THE Eurozone Economics Thread pt 1 (merged) Archived

[EnergyUnlimited]

Taking away the banks right to issue money and having the sovereign states issue and control its supply would go a long way to creating the stability that is required.

I cannot agree with that albeit this myth is often recirculated on many forums.

I have seen first hand where such strategy have led in communistic Poland (I was there during collapse).
Other commie states were similarly or even more severely affected.
I really assure you, you don't want to be there any more than where you are now.

500% annual inflation is not really nice and 50 000% inflation is even less nice.

Solution is in form of total ban for public sector to go into any sort of debt, unless there is a sovereignty threatening war.
That can be done once existing mess is liquidated.

[dolanbaker]

I have seen first hand where such strategy have led in communistic Poland (I was there during collapse). Other commie states were similarly or even more severely affected. I really assure you, you don't want to be there any more than where you are now.
500% annual inflation is not really nice and 50 000% inflation is even less nice.

If all the main economic powers were to take control of their currencies, there would not be any reckless money-printing, with strict controls on the availability of money and measures in place to prevent hoarding (time limited notes, taxes on excessive savings) we would end up with a situation where there would be very low growth rates as well as near zero inflation.

We only need inflation to support an economic model dependent on growth and/or inflation to function.

The state could base the value of its money on the population in the state, population rises money in the state rises but per capita supply remains the same.

Lending would be dependent on saving a significant deposit first, sensible banking principals would be enforced onto the banks as they will be prohibited from "fractional reserve banking" aka money printing. Banking will become a small part of the service sector rather than the master as it is now.

[EnergyUnlimited]

If all the main economic powers were to take control of their currencies, there would not be any reckless money-printing...,

Why not?
Welfare demanding mob wielding voting powers would force it...

with strict controls on the availability of money and measures in place to prevent hoarding (time limited notes, taxes on excessive savings) we would end up with a situation where there would be very low growth rates as well as near zero inflation.

I am afraid, populace would simply refuse to accept such currency in the first place, savings would be kept not in banks but in pillows (so there would be nothing to tax), gold and silver would replace official currency as a measure of wealth storage and also for many transactions.
No amount of repression could ever stop it (I have red an interesting article about North Korea where there is such situation - gold, silver or western currencies are held and hoarded as a wealth store despite of risk of ending up in concentration camp for that).

On the top of it factors related to *time value* of currency versus nominal value would distort economy beyond belief, and I bet that taxes would be paid solely in notes just about to expire.
The same would be on many occasions with workers pay, btw.

The state could base the value of its money on the population in the state, population rises money in the state rises but per capita supply remains the same.

This can be done with PM.

[careinke]

Looks like the pro bailout faction won Greece. So the can gets kicked down the road for another day. A relief rally on Monday would not be a surprise.

[dolanbaker]

Even if Greece manages to elect a stable government, the debt issue and the Eurocrisis are still looming large, this is really just a sideshow.

[Daniel_Plainview]

Even if Greece manages to elect a stable government, the debt issue and the Eurocrisis are still looming large, this is really just a sideshow.

Merely by virtue of threatening to be a "contagion," the Greeks are guaranteed roughly one hundred billion per year of bailout money. If the Greeks are smart, they'll keep taking the bailout money whilst breaching the bailout terms and running massive deficits.

The "blackmail" formula is so simple, that we can expect all of the PIIGS to try it:

1. By demanding bailouts of $100+ billion/year, and threatening that, without such bailouts, the country will unleash a viral contagion that will destroy Europe, the country is guaranteed to be awarded blackmail into perpetuity;

2. Once it becomes clear that the blackmail will be paid NO MATTER WHAT, the blackmailing country will find itself becoming extremely inefficient and corrupt; it will freely breach the bailout terms with impunity whilst running larger and larger deficits;

3. You can expect that the blackmailing country will become progressively bold and arrogant in its blackmail demands, whilst being progressively lax in meeting any purported "bailout terms."

4. Rinse and repeat for Portugal.

5. Rinse and repeat for Spain.

6. Rinse and repeat for Italy ... etc ... etc, as this vicious cycle of blackmail grows progressively worse year after year.

This is the new era we are entering. Any systemically important entity (whether a country, bank, or corporation) will be in a position to extract massive bailouts with increasingly lax concessions.