggested that the biggest common denominator in the PIIGS going belly up was dubious government and claimed better governments elsewhere faired well, yet reverse that and dubious governments in other nations didn't suffer to nearly the same degree. The non debatable written in black and white economics fact which you refuse to acknowledge is that the biggest common denominator was the currency in those cases. Yes there were of course other stresses, some large, some small, but the common denominator was the daft notion that one currency would fit wildly different economies in different states of growth.

Scofflaw

Wibbs wrote: »

One word; Spain. They did build a bigger indigenous export sector, while rolling back public spending, yet look at them today. A few more words; Name another country like ours were it wasn't bad. And no just to be very clear Finland simply does not fit your bill.

Earlier you suggested that the biggest common denominator in the PIIGS going belly up was dubious government and claimed better governments elsewhere faired well, yet reverse that and dubious governments in other nations didn't suffer to nearly the same degree. The non debatable written in black and white economics fact which you refuse to acknowledge is that the biggest common denominator was the currency in those cases. Yes there were of course other stresses, some large, some small, but the common denominator was the daft notion that one currency would fit wildly different economies in different states of growth.

In fact, Spain did much the same as us - balanced their tax take on their property bubble and deregulated their banks: http://politicalcalculations.blogspot.com/2012/05/spain-very-different-fiscal-crisis.html

Unlike Greece, we find that the Spanish government's expenditures throughout much of the period appeared to be stable, with the government running significant surpluses in 2005 through 2007.

Unfortunately for Spain however, those surpluses were based on that country's large housing bubble, which greatly increased the numbers of people paying the nation's highest income tax rates as their incomes were highly inflated during this period of time. We know this is the case because Spain's tax rates throughout nearly all of this period were very stable, and essentially unchanged from 2000 through 2010. The only way we would see this pattern then is if the distribution of income in Spain during this time shifted to increase the numbers and incomes of upper income earners, who were benefiting from the bubble economy.

Instead, we find that Spain's financial crisis came about because it also increased its spending to keep pace with its bubble economy, which simply could not be sustained. Once the bubble burst in 2008, the Spanish government found itself in a very precarious position as it was spending far more money than it could ever count upon sustainably collecting. And as the Spanish economy worsened from 2008 through 2011, it created even greater strains upon the nation's finances as the economy plummeted into deep recession, given the large scope of the malinvestments weighing it down.

I would take it from that that Spain had much the same policy instruments at its disposal as we had in respect of the property bubble and bank problems - prudential lending rules, tax rules and the like - and, like us, didn't use them. And, like us, they ramped up government spending on the back of a cyclical element.

cordially,
Scofflaw

K-9

Wibbs wrote: »

One word; Spain. They did build a bigger indigenous export sector, while rolling back public spending, yet look at them today.

You sure they did? They've a big car manufacturing industry, tourism etc. but they had large trade deficits so I don't know, property bubble nearly as big as our own. Any figures on it?

A few more words; Name another country like ours were it wasn't bad. And no just to be very clear Finland simply does not fit your bill.

It does, you don't want to compare it as it would be the exception to your rule.

Earlier you suggested that the biggest common denominator in the PIIGS going belly up was dubious government and claimed better governments elsewhere faired well, yet reverse that and dubious governments in other nations didn't suffer to nearly the same degree. The non debatable written in black and white economics fact which you refuse to acknowledge is that the biggest common denominator was the currency in those cases. Yes there were of course other stresses, some large, some small, but the common denominator was the daft notion that one currency would fit wildly different economies in different states of growth.

Dubious Governments in other countries?

EURATS

Scofflaw wrote: »

EURATS wrote: »

Kind of..never mentioned the fun side of things though. Fun is what kenny and family are having travelling the world at the taxpayers expense!!!
But vote NO until we KNOW.

But we do know - they had a summit, and the text is not being changed. If there's a growth pact - and it looks likely, which is good - it will be a separate pact.

The German opposition, which would be the main possibility of a change at this point, isn't looking for the text to change:

Center-left opposition leader Sigmar Gabriel reiterated ahead of the talks that his party would only vote for the so-called fiscal pact if it is amended to include an economic growth pact.

"It's not about changing the fiscal pact, but about complementing it with initiatives for growth and employment," Gabriel told German public broadcaster ARD.

http://www.businessweek.com/ap/2012-05/D9UV3RAO0.htm

cordially,
Scofflaw

So the Germans and French have ratified it already, and we know what's happening with Greece, italy, Spain, Portugal and ourselves. Interesting that.

Phill Ewinn

" This is about stability, it 's about creating jobs ,
it 's about getting investment into Ireland ."

http://m.brne.ws/ireland/govt-treaty-result-too-early-to-call-552934.html

For those accused of speculation, inaccuracy or just plain mking stuff up. Simon Coveney TD takes the Biscuit.

dvpower

Phill Ewinn wrote: »

" This is about stability, it 's about creating jobs ,
it 's about getting investment into Ireland ."

http://m.brne.ws/ireland/govt-treaty-result-too-early-to-call-552934.html

For those accused of speculation, inaccuracy or just plain mking stuff up. Simon Coveney TD takes the Biscuit.

I can't see anything at all wrong with any of the statements he made in that piece. Which bits are inaccurate and plain made up?

squod

Scofflaw wrote: »

Different people claimed different bits of that, though, and at different times depending on what their political angle was. The actual position throughout has been that the rules don't allow the assumption of each others debt, we had bailouts that were loans at market rates plus a margin to avoid breaking that rule, and now we have a Treaty that creates a fund that lends at its market rates plus a margin and doesn't break that rule.

Reality and political claims are separate.

cordially,
Scofflaw

You'd make sense of a bag of frogs. Once they were Euro frogs.........

Wibbs

K-9 wrote: »

It does, you don't want to compare it as it would be the exception to your rule.

No it really isn't but keep flogging that dead horse Ted. OK then, another question for you; name one EU nation in low/stable growth with low interest rates at the time of the Euro rollout that suffered like the PIIGS. Hint you will have just as much difficulty finding one. Hell you could try and dig out Finland, it would be about as accurate going the other way.

You pair will try anything to deflect what is obvious to the most deluded dog on the street and economists the world over, namely that the advent of the euro stoked the flames of the economies in growth in the EU at the time of it's creation. That by pegging those economies to the euro standard the EU created what was essentially a gold standard by any other name.

OK lets break it down. In essence a gold standard is a fixed exchange rate system. In the modern economic world with free trade and high mobility of finance such a system is an economic clusterfcuk waiting to happen. When you apply that across different economies in different rates of growth it's a given. Further reading on how it worked out in the time of the gold standard is defo worth a punt(no pun). What tends to happen is that you get widening differences in purchasing power happening between economies, because of differing productivity and inflation rates among other things, while the exchange rate remains set. This was good for Germany and France and other northern EU nations(and Finland by the by. Look at the meteroic rise of Nokia in the naughties), but an accident waiting to happen in the PIIGs.

So why didn't the PIIGs spot this and correct for it? Couple of reasons. Human nature being one. You had nations of people who had never had so much access to apparently "free" credit they went mad. Well saving at such low interest rates seemed and to a large extent was far less attractive. Large scale foreign investment inflated those economies in both good and bad ways, but also plugged into the human nature aspect in that "we never had it so good"(Ireland was unusual in that respect as we already had large scale pretty sustainable foreign investment before the euro. Italy another odd one out as they've more local inward investment).

Governments when faced with this cash should have kicked off cooling policies and dialed back on public spending, but they didn't. Greece being the crazy arse example of that, Spain were more cautious, with us somewhere in the middle. So why didn't these nations cool down these bubbles? Much of it was again down to the endless cash of the construction and tourism areas helped mask, or at least distract from the growing lack of competitiveness in other areas of the individual markets. To be fair to Ireland, by either design or more likely luck we avoided the suicide leap into uncompetitiveness of the other PIIGs, in fact we're in the top five worlwide on the competitiveness front. There is far more hope for us going forward. However the EU could fcuk this up again with austerity measures aimed at the other PIIGs. Our government must continue to be able to tell them to fcuk right off if they attempt it. Another reason for a NO vote.

Now lets get a time machine and go back and ask what could have been done to avoid this. Now the usual retort is to avoid adding to the bubble and raise taxes in the boom industries and that would have helped. Yes, but only so far. Unless you increase taxes to the point where it is practically unbearable to fund investment in those industries the bubble, though less inflated would continue to inflate on the back of "free money". If you did make it practically unbearable those industries would have contracted massively. It just would have happened earlier. Bear in mind we're talking about a fixed rate exchange system here. In such a system the only real way to take the wind out of it is by raising interest rates or by driving recession or deflation by printing money(or all three if you're really in the shíte). Oh wait... we couldn't have really done that with the Euro, could we? Those tools were and are in other peoples hands, or spread across many other people who may need different tools for their own job. And here we are and here it continues in the current crisis. Some nations looking for a spanner, while others are screaming out for screwdrivers, but the spanner wielders refuse to issue screwdrivers.

IMH at this stage the only way out I can see is that old saw, the two tier EU. On the currency front anyway. If we continue as is all I can see happening is the PIIGs suffering further under austerity and the the rest suffering funding it and all lose out or end up in stasis.

K-9

Wibbs wrote: »

No it really isn't but keep flogging that dead horse Ted. OK then, another question for you; name one EU nation in low/stable growth with low interest rates at the time of the Euro rollout that suffered like the PIIGS. Hint you will have just as much difficulty finding one. Hell you could try and dig out Finland, it would be about as accurate going the other way.

What do you mean by Euro rollout? The original members or new members?

You pair will try anything to deflect what is obvious to the most deluded dog on the street and economists the world over, namely that the advent of the euro stoked the flames of the economies in growth in the EU at the time of it's creation. That by pegging those economies to the euro standard the EU created what was essentially a gold standard by any other name.

OK lets break it down. In essence a gold standard is a fixed exchange rate system. In the modern economic world with free trade and high mobility of finance such a system is an economic clusterfcuk waiting to happen. When you apply that across different economies in different rates of growth it's a given. Further reading on how it worked out in the time of the gold standard is defo worth a punt(no pun). What tends to happen is that you get widening differences in purchasing power happening between economies, because of differing productivity and inflation rates among other things, while the exchange rate remains set. This was good for Germany and France and other northern EU nations(and Finland by the by. Look at the meteroic rise of Nokia in the naughties), but an accident waiting to happen in the PIIGs.

So why didn't the PIIGs spot this and correct for it? Couple of reasons. Human nature being one. You had nations of people who had never had so much access to apparently "free" credit they went mad. Well saving at such low interest rates seemed and to a large extent was far less attractive. Large scale foreign investment inflated those economies in both good and bad ways, but also plugged into the human nature aspect in that "we never had it so good"(Ireland was unusual in that respect as we already had large scale pretty sustainable foreign investment before the euro. Italy another odd one out as they've more local inward investment).

Governments when faced with this cash should have kicked off cooling policies and dialed back on public spending, but they didn't. Greece being the crazy arse example of that, Spain were more cautious, with us somewhere in the middle. So why didn't these nations cool down these bubbles? Much of it was again down to the endless cash of the construction and tourism areas helped mask, or at least distract from the growing lack of competitiveness in other areas of the individual markets. To be fair to Ireland, by either design or more likely luck we avoided the suicide leap into uncompetitiveness of the other PIIGs, in fact we're in the top five worlwide on the competitiveness front. There is far more hope for us going forward. However the EU could fcuk this up again with austerity measures aimed at the other PIIGs. Our government must continue to be able to tell them to fcuk right off if they attempt it. Another reason for a NO vote.

Now lets get a time machine and go back and ask what could have been done to avoid this. Now the usual retort is to avoid adding to the bubble and raise taxes in the boom industries and that would have helped. Yes, but only so far. Unless you increase taxes to the point where it is practically unbearable to fund investment in those industries the bubble, though less inflated would continue to inflate on the back of "free money". If you did make it practically unbearable those industries would have contracted massively. It just would have happened earlier. Bear in mind we're talking about a fixed rate exchange system here. In such a system the only real way to take the wind out of it is by raising interest rates or by driving recession or deflation by printing money(or all three if you're really in the shíte). Oh wait... we couldn't have really done that with the Euro, could we? Those tools were and are in other peoples hands, or spread across many other people who may need different tools for their own job. And here we are and here it continues in the current crisis. Some nations looking for a spanner, while others are screaming out for screwdrivers, but the spanner wielders refuse to issue screwdrivers.

IMH at this stage the only way out I can see is that old saw, the two tier EU. On the currency front anyway. If we continue as is all I can see happening is the PIIGs suffering further under austerity and the the rest suffering funding it and all lose out or end up in stasis.

The ECB started raising interest rates in the Summer of 06, we'd just had a huge property price rise of near 10% in 6 months, the death rattle of the bubble, the market stagnated and all the parties tripped over themselves in the rush to reduce stamp duty or as FF did in the end, double mortgage interest relief to €20,000 per annum, per couple, mortgages of €1 Million were encouraged by the Government. This from a Government that was told to scrap the tax relief completely over 10 years ago in the Bacon report.

Tbh I think you are far too focused on an argument. We both agree interest rates play a part, though you keep ignoring me saying that and post as if I didn't, you aren't listening, you admit Governments had a big part to play but seem to focus mostly on interest rates, I don't think there is much difference there as you think if you'd actually step back and listen.

The ECB actually acting as a Central Bank is another option.

Wibbs

...and if you stepped back and listened and read and had even the faintest grasp of economic theory(which would rank you above me, the aforementioned deluded dog on the street) you would see the notion of disparate economies pegged to a currency standard was about as good an idea as Guninness light or New Coke and yet again you're avoiding the elephant in the room because it doesn't suit your firmly, yet flimsily held desire for an ideal. The majority of economists and the example of economic history would agree with me, even as a rank tyro, not you.

The ECB started raising interest rates in the Summer of 06,

06? Yea and why did they do that? Even though it was in a halfhearted way because raising it too much would upset the other nations that it wouldn't fit with. Even by that avoidance of the issue you've just proven my point as you have with your previous "arguments" on this point. Deux Points.

Maybe try to actually engage and dispute my debate points in future, rather than engage in obfuscation and whataboutery. If you feel you need to apprentice yourself out to learn more, then I would suggest your fellow Scofflaw as he is well practiced in the art.

Wibbs

K-9 wrote: »

The ECB actually acting as a Central Bank is another option.

Why trust an entity that couldn't see the folly of a one size fits all economies/currency standard, with finding solutions to a problem they had a large part in creating? Eh no, that's the very definition of daft. Sure if you're gung ho for the ideal of a more federal Europe, but beyond daft if you're even slightly objective in an economic sense. Would you rehire a plumber who fcuked up your hot water system, hoping he'd get it right second time around? No. You would not. Not unless you thought dribbling on yourself was a sign of mental competency.

Justice for the individual

Micky Dolenz wrote: »

That if we fall within a percentage of our GDP, automatic procedures will kick into place to "correct"'the situation.

We may as well just give them the keys to the Dail. I also
Believe every time we vote yes, we are a step closer to not having a vote in the future.

Money is short term solution to a long term problem. We are
Being bought and I don't care for it.

We are already there! The Stability Treaty is been "negotiated by 25 EU countries including Ireland and all other countries that use the euro. The Treaty will take effect when 12 of the 17 signatories that use the euro have ratified it. No SINGLE country can veto the Treaty" - Independent Referendum Commission.

The Threat bit: "It is necessary to ratify this Treaty to continue to be able to access EU assistance funding through the new European Stability Mechanism (ESM) fund. Ratifying the Stability Treaty would mean that Ireland, if ever needed, would have access to this funding to help pay for public services, and job creation initiatives. This would provide a safety net against future economic problems and would reassure others who wish to invest in Ireland". - Independent Referendum Commission.

Put simply, this is what we are being asked to vote on. If we vote yes the Treaty will be put in as a BINDING AGREEMENT into national law, and if not adhered to, Ireland will be subjected to fines. We have no hope of paying back the bank debts, and time will be a judge of that.

The EU is being supported on this by OUR elected politicians (Fine Gael, Labour and Fianna Fail)

The safest and best path to follow is to reject this treaty by being awkward and voting NO, and this will gain Ireland more bargaining power, as the euro will be protected at all costs (note signals to Greece). In any case, it looks that the government are determined to get it passed, and if need be, they will ignore democracy and go for a second referendum.

squod

Justice for the individual wrote: »

and if need be, they will ignore democracy and go for a second referendum.

I wouldn't rule out vote rigging.

Wibbs

ah c'mon, vote rigging? Seriously?

squod

Wibbs wrote: »

ah c'mon, vote rigging? Seriously?

Yep

cbyrd

what about secret parties ???? seriously:eek:

K-9

Wibbs wrote: »

...and if you stepped back and listened and read and had even the faintest grasp of economic theory(which would rank you above me, the aforementioned deluded dog on the street) you would see the notion of disparate economies pegged to a currency standard was about as good an idea as Guninness light or New Coke and yet again you're avoiding the elephant in the room because it doesn't suit your firmly, yet flimsily held desire for an ideal. The majority of economists and the example of economic history would agree with me, even as a rank tyro, not you.

06? Yea and why did they do that? Even though it was in a halfhearted way because raising it too much would upset the other nations that it wouldn't fit with. Even by that avoidance of the issue you've just proven my point as you have with your previous "arguments" on this point. Deux Points.

Maybe try to actually engage and dispute my debate points in future, rather than engage in obfuscation and whataboutery. If you feel you need to apprentice yourself out to learn more, then I would suggest your fellow Scofflaw as he is well practiced in the art.

What does that add Wibbs, oneupsmanship is all I see.

Wibbs wrote: »

Why trust an entity that couldn't see the folly of a one size fits all economies/currency standard, with finding solutions to a problem they had a large part in creating? Eh no, that's the very definition of daft. Sure if you're gung ho for the ideal of a more federal Europe, but beyond daft if you're even slightly objective in an economic sense. Would you rehire a plumber who fcuked up your hot water system, hoping he'd get it right second time around? No. You would not. Not unless you thought dribbling on yourself was a sign of mental competency.

I don't see a two tier Europe as the answer Wibbs, I mean how exactly would your solution work?

Wibbs

K-9 wrote: »

I don't see a two tier Europe as the answer Wibbs, I mean how exactly would your solution work?

I don't know K, but it's one of the few ways out I can see that gets us out of this and so this doesn't happen again down the line and avoids dropping the euro entirely which at this stage would be a disaster. I don't think the "we want a punt nua" types have a bulls notion the shíte that would put us in for at least a decade. Going back to the Mark wouldn't be great shakes for Germany either.

I just reckon staying as we are doesn't do much for either the PIIGS or the rest, as it's always going to be fudge and a compromise, trying to make the square peg of a fixed exchange rate system into the round hole of economic reality and history. Now we could go further down the road of European unification, but that's gonna need tax homogenisation and the like sooner rather than later and then we're truly fcuked as our competitive edge would be gone. Bye bye multinationals. Southern Europe would be fcuked too. The EU would be like Italy, rich north and dirt poor south.

Scofflaw

Wibbs wrote: »

Why trust an entity that couldn't see the folly of a one size fits all economies/currency standard, with finding solutions to a problem they had a large part in creating? Eh no, that's the very definition of daft. Sure if you're gung ho for the ideal of a more federal Europe, but beyond daft if you're even slightly objective in an economic sense. Would you rehire a plumber who fcuked up your hot water system, hoping he'd get it right second time around? No. You would not. Not unless you thought dribbling on yourself was a sign of mental competency.

No offence, but the "folly of a one size fits all currency" has become something of a mantra. What exactly does it mean, and what did it contribute to the current problems that is unique to the eurozone?

As far as I can see, there's a global crisis stretching from the US to Australia. Countries both inside and outside the eurozone are struggling, and the similarities in their problems seem to stem far more from how they regulated their financial sectors than from what currency they're using.

Those countries in deeper trouble (with the exception of Greece) almost all shared a particular approach to their financial sectors over the last decade - they deregulated their banks and encouraged lending. The US did it, the UK did it, Iceland did it, Ireland did it, even Spain did it (and Portugal too) - and the depth of their crises can largely be correlated with the resulting boom in lending - which, interestingly, in those countries as in Ireland, rose more sharply in the late Nineties than after 2000.

There are certainly features of the euro that exacerbated the crisis for some countries - mostly by enforcing less market discipline on them because the markets believed Germany and France would stand over the debts of smaller eurozone members - and the complete lack of a crisis plan for the joint currency compared to the traditional responses in national currencies (most of which, to be fair, are damaging in the long term, however attractive in the short) - but primarily, the crisis is so visibly widespread beyond the eurozone, and so patchily distributed within it, that a one size fits all explanation of "it was the euro!" falls down immediately one stops focusing one's attention solely on the PIIGS and seeking an explanation based solely on those countries.

That there is a eurozone response to the current global crisis is obvious, and it's equally obvious that the response has been uncoordinated and overtly political - but the crisis itself is not the result of the single currency, but the result of politically motivated deregulation of the financial industry over the last 20 years.

Not an opinion you'll find in the "market analyst" outlets or the media of the financial centres in London or New York, of course - funnily enough.

cordially,
Scofflaw

Wibbs

Scofflaw wrote: »

No offence, but the "folly of a one size fits all currency" has become something of a mantra. What exactly does it mean, and what did it contribute to the current problems that is unique to the eurozone?

Here's one I prepared earlier...

by pegging those economies to the euro standard the EU created what was essentially a gold standard by any other name. In essence a gold standard is a fixed exchange rate system. In the modern economic world with free trade and high mobility of finance such a system is an economic clusterfcuk waiting to happen. When you apply that across different economies in different rates of growth it's a given. Further reading on how it worked out in the time of the gold standard is defo worth a punt(no pun). What tends to happen is that you get widening differences in purchasing power happening between economies, because of differing productivity and inflation rates among other things, while the exchange rate remains set.

This will continue to be a problem too. Remember the Asian financial crisis in the 90's. The IMF called in etc. How did they get out of it? Raised interest rates(in a big way) and devalued their various currencies to suit individual national economies. Something the Eurozone simply can't do to nearly the same degree.

As far as I can see, there's a global crisis stretching from the US to Australia. Countries both inside and outside the eurozone are struggling, and the similarities in their problems seem to stem far more from how they regulated their financial sectors than from what currency they're using.

Certainly there is a global crisis and I agree 110% with you on the role the financial sector played in it. A game of musical chairs with largely imaginary chairs. A bubble filled with nothing but hot air and complexity to mask the fact it was all bullshít. You'll not get any disagreement from me on that score S.

Those countries in deeper trouble (with the exception of Greece) almost all shared a particular approach to their financial sectors over the last decade - they deregulated their banks and encouraged lending. The US did it, the UK did it, Iceland did it, Ireland did it, even Spain did it (and Portugal too)

Slight problem there S. Italy didn't. Yet the "Grow Italy" package proposed by their current government backed by the EU wants to do precisely that as part of that package. Back to why trust the same balloonheads who helped get us into this mess...

and the depth of their crises can largely be correlated with the resulting boom in lending - which, interestingly, in those countries as in Ireland, rose more sharply in the late Nineties than after 2000.

I'd love to see your figures on that. Yes there was an increase in lending in the late 90's in some of the PIIGS and in other Eurozone nations BTW, but it didn't get near to going apeshít until after the Euro's introduction. For one simple reason; interest rates fell by significant amounts in those countries overnight. Again I'll ask, show me one country in the Eurozone that kicked off the Euro with low interest rates that subsequently went wallop. Then we have the German banking system. It holds huge reserves of cash and loaned said cash to the poorer nations of the Eurozone. Makes sense as it's good for their exports, so they heated up the pot too.

There are certainly features of the euro that exacerbated the crisis for some countries - mostly by enforcing less market discipline on them because the markets believed Germany and France would stand over the debts of smaller eurozone members

"Features of the Euro"? That's one of it's biggest problems and will continue to be so in one way or another.

That there is a eurozone response to the current global crisis is obvious, and it's equally obvious that the response has been uncoordinated and overtly political - but the crisis itself is not the result of the single currency, but the result of politically motivated deregulation of the financial industry over the last 20 years.

Not an opinion you'll find in the "market analyst" outlets or the media of the financial centres in London or New York, of course - funnily enough.

Like I said I fully agree with you that this global crisis can be blamed on deregulation of the financial industry, however it is my view(and I'm not alone by any stretch) that in the EU the Euro added a shítload of petrol to that particular fire. Would countries in the EU be in crisis if the Euro never happened? Of course, as you pointed out because of the issue with the financial industry losing the run of itself, but I contend it would be nearly as bad in some countries as it is today. As you pointed out the markets believed Germany and France would stand over the debts of smaller eurozone members. Without that confidence they quite simply would have loaned less and housing and other bubbles would have been a lot harder to sustain on more expensive credit.

Scofflaw

Wibbs wrote: »

Here's one I prepared earlier...

by pegging those economies to the euro standard the EU created what was essentially a gold standard by any other name. In essence a gold standard is a fixed exchange rate system. In the modern economic world with free trade and high mobility of finance such a system is an economic clusterfcuk waiting to happen. When you apply that across different economies in different rates of growth it's a given. Further reading on how it worked out in the time of the gold standard is defo worth a punt(no pun). What tends to happen is that you get widening differences in purchasing power happening between economies, because of differing productivity and inflation rates among other things, while the exchange rate remains set.

That basically just repeats the mantra at slightly greater length, though. It describes the issue as "a given", which means nothing other than it's not going to be explained.

As to these "widening differences in purchasing power" - (1) evidence; (2) how is that the cause of the crisis?

Wibbs wrote: »

This will continue to be a problem too. Remember the Asian financial crisis in the 90's. The IMF called in etc. How did they get out of it? Raised interest rates(in a big way) and devalued their various currencies to suit individual national economies. Something the Eurozone simply can't do to nearly the same degree.

Er, the Asian financial crisis was primarily a currency crisis - it started with devaluations. The reason I suspect commentators aren't drawing parallels between that crisis and this one is because there aren't such parallels, which makes your suggestion that the current crisis can be resolved the same way rather odd.

Wibbs wrote: »

Certainly there is a global crisis and I agree 110% with you on the role the financial sector played in it. A game of musical chairs with largely imaginary chairs. A bubble filled with nothing but hot air and complexity to mask the fact it was all bullshít. You'll not get any disagreement from me on that score S.

Well, you're slightly over-egging the pudding. The problems were more malinvestment of the credit boom, which itself is a fairly predictable outcome of unrestrained credit growth.

Wibbs wrote: »

Slight problem there S. Italy didn't. Yet the "Grow Italy" package proposed by their current government backed by the EU wants to do precisely that as part of that package. Back to why trust the same balloonheads who helped get us into this mess...

Italy makes quite a good exception to test the rule with, in fact. Italy went into the crisis with a very large public debt, and the potential for crisis in Italy is largely based on concerns over what might happen if market rates continue to be affected by troubles elsewhere. It has a recession, certainly, but it doesn't have the dramatic structural issues associated with the countries that went "Anglo".

Wibbs wrote: »

I'd love to see your figures on that. Yes there was an increase in lending in the late 90's in some of the PIIGS and in other Eurozone nations BTW, but it didn't get near to going apeshít until after the Euro's introduction.

Portugal, for example - lending by commercial banks in 1996 was €58.3bn, rising to €140.2bn in 2000, €248bn in 2007 - annual rate of rise 1996-2000 was 24.5%, annual rate of rise 2000-2007 8.5%.

Irish bank lending growth 1988-1998: http://dublinopinion.com/2012/05/21/irish-banks-and-credit-formationdirection-1988-1998/

Rates of growth there are huge - 80%. Rates of growth post euro are much more modest - 25% annually. If you track the property prices, you'll find the sharpest rises are, again, in the late Nineties.

The others are currently from reading the accounts of the various crises, but I'll dig for hard stats. In exchange, perhaps you could offer some statistical backup for your claims.

Wibbs wrote: »

For one simple reason; interest rates fell by significant amounts in those countries overnight. Again I'll ask, show me one country in the Eurozone that kicked off the Euro with low interest rates that subsequently went wallop.

Spain, Portugal...have you actually looked at their interest rates in the late Nineties? And Iceland, of course, went wallop without either joining the euro or dropping interest rates. Same for the UK.

Wibbs wrote: »

Then we have the German banking system. It holds huge reserves of cash and loaned said cash to the poorer nations of the Eurozone. Makes sense as it's good for their exports, so they heated up the pot too.

It always seems entirely reasonable that that was the case, but could you actually demonstrate it? I think David McWilliams managed to get that story embedded in everybody's heads with "the Pope's Children" and it's been an unquestioned article of faith ever since.

For the claim to be true, I would say you need to show not just that there was "some" German lending, but that there was such an amount as to make a really significant difference.

Wibbs wrote: »

"Features of the Euro"? That's one of it's biggest problems and will continue to be so in one way or another.

Like I said I fully agree with you that this global crisis can be blamed on deregulation of the financial industry, however it is my view(and I'm not alone by any stretch) that in the EU the Euro added a shítload of petrol to that particular fire. Would countries in the EU be in crisis if the Euro never happened? Of course, as you pointed out because of the issue with the financial industry losing the run of itself, but I contend it would be nearly as bad in some countries as it is today. As you pointed out the markets believed Germany and France would stand over the debts of smaller eurozone members. Without that confidence they quite simply would have loaned less and housing and other bubbles would have been a lot harder to sustain on more expensive credit.

But sovereign lending - outside of Greece - wasn't the major problem. And the confidence of the markets that it would be the case was in no way actually a feature of the euro - on the contrary, the euro rules, as well as the EU rules, were opposed to what the markets believed - Article 125 TFEU, for example, is the one that prohibits EU countries from taking on each others' debts.

That these are the same markets who believed that Anglo had found a totally new and totally great business model - and before that that dotcom companies with no actual revenues were worth billions, is probably not beside the point.

In general, I think you're asking me to prove a lot here, and I've gone some way towards meeting that (although not so far you can't move around a little and continue arguing the same thing), but you have yet to back up any of your claims except by repeating them.

I'm not getting on your case about this in support of the euro as a great thing (my love of euros is in fact limited primarily to euros that are mine), but because I think that we're very much at risk of allowing the analyses of the finance industry to dominate understanding of a crisis primarily caused by loose regulation of that industry - and, as I say, the one conclusion they're not going to come to is that they should have been more tightly regulated.

cordially,
Scofflaw

K-9

Wibbs wrote: »

I don't know K, but it's one of the few ways out I can see that gets us out of this and so this doesn't happen again down the line and avoids dropping the euro entirely which at this stage would be a disaster. I don't think the "we want a punt nua" types have a bulls notion the shíte that would put us in for at least a decade. Going back to the Mark wouldn't be great shakes for Germany either.

I just reckon staying as we are doesn't do much for either the PIIGS or the rest, as it's always going to be fudge and a compromise, trying to make the square peg of a fixed exchange rate system into the round hole of economic reality and history. Now we could go further down the road of European unification, but that's gonna need tax homogenisation and the like sooner rather than later and then we're truly fcuked as our competitive edge would be gone. Bye bye multinationals. Southern Europe would be fcuked too. The EU would be like Italy, rich north and dirt poor south.

It's the middle ground I suppose, a two tier Euro rather than all leaving or further unification of policy, just seem a bit "kicking the can down the road" to use the much loved phrase! In the US states have different regulation, tax incentives etc. so I don't know if a common tax rate is necessarily on the cards.

Wibbs wrote: »

H

I'd love to see your figures on that. Yes there was an increase in lending in the late 90's in some of the PIIGS and in other Eurozone nations BTW, but it didn't get near to going apeshít until after the Euro's introduction. For one simple reason; interest rates fell by significant amounts in those countries overnight. Again I'll ask, show me one country in the Eurozone that kicked off the Euro with low interest rates that subsequently went wallop.

I really, really don't know where you are getting the idea interest rates fell over night. Ireland reduced interest rates from the mid 90's on, aimed and IIRC achieved the budgetary rules by the Euro introduction and from my reading other countries did too. They reduced them over a period of time.

squod

Can Scofflaw and Wibbs please use less words.






*I would like to read both arguments, but I do have the attention span of .....*

Wibbs

K-9 wrote: »

It's the middle ground I suppose, a two tier Euro rather than all leaving or further unification of policy, just seem a bit "kicking the can down the road" to use the much loved phrase! In the US states have different regulation, tax incentives etc. so I don't know if a common tax rate is necessarily on the cards.

True, but I would suspect a more common coming together of taxation could well be on the cards. The old saw of our corp tax might come into the firing line again. That sort of thing.

I really, really don't know where you are getting the idea interest rates fell over night. Ireland reduced interest rates from the mid 90's on, aimed and IIRC achieved the budgetary rules by the Euro introduction and from my reading other countries did too. They reduced them over a period of time.

They reduced them, but the major falls happened very quickly and on top of that the flood of cheap credit for the PIIGS on the back of the daft financial sector and being backed up by the Euro fueled the fire.

Scofflaw wrote: »

That basically just repeats the mantra at slightly greater length, though. It describes the issue as "a given", which means nothing other than it's not going to be explained.

As to these "widening differences in purchasing power" - (1) evidence; (2) how is that the cause of the crisis?

OK - at the risk of reducing Sqoud and others to a near comatose state - let's take two countries under a fixed currency exchange rate system. Country A is in strong growth, Country B is in slow growth. Country A will be at risk of overcooking the pot with the risks of asset bubbles and inflation. Country B will have a risk of deflation and recession. The differences in inflation/deflation are part of the purchasing pwoer diffs. In a fixed exchange rate system neither country has the option of their central bank localising counterbalances to these trends and because of that are likely to accelerate them if not very careful. This was the historical problem(among others) of the gold standard. It had advantages to be sure, but tended to exacerbate cyclical financial trends in just this way. It's one reason why the gold standard is not with us today and I argue that the Euro is akin to a gold standard in all but name.

Scofflaw

squod wrote: »

Can Scofflaw and Wibbs please use less words.


*I would like to read both arguments, but I do have the attention span of .....*

OK, OK...the TL;DR version (Wibbs, please correct me as needed!):

Wibbs says the problems in eurozone countries are basically the fault of the euro, with a large contribution from the banks. I say they're basically the fault of deregulating the banks, with a small contribution from the euro.

Or, if you like, Wibbs' view is that the banks' problems are a symptom of euro problems, I say the reverse.

I reckon that if Wibbs is right, we should see the kind of problems we're both talking about - rapidly booming bank lending, rapid property price rises - coinciding with the introduction of the euro, so they should all start pretty much together in the affected eurozone countries. Why they should start in non-eurozone countries is something I don't think Wibbs explains at all.

If I'm right, I reckon they should start at various different times, in the first couple of years after bank deregulation in the country concerned, in eurozone and non-eurozone countries.

Of the two arguments, Wibbs would be the more generally accepted. I would say, though, that my view is not a view we'll ever see from the financial analysts and media like the FT, Bloomberg etc who dominate the commentary on the crisis - but it is to be found in reports like those of Honohan, Regling etc, who put most of the blame where I do.

cordially,
Scofflaw

Scofflaw

Wibbs wrote: »

True, but I would suspect a more common coming together of taxation could well be on the cards. The old saw of our corp tax might come into the firing line again. That sort of thing.


They reduced them, but the major falls happened very quickly and on top of that the flood of cheap credit for the PIIGS on the back of the daft financial sector and being backed up by the Euro fueled the fire.

That should be very easy to demonstrate - so?

Wibbs wrote: »

OK - at the risk of reducing Sqoud and others to a near comatose state - let's take two countries under a fixed currency exchange rate system. Country A is in strong growth, Country B is in slow growth. Country A will be at risk of overcooking the pot with the risks of asset bubbles and inflation. Country B will have a risk of deflation and recession. The differences in inflation/deflation are part of the purchasing pwoer diffs. In a fixed exchange rate system neither country has the option of their central bank localising counterbalances to these trends and because of that are likely to accelerate them if not very careful. This was the historical problem(among others) of the gold standard. It had advantages to be sure, but tended to exacerbate cyclical financial trends in just this way. It's one reason why the gold standard is not with us today and I argue that the Euro is akin to a gold standard in all but name.

But is this what happened to cause the crisis? And how is it new for us? We had a fixed peg against sterling until we joined ERM, which put us in a fixed band.

cordially,
Scofflaw

squod

Scofflaw wrote: »

found in reports like those of Honohan, Regling etc, who put most of the blame where I do.

cordially,
Scofflaw

If this happened twenty years ago most of the continent would be on strike and many people would have been hung from lampposts. If there is one common denominator it's the quearification of people generally.

Haughey wouldn't have let this happen. Fact.

Scofflaw

squod wrote: »

If this happened twenty years ago most of the continent would be on strike and many people would have been hung from lampposts. If there is one common denominator it's the quearification of people generally.

I'm not going to repeat the word you use there, because it returns only one hit in Google, and I think that's something worth preserving!

squod wrote: »

Haughey wouldn't have let this happen. Fact.

Haughey, for all his flaws, had more vision and sense than Bertie and Cowen put together.

cordially,
Scofflaw

K-9

Scofflaw wrote: »

OK, OK...the TL;DR version (Wibbs, please correct me as needed!):

Wibbs says the problems in eurozone countries are basically the fault of the euro, with a large contribution from the banks. I say they're basically the fault of deregulating the banks, with a small contribution from the euro.

Or, if you like, Wibbs' view is that the banks' problems are a symptom of euro problems, I say the reverse.

I reckon that if Wibbs is right, we should see the kind of problems we're both talking about - rapidly booming bank lending, rapid property price rises - coinciding with the introduction of the euro, so they should all start pretty much together in the affected eurozone countries. Why they should start in non-eurozone countries is something I don't think Wibbs explains at all.

If I'm right, I reckon they should start at various different times, in the first couple of years after bank deregulation in the country concerned, in eurozone and non-eurozone countries.

Of the two arguments, Wibbs would be the more generally accepted. I would say, though, that my view is not a view we'll ever see from the financial analysts and media like the FT, Bloomberg etc who dominate the commentary on the crisis - but it is to be found in reports like those of Honohan, Regling etc, who put most of the blame where I do.

cordially,
Scofflaw

Add in politicians the world over thinking they had everything cracked, Greenspan in the Fed cheering them on and Gordan Browns "no more boom and boost" and people will get an idea of how lax regulation played a huge part. The Euro never seems to have been designed to cope with recessions like and that's where the big problem lies.

K-9

K-9 wrote: »

Add in politicians the world over thinking they had everything cracked, Greenspan in the Fed cheering them on and Gordan Browns "no more boom and boost" and people will get an idea of how lax regulation played a huge part. The Euro never seems to have been designed to cope with recessions like and that's where the big problem lies.

This is one of the most important issues with the Euro (& other fiat currencies) is that they are totally dependent on (infinite) growth!
Without continual growth, the debts created as a function of the system, can never be repaid as the interest payments have to be raised by additional growth.

Global economic activity has reached the physical limits that the planet will allow, what we have seen over the past few years has been growth in some "emerging economies" being balanced by a similar decline in OECD countries.

It really doesen't matter which way you vote, this trend will continue, but, what does matter is whether you vote to accept a larger share of the burden of paying for the downside.