SkyNigger
07-16-2012, 10:27 PM
http://cdn.theatlantic.com/static/mt/assets/business/assets_c/2012/07/scarychar-thumb-615x699-92582.png
The world is literally run by imbeciles dumber than I was at 17. This is not 'opinion'. Very bright people make it very clear.
Dumber than Mike even. Nah, that's probably not possible. But still, they're pretty dumb. This article is kind of logically flawless.
http://www.theatlantic.com/business/archive/2012/04/spain-is-doomed-why-austerity-is-destroying-europe/256032/
Spain Is Doomed: Why Austerity Is Destroying Europe
APR 18 2012, 10:00 AM ET 318
... but the beatings will continue until bond yields improve!
http://cdn.theatlantic.com/static/mt/assets/business/800px-Plaza_Mayor_de_Madrid_06.jpg
Let's try a thought experiment. Imagine you walked into the bank, told them you were going to be taking pay cuts for the next few years, and then asked for a loan. You'd be laughed out of the office or else pay an interest rate so high that "usurious" wouldn't do it justice. The logic is simple: If you're in debt and your income is shrinking, it's mighty hard to pay back what you already owe.
It's not any different when it comes to countries that can't print their own money. That brings us to Spain.
The following charts (courtesy of Reuters) show overall and youth unemployment across the euro zone. Spain tops both measures, with truly depression-level joblessness.
http://cdn.theatlantic.com/static/mt/assets/business/assets_c/2012/04/EuroUnemployment-thumb-615x385-84971.jpeg
http://cdn.theatlantic.com/static/mt/assets/business/assets_c/2012/04/EuroYouthUnemployment-thumb-615x355-84973.jpeg
Nearly a quarter of Spain's population is unemployed. Half of its youth are out of work. And it's only going to get worse. Spain is supposed to trim its deficit by some 5.5 percent of GDP over the next two years. That's not a recipe for growth. Just ask the IMF, which downgraded its projections for Spain's economy back in January.
What matters for a nation is its GDP. That's a country's equivalent of personal income. If Spain's GDP is set to fall for the foreseeable future -- and it is -- then who would want to lend to Spain? The markets gave their answer -- practically nobody! -- and ECB was forced to fill the void by giving Eurobanks free money to then invest in sovereign debt. Yields came down. European policymakers declared "Mission Accomplished."
But now the free money is gone. It's unsurprising that Spanish borrowing costs are surging again.
Unsurprising to everybody who isn't a Eurocrat, that is. Consider this mind-boggling quote from the chairman of the euro zone finance ministers, Jean-Claude Juncker:
I invite financial markets to behave in a rational way. Spain is on track.
On track? For national bankruptcy, yes. But for recovery, absolutely not. Juncker's quote betrays a fundamental misreading of what is making markets anxious. He thinks markets shouldn't worry because Spain is going to follow through on its budget cuts. But markets are worried that Spain is going to follow through on its budget cuts. Austerity would almost certainly shrink the economy and make the country's unconscionable unemployment even worse.
If you're persuaded by my opening analogy, you can see why lenders are so concerned about growth. It's why they don't actually like austerity. But just today, the Bundesbank -- Germany's national central bank, and the real power behind the ECB -- came out and told countries not to worry about growth. Telling a country in a debt crisis like Spain not to worry about growth is like telling man in debt to not worry about finding a job. The most polite way to characterize this advice is "delusional."
To crib from Keynes, Europe's policymakers have blundered in the control of a delicate machine, the workings of which they do not understand. They're not evil. But they're almost certainly wrong. Rather than consider the possibility that the economy might work differently than they think, they have settled on a simple message: The beatings will continue. Unfortunately, morale will continue to not improve. Eventually, you have to think leaders in Europe's beat-up countries will begin to wonder if life might be better outside the euro zone. Hopefully, the ECB will come to its senses first.
SkyNigger
07-17-2012, 07:47 PM
Greece should leave the euro, return to a devalued drachma.
It would be painful short term but in a year or two they would be competitive and back in shape, look at how quickly Iceland recovered after their financial crisis and default.
Worked for Argentina too. But then they had a genius Messiah who miraculously saved them when they were as good as dusted. Democracy is literally the dumbest of all forms of government. Argentines elected personalities who ran campaigns of "identity" in lieu of "political positions" or "policy" and when the proverbial inevitably hit the democratic fan, their corrupt 'representatives' fled the country (which is to be expected, when they've Fedex'd the nation's currency reserves overseas in preparation for the inevitable). Argentina was fucking toast, on the brink of joining the fourth world as a failed state.
But a once-in-a-lifetime hero (who was selected rather than democratically elected) rose from the ashes of democracy to save the nation. He was selected by a President who was selected rather than democratically elected as well (the last half dozen Presidents had face-planted and no one in their right mind wanted the job).
Lavagna was fucking god. He literally single-handedly saved the nation from the IMF's attempts to bankrupt it. The IMF bankrupted it, but Lavagna got them out of the shit. The shit was so bad, the country had effectively stopped. Why go to work when you haven't been paid in months? There was no money to pay anyone because all the money had been syphoned offshore by democratically-elected corrupt politicians.
It was literally game over. Argentina was going to be a failed state, basically; something worse than the Philippines. Good god, can you imagine the horror? I cannot imagine I would want to.
But Lavagna saved them. Oh it wasn't really all that complex. Economics is literally so simple, I just realised I'm a moronic donk.
Reppat:
world is run by like 8-12 geniuses from a handful of families doing this on purpose
Of course you're 100% right. I got caught up in the (probably facetious) rhetoric evident in the article (that the policy-makers too stupid to function). Of course they're not. This is intentional shit. They're just playing at being too dumb to be plausible. That should have been my clue.
There's some pretty interesting parallels with the Argentine crisis; which is fascinating in ways I'd never been fascinated by economics.
Government spending continued to be high and corruption was rampant. Argentina's public debt grew enormously during the 1990s and the country showed no true signs of being able to pay it. The IMF, however, kept lending money to Argentina and postponing its payment schedules. Massive tax evasion and money laundering explained a large part of the evaporation of funds toward offshore banks. A congressional committee started investigations in 2001 over accusations that the Central Bank of Argentina's governor, Pedro Pou, as well as part of the board of directors, had failed to investigate cases of alleged money laundering through Argentina's financial system. Clearstream was also accused of being instrumental in this global financial process.
Other countries, such as Mexico and Brazil (both of which also happen to be important trade partners for Argentina), faced economic crises of their own leading other countries to mistrust Latin American countries moneywise and affecting the overall economy of the region. The influx of foreign currency provided by the privatisation of state companies had dried up.
By 1999, newly elected President Fernando de la Rúa faced a country where unemployment had risen to a critical point and the undesirable effects of the fixed exchange rate were showing forcefully. In 1999 Argentina's gross domestic product (GDP) dropped 4% and the country entered a recession which lasted three years ending in a collapse. Economic stability became economic stagnation (even deflation at times) and the economic measures taken did nothing to avert it. In fact the government continued the contractive economic policies of its predecessor.
The possible solution (abandonment of the exchange peg, with a voluntary devaluation of the peso) was considered political suicide and a recipe for economic disaster. By the end of the century, a spectrum of complementary currencies had emerged.
Since the early 1990s, Argentina had been closely engaged with the International Monetary Fund (IMF), with the body providing the country with a reliable access to credit and guiding its economic reforms. When its economy entered in recession the federal government deficit widened to 2.5% of GDP in 1999 and its external debt surpassed 50% of GDP. Seeing these levels as excessive, the IMF advised the government that it needed to address the issue of investor confidence, and that the government had to balance its budget by implementing austerity measures to do so.
Complying with IMF's requests, De la Rua administration committed to a sustained effort of fiscal consolidation and implemented US$1.4 billion in cuts in its first weeks in office in late 1999. In June 2000, with unemployment at 14% and projections of 3.5% GDP growth for the year, that move was furthered by a package of US$938 million in spending cuts and US$2 billion in tax increases.
GDP growth projections proved to be overly optimistic (instead of growing, real GDP shrank 0.8%), and lagging tax receipts prompted the government to freeze spending and cut retirement benefits again in November 2000. In early November, Standard & Poor's placed Argentina on a credit watch, and a treasury bill auction resulted in yields reaching 16% (up from 9% in July); this was the second highest rate of any country in South America at the time.
Rising bond yields left Argentina with no choice but to borrow from major international lenders, such as the IMF, World Bank, and the U.S. Treasury, which would lend to the government at below-market rates, and to comply with their conditions. Several more rounds of belt-tightening followed.
José Luis Machinea resigned as the Minister of Economy in February 2001. He was replaced with Ricardo López Murphy, who lasted 8 days in the office before being replaced with Domingo Cavallo. In July 2001, Standard and Poor's cut the credit rating of the country to B–.
In July 2001 the government instituted an unpopular across-the-board pay cut of up to 13% to all civil servants and an equivalent cut to government pension benefits - seventh austerity plan implemented since President Fernando de la Rua took office in 1999, triggering nationwide strikes, and, starting in August, it was forced to pay salaries of highest-paid employees in I.O.U.s instead of money. This further depressed the economy, which was already weak after a three-year recession. The unemployment rate rose to 16.4% in August 2001 up from a 14.7% a month earlier, and it stood at 20% by December.
In October 2001, public discontent with the economic conditions was expressed in the nationwide election. President Fernando de la Rua's alliance lost seats in both chambers of Argentina's congress, leaving it in the minority. Over 20% of all voters chose to enter so-called "anger votes", returning blank or defaced ballots rather than indicate support of any candidate.
The crisis intensified when, on 5 December 2001, the IMF refused to release a US$1.3 billion tranche of its loan, citing the failure of the Argentinean government to reach previously agreed-upon budget deficit targets, and demanded further budget cuts, amounting 10% of the federal budget. On 4 December, Argentinean bond yields stood at 34% over U.S. treasury bonds, and, by 11 December, the spread jumped to 42%.
By the end of November 2001, people fearing the worst began withdrawing large sums of money from their bank accounts, turning pesos into dollars and sending them abroad, causing a run on the banks. On 2 December 2001 the government enacted a set of measures, informally known as the corralito, that effectively froze all bank accounts for twelve months, allowing for only minor sums of cash to be withdrawn, initially announced to be of just $250 a week.
Because of this allowance limit and the serious problems it caused in certain cases, many Argentines became enraged and took to the streets of important cities, especially Buenos Aires. They engaged in a form of popular protest that became known as cacerolazo (banging pots and pans). These protests occurred especially in 2001 and 2002. At first the cacerolazos were simply noisy demonstrations, but soon they included property destruction, often directed at banks, foreign privatized companies, and especially big American and European companies. Many businesses installed metal barriers because windows and glass facades were being broken, and even fires being ignited at their doors. Billboards of such companies as Coca Cola and others were brought down by the masses of demonstrators.
Amid rioting, President Fernando de la Rua resigned on 21 December 2001.
Confrontations between the police and citizens became a common sight, and fires were also set on Buenos Aires avenues. Fernando de la Rúa declared a state of emergency, only to get the situation worsened, precipitating the violent protests of 20 and 21 December 2001 in Plaza de Mayo, where clashes between demonstrators and the police ended up with several people dead, and precipitated the fall of the government. De la Rúa eventually fled the Casa Rosada in a helicopter on 21 December.
Following presidential succession procedures established in the Constitution, the Senate chairman is the one in the line of succession in the absence of both president and vice-president in office. Therefore, Ramón Puerta took office as caretaker's head of state, and the Legislative Assembly (a body formed by merging both chambers of the Congress) was convened. By law, the candidates were the members of the Senate plus the Governors of the Provinces; Adolfo RodrÃguez Saá, then governor of San Luis, was eventually appointed as the new interim president.
During the last week of 2001, the interim government led by RodrÃguez Saá, facing the impossibility of meeting debt payments, defaulted on the larger part of the public debt, totalling US$132 billion, what approximately represented the seventh portion of all the money borrowed by the Third World.
When the default was declared in 2002, foreign investment fled the country, and capital flow towards Argentina ceased almost completely. The Argentine government met severe challenges trying to refinance the debt. The state had no spare money at the time, and the central bank's foreign currency reserves were almost depleted.
Several thousand newly homeless and jobless Argentines found work as cartoneros, or cardboard collectors. The 2003 estimation of 30,000 to 40,000 people scavenged the streets for cardboard to eke out a living by selling it to recycling plants. This method accounts for only one of many ways of coping in a country that at the time suffered from an unemployment rate soaring at nearly 25%.
Agriculture was also affected: Argentine products were rejected in some international markets, for fear they might arrive damaged from the poor conditions they grew in, and the USDA put restrictions on Argentine food and drugs arriving at the United States.
RodrÃguez Saá, utterly incapable of dealing with the crisis and unsupported by his own party, resigned before the end of the year. The Legislative Assembly convened again, appointing Peronist Eduardo Duhalde—then a Senator for the Buenos Aires province—to take his place.
http://upload.wikimedia.org/wikipedia/commons/3/39/Evolution_of_the_Argentine_GNP%2C_1999-2004.png
Evolution of the Argentine GNP, 1999–2004.
http://upload.wikimedia.org/wikipedia/commons/thumb/d/d2/N%C3%A9stor_Kirchner_y_Roberto_Lavagna-Buenos_Aires-23_de_agosto_de_2004.jpg/800px-N%C3%A9stor_Kirchner_y_Roberto_Lavagna-Buenos_Aires-23_de_agosto_de_2004.jpg
President Néstor Kirchner and Economy Minister Roberto Lavagna discuss policy, August, 2004.
I wrote this on ThaiVisa forum in a thread where I am just...brilliant. I destroy a journalist working for The Nation. Pure corruption, I tear him apart but if you want to see how horrifying the media is, you could do worse than to look at examples like this one in Thailand. 100% guaranteed, an identical (if far less brazen) corruption is dominating the media where you live.
http://www.thaivisa.com/forum/topic/432884-pm-abhisit-should-look-again-at-new-year-gifts/
But only corrupted governments or corrupted processes can negatively impact an economy. Most corrupted governments even get away with measured success (macroeconomics is just that simple - look at Thaksin's government, the most corrupt PM in Thailand history and he still presided over an economic boom [even if his somewhat unsustainable levels of populism which weren't really effective Keynesian stimulation]). But brilliant, ethical governments perform miracles and are kind of required otherwise the free market runs rampant like in the US and holds the nation hostage to bailout freerolls if the government isn't competent or ethical or sane enough to protect the nation's economy from being exploited.
As the 20th century wound down, Argentina's corrupt governments ferreted out billions, sending the nation into total economic collapse, defaulting on their IMF loans and the sheer chaos was imminent. They were gone. A failed state - marking time at least. Democracy had failed because the people weren't intelligent enough to vote in candidates with probity. Democracy didn't save Argentina either. What saved Argentina from disaster wasn't the electorate's distrust (justified) of politicians and their anger (unjustified, the electorate was to blame for electing corrupt politicians over and over in the first place) at the results of corruption and incompetence.
They distrusted politicians and were angry at the corruption / incompetence for sure, but that's not what saved the nation. If they weren't so stupid, they would have elected competent politicians who campaigned on anti-corruption platforms. They certainly did not do that. Thailand could learn a valuable lesson from Argentina's experience.
What saved Argentina was taking elections away from people too stupid to elect competent representatives to manage what really is simple economic theory and simple policies, which are only very difficult to implement because corruption is one hell of an opponent and those with probity are inevitably hampered by an electorate too stupid to elect politicians who understand that governing > scoring cheap, unproductive points, i.e. politicians who would make the job a lot easier from the opposition benches (current US example). Or coalition and opposition benches (current Thai example).
Saving Argentina was, on paper, a ludicrously simple task. Impossibly hard to sell to that stupid populace, of course, but a genius pulled it off. But simple it was in theory, Argentina and it's population simply were not worth what they believed. They could recover by floating their currency on the open market and finding their true value; this would allow the logical aspects of the idiotic (in terms of regulation) "Invisible Hand" to afford their recovery. With a devalued worth, tourism would flood in, exports would suddenly be too valuable to reject, recovery was both possible and simple - but of course, explaining this to an electorate confused by media owned by the rich who didn't want 75% of their illusionary wealth erased, Lavagna (having been given almost totalitarian powers by the President) forced Sanity through and the measures were enacted amid riots and screaming and petulance from the idiotic populace.
Argentina was saved by a genius named Lavagna. He was SELECTED to save Argentina, by a President who was not elected President by Argentina.
And once the genius Lavagna saved the nation (he told FT it was only possible by endlessly saying No! to the vested interests), this is how the democratic electorate thanked him. They elected Kirchner and his cronies, corrupt of course. And Kirchner eventually fired Lavagna because he was getting in the way of corruption.
"Mr Lavagna said there had been over-pricing in a number of public contracts to build roads. That was taken as a direct attack on Julio De Vido, the planning minister and a confidante of the president."
Was there outrage from the electorate of a nation he saved from unimaginable chaos? A nation who owes Lavagna - quite literally - their lives. A nation who has never had a hero comparable to the man who saved them from being a failed state?
Don't be silly. Why would they care. They're off spending and living and laughing; electing corrupt politicians who insult them to their faces but whom they 'connect' with.
Such is democracy.
Yep, democrazy. Literally the most stupid form of government ever because people have been rendered too stupid to be capable of acting in their own best interests.
Argentina has managed to return to growth with surprising strength; the GDP jumped 8.8% in 2003, 9.0% in 2004, 9.2% in 2005, 8.5% in 2006 and 8.7% in 2007.
Criticism of the IMF
The International Monetary Fund suffered no discounts in its part of the Argentine debt. Some payments were refinanced or postponed on agreement. However, the authorities of the IMF at times expressed harsh criticism of the discounts and actively lobbied for the private creditors.
During the weekend of October 1–2, 2004, at the annual meeting of the IMF/World Bank, leaders of the IMF, the European Union, the Group of Seven industrialised nations, and the Institute of International Finance (IIF), warned President Kirchner that Argentina had to come to an immediate debt-restructuring agreement with the speculative "vulture funds", increase its primary budget surplus to pay more debt, and impose "structural reforms" to prove to the world financial community that it deserved loans and investment.
In 2005, as a large and consistently growing fiscal surplus made it possible Argentina shifted to a policy of debt relief towards the IMF: paying the IMF in schedule, with no negotiation whenever possible, with the intention of gaining independence from it. On December 15, 2005, following a similar action by Brazil, President Kirchner suddenly announced that Argentina would pay the whole debt to the IMF. The debt payments, totaling 9.810 billion USD, were previously scheduled as installments until 2008. Argentina paid it with the central bank's foreign currency reserves.
In a June 2006 report, a group of independent experts hired by the IMF to revise the work of its Independent Evaluation Office (IEO) stated that the assessment of the Argentine case suffered from informative manipulation and lack of collaboration on the part of the IMF; the IEO is claimed to have unduly softened its conclusions to avoid criticizing the IMF's board of directors.
If it's not obvious, collaborators with the IMF should be shot for treason.
I was reading about that man (one of the most amazing men in history) Lavagna and was surprised to see him confirm what I'd just started to notice; the parallels between what they're doing to Spain and Greece to what they did in Argentina. This ludicrously transparent obsession with austerity, which they fucking know will bankrupt anyone stupid enough to comply; it's horrifying.
http://www.seprin.com/2011/09/24/argentinas-lavagna-austerity-pushing-greece-over-the-edge
Argentina’s Lavagna: Austerity Pushing Greece Over The Edge
BY LEONEL ON SEPTEMBER 24, 2011
The austerity measures that the European Commission, the European Central Bank and the International Monetary Fund are demanding from debt-burdened Greece are the same mistaken policy prescriptions that pushed Argentina into default and economic collapse a decade ago, former Argentine Economy Minister Roberto Lavagna said.
“The IMF is wrong, but it’s going to do the same thing as in Argentina,†Lavagna, who served as Argentina’s top economic policymaker from 2002 to 2005, said in an interview. “Greece is going to end up in default and leaving the euro.â€
He also said if the troika doesn’t handle the Greek situation well, the crisis will spread to Portugal, Spain, Italy and maybe even France.
Greece is tottering on the brink of default as it struggles to pay EUR350 billion ($477 billion) in debts. The troika, and especially Germany within the E.U., are demanding sharp cuts to Greece’s budget deficit before the group extends further financial aid.
Argentina holds the unenviable position of presiding over the world’s biggest sovereign default as a result of not making payments on about $100 billion in late 2001.
Lavagna inherited an economy in ruins when he took office. Adding to the chaos was Argentina’s abrupt exit from a currency board that pegged the peso to the U.S. dollar at a 1:1 ratio. Given that the U.S. currency was then at one of its strongest moments, that arrangement trapped Argentina in a competitive bind — a scenario many see repeated in Greece with its growth constrained by membership in the euro.
The initial and disruptive effect of the peso’s exit from the dollar peg, which left peso-based borrowers across Argentina unable to pay their dollar debts, also offers a cautionary tale about how a Greek euro departure may play out.
In 2002, the year following Argentina’s default and devaluation, gross domestic product contracted by nearly 11% and unemployment soared to more than 20%.
The default left Lavagna with a daunting task: the biggest, most complicated debt restructuring in history. He was the chief architect of a plan that offered investors about 25 cents on the dollar for the defaulted bonds in 2005.
Today, Argentina’s debt-to-GDP ratio has fallen to just under 40% from about 150% in 2002 thanks to the haircut imposed on creditors and years of strong economic growth.
While there are similarities between the Greek crisis and Argentina, Lavagna said Europe has an opportunity to orchestrate a more orderly default and contain the problem.
As was the case in Argentina, Greece is facing a long recession, high unemployment and wide fiscal and current account deficits coupled with low levels of investment and productivity.
Greece, however, has much higher per-capita income and the backing of one of the world’s strongest political and economic blocks — the European Union, he said. Argentina faced its crisis alone.
Yet some say Argentina’s economic independence actually made it easier to break the peg, devalue and start to recovery. Greece is deeply embedded in Europe’s monetary union, a much tighter marriage than a currency board.
But Lavagna argued that a Greek restructuring could be much more market friendly, involving a roll-over to longer-term debt rather than the steep haircut that Argentina pushed through.
“The Greek situation can be handled…but there isn’t a strong political will right now,†said Lavagna. “The longer they wait, the more complicated it’s going to be.â€
He said that pressing the country to lower salaries, pensions and public sector employment so that it can pay creditors is “totally the wrong prescription.â€
Greece needs to recover competitiveness and growth through investment in education, health and infrastructure, said Lavagna, who ran for president in 2007 and now runs an economic consulting firm.
However, Germany and other E.U. leaders have no stomach for pumping more cash into their profligate southern neighbors and continue to demand budgetary reforms before extending credit.
While enraging creditors and drawing the ire of many orthodox economists for throwing out the IMF’s playbook as it formulated its own recovery plan, Argentina has seen its economy post envious rates of growth since 2003. GDP has expanded by more than 6% in seven of the last eight years thanks to strong international demand for Argentina’s manufactured goods and bountiful grain harvests.
Just what future awaits Greece’s ailing economy, which is commodity poor and heavily dependent on services like tourism, is harder to say.
Non elected members have been appointed in greece and various place of the EU, with almost all of them having ties to Goldman or JP Morgan prior.
I'm not sure it really matters but in Vulture Picnic (http://www.gregpalast.com/vulturespicnic/), Greg Palast notes that on the boards of Goldman Sachs and JP Morgan and HSBC and Citibank etc, are delegates who ensure the Holy See's interests are protected.
A single currency based on 20 different countries and 20 different economies would never work and the EU zone is more about creating a centralised government (which cant ever work as long as their is democarcy in a some shape or form) but appears is the intention of this experiment.
From when my only interest was the criminalisation of online poker in some EU states, the fucking European Union seemed doomed in ways that were too demented for me to bother with, as I was sure there was something I couldn't understand. But if the free movement of goods and services was a legitimate tenet of the EC's charter (as it was vaunted), I couldn't understand why every gypsy or bum or Mike in Europe wouldn't all just move to Luxembourg where the standard of living was many multiples higher than like Bulgaria or wherever?
No one ever explained that confusing aspect to me.
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