Strange bedfellows in an endgame only Europe could dream up
We American are simpletons; completely unable to comprehend the dizzying series of twists and turns in this Greek drama. The latest twist is Germany treating Greece like a naughty child, suggesting that maybe they need a 5-year “timeout” from the euro. And so we arrive at a German/Krugman alliance trying to get Greece out of the euro. Germany to punish Greece and restore order to the euro, while Paul Krugman sees it as a way of avoiding punishing Greece, of sparking an Argentine-style recovery.
On the other side is the Sumner/Syriza alliance, taking the high road. Agreeing with the Financial Times that:
Tsipras has capitulated. His antagonists must show magnanimity
Syriza sees Grexit as an economic disaster for Greece and a political disaster for Syriza. I actually think Syriza would do worse politically if they stayed in the euro. Even Greece might to worse (it’s unclear, and depends on what else they do). Instead I fear that a Greece pushed out of the euro by Germany would nudge Greece in a radical leftward direction. A letter writer to the FT reminded readers of the dark side of the “Argentine miracle”:
“One can learn a lot about photography by studying excellent pictures and looking at bad ones. We can emulate the good and try not to duplicate the bad. Argentinian politicians raided bank accounts and absorbed pension plans in the collapse. People who saved for retirement were taken advantage of by populist politicians. Keep that in mind when your country goes down.”
And I also worry that the markets are clearly signaling that Grexit would be a deflationary shock to the other PIIGS, and indeed to the entire global economy. (Yes a modest one, but still unwelcome.) But I am a bit conflicted, as also I see the euro itself as a huge mistake, a sort of doomsday machine.
And so we await the dramatic climax that I am certain will occur today, because the Europeans told me so. Oh wait, I forget that we Americans are gullible simpletons like the cartoon character Charlie Brown. Darn, fooled again.
PS. Lars Christensen has a really nice post on how the entire euro project exemplifies Hayek’s Fatal Conceit.
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12. July 2015 at 07:00
Sumners all over the map on this post, hard to pin down. Sumners being Sumners. “Instead I fear that a Greece pushed out of the euro by Germany would nudge Greece in a radical leftward direction.” – and the problem with that is? What is the purpose of meddling in another country’s priorities? If Greeks don’t like the left-ward march of their government, they can either vote in a right-wing party or emigrate right?
12. July 2015 at 07:06
The proposal to hold Greek assets in trust is a good one. Shipping is a major industry in Greece. They run 20% of the worlds merchant fleet. Ships and shipping is a tax exempt industry. Greek claims that they cannot get their fiscal house in order … are dishonest. They are not trying.
The German proposal is apparently based on the system they used during the unification with Easf Germany. They couldn’t trust GDR to privatize without gutting the value of state firms or lining the pockets of powerful people. So the government in Bonn established holding companies to manage the state enterprises being wound down or sold.
It appears the current proposal is similar. So you may be wrong in thinking withdrawing from euro is the preferred outcome. That appears to be the threat to induce Greece to accept privatization in a way that won’t lead to rampant corruption.
12. July 2015 at 07:11
Jon, You said:
“So you may be wrong in thinking withdrawing from euro is the preferred outcome. That appears to be the threat to induce Greece to accept privatization in a way that won’t lead to rampant corruption.”
In that case I’d have to switch sides again.
Seriously, the motives in Germany probably differ from one person to the next. I’m pretty sure that at least some Germans would prefer Greece exit the euro. But good comment.
12. July 2015 at 07:29
Of course, it is impossible not be conflicted with Greece situation as there are so many players it is impossible for all of them to be satisfied. I still hold the Eastern Europe nations are the ones holding back Germany the most from offering a better deal. They suffered a lot as well. This is why a bankruptcy court are more successful. They make quick & decisive in which everybody suffers and life goes on.
I have rationalized there will be a Grexit which will lead to better Euro economic success but it is a political failure. We aren’t one Europe. But for all the whaling on modern failures, we should remember violence in Europe has been subdued over the last 10 years. That was not true in other depressions.
12. July 2015 at 08:12
“And I also worry that the markets are clearly signaling that Grexit would be a deflationary shock to the other PIIGS, and indeed to the entire global economy.”
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“Central banks have omnipotent power over aggregate spending and prices. The zero bound is a myth. If NGDP falls, the cause is central bank ineptitude, period.”
12. July 2015 at 08:38
Of course, the USA never made any constitutional mistakes; Asia, Africa, and South America are paragons of harmony. Yup, it’s only Europe where countries, states, voters, governments run up against each other.
12. July 2015 at 08:48
From the updates on CNBC it looks like there won’t be a deal today or even by next Monday.
“And DJN notes that Hans Schelling, the Austrian Finance Minister, was doubtful that a new deal could be done before July 20, when Greece has to repay 3.5 billion euros in bonds and 700 million in interest to the ECB.”
http://www.cnbc.com/2015/07/12/greece-crisis-deadline-for-greece-as-european-leaders-meet.html
If so doesn’t that mean there could soon be de facto Grexit-or at least the use of the drachma once the banks start to run of euros which will be soon?
12. July 2015 at 10:40
My take is that both negotiating sides want Grexit but neither sides wants to be blamed for it. So they are trying to make the other side be the one to throw the pacifier out the pram, while trying to appear reasonable at the same time. Germany can’t be too blunt in proposing impossible demands, but they will be trying to subtlety ramp up their demands every time a deal looks close. Syrizia will try to appear willing to do a deal but will find last minute obstacles when a deal looks close, like the need for a referendum.
The Germans want the Greeks out because of “pour encourager les autres” reasons. But they don’t want to seem to be bullies or unreasonable. Syrizia knows that Grexit is the best option for Greece now, but the Greeks population are scared of how it might work and especially the initial adjustment phase.
To me this is only explanation that actually explains what’s going on.
12. July 2015 at 11:41
Greece should agree to the austerity demands only if the BCE promises to do a ‘monetary offset’. Otherwise, the austerity is bound to fail. We hear a lot of talk about the conditions imposed on Greece. But what about the conditions on Europe? It can’t only consist in haircuts and new loans. Sure Greece needs to do structural reforms, but the EU does to.
12. July 2015 at 12:22
An Irish economist’s take: http://www.independent.ie/opinion/columnists/colm-mccarthy/a-wearisome-fudge-that-can-only-spawn-further-fudges-31369799.html
12. July 2015 at 12:46
ChrisA, I couldn’t disagree more. I think Tsipras clearly wants to say in, otherwise his recent moves make absolutely no sense at all. Why would he totally capitulate?
12. July 2015 at 13:17
Thanks for the link, Paul Power. Quoting from the article:
“Can you imagine the reaction if the US Federal Reserve decided, because the state of California is bust, which it is, to close the bank branches in California?”
They should forget about bailouts from one member to another. What the Euro needs to do in the Hamiltonian solution. They should create a Euro Treasury of the 19 Euro members, which should buy the ECB from the member states. It should assume an equal amount of debt by population from each member. I’d suggest the ET borrow at least 3 Trillion Euro and divide it up. That would wipe out half of Greece’s debt from the bailout. Germany’s debt would be 600 Billion or so less, meaning they could have a nice tax cut.
This would immediately solve the banking problem, as banks would own Euro bonds rather than weak Sovereign bonds. Then if Greece or any other member defaulted, it would be no worse than an American state defaulting – not great, but not a problem that could wreck the union. The Euro debt would increase by whatever the interest rate is minus the ECB dividend, so it would likely shrink as a share of GDP over time.
12. July 2015 at 13:58
“We American are simpletons; completely unable to comprehend the dizzying series of twists and turns in this Greek drama.”
Maybe because there aren’t many twists and turns. There was a first and second bailout, there will be a third one. And so on. I see no signs that the German government comes up with new ideas. They are in fact the simpletons. Germans can be very stubborn. They will stick to their ideology until the very end. Chances are higher that the Greeks will be fed up at some point. But this might take another 5-10 years.
12. July 2015 at 14:33
“It appears the current proposal is similar. So you may be wrong in thinking withdrawing from euro is the preferred outcome. That appears to be the threat to induce Greece to accept privatization in a way that won’t lead to rampant corruption.”
Cause, I’ve been right all along.
12. July 2015 at 15:03
Negation of Ideology:
Seriously recommend you change your name.
12. July 2015 at 16:14
Statism married to tight money=Greece.
Gee, no happy ending?
12. July 2015 at 18:39
Scott,
Yes, it seems that some(or better to say nearly all) of us were wrong about many things at many points along with way here. Who would have thought that Tsipras, however incompetent he might be, may come out looking like one of the more rational actors, and even end up a sympathetic figure?
It’s quite obvious now that he was in a tougher position than most realized from the very beginning. Trying to broker a deal between the hardliners in his party and coalition and Germany, the Netherlands, etc. may have been impossible from the beginning.
And, as it turns out, he’s been much more honest during this process than it may have seemed. So honest, that there’s apparently no contingency plan for exiting the Euro.
I thought that a deal would emerge in which Greece would get some debt relief, in stages, in exchange for some verified reforms. That would seem to be a rational way to proceed.
Greece would push for immediate relief with no reforms upfront, while the troika would push for no relief, with reforms needing to occur first. They would meet somewhere in the middle.
But, many in the Eurozone now seem eager to seem the villains. I wonder if they won’t kill the Eurozone in an effort to save it.
I also wonder what will become of Tsipras now. On the one hand, he followed the will of the people by opposing exit, but on the other he capitulated against public will as expressed in a referendum on the bailout.
12. July 2015 at 18:55
Major Freedom has a point. I thought Scott Sumner said there was no such thing as worldwide NGDP. If so, how could there be such a thing as a worldwide deflationary shock? Also, why would Grexit have any deflationary effect on the EZ if the Central Bank wasn’t okay with a deflationary effect?
12. July 2015 at 19:05
Instead I fear that a Greece pushed out of the euro by Germany would nudge Greece in a radical leftward direction.
Given that this disaster has happened under the radical left, I would think they would be fully and permanently discredited. As are the mainstream parties that got Greece into this mess in the first place. That leaves Golden Dawn. Do you consider them preferable?
12. July 2015 at 20:07
@ E. Harding -right you are, MF is onto Sumner. I’d like to see Sumner’s writings on NGDPLT collected and analyzed. You’ll find as many contradictions as in Keynes writings, who, like Sumner, lacked a formal math ideology (his disciple Hicks later on put his thoughts into IS-IM diagram form). Sumners can seem reasonable, that’s what makes him so dangerous. He’s all things to everybody: to people like Ben Cole of this blog, he’s for inflation (Cole must think Brazil was a paradise, since it had 40 yrs of high teens inflation, he should talk to R*buzzi* of this site to see high inflation short of hyperinflation is nothing but a slight drag on the economy, as money is neutral). To people who read Sumner’s formal papers, he seems to be saying: NGDPLT is just another monetary framework like the Taylor Rule, nothing too radical. To me, Sumner is following Hayek’s dictum in the Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”.
Sumner’s NGDPLT is the new Euro monetary union. Another Frankenstein scheme that won’t work at best and ruin the economy at worse.
12. July 2015 at 23:59
@Ray Lopez:”You’ll find as many contradictions as in Keynes writings, who, like Sumner, lacked a formal math ideology”
What are you talking about? You may not like him or Sumner, but Keynes wrote a Treatise on Probability and the first book of his Treatise on Money is full of a long discussion on index numbers and price measurement.
Dude, maybe you should read more than you comment.
13. July 2015 at 00:21
http://time.com/3955131/greece-bailout-deal-agreement-eu-austerity/?xid=tcoshare
13. July 2015 at 03:28
Woodford on Neo-Fisherism:
http://equitablegrowth.org/2015/07/12/must-read-mariana-garcia-schmidt-michael-woodford-low-interest-rates-deflationary-no-paradox-perfect-foresight-analysis
13. July 2015 at 05:44
Ray, somehow or other, along the way you got confused about Scott.
In the past I’ve done the work to go thru it all with MF until he FINALLY comes down to saying, he doesn’t care is X or Y would be better than TODAY, X and Y still have problems.
I can respect that bc well in my youth I was an ideologue, and then when I had kids, I became a far more pragmatic incrementalist. SO much so, that I now consider pragmatic Libertarianism to be mush more HARD CORE, bc you basically cut off the mainline speedball high of theoretical absolutism and have to live on watered down methadone.
But so you know, Greeks are normal humans, but simply less politically astute (dumber), than you give them credit for. They are not socialist right now, they are socialist bc it meant they might not have to:
1. change who has the power in their society.
2. borrow money to fund it.
Once they KNOW #2 is off table, they will give up on fighting #1.
Now I’d argue they aren’t criminal masterminds, I don’t think that most understand there is an awesome choice for them to be South Carolina on the table, and that’s a reflection of them being stupid.
But fortunately, it’s easy to learn to be South Carolina, you don’t have to understand it for it to work.
Lats note: But very soon, there will be a world wide revolution in govt, that makes all states more like South Carolina / Texas. So I think much of this is going to be tempest in teapot.
13. July 2015 at 06:39
And so we await the dramatic climax
Still a lot of foreplay left before European lenders get screwed again and probably years yet before Greece is finally taken to the hospital and aborted (wow, that analogy escalated fast).
Great post from Lars.
13. July 2015 at 06:42
NOI — But who would control monetary policy? If every country can print as many euros as it thinks it needs, the race to the bottom will happen with breathless speed.
13. July 2015 at 06:57
Maybe someone said it before. I do believe Tsipras wants Greece out of the euro. But as any politician, he has to obey the will of the people (or the median voter). So far the will of the people is to remain in the euro. However, there is an increasing number of people willing to exit.
Tsipras will have to wait for the tide to shift towards Grexit. One way to achieve it is the new austherity agreement (more deflation and RGDP decrease for 2015 and 2016). That will probably make it. The government “collapses” around the beggining of next year, and Tsipras will say that no new agreeement will be possible with EU. The action must be exit. And ends the speech with a “Who’s with me?!”
13. July 2015 at 08:12
Scott,
I’m going to disagree with Lars, I think this is wrong frame, and I think you can weigh in (it’s interesting) as a blog post:
“Do you think that Europe would have been as disunited as we are seeing it now?
Do you think we would have seen the kind of hostilities among European nations as we are seeing now?
Do you think we would have seen the rise of political parties like Golden Dawn and Syriza in Greece or Podemos in Spain?
Do you think anti-immigrant sentiment and protectionist ideas would have been rising across Europe to the extent it has?
Do you think that the European banking sector would have been quasi paralyzed for seven years?
And most importantly do you think we would have had 23 million unemployed Europeans?
The answer to all of these questions is NO!”
—-
I think we need to look at South Carolina and ask, what if South Carolina had their own currency?
I know, I know this gets into language and job mobility.
But, I’m going to argue that past Macro economic discussion about Currency areas failed to assume INTERNET.
Surviving in a foreign country not speaking the language is now FAR FAR FAR easier than it used to be. And witch digital localization services (real time translation) it will be just a small bother in another ten years.
Which means, whatever the past modeling has been on determining viable currency areas, we can shift the level of difficulty metric to right (or however you draw it), making us likely to have / need fewer currency areas.
I say this to get back to South Carolina.
We DO have to HAVE TO ADMIIT, that Southern States have been forced by lack of currency control:
1. to adopt Balance Budget Amendments. 49 of 50 states have laws on books to force them to run balance.
2. this FORCES southern states to LIVE OF FEDERAL LARGESS.
3. this FORCES southern states to DEREGULATE, COMPETE ON LABOR PRICING, RIGHT TO WORK, etc.
So now let’s get back to Lars and his alt.universe and Greece.
I kinda always HATE to argue with academics about Greece, because none of you feel any kind of personal slight when you look at Greece.
Meaning, I’ve been there, and I had a visceral reaction to the enslavement of my people in that country.
I look at Greece, and it is bizarro world, bc my guys aren’t running the country.
In the US, UK, Sweden, wherever, no matter how socialist, my people are still treated like smartest guys in room…. bc the private free marketer job creators ARE the smartest guys in room.
In Greece, my peeps, have been second class citizens basically FOREVER.
The point is, you don’t feel this, bc you aren’t these guys. IN fact on left, there is a wistfulness that Greece is failing by the second class citizens (academics) in this country bc they WANT to see a Greece WORK.
And it doesn’t.
Anyway, put on your free marketer highest status private citizen cap and READ Lar’s list again, BUT keep saying – it’s EASIER NOW for Greece to be South Carolina than it has EVER BEEN.
I think it changes the answer.
13. July 2015 at 08:19
@Morgan Warstler – seems you sold out when you had kids. I’ve seen that before, and I understand. Good friends who disappear when they get married and have kids. Captured by the wife. It’s OK, I’m planning to do the same soon (my girl is less than half my age: it’s more fun in the Philippines).
As for dumb Greeks, possibly racists (your South Carolina nd Texas analogy), it’s probably true (Greek IQs are in the low 90s, as opposed to 100 in the USA, and 10 points is a big deal in IQs, I was once well over 130 now I’m about 120 in my senility). But despite being dumb and poor (and the Filipinos are even dumber by 10 points more and poorer still), I rather live in the PH or GRE rather than the USA. The USA is so full of itself it’s sickening. I will continue to collect my rental money from DC rentals and live overseas, thank you very much. The States are a great place to visit, and to work, but like NYC I would not want to live there as a retiree.
As for Sumner, I believe nobody takes him seriously, thank goodness, so my money is safe from his crazy inflationary redistribution schemes.
13. July 2015 at 09:38
Morgan,
The US has a fiscal as well as a monetary union. The federal budget dwarfs the state budgets. That means that in tough times, our poorest and hardest hit states receive a substantial federal subsidy and do not have to make anything like the adjustment the hardest-hit European countries do.
Before the Civil War we did not have a single currency. Betwee the Civil War and the New Deal, we had a monetary but not a fiscal union. Monetary policy was, indeed, set by the wealthier and dominant states for their benefit and was usually too tight for the South. It did not go well for the South. Unsurprisingly, when the prospect of a fiscal union came up with the New Deal, Southerners were its greatest champions. They have benefitted from it ever since.
13. July 2015 at 09:51
Scott – you said “I think Tsipras clearly wants to say in, otherwise his recent moves make absolutely no sense at all. Why would he totally capitulate?” – my view is that he had only appeared to capitulate, the deal is not yet done, there are plenty of ways it could fall apart. The Germans don’t trust the Greeks, so they set what they thought were impossible demands, like the 50bn trust fund. But Syrizia went one better, they agreed to these demands because they know that it would be unlikely to be accepted by Parliament and the details would be unworkable. So they accepted because they know it would fail. I think it is all still manoeuvring on who will take the blame. But we will see. If this latest deal does survive the Greek parliament, and it actually gets executed as the Germans want, then all that’s happened is that the can is being kicked down the road for another few months or so as it leaves the fundamental problem in place – Greece is simply not able to pay its debts. And every year it gets further away from being able to do so.
13. July 2015 at 10:55
Essayist-Lawyer,
“The US has a fiscal as well as a monetary union.”
Yeah I know, and:
1. It’s OK if it takes a while for Greece to get to live in Fiscal Union. Because it makes them BEND BEND BEND BEND BEND.
2. BENDING actually gets them CLOSER to a Euro wide fiscal union.
MY POINT is that South Carolina (Southern states) being forced to bend IS THE REASON we got Fiscal Union. And what’s MORE, even after Fiscal Union (wealth transfers to Souther States), we have STILL seen Southern states economically move towards free markets to compete.
US states wandered in the wilderness with no control over currency, with rich people being able to move state to state, which forced states pre-1913 to compete to keep taxes on capital down.
I’d argue between Civil War and 1913, South Carolina had to DEAL WITH IT.
INFACT, you can go ahead and think of BENDING as no different than being forced to give up Slavery.
—-
What you REALLY want is to imagine that a Fiscal Union will enshrine some Greek culture into Euro area.
And that’s not on table. Stop imagining it.
Now then…
let’s back back to MY POINT all along, this isn’t about DEBT.
Talking about debt forgiveness is just another way of saying, “I hope Greece doesn’t get forced to be South Carolina”
And the answer CLEARLY seen now by talks is: THAT’S NOT POSSIBLE.
In fact, the more Greece ACCEPTS their destiny with free markets, the LESS anyone in north will care about getting paid back.
So anyone who cals themselves a TRUE debt forgiveness warrior… you better scream at Greece to BEND BEND BEND.
——
Folks, eventually, we have to look back at 2008 onward and admit that if we really truly love the Greeks, we all should have admitted who held the cards.
And as such, the personal preferences of the left and morality of the left should have been forked.
Leftists should have said to Greece, BE SOUTH CAROLINA or GET OUT.
There shouldn’t be back and forth short term wonky cheer leading as each new weeks news comes to froth. It forget the forest for the trees.
The forrest has AWAYS been: BE SOUTH CAROLINA or GET OUT.
And our entire econ blogosphere IS SMART ENOUGH to foresee this reality.
And it was immoral for Krugman, Sumner, DeLong, Cochrane, et al to not get together and agree that SURE, they’d argue going forward over trees…
BUT everyone should have been able to agree that Greece best advice from the Econ wonks was: BE SOUTH CAROLINA or GET OUT.
How do we start that discussion?
13. July 2015 at 10:57
The risk of Grexit, has created a massive monetary contraction.
If you are Greek and have money, you are doing what you can to get your money out of Greece. If you were a lender to Greek people would you dare lend anyone any money in this environment.
If you are a Greek businessman, how do you get the capital to fund your day-to-day business. Will supplier give you merchandise with 30 day financing? No! pay first.
Regardless of money supply growth from the ECB, money is very tight in Greece.
How can the Greek economy do anything but contract with this sort of money supply.
13. July 2015 at 10:57
The risk of Grexit, has created a massive monetary contraction.
If you are Greek and have money, you are doing what you can to get your money out of Greece. If you were a lender to Greek people would you dare lend anyone any money in this environment.
If you are a Greek businessman, how do you get the capital to fund your day-to-day business. Will supplier give you merchandise with 30 day financing? No! pay first.
Regardless of money supply growth from the ECB, money is very tight in Greece.
How can the Greek economy do anything but contract with this sort of monetary policy.
13. July 2015 at 12:14
I will agree Morgan that is the choice-capitulate or get out. Until now no one really got-accept maybe you LOL=that these were the only choices that the EU wasn’t going to compromise no matter what.
However, I should say that it’s not at all clear that Grexit is off the table. Even though Tsipras seems to want to pass this it’s not clear the Greeks will get it implemented in time.
Grexit still seems to me their best choice. When you talk about the South you’re talking about something that took 75 years. Do the Greeks have to wait 75 years?
But I will agree that whether they want to capitulate or exit they got to do it ASAP-the longer they wait the less well either option will work.
13. July 2015 at 12:54
Hi Scott,
I’ve typically considered Canada one of the pretty-close-to-NGDP targeting economies. Would be curious to hear your thoughts on the coming decisions by the BOC and hopeful return to target on NGDP.
http://www.businessinsider.com/canada-on-brink-of-full-blown-recession-2015-7
also: fred chart showing NGDP % chng YoY : https://research.stlouisfed.org/fred2/graph/?g=1rfH
Thanks,
Marcelo
13. July 2015 at 13:38
@Marcelo-if you take Canadian NGDP and index it to 100 at 2008-07-01 and do the same with the US, Canada looks like less of an NGDP targeter than the US-the decline is sharper, the upswing is only sharper til 2011, and afterward the two curves are right on top of each other.
13. July 2015 at 14:20
Scott,
In fairness, it seems you were right about the referendum not ultimately leading to the will of the voters being carried out, though some of the circumstances around why are surprising.
13. July 2015 at 15:04
@Morgan, Lars has a follow up post.
13. July 2015 at 15:16
@Marcelo, a year ago Jason Smith’s model/framework predicted that Canada would start to undershoot it’s 2% inflation target in 2015. I don’t know if this data is accurate, but it was at the top of the Google hits. Nick Rowe has brought up the BoC’s good track record in hitting this 2% target in multiple posts in the past. I’d love to know if that data is accurate or not: because if it is, it seems to confirm Jason’s prediction.
If I understand Jason’s framework correctly, there’s really no difference between an inflation target and an NGDP target in terms of whether a central bank (at a particular time in an economy’s maturation history) can easily hit it or not.
13. July 2015 at 15:19
TallDave – I wasn’t proposing changing who controls monetary policy, that would still be the ECB. I was proposing making it more like the US. The Federal Reserve buys US bonds, not California bonds. And to the extent there are fiscal transfers, we have the federal government giving all the states money. We don’t have Texas and NY bailing out California. And depositing money in a bank in California is the same as in Texas.
Now I recognize there is a huge problem with this – secession. The EU charter specifically allows members to leave. In the US, the Articles of Confederation wisely set up a “Perpetual Union” where it is illegal to leave. I don’t know how you could have European bonds if members can leave.
13. July 2015 at 18:16
Secession is illegal under a defunct legal document which is still binding in this one and only one respect?
13. July 2015 at 18:27
Andrew_FL:
Every legal document that is signed by A and B yet and includes a right of A and B to impose the contract on C without the consent of C, is a defunct legal document.
Every governmental legal document ever written and signed is defunct.
13. July 2015 at 18:33
@Major.Freedom-I just found the idea of someone obviously in favor of more power to the federal government citing the Articles of Confederation to be hilarious. Somewhere, the irony meter just exploded.
13. July 2015 at 19:00
Morgan Warstler:
“In the past I’ve done the work to go thru it all with MF until he FINALLY comes down to saying, he doesn’t care if X or Y would be better than TODAY, X and Y still have problems.”
“I can respect that bc well in my youth I was an ideologue, and then when I had kids, I became a far more pragmatic incrementalist.”
Morgan, please don’t make the mistake of believing that your arguments are an advancement over mine, or that they are on any morally higher ground, or that they are representative of “moving on”.
There are two major points that you have been missing / taking for granted since you attempted to convince me to “advocate” for NGDPLT under the guise of a non-ideologue “pragmatism”.
Number one. YOU ARE ADVOCATING AN IDEOLOGY. Sorry for yelling, but what you are arguing satisfies the criteria of an ideology. You aren’t willing to deviate from what you believe in favor of what I believe. You adhere to a set of ideas. You are devoted to the idea of NGDPLT. You are devoted to the idea of NGDPLT. Blog!e the definition of “ideology”, and here is what you will find:
“The body of ideas reflecting the social needs and aspirations of an individual, a group, a class, or a culture. A system of beliefs or theories, usually political, held by an individual or a group.”
Are you actually telling me that what you believe is not an ideology? YOU are an ideologue kind sir. And so is Sumner. Pragmatism and incrementalism towards libertarianism is no less an ideology than radicalism and overhaulism to towards libertarianism.
Secondly, and this one is so obvious to me that I find it hard to believe you haven’t yet come to understand it: How in the world can you possibly believe that your life is any different if you advocate for what happens without your power or input, versus what does not happen? Do you believe that you are cleansed or made holy or blessed if you were to have been an advocate of fascism in Germany during the 1930s and 1940s simply because that was the way the political winds were blowing at the time?
I advocate for a free market in money.
You advocate for NGDPLT.
Suppose X happens.
How in the name of logic and reason are you put into a better position by aligning your ideology with the course of history X that you could not absolutely predict anyway?
You are as worse off with NGDPLT whether you previously advocated for it or not.
When you tell me that I ought to adocate for NGDPLT on the basis that it will according to you be more likely, is really just asking me to perform some twisted rite of passage, a form of religious practice akin to eating bread and wine on Sunday morning and moving my hand to make the shape of a cross in the air. It does f%&k all.
It does not matter what the hell happens, when it comes to advocating for the best possible solution out of all conceivable solutions. You are not helping yourself by keeping to yourself the best, but then publicly advocating for second best. Whatever happens, the best is still the best and second best is still the second best.
If the world goes to a free market in money, then I would be no better or worse off by having advocated for NGDPLT, and if the world goes to NGDPLT, I still would be no better or worse off by having advocated for a free market in money.
And before you try to convince me that I would be helping myself by advocating for ANYTHING better than what we have, I don’t want to have to contradict myself and admit I lied once that next step is made and I do a flip flop and start advocating for the best finally, and then have to explain why I flip flopped, which is that I think the majority of people are stupid idiots.
I have a secret to you: Incrementalism has never ever worked to increase liberty. Ever. Incrementalism towards liberty has been the RESULT of radical advocacy, whereby the compromise is a movement towards liberty.
When you have a radical statist and a compromising pragmatist, the end results is an incrementalist movement AWAY from liberty. See the last 100 years of this country for evidence of what American pragmatists have left us with after sparring with European and American communists/socialists.
Pragmatism is not pragmatic.
13. July 2015 at 19:02
Andrew_FL,
Oh I got the joke, I admit I chuckled. I was just getting to the root of the hypocrisy.
13. July 2015 at 20:54
Andrew_FL –
You ask “Secession is illegal under a defunct legal document which is still binding in this one and only one respect?”
According to the Supreme Court, yes. Read some history before you make lame jokes.
13. July 2015 at 21:12
@NoI-Can you cite your case law on this? You seem to have something specific in mind.
In any case everything I’ve ever read of history has taken the position that the Constitution completely superseded the Articles of Confederation.
And all that being said, the Supreme Court has been wrong before, you do know that, right?
Also regardless of whether you think so or not the joke was most definitely not lame, because again regardless of what the Supreme Court has said on the matter, there is a supreme irony in you, a big centralized government guy, citing the Articles of Confederation on anything. If you can’t appreciate the irony then you’re just not cognizant at all.
13. July 2015 at 22:14
Andrew_FL –
I apologize for calling your joke “lame” – that’s snarkier than I want my comments to be. The case I referred to is Texas v White in 1869. I’ll quote them:
” By these, the Union was solemnly declared to “be perpetual.” And when these Articles were found to be inadequate to the exigencies of the country, the Constitution was ordained “to form a more perfect Union.” It is difficult to convey the idea of indissoluble unity more clearly than by these words. What can be indissoluble if a perpetual Union, made more perfect, is not?”
Lincoln made the same case in his inaugural speech. The Constitution specifically says it is forming a more perfect union, it did not supersede the union. It is not only binding “in this one respect” as you claim – The Northwest Ordinance is still in effect, for example, as are all the debts and treaties passed under the Articles.
Yes, the Supreme Court can be wrong, and so can Lincoln. But they are correct in this instance – according to the plain language of the two documents.
What is really ironic is that you call me a “big centralized government guy” while I’m pretty much the opposite. I favor a less centralized federal government than the US, but more than the Eurozone. Or more precisely, I think they either need to integrate more, or break up the Euro and all issue their own currency within the EU. I don’t think this in-between solution will work very well, for the reasons others have sighted.
Would you at least admit that unilateral secession is problematic for dividing up debts and other liabilities? Could 49 States leave and stick the last State with the entire national debt?
14. July 2015 at 01:17
Tom,
Lars is STILL championing countries I would DRAW AND TORTURE to put my peeps into power.
It’s just this simple, Turkey, Greece, Romania sound OK to academics, bc they feel “over there” they’d get a status bump. It messes with Lars head.
My people HAVE to the boss or the system should be burned to ground.
Since Lars doesn’t want that to be true he says these things – tell him that to rerun the numbers based solely on how my people do.
That’s all that matters.
MF,
don’t get all weirded out, of course my arguments are more advanced – I’m really good this stuff :).
no really, your best chance for a winning argument died when I lost my bet with Sumner over Obama winning second term.
I held onto “if GOP just spends all the money, all future Dem POTUS will be forced to be Bill Clinton,” bc it is 100% fact, Reagan forced Clinton to sacrifice his mains goals. If Dem POTUS doesn’t bend, he will lose. Fed will destroy him.
I was wrong. Scott was right.
One other small note, stop fixating on NGDP and just say LT, Scott has to sell the brand, but the part that matters to me and you is LT.
Level Target means computer runs Fed – brutally coldly without agency – it just grows NGDP – so we know in Jan 2027 exactly what GDP will be.
And then Mf and Morgan say,
“well that’s better than humans reading tea leaves.”
bc it is, and we don’t let the good be the enemy of perfect.
Mf, here’s the thing, you and I are surely right about a free market in money, altho the truth is the closest thing going is BTC, and that’s a bit more brute force than free market (which is why I like it), I’m a by any means necessary Libertarian. Which means not only do I support Piracy I also support Pragmatism.
Let’s get thru some more of your mistakes:
“And before you try to convince me that I would be helping myself by advocating for ANYTHING better than what we have, I don’t want to have to contradict myself and admit I lied once that next step is made and I do a flip flop and start advocating for the best finally, and then have to explain why I flip flopped, which is that I think the majority of people are stupid idiots.”
wrong. I’m doing it. kicking ass too. it’s not a lie when you speak in qualified statements. It isn’t a flip-flop. Not even a bit of one.
you aren’t going to be alive to contradict yourself. you and I will be worm food before before money and government are truly severed.
“I have a secret to you: Incrementalism has never ever worked to increase liberty. Ever. Incrementalism towards liberty has been the RESULT of radical advocacy, whereby the compromise is a movement towards liberty.”
Mf, this is just dumb.
My peeps made the commercial Internet in 1993, and since then drugs and gay marriage are legal.
And Mf, let me BE VERY CLEAR, we actually ALTERED the human brains in just 20 years we literally took American brains part and rewired them.
We fundamentally altered the human morality (disgust etc) of social conservatives to BE LIBERTARIAN.
I’ve written on this:
https://medium.com/@morganwarstler/is-liberalism-a-handicap-part-ii-801a2aacf6ce
Uber / Ebay etc is altering Liberal brains to be Libertarian. They are LITERALLY being reprogrammed on their morality (fairness)
So you are wrong, we have proof that incrementalism works. These are things I have longed for desperately, and they are coming true. IN MY LIFETIME.
Finally Mf, I’ll give you another example.
I spend my days working on a software platform (one app) to replace all of govt.
And once you TRULY start to grasp a govt that has a couple million employees, needy citizens are handed an endless free supply of cheap smartphones bc they can’t use govt without one, once you think about the actions taken my govt in an atomized way. Drive to pharmacy, get medicine, drive to old lady, talk to old lady for 15 minutes, send her family notes on the visit. Repeat.
Once you wrap your head around this, there is a better / worse.
A govt that is as productive YOY as the private sector for the next 20 years, bc it has so much catching up to do is BETTER than it just getting worse until collapse.
Will it eventually collapse without making these chnages?
Sure.
And pssst Mf, I’m far less likely to think collapse is a better option: 1) bc I have kids. 2) We’ve been winning.
But mainly, Mf for me this is all about STATUS, Libertarians are just the most capable of the humans, and what matters most to me is does the future give my people even more STATUS over the other types of people.
And since that is happening, it’s very hard, even dumb, to cheer for collapse.
14. July 2015 at 03:04
I don’t see anything wrong with leaving the suckers with the tab, no, actually.
And as I suspected, Chase is spouting the Party Line here. That a Perpetual Union cannot be made non perpetual if made more perfect, speaks to Chase’s personal ideological belief that a non perpetual union is not “perfect.” It does not correspond to reality.
14. July 2015 at 04:56
Scott, I have a new post at Econlog about what this endgame tells us about the eurozone.
E. Harding, I’ve argued that central banks may fail to offset unexpected financial crisis-type shocks in the short run. Fiscal policy is more predictable, and easier for a central bank to offset. In any case I go with the markets, who seem to predict that Grexit would be a mild deflationary shock, not a big one.
After all, the Fed did not offset the post-Lehman financial crisis shock.
Essayist, Nope.
Morgan, See my new Econlog post. And you were right about the EU taking a tough line.
ChrisA, It’s probably more accurate to say they don’t want to pay their debts, but I see your point.
Marcelo, I need to research that question before answering–how much of the weakness is oil? How are wages and salaries doing?
Tom, Nick has always argued that Canada hits the target on average, not each and every year. Most people predicted low inflation this year.
14. July 2015 at 06:37
Scott,
“3. This means that in some sense the EU might be seen as a vast right wing conspiracy to bring conservative economics to Europe. Nationalism prevents complete political union in the EU. And without complete political union you can’t have fiscal union. But they already have monetary union and free trade in goods, capital and labor. And it seems there is no going back and no going forward. This policy mix forces individual countries to become more conservative. That’s not to say Europe will suddenly move to laissez-faire, the changes will occur at the margin. It just so happened that Greece faces a much more severe constraint than some of the others, and hence will have to change quite dramatically.”
We won’t know for another 20 years, maybe 10 bc Internet / tech speeds up human history…
but I’m not sure Mundell won’t be seen by history as the most influential Economist of our age. I know his son pretty well, and it’s not like Dr. Mundell didn’t SEE that this would force Greece to be South Carolina.
Look, I’m quite serious about this idea how Econos / eggheads see things and how my peeps see things.
I have NEVER heard an Economist bemoan the suffering of the a generations best and brightest not being able to bend the system to their will.
In the US, we rule. We rule in UK. We rule in any and all first world countries.
Why do we have to use sanitized language about reform and privatization is DOESN’T GET DOWN TO BRASS TACKS.
Status in first world systems MUST flow to free market winners. Consumers > Citizens. CEO > Elected official. Who gets biggest house? Who gets best seats? Who gets hottest women?
It’s helpful to SAY WHAT WE MEAN.
God’s chosen people were being repressed in Greece, and Dr. Robert Mundell went in and BURNED GOMORRAH to the ground.
Don’t tel me about the little people, int he long run they are better off.
NO ONE WHO MATTERS is worse off. No one who matters.
14. July 2015 at 07:43
Morgan Wartsler says: “It’s helpful to SAY WHAT WE MEAN.” – yet uses bizarre analogies like South Carolina = Greece. And he references R.A. Mundell, who advocates a world currency (and likes gold).
Bizarro. Fitting for this site.
14. July 2015 at 07:52
Ray.
I’m sorry you don’t get the short hand of Greece = South Carolina. I think if you work at it, you’d find a non-bizarro understanding. You are smart guy.
And I advocate a world currency and I like BTC (the new gold), I used to like gold. I’d rather now all gold bugs go BTC. I’m pragmatic.
14. July 2015 at 10:00
Scott, thanks for the reply.
Can you tell me some examples of people who were predicting low inflation in Canada in 2015? The year’s not over, so there’s still time for them to all (including Jason) to be wrong. But more importantly, I’m curious what their models predict for Canada’s inflation rate for the rest of the decade.
14. July 2015 at 10:09
Morgan, I’m curious: what objective evidence would it take to convince you that the belief you are most confident about regarding macro economics is false? And what is that belief and how confident are you in it (say from 0% to 100%)?
14. July 2015 at 12:08
Macro idea:
Scott did it! I was 100% sure the UD Fed would/could do to Obama what Greenspan did to Clinton, what the EU does to Greece.
It was a long term belief (mid 80’s). Crushed by Obama’s second term. 1st blog post I wrote (and I don’t blog).
Right now, my biggest two beliefs is that:
1. Uber for Welfare employs everyone – and we can do it without printing near as much money over long term.
2. The real magic in NGDPLT is LT, not NGDP.
1 will eventually get tried and we’ll see.
On 2 I’ve never been able to get Scott to say which is more important target or level target.
So any level target tried would help change my mind.
14. July 2015 at 12:09
NOI — Then you still have the current problem: Greece controls much more of its fiscal policy than Texas does but needs a vastly different monetary policy than Germany. EU bonds won’t recapitalize Greek banks because the Greek government will seize and sell them — they’re Greek banks with Greek charters.
You just cannot decouple fiscal and monetary policy across a region with labor mobility as low as Europe’s, or you get messes like this one.
14. July 2015 at 13:44
Morgan, thanks.
14. July 2015 at 18:03
Perhaps instead of grexit,all of southern Europe needs its own currency.. Euro-B..
15. July 2015 at 07:44
Tom, No I cannot. But when oil prices fell sharply late last year most economists seem to mark down their inflation forecasts for 2015. I am pretty sure that applies to Canada as well, but not certain.