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Old 2011-12-22, 15:23   Link #18603
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Originally Posted by Noctis Lucis View Post
As usual from the BBC, somewhat skimpy on details but very accurate.
When it comes to the Euro and EU, the BBC is just as opinionated as Fox News is towards American politics. The BBC is simply not able to escape strong bias against Europe in English journalist circles. The article doesn't mention the problems caused by deregulation of the financial industry nor does it mention the unique structure of the EMU which made Europe so vulnerable to contagion. So, it's a fairly one sided view of events.

Originally Posted by Mentar View Post
The Euro in itself was merely a stable currency, up to this very date, offering a level playing field. Germany simply worked harder and didn't let wages get out of control. This is where the diagrams were misleading, and the claim that the German unions held the wages "steady" is flat-out wrong. However, the gains in wages were modest, and usually close to the inflation rate, while they ballooned in other countries.
Wage levels affect unemployment but they are hardly the source of economic success. Wage reduction schemes work for a while but in the end the source of all economic growth is based on increased labor productivity. Which for the most part comes down to technological and organizational improvements. The working harder argument is complete nonsense. The Greeks make by far the longest hours in the EU. Several other EU countries have significantly higher productivity figures than Germany.

Main difference is that Germany's public finances are healthier and it's economy recovered faster than most from the 2008 economic crisis. The jump start of the economy is in part due to wage growth control schemes and strong global demand for German exports. Wage controls alone won't help a country get out of an economic crisis as it negatively affects domestic demand.

Originally Posted by Mentar View Post
This "Germany broke it, they should pay for it" bullsh*t is seriously getting on my nerves. The rules were clear, and Germany abided by it. I refuse to apologize for being successful here. The European debt mess was caused by the American housing and "subprime loan" bubble caused by the fed's completely irresponsible "provide liquidity for free" policy paired with the disastrous lack of regulation resulting in a total meltdown of the financial sector world wide. It forced several European countries to "nationalize" otherwise bankrupt banks, and THIS is what sent the cart into the ditch. Ireland was completely peachy before the crap hit the fan. Spain was fine before the crap hit the fan. And now they have critical debt levels because of it.
Germany is definitely not to blame for the crisis. Financial deregulation is indeed at the heart of the problem but that was global development, not just American. Deutsche Bank and Goldman Sachs both have been at the forefront of lobbying for deregulation.

One of the key problems in the EU is that we still have banks that are tied to a specific member state. The US' Federal reserve system protects banks from being judged by the public finances of their home states. For example Italian banks saw their risk premiums increase alongside of that of their country, while no American bank will suffer from being situated in California. That state is as bankrupt as Greece. It's a design flaw in the EMU/ECB system partially caused by this incessant need for national sovereignty.

Originally Posted by Mentar View Post
If you have to blame Germany to be happy, do it for our reluctance to allow the easy US way out: Printing money. Oh, excuse me, that's called "quantitative easing". Guess what, we STILL think that money should be EARNED before it's spent, at least a little bit. If we had said "screw it, let the ECB buy government bonds ad infinitum" (illegal! but advocated by 90% of the same "experts" who caused the financial meltdown in the first place), we possibly wouldn't have that much problems now. But then, economy would be meaningless, and it would result in even bigger problems down the road. Want to see which? Let's see how the US is dealing with their 1-trillion-per-year deficit. It's the same.
Bailing out governments who can't get their public finances in order is a bad idea and just leads to moral hazard. However currently there is an extreme liquidity shortage in the financial system. The interbank market has been dead since the summer of 2011 and it's starting to affect the real economy. Perfect financially sound firms and individuals have trouble getting loans simply because the banks are strapped for cash. The ECB would be at fault if they let the intermediation function of the financial system break down.

Last edited by Bri; 2011-12-22 at 15:37.
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