There's an excellent piece on the Daily telegraph website this morning (I can't do a link as I am IT dyslexic, but if someone with a higher PC IQ tan me want's to post it, that would be great) saying that while the Versailles agreement after WWI was narrow minded and vindictive, it was more likely to work than the agreement the Germans waltzed through last weekend. It particularly quotes that Finance minister Schaubel, who reckons Greece would have done better to just take a 5 year holiday from the Euro. Basically sums up my feeling (which I suppose is probably why I mention it!) I don't pretend to be an expert on high finance, but people who are generally seem to think the agreement on the table won't work and will strangle the Greek economy. The ones who wanted the agreement are politicians, not financial people.
The Germans & the rest of the Euro zone are just papering over the cracks in hope something better will happen sometime down the line. It wont, Greece is bankrupt now and taking out payday loans from the EU is no solution. As for a German goods boycott, I'll boycott their wine, its foul.
I drink a fair amount of wine and have to say I have never, ever come across any German wine.
Really? Mosel (Cochem is well worth a visit) is a large wine producing area in Germany. They use the Gewurtztraminer grape a lot as it's better in cooler climates. They do some good stuff but it tends to be a little too sweet for me. Give a bottle a try though mate. On the label, look for 'Qualitswein Mit Pradikat' that translates to 'quality wine with distinction'.
PS: I ain't no wine buff by the way! Just happened to live out there for 5 years in the late 80s-early 90s with RAF.
It will be horrible for Greece. Less horrible than defaulting and going it themselves. The shame is that they were on their way to a recovery when a far left socialist government got in and convinced people there was an option to not pay back the money that they owed, and that Europe would buckle then. But if you give in to spongers you'll never be able to bring them to account, the richer and poorer nations in Europe could see it was never going to end without playing hardball. Nobody forced them to have five times as many civil servants as Germany (per capita), to allow people to retire on a state funded final salary pension at 55 or maintain Europe's worst record of tax collection. It's like lending a mate money, going short yourself as a result, then seeing him heading off on holiday and telling him he needs to pay the money back.
Doesn't count in the figures? So as I understand it we can get free oil, or bananas or Audi motorcars then? I don't think so? We have to pay for the stuff somehow some time. When I say 'we', I mean we as a country, whoever inside the country ends up footing the bill. Maybe we can pay for our hundred quids worth of imports, by selling a hundred quids worth of tickets to Morris dancing displays, but at the moment we're not, we are racking up 38 billion quids worth of debt to other countries annually. That's a lot of tourists we need to get in to buy our bed and breakfasts, our cream teas, and tickets to our Morris dancing displays. Jints the way you describe it, is as if we get given free stuff from the outside world, but we don't.
So, what happens in your scenario when a UK employee of Deutsche Bank uses their bonus to buy a Audi R8? Does it bankrupt the UK?
Presumably the UK employee gets paid in pounds, then imports the Audi and has to pay for it if he or she can afford it. ...and there is the nub of it, in order to afford it you need the money, the Audi does not come for free. The fact that you work for Deutsche Bank, or First Direct is irrelevant. If enough people are buying enough stuff from the outside world, and not selling enough stuff to the outside world, then yes indeedy, it will eventually bankrupt the UK. If Greece was oil rich, rather than just yoghurt rich, everybody would want what they have got and money would pour in wouldn't it? Once money has poured in then Greece can keep some by, and spend the rest anywhere and on anything they want, and hey presto they are not running a national balance of payments deficit. Greece is running a balance of payments deficit, and so is the UK, so who are we to judge them? The only difference is about the amounts, and the ability to pay back.
No Seth, it won't!
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
I do honestly think that Greece would do as well if not better to revive the drachma, set an exchange rate with Euros and then pump their own money into their public services. Either they will then be able to determine their own levels of tax and spending or they will carry on letting their spending get out of control and hyperinflation will teach them that they can't spend their way out of a spending crisis. Either way, regardless of whether they stay in the Euro or leave, imports will still be expensive.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
I do honestly think that Greece would do as well if not better to revive the drachma, set an exchange rate with Euros and then pump their own money into their public services. Either they will then be able to determine their own levels of tax and spending or they will carry on letting their spending get out of control and hyperinflation will teach them that they can't spend their way out of a spending crisis. Either way, regardless of whether they stay in the Euro or leave, imports will still be expensive.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
How would it work with the Drachma/Euro rate being fixed and then the Greeks printing loads of Drachma. It would enable them to buy whatever they wanted. It's the same as allowing me to print £50 notes in my spare bedroom. Surely they would need to have a floating exchange rate?
I do honestly think that Greece would do as well if not better to revive the drachma, set an exchange rate with Euros and then pump their own money into their public services. Either they will then be able to determine their own levels of tax and spending or they will carry on letting their spending get out of control and hyperinflation will teach them that they can't spend their way out of a spending crisis. Either way, regardless of whether they stay in the Euro or leave, imports will still be expensive.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
By 'pump' do you mean 'print'?
If so the drachma would be worthless very quickly as far as overseas trade is concerned and in particular it would decimate the tourist industry which is one of Greece's main lifelines.
But they could also set their own interest rates away from the Euro, where Germany and France, as the principal motors of the Eurozone economy, call the shots.
But they could also set their own interest rates away from the Euro, where Germany and France, as the principal motors of the Eurozone economy, call the shots.
But at what level? It would have to be high to attract foreign funds/investors - if only to offset the risk. But then the locals will not be able to afford their mortgage repayments and other personal loans... Set it too low and it's no different from being in the Euro and won't attract incoming money.....
I do honestly think that Greece would do as well if not better to revive the drachma, set an exchange rate with Euros and then pump their own money into their public services. Either they will then be able to determine their own levels of tax and spending or they will carry on letting their spending get out of control and hyperinflation will teach them that they can't spend their way out of a spending crisis. Either way, regardless of whether they stay in the Euro or leave, imports will still be expensive.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
How would it work with the Drachma/Euro rate being fixed and then the Greeks printing loads of Drachma. It would enable them to buy whatever they wanted. It's the same as allowing me to print £50 notes in my spare bedroom. Surely they would need to have a floating exchange rate?
I meant that they have a set initial amount of Drachma, there's a week where people can choose to exchange at banks for a set rate, then if they need to print money for public services they can, but they will need to abandon the fixed rate if they do so.
Is there anything stopping Greece having 2 currencies at the same time? Plenty of shops in the UK accepts Euros and some even accept US Dollars so what's to stop them paying for public services in Drachma that they can print themselves, as long as they can be exchanged for Euros. There will likely be some degree of hyperinflation but there is no way they are going to maintain their desired level of spending without either printing their own money or getting a massive bailout from the EU.
I do honestly think that Greece would do as well if not better to revive the drachma, set an exchange rate with Euros and then pump their own money into their public services. Either they will then be able to determine their own levels of tax and spending or they will carry on letting their spending get out of control and hyperinflation will teach them that they can't spend their way out of a spending crisis. Either way, regardless of whether they stay in the Euro or leave, imports will still be expensive.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
By 'pump' do you mean 'print'?
If so the drachma would be worthless very quickly as far as overseas trade is concerned and in particular it would decimate the tourist industry which is one of Greece's main lifelines.
You've got it the wrong way round.
Hyperinflation would make it more expensive for Greece to import what they need because they don't produce it themselves (such as food and medicine). However, tourists would flock to Greece due to cheap holidays, then the tourist resorts can charge 10 or 20 times more than the rest of Greece, which is what happens in literally every other tourist resort in a poorer country in the rest of the world.
Doesn't count in the figures? So as I understand it we can get free oil, or bananas or Audi motorcars then? I don't think so? We have to pay for the stuff somehow some time. When I say 'we', I mean we as a country, whoever inside the country ends up footing the bill. Maybe we can pay for our hundred quids worth of imports, by selling a hundred quids worth of tickets to Morris dancing displays, but at the moment we're not, we are racking up 38 billion quids worth of debt to other countries annually. That's a lot of tourists we need to get in to buy our bed and breakfasts, our cream teas, and tickets to our Morris dancing displays. Jints the way you describe it, is as if we get given free stuff from the outside world, but we don't.
So, what happens in your scenario when a UK employee of Deutsche Bank uses their bonus to buy a Audi R8? Does it bankrupt the UK?
Presumably the UK employee gets paid in pounds, then imports the Audi and has to pay for it if he or she can afford it. ...and there is the nub of it, in order to afford it you need the money, the Audi does not come for free. The fact that you work for Deutsche Bank, or First Direct is irrelevant. If enough people are buying enough stuff from the outside world, and not selling enough stuff to the outside world, then yes indeedy, it will eventually bankrupt the UK. If Greece was oil rich, rather than just yoghurt rich, everybody would want what they have got and money would pour in wouldn't it? Once money has poured in then Greece can keep some by, and spend the rest anywhere and on anything they want, and hey presto they are not running a national balance of payments deficit. Greece is running a balance of payments deficit, and so is the UK, so who are we to judge them? The only difference is about the amounts, and the ability to pay back.
No Seth, it won't!
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
It will sort itself out? If that is the case then leave all the Greek shenanigans alone to sort itself out then, what on earth can all the fuss be about?
Doesn't count in the figures? So as I understand it we can get free oil, or bananas or Audi motorcars then? I don't think so? We have to pay for the stuff somehow some time. When I say 'we', I mean we as a country, whoever inside the country ends up footing the bill. Maybe we can pay for our hundred quids worth of imports, by selling a hundred quids worth of tickets to Morris dancing displays, but at the moment we're not, we are racking up 38 billion quids worth of debt to other countries annually. That's a lot of tourists we need to get in to buy our bed and breakfasts, our cream teas, and tickets to our Morris dancing displays. Jints the way you describe it, is as if we get given free stuff from the outside world, but we don't.
So, what happens in your scenario when a UK employee of Deutsche Bank uses their bonus to buy a Audi R8? Does it bankrupt the UK?
Presumably the UK employee gets paid in pounds, then imports the Audi and has to pay for it if he or she can afford it. ...and there is the nub of it, in order to afford it you need the money, the Audi does not come for free. The fact that you work for Deutsche Bank, or First Direct is irrelevant. If enough people are buying enough stuff from the outside world, and not selling enough stuff to the outside world, then yes indeedy, it will eventually bankrupt the UK. If Greece was oil rich, rather than just yoghurt rich, everybody would want what they have got and money would pour in wouldn't it? Once money has poured in then Greece can keep some by, and spend the rest anywhere and on anything they want, and hey presto they are not running a national balance of payments deficit. Greece is running a balance of payments deficit, and so is the UK, so who are we to judge them? The only difference is about the amounts, and the ability to pay back.
No Seth, it won't!
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
It will sort itself out? If that is the case then leave all the Greek shenanigans alone to sort itself out then, what on earth can all the fuss be about?
Seth, I think you're confusing international trade deficits with national debts. One is the difference between imports and exports the other is an accumulation of the shortfall when income is less than expenditure.
The former will sort itself out with currency fluctuations, the latter can only be addressed if income rises and/or expenditure falls, which is what the EU nations demanded that Greece does by increasing taxes and reducing welfare/pension payments.
The crucial point here is that had Greece not joined the Euro its currency would have not been strong enough to allow it to 'buy' so many imports and would have been able to survive (albeit with a much lower standard of living) from exports to, and tourism from, richer nations that would have found they could get a lot of Drachma for their Euro/Sterling/etc. and would never have run up the level of debt they now have.
If they leave the Euro now they can devalue their currency but it will cause a much wider gap in their and the rest of Europe's standard of living. Something that I think is, now, unavoidable irrespective as to the currency they use.
Doesn't count in the figures? So as I understand it we can get free oil, or bananas or Audi motorcars then? I don't think so? We have to pay for the stuff somehow some time. When I say 'we', I mean we as a country, whoever inside the country ends up footing the bill. Maybe we can pay for our hundred quids worth of imports, by selling a hundred quids worth of tickets to Morris dancing displays, but at the moment we're not, we are racking up 38 billion quids worth of debt to other countries annually. That's a lot of tourists we need to get in to buy our bed and breakfasts, our cream teas, and tickets to our Morris dancing displays. Jints the way you describe it, is as if we get given free stuff from the outside world, but we don't.
So, what happens in your scenario when a UK employee of Deutsche Bank uses their bonus to buy a Audi R8? Does it bankrupt the UK?
Presumably the UK employee gets paid in pounds, then imports the Audi and has to pay for it if he or she can afford it. ...and there is the nub of it, in order to afford it you need the money, the Audi does not come for free. The fact that you work for Deutsche Bank, or First Direct is irrelevant. If enough people are buying enough stuff from the outside world, and not selling enough stuff to the outside world, then yes indeedy, it will eventually bankrupt the UK. If Greece was oil rich, rather than just yoghurt rich, everybody would want what they have got and money would pour in wouldn't it? Once money has poured in then Greece can keep some by, and spend the rest anywhere and on anything they want, and hey presto they are not running a national balance of payments deficit. Greece is running a balance of payments deficit, and so is the UK, so who are we to judge them? The only difference is about the amounts, and the ability to pay back.
No Seth, it won't!
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
It will sort itself out? If that is the case then leave all the Greek shenanigans alone to sort itself out then, what on earth can all the fuss be about?
Seth, I think you're confusing international trade deficits with national debts. One is the difference between imports and exports the other is an accumulation of the shortfall when income is less than expenditure.
The former will sort itself out with currency fluctuations, the latter can only be addressed if income rises and/or expenditure falls, which is what the EU nations demanded that Greece does by increasing taxes and reducing welfare/pension payments.
The crucial point here is that had Greece not joined the Euro its currency would have not been strong enough to allow it to 'buy' so many imports and would have been able to survive (albeit with a much lower standard of living) from exports to, and tourism from, richer nations that would have found they could get a lot of Drachma for their Euro/Sterling/etc. and would never have run up the level of debt they now have.
If they leave the Euro now they can devalue their currency but it will cause a much wider gap in their and the rest of Europe's standard of living. Something that I think is, now, unavoidable irrespective as to the currency they use.
I have not mentioned National Debt, but the balance of payments situation(s). If you take more from the rest of the world than you give back, eventually the world will want repayment/payment...or maybe the world will write off whats due, but that doesn't seem to happen much.
Approx. 11 million Greeks (same as number of Belgians) have the 4th or 5th largest budget on military hardware (including a lot of Russian stuff) of NATO. Good plan to keep on spending buying the toys, but lack the money !
Doesn't count in the figures? So as I understand it we can get free oil, or bananas or Audi motorcars then? I don't think so? We have to pay for the stuff somehow some time. When I say 'we', I mean we as a country, whoever inside the country ends up footing the bill. Maybe we can pay for our hundred quids worth of imports, by selling a hundred quids worth of tickets to Morris dancing displays, but at the moment we're not, we are racking up 38 billion quids worth of debt to other countries annually. That's a lot of tourists we need to get in to buy our bed and breakfasts, our cream teas, and tickets to our Morris dancing displays. Jints the way you describe it, is as if we get given free stuff from the outside world, but we don't.
So, what happens in your scenario when a UK employee of Deutsche Bank uses their bonus to buy a Audi R8? Does it bankrupt the UK?
Presumably the UK employee gets paid in pounds, then imports the Audi and has to pay for it if he or she can afford it. ...and there is the nub of it, in order to afford it you need the money, the Audi does not come for free. The fact that you work for Deutsche Bank, or First Direct is irrelevant. If enough people are buying enough stuff from the outside world, and not selling enough stuff to the outside world, then yes indeedy, it will eventually bankrupt the UK. If Greece was oil rich, rather than just yoghurt rich, everybody would want what they have got and money would pour in wouldn't it? Once money has poured in then Greece can keep some by, and spend the rest anywhere and on anything they want, and hey presto they are not running a national balance of payments deficit. Greece is running a balance of payments deficit, and so is the UK, so who are we to judge them? The only difference is about the amounts, and the ability to pay back.
No Seth, it won't!
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
It will sort itself out? If that is the case then leave all the Greek shenanigans alone to sort itself out then, what on earth can all the fuss be about?
Seth, I think you're confusing international trade deficits with national debts. One is the difference between imports and exports the other is an accumulation of the shortfall when income is less than expenditure.
The former will sort itself out with currency fluctuations, the latter can only be addressed if income rises and/or expenditure falls, which is what the EU nations demanded that Greece does by increasing taxes and reducing welfare/pension payments.
The crucial point here is that had Greece not joined the Euro its currency would have not been strong enough to allow it to 'buy' so many imports and would have been able to survive (albeit with a much lower standard of living) from exports to, and tourism from, richer nations that would have found they could get a lot of Drachma for their Euro/Sterling/etc. and would never have run up the level of debt they now have.
If they leave the Euro now they can devalue their currency but it will cause a much wider gap in their and the rest of Europe's standard of living. Something that I think is, now, unavoidable irrespective as to the currency they use.
I have not mentioned National Debt, but the balance of payments situation(s). If you take more from the rest of the world than you give back, eventually the world will want repayment/payment...or maybe the world will write off whats due, but that doesn't seem to happen much.
Seth, what don't you get about the word "payments" in the phrase "balance of payments"? Putting to one side the work of outfits like the Export Credit Agency, its not the " balance of money borrowed", so why do you think running a balance of payments deficit would mean anyone would demand payment (for stuff they've already been paid for) or have any debts to write off? You're confusing me!
I have not mentioned National Debt, but the balance of payments situation(s). If you take more from the rest of the world than you give back, eventually the world will want repayment/payment...or maybe the world will write off whats due, but that doesn't seem to happen much.
We are not taking or giving back - we are buying or selling.
I think what you're missing here is the domestic market. Let's say that a UK BMW dealer sells a car to a UK customer. BMW invoice the dealer and this would be an import, but the UK dealer then adds a margin and sells it to the UK customer - that sell is internal and therefore clearly not an export.
That UK customer works for a UK company that manufactures goods from UK raw materials and sells those in the UK - the profit that manufacturer makes goes to pay that BMW buyer their salary so they can afford to buy the car.
Another example - an oil refining company buys crude oil from Saudi Arabia - import. They refine that crude at Grangemouth and sell it in the domestic market as petrol - internal, not an export.
Your issue arises where every sale is an export and every buy is an import. But that isn't the case.
OK already. Try another angle then. What does 'the balance of payments' actually mean?
I think that was clarified earlier in the thread - it's the surplus or deficit of our external market - exports minus imports. If that's a positive figure it's a surplus!!
OK already. Try another angle then. What does 'the balance of payments' actually mean?
I think that was clarified earlier in the thread - it's the surplus or deficit of our external market - exports minus imports. If that's a positive figure it's a surplus!!
Right, OK, so if it is a negative figure it is a deficit? And you have to service that deficit somehow am I right? Or does having a deficit not really matter?
OK already. Try another angle then. What does 'the balance of payments' actually mean?
I think that was clarified earlier in the thread - it's the surplus or deficit of our external market - exports minus imports. If that's a positive figure it's a surplus!!
Right, OK, so if it is a negative figure it is a deficit? And you have to service that deficit somehow am I right? Or does having a deficit not really matter?
As long as the internal market (goods and services purchased by UK consumers from UK companies) produces a profit for the UK companies selling plus the profits made in exporting to overseas markets by UK companies, then it's the UK companies that cover (or in your words service) the cost of the imports. This has nothing to do with the government spending money - they don't pay for the imports! Individuals don't pay for the imports! Companies do and then sell the imports at a profit (or add value by using the imports to manufacture/assemble other products or services etc...).
OK already. Try another angle then. What does 'the balance of payments' actually mean?
I think that was clarified earlier in the thread - it's the surplus or deficit of our external market - exports minus imports. If that's a positive figure it's a surplus!!
Right, OK, so if it is a negative figure it is a deficit? And you have to service that deficit somehow am I right? Or does having a deficit not really matter?
As long as the internal market (goods and services purchased by UK consumers from UK companies) produces a profit for the UK companies selling plus the profits made in exporting to overseas markets by UK companies, then it's the UK companies that cover (or in your words service) the cost of the imports. This has nothing to do with the government spending money - they don't pay for the imports! Individuals don't pay for the imports! Companies do and then sell the imports at a profit (or add value by using the imports to manufacture/assemble other products or services etc...).
It's called free market capitalism.
BTW, more individuals should import directly from the EU and others. I have just bought some consumables (hood filters, etc) for my Siemens kitchen appliances direct from Germany. Much cheaper than buying at Siemens rip off UK prices even factoring in the delivery costs. Also got some door sills for my Jeep from the US. US dollars 87 plus tax there. £262.50 here.
OK already. Try another angle then. What does 'the balance of payments' actually mean?
I think that was clarified earlier in the thread - it's the surplus or deficit of our external market - exports minus imports. If that's a positive figure it's a surplus!!
Right, OK, so if it is a negative figure it is a deficit? And you have to service that deficit somehow am I right? Or does having a deficit not really matter?
As long as the internal market (goods and services purchased by UK consumers from UK companies) produces a profit for the UK companies selling plus the profits made in exporting to overseas markets by UK companies, then it's the UK companies that cover (or in your words service) the cost of the imports. This has nothing to do with the government spending money - they don't pay for the imports! Individuals don't pay for the imports! Companies do and then sell the imports at a profit (or add value by using the imports to manufacture/assemble other products or services etc...).
It's called free market capitalism.
It seems that you're saying that having a trade deficit as a country matters not a jot then.
What's supposed to happen is that the four biggest economies the €urozone, Germany, France, Spain and Italy, run the system and their affairs to keep things at least ticking over. If you read a report like one from the OECD then you will see that there is forecast growth across the Eurozone. As there is across the world except for Russia due to sanctions.
Without going into the history of Greek entry or pre crash economics we are at a place where the Greek debt: GDP ratio is 170% growing and the Greek government / troika have not taken the right steps to stabilise it. One reason the ratio keeps rising is because the economy is in depression and so GDP is shrinking making the ratio look like it's getting very bad, very quickly.
But let us remember that Greek debt is not that big compared to Eurozone debt so if fiscal union occurs the issue will go away!
Another reason for the tensions and chaos around the Greek negotiations is the complete failure of centre left post crash thinking. Two immediate symptoms of that are the Labour election campaign / leadership contest and the ultimate outcome of the negotiations.
We know from the 1930s that austerity causes and not cures depressions and yet the people of England (not Scotland) voted for austerity while the outcome of the Greek negotiations was loss of sovereignty and more austerity.
The irony for the UK is that we aren't actually getting austerity as the government lengthen the time to balance the books and look simply to raising the minimum wage and reducing social rents in order to reduce the benefits bill.
In Greece it is the pensioners who are taking cuts. The paradox is that their generation saw the vast expansion of the EU, the creation of the Euro and the mismanagement of the Greek economy. The only way out is grexit or for the Greek economy to expand. Or there is a third option: the centralisation of policy, debts and expenditure control - fiscal and policy union.
And that is why the German/Finnish/Baltic line won through. The Mediterranean countries did not have a credible policy apart from solidarity with Greece and keep them in the Euro.
People talk about debt forgiveness like it's actually on the table. Irrespective of the Greek situation debt forgiveness at this time has a grave risk of contagion and weakening the Eurozone, especially the med economies for who in their right mind would lend / buy debt? No the only answer I can see is supervision and special aid / grants to the Greek government to deliver sustainable growth.
They've taken it to the point where people haven't booked holidays there and banks have been shut for two weeks to control cash due to lack of confidence. Coming out of that will take skill and precision and most importantly the right messages from the politicians.
In summary you can't blame the Germans if the Italians, Spanish and French can't articulate a viable alternative and the English refuse to join in. We move to the next act and Greece will either exit in a few years or become the first part of fiscal/policy union. Some call it loss of sovereignty and becoming a Euro colony but there aren't too many other viable choices.
For me it's the philosophy and economics at the heart of the Eurozone that matters and not which capital the decisions are made.
Comments
Uk national debt £77,000 per person
There is no way that the Greeks can afford to pay back the best part of £350k each. Maybe we can manage £77k.
The Greek dent must be written down or they should go for Drachma.
I don't pretend to be an expert on high finance, but people who are generally seem to think the agreement on the table won't work and will strangle the Greek economy. The ones who wanted the agreement are politicians, not financial people.
PS: I ain't no wine buff by the way! Just happened to live out there for 5 years in the late 80s-early 90s with RAF.
In the event that the supply and demand for Sterling is too one sided the value of the currency would fall and eventually imports would be more expensive than buying home made goods and exports would become cheaper abroad so it would sort itself out. The sort of problem you describe is only true if there is no currency fluctuation, like the Euro where, as has been mentioned, the Germans have been able to sell their goods to the EU members in vast numbers without this currency fluctuation being able to protect the weaker nations.
The fact is regardless of what the Greek Parliament do or the result of that referendum, the Greeks got exactly what they voted for when Syriza got in: a bunch of hapless illiterates running a country in an economic state of emergency with the acumen of Russell Brand.
If so the drachma would be worthless very quickly as far as overseas trade is concerned and in particular it would decimate the tourist industry which is one of Greece's main lifelines.
Set it too low and it's no different from being in the Euro and won't attract incoming money.....
Is there anything stopping Greece having 2 currencies at the same time? Plenty of shops in the UK accepts Euros and some even accept US Dollars so what's to stop them paying for public services in Drachma that they can print themselves, as long as they can be exchanged for Euros. There will likely be some degree of hyperinflation but there is no way they are going to maintain their desired level of spending without either printing their own money or getting a massive bailout from the EU.
Hyperinflation would make it more expensive for Greece to import what they need because they don't produce it themselves (such as food and medicine). However, tourists would flock to Greece due to cheap holidays, then the tourist resorts can charge 10 or 20 times more than the rest of Greece, which is what happens in literally every other tourist resort in a poorer country in the rest of the world.
If that is the case then leave all the Greek shenanigans alone to sort itself out then, what on earth can all the fuss be about?
The former will sort itself out with currency fluctuations, the latter can only be addressed if income rises and/or expenditure falls, which is what the EU nations demanded that Greece does by increasing taxes and reducing welfare/pension payments.
The crucial point here is that had Greece not joined the Euro its currency would have not been strong enough to allow it to 'buy' so many imports and would have been able to survive (albeit with a much lower standard of living) from exports to, and tourism from, richer nations that would have found they could get a lot of Drachma for their Euro/Sterling/etc. and would never have run up the level of debt they now have.
If they leave the Euro now they can devalue their currency but it will cause a much wider gap in their and the rest of Europe's standard of living. Something that I think is, now, unavoidable irrespective as to the currency they use.
I think what you're missing here is the domestic market. Let's say that a UK BMW dealer sells a car to a UK customer. BMW invoice the dealer and this would be an import, but the UK dealer then adds a margin and sells it to the UK customer - that sell is internal and therefore clearly not an export.
That UK customer works for a UK company that manufactures goods from UK raw materials and sells those in the UK - the profit that manufacturer makes goes to pay that BMW buyer their salary so they can afford to buy the car.
Another example - an oil refining company buys crude oil from Saudi Arabia - import. They refine that crude at Grangemouth and sell it in the domestic market as petrol - internal, not an export.
Your issue arises where every sale is an export and every buy is an import. But that isn't the case.
And you have to service that deficit somehow am I right?
Or does having a deficit not really matter?
It's called free market capitalism.
http://quarterly.demos.co.uk/article/issue-4/britains-balance-of-payments-disaster/
If you read a report like one from the OECD then you will see that there is forecast growth across the Eurozone. As there is across the world except for Russia due to sanctions.
Without going into the history of Greek entry or pre crash economics we are at a place where the Greek debt: GDP ratio is 170% growing and the Greek government / troika have not taken the right steps to stabilise it. One reason the ratio keeps rising is because the economy is in depression and so GDP is shrinking making the ratio look like it's getting very bad, very quickly.
But let us remember that Greek debt is not that big compared to Eurozone debt so if fiscal union occurs the issue will go away!
Another reason for the tensions and chaos around the Greek negotiations is the complete failure of centre left post crash thinking. Two immediate symptoms of that are the Labour election campaign / leadership contest and the ultimate outcome of the negotiations.
We know from the 1930s that austerity causes and not cures depressions and yet the people of England (not Scotland) voted for austerity while the outcome of the Greek negotiations was loss of sovereignty and more austerity.
The irony for the UK is that we aren't actually getting austerity as the government lengthen the time to balance the books and look simply to raising the minimum wage and reducing social rents in order to reduce the benefits bill.
In Greece it is the pensioners who are taking cuts. The paradox is that their generation saw the vast expansion of the EU, the creation of the Euro and the mismanagement of the Greek economy. The only way out is grexit or for the Greek economy to expand. Or there is a third option: the centralisation of policy, debts and expenditure control - fiscal and policy union.
And that is why the German/Finnish/Baltic line won through. The Mediterranean countries did not have a credible policy apart from solidarity with Greece and keep them in the Euro.
People talk about debt forgiveness like it's actually on the table. Irrespective of the Greek situation debt forgiveness at this time has a grave risk of contagion and weakening the Eurozone, especially the med economies for who in their right mind would lend / buy debt? No the only answer I can see is supervision and special aid / grants to the Greek government to deliver sustainable growth.
They've taken it to the point where people haven't booked holidays there and banks have been shut for two weeks to control cash due to lack of confidence. Coming out of that will take skill and precision and most importantly the right messages from the politicians.
In summary you can't blame the Germans if the Italians, Spanish and French can't articulate a viable alternative and the English refuse to join in. We move to the next act and Greece will either exit in a few years or become the first part of fiscal/policy union. Some call it loss of sovereignty and becoming a Euro colony but there aren't too many other viable choices.
For me it's the philosophy and economics at the heart of the Eurozone that matters and not which capital the decisions are made.