Jump to content

US Politics: Mad Max Beyond Corona Dome


Tywin Manderly

Recommended Posts

7 hours ago, Ran said:

I think those arguments are overstated

I don't think so. The Euro has been a disaster for Europe. In making his analysis the author doesn't seem to understand why the gold standard caused or more made the depression worse. Under the gold standard, every nation's price level was in some fashion tied to the international gold standard. When the demand for gold increased, and prices don't adjust quickly enough, aggregate demand falls. And suppliers of gold couldn't simply meet the increased demand for gold quickly enough. Little surprise then that the countries that left the gold standard tended to recover more quickly.

The problem with the Euro is similar. Every nation  that is on it has its price level tied to it. And if the demand for Euros increase and the price level can't adjust quickly enough to restore a new full employment equilibrium aggregate demand falls. The ECB could of course increase the amount of Euros to meet demand, but that often becomes controversial as different nations have different economic agendas. Germany for instance may not want more Euros, while Spain desperately needs it.

Interestingly enough, when the Euro was being proposed, US liberals and British conservatives were generally allied in thinking it was a bad idea, while European Socialist and Wall Street were allied in being for it.

Link to comment
Share on other sites

57 minutes ago, Heartofice said:

The Euro might not be such a problem if the whole of the eurozone is going through similarly terrible times. 

In order for the Euro to work, Europe would have to integrate fiscally and allow free immigration within Europe. Until that happens the Euro isn't what is called an optimal currency area.

Link to comment
Share on other sites

7 minutes ago, Ran said:

Like so?

And 1 trillion probably won't be enough, particularly in a liquidity trap. The ECB will have to abandoned inflation targeting and switch to something like GDP or Price targeting or the Eurozone countries will have to increase fiscal spending or a combination of all of them.

And anyway, before this low interest rate era, the ECB during during to 2008 was too tight, in large part because the German aversion to inflation. That is one reason why Spain suffered 25% unemployment.  That was disaster and shouldn't have happened. Spain had plenty of fiscal capacity to counter act falling aggregate demand if only the ECB would have aggressively went out and bought Spanish bonds.

Link to comment
Share on other sites

1 minute ago, OldGimletEye said:

And 1 trillion probably won't be enough, particularly in a liquidity trap.

Pretty clear they're ready to do more. No reason to spit out 10 trillion all in a go.

1 minute ago, OldGimletEye said:

The ECB will have to abandoned inflation targeting or the Eurozone countries will have to increase fiscal spending.

All of this stuff is on the table.

1 minute ago, OldGimletEye said:

And anyway, before this low interest rate era, the ECB during during to 2008 was too tight

Seems they are aware of that and aren't planning to make the same mistake. 

I think the responses from all sorts of governments show that they recognize this thing will need a lot of liquidity. Germany isn't allowing gatherings of more than 2 people in public, they know what that means for the economy for the next month or two.

Link to comment
Share on other sites

1 minute ago, Ran said:

Pretty clear they're ready to do more. No reason to spit out 10 trillion all in a go.

All of this stuff is on the table.

Seems they are aware of that and aren't planning to make the same mistake. 

I think the responses from all sorts of governments show that they recognize this thing will need a lot of liquidity. Germany isn't allowing gatherings of more than 2 people in public, they know what that means for the economy for the next month or two.

The point is all this stuff only works if all the countries agree. Right now with low interest rates and the threat of Coronavirus, even Germany can be made to agree to increasing liquidity.

In other situations, all the countries may not agree as their perceived priorities may differ.

Link to comment
Share on other sites

1 hour ago, Heartofice said:

But if Germany is doing fine and Italy isn’t then you can guess what will happen again 

Good example. If Germany and Italy are on the Euro and Italy is running a trade deficit with Germany, the only way for the lost aggregate demand to be made up in Italy is for 1) Germany to increase fiscal spending or 2) prices to adjust downward in Italy. 1 isn't likely to happen because Germany may feel it doesn't need to increase fiscal spending. 2) Is likely to be extremely painful.

If Germany and Italy are on their own currencies, then Italy and can restore aggregate demand by lowering its monetary policy rate, or increasing fiscal spending (which in many cases will need support from the Central Bank), or both.

Link to comment
Share on other sites

Its pretty clear why Wall Street and finance love the Euro. Exchange rate movements can make the returns from investing in a foreign country more uncertain. Though a lot of that uncertainty can be mitigated by forward contracts and options.

It has never been clear to me why some elements of the European left like it so much.

Link to comment
Share on other sites

The Euro is above all a political project rather than an economic one, bringing countries closer together towards ultimate harmony.

Economically it’s benefits have been kinda limited and in Southern European states and in particular Greece its almost disasterous 

Link to comment
Share on other sites

4 hours ago, Fury Resurrected said:

And in the goddamned POOL for fucks sake. Number one- I didn’t know we bought them a pool. Number two- gross.

Well there is (or was) a pool in the WH because JFK wanted one. Things like this happen all the time. Honestly it's not a bug deal. 

Been wondering about the pool part though. I haven't heard anything about how COVID-19 can or cannot move in water, especially heavily sanitized water like that. 

Link to comment
Share on other sites

12 minutes ago, Tywin et al. said:

Well there is (or was) a pool in the WH because JFK wanted one. Things like this happen all the time. Honestly it's not a bug deal. 

Been wondering about the pool part though. I haven't heard anything about how COVID-19 can or cannot move in water, especially heavily sanitized water like that. 

A bug deal? Yo! Pot, this is the kettle calling!

Link to comment
Share on other sites

10 minutes ago, Tywin et al. said:

Well there is (or was) a pool in the WH because JFK wanted one. Things like this happen all the time. Honestly it's not a bug deal. 

Been wondering about the pool part though. I haven't heard anything about how COVID-19 can or cannot move in water, especially heavily sanitized water like that. 

I swim and I looked into this, it can't survive chlorinated water. Obviously that doesn't mean it's smart to go to a public pool, especially if you test positive, because there's still time spent walking around, touching doors, changing in the locker room, showering, etc. 

Link to comment
Share on other sites

6 hours ago, mormont said:

Yeah, the argument about the Euro here appears to proceed from the belief that the Euro is a priori a Bad Thing.

If you believe that given a set of tastes and technology, the economy will tend toward one equilibrium point, and spot market prices will quickly adjust to bring about a demand and supply equilibrium and people will form correct expectations about future prices that brings markets into equilibrium, then you might just believe there is no a priori problem with the Euro.

But if all those assumptions are just a bit too much, then you might just believe that the Euro might a priori be a bad thing.

Link to comment
Share on other sites

Wow, that'd be great if the Democrats got this in the package. I know all sorts of people that don't qualify for unemployment and that's crazy in a huge crisis like this.

 

Quote

In addition, Democrats are pushing for unemployment provisions to last four months instead of three and include independent contractors

Senate scrambles to finish coronavirus package by end of day
Negotiations are restarting talks after lawmakers failed to reach an agreement Sunday.

https://www.politico.com/news/2020/03/23/senate-coronavirus-rescue-package-143799

 

 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

Guest
This topic is now closed to further replies.
×
×
  • Create New...