What will be the consequences if Greece leaves the Eurozone?

[bale002]

Originally Posted by gwynedd1

That may be but it still does not explain essentially a foreign debt. Why could they still buy BMWs with no exports of their own? It's because they were too cheap.

Or perhaps to say the same thing in another way: Greek wages were too high, not justified by a corresponding level of exports on a competitive advantage basis.

How many luxury cars per capita in the stately suburbs of New Jersey compared to, say, Arkansas? But there is also a difference in average incomes.

To be sure, the euro has many flaws, the main one being, apart from the sovereignty issue, there is no clear and efficient way, as say exchange rate devaluations, to adjust for inequalities in competitiveness (and not to mention ideological issues, unicorns and candy canes).

But I see your point: either way, German manufacturing would have had to adjust gears too, perhaps living with lower profits and employment as a result.

On the one hand the Germans are saying that everyone would benefit if the southern Europeans gear up their competitiveness, on the other hand I don't see how they can do it with asphyxiating taxation and bureaucracy to begin with, making them simply too blue-faced to make it out of the womb alive, so to speak. In other words, current policies - monetary, exchange rate, fiscal, labor law policies - make them still-born.

The mess continues.

[gwynedd1]

Originally Posted by bale002

Or perhaps to say the same thing in another way: Greek wages were too high, not justified by a corresponding level of exports on a competitive advantage basis.

Why wages too high? All that will do is move over consumption of foreign goods up the food chain. Its a foregn balance of trade problem. That is exactly what I thought would happen 20 years ago.

How many luxury cars per capita in the stately suburbs of New Jersey compared to, say, Arkansas? But there is also a difference in average incomes.

There is no exhange buffer between Arkansas and the rest of the US. The other states don't take debt in Arkansas to sell into the market. So there is no distortion between those points.

To be sure, the euro has many flaws, the main one being, apart from the sovereignty issue, there is no clear and efficient way, as say exchange rate devaluations, to adjust for inequalities in competitiveness (and not to mention ideological issues, unicorns and candy canes).

No easy way because of a lack of willingness to do so.

But I see your point: either way, German manufacturing would have had to adjust gears too, perhaps living with lower profits and employment as a result.

On the one hand the Germans are saying that everyone would benefit if the southern Europeans gear up their competitiveness, on the other hand I don't see how they can do it with asphyxiating taxation and bureaucracy to begin with, making them simply too blue-faced to make it out of the womb alive, so to speak. In other words, current policies - monetary, exchange rate, fiscal, labor law policies - make them still-born.

The mess continues.

Greece was allowed to exist because of its dependency. Any country that cannot exist with a certain level of taxation and bureaucracy without foreign balance of trade deficits won't.

This is what confederate economies do with a common currency. They will always create these imbalances because its inherently colonial. If some fully functional hunter gather tribe decided not to use their own method of trade and then to adopt the dollar, they would suddenly be unable to trade with each other without a trade good. The moment you adopt the currency you have no independence .

We saw this problem with precious metals back in the civil war. Soon as the war started, all the gold and silver left the country. That weakened the north because the south were less industrialized and more independent as a result. The north functioned on global credit which caused an immediate crisis while the south was more tribal in nature. Its all a matter of credit instruments, not the economy . Now, even Greece cannot trade with itself with a perpetual lack of its own credit. Speaking of Greece, in ancient times, I am sure Athens would have collapsed sooner from a loss of currency over their more tribal rivals, the Lacedaemonians.

[bale002]

Originally Posted by gwynedd1

No easy way because of a lack of willingness to do so.


If some fully functional hunter-gather tribe decided not to use their own method of trade and then to adopt the dollar, they would suddenly be unable to trade with each other without a trade good. The moment you adopt the currency you have no independence.

That weakened the north because the south were less industrialized and more independent as a result. The north functioned on global credit which caused an immediate crisis while the south was more tribal in nature. It's all a matter of credit instruments, not the economy. Now, even Greece cannot trade with itself with a perpetual lack of its own credit. Speaking of Greece, in ancient times, I am sure Athens would have collapsed sooner from a loss of currency over their more tribal rivals, the Lacedaemonians.

So you seem to be saying that Greece might be better off without the euro, perhaps better off even without the EU, and seek autarky and/or partners with similar wills, similar patterns of social behavior.

If so, I too have considered that argument and sometimes think, indeed, it may be better if Greece joined the eastern Mediterranean/Black Sea fold, the way it was during many a long period of its history.

But that is a very controversial argument to a lot of people.

[Forest_Hills_Daddy]

I would be happy if they did. It's the only realistic way out of the mess that they're in.