In order for the EU to survive, it has to implement Fiscal Transfers

nitro · Jul 7, 2015

Example: Fiscal Transfer
key terms

Assume there is a negative demand shock in Portugal, but a positive demand shock in Spain (the shocks are asymmetric). Portugal experiences a rise in unemployment and a worsening of budgetary positions because of automatic stabilizers. Spain sees unemployment fall and an improvement in budgetary positions (again because of automatic stabilizers). Had Spain and Portugal paid taxes and received welfare from a central European authority, that authority could have transferred some of Spain’s fortune to Portugal. As it stands now, however, Portugal is left on its own. The worsening budgetary position makes is harder for the Portuguese government to conduct discretionary fiscal policy because of the restrictions on its budgetary position by the Stability and Growth Pact.

Right now, these guys are part of the United States of Europe, except when it comes to money. The idea of Fiscal Transfer is that the union's welfare is an averaging over time of the total wealth over time averaged by booms and busts in individual economies.

Otherwise, why even bother with a EU?

nitro · Jul 7, 2015

"...The way we deal with this kind of problem in the US is we have fiscal transfers. Mississippi and Alabama never really pay back what they owe California and New York, and that's okay. So you can see the crisis in Greece two ways: you can believe it’s a failure because the Greeks are reneging on their debts or because Germany is not treating Greece like the US treats Mississippi, as a state they have to look after...."

http://www.vox.com/2015/6/29/886331...on-to-greeces-problems-but-europe-wont-try-it

volpunter · Jul 7, 2015

Fiscal transfers have never been and will never be the key ideas of the European Union. Nor the idea of unifying and balancing wealth. Some nations prefer leasure time over hard work and long work hours (Greece vs Germany). Greece should never enjoy the same fruits from non labor than Germany from hard labor. This is not the idea of the European Union. The idea is to mutually benefit through economies of scale. Or since when has Greece ever benefitted Germany once? You said there should be times when others help a nation in need. Where were any of the Greeks , Spaniards, Dutch, French when Germany shouldered billions of euros and huge unemployment to pay for its reunification. Russia has sucked the last drop of blood out of Eastern Germany. Where were our solidarity partners then? Yet Germany has never pointed fingers or complained. But don't ask the rest of the world to feel compassion because Greeks are forced to repay their debts.

nitro said:
Example: Fiscal Transfer
key terms

Assume there is a negative demand shock in Portugal, but a positive demand shock in Spain (the shocks are asymmetric). Portugal experiences a rise in unemployment and a worsening of budgetary positions because of automatic stabilizers. Spain sees unemployment fall and an improvement in budgetary positions (again because of automatic stabilizers). Had Spain and Portugal paid taxes and received welfare from a central European authority, that authority could have transferred some of Spain’s fortune to Portugal. As it stands now, however, Portugal is left on its own. The worsening budgetary position makes is harder for the Portuguese government to conduct discretionary fiscal policy because of the restrictions on its budgetary position by the Stability and Growth Pact.

Right now, these guys are part of the United States of Europe, except when it comes to money. The idea of Fiscal Transfer is that the union's welfare is an averaging over time of the total wealth over time averaged by booms and busts in individual economies.

Otherwise, why even bother with a EU?

volpunter · Jul 7, 2015

You conveniently omit that us citizens in Mississippi are working hard and try their best to make ends meet. Are you comparing them with Greeks and Greek attitudes to work and life in general? Greece has produced nothing of value in over 2000 years. Well at least they did not start 2 world wars either...

nitro said:
"...The way we deal with this kind of problem in the US is we have fiscal transfers. Mississippi and Alabama never really pay back what they owe California and New York, and that's okay. So you can see the crisis in Greece two ways: you can believe it’s a failure because the Greeks are reneging on their debts or because Germany is not treating Greece like the US treats Mississippi, as a state they have to look after...."

http://www.vox.com/2015/6/29/886331...on-to-greeces-problems-but-europe-wont-try-it

nitro · Jul 7, 2015

volpunter said:
You conveniently omit that us citizens in Mississippi are working hard and try their best to make ends meet. Are you comparing them with Greeks and Greek attitudes to work and life in general? Greece has produced nothing of value in over 2000 years. Well at least they did not start 2 world wars either...

Fine, then why invite them into the EU to begin with? What makes a "Union"? What makes a United States?

I am not saying Greece is right or wrong. I am saying that if one starts with bad axioms, one gets into all sorts of contradictions eventually.

nitro · Jul 7, 2015

volpunter said:
Fiscal transfers have never been and will never be the key ideas of the European Union. Nor the idea of unifying and balancing wealth. Some nations prefer leasure time over hard work and long work hours (Greece vs Germany). Greece should never enjoy the same fruits from non labor than Germany from hard labor. This is not the idea of the European Union. The idea is to mutually benefit through economies of scale. Or since when has Greece ever benefitted Germany once? You said there should be times when others help a nation in need. Where were any of the Greeks , Spaniards, Dutch, French when Germany shouldered billions of euros and huge unemployment to pay for its reunification. Russia has sucked the last drop of blood out of Eastern Germany. Where were our solidarity partners then? Yet Germany has never pointed fingers or complained. But don't ask the rest of the world to feel compassion because Greeks are forced to repay their debts.

Ditto as above.

volpunter · Jul 7, 2015

Nobody invited them. They applied. The intent of the union has always been and will always be one thing: the promotion of peace. Only recent socialists try to tweak the fundamentals in order to turn it into some sort of transfer payment roller-coaster. By the way Greece received almost the most money of free cash over time among aLL EU members.

nitro said:
Fine, then why invite them into the EU to begin with? What makes a "union"

I am not saying Greece is right or wrong. I am saying that if one starts with bad axioms, one gets into all sorts of contradictions eventually.

volpunter · Jul 7, 2015

Meaning? It's pretty pointless to try to debate with someone who has no point to make.

nitro said:
Ditto as above.

nitro · Jul 7, 2015

volpunter said:
Meaning? It's pretty pointless to try to debate with someone who has no point to make.

Ditto meaning that the response to what you are saying can be made with the same argument I made above.

nitro · Jul 7, 2015

volpunter said:
Nobody invited them. They applied. The intent of the union has always been and will always be one thing: the promotion of peace. Only recent socialists try to tweak the fundamentals in order to turn it into some sort of transfer payment roller-coaster. By the way Greece received almost the most money of free cash over time among aLL EU members.

Ok. Why admit them into the EU. Why not reject the application? if they haven't produced anything in 2000 years, certainly that was known around the time the EU was forming?

If the forming of the EU is essentially about the promotion of peace, why lend them money? Is the EU some sort of Kumbaya? Wars are almost always fought over scarce resources.

"Man is essentially an economic animal" - Karl Marx