Monthly Archives: February 2015

Eurozone electors have been sold a lemon!

Being sold a lemon means you have been tricked into buying something which is seriously defective. When you say that something is a lemon it implies that it is useless because it fails to work properly.

lemononwheels

That’s a pretty good description of the the German dictated piece of financial engineering known as the Euro. It must rate as one of their worst ever engineering efforts. Even the much maligned East German Trabi is an engineering marvel by comparison.

Trabant20-540x304

Unlike the euro system, the Trabi has a starter motor to re-start the engine  after it has stalled!

The Euro, and the GSP rules that go with it, is clearly not fit for purpose. The Greek electorate is more than justified in demanding it be fixed under warranty. However, the makers have just declined, and are even insisting that the problems are all of the customer’s own making. No-one else has reported any problems! Except the Spanish, the Irish…….

There has to come a time when the buyer has to consider a  “lemon” is much more trouble than it is worth. The buyer  needs to stop making any further payments,  ask for a refund, ask for damages too,  and ultimately get rid of it.

European lemmings!

I hope Martyn Turner doesn’t mind my addition of a second cartoon pic to his excellent first one!

Martyn_Turner_February_21_2015

Martyn_Turner_February_21_2015_2

Edit: These look more like pigs than lemmings. Gadarene swine maybe?

MMTers: Does Adair Turner have a point?

Answer to the question in this post: No he doesn’t have a point! The electorate are quite capable, as they did in the 60’s, of understanding that if monetary and fiscal policy errs too much one way we’ll end up with too much inflation. Too much the other and we’ll end up in recession.
That’s the way things were until the late 70’s. The oil shocks did produce too much inflation but it wasn’t demand led. There was a need for corrective action, but that inflation was used by the ruling class to banish Keynes completely. When -all that was needed was some modification.

alittleecon

There’s quite an interesting interview with Lord Adair Turner published here. This bit in particular caught my eye:

“I think the crucial thing, the crucial question you need to answer when you accept that we can do fiat money creation is how to discipline and I’m going to address this subject in a lecture in Germany in February, because some of my very senior German friends have said to me, “Adair, you’re absolutely technically right that this is possible”, but, without quite putting it this way, they say, “we mustn’t tell the people!” Because if the people know, and if the backbenches of Parliament as well as the small elite technocrats know that this is possible, people want to do it – not to the extent of 2% of GDP or not just when we’re in a crisis – they’ll want to do it to the extent of 10%…

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On BBC tv NEWSNIGHT

Well worth following this blog! Good Luck Yanis Varoufakis!

Yanis Varoufakis

As a fan of the BBC, I must say I was appalled by the depths of inaccuracy in the reporting underpinning this interview (not to mention the presenter’s considerable rudeness). Still, and despite the cold wind on that balcony, it was fun!

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Greek debts cannot be repaid in euros!

If debts cannot be repaid they will not be repaid. Debts, in the commercial world, usually end up being settled. If they aren’t settled it is nearly always because debtors cannot pay rather than because they have chosen not to pay. There is a well recognised procedure , in civil law, recognising this truism, which can end up in the bankruptcy of the debtor if a suitable settlement with creditors cannot be satisfactorily negotiated.

Bankrupting a country, like Greece when it gets into financial difficulty,  however, is not a political option. Unless we want to start another war between Greece and Germany that is! So what are the options? Apart from carrying on, in both senses of the term, in the the present irrational manner there is only one.  If Germany (plus other countries such as Holland who also own Greek debt)  requires Greece to repay its debts,  Germany has to recognise that Greece has to pay in something other than euros, at least not directly, as it clearly does not have anywhere near enough and has fewer now after the application of the supposed economic remedy (punishment?) by the troika than it had previously.

 

ouzo_12 feta olives

 

Therefore, it has to pay in real goods and services:  Tourism. Olives. Feta cheese. Ouzo. Shipping. Whatever Greece makes, does and sells, Germany needs to buy to enable the debt to be settled. And it needs to buy more from Greece than it sells to Greece. That way Greece ends up with the euros, which pays the Greeks for growing the olives, running the tourist hotels, making the cheese etc . This enables Greece to provide jobs for the unemployed, improve its Government’s tax revenue base,  grow its economy, and also enables the Greeks to service, and eventually settle, their German debts.

The same naturally goes for Spain, Italy and even France. In other words, German debts get repaid when, and only when, Germany decides to accept real goods and services instead of euros. This in turn means that Germany has to run an economy more along the lines of the UK and the USA economies and import more goods and services than it exports.

If Germany and Holland don’t want to accept the reality of the situation, it is they who should exit the Euro not Greece or Spain.

Some Humour;

http://www.thedailymash.co.uk/news/international/greeks-apologise-with-huge-horse-2012051527146

http://www.thedailymash.co.uk/news/international/greeks-vote-to-stop-having-shit-kicked-out-of-them-2015012694755