The view from Vilnius

It seems that the new Greek government is rapidly wearing out its welcome:

Italian Prime Minister Matteo Renzi hailed Tsipras as bringing a “message of hope, not just fear”. Yet within days, Varoufakis angered Rome’s socialist leaders by saying: “Let’s face it, Italy’s debt situation is unsustainable.”

Italian Finance Minister Pier Carlo Padoan said the remarks were “out of place”.

In other bailed-out countries, sympathy for Syriza was mostly confined to the far left, while some mainstream politicians saw Tsipras’s success as a threat to themselves.

One Portuguese minister said privately that the center-right government would not be able to face voters later this year if Greece were given a “discount” on painful pension, wage and labor reforms that Lisbon had made under its EU/IMF program.

Prime Minister Pedro Passos Coelho called Syriza’s election platform “a children’s fairytale” while Tsipras accused Lisbon and Madrid of leading an “axis” bent on sabotaging its bailout negotiations, which both denied.

Presenting his Socialist party’s economic program in April, Portuguese opposition leader Antonio Costas distanced himself from Syriza, promising to meet all European commitments on the budget deficit and debt.

PODEMOS TONES DOWN

In Spain, radical left Podemos, whose pony-tailed leader Pablo Iglesias described Syriza as a “mirror” in January, has quietly stepped back from utopian campaign promises after seeing Tsipras struggle with the constraints of government.

The upstart party trumpeted Greek plans to end austerity and give free electricity and food to the needy but has now dropped a pledge to default on state debt and said a promised universal salary will be paid only when public accounts permit.

Interviewed by Reuters in March, Iglesias acknowledged that Greece’s difficult negotiations with its creditors showed there was limited scope to change economic policy in Europe.

In the Baltic states, which stoically undertook eye-watering austerity after the 2008 financial crisis, anchored by a single-minded determination to join the euro, there is even less sympathy for Greece and its leaders.

Lithuanian Finance Minister Rimantas Sadzius said Greek threats to default or restructure its debts to the euro zone posed a political problem in his country, where the minimum wage is half and the average pension one-quarter that in Greece.

“If the support money is spent without proper care to return it to the European Stability Mechanism, there will be serious questions raised about differences in living standards, and why a country has a significantly lower minimum wage than a country which it has to support,” he told Reuters.

Latvia too opposes any concessions to Greece on reform, with a spokesman for Finance Minister Janis Reirs saying “there has to be the same, equal attitude towards Greece as there has been to other (bailed-out) countries”.

It’s hard to argue with the Lithuanian perspective.  And as for Podemos, perhaps the fact that Spain is the fastest growing economy in Europe, whereas Greece has just slid into a double-dip recession, might have made them a tad reluctant to continue referring to themselves as a “mirror” of Syriza.

Back in the USA, readers were informed about these events in very different ways by the two top econ bloggers.  Here’s Paul Krugman on February 27th:

Last week, after much drama, the new Greek government reached a deal with its creditors.  .  .  . Greece came out of the negotiations pretty well, although the big fights are still to come. And by doing O.K., Greece has done the rest of Europe a favor.

And here’s Tyler Cowen, from a few days earlier:

I do not assume Syriza “” whom I have called The Not Very Serious People “” have a coherent bargaining strategy at all.  I take this point from a broader reading of history, where I see that quite often leaders in critical positions simply do not know what they are doing.  By no means is that always the case, but it is more often the case than narrative-imposing journalism encourages us to perceive.

Let’s see, who am I going to trust next time on complex international negotiations about which I’m not well informed?  Negotiations like the TPP. Don’t rush me, let me think about it . . .

PS.  This is an interesting rumor:

Meanwhile, some 6,000 miles from Athens, a banknote printing company called Fortress Paper in Vancouver, Canada, has seen its shares climb 67 percent this month on speculation it has a contract with the Greek government to turn on its printing presses if the country decides it needs a new currency.

PPS.  Off topic, I’m beginning to see negative RGDP forecasts for Q1 (revision.)  And today the Atlanta Fed lowered their 2nd quarter GDPnow forecast to 0.7%.  I still think a “recession” is unlikely, but the probability is increasing.  Of course there’s almost no chance of an actual recession, the scare quotes refer to the fact that many people wrongly assume that two negative quarters are a recession.


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54 Responses to “The view from Vilnius”

  1. Gravatar of Sam Sam
    13. May 2015 at 19:42

    I’m seeing forecasts for a *substantially* negative (roughly -0.5%) 2015Q1 SAARGDP growth. Moreover, the downward revisions supposedly reflect changes to the RGDP component not the deflator. It’s hard to trust this info; especially because there have also been recent reports emphasizing that the seasonal adjustment model has been deficient since the financial crisis. If that’s really the case, it’s a pretty damning indictment of how macroeconomic statistics are compiled. If a single business cycle can screw up the seasonal adjustment, that’s a pretty clear sign the the BEA is not using a good seasonal adjustment model. I’d like to know what Scott thinks about this issue.

  2. Gravatar of Ray Lopez Ray Lopez
    13. May 2015 at 19:47

    Sumner: “And as for Podemos, perhaps the fact that Spain is the fastest growing economy in Europe, whereas Greece has just slid into a double-dip recession, might have made them a tad reluctant to continue referring to themselves as a “mirror” of Syriza.”

    You notice readers that Sumner commits a logical fallacy (or maybe it’s deliberate?), by blaming a representative government’s statements for the state of an economy. That is, Sumner apparently believes that a politician can steer the economy into a better path through talk (“continue referring” above). Or, that talk is important. In fact, governments react to what their voters think: when times are tough, as in Greece, they talk of upsetting the status quo, but when times are improving, as Sumner says is happening in Spain, the pols tone down their radical rhetoric and favor the status quo. This is not new nor worthy of a blog post. Then again Sumner once violently railed about the environmental impact of beavers in the USA. No kidding.

  3. Gravatar of Stephen Stephen
    13. May 2015 at 19:57

    Don’t leave us hangin’. What is the correct definition of a recession?

  4. Gravatar of Britonomist Britonomist
    13. May 2015 at 20:01

    Regarding Q1 GDP: http://ftalphaville.ft.com/2015/05/13/2129393/another-lingering-cost-of-the-bubble-weirdly-seasonal-gdp-data/

  5. Gravatar of ssumner ssumner
    13. May 2015 at 20:05

    Sam, It sounds like they have some serious problems there, but I’m not an expert on seasonal adjustments.

    Ray, You have no idea just how dangerous beavers are to the future of the planet. It’s complacent people like you that will be the downfall of mankind.

    Stephen, In the US the NBER dates recessions—they have a fairly complicated method, looking at lots of factors. Fortunately in the US there are no close calls, all recessions are obvious, and all non-recessions are obvious. That’s not true in most other countries, where there are borderline cases.

  6. Gravatar of ssumner ssumner
    13. May 2015 at 20:16

    Britonomist, Interesting. Q2 will be a good test of the Atlanta Fed, as they are far out of line with other forecasters.

  7. Gravatar of TallDave TallDave
    14. May 2015 at 05:19

    Greek voters deserve to get exactly what they asked for — good and hard. So do all the other leftists. In the long run no one’s interests are served by doing the rational thing instead of what the voters are asking, that will just feed the conspiracists, delegitimize the EU, and the voters will just throw out the leadership again, and elect someone even crazier.

    I believe the 2001 US recession was a borderline case, as it did not meet the technical definition of 2 Qs of decline (unless this has been revised since I last checked), but is generally considered a recession.

  8. Gravatar of ssumner ssumner
    14. May 2015 at 05:30

    Talldave, I disagree about 2001, it was very clearly a recession, and I doubt the NBER lost any sleep over that decision. The 2 quarters thing is a myth, that’s not how it’s determined.

  9. Gravatar of Steven Kopits Steven Kopits
    14. May 2015 at 05:40

    Interesting piece. It was the first time I had really thought about the other of the PIGS opposing a further Greek bailout.

    It’s hard to interpret the US economy just now. Initial unemployment claims were at very low levels, and indeed, one more week at these levels, and US initial claims will be the lowest since Dec. 1973, literally on the eve of the First Oil Shock (which began in October of that year).

    Moreover, we added 550k jobs in the first quarter–a very respectable pace. At this point in the cycle, this should translate into a 1.6% GDP gain due only to headcount gains. Of course, Q1 will probably post negative numbers, so go figure.

  10. Gravatar of Major.Freedom Major.Freedom
    14. May 2015 at 07:40

    Sumner wrote:

    “Of course there’s almost no chance of an actual recession, the scare quotes refer to the fact that many people wrongly assume that two negative quarters are a recession.”

    This, everyone, is an example of the linguistic prescriptivism fallacy.

    In short, it is the argumentative fallacy whereby A claims B is making a factually or objectively false statement on the grounds that A disapproves of the definitions used by B.

    Definitions are not claims about reality. They are merely tools. If A defines a recession as two consecutive quarters of falling GDP (the NBER uses this definition for example), while B defines a recession as falling NGDP, then neither A nor B are factually wrong about anything. Neither can claim the other is factually or objectively wrong on the basis that they use a different definition.

    The proper approach is of course for both A and B to admit that when GDP falls for two consecutive quarters, that a recession as defined by A, has in fact occurred, and also when NGDP falls, that a recession as defined by B has in fact occurred.

    What Sumner is doing is psyops out of an Orwell novel. It is disappointing.

  11. Gravatar of Anand Anand
    14. May 2015 at 07:45

    My feeling is that Scott is identifying the govts. of Europe with people of Europe.

    Let’s take the Lithuanian example. Lithuania went through a deep austerity, with the result that its govt. was greatly praised by international creditors…and thrown out by its voters in 2012. The new somewhat leftist govt. (the same guy quoted in the article) promised to increase the minimum wage and reverse austerity. http://www.bbc.com/news/world-europe-19940043 The govt. is planning to increase the minimum wage again: http://www.baltic-course.com/eng/analytics/?doc=105227 Of course, they didn’t

    Let’s take Latvia. See this report about the Latvian public’s reaction to austerity. http://library.fes.de/pdf-files/id-moe/09353.pdf “Public opinion research shows that more than half of Latvia’s inhabitants consider
    that the measures for overcoming the crisis are incorrect and even devastating” The center-right govt. retained power, but nobody denies that its popularity took a great hit because of this. The reasons had to do a fair bit with the crisis in Ukraine. http://www.reuters.com/article/2014/10/04/us-latvia-election-idUSKCN0HT0C720141004

    I want to add that the terms “center-right” etc. are misleading. After all, PASOK was nominally socialist and “center-left”. The plain fact is that basically the “center-left” govts. in Europe are also neo-liberal, as Scott said here. http://www.econlib.org/library/Columns/y2010/Sumnerneoliberalism.html

    Of course the governments of Europe are afraid if Syriza would succeed somehow. They are deeply invested in the current policies. This is what Krugman referred to in his blog post. I am not sure why that is juxtaposed with the Tyler Cowen post, which is talking about a different issue altogether.

  12. Gravatar of Anthony McNease Anthony McNease
    14. May 2015 at 08:14

    Sam/Scott,

    Q1 GDP has been significantly lower relative to the other quarters for decades according to some analyses that recently were shared on Bloomberg. Even using the seasonal adjusted numbers still shows lower output. Therefore it seems that the adjustment factor is insufficient.

    But…..why adjust the numbers in the first place? Don’t we want to know what actual output is not what the output would have been if it occurred in a different season? I think adjustment factors more often cloud realities than illuminate them.

  13. Gravatar of Ray Lopez Ray Lopez
    14. May 2015 at 08:25

    MF-right you are. The right-wing bullies on this board indeed play games with definitions to suit their agenda, Orwellian style.

    OT-higher taxes correlates with greater growth…of interest to the propaganda of some like Morgan Warstler on this board. “The stunning fact that emerges from this graph is that taxes have increased enormously, from around 10 percent of GDP in 1929 to more than 30 percent of GDP at their peak in 2000. But as we already noted earlier, growth rates over the 20th century were remarkably stable “”if anything, they were higher after 1950 than before. Figure 34 shows a related fact by looking across the countries of the world: tax revenues as a share of GDP are positivelycorrelated with economic success, not negatively correlated.” THE FACTS OF ECONOMIC GROWTH Charles I. Jones, Working Paper 21142, http://www.nber.org/papers/w21142

  14. Gravatar of benjamin cole benjamin cole
    14. May 2015 at 08:46

    Yes…the Greeks have made mistakes. But that does not mean tight money and austerity are the answers. The opposite is likely true.

  15. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    14. May 2015 at 08:48

    @Ray
    I read that paper, correlation is not causation. It may well be that countries that are already rich, for one reason or another, end up accepting higher taxation.

    Also, if you take the last 50 years, actually growth is mildly declining, and taxation is going up …

  16. Gravatar of o. nate o. nate
    14. May 2015 at 09:20

    Krugman is almost always right on the economics but his political analysis is more like 50/50. When he starts writing about the conservative mindset, I just skip to the next post.

  17. Gravatar of steve from virginia steve from virginia
    14. May 2015 at 09:49

    Syriza was elected to repudiate EU obligations, not beg for mercy. Part of its (early) platform was to perform a forensic audit of Greek debt to determine which percentage of it was (is) odious, (at least half of it is).

    But no: the EU bosses apply age old techniques and neuter Syriza: selective floggings to isolate the Greeks while setting the little countries against each other. Varoufakis lacks imagination. Nobody in EU-landia wishes to be free of the euro as it enables driving:

    Euro = gasoline.

    The Greek government could act on its own without any authorization and simply issue ‘Greenback’ euros and defy the EU or ECB to do anything about it. Instead there are rumors of Vancouver paper companies and banknote printing = failure.

  18. Gravatar of Willy2 Willy2
    14. May 2015 at 13:21

    The US is already in a recession. Keywords: “Dow Theory”.

  19. Gravatar of ssumner ssumner
    14. May 2015 at 14:18

    Steven, Unemployment new claims are the lowest in the entire history of mankind, and have been for some time. For some reason the media reports the absolute numbers, not the percentage, which is beyond idiotic.

    Anand, You said:

    “After all, PASOK was nominally socialist and “center-left”. The plain fact is that basically the “center-left” govts. in Europe are also neo-liberal, as Scott said here.”

    No, that’s not my view. I’ve never, ever called any Greek government “neoliberal’ That’s nonsense. Greece has the least neoliberal policy regime of any developed country, anywhere in the world.

    I don’t know what the rest of your post has to do with my post, I did not confuse the government and people of Europe. The article I linked to is very clear on who it is quoting.

    Ben, Easier money and austerity are the answer.

    O. nate, You said:

    “Krugman is almost always right on the economics”

    Wow, you’ll have to explain that one to me. Was he right about fiscal austerity in the US in 2013? How about ending the extended unemployment insurance in 2014? Was he right about Britain? Was he right about Greece? Was he right about Switzerland? How about Japan?

    Willy2, Whatever you say; words mean nothing in a comment section where we have people like Ray Lopez, so please, say whatever you wish. It’s all nonsense anyway.

  20. Gravatar of Britonomist Britonomist
    14. May 2015 at 14:21

    What about it Willy2?

  21. Gravatar of Major.Freedom Major.Freedom
    14. May 2015 at 16:18

    Sumner comments in the comments section, and comments section being all nonsense, ergo Sumner is posting nonsense.

  22. Gravatar of Ray Lopez Ray Lopez
    14. May 2015 at 18:43

    @Jose Romeu Robazzi – yes, I agree, rich countries like high taxes. And of course correlation not causation. But the stats defeat the argument that high taxes are ruinous, as ‘mildly declining’ is not ruinous, and already high-tax countries enjoy greater growth than no tax countries (extreme example: the countries of Africa). Finally, your “last 50 years” comment is wrong. It should read “last 40 years” (you are referring to the productivity slow-down since 1973 no doubt).

    Consider: 1870-1929 (low tax era, less than 10% tax in GDP) = 1.76%/yr growth rate in USA; 1950-1973 (high tax era) = 2.50%/yr; 1973-2007 = 1.93%/yr. Again, high taxes did not stimie growth, and the ‘anti-tax’, ‘anti-Big Government’ movement of the 1980s until now did not revive growth, if anything the “Reagan revolution” created lower growth (due to lower productivity of course, not lower taxes)

  23. Gravatar of MichaelM MichaelM
    14. May 2015 at 18:49

    I wonder why not great scientific research into the rules of direct human interaction has been done when we have several decades worth of thread posts on the internet to use as data. Regularities that would provide deep insight into the nature of group dynamics are there to be identified, but nobody has done it, as far as I’m aware.

    Anyway, I wonder how Greece would perform if Greece liberalized currency issue, in line with what the Free Banking people would like. Let Greek banks do essentially what they want as far as deposit and note issue go, allow them to use whatever assets they want as reserves, and see what happens. How would this go?

    If you buy into what they have to say — and I’ve seen you say nice things about George Selgin before, Scott — isn’t an accommodating monetary policy un-necessary? The Greeks could balance their budget by raising real tax rates/going after the absurd level of tax avoidance present in their nation, have all the social programs, and still have something resembling a functional economy, too, right?

  24. Gravatar of MichaelM MichaelM
    14. May 2015 at 18:50

    And now I feel like an idiot. That ‘not’ in the first line of my post should be a ‘no’. You can do all the proof-reading you want and still come out looking like a fool. Life.

  25. Gravatar of Scott Freelander Scott Freelander
    14. May 2015 at 19:12

    Scott,

    While I can appreciate that Greece really did and does need structural reforms, they didn’t need this kind of extreme shock treatment. They should’ve left the Euro after their economy collapsed and taken their pain then, so they have enough monetary offset.

    If Syriza takes Greece out of the Euro, it can be a good thing in the long run for their economy, because how else can they escape their present situation without years of more painful grinding it out?

    Given the situation Greece finds itself in, perhaps you’re being too hard on Syriza in some ways, even given some mistakes they’ve made. Do you expect the people there to simply suffer under technocrats approved by northern Euro members?

  26. Gravatar of Morgan Warstler Morgan Warstler
    14. May 2015 at 19:39

    Scott Freelander,

    I expect Greece to take the entrepreneurs and make them as gods, an have the bureaucrats TREMBLE at the idea of causing any issues for them. Where asking for a bribe on camera means you are fired and lose your pension 100% of the time.

    I expect them to end any and all licensing requirements.

    I expect them to compete against Estonia in wiring their govt.

    And I expect them to run a deficit of no more than 3%.

    This isn’t about giving the poor greeks LESS, it’s about paying the people who do and make the things the poor greeks need LESS.

    Basically I expect them to adopt Uber for Welfare.

  27. Gravatar of Ray Lopez Ray Lopez
    14. May 2015 at 20:45

    @Morgan Warstler – most entrepreneurs in Greece are already gods (I live there), and pay little taxes. The problem is there are structural impediments in Greece caused by lack of opportunities. They tend to use the cookie cutter approach to development, doing the same thing over and over again, with no creativity and an aging population. For example they cater to drunk English and cheap Italians on holiday who just want to romp in the sand while drunk, rather than erudite wealthier people who wish to see the ruins. All in all it’s a great place to visit but even I don’t live there much (I’m in the Philippines and the USA mostly). Firing bureaucrats is a good first step but long term not a real solution. The Greeks need a haircut and going off the euro, renouncing their debts by default, is a good start. If they want growth (which I doubt they really do) allowing foreigners to easily buy property in Greece would help boost GDP (but they, like the Filipinos, don’t really want that). I would not worry too much about the Greeks. It’s the USA that’s going to turn into Greece in a couple of generations that worries me. And Scott Sumner’s crazy “NGDPLT” scheme.

  28. Gravatar of Anand Anand
    15. May 2015 at 03:21

    Scott, I linked to your article on neoliberalism because it makes the point that often it was center-left governments that implemented neoliberal reforms in many countries. Surely, we can agree that the austerity measures like fiscal consolidation and labour market reforms which PASOK implemented were neoliberal reforms. As I linked in my IMF report in an earlier post, it recognized that PASOK did a lot of fiscal consolidation and labour market reforms, though it said that it needed to do more in other areas. My point was also about the other European countries. For example, Lithuanian minister quoted in the article is nominally center-left, but still relatively neoliberal.

    My point was simply that with this perspective in mind, it is hardly surprising that Syriza’s actions would not be greeted with great friendliness by European govts.

  29. Gravatar of Blue Eyes Blue Eyes
    15. May 2015 at 04:37

    Anand, in the UK the sharpest cuts in public spending were also carried out by a “left-wing” party, for exactly the same reason that the Greek socialists, Pasok and Syriza will be remembered for: the cuts were/are imposed from outside, by reality in the form of the IMF/troika.

    “Neoliberals” (ridiculous and derogatory term) realise that a stitch in time saves nine.

  30. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    15. May 2015 at 04:39

    @Ray
    I did a regression on the quarterly annualized US RGDP growth, starting in Q1 1965, the slope is -0,045% p.a. t-stat is 2.7, therefore statistically significant. If I take 40 yeaars only, the slope is still negative, but smaller in absolute terms…

  31. Gravatar of Steven Kopits Steven Kopits
    15. May 2015 at 05:04

    Scott,

    Apparently Bill McBride reads your blog (what self-respecting econ guy wouldn’t?), and he’s posted initial unemployment claims as a percent of the labor force. These indeed confirm you assertion, that initial claims as a percent of the workforce are at historic lows, at least back to the mid-1960s.

    You might consider re-posting Bill’s graph, indeed, commenting on how we should think about unemployment when

    1. initial claims are historically low
    2. long term unemployment is still above the peak rate for all other recessions bar the Second Oil Shock
    3. part-time for economic reasons remains at elevated levels, essentially near or above the peaks of earlier recessions
    4. there seems to be still little wage growth pressure

    http://www.calculatedriskblog.com/2015/05/weekly-initial-unemployment-claims-as.html

    http://www.calculatedriskblog.com/2015/05/more-employment-graphs-duration-of.html

    http://www.calculatedriskblog.com/2015/05/employment-report-comments-and-graphs.html

  32. Gravatar of james in london james in london
    15. May 2015 at 07:00

    It’s getting tense as unemployment reaches those historic lows and the Fed gets itchier and itchier fingers. And, as we know, the unemployment never settles. It is either on a fairly steep upward trend or a steep downward trend. Somewhat mysteriously.

  33. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    15. May 2015 at 10:02

    Isn’t it possible that technology has made job search much more efficent so that unemployment can be structurally lower today than it was 30 years ago?

  34. Gravatar of Thomas Thomas
    15. May 2015 at 10:13

    There can be no recession because the Fed has learned that it should maintain or return NGDP to its pre-2008 trajectory

  35. Gravatar of Ray Lopez Ray Lopez
    15. May 2015 at 10:53

    @Robazzi who says: “Isn’t it possible that technology has made job search much more efficent so that unemployment can be structurally lower today than it was 30 years ago?” – it’s possible, but not really plausible, that this effect suddenly showed up right after the Great Recession. Anyway it’s well known corporations overhire, so the issue is why they stopped doing this practice now? The lack of AD seems the most likely explanation, rather than AS reasons like new technology.

  36. Gravatar of Money Helper Money Helper
    15. May 2015 at 11:46

    Prof Sumner, you can get rid of commenters like Ray by using Firefox, installing Greasemonkey and writing a little script like this:

    // ==UserScript==
    // @name Moneyblock
    // @description Erase commenters from the money illusion
    // @include https://www.themoneyillusion.com
    // @require http://ajax.googleapis.com/ajax/libs/jquery/1.2.6/jquery.js
    // @version 1
    // @grant none
    // ==/UserScript==

    jQuery("#content ol li:contains('\n\nRay Lopez')").remove();

    You can copy the last line as many times as you want and add as many commenter names as you like to the blacklist. Note that this just changes your computer; there is no censorship and everyone else who comes to the blog can see their comments. But at least you won’t have to.

    Of course, guys like Ray can change the name to “ssumner” and block all of his responses, if that makes you happy.

  37. Gravatar of TallDave TallDave
    15. May 2015 at 13:23

    Scott — if that’s a myth it’s a pretty pervasive one.

    re·ces·sion
    rəˈseSH(ə)n/
    noun
    1.
    a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

    Granted, 2001 certainly met other definitions of recession, just not the usual one.

  38. Gravatar of TallDave TallDave
    15. May 2015 at 13:27

    Thanks Money Helper! Nice piece of code. I had to create a pass-through HTTP handler class today on an ICF node to implement CORS in the headers, and if you understand any of that I feel sorry for you.

  39. Gravatar of Scott Sumner Scott Sumner
    15. May 2015 at 14:40

    Michael, You said:

    “If you buy into what they have to say “” and I’ve seen you say nice things about George Selgin before, Scott “” isn’t an accommodating monetary policy un-necessary?”

    I’m not sure what you mean by an “accommodative” monetary policy. I favor a stable monetary policy. And yes it’s obviously not “necessary”, as countries like Germany have been able to do quite well despite bad monetary policy. But I’d respond in two ways:

    1. Greece isn’t going to do sensible reforms.
    2. It would have been better if the ECB had followed a stable NGDP rule (regardless of Greece), I think George and I agree on that point.

    Scott, You said:

    “They should’ve left the Euro after their economy collapsed and taken their pain then, so they have enough monetary offset. If Syriza takes Greece out of the Euro, it can be a good thing in the long run for their economy, because how else can they escape their present situation without years of more painful grinding it out?”

    I agree that in retrospect Greece should have exited the euro in 2009.

    You said:

    “Given the situation Greece finds itself in, perhaps you’re being too hard on Syriza in some ways, even given some mistakes they’ve made. Do you expect the people there to simply suffer under technocrats approved by northern Euro members?”

    I don’t understand this argument, although I see it all the time. First of all, Greece is broke, so they have no choice but to cut back on government spending. Second, supply-side reforms are not painful, they produce a booming economy. It would be good for the Greek people to do lots of supply-side reforms.

    Anand, One thing I’ve noticed is that many of the least neoliberal countries in the world blame their economic problems on “neoliberalism.” In this respect, Greece reminds me a lot of Latin America. Based on what I’ve read, the Greeks have done very little in the way of reform. But obviously I’m not expert. I suppose the IMF must paint a brighter picture, otherwise it makes them look like suckers.

    Neoliberalism is the term used for policy regimes like Denmark, which is about as far removed from Greece as one can imagine. It means free markets plus a welfare state. Greece lacks free markets, and its welfare state is barely functioning.

    When I visited Greece in 2008 I noticed the hammer and sickle graffiti all over the place. This struck me as rather odd, as communism should be incredibly unpopular in Greece, which is a country in desperate need of neoliberal reforms. But for some reason that I don’t understand they don’t see it that way, they like communism. I’ll bet most people in Greece think of their country as capitalist, and think their economic problems are due to capitalism. One reason that liberals in the former communist bloc are more neoliberal than elsewhere, is that communism has been completely discredited in those places, at least among people with at least half a brain. In contrast, the Syriza government actually contains Maoists. How weird is that? Why is that even acceptable in Europe? Most European governments would not tolerate anyone that extreme in their government, they’d refuse to cooperate. Greece is different. The leader of Syriza named his son after the famous Cuban torturer Che Guevara. And he’s the leader. I can’t imagine how anything good is going to come out of a government that is so rapidly anti-capitalist.

  40. Gravatar of Scott Sumner Scott Sumner
    15. May 2015 at 14:48

    Thanks Steven, I’ve recently noticed that after I do a post taking a unconventional look at the data, similar stories appear in news articles picked up by sites like Yahoo, Bloomberg, etc. Of course it could be coincidence.

    James, The only constant (in macro) is change.

    Jose, Possible, but I kind of doubt it. We’ll find out soon.

    Thanks Money Helper, but I don’t want to miss Ray’s comments.

    Talldave, Yes, a very pervasive myth. But as you note, 2001 shows it is a myth. The NBER is the official judge of recessions, and they do not use the 2 quarter rule.

    All you need to do is look at a long time series diagram for the US, and it’s immediately apparent that recessions are really easy to spot—they are never borderline. (So far, there is always a first time.)

  41. Gravatar of Ray Lopez Ray Lopez
    15. May 2015 at 18:36

    ssumner: “When I visited Greece in 2008 I noticed the hammer and sickle graffiti all over the place. This struck me as rather odd, as communism should be incredibly unpopular in Greece, which is a country in desperate need of neoliberal reforms” – a jurist once said: “a page of history is worth a volume of logic”. If you studied Greek history you would understand why Communism is so popular (they provided the bulk of the resistance vs the Nazis in WWII, and they were involved in a civil war after WWII). Anybody with Greek relatives, as I do, has members who were Communists. As you say, the “capitalists” are not much different than the communists in outlook. The original Greek communists were Stalinists, but Stalin renounced them after agreeing with Churchill he would stay out of Greece if he got to meddle in Poland and other Warsaw Pact countries, which apparently Churchill agreed to. The Greek communists moved to Yugoslavia after they lost the civil war (I’ve met some who taught their kids Greek, even though the kids have never visited Greece, it was interesting). Today the communists actually have reasonable proposals and could be called “nationalists”. For example I found myself agreeing with them in the 00s that the 2004 Olympics were going to be a waste of money (they were right). But hey, an expert on all things everywhere including the greenhouse gas impact of American beavers has right to be misinformed, so blog on dude.

  42. Gravatar of MichaelM MichaelM
    16. May 2015 at 00:54

    Scott: I use ‘accomodative’ in the sense of a monetary policy sufficient to produce stable NGDP growth.

  43. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    16. May 2015 at 06:35

    @Ray
    That might explain Greece, but Brazil has the same problems. For some reason leftist rhetoric works very well here, and we did not have parallel historic facts with Greece. In fact, the revered “worker’s father” Getulio Vargas ran a military dictatorship during WWII and only joined western countries against the Nazis when it was very clear which side was going to win. I think that to truly explain what is going on one must go much deeper that that… But calling Syriza “reasonable” is too much. They remind me of PT (Worker’s Party) in Brazil, they spent 20 years criticizing everything and everybody, just hoping that when something went bad, voters would turn to them, which they did. In Brazil they just did not screw up things earlier because China bought a stupendous amount of iron ore in the last 20 years, which helped them to tax and distribute wealth a little. In Greece, it will not be that easy, there is no iron ore there, or anything else other’s want to buy …

  44. Gravatar of TallDave TallDave
    16. May 2015 at 20:03

    The NBER is the official judge of recessions

    Only in the sense that their opinion is respected by other institutions, such as the US government, not as a matter of epistemology. It’s fair to say while they ruled 2001 a recession, others could reasonably disagree.

    Jose Romeu Robazzi — the idea that free exchange leads to more optimal outcomes than coercive redistribution is terribly counterintuitive to even the well educated, and that sad fact explains most of the misery of the last couple centuries.

  45. Gravatar of Ray Lopez Ray Lopez
    17. May 2015 at 06:06

    @Robazzi – yes, I am familiar with the arrogant Vargas, who committed suicide rather than be humiliated by impeachment. “In Greece, it will not be that easy, there is no iron ore there, or anything else other’s want to buy …” – Greece has sand, surf, and nice ruins, which Brazil does not have (ruins, unless you count the slums of San Paulo as ruins, haha). I bought my girlfriend a pair of expensive “Havaiana” flip-flops today, made in Brazil, so I helped your countrymen, lol.

  46. Gravatar of Scott Sumner Scott Sumner
    17. May 2015 at 08:59

    Ray, Gee, I never knew the Greek communists fought the Nazi’s. What is their view on beavers?

    I will give them credit for being right about the Olympics.

    Michael, I guess I thought you were contrasting my views with Selgin’s. But he also supports stable NGDP growth.

    Talldave, Not sure what you mean by “epistemology.” Is there a truth of the matter regarding the definition of recessions, separate from what we believe?

  47. Gravatar of TallDave TallDave
    17. May 2015 at 12:27

    Scott — I just mean the NBER’s definition of the word “recession” isn’t like the meter being defined as the length of the path travelled by light in vacuum during a time interval of
    1/299,792,458 of a second, it’s just their particular opinion as an institution, and other observers might have different opinions.

  48. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    17. May 2015 at 14:33

    @Ray,
    Gee, Havaianas, really? Actually, we sell something good, airplanes, Embraer does a good job, but we spent billions and billions on it before it became self sustainable …

  49. Gravatar of Morgan Warstler Morgan Warstler
    18. May 2015 at 02:55

    Ray Lopez, that’s HILARIOUS!

    I spent a year of my life doing business there. I found a small little company that did some breakthru work on a chipset made by Sigma Designs (making it possible for first time to mount a file and play it like a DVD off a hard drive), very tricky stuff back in day.

    Little startup, you are Greek? wow, then things got slow and weird so I flew over Athens, and this little startup is inside the Greek telecom building.

    Founder is super nice, highly technical engineer, but basically the ONLY way he could get past al the nickle and diming and approvals was to hand over piece of his operation to someone in telco who got him space andhten told him to hire a bunch of telco employees relatives – and he was like “talk to A and B, C and D are worthless”

    Maybe that’s what you think of a being pro free market, but you’d be hooribly wrong.

    Greece ought to not just let my guy hire and fire at will.

    Greece telecom should be ENDED, everyone fired, and replaced by bandwidth and skyoe (VOIP) and NOTHING ELSE.

    This is really my point, Estonia is a country that is doing smart things, bc they look at their situation and say “we have no choice, we must do smart things”

    Greece could easily say no more minimum wage, no more work regulations, no more licensing requirements, no pensions until 75, we’re doing Uber for Welfare and THAT’s IT:

    https://medium.com/@morganwarstler/guaranteed-income-choose-your-boss-1d068ac5a205

    (ray, you’ll love uber for welfare – ti’s the one thing you and scott can agree on – not event he greeks can think of a way of hacking it)

    Immediately, Greek consumption would shoot thru the roof, poverty would be ended, and good greek would be happy, and bad greeks would be miserable.

  50. Gravatar of Ray Lopez Ray Lopez
    18. May 2015 at 03:42

    @Morgan Warsler – nice GI/BYOB proposal. I think pigs will fly before then. Instead of making lazy US people work, why not just open borders? The lazy will move out (and the criminal, you can ship them to say Liberia, exile is not against the law if you tweak the US constitution a bit or at worse change it) and any foreigner who wants to work hard to make money will move in. There’s millions of Pakistanis, Indians, Africans, Chinese, Filipinos and even a few Greeks who would love to emigrate to the USA but cannot due to restrictive laws.

  51. Gravatar of ssumner ssumner
    18. May 2015 at 11:39

    Talldave, I’d say it’s more than just their opinion, it’s the accepted definition used within the economics profession. Of course bakers and massage therapists are free to use other definitions.

    Seriously, I do see your point. But I hope you see mine. The 2001 downturn is pretty much universally accepted to be a recession (at least by the media and economists and the public) even though it didn’t have two straight negative quarters.

  52. Gravatar of MichaelM MichaelM
    19. May 2015 at 17:03

    Scott: As a second best, yes, that is my understanding.

    I was more blowing off some mental steam. I just had to write an extended essay on George’s subject (free banking) for an unrelated class and yours was the first blog I checked after finally finishing. My first thought on seeing this post was, “Well, if they need currency flexibility without leaving the monetarily conservative Euro-zone, private banks should be able to make up the difference, if they are allowed to”.

    I realize now the post doesn’t actually say much or contribute incredibly to the discussion, so I believe I was just thinking out loud.

  53. Gravatar of Scott Sumner Scott Sumner
    19. May 2015 at 17:53

    Michael, Thanks for clarifying that.

  54. Gravatar of Geopolitical Tectonic Movements: Watch the Mediterranean & Beyond – Olivier Travers Geopolitical Tectonic Movements: Watch the Mediterranean & Beyond – Olivier Travers
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