Friday, February 13, 2015

Mosler trolling Varoufakis with damn good arguments


HT Serban here....  go get'em Warren!

EU AUSTERITY HAS BEEN AN EPIC CRIME AGAINST HUMANITY, AND, UNFORTUNATELY GREECE MAY NOT HAVE THE UNDERSTANDINGS NEEDED TO REVERSE IT.

24 comments:

Jose Guilherme said...

Great sentence - especially the first part.

Anonymous said...

It seems to me that since Greece is part of the EU and Eurozone, the whole idea of a distinction between "domestic" demand vs. "external" demand isn't that applicable.

Of course any country can maintain full employment, even if it cuts itself off completely from the rest of the world's economy. But that full employment condition might only be fully employed poverty. Countries benefit enormously from trading with one another. They are able to obtain goods that they can't produce themselves, or produce only very expensively, in exchange for goods they can produce cheaply and efficiently.

Greece doesn't want to be a fully employed poor sister living in a shack outside prosperous Europe. They need to overhaul their economy so that they are participating fully.

Warren says devaluing via wage repression is not progressive and that's right. But if Greece adopts its own floating currency the exchange via the dollar and the euro will probably settle in at a rate that makes employed Greeks much poorer than they were before.

Warren says nothing about Greece's real resources. How exactly is he proposing to turn Greece into a more prosperous economy? You can't just manufacture some arbitrarily desired level of real GDP through demand management. What are Greece's relative strengths as a producer in the global economy?

Matt Franko said...

Dan I think we could get to those issues eventually...

I look at Warren's larger point with this is that no one involved there is exhibiting a macro-economic understanding even equivalent to your own here... so they might not get anywhere near the issues you are talking about...

rsp,

Anonymous said...

Matt, I think Varoufakis is 100 miles ahead of Warren. He actually seems to know something about his own country, what its real underlying potentials and limits are, and how much it needs the rest of the world in order to be prosperous. Warren just seems to think every problem can be fixed with money-fueled demand management and isolationism.

Tom Hickey said...

I don't think that Greece will be the first country to leave the EZ, and I don't think that the government in power will be leftist when and if one does. Much more likely that it will be the anti-EU right coming to power somewhere on a nationalistic platform.

Matt Franko said...

Dan I dont think Warren is ignorant of the issues you bring up... he's just pointing out that there is an option if the rest of the EU remains intransigent this time...

IF you understand macro-economic systems... which YV has not exhibited (albeit thus far) imo...

Seems like YV just wants a "haircut" ... this will just piss off the blue-eyed Teutons even more even if they grant it... rsp

Tom Hickey said...

Again, let's not forget that Syriza did not run on leaving the EZ and the majority of Greeks say that this is not their preferred solution.

I suspect that if Syriza decided that the only remaining option was Grexit, they would hold a referendum first to get popular approval and would resign from power if they lost.

I further suspect that if they attempted to act unilaterally, the Greek military would step in.

Economics is one think and politics is another. Economics follows politics. Neoliberalism tries to give the impression that economics leads politics based on its simplistic assumptions that exclude the role of powerful institutions and who controls them. But institutions are the controlling factor and that boils down to power relationships.

Malmo's Ghost said...

YV has an understanding of what is needed for Greece Syriza has no mandate to leave EZ, and YV argued that leaving the EZ would be catastrophic for Greece. The more I think about this the more I agree with Him. It's simply the political reality that Greece finds itself in.

YV believes the recent leftward tilt in Europe's electorate is the beginning of an ongoing shift in sentiment that will fully democratize Europe away from neoliberal baker interests. I suppose this means some type of fiscal policy will accompany monetary policy with this leftward shift.

He also rejects a resurrection of the Drachma, and disagrees strongly with WM on the efficacy thereof. YV says there is no comparison with Argentina either, as it was already a currency issuer. Apples to oranges.

He doesn't want several little Europe's to replace the existing makeup either. I imagine he fears the rightward movements Tom alludes to.

Ultimately Greece is relying on thoughtful interventions to help move Germany away from its hardline regarding austerity and debt forgiveness. YV belies this can be accomplished by pressure being applied by the IMF, who haven't been as pro austerity as Germany (He mentions Germany as both tail and dog when it come to the EZ, and thus effectively runs the show).

The gameplan will be Syriza sticking to its guns, with the not so certain knowledge that they will not be expelled from the EZ (I think they're going to get dumped and Syriza will be toast when they do). In short, Greece is not leaving the EZ VOLUNTARILY. It likely won't be run out of town either or so he thinks. Something's got to give, but postulating theories on what one thinks Greece should do, in spite of the political realities on the ground there, is farfetched mental gymnastics. Nothing more.

Tom Hickey said...

I don't know that the US (and UK) will let the EZ throw Greece out and take a chance on blowing up the euro. The financial fallout for Wall Street and the City could be devastating owing to a derivative implosion.

Malmo's Ghost said...

YV, in a video I linked to down thread, talked about tax credits being stimulative within Greece. he didn't develop the thought much beyond that, however.
--------------------------------


I just can't see Germany going along with what Syriza demands. Germans have been sold on the fiction that Greeks are shiftless and lazy. Greeks demands can't fly there. I don't think Greece is going to budge either. If both stick to their guns then can Germany et al basically smoke Greece out by withholding all financial support and thus cutting off these lifelines? If so the Grecian economy would suffocate to the point of total death, especially given Greece's fealty to the euro. At that point Syriza would call for a referendum like you suggest and or there will be an oligarchical catalyzed military takeover. So, yes, you are probably correct in that no expulsion needed. Cut off lifelines and Greece will run back to its debt master, tail firmly between legs.

Anonymous said...

Greece needs to present the world with a plan - not just a debt relief plan, but a plan to remake their economy. They are going to have trouble gathering enthusiastic global support if they have no ideas other than going back to business as usual.

NeilW said...

"Countries benefit enormously from trading with one another."

Do they? The efficiency and 'world trade' argument are vastly overdone IMV.

Creating a monoculture isn't the best use of people. It generates a very brittle state of affairs that does not respond well to shocks. If you wish to retain democratic control, you are best retaining a distributed and diverse economic base.

There will always be trade, but it should not be a policy focus or the near obsession it is amongst economists and commentators. In reality it is a minor part of the economy in the majority of countries.

The policy focus should always be on the domestic area that is under the control of the government in question, and let international trade fall where it will.

Matt Franko said...

Good points Neil... the nations that currently dominate exports.. Germany, Japan and China are defeated nations..

Germany: Napalmed and eating out of US Army soup Kitchens for years ..

Japan: Napalmed and actually nuked (twice)

China: Pillaged and raped by the Japanese until the West got them out of it..

So these are second rate nations... export zombies. .. using exports as a way of rebuilding self esteem of some sort..

Certainly not model nations to emulate imo...

Rsp



Geoff said...

The anti-Mosler sentiment appears to be growing stronger on this site, even from Mike Norman Himself. Perhaps due to Mosler's perma-bearishness on the US economy, or is it something else?

Tom, if not Greece first, who? My money is on Italy. Remember when MMT folks traveled to Italy, they drew massive crowds.

Anonymous said...

Matt, so what? Germany and Japan are among the most economically prosperous countries in the world, and China has used trade to zoom from its previous status of backward, isolated Maoist basket case to the largest economy in the world?

Matt Franko said...

Well Dan fine for them if that is what they want to do... its probably working and they are building self esteem and moving on... fine...

(Japan and Germany have the finest quality material systems...fine..)

But with China/Japan/Germany we (US) have been able to let our fiscal balance somewhat adjust to accommodate those nations USD savings desires....

while Greece is caught up in that 3% treaty target for the public balance and cant let their fiscal policy adjust to where they need it to go to at least result in some semblance of a decent economic outcome for what should be an honored member of our group of western nations... birthplace of democracy, etc..

So we should want them to stay in the EU/EZ (I agree) but we cant let a bunch of defeated nihilist Teutonic people who are psycho damaged goods nut-jobs dominate the arrangements and want everyone else to be export zombies like them in order to have a half-way decent economy... (and btw it cant even work mathematically...)

If this means the "periphery" nations have to leave and regroup and start a new "EU" with a better understanding of macro, then I guess that may have to happen .....

rsp,

Tom Hickey said...

"Greece needs to present the world with a plan - not just a debt relief plan, but a plan to remake their economy."

The problem is that step one in any plan is to get a leash on the oligarchs and endemic corruption. This is something that no previous government has been able to accomplish. Few give Syriza much of chance either.

Greece could come out pretty well on rents if did a long-term lease with China on the port of Piraeus and if Turk Stream actually manifests and Greece can collect transport royalties.

A main advantage of leaving the euro and going back to the drachma is that Greece is a huge tourist draw, and the relative value of the euro is working against it.

In addition, the military is a huge drain on resources and it gives the military establishment a great deal of influence, too. Greece needs to make some kind of deal with Turkey over the contested issues involving Cyprus.

So a major step is reducing and eventually eliminating the needless drag.

A second step, and one that all countries need to adopt to prevent the importation of embedded labor that hurts domestic employment is to require exporters to build factories in Greece, as Russia is now demanding.

The Greek economy is not in too bad shape other than from the devastation wrought by neoliberal austerity aka the German model. End austerity and address the abov, and Greece could be doing OK.

Unknown said...

After reading dozens of these Greece threads here, I think that many are vastly underestimating the sheer magnitude of the problem in Greece. They are in a great depression and the only way out of ours was 25% of GDP deficits for 4 years. A marginal shift of spending worth 3% of GDP (the primary surplus reduction syriza goal) is peanuts. One thing Kervick is right about is that Greece needs a complete overhaul, but he's wrong that this is possible absent Mosler's massive fiscal injections. Govt is the only capable countnercyclical actor, and that power has been relinquished. So the situation is completely hopeless for Greece, without monetary sovereignty, they are not getting out of this hole any time soon (20 + years maybe). Germany is never going to relax the fiscal rules to the required extent. Greece is doomed within the Euro.

Malmo's Ghost said...
This comment has been removed by the author.
Malmo's Ghost said...

AP,

Greece is doomed.

Too many moving parts in conflict with each other or generally incongruous--the oligarchs, the plebs desire to remain in the euro, the demonization of Greece's working class throughout Europe, and the military.

What a political quandary. Can't live with the euro, can't live without it Dump euro? No, because powerful interests within Greece, voters included, will dismantle Syriza faster than you can say bye bye dopes . Keep euro? Yes, but country sinks deeper in abyss.Gordian Knot. Greece is doomed.

Greg said...

In regards to the notion that countries benefit from trading with one another, I think it depends. When you don't have a free floating currency and you are trading with someone who has the worlds reserve currency you are definitely going to lose. Its an unfair fight from the beginning. Imagine if all the US states had to abide by all the same fiscal rules as say Texas or California, two states whose economies are as large as most countries. Mississippi, or Arkansas would make Greece look like Germany if they didn't have the fiscal backing of the US.

Germany, Japan and China benefit from trade but only because we are such a huge trade partner of theirs. We benefit way more than they do...... we get the stuff they get the bits of paper.

Its obvious why American and british economists push the "trade is good" meme. It greatly increases the influence of US and Britain as the financial centers of the world.

Tom Hickey said...

Commerce is based on trade (exchange). Parties trade with each other regardless of where they are. What matters is the rules under which trade takes place. So-called free trade is making the same rules apply globally as in all parties localities. In principle, free trade is the ideal context.

But the real and the ideal are often different owing to asymmetry, which may arise for a variety of reasons based on a number of factors not all of which are economic. This is where prioritization comes in and that is usually a political matter, often contested, rather than a purely economic one.

Calgacus said...

Dan K:Countries benefit enormously from trading with one another.

Neil:Do they? The efficiency and 'world trade' argument are vastly overdone IMV.

Right. "Ideas, knowledge, science, hospitality, travel--these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national." Keynes, National Self-Sufficiency, Yale Review 22- 4 (1933)

This doesn't conflict with "free trade", which is a Good Thing, but is a Better Thing which is a foundation for that Good Thing.

Schofield said...

All these comments seem to forget that countries rig their economies often to make their countries attractive for the purposes of "barge economics," China with its currency rigging and Eire with its low corporation tax, for example. Greece can obviously opt to do its own version should it leave the Eurozone and use its newly returned fiscal powers in devising its own form of rigging perhaps consistent with EU rules or outside if leaving the EU makes sense for its economic development plan.