I had another great conversation with with Dylan at Volitional Science Network. We talked about deficits, monetary policy, Weimar Germany, hyperinflation and what all of this means for Greece and the European Currency Union.
With a formidable yield of over 16 percent on their government bonds, way ahead of such shining beacons of economic stability as Pakistan and Colombia, Greece sure is a good example for how you can act like a third world country and get paid like an industrialized nation for a while if only you are lucky enough to find a pool of greater fools who would conceive of a deranged and imperialistic project such as the European Union.
The WSJ writes in Waking Up to Greece’s Default Position :
Last week saw real progress in reaching a solution to the Greek, Portuguese and Irish debt crises. It is now recognized that these countries can never, ever, repay their debts, certainly not on time, and more than likely not in full. A default by any other name is a default.
Mish writes in his blog:
Note that Roubini’s timeline is 5-10 years. The ECB an EU expect Greece to return to the dent markets by 2013.
Structural reforms or not, Greece will not pay back its debt in two years, nor will Greece return to a healthy bond market in two years.
Greece will default.
A few days ago I revisited the EUR/USD chart among other things:
… and the seemingly most hated currency in the world has also remained within it’s long term trading range, and it may be possible that once again it will show some significant strength for the months to come:
That possibility seems more and more likely at this point …
Protests in Spain continue in spite of a recently imposed ban:
Tens of thousands of demonstrators across Spain continued sit-ins and other protests against the established political parties on Saturday. They did so in defiance of a ban against such protests and ahead of regional and municipal elections on Sunday.
About 28,000 people, most of them young, spent Friday night in Puerta del Sol, a main square in downtown Madrid, the police said. They stayed even as the protest ban went into effect at midnight under rules that bring an official end to campaigning before the election in 13 of Spain’s 17 regions and in more than 8,000 municipalities.
Fueling the demonstrators’ anger is the perceived failure by politicians to alleviate the hardships imposed on a struggling population. The unemployment rate in Spain is 21 percent.
Beyond economic complaints, the protesters’ demands include improving the judiciary, ending political corruption and overhauling Spain’s electoral structure, notably by ending the system in which candidates are selected internally by the parties before an election rather than chosen directly by voters.
Live feed from Spain:
Young Spaniards are fed up with a regime that has wrecked the country’s economy and gets more and more corrupt by the day. This is always and everywhere the inevitable price of statism. Asking for a different flavor of it will change nothing fundamentally in the long run. Voluntaryism will …
I was happy to see someone recommend that post in a comment on Nobody Expects the Spanish Revolution:
It looks to me like the teenage leftists of the European Union require a direction and a purpose.
The market economy is the only thing on your side, young spaniards, it’s the only thing that provides you any measure of freedom and self-realisation. It’s also the only economy you have, and thus the only source of actual material wealth. By interfering with it you’re only going to produce less wealth, less jobs and more suffering. Yes, government is a massive problem which must be dealt with, but ‘democracy’ is not the solution. The solution is liberty: have the government withdraw interference from markets, eliminate ‘social services’ (every Euro spent by the government is another stolen from the productive market, meaning less real wealth and less sustainable jobs.. and how is it a ‘service’ if you’re forced to pay for it?), eliminate anti-market corporatism (limited corporate liability, patent law, bailouts, anti-trade taxation, fiat currency monopoly, all anti-competitive laws) and by doing so eliminate the corporatist problem while retaining the economic liberty to have a thriving economy. Because just demanding more socialism will only produce more economic problems, and you’ll never make any forward progress.
I’m not advocating a conservative position, in general conservatives tend to talk about economic freedom but in practise are just a bunch of cowardly prohibitionists, corporate whores and opponents of personal liberty. What I’m saying is that democracy and socialism are no better than fascist corporatism, you’re still going to be left with the same problems of massive corruption, very little economic progress and a ruling elite who don’t give a damn about you and your rights. The further you push to the left, the worse your problems will become. You won’t achieve anything positive for yourself or for Spain using coercive violence.
Please take a moment to consider the anti-coercive anarchist philosophy of Voluntaryism as an alternative to the further perpetuation of personal and economic oppression:
Revolutions are pointless things, they always return you to the same point you started at. Even the American revolution ended in tyranny and taxes. Lets try and aspire to something better than just another turn of the wheel…
Meanwhile, Italy Outlook Revised to Negative by S&P:
Italy had its credit-rating outlook lowered to negative from stable by Standard & Poor’s, which cited the nation’s slowing economic growth and “diminished” prospects for a reduction of government debt, according to an S&P statement sent late yesterday. S&P affirmed Italy’s A+ long-term rating, the fifth-highest, and its top-ranked A-1+ short-term rating.
‘Bottlenecks and Rigidities’
In Italy, “diminished growth prospects stem from what we consider to be a lack of political commitment to deregulating the labor market and introducing reforms to boost productivity,” S&P said. “We believe measures to reduce the bottlenecks and rigidities in Italy’s economy are especially important in light of Italy’s limited monetary flexibility.”
The negative outlook implies a one-in-three chance that Italy’s ratings could be lowered within the next 24 months.
Italy is headed for a recession, that’ll make the required adjustments all the more tough on its citizens. In a currency union without fiscal union such measures will only happen in the 11th hour.
This is exactly what I meant when I wrote Imbalance Increases in Eurozone over 2 years ago:
The fact that a bailout of some Euro states by others is discussed, just shows how torn this European Union really is, how severe its imbalances are. With discrepancies like these, it is completely unfeasible to maintain a currency union. The Euro will keep taking its beating for it.
European member states needs to come to their senses. An absolute and unconditional abandonment of any more bailout talks is highly necessary. Member states need to consolidate their finances, cut spending, trim down their obtrusive bureaucracies and cut their unsustainable tax burdens. Germany, France, and Italy should be leading the way in these efforts. The European Commission needs to put an end to its disastrous policy of subsidizing agriculture.
Individual responsibility per member state rather than complete collectivism should be aspired. Unfortunately Europe has not been very keen on individual responsibility. In Germany, France, and Italy, all one can hear is rants about “neoliberalism”, “anarchism”, “capitalism on steroids” which supposedly are to blame for the financial crisis.
The sentiment in the US is not at all different. As the US economy continues its decline, Europe is unwittingly joining the bandwaggon.
Also, look at what I said about Greece back then:
What do you think is going to happen once these plans, too, prove completely unsustainable and everyone acts surprised and rushes back to the table?
Every single time debates were raging about whether or not they should be bailed out by other member states the exposed banks’ and the governments’ propaganda minions out there would tell us that this particular bailout would solve the structural problems at hand, and every time people on the other side would say that they won’t and that we’ll be having the same debate a few years from then. Then the inevitable happens and everything these pro bailout minions were wrong on suddenly doesn’t matter anymore and we’re repeating the same debate.
Every media push in support of bailout measures is thus nothing but a temporary and concentrated effort to push a particular program across the finish line, and all tools and weapons in the propaganda arsenal are considered fair to make it happen. What happens afterwards is completely irrelevant to these people.
The cycle of screwing the future via government budget deficits always requires that future generations suffer for excesses of the past, be it via increased taxation or via a default on false promises made.
That future you’ve been hearing people talk about for decades is no longer future, it is here and now.
Truth is the enemy of statism, always and everywhere.
As a mere formality the German Bundestag has approved the bailout for Greece, and with that yet another aid package for German banks:
German lawmakers on Friday approved the country’s share of the rescue package for debt-laden Greece after a boisterous debate in which the finance minister told them they had no alternative to the unpopular measure, The Associated Press reported.
The lower house of Parliament voted 390-72, with 139 abstentions, to authorize granting as much as 22.4 billion euros ($28.6 billion) in credit over three years. That is part of a wider 110 billion euro package backed by eurozone members and the International Monetary Fund.
Chancellor Angela Merkel’s center-right governing coalition was joined by one of the three opposition parties in approving the aid. Germans dislike the idea of rescuing another country from its financial irresponsibility.
The upper house of parliament, which represents Germany’s 16 states where Merkel’s government also has a majority, was expected to add its approval later Friday.
”We have to make this decision and we have no better alternative,” Finance Minister Wolfgang Schaeuble told lawmakers ahead of the vote. ”Any other alternative would be much more expensive for the Germans, would be much more dangerous, would carry much bigger risks.”
Schaeuble said central bankers and the IMF agree ”it would be disastrous to risk … a member of the European currency union, Greece, now becoming insolvent.”
”This is about defending the common European currency as a whole, and with it we are defending the European project,” Schaeuble said.
”The situation is very serious and no one can make out that we are already out of the woods with today’s decision,” Foreign Minister Guido Westerwelle said. ”What is important now is that we must extinguish the fire so no brush fire spreads in Europe, and we must at the same time fight the cause of the fire.”
Geeez, could these guys at least have the courtesy to come up with some different nonsense than the one they have been feeding us over the past years? All this pathetic and fuzzy nonsense about defending the currency as a whole and how doing nothing is far worse than throwing more money at the problem, blah blah blah … come on people, we’ve heard it before and it’s simply embarrassing! :)
Bailing out Greece is unpopular in Germany, which has Europe’s biggest economy. Merkel long took a tough line on aid, and opponents have accused her of dragging her heels ahead of a regional election this weekend.
Sigmar Gabriel, the leader of the biggest opposition party, charged that Merkel had ”destroyed trust in the credibility of Germany’s European policy.”
Gabriel’s Social Democrats abstained. They had hoped to couple the vote with a call for a tax on financial market transactions — which Schaeuble described as unrealistic, given a lack of international support.
The Greens, also in opposition, voted in favor. But the hard-left Left Party objected to the rescue package on the grounds it would make things worse for Greece.
Left Party lawmaker Gesine Loetzsch described the austerity package to be implemented in Greece as ”brutal” and accused German leaders of doing too little to control markets.
”Speculators are Taliban in pinstripes, and people in our country must be protected from these Taliban,” Ms. Loetzsch said — a remark that drew a rebuke from speaker Norbert Lammert.
… you know how bad things are when the only ones who are remotely making sense are the commies.