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Financial disaster in Europe
Posted: 12 September 2011 07:30 AM   [ Ignore ]
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Europe is in a financial mess with Greece affecting Spain and Italy as well.

From this article by Paul Krugman at the NYT

Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.

The whole world will suffer:

And now it’s all coming to a head. We’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.

gulp

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Posted: 12 September 2011 08:49 AM   [ Ignore ]   [ # 1 ]
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Krugman has been one of the few lamenting this issue for years. Basically a single currency only works where there is effective labor mobility. There is in the US: if jobs are scarce in one state, it’s easy to pick up and move somewhere else. But in Europe that’s not nearly as true: differences of culture and more importantly language make labor mobility between countries difficult or impossible.

This means that when jobs are scarce in one country (viz., Spain, Italy, Greece) there’s nowhere for the jobless to go, and there’s nothing those countries can do to become more competitive. With separate currencies they could become more competitive by devaluing their currency with respect to neighboring currencies. (This would make their products better priced and hence improve sales and employment). But if all of Europe has a single currency, that’s not possible.

The only other option is for wealthy countries (Germany, France) to keep pouring money into those less well off, as might be done in a truly federal system. But since austerity seems to be the byword, that isn’t going to happen either. And long-term, large-scale joblessness just isn’t a politically viable option.

The longer this recession lasts the more likely it is that the Euro will eventually end ...

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Posted: 12 September 2011 09:49 AM   [ Ignore ]   [ # 2 ]
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So what would the state of the economy be if EVERYBODY concentrated on NET WORTH instead of JOBS.

Double-entry accounting is SEVEN HUNDRED YEARS OLD and invented in Italy.  Why hasn’t it been mandatory in our schools for decades?  Oh yeah, the workers are supposed to spend money on junk designed to become obsolete for the economists to ignore the depreciation of and create more JOBS for other people to run on the treadmill.

The treadmill can’t work forever.  Population increases change things.  Technological advances change things.  Dynamic equilibrium cannot be maintained even though some lying pseudo-intellectual morons think they can keep juggling more and more balls. 

The economists don’t even compute the algebra correctly because they treat $30,000 automobiles the same as $5 hamburgers.

http://www.fool.com/personal-finance/general/2006/10/18/foolish-book-review-quotthe-accounting-gamequot.aspx

psik

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Posted: 12 September 2011 11:32 PM   [ Ignore ]   [ # 3 ]
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dougsmith - 12 September 2011 08:49 AM

Krugman has been one of the few lamenting this issue for years. Basically a single currency only works where there is effective labor mobility. There is in the US: if jobs are scarce in one state, it’s easy to pick up and move somewhere else. But in Europe that’s not nearly as true: differences of culture and more importantly language make labor mobility between countries difficult or impossible.

How true. I always wondered how this should have been working from the beginning. Without a unity in all financial strategies the Euro would become a problem. The uniting of Europe is not a bad idea, but it went much too fast, and it was definitely too early to introduce the Euro with countries that are so different like the Netherlands, Germany, Belgium and France at one side, and Greece, Portugal, and Spain on the other. Italy and Ireland might be different cases. Those are more just mismanagement in different ways.

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Posted: 13 September 2011 06:45 AM   [ Ignore ]   [ # 4 ]
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Maybe if the economists took evolutionary economics a little more seriously they could have known it wouldn’t probably work out. They should blow out the Alps to allow the south and the north to mix to even out the differences.  grin

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Posted: 13 September 2011 09:00 AM   [ Ignore ]   [ # 5 ]
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Rumsfeld cancelled his NYT subscription after reading Paul HERE

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Posted: 13 September 2011 12:13 PM   [ Ignore ]   [ # 6 ]
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traveler - 13 September 2011 09:00 AM

Rumsfeld cancelled his NYT subscription after reading Paul HERE

Actually, that’s the followup. The original is HERE. He’s said much the same thing before, and moreover as far as I can see he’s absolutely right.

(NB: not related to the Europe issue).

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Posted: 13 September 2011 02:19 PM   [ Ignore ]   [ # 7 ]
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Ah, that’s even better. It’s all true. Thanks Doug.

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Posted: 13 September 2011 06:23 PM   [ Ignore ]   [ # 8 ]
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George - 13 September 2011 06:45 AM

Maybe if the economists took evolutionary economics a little more seriously they could have known it wouldn’t probably work out. They should blow out the Alps to allow the south and the north to mix to even out the differences.  grin

Quite so, wrt the evolutionary economics, but not the blowing out of the Alps.  cheese

What has been suggested though is that Greece and Spain should leave the Eurozone immediately and then devalue their national currencies by massive QE to create money ASAP, followed by loans from the ECB/IMF.

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Posted: 14 September 2011 05:49 PM   [ Ignore ]   [ # 9 ]
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dougsmith - 12 September 2011 08:49 AM

The longer this recession lasts the more likely it is that the Euro will eventually end ...

Do you have any reason to think this recession will not last?

What is there that can pull us out of the current economic slump?

How have past serious economic quagmires been overcome?

What has been the foundation of economic growth?

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Posted: 14 September 2011 05:53 PM   [ Ignore ]   [ # 10 ]
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traveler - 13 September 2011 09:00 AM

Rumsfeld cancelled his NYT subscription after reading Paul HERE

sick  and why would idiot Rumsfeld’s opinion mean anything to anyone anyways?

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Posted: 14 September 2011 05:59 PM   [ Ignore ]   [ # 11 ]
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Doug,
I’m allowed not to be shy*

Paul Krugman - New York Times Blog
September 11, 2011, 8:41 am
The Years of Shame

Is it just me, or are the 9/11 commemorations oddly subdued?

Actually, I don’t think it’s me, and it’s not really that odd.

What happened after 9/11 — and I think even people on the right know this, whether they admit it or not — was deeply shameful. The atrocity should have been a unifying event, but instead it became a wedge issue. Fake heroes like Bernie Kerik, Rudy Giuliani, and, yes, George W. Bush raced to cash in on the horror. And then the attack was used to justify an unrelated war the neocons wanted to fight, for all the wrong reasons.

A lot of other people behaved badly. How many of our professional pundits — people who should have understood very well what was happening — took the easy way out, turning a blind eye to the corruption and lending their support to the hijacking of the atrocity?

The memory of 9/11 has been irrevocably poisoned; it has become an occasion for shame. And in its heart, the nation knows it.

His words just hit too close to home. . . . . . .  I gotta flash them out there…

*at least until you reprimand me   cheese

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Posted: 14 September 2011 08:05 PM   [ Ignore ]   [ # 12 ]
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citizenschallenge.pm - 14 September 2011 05:49 PM
dougsmith - 12 September 2011 08:49 AM

The longer this recession lasts the more likely it is that the Euro will eventually end ...

Do you have any reason to think this recession will not last?

What is there that can pull us out of the current economic slump?

How have past serious economic quagmires been overcome?

What has been the foundation of economic growth?

Well, the foundation of economic growth as always are (1) greater efficiencies in production, and (2) growth in population.

But I can’t see a quick solution to this slump. The last one had huge deficit spending in WWII. This one, not enough political will.

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Posted: 17 September 2011 03:54 PM   [ Ignore ]   [ # 13 ]
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dougsmith - 14 September 2011 08:05 PM

Well, the foundation of economic growth as always are (1) greater efficiencies in production, and (2) growth in population.

Is that foundation still solid when we consider that this planet has finite resources?

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Posted: 17 September 2011 06:52 PM   [ Ignore ]   [ # 14 ]
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jls7227 - 17 September 2011 03:54 PM
dougsmith - 14 September 2011 08:05 PM

Well, the foundation of economic growth as always are (1) greater efficiencies in production, and (2) growth in population.

Is that foundation still solid when we consider that this planet has finite resources?

yes, yes, thank you, thank you, I’m not crazy.  hmmm


Society has always been dependent upon nature’s bounty.
the early seafarers and spice traders and colonizers,
were all about the discovery, conquest and extraction of natural bounties of various kinds, to send home and ravenously consume. {sure some of it could be seemingly sustained, but much was a quick path to extinction}

Humanity has spend, depending on how you want to count it, five hundred, a thousand, a few thousand, a few hundred thousand years. . .
actively exploiting these natural resources to the boundless benefit of humankinds health and happiness.

But, like the song sang, “maybe we had too much too fast,” as dramatized by eternal examples of our over indulgence leading to bad ends, so in that sense we are following an ageless natural pattern. 
Though, how sad when many thought, humanity was capable of more than animal instinctive driven behavior.


And, in the end the cold, hard reality is that we live on a ravaged planet, old before her day, and in dire straights - - - and all who could make a difference to the future we leave our kids and kin, simple don’t seem to give a damned, their personal ego driven dogmas are more important that the planet that has conceived and nurtured this fantastical biosphere we inherited.

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Posted: 18 September 2011 10:54 AM   [ Ignore ]   [ # 15 ]
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Too much, too fast? I do not know. However, slowing down seems the safest bet.

Economy has always been kind of black magic to me. I have the impression that everybody is waiting for a “recovery” that never comes, everybody is talking about the economy that “will grow a mere 0.5% next year, perhaps less”, or whatever the guru of the moment spits out.

As for the factors mentioned earlier:

1) greater efficiency in production: it is useless to produce more efficiently when there is nobody out there to buy whatever we produce. In order to survive, most companies need to keep everybody buying continuously, by releasing either new products or just lousy products that break down after few months (the so called “planned obsolescence”).

2) growth in population: In the last decade, the US population increased by some 28 million, and in spite of all these new customers asking for water, food, energy, health care, education, etc. we had zero growth (as reported by Krugman several months ago). Zero growth, despite all the billions poured to stimulate the economy. The only non-zero growth -as usual- is national debt.

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