
The defiant stand by Yanis Varoufakis in the E.U. economic negotiations - grey-area
http://www.nytimes.com/2015/05/24/magazine/a-finance-minister-fit-for-a-greek-tragedy.html
======
atmosx
Hm, I never thought I would come to admire a Greek politician. He is really
superb. What the article failed to notice is the EXTREMELY deep domain
knowledge this guy has. He literally blows everyone out of the water!

In his last interview (on Monday 18 May 2015, at tv show 'enikos') he made a
quick reference to BTC stating that it's not going to work 'very well' as a
currency but the underlying technology was amazing and sure as hell will heave
many real-world applications in the future. He was accused of talking 'macro-
economics' at the Eugogroup, as if the 'Eurogroup' is the 'kindergarten' where
people are not supposed to have basic macro-economic knowledge.

Really amazing guy. I'm proud he is my FinMin.

UPDATE/OFF-TOPIC: I see many comments that are disheartening for me as a Greek
on a _national_ level. However, I also noticed a lack of basic economic
concepts from large parts of the HN crowd. I'm talking about those who take
the time to comment.

I noticed the same thing in bitcoin-related post discussions. Ultimately I
stopped commenting on the subject because there were many people who clearly
understood the theory around the protocol bad had really a very narrow (if
any) understanding of how macro-economics, currencies, surpluses and public
finances (generally speaking) work.

This is something that puzzles me and I can't find any reasonable explanation.
In other domains, like biology, molecular biology, medicine - domains which
I'm able to understand at some level because I'm a pharmacist - the HN
commentators seem to be extremely prepared.

I wonder if I'm the only one who noticed this (for the specific topic of
economics at least) or there are others who think that when talking
'economics' or some other topic, the HN crowd is, on average, not well
prepared and the comments are not up to the expected level?

Sorry for the huge comment, have a nice day everyone :-)

~~~
graeme
For your question about HN comments and Econ:

If you are discussing molecular biology, it's easy to tell that you don't know
anything. Not that no one makes mistakes about the subject, but at least there
is a sizeable group of people prepared to say "I know nothing about that"

Economics is something that everyone participates in. This increases the ease
of having an opinion about it, and decreases the number of people willing to
say "I know nothing about that"

As for Bitcoin, that may be partly due to the halo effect. Bitcoin has an
effective technical base. That can lead us to assume that all aspects of
Bitcoin are effective.

(Note that this is not an argument against Bitcoin. Instead it's an
explanation for why people might overestimate it.)

~~~
atmosx
Yes, that's it. It's so obvious I wonder, y I didn't figure it out! Thanks for
adding subtitles for me :-)

------
cyphunk
Historically Europe was a region constantly reminded of people power. The
Greek crises is the first "European" action in the Eurozone since the
foundation of the European Union.

Like everyone else I curse under my breath when train drivers on strike make
me late to something (german train drivers just closed one of their longest
strikes of recent memory). But I'm also grateful that these actions happen as
they remind everyone including myself of, well, power of the people, at some
point other than the token 4 year vote.

------
ExpiredLink
The Greek elected confrontation. They got it.

~~~
coldtea
No, they had one-sided confrontation, derision and bullying from the other
side for several years. [1]

The Greeks merely elected a government to stand up to it.

[1] That side of the German stance has been thoroughly discussed even in the
Economist, Bloomberg, Financial Times, NYT, etc (as well as the huge financial
gains Germany got from the "assistance" they provided).

~~~
cjensen
Voluntarily accepting conditions attached to a loan is not bullying,
particularly as the countries giving the loan are in no way at fault for
Greece's dire need for a loan.

~~~
phreeza
'at fault' may be too strong, but Germany surely benefited in the zero-sum
game that resulted from the Euro fixing exchange rates within the eurozone: in
the old system, Greece could have (and did) increase the exchange rate wrt the
Mark to boost exports and keep the economy running.

The inability to do this benefited Germany, at the cost of Greece.

~~~
davidgerard
The main problem with the ECB is that it's supposed to be for the Eurozone but
operates like it's for Germany.

~~~
mafribe
I recommend that inform yourself about the decision making process on the ECB
board, and who's the majority there. Germany almost always votes against the
ECBs decisions but is outvoted by other countries. several German ECB members
have resigned because of that.

This gives a pretty clear indication in whose interest the ECB works. Namely
in the interest of the majority of the board members.

~~~
coldtea
For many years, the debate about whether the European Central Bank (ECB) was
too heavily influenced by Germany was confined to academic papers. As of late,
it has become the central policy question of the eurozone. Germany is more
influential at the ECB than it should be. In fact, Mario Draghi’s penchant for
seeking German approval has been his biggest mistake as head of the ECB. He
should end it.

(...)

The ECB was modelled on the German Bundesbank. As a result, it is one of the
world’s most politically independent central banks; its mandate is focused
narrowly on price stability; it does not take broader economic goals like
unemployment into account in the way other central banks, such as the Fed, do;
and it is de facto more restricted than other central banks, since
controversial measures can lead to complex political and legal struggles,
involving 18 (soon to be 19) countries. Its setup and philosophy are therefore
‘German‘, that is, conservative and cautious.

(...)

A wide range of studies have so far failed to establish a firm consensus on
the influence of various countries on the ECB during the euro’s first decade.
However, most studies have found that the ECB behaved like a multinational
central bank, in which each country has a weight proportional to the size of
its economy.

This gave Germany a higher weight than other countries because it is the
largest economy in the eurozone.

But it is hard to argue that there was a German bias at the ECB before the
crisis. In the post-crisis period, the ECB has failed to stabilise the
economy, and inflation has fallen to just 0.3 per cent. It is tempting to see
this as the product of a German bias, because the German economy has suffered
least from the ECB’s hesitation to do more. But it is hard to argue that
German pressure prevented the ECB from lowering rates faster during the last
two years, for example, or managing the inflation expectations of consumers
and investors more aggressively. Rather, the ECB’s misjudgement of the
economic dynamic in the eurozone prevented a more timely and aggressive
stance. However, now that the ECB has to move further into unconventional
territory to correct its previous errors – potentially by buying government
bonds – Draghi has taken German resistance into account and delayed
quantitative easing (QE).

(...)

In the governing council of the ECB, all relevant monetary policy decisions
are taken by simple majority, with the smaller countries having one vote each,
and the larger countries traditionally two (because of the additional votes of
executive board members). Some of the more fundamental decisions, like
recapitalising the ECB, need a two-thirds majority, based on the ECB’s capital
shares, but even then Germany has no veto. What is more, there is currently a
clear majority for more aggressive ECB action in the council, which Draghi can
draw upon whenever he decides that the time is right. Formally, there is no
need for German approval, either from Berlin or from the Bundesbank. Why,
then, is Draghi waiting for German approval? There are two possible reasons.
First, he might consider it unwise to conduct monetary policy in the face of
opposition from the largest eurozone country. There is some merit to this view
but it loses validity when the ECB is failing to fulfil its inflation mandate
by a wide margin, as it is now.

(...)

Even the relatively cautious OECD has now come out in favour of further
monetary stimulus, and the IMF has been urging the ECB to do more for a while.
Given that the Fed and the Bank of England have bought government bonds on a
massive scale, the ECB would be well in line with consensus views on monetary
policy if it did the same.

(...)

The second reason why Draghi might want to get Germany’s backing is that he
may fear losing the German government’s consent for the ECB’s other
operations, which are not strictly monetary policy. The most important of
these, of course, is the OMT programme, which was announced during a panic-
driven run on eurozone government bonds in the summer of 2012. The ECB
declared that it intended to buy unlimited quantities of these bonds if the
panic did not subside – which it then duly did. This programme makes the ECB
the implicit guardian of the eurozone as the lender of last resort to
governments, but the OMT is in part a fiscal operation. Without the support of
Germany, the country with the deepest pockets, the OMT might fail. Draghi
therefore does not need the Bundesbank’s support but that of Merkel and the
German government – which has backed him on the OMT.

[http://www.cer.org.uk/insights/ecb-not-german-central-
bank#s...](http://www.cer.org.uk/insights/ecb-not-german-central-
bank#sthash.VY9jG4O3.dpuf)

~~~
mafribe
Did you actually read the arcticle?

    
    
       [I]t is hard to argue that German pressure prevented the ECB from lowering rates faster during the last two years, for example, or managing the inflation expectations of consumers and investors more aggressively. 
    

The article says quite clearly that the ECB has been going against German
interests and wishes.

~~~
coldtea
Is that line the only thing you got from the article?

Because it goes on and on about how Germany affected ECB for several
paragraphs, and explains the reasons and how.

------
msabalau
So, if one believes that Varoufakis is right, but also believe that the
European Commission and the European Central Bank are idiots, empowered by the
EU democratic deficit, does anyone have any ideas how to best invest to bet
against the EU?

~~~
throwaway12309
buy dollars and wait until the euro explode? It netted me quite a bit this
last year

~~~
meric
If dollars are overbought, gold is an option. A couple of my gold mining
stocks more than doubled during the dollar's advance in the past few months.
Gold price in USD steady, USD rising, foreign currency and mining costs fall,
soaring profit margins.

------
riffraff
sadly, Varoufakis combines alternative policy views with a personality a bit
too over the lines.

I think a more "traditional looking" minister might have produced more
results, as Greece work seems to suffer from his "big personality".

On the other hand, this[0] wouldn't exist without him.

[0] the funniest video on an economic minster I've ever seen
[https://www.youtube.com/watch?v=Afl9WFGJE0M](https://www.youtube.com/watch?v=Afl9WFGJE0M)

~~~
icebraining
I believe that's why they replaced him at the negotiations with the lenders.

------
lotsofmangos
Austerity politics is bonkers. When there is a recession, the state is the
entity that can still borrow and lend at reasonable rates. The money will
still be borrowed, but with the state pulling back, it is borrowed at rates
that would make a loan-shark blush.

~~~
gadders
That's strange, because it's working fine in the UK.

~~~
jwdunne
Whhy do you think it's a success in the UK? There are many that don't think
it's working at all. I'm not criticising your position, I'm just intensely
curious.

~~~
akhatri_aus
Because the UK went on heavy on cutting its budget, whereas the US went heavy
on increasing expenditure (Fiscal keynesian style). The way the UK did it
should have dragged them into recession but the UK employment rate improved to
under 6% (in spite of the sensationalised immigration 'issue') and the
economic growth rate is doing pretty good (on a relative basis to the other G*
countries).

I don't want to get into the contentious political issues involved but I'll
say this too: There may be some argument to the loss involved due the budget
cuts but on the typical economic numbers its not too bad/quite good
considering austerity was used.

1\. [http://www.tradingeconomics.com/united-
kingdom/unemployment-...](http://www.tradingeconomics.com/united-
kingdom/unemployment-rate)

~~~
tjradcliffe
I've seen this claim as well, but the data don't seem to support it. UK
spending for all levels of government 2008-2014 in constant (2005) pounds
(data from:
[http://www.ukpublicspending.co.uk/download_multi_year_2008_2...](http://www.ukpublicspending.co.uk/download_multi_year_2008_2015UKk_10c1li111mcn_F0t)):

    
    
        Year	GDP	Pop	Spending £ bln 2005
        2008	MW gdp	61.548	582.23	
        2009	MW gdp	61.904	623.50	
        2010	1564.9	62.262	697.65	
        2011	1600.2	62.649	699.89	
        2012	1621.6	63.067	692.43	
        2013	1632	63.488	661.32	
        2014	1665.6	63.912	525.22	
    

There's a huge drop 2013-2014, but before that the spend-up was pretty
considerable, and economic growth has been solid since the start of 2013, so
if this be "austerity", make the most of it!

EDIT: the drop in 2014 is due to local government not being added in. If I
look at just "Central Government" from the same source:

    
    
        2008	MW gdp	61.548	427.07	
        2009	MW gdp	61.904	458.29	
        2010	1564.9	62.262	516.99	
        2011	1600.2	62.649	517.16	
        2012	1621.6	63.067	522.42	
        2013	1632	63.488	496.97	
        2014	1665.6	63.912	525.22
    

Again, hard to claim much "austerity" in these data.

~~~
akhatri_aus
Austerity can't be looked at only from the spending point of view, especially
since it carries with it an element of affordability. Its also about looking
at taxation receipts.

On overall the deficit between the two has been decreasing which is where the
'austerity' terminology is used. The comparison comes in handy where alot of
Europe has been going through this (in spite of decreasing or low economic
growth) whereas the US increased its deficits too.

What I mean to say is austerity is tied more to the affordability as opposed
to the absolute dollar amounts.

Deficits

Year Amount 2009 156.3 2010 148.6 2011 120.6 2012 99.5

------
Phlow
I've heard of 1 tax dodger being forced to pay in Greece, but why haven't I
heard about other measure to get some of the money back from the previous
corrupt government? Surely there's more that can be done there.

