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Per Westermark
03/01/12 03:01
Read: 629 times

#186322 - Social progress and change is often slow
Responding to: Richard Erlacher's previous message
Richard Erlacher said:
As for making imported goods more costly, it has been shown that much of the produce sold in Greece, once grown and marketed locally, is from Belgium or other Euro-zone countries, exactly because it is cheaper to produce them in great quantity there rather than in smaller volume and at greater cost in Greece. I'm not saying you're wrong, Per, but it is a fact that it's far too easy to oversimplify the way in which the integration of the Euro-zone has affected the various economies involved. The real problem, IMHO, lies in that the economic barriers between these economies have been taken down, but the cultural and political distinctions between them have not. The smaller economies are typically left-leaning ones, while the larger ones are not so much so.

A person gets into economical troubles when he/she spends more money than he/she is having and is comming in.

Same thing with a country.

It may be good for the people of the country to buy cheap food abroad. But that also moves money out of the country. If not rebalancing the value of money, this move of money out of the country needs to be balanced with some move of money into the country. Tourism is one such move. But a Greece on strike is a Greece that does not invite tourists.

When you devalue a currency, the relative cost of own produce will stay the same but the cost of imported produce will go up. So the main burden for the people is that luxury products and often fuel will be more expensive while the rest will remain at similar cost. Not so big reasons to strike because the amount of money received each week/month will be the same. And much of the daily costs will be the same. But tourism will blossom and bring money and work.

With a shared currency, Greece are in a situation where everyone who sells local stuff needs to sell it cheaper, and each employer needs to pay out lower salaries. From an economical standpoint, the result would be the same - it would stabilize the economy. Except for the very much bigger psychological effect. People don't want to put new and lower prices on their products. Workers don't want lower salaries. And its millions of decisions needed to scale the economy that way. A devaluation would just be one single decision.

So a common currency is very bad, conceptually, if one of the members is allowed to slip.

And politicians have a tendancy to want to make decisions themselves, instead of listening to economical expertise. Especially if the expertise recommends something that hurts the political carieer. So a small imbalance can be allowed to become a large imbalance. Until it is totally impossible for any politician to make any decision without receiving death threats from the people.

USA did start out with a common currency long time ago, making it well rooted in the system. And having the control mechanisms adapt as the country grew. The introduction of the euro has been way too fast. It has ignored the huge difference between the different countries. There have been requirements that countries manages a certain amount of inflation and budget balance for a couple of years. But ignoring the drive of these countries to be let in. And ignoring the required validation of the published figures. More than one of the Euro members have - a couple of years after being accepted - produced new figures showing that earlier years books have not been correct. You could see it as falsely inflated goodwill. Maybe not intentionally. But indirectly, everyone in the total chain have felt some need to try to show that they are doing their job. So many small lies have escalated into a significant lie about the national economical state.

It would work out much better if a country was required to take maybe 20 years - basically a human generation - to try to readjust for a common currency.

But there are many other issues too with a common currency. One example is that there have for many years been big differences in salaries between countries. So people have gone to Greece etc on vacation because it has been cheap. When unifying the currency, lots of food and other stuff suddenly got adjusted because people noticed that the item was 2 in Germany. Why then sell it for 0.95 locally? So lots of items suddenly took a big increase in price. Which required a big jump in salaries for the nationals to afford it. Which created a huge inflation pressure on a country that did not have the economical engine for such a change. While at the same time making tourists select Thailand instead - the extra flying distance doesn't matter when food and living is so much cheaper in Thailand.

In the end, everything is a mess. And it's a mess that is evilishly hard to solve since a huge part of the solution requires people to adapt. And people do not adapt in a month or a year. Some changes requires 10 or 100 years. It wasn't over a day that it was accepted that black people where just as real people. It wasn't over a day that it was accepted that women had an equal right to vote. Society is a slow organism, and if we poke it too hard it bleeds. But it does need constant pokes or there will be stagnation. And we can't use a thumb stick to simply measure exactly how much poking that is "correct". So the politicians attempts one sepcific speeed and the we have to wait months or years before we see the outcome.

It's only when every individual in society have a big advantage of a change that society as whole can react quickly. That seldom happens in a "good" way. Internet could be seen as a "good" change that have made a huge difference in a short time. But most quick changes in history have been of the violent kind, where too much tension have been built up and then instantly been transformed into a cataclysmic event. Let's just hope it's possible to pick up the current tensions before we see a too big reaction.

List of 21 messages in thread
Greece Crisis      Satish S Munot      02/29/12 13:06      
   when        Erik Malund      02/29/12 14:42      
      do you mean      AP Charles      05/19/12 00:24      
   Well, ...      Andy Neil      02/29/12 15:33      
      Insufficiant effort      Satish S Munot      03/01/12 00:12      
         war?      Stefan KAnev      03/01/12 02:13      
         war wouldn't solve the problem      Richard Erlacher      03/01/12 06:58      
            War?      Per Westermark      03/01/12 07:22      
               Capital of Greece?      Murray R. Van Luyn      04/29/12 03:06      
   As always...        Kai Klaas      02/29/12 16:23      
      Devaluation of money      Per Westermark      02/29/12 17:01      
         That's exactly the solution ... however ...      Richard Erlacher      02/29/12 20:33      
            Social progress and change is often slow      Per Westermark      03/01/12 03:01      
               (SP)Stander & Poor Ratting      Satish S Munot      03/01/12 10:49      
            return to the Drachma will be cathastrofic      Stefan KAnev      03/01/12 11:38      
               ??      Kai Klaas      03/01/12 13:30      
                  You are right,Kai      Stefan KAnev      03/02/12 00:27      
               I don't agree      Oliver Sedlacek      03/02/12 04:39      
      austerity      Andy Peters      03/03/12 19:34      
         from what I've gleaned from the news ...      Richard Erlacher      03/04/12 08:20      
      New Testament      John D. Maniraj      03/06/12 08:25      

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