Posts Tagged ‘austerity’

Austerity or Stimulus?

February 25, 2017

Well this is an improvement.

When I was still a gleam in my daddy’s eye, Germany fought a world-sized war against France. But now, in 2017, all the obsolete ideology that then fueled both fanaticisms–fascist v. communist–has withered down into a battle of ideas.

Fiscal ideas, like whether budgets should be balanced, or put on hold until things get better.

From a Peace vs. War standpoint, I’d say that delicate balancing act is an improvement, wouldn’t you? Budgets and Economic Plans are, theoretically, much more manageable than tanked-up military campaigns.

Now Germany and France– those two nation-state heavyweights whose fiscal priorities set the course for the rest of Europe–they are getting along just fine now. They expend financial energies trying to keep the whole of Europe humming along on all cylinders. Budget deficits that drag down Euro economies are generated mostly in the lackadaisical southern  economies–Greece, Italy and Spain.

But those two mid-continent economic heavyweights–France and Germany, function as fiscal opposites, polarizing European values and budget priorities in opposite directions. They are two very different countries; and yet Germany and France are not as opposite as they used to be. A lot has changed since they finally made peace back in 1945.

At the time of that last Great War, early 1940’s, Germany was suffering through the death-throes of a dying monarchy. What was left of the Kaiser’s authoritative legacy had been lethally manipulated into a world-class death regime by a demonic tyrant who wore an odd, obnoxious little mustache on his flat German face.

France up to that time was still stumbling through a sort of awkwardly adolescent stage, having booted their kings and queens out back in the early stages of the industrial revolution, and then replacing, in stages, the ancient monarchy with a struggling new Republic.

What the French did as the 18th-century came to a close was similar to what we Americans did, but different. We had ditched King George III in 1776. The French cut off Louis XVI in 1792. On the other side of the Rhine, the Germans kept their Wilhelm top dog hanging on a thread until the Allies ran him down in 1918.

We Americans did a whole new thing after we rejected the old wineskins of monarchic government back in 1776; we had a lot going for us–a vast, nearly-virgin continent that stretched out for 3000+ miles, with plenty of room to grow,  and to expand our new-found explorations for Life, Liberty and Pursuits of Happiness.

The Europeans–neither the French nor the Germans–did not have all that fruited-plains expansion space like we had. They were cramped up over there in the Old World.

Having wielded a fierce guillotine ruthlessness upon their king and queen, the French tried to spread the wealth all around, ensuring that everybody got a chunk of it. They had wrung a blood-stained liberte from the palaces of privilege in 1789. Over the course of the next century and a half, they generally moved leftward the whole time, toward an egalitarian idea of solidarity.

The Germans have always tended toward authoritarian leadership, which is one reason why Hitler was able to pull off the abominations that he did. But we Allies put that to an end in 1945.

Thank God.

Now in the post-WWII Europe, the Germans have turned out to be pretty good kids on the block, considering all that had happened back in the day. The last 3/4 of a century has seen a remarkable recovery. They went through some serious changes, rebuilding after  losing two wars, and then being divide into two different countries.

Since 1990, when Germany became united again into one country, those krauts have established a pretty impressive record. They now have the strongest, most stable economy in Europe.  One reason it turned out this way is: the Germans have historically been, by necessity, very disciplined, rational people and they know how to get things done.

The French are different from that. You gotta love the French. As the Germans have made the world a better place with their great music (Bach and Beethoven), the French have brightened and lightened our worldly life with their very lively, expressive and impressionistic art, coupled with their unbridled Joie de vivre. And let’s not forget the original architectural piece-de-resistance of the Western World. It was French creativity married to inventive 19th-century industrialism that brought us the Eiffel Tower in 1889.

ParisGargoyl

The French do progress with style and artistry; the Germans get it done with impressive efficiency and precision.

As an American who has geneologic roots in both cultures, this fascinates me.

Their two different attitudes about generating prosperity also encompass, respectively, their approaches to solving money problems.

Or more specifically. . . solving “lack of money” problems.

A new book, Europe and the Battle of Ideas, explains how these two nations, as the two polarizing States of modern Europe, each lead in their own way to set policy, together,  for solving Europe’s financial problems. Their tandem leadership is enhanced by their two very different strategies.

The simplest way to describe their treatments of European deficits is this:

The Germans are into Austerity; the French are into Stimulus.

Or to put it into a classic perspective:

The Germans want to balance the books,  thereby squeezing all governments and banks into economic stability. The French want the assets to get spread around so everybody can have a chunk of it.

How do I know anything about this?

This morning I saw Markus Brunnermeir being interviewed; he is one of the authors of the new book, Europe and the Battle of Ideas.

  https://www.socialeurope.eu/2017/02/europes-future-will-settled-battle-ideas/

In this fascinating, very informative interview, the questions are being posed by Rob Johnson, President of Institute for New Thinking, whatever that is.

Together, these two guys explore the two basic problem-solving approaches to working out Europe’s economic deficiencies. And it just so happens that the two main strategies are related to those two old nationalized culture, described above, between Germany and France.

Sounds simplistic perhaps, but this comparative analysis makes a lot of sense when you hear these two knowledgable men talk about the present condition of economic Europe.

So, rather than try to explain it to you, I’ll simply leave you with this list of characteristics, as identified by. Mr Markus Brunnermeier. The list identifies how each country’s budgetary priorities contributes to a strategy for solving Europe’s fiscal woes.  My oversimplified version of it  looks like this:

France

Germany

1.Stimulus

1.Austerity

2.Liquidity

2.Solvency

3.Solidarity

3.Liability

4.Discretion

4.Rules

5.Bail-out

5.Bail-In

Consider these two lists of national characteristics as two different strategies for solving large-scale economic problems.

Here are a few notes I made while watching Mr. Johnson interview Mr. Brunnermeier:

For French, the problem is always liquidity. Stimulus will flush money out of markets again.

Germans see problems as solvency difficulty. Fix the fundamentals. Don’t throw good money after bad.

French: If you see it as a liquidity problem, just bail them out.

German. If you see it as solvency problem,  Bail in, to avoid future hazards. Bail-in means: Bond holders who essentially gambled with a country or bank and  then reap the gains on upside– they should take losses on downside.

There was a radical shift in attitudes in Europe over the Cyprus bank crisis in spring 2013. Who pays? Who covers the losses?

. . . Bail-in or bail-out?

French fear systemic risk so they tend toward governmental bail-outs.

The Germans, on the other hand, see crisis as an opportunity to address and solve the systemic deficiencies. So penalize  the depositors/ investors; others will learn from that, and you will have bank-runs in other places. Such circumstances provide incentives for institutions and individuals to take responsibility for their own actions and investments.

Just how the Europeans get all this worked out, we shall see in the days ahead. And the working-out may provide some lessons for all of us.

Smoke

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The Rights of Humankind

February 20, 2017

Archives

Twelve score and one year ago Thomas Jefferson submitted an innovative set of political principles to a congress of delegates from thirteen American colonies. The gathered assembly, known as Continental Congress, debated the contents and the merits of Jefferson’s proposal. The document began with these words:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness–that to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. . .

The world has changed a lot since those words were adopted  as the philosophical basis of a new experiment in civil government. Here are just a few of the ways our world has changed since those revolutionary days:

~ Our fledgling national legislature, known at that time as the “Continental” Congress, is now called the Congress of the United States.

~ We Americans now associate the world “Continental” with Europe.

~ On the “Continent” of Europe, citizen-groups are now struggling to form a workable political basis for a European Union.

~~ Whereas, In the year 1776, when our American Continental Congress adopted a plan for a United States of America, we had a nominal consensus for the basis of our Union; and That consensus was based, rhetorically, upon “certain unalienable Rights, . . . Life, Liberty and the pursuit of Happiness; which Rights that had been “endowed” by a “Creator,

~~ In the year 2000,   the European Parliament adopted a Charter of Fundamental Rights of European Union, by which the peoples of Europe are resolved to share a peaceful future based on common values. . . indivisible, universal values of human dignity, freedom, equality and solidarity. . . based on the principles of democracy and the rule of law.

We see, therefore, that the American Union was initiated during an historical period in which faith in a Creator God was still, at least rhetorically, allowed to be a basis for political consensus.

The European Union, however, is coalescing in a post-modern, humanistic age in which their unity can only be expressed in terms of human agreements and motivations, stated above as common values.

As we Americans ultimately divided ourselves into two primary political identities, Democrats and Republicans, with one side being generally associated with  progressivism programs while the other is  based in conservatism,

We notice that in Europe, in what is now a churning crucible of 21st-century economic constraints, the divisions seem to be congealing toward two uniquely Euro polarities. On the Right side, we find the  Austerians, whose values are based on fiscal responsibility and the austerity that is thought to be necessary for maintaining economic and political stability. On the Left side, we find the Socialists, whose values are based on equality that is assured and managed by the State, which should produce solidarity among the people.

As Thomas Jefferson had proposed a declaration based ostensibly on the zeitgeist of the so-called Age of Enlightenment, so has a spokesman stepped forth, in our age, to propose for the Europeans a document that aspires to manifest the zeitgeist of this (perhaps) Age of Equality.

Toward that end, Mr. Yanis Varoufakis, former Finance Minister of the Greek Syriza party, has proposed a five-point plan by which the Europeans would collectively assure the rights of persons as they are understood in this, the 21st-century.

  https://www.socialeurope.eu/2017/01/new-deal-save-europe/

Stated simplistically, those rights are:

~ a collective investment in green/sustainable technology

~ an employment guarantee for every citizen

~ an anti-poverty fund

~ a universal basic dividend (income)

~ an immediate anti-eviction protection.

So we see, now, that in the 200+ years since the inception of American Democratic-Republicanism, the zeitgeist that was then seen as inevitable has changed. In the so-called Age of Enlightenment (c.1776) we were demanding a Government that would Protect our Unalienable Rights, defined broadly as Life, Liberty and the Pursuit of happiness.

The modern zeitgeist, however, as it appears to be evolving in the Europe of Our Age, is demanding: a Government to Protect our Basic Life Necessities.

Instead of Life, Liberty, and the Pursuit of Happiness, citizens of the World now appear to be demanding Life, Security, and the Pursuit of Equality.

EURomeHdq

And that’s the way it is, 2017. We shall see how this develops as the 21st-century unfolds.

Smoke

the Minotaur metaphor from Yanis V.

May 10, 2015

The day after we arrived in Greece for a vacation, they SyrizaNws
held an election there.

The leftist Syriza party won, propelling Alexis Tsipras into the office of Prime Minister. With no delay, Mr. Tsipras appointed Yanis Varoufakis as the new Finance Minister for Greece.

Before that week was over, these two men were visiting national leaders all over Europe. They were abruptly leaping into the Continental fracas of unbalanced financial equilibrium between their bankrupting government and the Euro creditor overlords up north.

Messers T and V immediately let it be known that their negotiating strategy on behalf of the Greek people would be very different from that of their predecessors. Austerity was not working to solve the problem, and would no longer be tolerated by the poor people of Greece. And it was time to acknowledge that fact. Something had to change.

That was about 3 and a half months ago. Now, in May 2015, the then-newly-appointed finance minister Mr. Varoufakis has already been replaced; he is now moving on to other roles in the international order of things (if “order” is an appropriate word for whatever it is that holds our nations together.)

As I write this, on a Sunday morning in May, in the USA, I am 2/3 of the way through reading Mr. Varoufakis’ book The Global Minotaur;

http://www.amazon.com/The-Global-Minotaur-Financial-Controversies/dp/1780324502

I can tell you I am not surprised that his role as a negotiator was so brief. The man is a truth-teller. (of the leftist type; there are truth-tellers on both the “left” and the “right”.)

As a regular ole conservative-leaning working-stiff kind of guy, I’ve done quite a bit of reading on this financial Crisis that has engulfed us since the fall of ’08. Mr. V’s explanation of that 6-year devolving tsunami is the easiest to understand that I have seen.

Yanis’ strategy is centered on what we call these days a narrative. That is to say, a kind of story. He converts the whole unfolding circus of events into a story based upon the ancient Greek mythical tale of a terrible flesh-devouring beast, the Minotaur. If this sounds far-fetched, it is.

My conservative brethren these days disdain the narrative approach to elucidating current events; they prefer, as Sgt. Friday used to say back in the day. . . just the facts, ma’am.

As if such a thing–separating facts from fluffy hype–were possible in this day and time of cyber bewilderment. Even statistics, raw numbers, are near-nonsense nowadays; they’re almost useless for making sense of contemporary fiscal/financial conundrums.

One has to survive by intuition in the 21st century.

There’s “spin” imposed on everything! Consider the unemployment figures that the BLS cranks out every month. Talking heads await those stupid numbers on the first Friday of every month, so they can have something to talk about, forming projections and predictions about future events based on stuff that already happened last month. Looking for the “trend.”

To hell with the trend! What’s the truth?

Unemployment rate, or Labor participation rate?–you tell me which one really tells the tale.

It’s like the CPI, Consumer Price Index. They leave fuel and food costs out of the equation, when those two factors comprise the biggest impact on every “middle class” household budget. Go figure.

But I digress.

Here’s this lefty, Mr. Varoufakis, an economist. He writes a very interesting book, using the Minotaur analogy narrative, and helps me understand what the hell has been happening in the world of money, which is to say the real world.

And though he claims to be some kind of neo-Marxist, I don’t care. If some conservative can do a better job of explaining why the free market has been buried under a landfill of toxic assets and leveraged finance-babel, let him/her do so.

I’ve blown my wad here in ranting, which is something I hate to see in other blatherers online, so I’ll not weary you with more of this grievance;

I’ll not explain the Greek’s minotaurial metaphor. Except to say it involves  the global recycling of economic surpluses since the post-WWII Bretton Woods financial arrangement that slanted everything in the world toward American advantage.

But now, since 1971, when Nixon shut down the gold window, all of that US-favoring international baggage has been lost in an airport somewhere between Brussels and Beijing and so the great recycling flow of surpluses has reversed. So that now it morphs into recycling deficits instead of surpluses and the winners will someday be losers and vice versa and so austerity is for the birds and now Mr. V thinks the Bretton Woods potentates should have listened to Mr. Keynes in 1944 instead of Harry Dexter White.

Or something like that. More about this later, probably next week after I finish the book. I suppose I’ll have to jump over to Hayek or Schumpeter or Mr. Volcker for some right-leaning controlled financial disintegration explanations after this tragi-comedic death-toggle with Greek mythology.

 

Glass Chimera

Road to a Grecian Turn

January 30, 2015

With apology to John Keats, a new poem for 2015:

 

Oh, You unbridled bride of Entitlement,

Can you still afford to pay the Rent?

You, love-child of Austerity and Free-spending,

Is your ambrosia Never-ending?

Paid debts are sweet, but those unpaid are sweeter

says your new Syriza leader,

’cause we’ve got to get the people working,

so in Unemployment they’ll not be lurking.

Ah, happy, happy days that cannot end,

as long as EU-lovers still do send

debt forgiveness, and credits new

so you’ll never bid EU adieu.

UmbrelSyntagm

Who are these coming to the Sacrifice?

a little help from Euro friends would sure be nice.

The Germans, the French, will surely come

and Play the Games until they’re done!

MarblStrt2

Oh Athenic State, on marbled path of Austerity

Can you reach that elusive peak of Victory?

Winged Athens, her goddess wings now torn away–

Has she lost her head in heat of the fray?

PleatedFigur

Oh, for ever may you live, and Greece be fair!

as long as EU pals still care.

Austerity puts Prosperity on the go–

That’s all you really need to know!

Glass Chimera

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