Good. So we leave the generalities and get to specifics -- unless Karl joins us again and wants to contribute something profound. I will be posting some specifics I am quite passionate about in the next few days, but here are some current events. If you wish, comment on any of what follows, but if you don't I will have something else up here in the next day or two.
Some news events in the last week or so:
1)Massey Energy violated numerous safety regulations at its West Virginia mine. The result was the mine explosion which killed 25.
2)The BP oil explosion and spill.
3)Greece. They have just changed from a conservative government to a socialist one – and now there is a financial crisis.
4)Greece is in trouble. So is Spain, Portugal. But I don't hear that the Scandinavian countries are in trouble.
5)Goldman Sachs promoted the sale of derivatives, even as they were betting that these would fail.
6)News about Blackwater and Erik Prince and the shifting of military activities to private contractors. Of course this reduces the size of government, and I have little doubt that a private contractor can kill a “bad guy” more economically than the government, but is this what we want?
Can you tell me how less government is going to solve these problems and problems like that?
These are serious problems, and none will be easy to fix – maybe even they can't be fixed. I am certainly not arguing that big government per see will fix these problems. But I can't see how a condition that says, "only if the fixing results in a decrease in government size is the fix right", can contribute to the solution!
I can tell you couldn't wait till I finally responded so one could bring up other issues. I hope you were waiting to discuss this and were not doing so based on my suggestion.
ReplyDeleteAre you and I are not profound? ^_^
I really enjoy chatting here I feel like I have a purpose and am challenged to "think", as a Hausfrau this is a nice change.
It's good to be informed on current issues, but I think I am not going to be able to tackle all those subjects ( since I am so slow) but I would like to deal with Greece, as a EU dweller I should understand it better and after all Deutschland is doing most of the bailing out. I am still getting a picture on this, seen a few lively discussions on tv, but need to learn more.
Oh just fyi only Finland has the euro and Norway isn't even in the EU, odd but true.
OK, if you want to tackle Greece! I am certainly not the world expert on Greece. But let me at least be clear on what I am saying.
ReplyDelete1) Greece has a huge problem, not unlike that of the US, namely that they have been spending more than they have been taking in [through taxes]. My reading is that in Greece it has inflated civil servant salaries and generous pensions on the one hand, and very low taxes on the other. (I do not know who has been the main beneficiary of the low Greek taxes) In the US it has been military spending [empire building] and low taxes. The main beneficiary of the lowered taxes in the US have been the rich. So when the chickens come home to roost, who will pay the price?
2) Although Greece now has a leftist government, this is very recent. Before that, there was a rightist (I have no idea how far right) government, and before that a leftist government. Both have contributed to the deficit. I just do not think it will do to say conservatives are responsibly fiscally, and leftists are irresponsible. In Canada the Conservatives, whether federal or provincial, have always tried to portray themselves as the fiscally responsible party. The record just does not bear that out. I am enough of a Keynsian to believe there is a place for deficit spending, but this needs to be balanced with a time to pay down the deficit. Unfortunately our political parties allow their preoccupation with wanting to be elected to interfere with this. The Conservatives and Liberals are equally guilty. But the chickens come home to roost!
3)If Greece is in debt, who are the creditors? Somebody was stupid [or greedy] enough to lend Greece the money. I don't know who it has been, but I think it was the rich. My uneasy feeling about all of this is that the Greek bailout is again, essentially a bailout of the rich.
Look, bankruptcy [alone, without bankruptcy legislation] punishes the person who borrowed more money than he ought. He looses the house, business -- whatever. But he is not the only culprit in the transaction. Somebody, probably equally greedy, lent him the money. It is my understanding that bankruptcy law [probably in part] has been put there to ensure that the lender also pays -- that there is a fair distribution of culpability for the failed venture between the borrower and lender. In the case of the US bailout, this did not happen. Many people [who borrowed more than they should have] lost their houses, but the bank executives have increased their riches. I suspect the same thing will happen in Greece. The Greek rank and file will pay the price -- they will take their salary cuts and pension cuts, and may lose their jobs. They are or will need to account for their greed. But the [rich] lenders have been just as greedy -- the German public is bailing them out.
There have been many examples given on this blog, of how the rich in the US do not pay low taxes (top 1% pay nearly 50% of all income taxes for example, and the bottom 50% pay no income taxes), and how raising taxes above 30% in fact cause the government to take in less money. The rich continue to take on a larger and larger share of the tax burden in the US. There has been no data refuting any of this the two times I have brought forth the data, yet it appears the same old non-researched, liberal lines of "the US is in trouble because of lowered taxes to the rich" are given. That is a shame.
ReplyDeleteThose lending to the Greeks should pay, I agree with you. Whether that is the relatively poor (through their investments in pension funds) or the rich, people should pay for their faulty investments. However, that is sadly not the world we live in, and hence everything is considered too big to fail. At least this is a point we agree on, and its unfortunate Germany and the US (through the IMF) have to bailout Greece. There will surely be more bailouts, and likely ultimately a complete global economic collapse if we do a few more.
I think the entitlement mentality in most of the world (not unique to Greece although perhaps more pronounced), as well as anti-business practices (see article) summarize Greece's failures.
http://online.wsj.com/article/SB10001424052748703961104575226651125226596.html?mod=WSJ_Opinion_AboveLEFTTop
The facts that I know so far, I would like to go back and see when Greece entered the Eurozone, since they apparently did not qualify, but the then SPD, socialist party and Chancellor Schroeder with the Green party coalition bent the rules to allow them in. The FDP, liberal and CDU conservative was against it. Politics won and some say the Euro central bank should have had more say. This is ironic because the FDP-CDU is now the governing power coalition and who voted against the bailout now? The SPD!
ReplyDeleteSo out of the 110 billion that the Eurozone ( 15 countries out of 27) is giving towards bailout, Germany has pledged 22 billion and German leading firms, like banks and insurers, Deutsche bank, Commerzbank, Munich RE and others combined have pledged 8 billion, so it isn't just the government that is pledging funds. Greece already owes German banks 34 billion euro.
Arguement is of course to save the euro? But will it?
The conditions of bailout are to slash pension and private sector wages, spending cuts total 30 billion and consumer taxes are to increase.
I found this article very informative on the corruption by both conservative and socialist governments in Greece and explaining the all too generous social package and how they got to where they are.
http://www.spiegel.de/international/europe/0,1518,669235-2,00.html
I think we can agree that a too big government and corruption no matter who was in power is to blame on Greece.
Spiegel is a pretty much left paper but has good writers and a few good conservative writers as well, ok one that I know of, Jan Fleischauser.
I have to correct my mistake the SPD abstained from the vote and die Linke voted against the bailout.
ReplyDeleteYour comment "the lenders are probably the rich", well duh-uh who else would it be? The poor usually don’t lend out money just like they don’t create jobs.
Could be the banks and EU countries are stupid on bailing Greece out, I still need to understand the consequences of letting them fall. Someone suggested Germany should have bluffed to pull out of the euro if Greece did not voluntarily step out.
Though you agree all were overly greedy in this scenario, I laugh that you say “the rank and file will pay the price with salary and pension cuts”. Well YES I HOPE SO, as the Spiegel article and you stated they were overinflated in the first place. Pensions are 95% of salaries. They can afford a pension cut without suffering.
Karl-Fr also mentioned to me that if a police officer dies for example and does not have a spouse, their children receive the officer's pension, even if they are working adults. Stupid!
Though yes the honest working, tax paying Joe , rich or poor that was not receiving such ridiculous pensions or over inflated wages,will have to pay for everyone else's greed and corruption, there I agree.
In Globe and mail I read that in 2004 Greece created 250,000 civil servant jobs, that put their number to 900,000 civil servants in a country of pop. of 11 million.
The Greeks and many southern euro countries, like Portugal, Spain and Italy that are also in trouble live a totally different lifestyle from let’s say their northern partners, they live for today, spend like there is no tomorrow. Different outlook on life.
Papandreau was on vacation, living it up enjoying himself while the rest of the world was scrabbling to get money together to help his bankrupt country. I can't imagine Harper or Merkel doing that, they would have been in office working feverishly.
Though all or most governments have overspent, they need to STOP spending, as does the public that lives beyond their means.
So is Greece getting funds from EU and the IMF? Those scoundrels.
Oh I forgot thanks for the WSJ article. I would not have thought they were so antibusiness. Big government jobs I guess should have triggered that one for me.
ReplyDeleteI have to laugh that people love to blame everyone else but the root of the problem. Stmts like this make me laugh;
US creditors are to blame b/c lent them worthless funds and they wanted to weaken the euro. True ? Who knows?
Frau Merkel is to blame for furthering problem because she too wanted to weaken the euro, ( Germany benefits on exports) thus took so long to make her decision. Hah these factors true or not were not the cause of the problem.
Ok I need an explanation from Karl and perhaps I am not the only one so will ask the ? here.
ReplyDeleteAlthough this is old news it has resurfaced here since the media is focusing on wanting the speculators to also pay in bailing out the Euro.
Maybe all those businesses who profit from a lower euro should pay too?
Where is the limit? ok maybe unfair comparison, but I am so sick of looking who should pay and pay and pay and pay. FIX THE PROBLEM!
Now to my ? can you explain to me the crime committed by SAX Capital, SOROS fund, Greenlight Capital and Brigade betting against the Euro. Goldman Sachs involved too? Did they break the rules?
If yes, why were they not punished?
If they were or remain unpunished, instead you will get more regulation and all investment firms and hedge funds will suffer, which has long been the cry.
Many of these type of people also have the attitude banks and insurance companies are bad, until they need them of course and over state their insurance claims b/c in their eyes stealing from a insurance company is after all good.
What do you think should happen with regulation of the markets and with speculators?
I mean when speculators do good does anyone mention them then?
I think the reason hedge funds are made to be villains, is they are easy targets, to take the blame away from where it belongs - runaway government spending. Most consider hedge fund managers or people that work at Goldman Sachs, worse then child molestors as they are faceless - few actually deal directly with one that works there. In the past 18 months, hedge funds in particular are being attacked by the government. We are constantly being randomly investigated at work, wiretaps on us, in hopes they find some wrongdoing. The government doesn't need any remote evidence of wrongdoing (i have personal experience with this). What is easier for the government, than having faceless rich people, hated by the media, to take the blame in times of economic trouble? Today its hedge funds and finance, increasingly its the church, and i think everyone's freedoms are at risk from an ever increasing government. Government entitlements have to be shrunk, and in order to do that, governments are making villains out of groups in order to take the blame from themselves.
ReplyDeleteWow! What an answer! I like it and fully agree.
ReplyDeleteSo are you saying the speculators that I mentioned had not done anything out of the ordinary, that was incorrect?
If that is the case then the government and media has done an excellent job in making them out to be villians! Right up there in the evil category with George W..
Can you explain it to me why then these particular hedge funds were targeted other than they obviously had influence and played with huge amounts of funds against the euro.
Isn't there speculation going on against and for currencies all the time? Why was this different?
Really just the negative anti-finance climate? Sorry I need an answer for dummies.
Sorry guys, maybe I'm just to simple.
ReplyDeleteBut if Goldman Sachs is actively promoting a product (I think they call it a derivative -- I don't understand all these products), while at the same time they are betting that these will fail, THAT IS WRONG. If people who have made bad decisions are losing their houses and life savings, and at the same time the bank executives who also made bad decisions continue to collect their bonuses THAT IS WRONG. That is not the result of big government or small government. That is the result of bad policy, poor (or perhaps inadequate) regulation, and bad government decisions.
Why is it that despite the near disaster two years ago, the regulatory mechanisms that allowed that to happen have not yet changed? Is that because of big government or small government?
There was a time when if a government wanted to borrow money, it had to borrow from its own people. I think this was still the case in WW2. Now, as we all know, governments borrow off shore, and does anyone know what's going on? Why didn't Greece divulge its actual financial situation before it joined the Euro? Did anyone know? Who, if anyone, was responsible? If no one was responsible, who was responsible for that? The man in the street?
Who made the decision that the US could become indebted to China, and who knows whom else? The man in the street makes the decision to buy cheap [Chinese made goods] at Walmart rather than more expensive locally made goods at the store in the neighborhood. Is he, because of that as responsible for the global financial mess (if that is the appropriate description) the world is in, as the financial gurus in Washington, or wherever?
Are you seriously suggesting that the ruling elites and the financial elites in the US and Europe and elsewhere in the world, are not in cahoots. Sure they have their disagreements from time to time, but mostly they coddle each other. You stroke my back I'll stroke yours. You pay my campaign costs, I'll make sure you don't suffer. They make the decision with respect to financial and fiscal policy, as well as war, and the man in the street pays. Its always been that way, but more so now.
Karl, if you are being harassed, I honestly do feel sorry for you. But not as sorry as I feel for those who made an honest mistake and over-borrowed and have lost their house because of this crisis.
Lots to respond to, but in brief, it sounds you have high conviction that what Goldman is doing, by betting against their products is WRONG. Goldman was paraded around by the government and critized as doing something wrong as an easy villain. Perhaps they have, but as far as what you, the government, and the media cite as wrong, goes to a misunderstanding of their business. Goldman - like virtually every major financial institution in the world including the big 6 Canadian banks - has an investment banking arm, an investment arm, and a brokerage arm. They are completely separate, and they legally cannont share any information. If they did, that is wrong, but i have seen no accusation of that. The investment division and brokerage arm, daily makes unknowing bets against their investment bank. Its what provides liquidity to the market.
ReplyDeleteIf Greece had not fudged its figures before it entered the eurozone it would not have met the conditions to enter.
ReplyDeleteObviously the government is to blame, the socialists were in power in 2000-2004.
In 2004 the conservative government revealed that the figures were fudged at time of euro entry, which the socialists denied.
I don't think it really matters socialists or conservative, corruption runs rapid in Greece, if one can believe the media.
A decent summary of the Goldman/SEC case.
ReplyDeletehttp://online.wsj.com/article/SB20001424052748704852004575258292274111802.html#mod=todays_us_opinion