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Italy’s teetering banks will be Europe’s next crisis

economist.com

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Re: Italy’s teetering banks will be Europe’s next crisis

#81

Post by rubber_duck »

netcan wrote: post #62
guelo wrote: post #24

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only…

I'm not strongly opinionated on what's wrong with the euro currency, but this is a pretty major issue with the EU generally. There isn't a coherent democratic polity, it's being governed like a trade agreement while acting like much more. I think Brexit highlighted this big hole. Who spoke for the EU? You'd occasionally see a headshot with a "EU President" title attached to it, which would then be dismissed in favour…

>The EU needs a face, parties with cross-border support, democracy, mandate...

You know what's funny - US is constantly railing about inequality - meanwhile median income between poorest and richest EU members is close to 10x - in the US it's ~2-3 between states. It's no longer "the 1% are exploiting us" narrative and "democracy will save us" - these are similarly sized countries where people are 10x richer in one compared to the other.

And that's just one easily quantifiable difference of how diverse the EU actually is, broader point is - these are different countries with different culture, history, religion, economies, language, ethnicity, etc. pretending you can bunch them all up in to a single unit and that democracy makes any sense in this context is ridiculous.

Re: Italy’s teetering banks will be Europe’s next crisis

#82

Post by adventured »

ktRolster wrote: post #47
fibo wrote: post #45

the big problem in Italy are taxes, I pay 38%, but for more than 55k you pay 41%, how politicians pretend Italy can survive? In Switzerland you pay 16%.

How can Switzerland survive on 16%? That is my question.

Basically like this (just an example):

$100,000 income at 20% tax = $20,000

$35,000 income at 40% tax = $14,000

Switzerland's median income is between 2.5 and 3 times that of Italy. They have a smaller black market economy than Italy, so they're likely deriving a higher actual share of taxation out of it.

Further, the 16% referenced isn't complete. If you cap out the federal income tax in Switzerland, it's more likely you're paying a total of closer to 25-30% in income taxes (depending on what part of the country you're in), between federal, cantonal and municipal income taxes.

Re: Italy’s teetering banks will be Europe’s next crisis

#83

Post by ZenoArrow »

blahi wrote: post #41
ZenoArrow wrote: post #30

Earlier quoted context omitted.

Money does not need to be based on debt. Money is just a medium of exchange. There is no requirement for the creation of money to generate profit for the money creators, especially as the cost of creating digital money is near zero. If you want to look into it more, I'd suggest taking a look at debt-free money. https://en.m.wikipedia.org/wiki/Monetary_reform http://positivemoney.org/2011/10/debt-free-money/ http://po…

This requires a perfectly just world. We do not live in such a world and we probably never will.

It doesn't.

There's a few different ways of creating debt-free money.

Government-created debt-free money has existed in the past, and can exist again. Using the UK system as an example, the minimum that would be required would be to update the Bank Charter Act of 1844 to include bank credit, so that private banks couldn't create money:

http://positivemoney.org/how-money-works/how-did-we-end-up-h...

It would then be the sole responsibility of the government to create money and spend it into the economy. In order to prevent hyperinflation, you could create an independent body responsible for setting how much new money could be created, which would be separate from the those who decided what the money was spent on.

As for other forms of debt-free money, cryptocurrencies like Bitcoin also qualify. You do not owe interest to Bitcoin miners, when you own a Bitcoin it is debt-free, and it cannot be destroyed by paying off a debt.

Re: Italy’s teetering banks will be Europe’s next crisis

#84

Post by blahi »

ZenoArrow wrote: post #83
blahi wrote: post #41

Earlier quoted context omitted.

This requires a perfectly just world. We do not live in such a world and we probably never will.

It doesn't. There's a few different ways of creating debt-free money. Government-created debt-free money has existed in the past, and can exist again. Using the UK system as an example, the minimum that would be required would be to update the Bank Charter Act of 1844 to include bank credit, so that private banks couldn't create money: http://positivemoney.org/how-money-works/how-did-we-end-up-h... It would then be t…

Oh but it does. Because you will essentially be destroying the wealth of the rich people. They will not agree to that.

Re: Italy’s teetering banks will be Europe’s next crisis

#85

Post by toyg »

sievebrain wrote: post #66
vidarh wrote: post #56

Earlier quoted context omitted.

For that to happen, Europe would need to go federal. You can't have a legislative parliament in the current system because it'd violate the constitutions of a large proportion of the member states to delegate sovereignty somewhere else. This is the big challenge. People complain about the lack of powers for the EU Parliament, but largely aren't willing to support a model that'd make it possible. This is also why the…

This sort of argument is merely playing with words and has no intellectual merit. The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with, without also leaving the EU. Failure to obey the rules is met with fines and other forms of punishment. Whilst a handful of lawyers may pretend this is not a transfer of sovereignty, no…

> A country cannot simply refuse to implement directives it does not agree with

As long as it can afford the resulting fines, it absolutely can. I believe this is what happened with milk quotas, which were widely criticised: a lot of countries kept paying fines until related directives were changed with more amenable rules.

Talking of Italy, they've been floundering EU rules on TV markets for some 20 years, paying fines and eventually side-stepping the problem by changing technology. I wouldn't be surprised if they were still technically afoul of those rules. They've taken judgements and fines on the chin and just kept going, because local political classes had no will to basically hit Berlusconi's interests in that market.

Good ol' Joseph Jughashvili would have said "how many armoured divisions does the EU Commission or Parliament control?", and he would have been right. Enforcement mechanisms in the EU are really weak; which is why the dominant culture in Bruxelles is about reaching consensus, all the time and with all sorts of horse-trading if necessary. Because what are you gonna do when a country gives you the finger, send in the police? There is no police. The military? There is no military. So, what are you actually "sovereign" on, if you have no way of imposing your sovereignty?

Lawyers get a bad rep but sometimes they're actually pretty right.

Re: Italy’s teetering banks will be Europe’s next crisis

#86

Post by adventured »

blahi wrote: post #64
Dylan16807 wrote: post #36

Earlier quoted context omitted.

You can just print more money in proportion to population growth. While keeping a stable minimum reserve percent.

The rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed. I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters. There are also other, pract…

The rich do better than everyone else in times of inflation. Their assets are heavily liquid and easily moved. They have very little to fear from higher rates of inflation, it enables them to outperform everyone else that is more income dependent and less asset rich. The poor have the most to fear, by far. That's also why the rich have done so well since the year 2000, the Fed's policies have been heavy on dollar debasement since then, which has eroded the median while the rich have been able to benefit from the Fed's monetary support of asset prices. The Fed's asset inflation policies are a prime driver of the growth in wealth inequality in the US.

Re: Italy’s teetering banks will be Europe’s next crisis

#87

Post by ZenoArrow »

blahi wrote: post #64
Dylan16807 wrote: post #36

Earlier quoted context omitted.

You can just print more money in proportion to population growth. While keeping a stable minimum reserve percent.

The rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed. I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters. There are also other, pract…

> "The rich people will be less rich in that situation."

> "growth of money has to be tied to economic growth or otherwise the rich will feel screwed."

> "I'm not saying it's good, but you cannot screw the rich."

Two points:

1. Aside from the financial services industry, the rich would be just as capable of getting rich regardless of how new money was put into the system. The pot of available money to grow their businesses would still exist.

2. What is stopping a group from "screwing the rich"? Furthermore, why are you framing addressing economic inequality as "screwing the rich"? Economic inequality will get addressed one way or another, the divide between the rich and the poor shouldn't be allowed to grow unchecked.

> "the noise from tin-foil hatters."

If you're referring to me, I was merely pointing out how the money system works and pointing out that alternatives are available. If you want to refute the accuracy of what I've stated, then please feel free to do so.

Re: Italy’s teetering banks will be Europe’s next crisis

#88

Post by ZenoArrow »

mac01021 wrote: post #46
blahi wrote: post #25

Earlier quoted context omitted.

The world's population in the 1900 was 1,5B people. By 1970, it was twice that. By the year 2000, it was twice that again! And by 2050 it will be 9B. Where does the money for all those people would come from if not from borrowing (money from the future)?

Why does additional population require additional money?

Because deflation is seen as more risky than inflation. In principal prices could drop to stretch the spending power of money, so that the money supply didn't need to increase along with population. In practice this is seen as risky as during the period of transition to lower prices you risk going through a period of economic slowdown and reduced spending power of the population. These problems are especially problematic in a system of globalised trade, as foreign investors can take advantage of the deflationary period to gain further control of local assets.

In other words, inflation is required because the world's economy is based on growth, and inflation and deflation are not equal in this scenario. If the world's economy was based on a steady state economic system, then we wouldn't need to create more money.

Re: Italy’s teetering banks will be Europe’s next crisis

#89

Post by ZenoArrow »

blahi wrote: post #84
ZenoArrow wrote: post #83

Earlier quoted context omitted.

It doesn't. There's a few different ways of creating debt-free money. Government-created debt-free money has existed in the past, and can exist again. Using the UK system as an example, the minimum that would be required would be to update the Bank Charter Act of 1844 to include bank credit, so that private banks couldn't create money: http://positivemoney.org/how-money-works/how-did-we-end-up-h... It would then be t…

Oh but it does. Because you will essentially be destroying the wealth of the rich people. They will not agree to that.

All it requires is for people to choose democratic representatives that stick up for the interests of the masses. Even if a few rich people disagree with the policy, it doesn't matter if the masses have decided what they want to happen.

Re: Italy’s teetering banks will be Europe’s next crisis

#90

Post by legulere »

guelo wrote: post #24

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only…

I still haven't seen a good reasoning why the Euro is to blame for the economic problems in southern Europe.

It certainly is a issue that those countries can't devalue their currency anymore, but devaluing is not a miracle cure.

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