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EU Politics - Hamsterwheel

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EU Politics - Hamsterwheel

Old 14th Jun 2012, 07:45
  #1481 (permalink)  
 
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Email received this morning from my Europhile friend Peter :
(reproduced as received!)

"I don't know what your gripping about. You still have money in your bank accounts. You can still go shopping and use a credit card or cash. You can fill your car with petrol. You can buy food. You can travel around Europe without showing your passport at borders and you can use the same currency wherever you go. Is that the sign of something that's not working?"

Yup, ostrich, sand, head .............
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Old 14th Jun 2012, 07:58
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yep.. and funnily enough, when i travel to and from france, i have to show my errm passport...

of course the freedom of movement [sic] in the EU also makes the movement of illegal immigrants between states easier..

however.. the economics point..

what is the money in the bank account worth.. what will that be worth tomorrow, or in six months time..

will you be able to fill your car with petrol or go shopping for anything other than local produce, because anything imported or a commodity that is pegged and traded at another currency will become unaffordable because the currency in the bank is worthless internationally and the currency that can be used anywhere is a fallacy because the same goods cost different amounts in different regions and EU states, so it only hold an intrinsic value on a local level, which of course makes the whole exercise moot.

of course to those that bury their in the sand, they have to come up for air sometime or they suffocate.
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Old 14th Jun 2012, 08:26
  #1483 (permalink)  
 
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just to follow on from that point, a big mac index for Europe would be intersting..


Last edited by stuckgear; 14th Jun 2012 at 08:27.
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Old 14th Jun 2012, 08:48
  #1484 (permalink)  
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I'm not surprised Big Macs are so cheap in India - they probably can't give 'em away given the no. of vegetarians. I am surprised at why the cost of living appears so low in the Ukraine. Why is this?

Meanwhile, from today's Telegraph:

The Redemption Pact covers all public debts of EMU states above the Maastricht limit of 60pc of GDP, roughly €2.3 trillion. It is modeled on Alexander Hamilton's Sinking Fund in 1790 to clear up legacy debts after the American revolutionary war.

The idea is to treat the first decade of monetary union as a learning experience -- with mistakes made all round -- and allow a fresh start. The excess debt would be paid down over twenty years.

The beauty of the proposal is that would return Europe to the Maastricht discipline where each state is responsible for its own debts. It is the exact opposite of fiscal union.

Officials at Germany's top court say it appears compatible with the country's constitution -- unlike eurobonds. There would be a fixed limit to costs and the fund would not endanger the tax and spending sovereignty of the Bundestag.

The debt would be covered by joint bonds, payed for from a designated tax. Each country would be responsible for its own share of debt in the fund -- Italy €960bn, Germany €580bn, France €500bn, and so forth -- but would issue bonds jointly.
Neat idea. I wonder if it would actually work?
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Old 14th Jun 2012, 08:57
  #1485 (permalink)  
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It is modeled on Alexander Hamilton's Sinking Fund in 1790 to clear up legacy debts after the American revolutionary war
New York Times: Why Berlin Is Balking on a Bailout


..................Even a European nation, however, should not socialize debt, a lesson demonstrated by the United States in the 19th century.

When Secretary of the Treasury Alexander Hamilton socialized the states’ war debt after the Revolutionary War, he raised the expectation of further debt socialization in the future, which induced the states to over-borrow. This resulted in political tensions in the early 19th century that severely threatened the stability of the young nation.

It took the experience of eight states and territories going bankrupt in the 1830s and 1840s for the United States to shed socialization. Today no one suggests bailing out California, which is nearly bankrupt but is expected to find its own solutions...............
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Old 14th Jun 2012, 09:01
  #1486 (permalink)  
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Speaking of overborrowing - and forecasts of the fate of the Euro from the day it was founded.....

The Corner: A Euro-Zone/Twilight Zone Moment

While looking for a link to the second paper by Professor De Grauwe that I mentioned in the previous post, I came across (via Eurozoneremarks) something else he had written, together with some interesting background.

Here’s an extract from De Grauwe’s article:
Suppose a country, which we arbitrarily call Spain, experiences a boom which is stronger than in the rest of the euro-area. As a result of the boom, output and prices grow faster in Spain than in the other euro-countries. This also leads to a real estate boom and a general asset inflation in Spain. Since the ECB looks at euro-wide data, it cannot do anything to restrain the booming conditions in Spain. In fact the existence of a monetary union is likely to intensify the asset inflation in Spain. Unhindered by exchange risk vast amounts of capital are attracted from the rest of the euro-area. Spanish banks that still dominate the Spanish markets are pulled into the game and increase their lending. They are driven by the high rates of return produced by ever increasing Spanish asset prices, and by the fact that in a monetary union, they can borrow funds at the same interest rate as banks in Germany, France etc. After the boom comes the bust. Asset prices collapse, creating a crisis in the Spanish banking system.
This appeared in the Financial Times in February . . . 1998.
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Old 14th Jun 2012, 09:16
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I'm not surprised Big Macs are so cheap in India - they probably can't give 'em away given the no. of vegetarians.
dead pan, well noted it's based in india on the maharaja mac:
THE ECONOMIST's Big Mac index is based on the theory of purchasing-power parity: in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. This particular basket holds a McDonald's Big Mac, whose price around the world we compared with its American average of $4.20. [...]

The cheapest burger is found in India, costing just $1.62. Though because Big Macs are not sold in India, we take the price of a Maharaja Mac, which is made with chicken instead of beef.

Nonetheless, our index suggests the rupee is 60% undercooked. The euro, which recently fell to a 16-month low against the dollar, is now trading at less than €1.30 to the greenback. The last time we served up our index in July 2011, the euro was 21% overvalued against the dollar,
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Old 14th Jun 2012, 09:50
  #1488 (permalink)  
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Yeild on Spanish Bonds just went over 7 percent. That bail out a few days ago really has worked so well.
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Old 14th Jun 2012, 10:16
  #1489 (permalink)  
 
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we take the price of a Maharaja Mac, which is made with chicken instead of beef.
Nonetheless, our index suggests the rupee is 60% undercooked.
If the chicken's undercooked, we're really in trouble.
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Old 14th Jun 2012, 10:22
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Interesting speculation on the Beeb regarding Cyprus, recently downgraded and heavily exposed to the Greek banking situation. Will Cyprus turn to Europe, or to Russia, which has already provided a loan of 2.5bn euros?
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Old 14th Jun 2012, 12:54
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Actually chaps, we married men should all learn from the way in which the EU/ECB is being managed.

Wife: "Could I have some extra cash this month for ..."

JB Husband "Of course dear, no problem...it will come out of our new rescue/bail-out fund".

Wife "Oh, good dear. What's that then ?"

Husband: "Well, it's a new household contingency fund to cater for emergencies."

Wife: "Where's the money come from?"

Husband: "Both of us pay into it...and I haven't seen any from you, yet !"
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Old 14th Jun 2012, 14:41
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Actually chaps, we married men should all learn from the way in which the EU/ECB is being managed.

Wife: "Could I have some extra cash this month for ..."

JB Husband "Of course dear, no problem...it will come out of our new rescue/bail-out fund".

Wife "Oh, good dear. What's that then ?"

Husband: "Well, it's a new household contingency fund to cater for emergencies."

Wife: "Where's the money come from?"

Husband: "Both of us pay into it...and I haven't seen any from you, yet !"
Wife: "But I dont have an income that will enable me to do that !"

Husband: "Then bend over, dearest!"
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Old 14th Jun 2012, 16:26
  #1493 (permalink)  
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Are you suggesting Greece should bend over ? a bit naughty, that.

Although to be serious, "bending over" in terms of Greece (and Spain and Italy) offering what it can to make up the deficit, is a good analogy. Good weather, food, friendly people, blue seas.....I wonder just how much the tourist industry is worth ?

Last edited by OFSO; 14th Jun 2012 at 16:36.
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Old 14th Jun 2012, 16:50
  #1494 (permalink)  
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That brings back memories of the Greek way, which, coincidentally is the title of a book written by Edith Hamilton and published in 1930 when she was 63.
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Old 14th Jun 2012, 17:49
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I wonder just how much the tourist industry is worth ?
the problem is though is that tourist industry is not a stable economy. it's seasonal, and a short season, it's largely dependent on other economies having 'disposal income' and all those hotels, restaurants and the associated staff need to generate revenue the rest of the year. or they just become money absorbers.

we see this a lot in aviation when in peak season you cant get a commercial jet transport in peak season for love nor money, yet at down times operators just need something to pay the staff the maintenance, the asset, the overheads... of course aircraft can move, regions cannot.

Last edited by stuckgear; 14th Jun 2012 at 17:51.
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Old 14th Jun 2012, 17:51
  #1496 (permalink)  
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Just how much is the spring/summer tourist trade usually worth to the Greek economy? Had they the drachma by next weekend at least whatever the income was would be in hard currency.
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Old 14th Jun 2012, 18:07
  #1497 (permalink)  
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And the contagion continues to spread........

Torygraph: Dutch Disease
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Old 14th Jun 2012, 18:29
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Just how much is the spring/summer tourist trade usually worth to the Greek economy? Had they the drachma by next weekend at least whatever the income was would be in hard currency.
Found one that says $17 Billion of international tourist receipts in 2008.

http://www.unwto.org/facts/eng/pdf/b...rom10_2_en.pdf
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Old 14th Jun 2012, 18:45
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Found one that says $17 Billion of international tourist receipts in 2008.
and the tourism industry accounts from between 15% (CIA world factbook) and 18.2% (Greek investment forum) to the Greek GDP...

so if we take an average 17 percent accounting for 17 billion some easy maths gives an idea of the GDP..

however the CIA world factbook gives that 40% of the greek GDP is 'public sector' so we can start to see very quickly how the greek economy gets upside down.

of course the socialist dream is increased public sector dependency...

Last edited by stuckgear; 14th Jun 2012 at 18:50.
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Old 14th Jun 2012, 18:55
  #1500 (permalink)  
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One million visitors less in 2009 than in 2008 and a commensurate statistical revenue decrease close to three billion dollars. That works out at three thousand dollars a head?
So this is the year to go to Athens and gaze at the slots where the marbles should be displayed were the present owner to send them back to their homeland in the brief interval before they were sold on to the antiquity collectors market and probably replaced with cleverly concealed fakes made in China?
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