On Greece and the Euro...

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Post by Rockhopper on Tue Jul 07, 2015 9:49 pm

Some thoughts...

The father of the Euro was Professor Robert Mundell. It’s important to mention the other little bastard spawned by the late Prof. Mundell: “supply-side” economics, otherwise known as “Reaganomics,” “Thatcherism” – or, simply “voodoo” economics.

The imposition of the euro had one true goal: To end the European welfare state.

Here’s how it works. To join the Eurozone, nations must agree to keep their deficits to no more than 3% of GDP and total debt to no more than 60% of GDP. In a recession, that’s plain insane. By contrast, President Obama pulled the USA out of recession by increasing deficit spending to a staggering 9.8% of GDP, and he raised the nation’s debt to 101% from a pre-recession 62%. Republicans screamed, but it worked. The US has lower unemployment than any Eurozone nation.
As Obama scolded the European tormentors of Greece: “You cannot keep on squeezing countries that are in the midst of depression.” Cutting spending power only leads to less spending which leads to further cuts in spending power – a death spiral we see today in the Eurozone from Greece to Italy to Spain—but not in Germany.

“Not in Germany.” There’s the rub. Normally, a nation such as Greece can quickly recover from debt-induced recession by devaluing its currency. Greece would become a dirt cheap tourist destination once more and its lower-cost exports would zoom, instantly increasing competitiveness. And that’s what Germany can’t allow. Germany lured other European nations into the euro in order to keep them from undercutting Germany’s prices in export markets.

Restricted by the 3% deficit rule, the only recourse left for Eurozone debtors: pay the piper with “austerity” measures.

That cutting pensions, privatising and closing industries, slashing wages — in other words, “austerity” — or, to use the latest jargon, “reform” — is not just cruel, it’s plain stupid: it can only push a nation in recession into depression.

That’s not just theory. The Troika first imposed their vicious austerity measures on Greece in 2010. Greeks watched their annual salaries plummet to half of a German’s paycheck. Greece’s supposedly generous pensions have been cut eight times during the crisis, while two-thirds of pensioners live below the poverty line. Everything from Greece’s airports to harbours, the national lottery to prime publicly-owned real estate was sold off, while schools and hospitals were shuttered. And, for the first time since World War II, widespread starvation had returned. 500,000 children in Greece are said to be malnourished. Students fainting from hunger in frigid schools which cannot afford heating oil is now a common phenomenon.

This cruel “belt tightening,” the Troika promised, would restore Greece’s economy by 2012 (and then 2013, 2014, and 2015). In reality, unemployment went from a terrible 12.5% in 2010 to a horrendous 25.6% today.

Now, the Troika demands more of the same, a continuation of this disastrous policy.

Tim.
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Post by Rogue on Thu Jul 09, 2015 5:17 am


Greek Pensioners Are Surviving On Just 120 Euros. Here's What That Buys.
http://www.huffingtonpost.com/2015/07/08/greek-pensioner-120-euros_n_7755002.html
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Post by Rockhopper on Thu Jul 09, 2015 5:44 am

Yup Roggie. Austerity rules!

Bloomberg explains the Euro and it's difficulties. Bloomie is a rightwing rag but this is pretty accurate.




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