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Where has all the money in the world gone?

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Re: Where has all the money in the world gone?

#71

Post by Atropos »

mixmax wrote: post #70
Atropos wrote: post #54

Earlier quoted context omitted.

At the moment only Greece (2,65% of eurozone gdp), Portugal (1,83%) and Ireland (1,82%) have received bailouts - which makes 6,3% not "half the Eurozone melting down". Spanish banks may get a €100b bankout aswell - big deal. But I agree with you on the source of the problem - socialism or uneconomic regulation. That is visible in the doing business rankings of the world bank ( http://www.doingbusiness.org/rankings ).…

The problem isn't socialism, it's a divergence of productivity between the northern and southern regions of the euro area. When you combine this with a shared currency you're asking for trouble. Note that the socialist nordic countries have stellar economies. I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in heari…

I only used the word "socialism" because the other commenter used it - in the original meaning of the word it doesn't exist anywhere in Europe. What I meant is simply bad regulation. You are correct that some of the nordish countries have a more ,,left'' reputation and have things like high taxes, alot of redistribution etc... But if you look at the "Heritage Ranking of Economic Freedom" (http://www.heritage.org/index/ranking), you see: - Denmark (Rank 11), Finland (17), Sweden (21) - Spain(36), Portugal(68), Italy(92), Greece(119)

Re: Where has all the money in the world gone?

#72

Post by photon137 »

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

Your fundamental premise is wrong (as an aside, fiat currency does pay dividend - it's called "interest").

Central Banks are meant to be independent of the government. Their mandates are: (a) Acting as a lender of last resort to banks (b) Controlling inflation/deflation through monetary policy (c) (In some cases, like that of the Fed) ensure unemployment does not breach an "acceptable" level.

In almost no mandate, is it mentioned that the Central Bank has to monetize sovereign debt (T-Bills, Treasuries, Greek Debt, Spanish debt etc). The ECB isn't legally allowed to do so for very good reasons. Even the Fed doesn't do that - all its Treasury and MBS purchases are from the secondary market.

In fact, when the Spanish government directed $19B ECB funds to Bankia via injecting Spanish debt into the bank, it was a covert form of sovereign debt monetization - something the ECB objected to vehemently, but couldn't stop.

Even Germany could not pay its debt if investors demanded redemption at maturity

They always demand redemption at maturity - every single one - however, it occurs via a debt-rollover, ie issuing new debt to repay older debt.

What Europe needs is that the distortions in the balance-of-payments between countries should be fixed - the liabilities of the Eurozone aren't evenly distributed amongst countries with respect to their capability to service those liabilities (and that indeed is due to irresponsible fiscal behavior). Bu this can't be controlled by monetary policy alone - it requires closer fiscal integration (and agreeing upon things like retirement ages, pensions, insurance and a whole lot of other stuff).

Re: Where has all the money in the world gone?

#73

Post by potatolicious »

mixmax wrote: post #70
Atropos wrote: post #54

Earlier quoted context omitted.

At the moment only Greece (2,65% of eurozone gdp), Portugal (1,83%) and Ireland (1,82%) have received bailouts - which makes 6,3% not "half the Eurozone melting down". Spanish banks may get a €100b bankout aswell - big deal. But I agree with you on the source of the problem - socialism or uneconomic regulation. That is visible in the doing business rankings of the world bank ( http://www.doingbusiness.org/rankings ).…

The problem isn't socialism, it's a divergence of productivity between the northern and southern regions of the euro area. When you combine this with a shared currency you're asking for trouble. Note that the socialist nordic countries have stellar economies. I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in heari…

I've noticed that socialism is definitely a pejorative term in the US - which dismays me as a socialist-leaning Canadian. It's like economic Godwin - call someone a socialist and effective discourse just kind of grinds to a halt.

It's the modern "communism", without invoking the spirit of McCarthy.

Re: Where has all the money in the world gone?

#74

Post by jl6 »

mixmax wrote: post #70
Atropos wrote: post #54

Earlier quoted context omitted.

At the moment only Greece (2,65% of eurozone gdp), Portugal (1,83%) and Ireland (1,82%) have received bailouts - which makes 6,3% not "half the Eurozone melting down". Spanish banks may get a €100b bankout aswell - big deal. But I agree with you on the source of the problem - socialism or uneconomic regulation. That is visible in the doing business rankings of the world bank ( http://www.doingbusiness.org/rankings ).…

The problem isn't socialism, it's a divergence of productivity between the northern and southern regions of the euro area. When you combine this with a shared currency you're asking for trouble. Note that the socialist nordic countries have stellar economies. I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in heari…

People use the word Socialism when they mean something like "perversion of incentives". We perceive that Socialism incentivizes bad choices, like having more children than you could afford without government benefits, or making investments that appear less risky because you assume a government bailout will protect you.

As you point out, the nordic countries show that perverse incentives don't necessarily follow from Socialism. And indeed, America has its own non-Socialist perverse incentives such as encouraging pollution by not enforcing payment of the environmental externalities.

But all things considered globally, more socialism does tend to imply more perverse incentives.

Re: Where has all the money in the world gone?

#75

Post by soc88 »

mixmax wrote: post #70
Atropos wrote: post #54

Earlier quoted context omitted.

At the moment only Greece (2,65% of eurozone gdp), Portugal (1,83%) and Ireland (1,82%) have received bailouts - which makes 6,3% not "half the Eurozone melting down". Spanish banks may get a €100b bankout aswell - big deal. But I agree with you on the source of the problem - socialism or uneconomic regulation. That is visible in the doing business rankings of the world bank ( http://www.doingbusiness.org/rankings ).…

The problem isn't socialism, it's a divergence of productivity between the northern and southern regions of the euro area. When you combine this with a shared currency you're asking for trouble. Note that the socialist nordic countries have stellar economies. I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in heari…

This also amazes me too. The US has neither a working, efficient health care nor education system, but blames others for "socialism"?

Re: Where has all the money in the world gone?

#76

Post by [deleted] »

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

[deleted]

Re: Where has all the money in the world gone?

#77

Post by tocomment »

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

Why is europes situation different than individual states in the us? They all issue debt in a currency they can't create and they generally do fine.

Why can't we think of eu members like states of a larger country?

Re: Where has all the money in the world gone?

#78

Post by ap22213 »

I just finished David Graeber's "Debt", and it really enlightened me on this subject more than anything in that reddit thread. It's one of the most scholarly, informative, provocative books I've read in a very long time. I'm actually reading it a second time through, just to make sure I understand it all.

Re: Where has all the money in the world gone?

#79

Post by jonhohle »

WA wrote: post #9
bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

You ask how any of this debt can ever be repaid. But is this really what we want to achieve? Repay the debt? If money is, like in the reddit post, an IOU (or a certain unit of debt), then the idea is to balance out the amount of money (debt) with the growth of the economy. Too much and we got inflation. Too little and we cripple the economy. I'm very curious why debt should be repaid at all, care to explain? (Note: I…

It is different, but there are similarities: the more debt accrued, the more resources that go into servicing that debt; the more debt accrued, the less likely you are to be able to secure additional debt.

A US defective of $10T required 6% of the federal budget to service in fiscal year 2011. Currently, accrual of debt is outpacing both inflation, and increases in revenues.

This might still be fine _if_ the additional debt has a positive impact on GDP growth, but that's not entirely obvious. Japan has been in a similar situation for two decades. 25% of their national budget is used for servicing loans.

Re: Where has all the money in the world gone?

#80

Post by [deleted] »

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

[deleted]
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