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Don't expect sympathy – Lagarde to Greeks
Topic Started: 27 May 2012, 04:55 PM (2,104 Views)
Count du Monet
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Greece built an 'economy' on borrowing money for conspicuous spending and decided tomorrow is another day. Well tomorrow came!

Back in 2008 the Greek government budget was aiming at 100B E p.a. This is all good and fine, but only if the revenue could be raised.

Now they are only raising 50B E revenue, but still spending in the region of 70B E. Of that about 11B E is debt service. So the Troika has to fill the gap and they want the annual budget deficit to become smaller. A lot Greece's problems stem from the collapse of world shipping rates which must be a large contributor to the GDP.

The Troika has every right to demand the Greek government cut spending because it is the Troika that must furnish the difference and they will continue doing so for years. Without the assistance of the Troika the Greek government couldn't pay its wages and welfare.

It's a huge mistake to bite the hand that feeds you.

Greek government spending is 6,300 E per capita.

Just across the border.

Bulgarian government spending is 2,200 E per capita.

PLEASE DON'T TELL ME THE GREEKS HAVE IT THAT BAD!

Greece population is 11 million, Bulgaria is 7 million.

The entire Bulgarian GDP is 40B E, less than what the Greek government gets in revenue!!!
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Lefty
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Bulgaria is a small, relatively poor place with fairly high unemployment (around 12% at present) - a rate which is now substantially higher than when the current, pro-austerity government was elected some time ago.

Count, the harder Greece squeezes at the behest of the troika, the more the economy contracts, the further tax revenues fall on falling wages and rising unemployment, and the higher the transfer payments go to stop the one-quarter of the workforce who are jobless from smashing shop windows looking for food.

Like a dog chasing it's own tail, austerity is chasing falling tax revenue down the drain even as it creates conditions that exacerbate it.

You seem to be struggling with the concept of "vicious circle"
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Count du Monet
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Lefty
28 May 2012, 02:11 PM
Bulgaria is a small, relatively poor place with fairly high unemployment (around 12% at present) - a rate which is now substantially higher than when the current, pro-austerity government was elected some time ago.

Count, the harder Greece squeezes at the behest of the troika, the more the economy contracts, the further tax revenues fall on falling wages and rising unemployment, and the higher the transfer payments go to stop the one-quarter of the workforce who are jobless from smashing shop windows looking for food.

Like a dog chasing it's own tail, austerity is chasing falling tax revenue down the drain even as it creates conditions that exacerbate it.

You seem to be struggling with the concept of "vicious circle"
You can't answer the question though......where is the money going to come from?

I suspect lefty you're too inexperienced with these questions to understand much of what you are referring to.

Simply spouting the Keynesian formula is not the answer.

One huge bloody clause for starters............printing money in Keynesian fashion does not work with floating currencies.

Do you understand the difference between floating exchange and fixed exchange?

When the US bucked the gold standard 40 years ago, it moved to a floating exchange. When that happened the Keynesian system went into meltdown, most followed suit and Australia in the early 1980's.

Some nations like China are still on fixed exchange.

Quote:
 
Like a dog chasing it's own tail, austerity is chasing falling tax revenue down the drain even as it creates conditions that exacerbate it.


This bit is relative nonsense. Of course you get falling tax-revenue when the huge sums of borrowed money cease.

The Greek government borrows 40 billion (like they did 2008 to 2009), spends it and gets back maybe 20 billion. You're saying spending 40B to get back 20B is clever? The other 20B goes on foreign luxuries.

The problem is nobody will lend them the money anymore.

..................................................................................................................................................................................................
If this amount of government spending is too little for the Greeks.

Quote:
 
Greek government spending is 6,300 E per capita.


Then how must the Bulgarians feel?

Quote:
 
Bulgarian government spending is 2,200 E per capita.


The entire Bulgarian budget is less than what the troika is topping up Greece's budget up with.



The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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b_b
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Count du Monet
28 May 2012, 05:24 PM
You can't answer the question though......where is the money going to come from?
The ECB has all of the money required to fund any level of spedning within the Euro system.

Quote:
 
One huge bloody clause for starters............printing money in Keynesian fashion does not work with floating currencies.

Money printing has worked really well under a floating system. For example, real GDP per person in the US us significantly since 1971 (after Nixon closed the gold window). Please try to get your fact right.
Posted Image
Quote:
 
I suspect lefty you're too inexperienced with these questions to understand much of what you are referring to.

Simply spouting the Keynesian formula is not the answer.

True - but is a better answer compared to austeriety. Lets compared the US to Europe and see how things are goings shall we...
Posted Image
oops.

Quote:
 
When the US bucked the gold standard 40 years ago, it moved to a floating exchange. When that happened the Keynesian system went into meltdown, most followed suit and Australia in the early 1980's.

True - Keynes operated with a convertible currency - now with non convertibility, Post-Keynesian is more relevant.


Quote:
 
This bit is relative nonsense. Of course you get falling tax-revenue when the huge sums of borrowed money cease.

The Greek government borrows 40 billion (like they did 2008 to 2009), spends it and gets back maybe 20 billion. You're saying spending 40B to get back 20B is clever? The other 20B goes on foreign luxuries.


Greek citizens currently desire to save. These savings must come from somewhere - either givernment deficits or trade surpluses. With a non-convertible floating exchange rate, the Euro countries can not all collectively net save since it would violate Wynne Godley's sectorial balances. If Germany and France want to keep running trade surpluses, someone has to run a deficit, and such deficits are funded by fiscal ttransfers. The problem is not money or deficits - it is lack of aggregate demand.
(S – I) + (T - G) + (M - X) = 0
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Count du Monet
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b_b
28 May 2012, 06:09 PM
The ECB has all of the money required to fund any level of spedning within the Euro system.



Money printing has worked really well under a floating system. For example, real GDP per person in the US us significantly since 1971 (after Nixon closed the gold window). Please try to get your fact right.







True - Keynes operated with a convertible currency - now with non convertibility, Post-Keynesian is more relevant.





Greek citizens currently desire to save. These savings must come from somewhere - either givernment deficits or trade surpluses. With a non-convertible floating exchange rate, the Euro countries can not all collectively net save since it would violate Wynne Godley's sectorial balances. If Germany and France want to keep running trade surpluses, someone has to run a deficit, and such deficits are funded by fiscal ttransfers. The problem is not money or deficits - it is lack of aggregate demand.
Perhaps you can tell me how much money the US has printed since 1971.......I know, but do you?

Do you have any facts?

Quote:
 
True - but is a better answer compared to austeriety. Lets compared the US to Europe and see how things are goings shall we...


You forget the US can borrow any amount of money from the world it likes, that is until the world pisses off the USD.

Money = surplus goods

Do you understand that one? (with the proviso there is real demand for the goods concerned)

If Greece is to produce "money" what goods can they create in surplus which have demand?
Edited by Count du Monet, 28 May 2012, 06:23 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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b_b
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Count du Monet
28 May 2012, 06:19 PM
Perhaps you can tell me how much money the US has printed since 1971.......I know, but do you?
Total US government debt since 1971 has increased in nominal terms by about US$15T (so about 99% of total money printing has occurred since the closing of the gold window). Since governments "spend money into existance" the total amount of money printed is the same $15T. Please do not confuse this issue with QE or paper money. Neither of which is actually "money printing".
Quote:
 
You forget the US can borrow any amount of money from the world it likes, that is until the world pisses off the USD.

The US government does not borrow any money from anyone. The US Federal reserves issues currency to the US treasury (operationally unconstrained), and the US treasury spends the money into existance. Bonds are issued later to mop up reserves. No different to Japan, Australia, New Zealand, UK..but very different to Greece, France, italy, Ireland etc.

This is why the 10-y US T is 1.8%. This is why anyone who does not understand monetary economics have shorted the UST's and Japanese Bonds and have been slaughtered.
Edited by b_b, 28 May 2012, 06:32 PM.
(S – I) + (T - G) + (M - X) = 0
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Count du Monet
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b_b
28 May 2012, 06:31 PM
Total US government debt since 1971 has increased in nominal terms by about US$15T (so about 99% of total money printing has occurred since the closing of the gold window). Since governments "spend money into existance" the total amount of money printed is the same $15T. Please do not confuse this issue with QE or paper money. Neither of which is actually "money printing".


As I thought, you can't answer.

In 1970 the was 46 Billion USD in circulation, today there is about 1100 Billion USD. That's not a 99% increase is it?

Quote:
 
The US government does not borrow any money from anyone


Yes, they do. The same way the Greek government borrowed....via selling treasuries.

Most of the money for treasury purchases comes from that already in circulation. More explicitly from the demand deposits held in the US banking system.

The US banks have and MZM of 5 or 6 trillion, these pay virtually no interest to the depositors. The banks earn a benchmark 1.8% on US treasuries.

Yes Virgina, most of the 'Fed' treasuries are purchased with the money little old ladies put in their bank accounts. The FED has to pay interest to the US treasury for all the FRN's in circulation......at the moment 1100 Billion x 0.0015%.

So no, the US government doesn't present 5 - 6 trillion worth of treasuries to the FED and the FED then print 5 - 6 trillion worth of FRN.....for starter there isn't 5 - 6 trillion worth of FRN's in existence. Yep, most of it from real deposits.

Quote:
 
This is why the 10-y US T is 1.8%. This is why anyone who does not understand monetary economics have shorted the UST's and Japanese Bonds and have been slaughtered.


I could tell you that before it happens

http://www.talkfinance.net/f33/pimco-short-us-government-debt-9378/

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Pimco has signaled the US treasury is moving towards becoming a junk bond.

However it still buys oil.

He's betting on inflation! A fool and their money are soon parted.

Edited by Count du Monet, 28 May 2012, 07:58 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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genX
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Quote:
 
The US government does not borrow any money from anyone.

From Wikipedia:
A United States Treasury security is a government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt.

Quote:
 
The US Federal reserves issues currency to the US treasury (operationally unconstrained), and the US treasury spends the money into existance. Bonds are issued later to mop up reserves.

Who issues the bonds? Not the Fed.

Quote:
 
This is why the 10-y US T is 1.8%. This is why anyone who does not understand monetary economics have shorted the UST's and Japanese Bonds and have been slaughtered.

It's true that the Federal Reserve can buy an unlimited number of treasuries. However this has implications for inflation,money markets, exchange rates and outstanding issued paper. In short, issuing an unlimited amount of debt amounts to financial warfare, which soon degenerates into trade warfare, which then degenerates into real warfare.
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Count du Monet
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Quote:
 
The US Federal reserves issues currency to the US treasury (operationally unconstrained), and the US treasury spends the money into existance. Bonds are issued later to mop up reserves.


The legal issuer of the FRN is the US treasury, it's been on issue since 1934.

The FED did issue it own banknote in general circulation from WW1 until 1933 when it went bankrupt and was seized by the US government. These were the Federal Reserve Bank Notes (FRBN), which were bearer cheques for gold coin.

Edited by Count du Monet, 28 May 2012, 08:27 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Andrew Judd
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Count du Monet
28 May 2012, 08:25 PM


The legal issuer of the FRN is the US treasury, it's been on issue since 1934.

The FED did issue it own banknote in general circulation from WW1 until 1933 when it went bankrupt and was seized by the US government. These were the Federal Reserve Bank Notes (FRBN), which were bearer cheques for gold coin.

I have no doubt that once Greece is out of the Eurozone the MMTers will be saying the massive surge in inflation experienced by Greece and continuing to be experienced by Greece, was just part of modern monetary economics etc etc. No matter what happens to Greece the faithful will still be there banging the MMT gong.
Edited by Andrew Judd, 28 May 2012, 10:06 PM.
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