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Though I, personally, consider the Euro a quack currency and the cause of all kinds of problems (and think the Greeks should default, not that doing so would prevent much suffering there), I don't think it would take the intellect of a Nobel Prizewinner to come up with some other possibilities. For example, Wikipedia tells me that average wage rates in Greece are practically double those in Poland (1262.05 Euros vs. 634.49). Might that have something to do with mass unemployment and depression in the one and relative normality in the other? Is Greek productivity double that of Poland's? I believe it's higher but nowhere near twice as high. I'll see if I can find the numbers. If they are twice as great (or more) then this wouldn't be much of an argument.
Okay, according to the OECD, GDP per hours worked in Greece is 34.5 (measured in U.S. dollars); in Poland it's 28.1. Not nearly comparable to the difference in average wage rates. Economically speaking, that implies either massive unemployment in Greece or massive worker demand in Poland. I guess we all know which it is.
Poland wages here are translated into euro for comparison? And you read the piece, right? I thought some of your queries were addressed in it.
Expressed in Euros, yes. As for the article, Krugman pretends that the Euro is the problem causing the unemployment, then concludes that the real problem is that the Greeks can't radically devalue their currency thus causing a radical fall in their wage rates. Unspoken is the assumption that Greek workers will meekly accept this collapse of their living standards without demanding still higher wages, inflation indexing, etc.
Once the Greeks reinstitute the drachma or whatever (if they ever do) their problems aren't going to change. Their productivity still won't support their wage rates. They can work on their problems while under the Euro by, you know, cutting those wage rates (if they want Germany's unemployment and their productivity really is 60% of Germany's then they can cut those wages to 60% of Germany's wages) or they can cut them using their own currency in the same manner. Using their own currency allows them to try to inflate them away, thus fooling their people that the wages aren't being cut. This apparently is the Krugman preferred method. It's a cure worse than the disease IMHO. It sets up a wage/price spiral, resultant wage and price controls, mass destitution due to the destruction of rational relative prices, and commonly will be seen to be a prelude to dictatorship of one kind or another as some man on a white horse offers to resolve the national emergency once and for all.
Unfortunately, the Greek people are in a mess. They probably wouldn't have been able to get into this big of a mess if the Euro hadn't allowed them to borrow more than they otherwise would have been able to borrow. So far as I can see, staying in the Euro now means ever-spiraling debt which will continue to impoverish them to ever greater extents. Defaulting on the debt, I guess, gets them out of the Euro whether they want out or not. It would mean that they could concentrate on digging themselves out of the hole that they're in. But they would have to do that (cut wages, pensions, etc. They might also try doing something to increase productivity, of course). That necessity ain't gonna change. It's a dream world to believe that just getting out of the Euro means everything will be fine just like in Poland.
Of course, if they could convince Germany to pay their bills forever they wouldn't have to worry about any currencies. Come to think of it, if I could convince Germany to pay my bills forever I wouldn't have to worry about money, either (perhaps I could try telling the Germans that they're lucky I'm importing so much stuff from them). We'll see if either of those things happen.
? You may not have read about all the austerity measures they have already taken, and how their 'sloth' compares with others'; it is covered in detail elsewhere on this site. Will try to find the links. And your eloquent paragraphs reiterating the standard viewpoints pose the question of whether you read the Brookings paper.
Comments
Though I, personally, consider the Euro a quack currency and the cause of all kinds of problems (and think the Greeks should default, not that doing so would prevent much suffering there), I don't think it would take the intellect of a Nobel Prizewinner to come up with some other possibilities. For example, Wikipedia tells me that average wage rates in Greece are practically double those in Poland (1262.05 Euros vs. 634.49). Might that have something to do with mass unemployment and depression in the one and relative normality in the other? Is Greek productivity double that of Poland's? I believe it's higher but nowhere near twice as high. I'll see if I can find the numbers. If they are twice as great (or more) then this wouldn't be much of an argument.
http://www.forbes.com/sites/jamesdorn/2014/05/19/leszek-balcerowicz-transformed-poland-through-an-embrace-of-economic-freedom/
Once the Greeks reinstitute the drachma or whatever (if they ever do) their problems aren't going to change. Their productivity still won't support their wage rates. They can work on their problems while under the Euro by, you know, cutting those wage rates (if they want Germany's unemployment and their productivity really is 60% of Germany's then they can cut those wages to 60% of Germany's wages) or they can cut them using their own currency in the same manner. Using their own currency allows them to try to inflate them away, thus fooling their people that the wages aren't being cut. This apparently is the Krugman preferred method. It's a cure worse than the disease IMHO. It sets up a wage/price spiral, resultant wage and price controls, mass destitution due to the destruction of rational relative prices, and commonly will be seen to be a prelude to dictatorship of one kind or another as some man on a white horse offers to resolve the national emergency once and for all.
Unfortunately, the Greek people are in a mess. They probably wouldn't have been able to get into this big of a mess if the Euro hadn't allowed them to borrow more than they otherwise would have been able to borrow. So far as I can see, staying in the Euro now means ever-spiraling debt which will continue to impoverish them to ever greater extents. Defaulting on the debt, I guess, gets them out of the Euro whether they want out or not. It would mean that they could concentrate on digging themselves out of the hole that they're in. But they would have to do that (cut wages, pensions, etc. They might also try doing something to increase productivity, of course). That necessity ain't gonna change. It's a dream world to believe that just getting out of the Euro means everything will be fine just like in Poland.
Of course, if they could convince Germany to pay their bills forever they wouldn't have to worry about any currencies. Come to think of it, if I could convince Germany to pay my bills forever I wouldn't have to worry about money, either (perhaps I could try telling the Germans that they're lucky I'm importing so much stuff from them). We'll see if either of those things happen.
http://mutualfundobserver.com/discuss/discussion/comment/66199/#Comment_66199
I just thought it was an interesting column about productivity and monetary base policies, that's all.