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Why Germany seems not to want a quick fix for the euro crisis

economist.com

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Re: Why Germany seems not to want a quick fix for the euro crisis

#51

Post by blue1 »

jasonkolb wrote: post #45

While I generally abhor taxes, I really like the idea of a financial transaction tax. It would effectively eliminate the profit margin for high frequency trading and remove a LOT of volatility from the markets. IMHO the market volatility is causing the average person to doubt the stability of the economy and hurting the entire ecosystem. Even a small transaction tax... Say, $1/EUR per trade would remove the incentive…

By drastically reducing volume it would also reduce liquidity and increase spreads. Sweden tested this in the eighties and abandoned after seeing the market substantially dry up (and the resulting taxes as well).

Re: Why Germany seems not to want a quick fix for the euro crisis

#52

Post by _delirium »

Iv wrote: post #37
paulkoer wrote: post #5

As a German I must say that in my opinion this article captures the German sentiment very well. On the one hand it is short sided, it will likely lead to more economic problems than necessary and the stance of the Euro members (and Germany especially) on Greece is hurting the economy there much more than necessary. On the other hand I do feel that some of this sentiment is justified. After all the example of Italy (B…

I see only one way out : find responsibles and punish them. Through fines and prison terms. Some people have hidden the true state of Greece by fraudulent accounting with the help of experts from Goldman Sachs. Politician who participated in that should be judged for treason. Financial experts for fraud. Goldman Sachs must be fined heavily for this. Right now, Dexia is falling despite 6 billions of aid in 2008 and a…

I'm not sure the falsification of records is really at the root of this, in the sense that it was a deception that did not really deceive anyone. There was a bit of consensual hallucination going on: nobody really believed Greece's numbers, but it was convenient for everyone to pretend to believe them. Lenders who bought Greek bonds should certainly have conducted their own analyses and had a decent idea that the headline figures were not accurate (I would guess they did, actually, but assumed that Greece wouldn't be allowed to default, so bought the bonds anyway).

Re: Why Germany seems not to want a quick fix for the euro crisis

#53

Post by seunosewa »

jasonkolb wrote: post #45

While I generally abhor taxes, I really like the idea of a financial transaction tax. It would effectively eliminate the profit margin for high frequency trading and remove a LOT of volatility from the markets. IMHO the market volatility is causing the average person to doubt the stability of the economy and hurting the entire ecosystem. Even a small transaction tax... Say, $1/EUR per trade would remove the incentive…

Are you 100% sure?

Re: Why Germany seems not to want a quick fix for the euro crisis

#54

Post by _delirium »

blue1 wrote: post #51
jasonkolb wrote: post #45

While I generally abhor taxes, I really like the idea of a financial transaction tax. It would effectively eliminate the profit margin for high frequency trading and remove a LOT of volatility from the markets. IMHO the market volatility is causing the average person to doubt the stability of the economy and hurting the entire ecosystem. Even a small transaction tax... Say, $1/EUR per trade would remove the incentive…

By drastically reducing volume it would also reduce liquidity and increase spreads. Sweden tested this in the eighties and abandoned after seeing the market substantially dry up (and the resulting taxes as well).

I can see that happening with a large tax, but surely it's not a step function, where no transaction taxes results in huge liquidity, while any non-zero tax causes a catastrophic drying up of liquidity. How about, say, a penny-per-trade fee? That would discourage trading at the sub-penny level of liquidity, which is not particularly useful anyway, while still making it profitable to provide liquidity if arbitrage opportunities of >$0.01 were involved.

Re: Why Germany seems not to want a quick fix for the euro crisis

#55

Post by vsl2 »

sprash wrote: post #43

"German politicians are constrained by a complex federal system, a sceptical public, messy coalition politics and jealous institutions such as the constitutional court." You mean German politicians are constrained by Democracy. This article portays it as if it was a bad thing.

Democracy I think is the least evil of the types of government that a society can have, but is still inherently terribly flawed (but less than other types of government) because of basic human failings (e.g. moral corruption, greed, "sheeple" mentality).

Perhaps only a benevolent dictator could actually make decisions in an unbiased "best for everyone" manner...but then again how long would any dictator remain benevolent once he/she's had a taste of absolute power?

Re: Why Germany seems not to want a quick fix for the euro crisis

#56

Post by _delirium »

hugh3 wrote: post #48
lukeschlather wrote: post #44

Earlier quoted context omitted.

The US has been doing extremely half-assed Keynes. It's not working because the bills haven't been large enough to have a measurable effect. Fundamentally I think the problem is the US has been too risk-averse. We've been hamstrung by our inability to accept that we have to take big risks to solve big problems, instead we're neutering any sort of solution to the point here it doesn't present a risk, and consequently…

You're making economics sound like a religion rather than a science, there. If Keynesian economics hasn't worked in the US, then there's two possibilities: 1. It was too small or wrongly applied, or 2. Keynesian economics doesn't really work

It's also worth separating the descriptive and prescriptive aspects of Keynesian economic theory. On the descriptive aspects, it seems to be doing fairly well so far. In particular, Keynesian models predicted that we wouldn't suffer significant inflation from the stimulus program + QE/QE2, due to a liquidity trap, whereas some monetarist models predicted that high inflation would result (and the Austrians were even predicting hyperinflation). Since high inflation hasn't materialized, that seems like at least some evidence in favor of the Keynesian macroeconomic models.

Re: Why Germany seems not to want a quick fix for the euro crisis

#57

Post by IdeaHamster »

jonnathanson wrote: post #35
paulkoer wrote: post #5

As a German I must say that in my opinion this article captures the German sentiment very well. On the one hand it is short sided, it will likely lead to more economic problems than necessary and the stance of the Euro members (and Germany especially) on Greece is hurting the economy there much more than necessary. On the other hand I do feel that some of this sentiment is justified. After all the example of Italy (B…

The sentiment is justified, but the position is untenable. With every passing day, Greek debt compounds massively, and the hole gets bigger. Meanwhile, the uncertainty in the markets causes further volatility and pain for all concerned, and you risk the setting in of total panic. You end up with the worst of both worlds: all the market pain of a Greek default, without the default itself...but with the default still q…

There's an interesting extension of this line of thought. My sister-in-law works in Istanbul for a Greek company. She says that most of the actual profit-generating work done for this company is done in Romania or Turkey. The Greek offices, from what she describes, are more or less completely dysfunctional.

Now, take that insight of conditions on the ground along with a chart of the growth of the Greek vs Turkish economies over the last decade, and then ask yourself: why is Greece a full EU member and included in the Eurozone, while Turkey's membership negotiations have completely stalled (and will probably conclude with Turkey not joining the EU)?

Can you imagine a world where Greece is allowed to leave the Euro, massively devalue its debt (and take the decade or more of restructuring/rebuilding its economy that would come with that), and Turkey with its strong manufacturing sector and youthful, growing middle class is brought in in Greece's place? The EU and the Euro would be in a far stronger position...but it will never happen. Unfortunately, European cultural prejudices are still to ever-present and will result in Greece continuing to be dragged along while Turkey gets shunned.

Re: Why Germany seems not to want a quick fix for the euro crisis

#59

Post by j_col »

DasIch wrote: post #41
athoma wrote: post #11

Even the title of this article doesn't make a large amount of sense. Of course the Germans want to take part in "fixing" the Euro crisis. But this is the problem with people in the finance world today. All they want is a "quick" fix. "Patch" the hole and the boat will stop leaking. I completely agree, something must be done to avert a double dip however a "quick fix" will not get us there. Most importantly, people ne…

If people save more and spend less, the prices go down, the companies make less money and unemployment figures go up. I don't quite see how this would solve the problem.

Precisely. That is why Germany does not have a great domestic economy, all of their wealth is generated from exports, i.e. first we lend you the money, then you buy our expensive cars with the money, then we ask for the money back ;-)

Re: Why Germany seems not to want a quick fix for the euro crisis

#60

Post by tftfmacedo »

IdeaHamster wrote: post #57
jonnathanson wrote: post #35

Earlier quoted context omitted.

The sentiment is justified, but the position is untenable. With every passing day, Greek debt compounds massively, and the hole gets bigger. Meanwhile, the uncertainty in the markets causes further volatility and pain for all concerned, and you risk the setting in of total panic. You end up with the worst of both worlds: all the market pain of a Greek default, without the default itself...but with the default still q…

There's an interesting extension of this line of thought. My sister-in-law works in Istanbul for a Greek company. She says that most of the actual profit-generating work done for this company is done in Romania or Turkey. The Greek offices, from what she describes, are more or less completely dysfunctional. Now, take that insight of conditions on the ground along with a chart of the growth of the Greek vs Turkish eco…

Regarding Turkey negotiations, I guess you know why.

Human rights issues ( http://en.wikipedia.org/wiki/Human_rights_in_Turkey ), Cyprus, death penalty.

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