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[LordSlowpoke]

that period was pretty shitty for ukros through and through

which is why we have to learn from mistakes and stop at the ukraine, make it into east berlin, then once we're done feeding them peeled cucumbers move onwards

[MarcAFK]

Import greeks into Germany, It's win-win, it will raise german imports to support them and then since they're unemployed it wouldn't raise exports at all.
While you're there import the rest of the PIGS too.

[smjjames]

Import greeks into Germany, It's win-win, it will raise german imports to support them and then since they're unemployed it wouldn't raise exports at all.
While you're there import the rest of the PIGS too.

What's PIGS an acronym for here? Portugal Italy (or maybe Ireland) Greece Spain?

Also, really bad acronym really.

[MarcAFK]

Import greeks into Germany, It's win-win, it will raise german imports to support them and then since they're unemployed it wouldn't raise exports at all.
While you're there import the rest of the PIGS too.

What's PIGS an acronym for here? Portugal Italy (or maybe Ireland) Greece Spain?

Also, really bad acronym really.
Yeah, the PIGS are the ones dragging behind the rest of the EU economically or something. :/

[Sergarr]

There is a time for all things and there is a time for devaluation.  50% of the time in fact.  The other 50% of the time being the time for currency appreciation.

I know, I know, but the concept has still acquired an almost taboo-word status in Finnish econopolitics discussion since the nineties, especially when it's unexpected emergency devaluation. In the everything-but-Soviet Republic of Finnistan, the 80s were an overheated period of deregulation and speculative investment, and for some inexplicable reason the politicians decided that this sudden experiment in neoliberalism had to be backed by a rock-solid pegged currency. It so happened that the purchasing power of citizens rose far above the actual domestic product, resulting in a Yuppie Orgy, and when the bubble was about to burst, the finance minister made a solemn oath to not devaluate the magical currency, with the government opting for wage cuts instead. The devaluation had to be done eventually, of course, and as a result people lost their wages and their savings, which created a public backlash comparable to the Greeks' outrage at their politicians. The 90s recession has some uncanny similarities with our current situation in Finland, as well as with Greece, but pointing that out is hugely impolite to the inhabitants of Lake Wobegone.

Funnily enough, according to what I've been told, this mirrors almost exactly the devaluation that happened in Russia in late 90s, down to the "high-ranking government figure promises that it won't happen, then it happens anyways".

Only that in our case, it was the President of the country that said that.

[mainiac]

Why not start talking about how other countries will reduce their trade deficit?

Because the Euro is massively over valued.

This has been another episode of simple answers to simple questions.

[Helgoland]

Why not start talking about how other countries will reduce their trade deficit?

Because the Euro is massively over valued.

Huh, I thought it was floundering at close to 1:1 to the dollar... Plus we're talking about the internal trade surpluses and deficits, right? Then the exchange rate of the Euro shouldn't matter at all. And one could remark that much of Germany's surplus comes from non-EU trading partners...

[Sheb]

Because if currencies were independent, the DM would be much higher than the Euro is and the other currencies lower, making German export less competitive and exports from the Eurozone on average less so.

[mainiac]

Huh, I thought it was floundering at close to 1:1 to the dollar...

Not what strong currency/weak currency means, it's comparing the exchange rate of the currency to market clearing prices at equilibrium.  So we look at Europe and see unemployed people that should be exporting and they aren't.

Plus we're talking about the internal trade surpluses and deficits, right?

No, the Euro is over valued compared to currencies like the dollar, Yen and even the Yuan these days.  The Euro is also experiencing too little inflation but that is a related but different issue.

Then the exchange rate of the Euro shouldn't matter at all.

Nope, it is a major reason for the unemployment throughout Europe.

And one could remark that much of Germany's surplus comes from non-EU trading partners...

Doesn't change the problem one whit where Germany is contributing to the net trade balance, just that they are net in massive surplus while having very low unemployment.

Because if currencies were independent, the DM would be much higher than the Euro is and the other currencies lower, making German export less competitive and exports from the Eurozone on average less so.

I believe you mean to say exports from the Eurozone on average more competitive.

[Sheb]

Hey, mainiac, could you be a bit less... arrogant I guess? Even if you think we're all stupid, I for one would like a more worded-out answer. Not everyone is an economic major.

[mainiac]

It's always hard to tell how something is coming across, thanks.

[Sergarr]

-snip-

So single currency benefits more effective/productive economies that much more than it does the weaker ones? How did Germany even manage to get others to join their monetary union, then, if it's effectively equivalent to colonization?

[Helgoland]

I'm afraid I don't get it. Taken the unified currency as a given (since even the Greeks want to keep the Euro), why is a Germa surplus in the trade with, let's say, China a bad thing for Spain? It's not like the two countries compete all that much in their exports to China... The overall trade balance of course is important for the overall Eurozone economy, I agree - a weaker Euro would (probably) be a good thing for the countries currently in states of crisis. It wouldn't do shit about the internal trade balances, which devaluations in national currencies would take care of. But - again - that's not wanted politically...

Also why do you hold the Euro to be too strong? IMO its devaluation has been quite hefty - I've already refrained from donating to US sites because my money is worth so little. Of course, that may just be a reaction to the Greek crisis and not a long-term devaluation: Inflation rates around here are, after all, ridiculously low. But it's not like that should matter to the economy right now...



NINJA: The narrative around here is that they were in essence implicitly hoping for easy bailouts...

[mainiac]

So single currency benefits more effective/productive economies that much more than it does the weaker ones? How did Germany even manage to get others to join their monetary union, then, if it's effectively equivalent to colonization?

A well functioning single currency would benefit the least productive countries the most.  But the Euro is a very, very poorly functioning single currency.  The damage to that falls on the least productive countries the most although even Germany would be richer if the currency was working properly.  The German benefits would mostly show up in the purchasing power of working class households while the wealthy would would probably be worse off.  Makes me wonder sometimes about the morality of the German "center" right government.

The overall trade balance of course is important for the overall Eurozone economy, I agree - a weaker Euro would (probably) be a good thing for the countries currently in states of crisis. It wouldn't do shit about the internal trade balances, which devaluations in national currencies would take care of.

Greece would benefit just as much from exporting another billion Euros to the United States as from exporting another billion Euros to Germany.  If the value of exporting to the United States rose relative to the value of exporting to Greece, German exports to Greece would face increase competition and rise in price, thus lowering Greek imports within the Eurozone.

I'm afraid I don't get it. Taken the unified currency as a given (since even the Greeks want to keep the Euro), why is a German surplus in the trade with, let's say, China a bad thing for Spain?

Germany exports to China.  China now owes Germany Euros (we could also say Germany has Yuan but it doesn't matter).  Currencies need to balance in the long term.  So in order for China to acquire Euros, they need to sell something to some country in Europe.  If it's not going to be Germany, that increases the deficit of a country that isn't Germany.

Inflation rates around here are, after all, ridiculously low. But it's not like that should matter to the economy right now...

Relative inflation rates are reflected in long term exchange rate parity.

[Helgoland]

Greece would benefit just as much from exporting another billion Euros to the United States as from exporting another billion Euros to Germany.  If the value of exporting to the United States rose relative to the value of exporting to Greece, German exports to Greece would face increase competition and rise in price, thus lowering Greek imports within the Eurozone.

Only in the short term though, right? Long-term either the Greek economy would need to become more competitive, or the German one (or that of some other country) would just reclaim that piece of the pie...

Germany exports to China.  China now owes Germany Euros (we could also say Germany has Yuan but it doesn't matter).  Currencies need to balance in the long term.  So in order for China to acquire Euros, they need to sell something to some country in Europe.  If it's not going to be Germany, that increases the deficit of a country that isn't Germany.

There's got to be a flaw here: Following this reasoning, it is flat out impossible for the US to have a trade deficit... Taking it at a bit less than face value, you can also turn this argument around: If the rest of the Eurozone imports less, Germany will be forced to reduce either its exports or increase its imports. It's not like Germany has some sort of magic wand here.
I admit though, this argument is interesting. The only thing that bugs me is that you act like deficits just magically appear, without the deficitary country having any influence on what's happening.


Oh, and could you elaborate on your last point? And describe how you'd transform the Euro into a well-functioning currency - that ought to be interesting to hear.