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2011-11-15 Home Front: Politix

Paul Krugman is rewriting history now that the eurozone, beloved by US liberals, is going down

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Posted by tipper 2011-11-15 07:33|| || Front Page|| [4 views ] Top

#1 "We've always been at war with Eastasia" - 1984

Life imitating art.

Posted by Procopius2k 2011-11-15 08:15|| 2011-11-15 08:15|| Front Page Top

#2 Krugwoman is the best reason to stay away from intellectuals.

Posted by Jack Salami 2011-11-15 08:20|| 2011-11-15 08:20|| Front Page Top

#3 Sweden, the same story, social cohesion based on shared ethnicity.

Posted by phil_b 2011-11-15 08:49|| 2011-11-15 08:49|| Front Page Top

#4 There might be a way to preserve the Euro, and Greece is a small enough economy to experiment with the technique without threatening the rest of Europe. The technique worked for Germany's economy way back when, so it is not particularly novel.

When the Weimar currency, the Papiermark, was hyperinflating, it had to be replaced by a new currency, the Reichsmark. But to protect the Reichsmark from being infected by the hyperinflation, a third, transition currency, called the Rentenmark, was introduced.

The Papiermark was a fiat currency, and hyperinflation was caused by Germany's massive WWI reparations, which the government just printed more money to pay.

The Rentenmark, however, was back by gold, so was solid as a rock. So the debt was pretty much set aside, and the Rentenmark was used for bank and financial institution normalization, a special bank being created for the purpose of managing the debt.

The Reichsmark, as well, was backed by gold, and was able to take over as a fairly debt free currency. Which is why, except for events intervening, Germany would have recovered without the Nazis, who just managed to seize power in a narrow window of opportunity during the recovery.

In Greek terms, they need to be temporarily taken off the Euro and returned to the Drachma. But they need a third currency, called say, the "Greco", to make the transition back to a solid economy.

The Greco would likely not be backed by gold, but by commodities swaps between the EU and Greece, with favorable set prices for Greek exports, and EU surpluses sold at a great discount to Greece.

This would both make the Greco strong, though it would only be a banking and financial business currency, and it would give Greece a growing store of Grecos, which would increase the value of the Drachma, the internal Greek currency.

Grecos could then be worth far more than the Euro, and be used to slowly pay off Greece's external debts, without harming the Drachma. Then, with their debt reduced considerably, the Greeks could slowly be reintroduced to the Euro.

Posted by Anonymoose 2011-11-15 10:14|| 2011-11-15 10:14|| Front Page Top

#5 #3 - not so much any more. Do a search to track just what's been happening in, say, Malmö over the last decade.

Posted by lotp 2011-11-15 12:20|| 2011-11-15 12:20|| Front Page Top

#6 Anonymoose
Germany would have recovered without the Nazis,
The whole of Europe including Germany was in a depression at the time when Hitler took over in 1933, as was the US. Hitler's claim to fame was that he reduced unemployment from 30% to 5% by 1936. I think that the success of Hitler was one the main impetuses for Keynes General Theory which was meant to ensure full employment.
He wrote in his forward to the German edition
"The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory."
I do like to point this fact out to my Keynesian "friends" It drives them mad.

Posted by tipper 2011-11-15 14:28|| 2011-11-15 14:28|| Front Page Top

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