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  • An Austrian Perspective On Greece [View article]
    Difficult to disagree with that, sleek. In general, fixed currencies are a bad idea. There are some exceptions. Small open economies with big (and monetary sound) trading partners (like the Baltics or my own Netherlands), or countries using an external anchor to reduce inflationary expectations if their own monetary policy isn't credible. But apart from that.. Monetary unions are a much worse idea, unless the members are prepared to go all the way (like in the US).
    Jul 27, 2015. 09:51 PM | Likes Like |Link to Comment
  • An Austrian Perspective On Greece [View article]
    James, you're right to point that stuff out. I am aware of Hayek's positions, in fact there is stuff that he wrote that I consider among the very top of important work in economics (most notably his 45 article about the distributed nature of knowledge).

    What I take on is perhaps a 'cruder' form of Austrian economics that nevertheless is rather (and surprisingly, IMHO) popular in the financial world, the Schiff's and Acting Man's of this world (or much that goes on on ZeroHedge). This article is only the result of Acting Man not wanting to reply to comments under his own article (that is, my comment expressing astonishment about him discussing Greece without mentioning any of the dynamics of fixed currency/monetary union systems)
    Jul 27, 2015. 11:18 AM | 2 Likes Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    diewer, if people want to move money out of a country with a flexible exchange rate, they have to sell the currency as well, for which there will be buyers who then buy assets in the country, that is, the money can never really leave a country with a flexible exchange rate (and the resulting devaluation will give it a boost).

    Now, if Greeks are scared they can simply move their money to elsewhere in the eurozone. There is no offsetting devaluation and the money leaves.

    This is what I was referring to.
    Jul 17, 2015. 03:04 PM | 1 Like Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    You're entirely right Carolina1954, I'm afraid..
    Jul 17, 2015. 02:43 PM | 2 Likes Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    ["he shows that the eurozone is nothing more than Gold Standard"]


    I've been arguing that since 2012..

    ["I wonder what would happen if the Club Med countries "seize control of the ECB" and force through a severe reflation program."]

    That has sort of happened already, first with "whatever it takes" (where the ECB finally assumed lender of last resort status, albeit conditionally), then with QE.

    The problem is that money can move freely in the eurozone, as the Greeks have noticed, they have little to show for all that QE..
    Jul 17, 2015. 02:38 PM | 1 Like Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    ["Rather than choosing to Grexit much earlier and avoid externally imposed austerity and ever increasing debt they continue to want to trade promises for money and lash out when the terms become increasingly harsh."]

    Harsh yes, but I don't really mind that, at least not in principle. What I do mind is that they are non-nonsensical, that is, self-defeating, that is, the harshness and suffering it is causing is serving no purpose. Greek structural primary surplus is the highest of the eurozone at 6% or so.
    Jul 17, 2015. 02:03 PM | 1 Like Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    Thanks James, my pleasure.
    Jul 17, 2015. 12:51 PM | Likes Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    ["I don't totally agree that Euro straightjacket + austerity fully or even mostly explains the severity of the Greek disaster. Ireland and others have had comparable challenges with much better results."]

    Thanks. That is true, but they didn't embark on quite the same level of austerity as Greece. Ireland has an export gearing that is several times the size of Greece's, and even non-program countries like Finland and the Netherlands are performing poorly under the constraints of the euro, as Matt O'Brian has just set out here
    Jul 17, 2015. 12:49 PM | 1 Like Like |Link to Comment
  • The Idea Of A Temporary Grexit Is Rubbish [View article]
    ["Greece still hasn't learned the lesson that what they are doing is their fault"]

    Yes, they ran unsustainable deficits during the first years of the euro so in that sense it's their fault.

    What you completely fail to grasp is that the euro straightjacket and the subesquent imposed austerity has made things 10x worse.

    Greece, while not being a high growth economy, wasn't anywhere near imploding until it met the combination of hard money and austerity which sank their economy by over a quarter, destroyed a significant part of their productive base and made the debt unsustainable through nominal GDP contraction.
    Jul 16, 2015. 08:46 PM | 2 Likes Like |Link to Comment
  • U-Turn In Greece [View article]
    ["Surely, you must have seen the Italian, Spanish and Portuguese yields not reacting much, even when Grexit seemed to be days away."]

    For now, yes. But the grinding denominator effect is ratcheting their debt/GDP ratios every higher so we'll have to see whether this will stay like this when the next crisis arrives, which it surely will..
    Jul 14, 2015. 11:55 AM | Likes Like |Link to Comment
  • U-Turn In Greece [View article]
    [""Cost of Grexit is unknown" Of course I agree. But why is the cost going to be high ??"]

    Well, for starters, there is the default on the loans from two earlier bailouts. It depends what you consider high cost, but these were 130 and 110 billion euro, if my memory saves me well.

    Also good luck to that ELA support from the ECB to Greek banks on collateral that will be worth pennies after Grexit. That's 89 billion euros, I belief.

    Target 2 balances is a complex issue and opinions differ on this, so let us leave them out for the moment.

    Then there is the re-introduction of redinomination risk. Thanks to the eurozone's deflationary bias forcing the periphery to do all the adjusting (whilst the likes of Germany and my own Holland bask in obscene current account surpluses of 7% and 10% of GDP, respectively), they have little to no nominal GDP growth, leading them into a debt-deflationary spiral which inexorably ratchetes up their debt/GDP ratios. Next time there is a hint of a crisis that re-introduced redenomination risk will bite their bond yields in the tail, reintroducing the feedback loop between bond yields and public finances that Draghi's "whatever it takes" had taken out. Throw in a few banks holding big portfolios of domestic paper and this will be reinforced by another self-reinforcing feedback loop between banks and sovereign.

    Whilst the geopolitical dimensions are a bit beyond my remit (I'm a simple economist) but you might, as a primer, take a map of the world and look up where Greece is actually situated, read up a bit about it's history, the religion it shares with Russia, simple stuff like that...
    Jul 13, 2015. 10:58 PM | 1 Like Like |Link to Comment
  • U-Turn In Greece [View article]
    They indeed did a lot of heavy lifting, but the current account surplus is due almost entirely to the crash, which has reduced imports a lot.
    Jul 13, 2015. 02:35 PM | Likes Like |Link to Comment
  • The Parody Of Errors That Led To Grexit [View article]
    ["Please list in-demand non-agricultural products that Greece can export competitively and sustainably. Thank you!"]

    This is a bit of a red herring, but only a bit. It is a red herring as you seem thoroughly unfamilliar with the law of comparative advantage. It isn't a red herring as there are indeed structural impediments to Greece export success.

    I'll probably write something about that in the coming days, so stay tuned if you want.
    Jul 11, 2015. 03:21 PM | Likes Like |Link to Comment
  • The Parody Of Errors That Led To Grexit [View article]
    ["Did you have a look at the linked article in my reply? Doesnt this bother you, as you believe in the value of numbers?"]

    No, as you argued
    1) There was no austerity
    2) Based on numbers from an article in 2010

    As it happens, austerity started in 2010 so even if your article shows no austerity this shows exactly nothing.
    Jul 10, 2015. 09:57 PM | Likes Like |Link to Comment
  • The Parody Of Errors That Led To Grexit [View article]
    ["The Drachma won't help, because the country has hardly anything worth exporting, apart from selected agricultural products."]

    This kind of broadsides (amongst many others) aren't really helpful, they are lazy and economically illiterate as you might want to study the law of comparative advantage again.
    Jul 10, 2015. 09:53 PM | Likes Like |Link to Comment