Ze, 'Ow you say, Deflation Watch. Eurozone edition

tomterm8

ILW wrote: »

I think the Germans have a worse experience of what inflation can do than anyone has of deflation. Deflation tends to be self limiting, inflation can easily run away.

I never understood that. Even at its worst, government didn't crumble in Germany during its hyperinflation. During hyperinflation pretty much everyone was employed and fed. It was the general deflation that saw the destruction of democracy and the rise of Hitler.

globalds

Just a question and I don't know if it is relevant:

Would one country fixing the value of there curency and stopping it from inflating have a deflationary effect on other currencies ?

Generali

globalds wrote: »

Just a question and I don't know if it is relevant:

Would one country fixing the value of there curency and stopping it from inflating have a deflationary effect on other currencies ?

It depends on what you mean.

If you mean that, for example, Aus decides to maintain an FX rate of $2 = £1 and refuses to let it fall to $2.5 = £1 then no.

To do that, Australia would need to buy any $ in the market and sell £. That would increase the supply of pounds for a while which might be inflationary for the British but in the end the Aussies would simply run out of £s and the policy would fail.

purch

See September 1992 as an obvious example

Generali

purch wrote: »

See September 1992 as an obvious example

Also a clear example and early warning of exactly how much of a shyt Buba gives about any economy other than Germany's.

The rate of HIV infection is rising fast in Greece now as the Government can't afford to replace needles. Malaria is possibly making a return too. That's Germany's policy of running a surplus right there in the hospital ward.

ILW

Generali wrote: »

Also a clear example and early warning of exactly how much of a shyt Buba gives about any economy other than Germany's.

The rate of HIV infection is rising fast in Greece now as the Government can't afford to replace needles. Malaria is possibly making a return too. That's Germany's policy of running a surplus right there in the hospital ward.

Surely the problem is caused simply by the Greeks borrowing more money than they were taking in taxes and trying to live beyond their means. Now they are having to pay the price with nobody to blame apart from their own governments and themselves. Germany may have allowed them to get into the mess, but they did not force them.

HAMISH_MCTAVISH

ILW wrote: »

Surely the problem is caused simply by the Greeks borrowing more money than they were taking in taxes and trying to live beyond their means. Now they are having to pay the price with nobody to blame apart from their own governments and themselves. Germany may have allowed them to get into the mess, but they did not force them.

I think the bit you're missing is that if you expect that Greece should have known better than to borrow all that money from Germany to buy German products, then Germany should have known better than to lend it to Greece (and portugal, and spain, etc).

But of course, had Germany not done so, it would have remained the economic basket case it was.

Germany absolutely, positively, had to be a debt pusher in order for it to achieve economic growth.

That's what surplus countries have to do in order for their customers to continue buying from them. They must give back the excess capital accumulated (in the form of loans) otherwise their sales dry up.

So just as Greece may be a debt junkie, Germany is a debt pusher, and the two cannot function without each other.

That the situation would be unsustainable over the long term was certainly known by Germany if it was known by Greece.

That a collapse must happen was certainly known by Germany if it was known by Greece.

And that Greece would be unable to pay those debts was certainly known by Germany if it was known by Greece.

Germany is every bit as responsible for the pensioners foraging through bins for food on the streets of the Greek capital as Greek politicians are. And every bit as responsible for the people dying from no medicines in the hospitals, or contracting HIV because of a shortage of needles.

ILW

HAMISH_MCTAVISH wrote: »

I think the bit you're missing is that if you expect that Greece should have known better than to borrow all that money from Germany to buy German products, then Germany should have known better than to lend it to Greece (and portugal, and spain, etc).

But of course, had Germany not done so, it would have remained the economic basket case it was.

Germany absolutely, positively, had to be a debt pusher in order for it to achieve economic growth.

That's what surplus countries have to do in order for their customers to continue buying from them. They must give back the excess capital accumulated (in the form of loans) otherwise their sales dry up.

So just as Greece may be a debt junkie, Germany is a debt pusher, and the two cannot function without each other.

That the situation would be unsustainable over the long term was certainly known by Germany if it was known by Greece.

That a collapse must happen was certainly known by Germany if it was known by Greece.

And that Greece would be unable to pay those debts was certainly known by Germany if it was known by Greece.

Germany is every bit as responsible for the pensioners foraging through bins for food on the streets of the Greek capital as Greek politicians are. And every bit as responsible for the people dying from no medicines in the hospitals, or contracting HIV because of a shortage of needles.

Guess we have to differ there (even with the analogy). Individuals and states should take responsibility for their own actions. I do not blame drug dealers for problems of an addict, the addict always had the option of saying no.

I truly hate this everything is somebody elses fault culture.

HAMISH_MCTAVISH

ILW wrote: »

Guess we have to differ there (even with the analogy). Individuals and states should take responsibility for their own actions. I do not blame drug dealers for problems of an addict, the addict always had the option of saying no.

I truly hate this everything is somebody elses fault culture.

If a drug pusher tried to collect money owed to him from a junkie through the courts, he'd be arrested.

Not lauded for kindly offering credit and being a good businessman.

ILW

HAMISH_MCTAVISH wrote: »

If a drug pusher tried to collect money owed to him from a junkie through the courts, he'd be arrested.

Not lauded for kindly offering credit and being a good businessman.

I believe the junkie still has a duty to pay for what he has purchased. If he could not afford he should have refused the offer.

Enforcement of the debt is another matter, and in this case probably more direct that going to court.