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On new currencies – mark these predictions December 27, 2011

Posted by proeconomia in Main, News on Greece, On the crisis, Trade.
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Check these two links from Handelblatt (you can translate them with Google): the first is an interview of the chief economist of Deutsche Bank, Thomas Mayer, who claims that the future of the eurozone depends on Italy and whether it will make it on time with its structural reforms.  He anticipates that Italy will make it and the eurozone will stay intact, otherwise his claim is a break-up of the eurozone. Still, he thinks that an exit of Greece from the eurozone now is not unthinkable, especially with a new Greek government unable or unwilling to go through with the austerity measures (mark the unwilling part!) The second link is about the potential agreement between Japan and China to use their own currencies for their bilateral trade, a prospect with serious global implications – especially for the U.S. dollar as a medium of interantional exchange and as a reserve currency and an increase in the importance of the Chinese currency.

For our 200th post this is a must read December 22, 2011

Posted by proeconomia in Fiscal policy, Main, Monetary policy, News on Greece, On the crisis, Opinion.
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Here is the link from Bloomberg. From John Cochrane @ U of Chicago. Sets the record straight on the euro/drachma issues and puts things in the perspective of the current realities. Highly recommended! An excerpt, dedicated to all the euro-bashers:

 

“Leaving the euro would also be a disaster for Greece, Italy and the others. Reverting to national currencies in a debt crisis means expropriating savings, commerce-destroying capital controls, spiraling inflation and growth-killing isolation. And getting out won’t help these countries avoid default, because their debt promises euros, not drachmas or lira. Defenders think that devaluing would fool workers into a bout of “competitiveness,” as if people wouldn’t realize they were being paid in Monopoly money. If devaluing the currency made countries competitive, Zimbabwe would be the richest country on Earth. No Chicago voter would want the governor of Illinois to be able to devalue his way out of his state’s budget and economic troubles. Why do economists think Greek politicians are so much wiser?”

 

Europe needs a scapegoat? December 21, 2011

Posted by proeconomia in Main, News on Greece, On the crisis, Opinion.
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It is very interesting that Greece appears to be the only problem that Europe has. It is also very interesting that there is a claim in the air that once Greece leaves the euro Italy and Spain should stay at all costs – even though the magnitude of their fiscal problems is way higher. It makes one wonder who might be behind this line of attack to an economy that is struggling for survival and whose destruction will not benefit either Europe or the global economy. Here is an article from Financial Times Deutschland that you should carefully read. It is about the state of readiness for Greece leaving the euro while Italy and Spain are rescued. You can easily translate it into Greek in Google.

 

To compliment it lets also have a look at a few older articles:

 

Germany leads the global economy

 EU-A confederacy of dunces?

 Why Greece will bring the euro down with it

 Greece, the serf of Europe

 Imperial Germany – eager to bury the euro

IBM’s next 5-in-5 December 20, 2011

Posted by proeconomia in Main, Science and technology.
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Here is a link to what IBM considers the list of the next big 5 innovations in the coming 5 years! See the video!

The exchange rate delusion December 20, 2011

Posted by proeconomia in Main, On the crisis, Opinion.
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An excellent article by Nobel laureate Michael Spence @ NYU’s Stern School of Business. It is especially relevant to the euro/drachma debate (it effectively debunks the arguments in favor of a national currency). Check out also the link to his new book www.thenextconvergence.com

On economic theory and the euro/drachma discussion December 19, 2011

Posted by proeconomia in Fiscal policy, Main, Monetary policy, News on Greece, On the crisis, Opinion.
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Read this one from Nikos Varsakelis, a colleague from the Aristotle University of Thessaloniki. At last a Greek economist that sets the record straight, and in doing so points to the obvious: all our theories are about the real economy and not the nominal so the choice of currency is, in the end, irrelevant.

A bad scenario? December 19, 2011

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis.
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Here is an article (in Greek) about a mandatory “conversion” of part of bank savings of individuals (mind you though not of businesses) to domestic bonds. While the idea of a domestic bond is obviously acceptable the method of doing so by forcefully seizing bank savings is clearly not. If this happens by force and it does not work and we the doomsday scenario of exiting the euro zone happens the accumulated savings base of Greek households can easily loose in a very short time over 75% of its value, and maybe more. The current estimate of private savings deposits in Greek banks, as stated in the article, is about 180bn euro.

Umbrella union: 10 myths about Greece and the crisis December 19, 2011

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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You may find this article very interesting with your morning coffee.

UK exit from EU not unthinkable December 18, 2011

Posted by proeconomia in Main, Monetary policy, On the crisis, Opinion.
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You may also find this one interesting.

Fragile and Unbalanced in 2012 December 18, 2011

Posted by proeconomia in Fiscal policy, Main, Monetary policy, News on Greece, On the crisis, Opinion.
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This is from Nouriel Roubini and can be read as a follow-up to the previous post since it also includes many arguments (re-distribution, demand, currency appreciation etc). Here are some excerpts to see why!

“Rising inequality – owing partly to job-slashing corporate restructuring – is reducing aggregate demand further, because households, poorer individuals, and labor-income earners have a higher marginal propensity to spend than corporations, richer households, and capital-income earners. Moreover, as inequality fuels popular protest around the world, social and political instability could pose an additional risk to economic performance.”

“Orderly adjustment requires lower domestic demand in over-spending countries with large current-account deficits and lower trade surpluses in over-saving countries via nominal and real currency appreciation. To maintain growth, over-spending countries need nominal and real depreciation to improve trade balances, while surplus countries need to boost domestic demand, especially consumption. But this adjustment of relative prices via currency movements is stalled, because surplus countries are resisting exchange-rate appreciation in favor of imposing recessionary deflation on deficit countries.”

Currency devaluation is a zero-sum game, because not all countries can depreciate and improve net exports at the same time.” (very relevant for Greece)

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