Economies need money. Without it, businesses and households stop. Just ask Spain. It’s further along in the “no money” race than most. Unemployment is 25 percent, credit is drying up, and the government is supposed to cut its deficit an almost unthinkable amount.
It’s a vicious circle. When there’s not enough money, the economy collapses. And when the economy collapses, nobody wants to take out loans. Which reduces the amount of money even further. That’s why falling European private loan growth is so concerning. Instead of borrowing more, people prefer to stuff whatever money they have under the mattress. Except nowadays we have a new name for mattresses. We call them “government bonds”. That’s why the yields on U.S., U.K. German and a host of sovereign bonds are at all-time lows.
Read more. [Image: Scotty Barber]
Greece is the hardest-working country in the EU! According to Greece. And only Greece.
According to Britain, Germany, Spain, Poland, and the Czech Republic, it’s the laziest country in Europe.
Meanwhile, Germany is the most respected EU country, according to the Pew Global report, European Unity on the Rocks. And Greece appears to be living in a bizarro universe where 78% of its respondents held negative views of Germany. Three in five Greeks said their country had Europe’s hardest working citizens. Half of the rest of the respondents from the other seven nations said Greece had the laziest workforce in Europe.
Read more. [Image: Pew Research Center]
The euro zone has Greece. The United States has Mississippi. Or Missouri.
The difference between the U.S. and Europe is that when the Greek economy “pulls a Mississippi” (or perhaps I should say, when Mississippi “pulls a Greece”), the EU and the U.S. have 180-degree opposite reactions. Over here, we calmly write checks to Mississippi in the form of Medicaid and unemployment insurance, no questions asked. Europe has no comparable “Peripheraid” for its weak peripheral states. Instead, it has chaos.
Michael Cembalest, a JP Morgan analyst, passes along another clever graph which shows fiscal transfers (don’t worry, that’s just another word for money) between the rich California-Connecticut-Illinois-New Jersey-New York quintuple and poorer states like Tennessee. If similar, seamless transfers existed in the EU, the rich north would have to send to Portugal and Greece at least an additional 30 cents for every dollar they paid in taxes, year after year after year.
When you hear commentators say, “the euro zone must begin to transition toward a fiscal union,” what they are saying, in human-speak, is that the Europe needs to be more like the United States, with balanced budget laws for its individual members and seamless fiscal transfers from the rich countries to the poor, to protect the indigent, old, and sick, no matter where they reside.
The Germans call this sort of thing “a permanent bailout.” We just call it “Missouri.”
If you spun a globe and stopped your finger 12 times on 12 random countries, they just might make more sense for a monetary union than the euro zone.
That’s the conclusion from this awesomely clever chart showing the difficulty, and maybe impossibility, of the euro experiment.
Here is what this chart shows. Compared across more than 100 factors measured by the World Economic Forum Global Competitiveness Report, from corruption to deficits, JP Morgan analyst Michael Cembalest calculates that the major countries on the euro are more different from each other than basically every random grab bag of nations there is, including: the make-believe reconstituted Ottoman Empire; all the English speaking Eastern and Southern African countries; and all countries on Earth at the 5th parallel north.
And here is your tweetable fact: A monetary union might make more sense for every nation starting with the letter “M” than it does for the euro zone.
Top: Dimitris Stamatakos, 36, sits in a field on land he is renting near his home in the village of Krokeae in the Peloponesse area of Greece, on March 18. Before the crisis Stamatakos was able to make a living by selling olives that he farmed on the land he owns, now he is forced to work for neighboring farms and do odd jobs to earn his living.
Center-left: Afghan immigrants jump from an abandoned rail car to catch the train for Athens in Orestiada, on April 9. Human rights groups have heavily criticized Greece over the the building of a six-mile-long fence topped with razor wire, and for plans to intern illegal immigrants in former military bases pending deportation. The debt-crippled country is the European Union’s main entry point for illegal immigrants, mostly from Asia and Africa.
Center-right: Protesters run from police after hurling petrol bombs during violent anti-austerity demonstration in central Athens, on February 12. Historic cinemas, cafes and shops went up in flames in central Athens as black-masked protesters fought Greek police outside parliament, while inside lawmakers endorsed a new EU/IMF austerity deal.
Bottom: Passers-by cast shadows on pavement near a pool of blood following an attack on a policeman by protesters in Athens’ main Syntagma Square, on April 7. A protest march that followed a memorial service for Dimitris Christoulas turned violent with marchers beating a policeman and stealing his uniform, bulletproof vest, handcuffs and radio.
See more. [Images: Reuters, AFP/Getty, AP]
There are two things everybody loves: kids and pizza. The only thing better than either, of course, is when a kid makes a pizza policy metaphor. Which explains why this chart showing how to solve the Greek debt crisis by an 11-year old Dutch boy has been taken the internet by storm.Here’s how 11-year old Jurre Herman describes his entry for the Wolfson Economics Plan (and yes, that is a pizza at the top):
Greece should leave the Euro. How do you do that? All Greek people should bring their Euro to the bank. They put it in an exchange machine (see left on my picture). You see, the Greek guy does not look happy!! The Greek man gets back Greek Drachme from the bank, their old currency. The Bank gives all these euro’s to the Greek Government (see topleft on my picture). All these euros together form a pancake or a pizza (see on top in the picture). Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza. You see that all these euro’s in the pizza’s go the companies and banks who have given loans in greece (see right in my picture).
Now here comes the clever part of my idea:
The Greek people do not want to exchange their Euro’s for Drachmes because they know that this Drachme will lose its value dramatically. They try to keep or hide their Euro’s. They know that if they wait a while they will get more Drachmes. So if a Greek man tries to keep his Euros (or bring his euros to a bank in an other country like Holland [or] Germany) and it is discovered, he gets a penalty just as high or double as the whole amount in euros he tried to hide!!! In this way I ensure that all Greeks bring their euros to a greek bank and so the greek government can pay back all the debts. I hope my idea helps you!!!! Of course if a country has paid back all his debts , he can return to the eurozone.
Try to get past the pizza. I know: it’s spectacularly adorable to imagine Greeks piling their euros into a giant “pancake or pizza.” But wait. The Greeks will have all of their euros confiscated to fill this (metaphorical?) debt-paying pizza? That’s a cute idea. But it’s not a good idea.
Greece’s troubles are twofold. It has a competitiveness problem and a debt problem. Bringing back the drachma would solve the first, but, under this plan, would exacerbate the second. The real burden of Greece’s euro debts would skyrocket overnight once its people are paid in drachmas. A far better plan would be to drachmaize all debts, or simply write them off completely. There are real costs to doing this — i.e., being shut out of international markets — so Greece should probably wait to fully default until they’re running a primary surplus.
Again, I hate to pick on an 11-year old kid. This diorama is adorable, and Jurre is probably just repeating what he’s been told. This plan makes sense to a child. The adults should know better.
The Atlantic: America’s Leading Source For Hating Pizza and Crushing Children’s Dreams Since 1857!