9.19: news.pol/greek debt problem festers:
diane rehm/Eurozone Debt Crisis:
. the Eurozone Debt Crisis debate's main point
was that a few elite dogs ate the people's lunch
and then the elites idea of
making good on their bad loans
was selling off community-owned capital
and witholding labor-class benefits .
. this apparently has resulted in
the people are denying responsibility
for their elites .
. when foreign elites give loans that could
result in taking property from the people,
why would that transaction remain
between 2 elites ?
. you think our elites really have
a lid on civil war?
they certainly don't have a handle on
what they owe you!
caller John "(not an economist) of Cary, N.C.: 10:34
. by reinstating their old currencies
and have those individual currencies
float against the euro,
countries could have their own exchange rate,
and be able to devalue their own currency .
[. yet still have the euro in place for
transnational trades . great idea!
Sudeep Reddy from The Wall Street Journal, 10:34:55
. the old playbook was to devalue a currency.
And it would boost exports, draw in tourism,
and allow a country to recover .
To do that now would essentially be
the breakup of the eurozone.
[. how? ]
If you're going to move away from
a single-share currency
and move back to individual currencies,
it would be ugly.
[. but you're not moving away from the euro!
gov's are just paying locals in local cash,
while foreigners still get paid in euro's!
And you have to figure out how to deal with
the banking systems in different countries
that all have debt from each other on their books.
[. no you don't!
keep it all transacted in euro's .
But once you get beyond that stage,
you then deal with the issue of the crisis
and financial markets that would occur
just by raising the idea.
And then you're just creating the problem
that you're trying to avoid in the first place.
. but a 2-currency system still resolves
future problems -- nothing can be expected
to solve the current hole;
that problem is not really about currency:
they had the misfortune of lending to a loser,
they deluded themselves into reassurances
that the lendee owns the country,
but then they find no such ownership exists,
and no collateral is collectable .
Markus Ziener of Handelsblatt, German daily, 10:35:51:
. in the past, many of the European countries
were able to devalue their way out of trouble.
. when countries like Greece and others
don't have that tool anymore,
that makes it difficult for them to adhere to
what they agreed on.
. European leaders only now understand
that being in the currency union
means you have to stick to
what you had agreed upon.
[. germany has been esp'ly exhuberant about
bringing the greeks into the EU
eager to buy financial products from them
only to find the elites don't own the country,
so there's nothing inside their product!
-- there were no comments from
Zanny Minton Beddoes,
economics editor at The Economist;
or Antonio de Lecea,
EU Delegation to the USA .
9.19: great misunderstood idea!
. my first reaction to that excerpt was,
what a great misunderstood idea!
. why not always have 2 currencies
-- local and global -- that would allow
easy trade with other countries
but would also let countries
devalue their own currency?
. Reddy answered as if the proposal was to
simply drop the global currency .
did the caller imply that? I'm not seeing it .
. money works the same as language,
you only need 2 lang's:
# local -- to stay adaptive to local needs,
# global -- to stay unisolated .
more than the markets, think of the politics:
in the old playbook, you started with inflation
but this always resulted in political instability,
and that would increase the chance of wars .]
anyway, here's how it works:
. to devalue a currency, the gov starts by
requiring that all its payments to locals
are done in the local currency;
while all payments in
must be done in the global currency .
. if they've been economically sound
only then will they be rewarded at exchange time .
if they aren't being very productive,
or their bankers and capitalists
are taking too many losses,
then the global currency banks
won't give them much for their local currency;
and, this effectively raises taxes,
while keeping costs low for the gov't .