Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
My solution for Europe: Equity, not debt
#1
I grew up in DC, and this was the federal government's response to our fiscal troubles. It probably couldn't have happened if DC had true democratic representation...but times are 'achangin.

I'm not sure how Europeans are seeing this crisis, but from my perspective, this whole thing is eerily reminiscent of the two world wars. The whole Euro project was a power play for Germany: they entered the Euro with a devalued currency, and they've had trade surpluses with the rest of Europe ever since. While they claimed to be on a "vacation from history," they were actually so tied up in their historical lessons that they couldn't adapt to the present. They have always prevented the inflation that could right these trade imbalances on the grounds of their violent past.

I am not so troubled by the power play itself, but rather its secrecy. I actually think that Germany should be able to get credit for being able to manage its economy better than other countries, as they have emphasized. But doing so will require them ending their "vacation." Right now, they (or the European authorities, but really the Germans) have been propping up the failing economies with more debt. They are not opposed to the signing over of more debt, as much as rewarding the mismanagement that has already taken place. They've been proposing new political controls, but nothing that would really prevent a repeat of the current crisis. The solution is obviously political - hence the analogy with equity, which implies ownership.

Germany (acting through the ECB, or whatever) should make it clear that lending these countries money comes at a cost. In particular, it should come at a cost to those who started the problem in the first place: the politicians. Any new financing should come with a commensurate loss of sovereignty. Let the great game recommence - only this time, in a controlled environment where only politicians get hurt. Isn't that the whole logic behind democracy?

This really should go under international politics, I guess. But if you study economics in enough detail, it always leads to these larger topics.
Reply
#2
The Euro was a mistake, as well as the EU. The Common Market was a glowing success, and they should have stopped right there. But Europeans are more Big Government people than practically anyone, and they just had to be the biggest and baddest.

Now they are saddled with many Collectivist Nanny States, which are insolvent, or almost there, and having to bail them out in order to keep the entire system solvent. It ain't gonna' work in the long run.

Again,......as John Naisbitt, who is a Democrat BTY, wrote in his Megatrends 2000 book on trend theory, that "The More We Act Globally, The More We Think Tribally". All of those different European countries are not about to give away their soverignty for very long.

And too, this means each country is rethinking their willingness to give up their currency and be saddled to the Euro. Most would just love to kick it out the door, and it's going to happen eventually. Mark my words.

This insolvency problem is the classic example as to why the system is going to collapse. The 'haves' are not going to keep propping up the 'have-nots'.

And no, economics is a good place for this, because it is an economic issue.
___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#3
(08-12-2011, 07:34 PM)John L Wrote: Again,......as John Naisbitt, who is a Democrat BTY, wrote in his Megatrends 2000 book on trend theory, that "The More We Act Globally, The More We Think Tribally". All of those different European countries are not about to give away their soverignty for very long.
This sounds like a form of egalitarianism to me. Are all of these "tribes" supposed to be equal?
Reply
#4
Do you want realistically or?
Reply
#5
Of course not. Each of those tribes thinks they are the best.
Reply
#6
(08-13-2011, 12:32 AM)Huh...What? Wrote: Of course not. Each of those tribes thinks they are the best.
Not only thinks. Some of them actually are better than others.
Reply
#7
And yet you think you can unite Europe under Germany. I want some of what you've been smoking...
Reply
#8
I never said anything about uniting. My method is simple: Germany has the money; other countries want it.
Reply
#9
And to get it, you want to turn their sovereignty over to Germany. In effect, doing something Germany was unable to do with two world wars. I'm, beginning to question your sanity.
Reply
#10
(08-13-2011, 12:30 AM)b5d Wrote:
(08-12-2011, 07:34 PM)John L Wrote: Again,......as John Naisbitt, who is a Democrat BTY, wrote in his Megatrends 2000 book on trend theory, that "The More We Act Globally, The More We Think Tribally". All of those different European countries are not about to give away their soverignty for very long.
This sounds like a form of egalitarianism to me. Are all of these "tribes" supposed to be equal?

Of course not. Egalitarianism is equality AFTER the fact, not before it. And all those tribes, or nations, are not supposed to be equal. They are unique, and value their own individual sovereignty,.....over themselves.

Tribalism is the second most powerful force, after 'family'.

The EU is an attempt to wrest sovereignty from the nations/tribes, and the European manner just won't work. You are seeing it right now, over there, as shown by the financial crisis. Even the Germans, who set out to economically control the continent, are growing restless over the financial costs of being in the lead.

It's all going to eventually break down, just as the system here will if we don't get back to what our Founding Fathers intended for us.

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#11
bd5, I don't know why you americans are so focused on Germany.

Yes Germany lending to the PIIGS comes at a cost: 5% of interrest + austerity measures which garantee the payment of the debt.
It should be noted that doing so, Germany also helps its own private banks, heavily invested in PIIGS debts.

But it doesn't come at the expense of soveriegnty. This is absurd because europeans have already given up some of their sovereignty by joining the EU. It's been 20 years that we gradualy replace national laws by euro ones. This is also valid for Germany.

Nobody in Europe feels that Germany has some special powers over the others. This is not true.
Especialy in this case, conditions to get a bail-out are established at the european level (when the fund comes form the ECB - when it's Germany itself they decide of course, but so far the bail-outs have been largely at the european level). With a greater influence of Germany, but still depending on the aprobation of a multinational comition.

The second thing is that a bail-out is not a gift, it's a loan (poeple forget that all too often). If that was a gift then, yes we could imagine that an indebted country could sell a part of their territory to get this money. But nobody seems interrested in piece of land. What would do Germany with a piece of Italy or Greece? The value of national territory is practicaly worthless because the tax you can get from these areas are minus the spending you have to do to develop the region (or keep it developed) is minimal. Far too small to make interresting deal.

In Italy the debt is 100% of GDP, it means that Italy should sell its entire territory because it would take the tax revenues of its entire economy to repay the debt in timely manner (say 5% of GDP going to repaying the debt ==> 20 years).

It's clear that no one is interrested in a debt for sovereign land swap. It's not like a private house because sovereign land is already privately owned for the great part (unless it's 100% governement owned but it's more like it's 1% owned) and the only revenue can come from taxes for your governement.

HTH

JohnL
Almost everybody here agrees that the euro, the EU and the Shengen zone is a success.
Even the communist (unions) are adapting to the euro pradygm. Communist were the most opposed to the EU because they saw that as a new tool for capitalism, which it is.

The EU is a big bureaucracy, but at the same time it makes obsolete some local institution. When one thing is being delt with at the euro level, it's 17 countries that dn't have to do it by their own. At the end of the day, it's less governement.
The problem is that some countries have not adapted accordingly. Now that they are forced to slim down, they do it.
Italian Provincial administrations — in-between municipalities and regions — are seen by many as redundant and expensive

The reason why they waited so long lies in the very economic success of these regions, largely helped by the EU.
Spain: Townspeople are sick of constant bickering between local politicians over who's to blame

It's noticeable that no one protest (in writing or by hurling pavement stones) against the EU in this financial crisis. The blames goes to the banks (first) and the local politicians (second). Poeple are more fed up with national and local (Greece is small enough to say that national = local) governements.

Poeple even seems to understand that the EU is a unique savior for the national and minicipal debt crisis. The EU allows for example Germany to massively lend money to other countries thanks to all the garantees the EU implies directely and indirectly.

We don see it as lending to another country, but to antoher region of europe.

Without the EU and the euro, it's obvious that Greece and Portugal would have to undergo massive currency debasement, perhaps defaut, a crash of their banking system and then probably a semi-military dictature as it was common in the past.
The EU was an evolution that avoided that.
Reply
#12
The problem is that you have a whole bunch of different countries, with different monetary policies, all using the same currency. This is a recipe for disaster in the long run.


Quote:But it doesn't come at the expense of soveriegnty.

But b5d thinks it should. He thinks the richest country should own the poorer, less fiscally responsible countries (though I doubt the fiscal responsibly of Germany, who is spending it's own prosperity to bail out the other countries).
Reply
#13
(08-13-2011, 02:48 PM)Fredledingue Wrote: JohnL
Almost everybody here agrees that the euro, the EU and the Shengen zone is a success.
Even the communist (unions) are adapting to the euro pradygm. Communist were the most opposed to the EU because they saw that as a new tool for capitalism, which it is.

Fred, it's not going to work, no matter how much you all think it is just 'peaches and cream'.

If you all want mediocrity, then be my guest. But if you are going to prosper and not have to keep propping up the worst of the lot on a continual basis, the EU is doomed in the long run.

The system is attempting to meld the entire continent into one huge homogeneous mud-pie, and tribalism/nationalism isn't going to stand for it.

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#14
So the choice put forward is to merge standards to the lowest common denominator? I think uplifting all to the highest standard is the only winning strategy.
Reply
#15
(08-13-2011, 10:18 AM)John L Wrote: The EU is an attempt to wrest sovereignty from the nations/tribes...
Are you sure it's not an attempt to increase the sovereignty of certain tribes?

Quote:...and the European manner just won't work. You are seeing it right now, over there, as shown by the financial crisis. Even the Germans, who set out to economically control the continent, are growing restless over the financial costs of being in the lead.
I don't think they're so concerned about the costs, as much as the fact that there's no reward (and the fact that they're rewarding those who have underperformed.)


(08-13-2011, 02:48 PM)Fredledingue Wrote: bd5, I don't know why you americans are so focused on Germany.
For the reasons I mentioned above, in the original post. Most importantly, their ability to weather this crisis is largely coming at the expense of other countries, who have trade deficits towards them.

Quote:The second thing is that a bail-out is not a gift, it's a loan (poeple forget that all too often).
You're going to end up like America, with the economy revolving around debt. There has to be some 'skin in the game' (i.e. equity) - it's the same whether the debt goes to a corporation, or a country.

Quote: If that was a gift then, yes we could imagine that an indebted country could sell a part of their territory to get this money. But nobody seems interrested in piece of land. What would do Germany with a piece of Italy or Greece? The value of national territory is practicaly worthless because the tax you can get from these areas are minus the spending you have to do to develop the region (or keep it developed) is minimal. Far too small to make interresting deal.
Just to be a little more specific, I was thinking, like in a PR system, they could create a "Germany party", with a certain number of representatives appointed regardless of the votes. (In a non-PR system, something different would have to work.) Then, after the 'equity' is paid off, the arrangement ends. The same way the US government sat on the board of several companies after the financial crisis. Of course, countries would never do that if they could finance themselves on the market.

Quote:We don see it as lending to another country, but to antoher region of europe.
And what happens if one region of, say, the states has to lend a lot of money to another? Probably, that bloc of states goes on to increase its power, through national elections - as they should.
Reply
#16
(08-13-2011, 04:40 PM)b5d Wrote:
(08-13-2011, 10:18 AM)John L Wrote: The EU is an attempt to wrest sovereignty from the nations/tribes...
Are you sure it's not an attempt to increase the sovereignty of certain tribes?

There may be truth to that David. All the more reason why most of the members will be more than glad to remove this albatross from around their necks, once the weight and stench becomes too much to bear.

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#17
Quote:Are you sure it's not an attempt to increase the sovereignty of certain tribes?


That's a good one. Increasing a country's sovereignty by enforcing laws from outside the borders.
Reply
#18
It's all part of the natural process of using countries as 'laboratories' for innovation. They need incentives. America likewise will lose its position in the world if its political and economic system performs worse than those of other countries.
Reply
#19
So, taking away home rule in favor of foreign rule is an experiment in sovereignty?
Reply
#20
First, I'd object to that word foreign...see Fred's quote in bold above.

Second, to hear some conservatives on this board tell it, the whole Euro project was America's attempt to create a buffer zone. Now, if they're going to be losing their sovereignty to someone, shouldn't it be to a country that knows how to manage their economy?
Reply


Possibly Related Threads…
Thread Author Replies Views Last Post
  Why Increased Equity Taxation is Self-Defeating and Wrong John L 1 1,077 09-11-2007, 07:06 PM
Last Post: jt

Forum Jump:


Users browsing this thread: 1 Guest(s)