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Post Reply Greek debt crisis
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Posted 7/5/15 , edited 7/5/15
GREECE NO! God bless Greece and the Hellenic People!

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Posted 7/5/15

Bantarific wrote:

I'll address your first point now and I'll respond again regarding the video.

"While I see what your saying doesn't simply printing more of your currency simply devalues it?"
-Printing money does NOT devalue the currency. The best way to get this is an example. If the government prints $10,000,000,000,000,000,000 dollars and puts it in a bunker under the White House, how would that affect the currency value? Answer: It wouldn't. Simply printing the dollar does nothing, what matters is where and how and how much is spent. If the government prints $1 billion dollars and spends it, that would affect the economy, but it would be no different than if a business or anyone else spent the same amount of money in the same place. (at least regarding the dollar's value.) When people say that the government printing money will devalue the dollar, they posit a very serious assumption, and that assumption is that we are, as a nation, at 0% unemployment. The only situation in which the government spending money automatically causes inflation (devaluation of the currency,) is if all markets are at maximum output. This is because the assumption of inflation caused by the idea that 1) There is no way any product can be made more of. That is, all factories/car companies etc are producing the maximum possible output with the maximum possible number of employees at all times. 2) IF that were the case, then if you tried to buy $1 billion dollars worth of cars, and they are at maximum output, their only viable response would be to raise the prices in order to allow for the purchases to happen, (because why turn down someone offering to pay more for the same product?) thus causing inflation and the oh-so-dreaded devaluation of the dollar. But again, that's exactly the same thing that would happen if ANYONE ELSE SPENT THE MONEY TOO. So if Bill Gates pulled $1 Billion out of his off-shore bank account and spent it, in this scenario that would also "devalue the currency" just as much as the government spending the money would. But the key point is this, we aren't at 0% employment so none of that makes a damned bit of difference. This is especially important for a place like Greece where unemployment is extremely high, because if they were able to print money they could spend and put people to work. Because, when unemployment is above 0% the additional spending reduces unemployment with no change to price.

This is not whacko theory, this is just basic Keynesian theory which was decidedly accepted during his time, and then manipulated and misrepresented so you can now have economists who call themselves Keynesian but are actually hardcore orthodox economists who think that we should go back to the "natural" gold standard.
So velocity doesn't matter?
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Posted 7/5/15

Nobodyofimportance wrote:

If Greece doesn't want to pay loans back, then why would anybody want to lend them money?


Because it's the EU, expectations for them aren't that high to begin with.

Truthfully, Greece hid the holes in their economy when they applied to et into the EU.
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Posted 7/5/15 , edited 7/5/15

FlyinDumpling wrote:

So velocity doesn't matter?


If you mean the equation of exchange, MV=PQ, what we're doing is removing the assumption of fixed employment/productivity. The velocity of money, however, is fairly stable (in the short term.) The reason we remove the assumption of fixed productivity/spending is, as I've said, that it relies on the assumption of full employment. So what does this do? Well, velocity too can change, and that could in-fact change the price level, but the far more likely/more drastic change would be Q or employment. In the traditional model, Velocity is fixed and Employment is fixed, so that results in effectively M = P. The money supply (M) determines the price level, (P) which leads us to foolish statements such as, "if the government just prints money that will cause inflation!" Given those assumptions, that statement is true, but it's almost never true. While that statement is true if Q is fixed at full employment, in reality, the government printing and spending money would cause an increase in Q (since Q is NOT maximized,) as caused by the increase in employment, (since employers automatically tend to increase production rather than raise prices.)


An example if you need one for the money supply raising productivity rather than prices:

You own a pizzeria, you have 3 employees, the government printed a billion dollars and hired homeless people to fill in pot holes. Those (formerly) homeless people start spending money at your pizza joint so you find yourself understaffed, do you A) Raise prices or B ) hire another pizza maker? Well, if you're already fully staffed, then you would simply have to raise prices, but if you can simply higher another pizza baker to accommodate the increased demand, you would! (Even according to traditional economic theory.)
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Posted 7/5/15

Bantarific wrote:

If you mean the equation of exchange, MV=PQ, what we're doing is removing the assumption of fixed employment/productivity. The velocity of money, however, is fairly stable (in the short term.) The reason we remove the assumption of fixed productivity/spending is, as I've said, that it relies on the assumption of full employment. So what does this do? Well, velocity too can change, and that could in-fact change the price level, but the far more likely/more drastic change would be Q or employment. In the traditional model, Velocity is fixed and Employment is fixed, so that results in effectively M = P. The money supply (M) determines the price level, (P) which leads us to foolish statements such as, "if the government just prints money that will cause inflation!" Given those assumptions, that statement is true, but it's almost never true. While that statement is true if Q is fixed at full employment, in reality, the government printing and spending money would cause an increase in Q (since Q is NOT maximized,) as caused by the increase in employment, (since employers automatically tend to increase production rather than raise prices.)


An example if you need one for the money supply raising productivity rather than prices:

You own a pizzeria, you have 3 employees, the government printed a billion dollars and hired homeless people to fill in pot holes. Those (formerly) homeless people start spending money at your pizza joint so you find yourself understaffed, do you A) Raise prices or B ) hire another pizza maker? Well, if you're already fully staffed, then you would simply have to raise prices, but if you can simply higher another pizza baker to accommodate the increased demand, you would! (Even according to traditional economic theory.)
To be honest, this stuff is going over my head

but yeah what you said sounds about right
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Posted 7/5/15
My post on this subject from the last thread a few days ago. /w link to the topic.

http://www.crunchyroll.com/forumtopic-907357/debt-by-countries?pg=1



DasWood wrote:

The most important thing to keep in mind is that the US monetary system is based on Modern Monetary Theory (MMT). The EU system is more of a 'hard' currency. It is hard in that Greece has no control over it. It is managed by an outside entity. In addition this hard currency is what Greece's debt is issued in.

This makes a rather huge difference in the effects of debt and the consequences. Greece benefited in the past from having this hard currency. Because people did not have to worry about Greece devaluing it's currency there was confidence Greece would not inflate away it's debt and on the exchange get screwed, which is fairly common. So Greece had lower rates than they actually earned. Then in the financial troubles of 2008 it all came to a head and things got bad quickly. Not being able to manipulate it's currency means Greece has to pay back bonds in a hard currency it doesn't have money to pay back. So suddenly their borrowing rates skyrocketed. They don't have money to pay back old loans and don't have income for new ones. A bad place to be.

Meanwhile, the US under it's MMT can only default if it wills it to be so. First, understand the institutions and objects have in this system. The fiat dollar on it's own has no value. The government makes it valuable by making you pay your taxes in it. So you HAVE to use it even if you don't want too. So now there is demand. Next, the federal reserve is like a bank teller and the treasury is the bank. The treasury goes "Oh I owe you money? Have a check!" then the federal reserve goes "Oh this is a check, have some money!". There is a big difference in your normal bank - teller relationship here. Suppose the bank wrote a check with a 0 balance and someone tried to cash it. The federal reserves goes "You have a check, here have some money!" and gives them money.

But how does this happen? How can the federal reserve continue having out cash despite the treasury not having any money? Most banks would be in default and be forced into bankruptcy. It is rather simple (Even if the ripple of effects may or may not be). The cash the federal reserve hands out is cash it makes. Someone tries to cash a $1 trillion dollar check? No problems. Have a newly minted $1 trillion note. Just let me record this on my books that I minted new cash and gave it to a person with a check.

All debt the US owes is in US currency and not a hard currency the US does not control like other nations currency or precious metals. Therefore it quite literally takes an act of congress for our system to default. Also, under this system, the debt load does not matter so much as the effects of inflation. Example, during the financial crisis the feds increased the monetary base 3x ( https://en.wikipedia.org/wiki/Monetary_base#/media/File:U.S._Monetary_base.png ) and we never saw inflation for it. The velocity of money was very slow so the feds could basically print as much money as they wanted (And they did) without any ill effects. Now if the velocity picks up inflation might get bad in which case, the fed which controls the fractional reserve of other banks will say "Time to cut the slack!" and force it to slow down.


While the US system on MMT isn't perfect, it is a much better system than the Euro one.


EDIT:------------------------

Pt2:

I just wanted to add this since other people are talking about bonds in the threads. The whole system of the US auctioning bonds is a relic of the times of when the US had a hard currency. Back then if you wanted to spend more dollars you had some choices. For example you could devalue your currency. Instead of 1oz of gold per dollar now we only give .75oz per dollar(you could also back currency with other nations currency so substitute gold for yuan or pesos or something), or something along those lines. You could continuing issuing money and hedge your bets that you will not ever have to give out more gold than you have but risk default/bankruptcy of your nation or you could just borrow. As you can see borrowing is usually a much safer alternative which still allows you to spend.


But the US doesn't need to issue debt. It can just pay it as it is needed. But congress never abolished the debt auctions or kept the process up to date since the time Nixon took us off gold.


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Posted 7/5/15 , edited 7/5/15

DasWood wrote:

My post on this subject from the last thread a few days ago. /w link to the topic.

http://www.crunchyroll.com/forumtopic-907357/debt-by-countries?pg=1



Glad to see a fellow kindred MMT spirit.
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Posted 7/6/15
Greece was always corrupt. Name one country with good people and no evil government.
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Posted 7/6/15

underlock wrote:

Greece was always corrupt. Name one country with good people and no evil government.


Norway? Sweden? Finland?
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Posted 7/6/15

Michformer wrote:


underlock wrote:

Greece was always corrupt. Name one country with good people and no evil government.


Norway? Sweden? Finland?


Easy to have a good leader when the population is alcoholic.
Posted 7/6/15

underlock wrote:

Easy to have a good leader when the population is alcoholic.



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Posted 7/6/15
Then again, if they have the right policies in place, they could always just not pay anything and work themselves free of the issue.
It would piss off people, but quite frankly, if they can get a self-sufficient economy running what anybody else thinks hardly matters.
The hard part would be the right policies and getting themselves up-and-running.
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Posted 7/6/15
All I have to say is. Pay your bills greace. How would you like it if I borrowed a few thousand bucks from you, and said, oops sorry I spent all my money on figmas and now have no money to pay my rent, give me more, oops I blew my rent money on DVDs, and I can't pay my previous loans but now you have to give me money so I can pay the guy I paid to pimp my ride.....
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Posted 7/6/15
Party like a rock star, then skip out on the tab. It's amazing what a few thousand years can do to a country.
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Posted 7/6/15

Michformer wrote:


underlock wrote:

Greece was always corrupt. Name one country with good people and no evil government.


Norway? Sweden? Finland?


Remove Sweden from that list. Their government is essentially the embodiment of Tumblr.
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