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View Diary: Italy's New Government: STOP Austerity Now. Time To Push Growth. Halle-frickin-lujah! (78 comments)

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  •  You have to grow your EXPORT sectors (3+ / 0-)
    Recommended by:
    marsanges, johnny wurster, PatriciaVa

    Government services and social welfare do not help pay off the debt.

    Making more goods and services of value does.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Tue Apr 30, 2013 at 12:21:05 PM PDT

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    •  Growth requires increased demand (6+ / 0-)

      Recession is made worth by austerity because no one wants to buy. Firing people doesn't help. Borrowing and spending (yes, more borrowing) temporarily to kickstart growth is far more effective than austerity. Again, read Krugman.

      •  You're both right. Krugman agrees. (4+ / 0-)
        Recommended by:
        marsanges, Ian Reifowitz, fumie, BYw

        As Krugman often points out, the GIPSI countries are fundamentally different from the USA because they don't control their own currency.

        The USA could spur growth by "printing" or borrowing a lot of money, spending it on stimulus (producing goods & services), raising inflation a bit, and paying back the debt later with cheaper dollars.

        The GIPSIs can't have inflation via printed or borrowed money unless the rest of the Euro zone goes along. As it is now, more borrowing by the GIPSIs = higher interest rates on their debt = more spending on debt service = economy goes nowhere.

        In theory the GIPSIs could tax their own wealthy & corporations significantly more heavily and use the revenue on growth projects, without borrowing more. But (a) that's politically very difficult, and (b) that only works as long as the wealthy & corporations have idle capital that they're not spending or investing; once you pass that point, it starts to hurt the economy.

        At this point the wealthy & corporations in the USA have shitloads of idle capital; I suspect the same is true in Europe but don't know that for a fact.

        What thoroughly befuddles me is why the GIPSIs haven't bonded together into a debt cartel and held the Euro hostage. Demand to the rest of the EU that they loosen monetary policy, to allow some good old-fashioned Keynesian stimulus, or the GIPSIs dump the Euro and create their new, cheaper currency. Either way, the GIPSIs get out of their hole.

        "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

        by HeyMikey on Tue Apr 30, 2013 at 01:08:09 PM PDT

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        •  the latter part (3+ / 0-)
          Recommended by:
          tardis10, Ian Reifowitz, PatriciaVa

          would be good policy, but there it plays in which party is really in power. Look at the Cyprus example: the cypriotic government actied to defend the interests of their foreign depositholders more than of their own islanders, and had to be forced into restructuring. One cant understand the happenings around the peripheral countries without looking at who is in power and whose interests they hold dear. From far away, it may look like countries versus countries, but in reality it is a wealth (or loss) redistribution struggle that plays as much within countries as between them. That has made it politically so difficult to organize resistance against the wealthy interests: they are rationally united; the leftists and representatives of the middle and lower classes are not at all united and have to fight ressentiments at all sides.

          •  In Italy, who should suffer? (1+ / 0-)
            Recommended by:
            marsanges

            (i) The Italian oligarchy, whose wealth could be taxed on a one-time basis so as to significantly cut Italy's debt burden

            or

            (ii) The German voter, who's already FAR WORSE OFF than the Italian voter.  The German voter would be adversely impacted by ECB monetization of debt.  Moreover, per an agreement b/w Germany and the ECB, debt monetization is forbidden.

            Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. www.hamiltonproject.org

            by PatriciaVa on Tue Apr 30, 2013 at 04:31:38 PM PDT

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            •  There's more to the picture. (0+ / 0-)

              OK, the German banks loaned a lot of money to the GIPSIs. And what did the GIPSIs do with it? They spent a large % of it on...German exports.

              That's a neat trick. The money goes to Italy et al. and comes right back to Germany, ending up in the pockets of those German voters. But Italy et al. are on the hook for the payments.

              This is why the German economy is at last starting to falter. Impoverish your neighbors and they can no longer afford to be your customers.

              Yes, I recognize the GIPSIs bear a lot of blame, too. But there's blame to go around. Three things are in everyone's interest:

              1. Compromise.

              2. Decent treatment of the unemployed.

              3. Sound economic practices (good old-fashioned Keynesian stimulus).

              All three have been in far too short supply.

              "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

              by HeyMikey on Wed May 01, 2013 at 10:09:19 PM PDT

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