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Ignorant European Elites Fume At Markets
Old 05-07-2010, 02:19 PM   #1
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Ignorant European Elites Fume At Markets

Ignorant European elites fume at financial markets | Brussels Blog | FT.com

This may require free registration, not sure. I registered long ago.

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Old 05-07-2010, 04:02 PM   #2
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A strong trade alliance between European states makes good sense, but what they wound up with is the Ottoman Empire (in it's latter years) run by German and French bureaucrats. How will they bail themselves out of the looming crisis as the domino labeled "Greece" topples and the ones labeled Portugal and Spain start to wobble. And England, how healthy are they? This should be interesting to watch, I just hope we don't get spattered with much of the mess.
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Old 05-07-2010, 04:16 PM   #3
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Just please Euro - please keep going down. I'm ready to become a European tourist again!

And Spain is on the top of my list!

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Old 05-07-2010, 04:44 PM   #4
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Just please Euro - please keep going down. I'm ready to become a European tourist again!

And Spain is on the top of my list!

Audrey
Good point. I had mostly crossed Europe off my list. I should be rethinking that.
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Old 05-07-2010, 05:38 PM   #5
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Here are some observations from the blog:

Barber article -
"Or think of the social status attached for the past 150 years to being a state-employed soldier, teacher, office clerk or railway worker rather than a banker in Germany." (Barber article)

Comments -
"As a German who worked in the city for most of the nineties I couldn't agree more with your sentiments Mr. Barber. Fact is: it wasn't until the late nineties that "investment banking" was something recognised or even practiced as such in Germany. Up until then, ambitious graduates aspired to a career in industry, consultancy, the civil service or the professions.The banks were essentially commercial banks staffed by lawyers lacking basic numeracy."

"What is the trouble about wanting to have a proper job instead of seating in front a computer in front of graphics all day. What should we trust our livelihood to those people?" (UK commenter)

Decades ago novelists like Sinclair Lewis and Henry James who wrote about what constituted the American character and society would characterize essential differences in social mores and outlook between the U.S. and Europe. Difficult political and economic times seem to highlight what globalization hasn't eradicated.
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Old 05-08-2010, 08:32 AM   #6
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I finally read this article, and it left me flabbergasted. I am not even sure that I understood it correctly. Some assertions seems to drip in sarcasm, like this one
Quote:
Wow!* Markets undermine democracy!* Now there’s a headline.
and I do not see why. Other than a sloppy use of metaphors, what is the problem?

Allow me to play devil's advocate for a bit.
Modern markets (as opposed to their original face-to-face form in the village "marketplace") are completely heartless, impersonal, and amoral. They allow folks who are otherwise good and moral to profit from actions of companies that they would consider totally immoral and unacceptable and never dream of behaving that way themselves and in person. By keeping such actions at "arm's length" markets absolve us from ugly moral dilemmas.

At the risk of sounding like a wild eyed socialist (I am not), I'll give a hypothetical example. Folks who wouldn't dream of cheating a poor peasant in order to save a few pennies when purchasing a banana in a face-to-face transaction see nothing wrong with loading up on, say, Dole stock.

Please don't take the above as real evidence, I mean it merely as a parable.

It might not make any sense to claim that markets undermine democracies, but companies do, and occasionally with the assistance of the U.S. Military.

So I do think there is cause to be suspicious and uncomfortable with some aspects of "the market". Contrary to what "free market" capitalist seem to believe, they are not unalloyed good.

I apologize for this sounding like a rant. I did not intend it to be, and I hope that it doesn't make anybody angry. I do not mean to cast stones. I am just thinking out loud and bouncing these half-baked thought off the forum.
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A question of war and peace
Old 05-08-2010, 10:19 AM   #7
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A question of war and peace

That's how Helmut Kohl sees the EU. Relatively conservative German fiscal policy is at least partly based on the memories of Hitler's rise to power using the crappy inter-war economy. No future crises = no future Hitlers is the thinking.

So, Kohl goes on to criticize the current chancellor, Angie Merkel's handling of the Greek problem.
Quote:
As Chancellor Angela Merkel looked on, Mr. Kohl issued a thinly veiled critique of her reluctance to help Greece, saying he couldn't understand "people who act as if Greece doesn't matter." Of course the situation is difficult, but Germany must pull out all the stops, he said, drawing applause from the crowd.
Good article here in the WSJ asking the question "how far is Germany willing to ride along with EU before looking out for its own future?" Greek Woes Test German Zeal for European Unity - WSJ.com
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Old 05-08-2010, 10:56 AM   #8
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European monetary union is a very big experiment. Having a single currency without a single government produces a situation where now German citizens are paying for decisions and promises made by Greek politicians. Whether this ultimately results in enhanced European stability or festering resentments that exacerbate deeper divisions is the big question. Germans are not going to be happy paying increased taxes so Greeks can continue to avoid the pain caused by their bad decisions.

In both business and government, it is usually best to keep the linkage between authority and responsibility as tight as possible. Similarly, systems which minimize the distance (geography and time) between "cause" and "effect" are more stable and more prone to self-correction than systems constructed differently. European monetary union violates both of these principles. History will show whether it works and whether the benefits outweigh the costs.
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Old 05-08-2010, 11:04 AM   #9
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European monetary union is a very big experiment. Having a single currency without a single government produces a situation where now German citizens are paying for decisions and promises made by Greek politicians. Whether this ultimately results in enhanced European stability or festering resentments that exacerbate deeper divisions is the big question. Germans are not going to be happy paying increased taxes so Greeks can continue to avoid the pain caused by their bad decisions.
Agreed.

This just in:
EU to Set Up Fund to Prevent Spread of Greek Crisis (Update3) - Bloomberg.com
Sounds like they are at least kicking the can the the road a bit. Maybe the markets will be pleased at the news and up on Monday.
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Old 05-08-2010, 11:17 AM   #10
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European monetary union is a very big experiment. Having a single currency without a single government produces a situation where now German citizens are paying for decisions and promises made by Greek politicians. Whether this ultimately results in enhanced European stability or festering resentments that exacerbate deeper divisions is the big question. Germans are not going to be happy paying increased taxes so Greeks can continue to avoid the pain caused by their bad decisions.
Actually Germany (and the rest of the EU) has not agreed to pay for Greece's debts or to bail them out (gift them the money). The only thing they have agreed to is to lend money to Greece at a sub-market interest rate (5% IIRC) so that Greece can roll over its debt without going to the market and getting clubbed with sky high interest rates for the next few years. It will buy Greece more time to get its act together (Greece will be under intense pressure to reform from the EU and the IMF). According to the agreement, the money has to be repaid, with interests, and the cost to the European taxpayers will be nil. There is no reason why German taxpayers should see their taxes go up - unless Greece defaults on the loans which is far from a foregone conclusion.
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Old 05-08-2010, 11:32 AM   #11
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Actually Germany (and the rest of the EU) has not agreed to pay for Greece's debts or to bail them out (gift them the money).
Right. It's about like cosigning a loan for your layabout neighbor who won't get a job and is behind on all his debts. I haven't loaned him any money, he gets the loans at a more favorable rate, and I have no costs if everything works right. It's a win-win-win!
If the Greeks had drafted meaningful reforms and demonstrated an inclination to implement them, the market wouldn't be charging them 8 points higher rates on their bonds than for German bonds.
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Old 05-08-2010, 11:48 AM   #12
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Well I didn't think that money lent to some F'ed up banks (TARP) would get repaid either... Yet it did.

Back then, American Elites were fuming at the financial markets too.
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Old 05-08-2010, 12:06 PM   #13
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Well I didn't think that money lent to some F'ed up banks (TARP) would get repaid either... Yet it did.

Back then, American Elites were fuming at the financial markets too.
When markets disagree with politicians, the markets are almost always right. It takes luck and more skill than is usually involved in a good job of blow-drying your hair to outguess the markets.

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Old 05-08-2010, 01:15 PM   #14
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When markets disagree with politicians, the markets are almost always right. It takes luck and more skill than is usually involved in a good job of blow-drying your hair to outguess the markets.

Ha
How come people that have shown competence, education, hard work and success as civilians, automatically start talking nonsense or stating chiches/platitudes once they enter politics...... And we resignedly vote for them?
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Old 05-08-2010, 01:46 PM   #15
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The Greek welfare state has done more than turn their economy into a basket case. It has also helped produce the large scale rioting and violence we are seeing there. Three people have been killed so far, and property damage has been extensive.
In collectivist societies and welfare states, the government takes a huge role in setting wages and working conditions, setting prices for various commodities (often foods, but frequently gasoline, etc) and in deciding who gets what--taking from some people to redistribute to others. Under a system like this, the government has placed itself (rather than the market and supply/demand) in the position of determining what "fair" prices/wages are. Under such a system, it is perfectly rational for people to take to the streets and demand higher wages or lower bread prices, because the government (as the determining authority) has to be pressured to change their policies. Country-wide work stoppages and protests are common. Under a market-based system, taking to the streets to get a raise or get lower prices doesn't occur to most folks--it doesn't make sense, as the government has, in general, not placed itself in the position of determining these things.

As our own government moves to place itself in the position of ultimate arbiter of "who has enough" and what the "fair" price for various products and services should be, we should be aware that this will justify more public demonstrations and possibly civil unrest as people try to influence these policies.
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Old 05-08-2010, 01:54 PM   #16
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Just please Euro - please keep going down. I'm ready to become a European tourist again!

And Spain is on the top of my list!

Audrey
Audrey: you really donīt need to drastically sink our euro to come to Spain!
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Old 05-08-2010, 01:59 PM   #17
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The Greek welfare state has done more than turn their economy into a basket case. It has also helped produce the large scale rioting and violence we are seeing there. Three people have been killed so far, and property damage has been extensive.
In collectivist societies and welfare states, the government takes a huge role in setting wages and working conditions, setting prices for various commodities (often foods, but frequently gasoline, etc) and in deciding who gets what--taking from some people to redistribute to others. Under a system like this, the government has placed itself (rather than the market and supply/demand) in the position of determining what "fair" prices/wages are. Under such a system, it is perfectly rational for people to take to the streets and demand higher wages or lower bread prices, because the government (as the determining authority) has to be pressured to change their policies. Country-wide work stoppages and protests are common. Under a market-based system, taking to the streets to get a raise or get lower prices doesn't occur to most folks--it doesn't make sense, as the government has, in general, not placed itself in the position of determining these things.

As our own government moves to place itself in the position of ultimate arbiter of "who has enough" and what the "fair" price for various products and services should be, we should be aware that this will justify more public demonstrations and possibly civil unrest as people try to influence these policies.
ergo, the current meat crisis in Venezuala.
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Old 05-08-2010, 02:30 PM   #18
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As our own government moves to place itself in the position of ultimate arbiter of "who has enough" and what the "fair" price for various products and services should be, we should be aware that this will justify more public demonstrations and possibly civil unrest as people try to influence these policies.
We have historical precedents in the US, most recently among a group whose "wage" is set directly by the governemnt-welfare recipients. Burn down some stuff, kill some people, disrupt the economy and the governemnt will always raise your wages.

If Social security recipients weren't so damn old we would be rioting too!

Ha
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Old 05-08-2010, 02:34 PM   #19
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If Social security recipients weren't so damn old we would be rioting too!
<pun gun set to 'stun'> And we'd be dead right to do so! That could really turn into a grave situation.
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Old 05-08-2010, 04:24 PM   #20
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The Greek welfare state has done more than turn their economy into a basket case.
Good thing the entire Greek economy is only the size of Michigan. Spain would be the California .... need to watch that one.
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