Feel free to weigh in, mate. Don't worry, we're not discussing the Fed, so there's conversation will be fun!
Submitted by Charles Hugh-Smith of OfTwoMinds blog, There is no substitute for the discipline of a market that cannot be manipulated by political elites. It's not that difficult to understand why the euro is doomed to fail. Given its structure, there is no other possible outcome but failure. Greece's exit (Grexit) will simply be the first manifestation of the inevitable structural failure of the euro. To understand why this is so, we have to start with two forms of discipline: the market and the state. The market disciplines its participants by discovering the price of not just goods and services but of currencies and the potential risks generated by fiscal and trade imbalances. When nations issue their own sovereign currencies, the global foreign exchange (FX) market enforces an iron discipline on all participants. If a nation prints excessive quantities of its currency without boosting its production of goods and services by an equivalent amount, the FX market punishes this nation by devaluing its currency. The market provides unwelcome feedback to the imbalances of interest rates, credit and currency: imports become prohibitive, nobody wants to buy the nation's bonds unless the interest rate compensates for the higher risk, and so on. The political and financial leadership of the nation would eliminate this feedback if they could. Unfortunately for the domestic leadership, the FX market is too big to manipulate for long. Domestic governments and central banks can try all sorts of fancy footwork (pegging their currency to stronger currencies, etc.) but in the end, the market will sniff out the fundamental imbalance between the rigged price of the nation's currency and its market value. The domestic political and financial leadership/Elites are powerless to stop or evade the discipline of the FX market. They can complain and protest and claim an international conspiracy brought down their financial fantasies, but the reality is the market is made up of many participants, all of whom want to make money, not lose it by accepting a bunch of political BS as the actual truth. The other form of structural discipline is imposed by the state (government in all its forms, including central banks). A typical example is the state legislature imposes a cap on state borrowing, i.e. the state is not allowed to borrow more than 3% of expenses annually. We all know what happens to these kinds of state-imposed discipline: they are ignored, bypassed, watered down or gutted. Why is this so? The reason is that all political systems, regardless of their ideology, are influenced by powerful elites and vested interests. When some political cap stands in the way of enriching or protecting a politically powerful elite or vested interest, the cap is quickly reduced to a PR play. This is the fundamental flaw in state fiscal discipline: it is always a political construct and thus contingent on what benefits powerful elites and constituencies. The disciplinary foundation of the euro is wholly political. In agreeing to join a monetary union of one currency, the EU nations eliminated the market's ability to provide feedback on the imbalances building up in their economies. In effect, they replaced the discipline of a market that cannot be manipulated for a political discipline that can be manipulated as a matter of course. Canny domestic politicos are well-versed in ways to hide fiscal and credit imbalances. Masking financial realities is their bread and butter. So what happens when you impose a super-state (the EU) on the member nations? the super-state becomes the cozy home for canny politicos who play the same old hide-and-seek financial games on a larger stage. The official response to this intrinsic lack of discipline is for the central banks to print money and issue more credit. Does issuing more money and credit provide any fiscal discipline? Of course not--it does the opposite, freeing the canny politicos (yes, the ones supposedly in charge of imposing discipline on the system) to escape any consequences from their fraud and profligacy. The idea that the political leadership of a state or super-state could impose a discipline equivalent to that imposed by a market was always a fantasy. As a result, the idea that political discipline could impose painful and difficult reforms on politically powerful elites and vested interests was also a fantasy. This is why Greece has no choice but to exit the euro. The politicos in the EU will "do whatever it takes" to extend the fantasy their discipline is equal to the discipline of the FX market, but everyone knows it's all PR and lies. There is no substitute for the discipline of a market that cannot be manipulated by political elites, and as a result there can be no real reforms until the euro is dissolved and the FX market forces the true cost of systemic imbalances on the domestic participants who created and maintained the imbalances. Reform cannot be triggered by borrowing more money--it can only be triggered by defaulting on existing debts that cannot be paid. Bailouts are never about enabling reform--they're about preserving the Status Quo Elites' and vested interests' share of the swag.
Hahaha, I am happy to discuss the Fed, as well, as you know... On Greece, if you want me to be honest, I don't really see what the argument is all about (other than volpunter throwing toys out of the pram, as usual). I think you're both, basically, right. Yes, the Greeks have been systematically "taking a piss" and abusing the system; the latest Syriza shenanigans are just more of the same. This is all the more pronounced in contrast to somewhat genuine success stories out there (e.g. Ireland, Portugal, Baltics, etc). On the other hand, the Europeans are undoubtedly guilty of throwing good money after bad and being rather disingenuous about it. They've also totally failed to admit how sub-optimal some aspects of the EU arrangement are for a country like Greece (e.g. with regard to military spending as well as others). One possibility is that the EU has been dragging the process out because it has provided them with the window of time that was needed to properly ring-fence Greece.
I think you're spot on here. They've seen the writing on the wall for a while now, knew these debts were not going to be repaid and they've probably done as best as they can with fire-walling. Even if they figure out this latest fiasco and manage to keep Greece on board, it is my belief that it is only a matter of time before we see Grexit anyway. It's just a question of how much good money gets thrown after bad. The argument (volpunter and mine) is really about him not agreeing that the Troika has any fault in this - that it's purely Greece's fault for going back on the agreement an earlier government agreed to. I agree with him on Greece, but I also believe that the Troika never really cared about helping Greece and only wanted to pay back their financial institutions (see chart showing how 85%~ of bailout dollars leave Greece previously posted) - they had to know these bailout programs were a farce from the get-go. If they didn't, they're guilty of being stupid.
Lol that is not what Martinghoul said. Now you even twist the words of your mate? Priceless. So you are saying the IMF was complicit in making whole good old European banking institutions? You should get a job at the Washington Post. Looks like you are to uncover the story of the decade. So as I have been saying you either accuse Troika as being complicit in destroying Greece or as being stupid and not knowing what they were doing. I say again you have no fucking idea what you are talking about. History will tell that they have done their best to contain damage and that they have done so in the best possible way given the circumstances they were in. Greece could not have let go at the time of the first bailout and thats not because banks needed to be saved. It was because Europe was economically speaking at the brink of collapse. I think the facts will come to light over time and you will be disappointed that there will be no ugly krauts as part of the story nor evil bankers. You may hate and disagree on the European experiment but with all due respect nobody gives a rats ass how much an American blogger dislikes Germany and greater Europe for that matter (of course you never said that but I say it). In the same way your nation plays it's wars on drugs, terror and what have you, and Europe not interfering so do Europeans appreciate riding this out themselves. At least that seems to be the majority opinion in Europe, certainly not just mine. After all the rest of the world also does not point fingers and smirks at the percentage of fat fucks in your country, a government and political system that has been entirely taken over by lobbyists, and a sheer panic about terrorists after your country invaded half the world. So can we agree to disagree. I focus on the moral, ethical, and legal aspect of an agreement and the side who breaks the agreement is at fault. The other side who stood by the agreement is not at fault. Whatever standards you go by I stopped caring about because if you could not make those apparent then I do not believe you will succeed explaining yourself going forward either. And of course you are entitled to your opinion. Just please don't play ass clown as if you knew a thing about Europe. You are not European, nor have you lived by own admission for any extensive periods in Europe and you naming Miami one of the top holiday spots of Europeans is like asking whether the Berlin Wall still stands. Certainly does not demonstrate you know a thing about Europe. Please keep on posting your one sided articles...only demonstrates to all where you really stand. left left leeeeeeft.
According to the Greek newspaper Kathimerini Greece will ask tomorrow a prolongation of the financial help. Back with their feet on the ground. At this moment there are negociations about which form this prolongation will have.
Yeah, maybe they're guilty of stupidity and maybe they've been giving us the whole holier than thou act a bit too much. But I can also imagine that, instead, they have been really buying themselves time to ring-fence Greece, salvage what remains of the European project and, God forbid, maybe fix some of the more egregious flaws that the crisis has exposed. So I dunno, maybe it's all been a cunning plan. I can't find the chart you mention, unfort. But given that Greece has been running a primary budget surplus, it's been reasonably clear all along that the purpose of the bailouts has been to allow Greece to pay interest on its existing stock of both restructured and original debt (I believe this is what one of your posts described as partial forbearance). Now is lending money to a debtor at a lower rate so that they can pay other creditors "helping", strictly speaking? I dunno, I suppose it depends... Maybe for Greece it isn't, while for Ireland and Portugal it is? So, again, I just don't really see what your and volpunter's passionate argument has been all about. As far as I can see, your only disagreement is over a reasonably subtle nuance of the whole drama. Moreover, it's a case where it's going to be almost impossible to arrive at the "truth".
Martinghoul, the original disagreement came about a ridiculous letter by the Greek administration addressing Germany. In summary it read "you cocksuckers, we got you by balls good and we will squeeze the last penny out of ya , you nazis". One person, exactly one person got off over this and that was Tsingtao. He kept on coming back for more. Most every single of his posted articles was siding with Greece, sharp shooting Germany, reaching deep down dirty into the Holocaust and WW2 closets and it was right up Tsingtao's alley. You can't side with the people (the Greeks) who display some of the most disrespectful, thankless, hateful attitude towards those who attempted to help them and be taken seriously. Tsingtao did exactly that. I enjoy the occasional shouting match but then Tsingtao posted some really funny gaffes and that was the start.. ;-) But back to the topic. I thought it was perfectly apparent that Europe was ringfencing Greece. I mean what else can it be? Naivity or bad intent? Tsingtao ruled out the latter and settled for the former. I think it is extremely short sided to think of those who evaluated and put together those packages as being naive. I hope i dont open another can of worms here but you can probably put the past 5 Fed presidents together and they would still not reach Draghi' clout. Putting ECBs staffers together, the top European legal teams and accountants and finance professionals as well as IMF legal and economists and it's hard to argue against a pretty solid team. Would have Wall Street come up with a smarter solution? Yes but maybe no. But assuming the bunch was naive ? I thought everyone with an iq of at least more than 100 would have come to the same conclusion. That Tsingtao did not and still does not point to either stupidity or his bad intent to flame and stir up discontent just for the sake of it. I give him the benefit of doubt and assume the latter. But then she should take it like a man and not cry like a baby as he did "but it's unfair you guys are all against me blaaaa blaaaa"
Blah blah blah same ol' shit. How about you let Martinghoul tell me if that's what he said or not? You can piss off and continue suffering from your US envy/hate and various nationalistic tendencies.