George Soros latest article

[pabraifan]

George Soros latest view on EU problem: http://www.georgesoros.com/articles-essays/entry/the_tragedy_of_the_european_union/

 

Enjoy

 

James

[beerbaron]

I wonder if Soros, still believes it holds true after the ECB comments. My guess is it's less likely.

 

The European Union that will emerge from this process will be diametrically opposed to the idea of a European Union that is the embodiment of an open society. It will be a hierarchical system built on debt obligations instead of a voluntary association of equals. There will be two classes of states, creditors and debtors, and the creditors will be in charge. As the strongest creditor country, Germany will emerge as the hegemon.The class differentiation will become permanent because the debtor countries will have to pay significant risk premiums for access to capital and it will become impossible for them to catch up with the creditor countries. The divergence in economic performance, instead of narrowing, will become wider. Both human and financial resources will be attracted to the center and the periphery will become permanently depressed. Germany will even enjoy some relief from its demographic problems by the immigration of well educated people from the Iberian Peninsula and Italy instead of less qualified “Gastarbeiter” from Turkey or Ukraine. But the periphery will be seething with resentment.

 

Also, would'nt it be fair to say that creating a 5% inflation environment by the ECB would be the equivalent of Germany transferring money to the debtor states?

 

Regards

BeerBaron

 

 

[bmichaud]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

[Guest valueInv]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

Is there a concise description/article on monetary and fiscal policy during the great depression anywhere?

[beerbaron]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

5% Inflation would solve some of that debt trap. Not the structural imbalances tough.

 

BeerBaron

[ERICOPOLY]

I didn't realize the crisis would effectively come to a non-crisis end if only Germany were to leave the common currency.  I suppose that's a no brainer.

 

They don't have to help the periphery nations by getting their voters to agree to bailouts.  All they need to do is just leave the common currency so that the Euro can depreciate.

[bmichaud]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

Is there a concise description/article on monetary and fiscal policy during the great depression anywhere?

 

http://www.bwater.com/Uploads/FileManager/research/deleveraging/an-in-depth-look-at-deleveragings--ray-dalio-bridgewater.pdf

[bmichaud]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

5% Inflation would solve some of that debt trap. Not the structural imbalances tough.

 

BeerBaron

 

A fiscal union that creates a transfer union like we have in the US would be the ideal way to go, as a central authority would spend Euros into the PIGS to offset the trade deficit while taxing Euros out of the Northern countries. Simplistic of course, but generally how it could work.

[Guest valueInv]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

Is there a concise description/article on monetary and fiscal policy during the great depression anywhere?

Thanks!

 

http://www.bwater.com/Uploads/FileManager/research/deleveraging/an-in-depth-look-at-deleveragings--ray-dalio-bridgewater.pdf

[Liberty]

George Soros latest view on EU problem: http://www.georgesoros.com/articles-essays/entry/the_tragedy_of_the_european_union/

 

Enjoy

 

James

 

Thanks for posting, James.

[Orientinvestor]

 

a viewpoint from realpolitik considerations:

 

http://atyantcapital.com/global-us/realpolitik-and-hedge-funds

[twacowfca]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

Is there a concise description/article on monetary and fiscal policy during the great depression anywhere?

 

Try: A Monetary history of The US by Friedman and Schwartz.  But make sure that your coffee table is sturdy.  It's definitely heavy reading.  However, it's got a nice pullout that's a good summary chart.  :)

[returnonmycapital]

Soros' article is the epitome of MMT - Europe needs a fiscal union, and as Soros points out in the article, while the ECB's recent move ensures the Euro stays intact, it does NOTHING to solve the debt trap that a fiscal union and deficits would provide.

 

Congrats Europe - continue to follow the Great Depression template for how not to deal with deflation!

 

Is there a concise description/article on monetary and fiscal policy during the great depression anywhere?

 

Try: A Monetary history of The US by Friedman and Schwartz.  But make sure that your coffee table is sturdy.  It's definitely heavy reading.  However, it's got a nice pullout that's a good summary chart.  :)

 

 

What about "The Lords of Finance"? Or, how Montagu Norman and his gold standard caused the Great Depression.

[giofranchi]

What about "The Lords of Finance"? Or, how Montagu Norman and his gold standard caused the Great Depression.

 

Very good question! If you haven't already done so, please find The Absolute Return Letter September 2012 in attachment. Discussing Policy Mistake n.3 and n.6, Mr Jensen writes about "The Lords of Finance".

 

giofranchi

The_Absolute_Return_Letter_0912.pdf

[PlanMaestro]

The Lords of Finance is great. If you want something brief:

 

The Gold Standard and the Great Depression

Barry Eichengreen, Peter Temin

http://www.nber.org/papers/w6060.pdf?new_window=1

 

Replace every mention of the Gold Standard by the Euro and it becomes a Greek tragedy. Other brief articles:

 

Lessons from the Great Depression for Economic Recovery in 2009

Christina D. Romer Council of Economic Advisers

http://www.brookings.edu/~/media/events/2009/3/09%20lessons/0309_lessons_romer.pdf

 

The Great Depression

Peter Temin

http://en.wikipedia.org/wiki/Peter_Temin

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=701277

 

Regarding books, besides Friedman/Schwartz

 

The World in Depression 1929-1939

by the outstanding Charles Kindleberger (the same author of Manias, Panics and Crashes)

http://en.wikipedia.org/wiki/Charles_P._Kindleberger

http://www.amazon.com/The-World-Depression-1929-1939-Twentieth/dp/0520055926/ref=tmm_pap_title_0

 

Golden Fetters

Barry Eichengreen

http://en.wikipedia.org/wiki/Barry_Eichengreen

http://www.amazon.com/Golden-Fetters-Depression-1919-1939-Development/dp/0195101138

 

The World Economy between the World Wars

Feinstein, Temin, Toniolo

http://www.amazon.com/The-World-Economy-between-Wars/dp/B004JZWW6M/ref=tmm_hrd_title_0

 

Lessons from the Great Depression (Lionel Robbins Lectures)

Peter Temin

http://www.amazon.com/Lessons-Depression-Lionel-Robbins-Lectures/dp/0262700441/ref=pd_sim_b_5

 

OK, now to the Friedman-Eichengreen theory of depression. Friedman famously argued that the key factor causing the Depression was a collapse in the US money supply, which was not due to a sharp fall in the monetary base, but rather to a sharp fall in the money multiplier, as households decided that cash in the mattress was better than money in the bank, and the surviving banks decided that cash in the vault was better than money lent out. The Eichengreen theory of the international spread is that as countries’ commitment to the gold standard came into question, the gold coverage ratio rose: central banks, especially the Bank of France, started wanting to hold more gold reserves. — Paul Krugman

 

 

[Aberhound]

http://www.econtalk.org/archives/2012/08/ohanian_on_the.html

 

Ohanian's research on the labour market of the great depression shows that policies that made the labour market more rigid caused the great depression to be worse than the free market result. Ironically most people blamed private greed instead of blaming Hoover's and Roosevelt cartel and price support policies.

 

Sound's very similar to the pigs. If they are going for internal deflation you have to introduce a free labour market first. If they leave the Euro (same as gold standard) they will adjust faster if the free market is introduced first. The best choice for the citizens is the free market. They are unlikely to enjoy a free market until they leave the EU. A free market means that debts are cleared through bankruptcy. The biggest problems for the piigs is that the banks are not allowed to go bankrupt so the debt remains then is transferred to the innocent taxpayers leaving the taxpayers in debt tutelage. This destroys the illusion of legitimacy causing systemic breakdown. Solve that problem and the rest is much easier. Hong Kong was able to deal with a 30% plus internal devaluation because of their free market and common law courts even though they had fixed exchange rates.

[Liberty]

I finished reading the piece today. Very interesting, and Soros is obviously wicked smart. But if I try to boil it all down to fundamentals, he's basically saying that a way must be found to monetize the debt of debtor nations (either with Germany on board via higher inflation, or be having Germany leave and then have the rest devaluate).

 

Is this the central point he's making, or did I misunderstand something?

[PlanMaestro]

http://www.econtalk.org/archives/2012/08/ohanian_on_the.html

 

Ohanian's research on the labour market of the great depression shows that policies that made the labour market more rigid caused the great depression to be worse than the free market result. Ironically most people blamed private greed instead of blaming Hoover's and Roosevelt cartel and price support policies.

 

 

 

 

Wage rates tend to be among the less flexible prices [Plan: and that is beyond unions and regulations]. In consequence, an incipient deficit that is countered by a policy of permitting or forcing prices to decline is likely to produce unemployment rather than, or in addition to, wage decreases. The consequent decline in real income reduces domestic demand for foreign goods and thus demand for foreign currency with which to purchase these goods. In this way it offsets the incipient deficit. But this is clearly a highly efficient method of adjusting to external changes. If the external changes are deep-seated and persistent, the unemployment produces steady downward pressure on prices and wages, and the adjustment will not have been completed until the deflation has run its sorry course. - Milton Friedman, The Case for Flexible Exchange Rates

 

The argument for a flexible exchange rate is, strange to say, very nearly identical with the argument for daylight savings time. Isn't it absurd to change the clock in summer when exactly the same result could be achieved by having each individual change his habits? All that is required is that everyone decide to come to his office an hour earlier, have lunch an hour earlier, etc. But obviously it is much simpler to change the clock that guides all than to have each individual separately change his pattern of reaction to the clock, even though all want to do so. The situation is exactly the same in the exchange market. It is far simpler to allow one price to change, namely, the price of foreign exchange, than to rely upon changes in the multitude of prices that together constitute the internal price structure. - Milton Friedman, The Case for Flexible Exchange Rates

 

 

 

 

[twacowfca]

http://www.econtalk.org/archives/2012/08/ohanian_on_the.html

 

Ohanian's research on the labour market of the great depression shows that policies that made the labour market more rigid caused the great depression to be worse than the free market result. Ironically most people blamed private greed instead of blaming Hoover's and Roosevelt cartel and price support policies.

 

Sound's very similar to the pigs. If they are going for internal deflation you have to introduce a free labour market first. If they leave the Euro (same as gold standard) they will adjust faster if the free market is introduced first. The best choice for the citizens is the free market. They are unlikely to enjoy a free market until they leave the EU. A free market means that debts are cleared through bankruptcy. The biggest problems for the piigs is that the banks are not allowed to go bankrupt so the debt remains then is transferred to the innocent taxpayers leaving the taxpayers in debt tutelage. This destroys the illusion of legitimacy causing systemic breakdown. Solve that problem and the rest is much easier. Hong Kong was able to deal with a 30% plus internal devaluation because of their free market and common law courts even though they had fixed exchange rates.

 

Interestingly, there was a great article recently (NYT?) about the growth of labor exchanges in Spain where unemployment among young adults is about 50%.  Services are exchanged through hundreds of central registers  hour for hour, regardless of nominal wages.  Thus a hair dresser may gain a couple of hours credit after dressing someone's hair.  Then she might ask a mechanic to fix her car in exchange for those same two hours of credit.  Yada yada yada.  It's a quasi devalued currency devorced from the Euro.