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What exactly is going wrong with the Eurozone? Thanks
but if everyone could please stop using the phrasing "fiddling while Rome burns" I would be very grateful.
politicians are handing over all responsibility and decision making to markets that are chasing their own tails and corporate vultures are circling - though many of them on on the brink of death themselves
Italy requires bailing out to the tune of €306 billion
There's only €250 billion in the bail out fund
Everyone's going '...errrrrr'...
that's my take
But why do we have to bail out Italy? I understand that if Italy went bankrupt, it would have a knock on effect across Europe and the markets across the world, but would it be worse than the scenario currently happening, IE, the eurozone collapsing?
Now multiply the consequences by [pick a number] when considering Italy.
5 out of the 5 possible options are incredibly shit?
in order to prop up the Euro, then, for anyone staying in the Euro, pretty much, yes - those still in the eurozone will be suffer massively, economically and socially.
I think you're probably wrong
and depends upon what you want in the future, and/or when you want that future to happen.
but Italy has borrowed money from Governments, Banks, Corporations and its own future GDP in order to run the country
if it doesn't pay back that debt (or an amount that shows a commitment to a long term pay off) then those lines of credit will be cut and Italy's public infrastructure will collapse
which will lead to its private sector collapsing
which will lead to the entire eurozone taking a concrete boot to the crotch - and this at a time when many of the Eurozone countries are standing naked in the wind
think is, its the Corporations and foreign Governments DEMANDING that they are not going to lose out and write off their investments, that the Italian people will have to take the austerity buggering position
Meanwhile, Berlusconi is using the situation to blackmail us all into accepting his Bailout Bill, which is likely to include such comedy clauses as
i)I will forever be immune from prosecution
ii)I will be entitled to a pension of whatever I decided I'm entitled to
iii)I get to call Sarkozy a gaylord and shag his wife while merkel gives hand-shandies to my pet cats
accept this as one.
i was about to but you've ruined it now
I kept thinking The Markets! The Markets! It was pretty funny/tragic.
That's cat-food for thought.
because the stagnation of growth is the perfect solution to these ills
and whilst you're at it, maybe some unemployment figures too
I was previously under the impression you were trying to argue against me
"but a separate survey of the manufacturing sector suggests Britain could be in negative growth before the year end"
Yeah, I guess that's important, in a "it's hip to be square" way.
not reduce what we owe, merely slow down the increase of what we owe, ombined withy negative growth and no prospect of it, and they can therefore see that the maths do not work (of course the alternatives put up also do not work)
it doesnt upset me as the negative growth is there underlying the method of growth interpretation.
Plus i just tried to keep my post short and snappy and mispelt......but ok here we go a longer explanation........nah I cant be bothered.....look it involves the net of growth rate vs inflation and interest charged on lending and increase in overall debt and capacity/position to increase tax revenues.
By the normal gov measure growth rate below 2% per annum is a failure and almost like a negative as this is taken as the benchmark, not that it needs to be measured like this to be negative....i think that you will find that only by optimistic creative interpretation is it not physically grossly negative
system..is about to crash....everyone will die.....no one is..safe
- Governments need to spend money on stuff, and sometimes that means borrowing money in order to have the money right away.
- Just like any other loan, this money is lent at interest.
- Many European governments run budget deficits (that is, they spend more than they receive in taxes and other income), and as such need to borrow regularly.
- This is OK for a while if the interest rates on repayments are low enough to handle, but if the interest rates go too high (because the country is seen as less trustworthy) then a larger and larger chunk of the country's income will be spent not on actually using the money they've borrowed on pensions or schools or whatever, but on just paying off debt interest.
- This creates a bit of a debt-spiral where eventually the country is basically borrowing money just to pay off more debts like a single mother using Wonga.com to pay her mortgage, and if it gets to that stage then a bankruptcy is pretty much the only option.
- If a country goes bankrupt then that means a shitload of banks and other entities around the EU and world will lose a lot of their money (since it's on their balance sheets as an asset) and then if that happens they too will be kicked into bankruptcy.
- This creates another chain reaction which knocks out other countries, etc. etc.
- Usually a country can just deliberately inflate away its debts by printing more money if this happens, but in the EU you had a bunch of countries with high public expenditure (like Greece and Italy) with the same value currency as countries with lower expenditure (Germany, France), so that option isn't there.
- When they made the EU they set up some rules saying you couldn't let your public debts exceed 3% of your country's GDP, but pretty much every EU country broke that rule immediately to some degree.
- When Greece got to the stage where it was in the debt spiral the EU countries came together and 'bailed them out', that is, when the Greek government needed more money the EU lent them money at a lower interest rate than they would get on the real market. Meanwhile, to get its expenditure under control, the only option other than bankruptcy for Greece is that it drastically cuts its spending; hence rioting.
- Unfortunately the contagion is spreading, and now it's at Italy. Italy has an insanely high level of public debt, and now the markets are worried that it can't pay the money it borrows back and the interest rates are jumping (you might see reference to 7% in the news - this is seen as the point at which, if Italy borrows money, it will enter a positive-feedback loop where it needs a bailout like Greece did).
- If that happens then we're in real shit, since a large part of the original bailout fund was actually guaranteed by the Italians, and without their contribution that leaves us with about E200bn to bail out an economy with something like two TRILLION euros of debt.
- And if that happens, we're going to see this thing spread to countries where it shouldn't have been an issue of this magnitude at all, such as France.
- So if Italy goes, there's a strong chance that the entire EU will collapse.
That's sort of a condensed version.
i mean in the press and stuff; not just on here
I haven't really had time recently to keep up to date with the news, so this is a great help.
CURSE YOU GORBACHEV
but the eurozone is showing it up because within it there are several countries that will go bust before others .....e.g. greece italy, ireland, spain, portugal.....then countries more like france and finally germany .....now what they are arguing about is the not so near bust countries are trying to say to those that are nearly bust......stay in the euro and we can bail you out ....BUT you must put the burdon of your debt on 'the people of your country' and pay back the interest on what you owe........the alternatives of them leaving the eurozone is they would go bust quicker and then default on what they owe the remaining eurozone countries, thus putting more strain on the remaining eurozopne countries economies. overall the methods they are applying are obviously going to fail (but then again so are the alternatives that the individual countries have been suggesting)
It needs someonme with appreciation of the reality to advise them....the problem is I have no influence on them, unless all the people of DIS back me :D :D and dig out my old posts to prove I could see it all along :D
Its a pretty rum do, and I only laugh as in james coburn laughing at the end of 'cross of iron'
1. The US, as the reserve currency of the world, was in a position to 'print' way way way way way way too much money. So it did.
2. The Markets™ = China, Rich Western People, and Oil people who played along and bought into it, cos they thought the US had enough room for growth to allow it to keep on consumin'.
3. Europe created the Eurozone as a cog in that machine so it could play along.
4. If Italy defaults (says FU to the people mentioned in step 2), the Eurozone probably collapses, and we go back to individual currencies (a severe setback, but a temporary one), and the Eurozone shaped cog in the machine is missing, so the world stops working the way it oughtta (according to The Markets™).
5. Three possible outcomes: a) The Markets™ get told to fuck off by "us", OR b) The Markets™ wage "war" on "us" in one way or another, OR c) someone comes up with some maths that means this whole sorry mess can be put back a while and forgotten about until the next crisis (this will ultimately involve 'printing' money, and that's just another way to describe 'borrowing from the future').
I KNEW IT.
Give us a one para summary as if you were explaining it to my mum, and I'll give you a preliminary yes or no.
At its most basic level it all comes down to fiat currency being fundamentally flawed in that it dramatically increases the severity and length of both booms and busts. Since it detaches the nature of 'wealth' from actual reality it gives governments an incentive to print and spend more money than they can actually afford, leading to a cycle. Governments are freed from having to balance budgets and so they can go on massive spending sprees which you couldn't do with a currency linked to a real-world asset such as gold - our modern welfare systems, for example, would bankrupt a state run by a Hayekian economist, but then they'd never spend that much money as a proportion of government GDP in the first place.
Also, central banks are the source of all evil. Get rid of them, and you'd get rid of the most damaging economic bubbles since you'd no longer be fucking about with the actual supply of money. Since central banks have a habit of holding interest rates too low it creates an expansion of easy credit which eventually 'crunches', and Austrian theorist predicted both the 1929 crash and the 2008 one (though they've been wrong about other ones, and this theory has been shown by people like Friedman to not be entirely, universally, accurate, though I think this is down to its simplicity as a model and not its foundational idea).
What I do like about Austrian economists though is that they all believe that economies and individuals are too complex to model properly with mathematics, so they like to stick to very basic fundamentals that they know will work. They're basically philosophers deriving economic theory based on more fundamental premises (and as such there's a heavy emphasis on what is 'moral') and not on just the idea of what makes more money or whatever. Murray Rothbard once said that it's just a happy coincidence that the greatest amount of freedom for people also correlates to the system which will give them the most comfortable lifestyles.
aye, that can have a 'yes' for now.
(I can't hear that video at this computer :( )
what are the basic fundamentals that Austrian School economists know will work?
That is, a Lockean form of individualism (with addendums from later thinks) of the sort which inspired the writers of the American Declaration of Independence.
Austrian theory is largely derived from the nature of what property rights would be 'moral' assuming that background.
which is fine, as long as it is viewed as such.
But my main problem with it is it seems to think any kind of planning is disruptive and futile. It thinks markets are perfectly efficient when left to themselves and to me that's madness.
Basically they believe in individualism and totally free markets, so I hate them.
Individual freedom, or the free market? Or both?
Because I'm always torn on economic issues because I think that the freedom of people to act autonomously is 100% the most important thing there is (especially in the face of government power), but then at the same time I agree with those who say unfettered individual freedom is a route to disaster sometimes. And whilst things like the smoking ban are pretty easy to justify on a rights basis, when it comes to economics the levels of blame and hurt get incredibly complex.
Well, I don't necessarily hate individual freedom, depends on which freedoms we're talking about. I don't agree with Locke's view of natural rights (from looking it up on wikipedia, arf), for example.
Essentially I think the freer a system is, the more easily exploitable it is by jerks. Jerks dominate in free systems. And I don't trust free markets to efficiently (or humanely) organise capital.
1) Humans are jerks, so you can't let them be free.
2) You need to restrict them within a system to limit damages.
3) But humans need to invent a system, and we know from 1) that humans are self-interested and can't be trusted with the freedom to affect others.
4) Thus, any system set up to prevent the abuse of power is, itself, susceptible to the abuse of power by its very nature.
The construction (and maintenance) of a more limited system is susceptible to the same forces, but there are at least mechanisms to counteract them.
Also, free markets rely on consumers rationally acting on their own information. I don't agree that you can expect most people to do this - rationality is more easily built in to the system itself, by planners.
That's a very basic simplification, and I doubt any economist of any hue would say that's an assumption they'd make.
Secondly, I posit that your point about a limited system is not valid as it does not address the core problem with such systems - that is, that once you put into place a mechanism for taking freedom away from people (often by force), then that mechanism can be used to defend the system from powers being repatriated.
The concentration of political power is a self-fulfilling, and self-reinforcing, phenomenon. The 'mechanisms to counteract' the abuse of that power are parts of the same overall machine. And since you're already arguing that humans cannot be trusted to act on individual interest it seems mad to say that some, occasionally, can, and that only those ones will rise to positions of power. We can see that that is usually not true, and indeed it seems that those who want political office the most are usually the least-suited to it.
That's pretty much the main point of Animal Farm, after all.
I'm more in favour of voluntary cooperative organisations and bodies of a more fluid nature than rigid social hierarchies, tbh.
The thing is that Austrian economist are actually political philosophers who focus on property rights, not economists. And as such their work focuses on deriving what it is, exactly, that is justified or not when two people who both own property interact.
So whilst they work in a field like economics they approach it from an entirely different angle. The question is: What is justified in this situation? Does the government have the right to do this? It's not a question of whether the government should just do x, y, or z for the sake of some arbitrary balance between two arbitrary outcomes, as in other fields of economics. I think they'd probably get quite huffy if accused of 'dabbling in a pseudo-science' because, as far as they're concerned, they both know economics isn't scientific and that what they're doing isn't normal economics.
Or, at least, that's my understanding of it. Realise I'm starting to sound like a cheerleader now.
My whole beef with economics in general is where it goes beyond science and into ideology and how ideas in that grey area are applied (and promoted). (It's partly because of my frustration at not knowing where the line is - and at generally not understanding economics.)
e.g. the application of Hayek's ideas in the 80s - were these applied primarily because people believed it would create an efficient economy? Or primarily out of regard for property rights? I think the accepted narrative of Western economies is that they are designed to be efficient, if not fair. Is efficiency an Austrian economist's priority? What does he want dammit?
- I take your point about my simplification
- I'm a little hazy on the 'defending from repatriation' thing being a problem. Surely the ability to defend its powers has to be built in to any governing system? Do you mean it can be used to defend its powers even against overwhelming democratic will?
- I don't trust humans to sufficiently act rationally in their interest, but I do think that through discussion and negotiation, groups of people can. The problem, as you say, is the method of selection of people in power. I think there is hope in this, whereas, like I said, I think corruption of free systems is inevitable. Do free market types accept this inevitability?
- I need to read Animal Farm again.
Past experience has shown that the natural instinct of governments is to grow in size no matter how determined anyone may be to try and cut it down.
And the defining characteristic of a government, by most definitions, is that it has the monopoly on legitimate force throughout a defined territory. Governments are defined by their ability to punish, through violence, those who disobey their will. If you derive your system of morality from the fact that humans have some kind of free autonomy then there's a clear clash of moral justification going on here. It's where the idea of 'taxation is theft' comes from, because, well, it is. If the people lend authority to the government which governs over them, it's a contradiction for that government to then use its force to restrict person freedom - but by its very nature it must adhere to this contradiction.
And on Animal Farm: In my copy there's a foreword about how George Orwell grew frustrated after its publication, since people felt it was only a criticism of Soviet-style communism. He meant it to be a wider critique of the idea of putting power over society in the hands of a small, select group who claim to be above the instincts that influence the small, regular people. Politicians drink and smoke and fuck and inhale and lie just like anyone else - asking them to be the moralisers is always going to result in ridiculous hypocrisies. It's a fable about the dangers of powerful government of any political leaning, not just a communist one.
The question is then what kinds of theft are justified for a greater good.
Robin Hood was a thief, but one who many think would have been justified. It's the same moral issue.
in a democracy, isn't it implied that people have given their consent for their tax to be taken?
See below for more on this.
with libertarian types.
The standard justification for these systems is freedom-basd: i.e. everyone is given maximal amounts of freedom to deal with their property.
But of course, that appeal is rhetorical: property rights are themselves a restriction of freedom. The assertion that I own X restricts the freedoms of others in certain ways as regards X. The complex of entitlements and powers contained in this property right is a social, not a natural phenomenon.
It follows that libertarianism cannot be justified simply by appeal to a moral imperative to maximise freedom. Because it's premised on a restriction of freedom. The question is rather what configuration of freedoms and duties is most readily justifiable.
Libertarians might yet turn out to be right in the answer that they offer to that question,* but they need an independent argument for why they are.
(* I doubt that they are, though - as things like inheritance move us away from a situation of "fair shares" it becomes difficult to believe that the absolute protection of property rights is justifiable.)
The justification for property rights that many libertarians use is essentially derived from Lockean ethics, but that idea is just plainly batshit.
There's this attitude that property rights are inherent in the same way that gravity exists, and it occurs because of some kind of (semi-spiritual, almost) 'mixing' of the individual's labour with the physical object.
Nozick nicely pointed out how fucking stupid this was when he asked if he then owned the oceans just because he dumped a tin of tomato sauce in it. If you're going to claim that someone and that someone's property are ethically the same entity then the theory needs to also include a point at where you draw the line.
I remember Rothbard coming up with quite an elegant solution to that issue, but property rights remain one of those things where it's pretty instinctual to 'own' something (as Frank Zappa said, the first thing a kid learns to say, after 'Mom' or 'Dad', is 'mine'), but it's incredibly hard to figure out how to justify owning something, and certainly to how to derive an entire system of governance from that one position.
maybe I do, dunno.
I certainly don't believe that all humans are equally able to exercise or exploit or enjoy their autonomy - and to me that's a more important concern (and a justification for government and tax-theft and...don't know about the monopoly on violence).
I don't really understand the contradictions you highlight; it's all a bit over my head.
Our conception of democracy is such that we believe that the government acts on behalf of the will of the people.
This stems from our belief that it is ultimately individuals which are the ultimate source of moral authority.
This is another way of saying – how do you determine what is wrong or right? In a society which isn’t theocratic you have to find some other absolute if you want to avoid moral relativism, and (especially in the west) recent history has had us rely upon the idea of moral rights stemming from individual autonomy. That’s the idea behind the US Constitution – there are certain ‘inalienable rights’ which we all have simply because we are humans, regardless of anything else about us. We’re human, we’ve got rights, and you can’t take those away.
We can think and act freely – and, also, own property. But that’s another level of complexity I don’t want to get into here because frankly it’s too much for 4pm on a Thursday, but let’s just assume that the basic assumption at the heart of our society – that people can own property – is correct.
Recognising that people are better and stronger together than apart we appoint government officials to make judgements on governance. Our MPs represent our opinions in Parliament, theoretically, and try to make sure that our voices are heard. If we had everyone across the UK shouting at once nothing would ever get done.
But. The government is funded by taxation, which is the forcible seizure of an individual’s private property. The government enacts laws to protect the health and safety of its citizens. It wages wars using money it seizes, fighting with men who it will lock up if they refuse to fight after signing up, often when too young to make the choice. They sell off public assets, and they will send in the riot police when people complain.
What I’m getting at with this is:
1) We’re all autonomous individuals.
2) We elect governments to preserve our interests in a more effective manner.
3) Our governments derive their authority from the electoral choices of individuals.
4) The government must use force of some kind to carry out legislative aims.
5) The use of force contradicts the autonomy of each individual
6) Therefore, a government must, by definition, violate the very principle it is meant to protect.
It can get away with this in the name of ‘the greater good’, but philosophically it’s an absolute moral headfuck because ‘the greater good’ is a waffly and meaningless concept.
And people like the Austrian School economists, to answer your question earlier about what it is that they want, well, they want property rights to be respected above anything else, since violating property rights is a violation of the autonomy of the individual – the only valid source of moral authority in a world without god.
Now we're getting really off the original point of the thread here, but it's kind of key if you want to get why the Austrians are how they are - and how the US system is so weird compared to Europe. As a nation founded on these kinds of ideas there's, understandably, a lot more concern and worry about adherence to the moral underpinnings of what it is that the government is meant to do. As a nation where the current system was basically, piece-by-piece, taken over by the ordinary citizen, that kind of question never really arises.
it's an excellent explanation of why I find it so hard to understand the US. I'd never thought about this aspect of it before.
Similarly, though you've helped me understand the contradictions, for some reason it doesn't matter much to me. I see there's a moral contradiction there, but it doesn't bother me much as long as the outcome is a system that is 'fair'. Maybe I'm happy with messiness. Is it the case that in Europe, the moral basis of our governments is something that, rather than being derived from something simple and defined (like the US did), has been arrived at after centuries of complex negotiation and therefore is something we're all intuitively comfortable with, even if we can't express it without exposing contradictions?
Re: the violation of autonomy - do citizens agree to give up some of their autonomy to govts in elections? So the govt could be justified in using force to defend anything they'd promised to do. But if they sell off public assets despite promising not to, then their use of force would not be justified.
Especially in parliamentary systems like our the way we run the country has basically been invented on the fly. Even in countries like France, which have had revolutions and tried to somehow draw up a government on a 'blank slate' of sorts, things are a lot more waffly, and politicians are way, way more comfortable with ideological pragmatism, than their mainstream equivalents in America. Some politicians in America carry little pocket-sized copies of the constitution, for fuck's sake, like it's some religious text that must be taken literally, word for word. As if it was gods, not fallible humans, who wrote it in the first place.
And your second point hits the contradiction on the nose. For the most part people accept taxes and stuff like that because it's something you give up to live in a state where you can call the police if you're robbed and you have an army to defend you against invaders and you get hospitals to heal you if you're sick. But there are many issues on which people sharply divide over what kind of things the government should do, or whether it should be involved at all, and that's when you get the moral conflict.
and of course they're gonna support the libertarian free market view of society.
Also, there is the idea that by wishing to live in a certain country, you're performing a transaction whereby you assent to give up some of your property and total autonomy for the sake of security and other benefits that this society gives you. If you look at it this way then taxation isnt theft at all. This gets on shakier ground when talking about the lower income brackets, who don't really consent to anything at all, but in terms of the rich guys whose property the libertarians fight to protect so much it holds pretty true due to much greater potential for mobility or whatever.
I was just trying to provide an outline of that particular political position.
Although, not sure talking about 'wishing to live in a certain country' counts as a real, valid implicit consent considering you can't just up sticks and move to a country which has laws you 100% agree with. There are only a finite number of countries in the world, there are quite considerably restrictions on movement amongst them, and the number of economic and governmental systems to choose from is quite limited.
I'd have thought Friedman would've been a big fan of simplistic economic models.
it never seems that bothered about claiming any of it back
The Markets™ have decided that, hey!, fuck!, hang on a minute, I'm probabaly not gonna see a(s much of a) return on this as I thought because 'the future' is slipping too far out of my grasp.
So what next?
No more future. (aka no cheap lending, aka no more cheap money, aka no more dipping into the pockets of the future, aka no more borrowing of time, aka your time is up.).
Time + Resources (human or natural) = Money.
With resources drying up (i.e. population growth, and oil), when The Markets™ (China, Rich Western People, and Oil people) want to cash their chips in (Money), time has run out.
The line must be drawn. THE CLOCK MUST STOP.
Consider also: the younger generations who have an actual stake in the future (Time), but aren't prepared to lend any more time to the present either.
in the world (or Europe) from one day to the next. And the answer is usually nothing. This isn't a crisis caused by lack of resources or raw materials or plague of famine or war. It's a crisis of mis-management, of organisation. It seems trite to even mention it but I think it's worth bearing in mind.
That's it. I'm Plan B.
it's a top-level organisational one. And we have a choice of solutions, and who bears the consequences of those solutions.
just saying i agree with the feeling that its hard to...feel(?) whats happening at a personal level (the systematic cause of failure itself, not redundancies, cuts etc)
but it's looking possible, if not likely, that this crisis will lead to one of those material crises you give as examples
I wasn't trying to downplay the seriousness of this, just trying to articulate something about the nature of it (for my own benefit, really).
we live in a world of make-believe wealth, there's no reason why our crises can't be abstract
but I read something this morning that, given the sabre rattling over Iran and the currency/market crisis in Europe mae me rather fear the worst
Italy sold 5 billion euros ($6.8 billion) of one-year bills at the highest interest rate in 14 years. The Rome-based Treasury sold the securities to yield 6.087 percent, the most since September 1997 and up from 3.57 percent at the last auction of similar-maturity debt on Oct. 11. Demand was 1.99 times the amount on offer, compared with 1.88 times last month.
1.99 TIMES DEMAND
and i've still literally no idea.
(from watching the interviews i don't really get the impression they do either tho to be honest, from what i can gather from watching the minute or so before i totally zone out and send it to client with really obvious mistakes/typos all over it U_U;;;)
can't we just turn it off and on again?