9 hours ago, oilinki said:

Every country and economy can decide their own salaries, regardless of the currency they are using. 

 

When normal salary in Scandinavia is 3-4.000 euros, the same salary can be 1.000 euros in the southern states like in Spain or Greece, if they wish to have so low salaries. 

 

What currencies each country uses, doesn't really matter how much each person is actually rewarded for the job they do. 

 

If Europe would be using Thai baht, the normal salaries would be 120.00 to 160.00 up north and 40.00 down south. Once again, regardless of the currency used in the countries. 

 

Using Euro or any other currency doesn't make a difference how economies work. It's all to the performance of the people who create these economies. 

Things don't work that way.

 

Economies are based on credit, not on salaries.

With a single currency and interest rate, credit tends to flow where it is most requested, that is to the weakest countries, which is what happened...because Greeks or Portuguese need more credit to buy cars, for example, than Germans.

 

Before the euro, such credit was not available to these countries and their populations, because there was always the risk of devaluation, or worse, which was removed with the euro.

 

Always looking for short term profit and unable to see the consequences, banks and other lenders thought they didn't need to be careful anymore and could open the flow of credit all over the eurozone.

 

Now, they have learned their lesson and the situation has moved to the other extreme: no one is willing to lend to the weak countries, which is why the ECB has to buy all their bonds, an unsustainable policy from which there is no escape.

Edited September 27, 20187 yr by Brunolem

12 hours ago, oilinki said:

How using drachma instead of Euro, would have made any difference of a country not well run?

 

Why English people think that what currency we use, somewhat equals how our countries are run?

 

Economies are run well or not so well, depending out policies and how our people want to work and do business. Not based of the type of money we use.

Because if you have your own currency it limits the amount of irresponsibility you can get away with. Greece and Portugal, the 2 nations that would have defauted on their loans, would never have been lent all the money if they had their own currency. And if an economy of a country that uses its own currency crashes, it won't be nearly as much as a threat to other economies.

And you keep on ignoring the huge point that Spain and Ireland weren't irresponsibly run. It was the banks, very notable including Deutschbank, from the "responsible" nation of Germany that made very foolish loans to private interests investing in private projects in Spain and Ireland. The EU forced the government of Spain and Ireland to assume responsibility for these private loans, thus penalizing  massively the citizens of those countries. 

In fact, Germany, France and other Euro nations were very very very irresponsible in the management of the banks based in their respective nations. So let's not get too carried away with the notion that these nations are so responsible.  They acted to shift the responsiblity for their own dismal oversight to others who were not at fault.

1 hour ago, Brunolem said:

Things don't work that way.

 

Economies are based on credit, not on salaries.

With a single currency and interest rate, credit tends to flow where it is most requested, that is to the weakest countries, which is what happened...because Greeks or Portuguese need more credit to buy cars, for example, than Germans.

 

Before the euro, such credit was not available to these countries and their populations, because there was always the risk of devaluation, or worse, which was removed with the euro.

 

Always looking for short term profit and unable to see the consequences, banks and other lenders thought they didn't need to be careful anymore and could open the flow of credit all over the eurozone.

 

Now, they have learned their lesson and the situation has moved to the other extreme: no one is willing to lend to the weak countries, which is why the ECB has to buy all their bonds, an unsustainable policy from which there is no escape.

Your explanation was better and more succinct than mine have been.

Some useful replies on currency. To which I'd add...

A national currency is an extremely important factor in a nation's economy, as exchange rate fluctuations naturally regulate trade. A weak currency has benefits as well as disbenefits, a strong currency ditto. A currency union without political and fiscal union cannot succeed in the long-term, either for the debtors or the creditors. Here's a quote from Gabriel Felbermayr, the director of the Munich-based Ifo Center for International Economics:

 

“The [German] surplus is becoming toxic, and also within Germany many argue now that we need to do something about it with the purpose of lowering it. It turns out to be a liability rather than an asset.”

 

https://www.cnbc.com/2018/07/04/germanys-massive-trade-surplus-is-becoming-toxic-ifo-director-says.html

2 hours ago, Brunolem said:

Well, using the drachma, Greece had managed to go on decently for decades, while using the euro it took only a decade to sink the country and send its population to hell for probably many decades!

However, during the observation year in 2001, before being fully admitted in the Eurozone, Greece started to hide its debt using an accounting trick in order to meet Eurozone's requirements. 

Had they not done that, they would not have been admitted. The admission would have been delayed and probably they would have entered the system with a lower conversion rate. On top of it, complying with Eurozone requirements from the start would have prevented a much bigger problem a few years later.

10 minutes ago, candide said:

However, during the observation year in 2001, before being fully admitted in the Eurozone, Greece started to hide its debt using an accounting trick in order to meet Eurozone's requirements. 

Had they not done that, they would not have been admitted. The admission would have been delayed and probably they would have entered the system with a lower conversion rate. On top of it, complying with Eurozone requirements from the start would have prevented a much bigger problem a few years later.

Oh come on!  Everyone knew that allowing Greece into the eu was 'a fudge' to allow them entry!

 

It was widely reported by uk newspapers at the time, so pretending that the eu didn't know is more than disingenuous.

21 minutes ago, candide said:

However, during the observation year in 2001, before being fully admitted in the Eurozone, Greece started to hide its debt using an accounting trick in order to meet Eurozone's requirements. 

Had they not done that, they would not have been admitted. The admission would have been delayed and probably they would have entered the system with a lower conversion rate. On top of it, complying with Eurozone requirements from the start would have prevented a much bigger problem a few years later.

Well, first off, it wasn't hidden in such a way that proper due diligence couldn't have discovered it. But since that's the case that Greece shouldn't have been admitted, then the EU should have ejected Greece from the Eurozone.

39 minutes ago, My Thai Life said:

Some useful replies on currency. To which I'd add...

A national currency is an extremely important factor in a nation's economy, as exchange rate fluctuations naturally regulate trade. A weak currency has benefits as well as disbenefits, a strong currency ditto. A currency union without political and fiscal union cannot succeed in the long-term, either for the debtors or the creditors. Here's a quote from Gabriel Felbermayr, the director of the Munich-based Ifo Center for International Economics:

 

“The [German] surplus is becoming toxic, and also within Germany many argue now that we need to do something about it with the purpose of lowering it. It turns out to be a liability rather than an asset.”

 

https://www.cnbc.com/2018/07/04/germanys-massive-trade-surplus-is-becoming-toxic-ifo-director-says.html

Yes there is this smugness coming from the Germans about running surpluses in the budget. It's because of a belief that a country should be run like one runs one private finances.  John Maynard Keynes work was all in vain as far as the EU goes.

And 0ne use for that budget surplus would be to devote about 25% of it to paying into the EU the UK's share once Brexit is completed.

2 minutes ago, bristolboy said:

Yes there is this smugness coming from the Germans about running surpluses in the budget. It's because of a belief that a country should be run like one runs one private finances.  John Maynard Keynes work was all in vain as far as the EU goes.

And 0ne use for that budget surplus would be to devote about 25% of it to paying into the EU the UK's share once Brexit is completed.

There can't be a common currency with a group of countries acting as if they were independent from each other.

 

The US has 50 states, but also a federal government and federal taxes.

 

Money is collected from the wealthiest states and transferred to less wealthy states, and the Texans are not complaining that their taxes help Montana, yet the Germans are not ready to pay taxes to help the Greeks.

 

On top of that, a federal government ensures that, with some horse trading, not all the economic activity is concentrated in a few states, while the others are left with fruits and vegetables to cover their needs.

 

A shrewd senator like Shelby can manage to have automobile factories in Alabama, instead of the obvious California, something that is impossible in Europe.

 

Decades after the creation of the EU and eurozone, each member country remains with more or less the same economic profile it had before joining.

This is the heart of the problem: "A “German euro” was nearly 17 percent undervalued against the dollar in PPP terms, while a “French euro” was overvalued by nearly 5 percent. A “Greek euro” was overvalued by 7 percent." It's a direct consequence of currency union without fiscal and political union.

 

https://www.reuters.com/article/uk-usa-trump-euro-analysis/euro-may-be-too-weak-for-germany-but-too-strong-for-others-idUSKBN15I1ND

 

"Chronic surpluses are a way of stealing demand from elsewhere. They export unemployment to other countries. This matters in an era of "secular stagnation" and excess global savings. Societies are entitled to retaliate once this gets out of hand."

 

https://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11584031/Germanys-record-trade-surplus-is-a-bigger-threat-to-euro-than-Greece.html

Edited September 27, 20187 yr by My Thai Life

yes of course he has more important things ,to think of, like trying to shore  up the huge hole in the spendthrifts coffers when the UK has long gone

2 minutes ago, mercman24 said:

yes of course he has more important things ,to think of, like trying to shore  up the huge hole in the spendthrifts coffers when the UK has long gone

Please keep in mind that the German budget surplus alone is roughly 4 times what will be lost after Brexit. Whilst the UK's contribution may be large in reference to the EU's budget, in relation to the budgets of EU nations it doesn't amount to much.

28 minutes ago, bristolboy said:

Please keep in mind that the German budget surplus alone is roughly 4 times what will be lost after Brexit. Whilst the UK's contribution may be large in reference to the EU's budget, in relation to the budgets of EU nations it doesn't amount to much.

Please keep in mind that there is no EU mechanism for a country with a trading surplus to plug EU budget holes. What you're saying is a non-sequitur.

 

The quotes and links that I have posted above demonstrate that Germany's trading surplus is (i) exacerbated by the Euro currency union in its present state, and (ii) a major contributor to the ongoing structural problems created by the Euro, including the impoverishment of Greece. These problems can only be solved via fiscal and political union acrosss the EU - ie the superstate that Monnet, Juncker and many other EU leaders have clandestinely worked towards for 70 years. The UK will never agree to be part of an EU superstate.

 

This is one of the best arguments for leaving the EU in my opinion. 

Edited September 27, 20187 yr by My Thai Life

7 minutes ago, My Thai Life said:

Please keep in mind that there is no EU mechanism for a country with a trading surplus to plug EU budget holes. What you're saying is a non-sequitur.

 

The quotes and links that I have posted above demonstrate that Germany's trading surplus is (i) exacerbated by the Euro currency union in its present state, and (ii) a major contributor to the ongoing structural problems created by the Euro, incluuding the impoverishment of Greece. These problems can only be solved via fiscal and political union acrosss the EU - ie the superstate that Monnet, Juncker and many other EU leaders have clandestinely worked towards for 70 years. The UK will never agree to be part of an EU superstate.

 

This is one of the best arguments for leaving the EU in my opinion. 

What EU budget holes? EU countries are doing rather well, don't you think?

 

If and when Germany is doing so well, it's a well deserved reward of doing things right. Don't you think people who work hard, plan a future and have managed corruption, should be allowed to gain a bit more wealth than other, less performing countries? 

 

Greece has not yet managed to weed out her corruption and bad practises. Hopefully she'll be able to do so in the future. Greece reminds me a bit of one country, most of us live in on this forum. 

1 minute ago, oilinki said:

What EU budget holes? EU countries are doing rather well, don't you think?

 

If and when Germany is doing so well, it's a well deserved reward of doing things right. Don't you think people who work hard, plan a future and have managed corruption, should be allowed to gain a bit more wealth than other, less performing countries? 

 

Greece has not yet managed to weed out her corruption and bad practises. Hopefully she'll be able to do so in the future. Greece reminds me a bit of one country, most of us live in on this forum. 

But it would be doing less well were it not for the Euro. And other countries would be doing better. You persist in ignoring hard data and repeatedly confirmed theory in favor of treating economics as a morality tale. 

2 minutes ago, bristolboy said:

But it would be doing less well were it not for the Euro. And other countries would be doing better. You persist in ignoring hard data and repeatedly confirmed theory in favor of treating economics as a morality tale. 

Germany would probably perform less well, if we wouldn't have a common currency, which is stable and doesn't cause us to worry about high interest rates or devaluations. 

 

That same applies to every Euro country. Stability creates prosperity.

13 minutes ago, oilinki said:

Germany would probably perform less well, if we wouldn't have a common currency, which is stable and doesn't cause us to worry about high interest rates or devaluations. 

 

That same applies to every Euro country. Stability creates prosperity.

Your asserting such doesn't make it so. If the Euro is so potent a force for stability why the economic crash in 2008 for the Eurozone nations? Is that your idea of stability? Why did non Euro members of the EU come out of that recession much faster than did the Eurozone group?  Why was the Eurozone the last to come out of the recession? I guess you could say that extreme slowness in recovery is a kind of stability. A particularly cruel kind of stability but stability nonetheless.

30 minutes ago, oilinki said:

What EU budget holes? EU countries are doing rather well, don't you think?

 

If and when Germany is doing so well, it's a well deserved reward of doing things right. Don't you think people who work hard, plan a future and have managed corruption, should be allowed to gain a bit more wealth than other, less performing countries? 

 

Greece has not yet managed to weed out her corruption and bad practises. Hopefully she'll be able to do so in the future. Greece reminds me a bit of one country, most of us live in on this forum. 

They are not doing well!

Like the US and a few others, they only appear to do well, thanks to unsustainable monetary policies.

If the ECB let the market set the interest rates, and stop creating euros by the truckloads, the EU economy would collapse in a matter of weeks!

 

Besides, it is a long lasting fantasy to believe that Germans work hard while others enjoy the good life.

 

It so happens that the German economy was doted, very long ago, with a heavy industry, in the famous Ruhr basin, and that notably thanks to the massive economic development in Asia, their products were and still are in strong demand...much more so than Italian fine clothes and pastas, French perfumes and handbags, or Greek cheese.

 

It is easier to bring back home billions of euros selling factories, or the Bangkok BTS, for example, than to do so selling items retailing at a few hundred euros.

 

The Germans were lucky to inherit this industrial infrastructure, because when it comes to modern technology (computers, mobile phones and so on) they are nowhere to be seen.

 

And when it comes to clothing, food and arts, no one thinks about Germany first, or at all...

12 minutes ago, bristolboy said:

Your asserting such doesn't make it so. If the Euro is so potent a force for stability why the economic crash in 2008 for the Eurozone nations? Is that your idea of stability? Why did non Euro members of the EU come out of that recession much faster than did the Eurozone group?  Why was the Eurozone the last to come out of the recession? I guess you could say that extreme slowness in recovery is a kind of stability. A particularly cruel kind of stability but stability nonetheless.

In physics greater mass creates greater momentum. I think this applies to economies as well.

 

Having a stable currency and economies, movements to one way or another tend to happen slower than those which have more agile currencies. The slopes are also lesser. 

 

Don't you think Euro countries are doing rather well generally? Inflation has been almost nothing for the past decades. I really don't want to get back to the days when inflation was 5-10 percent annually. While the number of our salaries 'increased', we were still be able to buy the same amount of milk with our salaries, due inflation. 

2 minutes ago, oilinki said:

In physics greater mass creates greater momentum. I think this applies to economies as well.

 

Having a stable currency and economies, movements to one way or another tend to happen slower than those which have more agile currencies. The slopes are also lesser. 

 

Don't you think Euro countries are doing rather well generally? Inflation has been almost nothing for the past decades. I really don't want to get back to the days when inflation was 5-10 percent annually. While the number of our salaries 'increased', we were still be able to buy the same amount of milk with our salaries, due inflation. 

Have you seen the youth unemployment rates in the lower half of the eurozone?

And these are massaged figures as usual...no need to think what the real rates are...

5 minutes ago, Brunolem said:

They are not doing well!

Like the US and a few others, they only appear to do well, thanks to unsustainable monetary policies.

If the ECB let the market set the interest rates, and stop creating euros by the truckloads, the EU economy would collapse in a matter of weeks!

 

Besides, it is a long lasting fantasy to believe that Germans work hard while others enjoy the good life.

 

It so happens that the German economy was doted, very long ago, with a heavy industry, in the famous Ruhr basin, and that notably thanks to the massive economic development in Asia, their products were and still are in strong demand...much more so than Italian fine clothes and pastas, French perfumes and handbags, or Greek cheese.

 

It is easier to bring back home billions of euros selling factories, or the Bangkok BTS, for example, than to do so selling items retailing at a few hundred euros.

 

The Germans were lucky to inherit this industrial infrastructure, because when it comes to modern technology (computers, mobile phones and so on) they are nowhere to be seen.

 

And when it comes to clothing, food and arts, no one thinks about Germany first, or at all...

Oh yes, we are doing very well at this moment. Our problem currently is to find enough capable workforce for our technology sectors. That's a nice problem to have.

 

Clothing food and arts are probably found best in Italy, France and Spain. We more northern countries have very little to contribute to those sectors really. Britain, Germany or Finland are not really famous of our dishes, for a good reason ????

 

 

4 minutes ago, Brunolem said:

Have you seen the youth unemployment rates in the lower half of the eurozone?

And these are massaged figures as usual...no need to think what the real rates are...

I have seen and it's because these countries are managed, no because Euro. 

 

Stop blaming external reasons. 

1 minute ago, oilinki said:

In physics greater mass creates greater momentum. I think this applies to economies as well.

 

Having a stable currency and economies, movements to one way or another tend to happen slower than those which have more agile currencies. The slopes are also lesser. 

 

Don't you think Euro countries are doing rather well generally? Inflation has been almost nothing for the past decades. I really don't want to get back to the days when inflation was 5-10 percent annually. While the number of our salaries 'increased', we were still be able to buy the same amount of milk with our salaries, due inflation. 

No it doesn't apply to economies as well. Tell me how the British economic decline was worse than the Eurozone's. Or the Poles or the Hungarians. Even Iceland which suffered a huge decline thanks to its banking disaster is doing very well indeed nowadays. Thanks to free movement of goods, services, and people, the economic zone is the EU. The Eurozone is a currency union not an economic union. 

And I notice that you still haven't addressed the fact that nations were punished not for the sins of their governments, but for the sins of private parties and the foolish banks who lent to them. Germany clearly was hugely negligent and responsible for the part its banks played in bringing so much destruction to the Eurozone. Yet it managed to shift most of the burden from its banks to the governments and citizens of other nations. It tried to get the UK to assist, but quickly backed off when the UK told them more or less to go f*** themselves. Yet you go on and on about virtuous Germany.

2 minutes ago, oilinki said:

I have seen and it's because these countries are managed, no because Euro. 

 

Stop blaming external reasons. 

You are being consistently dishonest. Spain and Ireland did not have a problem with government mismanagement. It was the foisting of private debt onto governments, also known as socialization of doubt, that damaged those countries so badly. Let me remind you that before the crash the debt to GDP ratio of Spain was less than 40%. For Ireland it was 21%. For Germany the rate was slightly less than 65%,

Stabile currency creates environment of prosperity, quite like stabile social environment does. People simply doesn't have to worry so much of surviving and can focus of creating future for themselves. That's where Euro comes in as a tool of stability.

 

I do agree that what happened with Greece, bailing out bank loans, was a stupid thing to do. But I agree it only because I have no idea what the alternative would have been. I simply don't know. If you know better, I'm happy to learn from you. 

 

 

20 minutes ago, oilinki said:

That's where Euro comes in as a tool of stability.

It can do so inside one nation. But currency union across different nations without fiscal union (which requires political union) creates instability. The theory is clear, the evidence is clear.

1 minute ago, My Thai Life said:

It can do so inside one nation. But currency union across different nations without fiscal union (which requires political union) creates instability. The theory is clear, the evidence is clear.

That's easy to say when you come from one of the largest economies in the world. The rest of us have not been so lucky in the past.

 

I have a feeling, you might learn this lesson in not so distant future. 

35 minutes ago, oilinki said:

Stabile currency creates environment of prosperity, quite like stabile social environment does. People simply doesn't have to worry so much of surviving and can focus of creating future for themselves. That's where Euro comes in as a tool of stability.

 

I do agree that what happened with Greece, bailing out bank loans, was a stupid thing to do. But I agree it only because I have no idea what the alternative would have been. I simply don't know. If you know better, I'm happy to learn from you. 

 

 

The alternative would have been to share the losses between lenders and borrowers, because they both shared responsibility.

 

Yet, Germany and a few others like France are only part of the eurozone when it favors them.

 

As soon as things go sideways, they retreat in their fortress and feign ignorance.

 

They are not different from the big corporations whose motto is: "privatize the profits, socialize the losses", adapted in this case as "let us enjoy the benefits of the euro and let others deal with its downsides".

 

 

Edited September 27, 20187 yr by Brunolem

46 minutes ago, oilinki said:

Stabile currency creates environment of prosperity, quite like stabile social environment does. People simply doesn't have to worry so much of surviving and can focus of creating future for themselves. That's where Euro comes in as a tool of stability.

 

I do agree that what happened with Greece, bailing out bank loans, was a stupid thing to do. But I agree it only because I have no idea what the alternative would have been. I simply don't know. If you know better, I'm happy to learn from you. 

 

 

And your stability analogy is definitely wrong. What having a single currency do is suppress the inequalities between economies until that's' no longer possible and a drastic break occurs. If you want a more fitting analogy it's like living in an earthquake zone. The stresses and strains build up until disaster hits. It's much more genuinely stable actually to live in an environment where the stresses and strains are eased frequently. And if a major disaster does strike one, it leaves the others relatively unaffected. The Eurozone enjoyed the illusion of stability for roughly 14 years. But when disaster struck, it suffered far more and far longer than those nations that kept their own currency. Believing that you can impose a rigid stability is a sure plan for disaster. 

 

As for what should have been done with Greece. It should have been kicked out of the Eurozone and not threatened with economic warfare as espoused by the EU. The banks that would fail in that case should have been nationalized. Depositors and creditors should have been protected but shareholders not. Sweden actually did this in the 1990's and it was very successful. 

3 hours ago, oilinki said:

Stabile currency creates environment of prosperity, quite like stabile social environment does. 

Some food for thoughts...

 

http://gnseconomics.com/en_US/2018/09/26/qr-3-2018-how-the-eurozone-breaks/