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Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

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Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#121

Post by shazow »

Patrick_Devine wrote: post #98
tomp wrote: post #87

Earlier quoted context omitted.

Germany is a nation that has benefited enormously from a single currency (according to my understanding). A large source of currency fluctuations are trade imbalances. If a country exports more than it imports, its currency appreciates. If it imports more than it exports, it depreciates. For example, if USA imports from the UK are bigger than it's exports to the UK, then USA will be buying GBP with USD (on average),…

I wish more people understood this. Germany has benefited enormously because of the euro, and yet you see a lot of belly aching about the southern European countries. Countries really only have two valves to throttle their economies. Interest rates (which Greece now has the highest in the European Union), and printing more money. Right now because the Greek economy is in a log jam, they're suffering from deflation an…

> It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.

I read this a lot but I don't quite understand why--How does a unified currency prevent the domestic economy in Greece from being cheaper than importing German goods?

Why can't the local Greece industry lower prices (as it would effectively with a falling local currency), thus driving more domestic purchasing and exports since it would be comparably cheap to neighbouring countries?

The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#123

Post by josu »

antientropic wrote: post #95
WhitneyLand wrote: post #59

Tangentially, what is the main reason for all the protest against the EU? I understand that people in Greece are suffering and that's a terrible thing. However from a lay perspective it seems Germany et al are just trying to help.

Paul Krugman helpfully explains the situation here: http://www.nytimes.com/2015/01/26/opinion/paul-krugman-endin... In short, the EU and the IMF demanded savage spending cuts from the Greek government. Turns out that cutting in a depressed economy makes the depression worse (despite the wildly optimistic predictions by EU officials, who decided to ignore textbook economics). As a result, Greece now has enormous unemp…

>Turns out that cutting in a depressed economy makes the depression worse

Sure, if you are insolvent but you can still get a hold on some borrowed money your situation is obviously going to get better in the short run. But you are just killing the goose that laid the golden egg, since your economy is dependent on borrowing money.

It's not black or white. On the one hand you have the economist that say that Greece must stop running a public deficit since it may risk a default if creditors believe that the Greek Government will never be able to repay the debt. On the other hand, you have the (neo)keynesian economists that believe that cutting spending during a crisis is a suicide, and therefore paying off the debt is not a priority. Which ones are right? Well, only time will tell.

> As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts.

It's not clear how much of these is caused by the austerity measures. If you remember, at the beginning of the crisis most European governments launched public spending programs in order to reactivate the economy. It only made things worse: it did not create long lasting jobs and it only increased public deficit, which in turned also increased their debt obligations.

>This is clearly an unsustainable course, something now recognized by the Greek voters.

Actually, the only "clear" unsustainable course is to keep the economy afloat by increasing their debt. If this is the new normal, they will not be able to keep borrowing forever.

>Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work.

You have to understand that they are choosing the lesser evil. Even if austerity did not work, it still might be better than increasing their debt.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#124

Post by rst »

tomp wrote: post #79
JumpCrisscross wrote: post #11

Varoufakis wrote a blog post two years ago on the history of political economic thought on the firm. It also delves into Valve's unique management culture [1]. "There is one last bastion of economic activity that proved remarkably resistant to the triumph of the market: firms, companies and, later, corporations. Think about it: market-societies, or capitalism, are synonymous with firms, companies, corporations. And y…

Ironically, Valve also operates "by the means of some non-price [...] mechanism". I wonder how an even more radically free-market organization would look like - where people are literally trading services for money within a company. I think that several industries already operate in a similar manner, where you have "rain-makers" who bring in the money, and "support staff" (everybody else). For example, traders/portfo…

A doctrinaire Ayn-Rand-ian got control of Sears a few years ago and tried it: http://www.alternet.org/economy/ayn-rand-sears-and-eddie-lam...

Didn't work out too well. Some units needed to work together for the organization as a whole to function -- but being forced to compete against each other for corporate resources gave them incentives to sabotage each other instead, and the overall bottom line suffered greatly.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#125

Post by xkarga00 »

jameshart wrote: post #74
xkarga00 wrote: post #30

Varoufakis is a great economist and his placement as the Finance Minister is a smart move from the new government. At this point I would like to suggest reading To Future And Back by I. Pitsouli[1]. Somewhere in it, there is suggested (or prophecized if you wish) that in years to come scientists will replace politicians in governments. Well, that has already started happening and is right IMO because science is close…

"in years to come scientists will replace politicians in governments" Not an especially new idea, especially in a Greek context. Plato, in Republic : "The society we have described can never grow into a reality or see the light of day, and there will be no end to the troubles of states, or indeed, my dear Glaucon, of humanity itself, till philosophers become rulers in this world, or till those we now call kings and r…

"Not an especially new idea"

I didn't claim it to be one. Of course Plato and his thoughts are behind it and if you give the book I mentioned a shot you'll find out that he is heavily mentioned in it.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#126

Post by lmm »

arethuza wrote: post #37
kalkin wrote: post #21

Earlier quoted context omitted.

Politicians from parties who now get 3-4% of the vote lied years ago (to the Greek public as well as EU bankers), so let's take Greek workers' pensions, crush their unions, slash their social services, and offer no jobs or future to 60% of Greek young people. The bankers may not get their money anyway, since the debt is still increasing, but at least the Greeks* will get what they deserve! *may not apply to the elite…

Out of interest, where do you think the money to pay for pensions, social services and create jobs for young people will come from in Greece in the future? Surely these all have to be set at a level that is actually sustainable by the Greek economy?

Greece is what I might call cashflow positive - its government is taking in more money than it's spending in its business of running the country. It's only the bond repayments that are pushing it down.

Government spending should be countercyclical - and smart creditors (which, sure, a government beholden to populism can't always be) would realize that. Prop up the economy now, get growth up again, and then cream off some "repayments" when times are good - I'm sure a contract could be structured to specify that they'd repay their bonds in proportion to e.g. growth above 3%. Running Greece into the ground benefits noone, not even Germany. But sadly, decades on, politicians are still ignoring Keynes.

Or they could have simply defaulted. It's worked out pretty well for Iceland. The argument as I understand it for every nation being perpetually indebted is that it ensures outsiders have an interest in that country being successful - if you own Greek bonds you're less likely to invade Greece. But if your bondholders are forcing a lot of suffering on your country, maybe the costs outweigh the benefits.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#127

Post by lmm »

crdoconnor wrote: post #24
seliopou wrote: post #19

Earlier quoted context omitted.

Not to justify the practice, but pretty much every periphery country fudged the numbers in order to be admitted to the Eurozone because none of them had a strong enough economy then to be let in. One did it, then the next looked at the last one and said "If them, why not us?" Greece is pretty corrupt though.

>Not to justify the practice, but pretty much every periphery country fudged the numbers in order to be admitted to the Eurozone because none of them had a strong enough economy then to be let in. One did it, then the next looked at the last one and said "If them, why not us?" The real fun starts when Greece defaults and Italy/France/Spain/Ireland/etc. go... If them, why not us?

The conspiracy theorist in me suspects that's the reason Greece is being forced to go through painful austerity measures even though everyone knows they won't work. The system survived a Greek defaul^H^Hvoluntary restructuring, but it wouldn't survive every country doing that, so the Greeks have to be seen to suffer.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#128

Post by xkarga00 »

atmosx wrote: post #89
simonebrunozzi wrote: post #64

Earlier quoted context omitted.

Why do you say he has to revisit Bitcoin? Genuine question, just curious to hear your thoughts about his view.

Maybe he didn't read closely enough his thoughts. Actually, Varoufakis from his twitter account said that since there is this post around[1] by our beloved Berlinese internet-economist TechieChan he didn't had to analyze BTC any further. A couple of points he made are: * He believes that the BTC market can be manipulated by big players easily. * Having a central bank regulating your economy is a good thing, because y…

Maybe reading his post twice wasn't enough. Or maybe it's just that Bitcoin is not just "money" but the whole underlying technology ie. the blockchain is about to introduce huge changes into things we have been used to do in a certain way.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#129

Post by Patrick_Devine »

shazow wrote: post #121
Patrick_Devine wrote: post #98

Earlier quoted context omitted.

I wish more people understood this. Germany has benefited enormously because of the euro, and yet you see a lot of belly aching about the southern European countries. Countries really only have two valves to throttle their economies. Interest rates (which Greece now has the highest in the European Union), and printing more money. Right now because the Greek economy is in a log jam, they're suffering from deflation an…

> It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods. I read this a lot but I don't quite understand why--How does a unified currency prevent the domestic economy in Greece from being cheaper than importing German goods? Why can't the local Greece industry lower prices (as it would effectively…

> The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.

That's exactly right. The key point is time.

If you have to wait for your economy to contract, you're still borrowing tons of money to keep the country afloat. You're paying high interest rates on that debt, while at the same time you're losing tax receipts as more and more people are no longer paying taxes but instead are on the dole.

Re: Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece

#130

Post by xkarga00 »

simonebrunozzi wrote: post #64
xkarga00 wrote: post #30

Varoufakis is a great economist and his placement as the Finance Minister is a smart move from the new government. At this point I would like to suggest reading To Future And Back by I. Pitsouli[1]. Somewhere in it, there is suggested (or prophecized if you wish) that in years to come scientists will replace politicians in governments. Well, that has already started happening and is right IMO because science is close…

Why do you say he has to revisit Bitcoin? Genuine question, just curious to hear your thoughts about his view.

See my reply in atmosx's comment.
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