[Currency Readers

On 7/10/15, Miriam Vieni <miriamvieni@optonline.net> wrote:
>
> Stiglitz writes: "As the Greek saga continues, many have marveled at
> Germany's chutzpah. It received, in real terms, one of the largest bailout
> and debt reduction in history and unconditional aid from the U.S. in the
> Marshall Plan. And yet it refuses even to discuss debt relief for Greece."
>
> Supporters of the 'No' vote wave Greek flags after the referendum's exit
> polls at Syntagma square in Athens. (photo: Emilio Morenatti/AP)
>
>
> The US Must Save Greece
> By Joseph Stiglitz, TIME
> 09 July 15
>
>
> If Greece continues with austerity, it would be depression without end
>
> As the Greek saga continues, many have marveled at Germany's chutzpah. It
> received, in real terms, one of the largest bailout and debt reduction in
> history and unconditional aid from the U.S. in the Marshall Plan. And yet it
> refuses even to discuss debt relief. Many, too, have marveled at how Germany
> has done so well in the propaganda game, selling an image of a long-failed
> state that refuses to go along with the minimal conditions demanded in
> return for generous aid.
> The facts prove otherwise: From the mid-90's to the beginning of the crisis,
> the Greek economy was growing at a faster rate than the EU average (3.9% vs
> 2.4%). The Greeks took austerity to heart, slashing expenditures and
> increasing taxes. They even achieved a primary surplus (that is, tax
> revenues exceeded expenditures excluding interest payments), and their
> fiscal position would have been truly impressive had they not gone into
> depression. Their depression—25% decline in GDP and 25% unemployment, with
> youth unemployment twice that—is because they did what was demanded of them,
> not because of their failure to do so. It was the predictable and predicted
> response to the austerity.
> The question now is: What's next, assuming (as seems ever more likely) they
> are effectively thrown out of the euro? It's likely that the European
> Central Bank will refuse to do its job—as the Central Bank for Greece, it
> should do what every central bank is supposed to do, act as a lender of last
> resort. And if it refuses to do that, Greece will have no option but to
> create a parallel currency. The ECB has already begun tightening the screws,
> making access to funds more and more difficult.
> This is not the end of the world: Currencies come and go. The euro is just a
> 16-year-old experiment, poorly designed and engineered not to work—in a
> crisis money flows from the weak country's banks to the strong, leading to
> divergence. GDP today is more than 17% below where it would have been had
> the relatively modest growth trajectory of Europe before the euro just
> continued. I believe the euro has much to do with this disappointing
> performance.
> Managing the transition from the euro to the Greek euro may not be easy, but
> Argentina and others have shown how it can be done. The government would
> recapitalize the banks in the new currency, continue with capital controls,
> restrict bank withdrawals, and facilitate the transfer of money within the
> banking system from one party to another. The money inside the banking
> system would be slightly discounted (i.e. worth slightly less than cash—in
> the case of Argentina, the discount was a few percentage points for ordinary
> transactions). Pensioners would need to get special treatment.
> Meanwhile, Greece would begin the process of debt restructuring: Even the
> IMF says that it's absolutely necessary. The Greeks might take a page from
> Argentina, exchanging current bonds for GDP-linked bonds, where payments
> increase with Greece's prosperity. Such bonds align the incentives of
> debtors and creditors (unlike the current system, where Germany benefits
> from the weaknesses in Greece).
> Greece can easily survive without the funds from the IMF and the eurozone.
> Greece has done such a good job of adjusting its economy that, apart from
> what it's paying to service the debt, it has a surplus. It isn't even
> dependent on the IMF and the eurozone for foreign exchange: At least before
> the most recent stranglehold that Greece's creditors had imposed, it was
> running a current account surplus of 1%—5% if we exclude oil exports. (What
> it was buying abroad in imports was 1% less than what it was selling in
> exports.) Especially if oil prices remain low, and if its lower "new"
> exchange rate attracts more tourists and encourages exports, it can weather
> the storm.
> After Argentina restructured its debt and devalued, it grew rapidly—the
> fastest rate of growth around the world except for China—from its crisis
> until the global financial crisis of 2008. Every country is different.
> Economists debate about how responsive exports and imports are to changes in
> exchange rates. Argentina benefited from a large increase in exports as a
> result of the commodity boom. There are, however, some striking
> similarities: Both countries were being strangled by austerity. Both
> countries under the IMF programs saw rising unemployment, poverty, and
> immense suffering. Had Argentina continued with austerity, there would have
> just been more of the same. The Argentina people rose up and said no. So,
> too, for Greece: If Greece continues with austerity, it would be depression
> without end.
> The U.S. was generous with Germany as we defeated it. Now, it is time for
> the U.S. to be generous with our friends in Greece in their time of need, as
> they have been crushed for the second time in a century by Germany, this
> time with the support of the troika. At a technical level, the Federal
> Reserve needs to create a swap line with Greece's central bank, which—as a
> result of the default of the ECB in fulfilling its responsibilities—will
> have to take on once again the role of lender of last resort. Greece needs
> unconditional humanitarian aid; it needs Americans to buy its products, take
> vacations there, and show a solidarity with Greece and a humanity that its
> European partners were not able to display.
> <HTML><META HTTP-EQUIV="content-type"
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> class="imgon2"><IMG width="430" height="195" title="Supporters of the 'No'
> vote wave Greek flags after the referendum's exit polls at Syntagma square
> in Athens. (photo: Emilio Morenatti/AP)" style="border: 0px currentColor;"
> alt="Supporters of the 'No' vote wave Greek flags after the referendum's
> exit polls at Syntagma square in Athens. (photo: Emilio Morenatti/AP)"
> src="/images/stories/article_imgs17/017195-greece-070915.jpg" border="0">
> <BR>Supporters of the 'No' vote wave Greek flags after the referendum's exit
> polls at Syntagma square in Athens. (photo: Emilio Morenatti/AP)</P><P
> class="noslink"><A
> href="http://time.com/3949954/joseph-e-stiglitz-greece-crisis/"
> target="_blank"></A><IMG title="go to original article" alt="go to original
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> href="http://time.com/3949954/joseph-e-stiglitz-greece-crisis/"
> target="_blank"></A></P><p class="txtimg"><BR><H1 class="txttitle">The US
> Must Save Greece</H1><P class="txtauthor">By Joseph Stiglitz, TIME</P><P
> class="date">09 July 15</P><P> </P><P><CENTER><OBJECT width="600"
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> bgcolor="#FFFFFF"></OBJECT></CENTER><P></P><BLOCKQUOTE><B><I>If Greece
> continues with austerity, it would be depression without
> end</I></B></BLOCKQUOTE><BR><P><IMG src="/images/stories/alphabet/rsn-A.jpg"
> border="0">s the Greek saga continues, many have marveled at Germany’s
> chutzpah. It received, in real terms, one of the largest bailout and debt
> reduction in history and unconditional aid from the U.S. in the Marshall
> Plan. And yet it refuses even to discuss debt relief. Many, too, have
> marveled at how Germany has done so well in the propaganda game, selling an
> image of a long-failed state that refuses to go along with the minimal
> conditions demanded in return for generous aid.</P><P class="indent">The
> facts prove otherwise: From the mid-90’s to the beginning of the crisis,
> the Greek economy was growing at a faster rate than the EU average (3.9% vs
> 2.4%). The Greeks took austerity to heart, slashing expenditures and
> increasing taxes. They even achieved a primary surplus (that is, tax
> revenues exceeded expenditures excluding interest payments), and their
> fiscal position would have been truly impressive had they not gone into
> depression. Their depressionâ€"25% decline in GDP and 25% unemployment, with
> youth unemployment twice thatâ€"is because they did what was demanded of
> them, not because of their failure to do so. It was the predictable and
> predicted response to the austerity.</P><P class="indent">The question now
> is: What’s next, assuming (as seems ever more likely) they are effectively
> thrown out of the euro? It’s likely that the European Central Bank will
> refuse to do its jobâ€"as the Central Bank for Greece, it should do what
> every central bank is supposed to do, act as a lender of last resort. And if
> it refuses to do that, Greece will have no option but to create a parallel
> currency. The ECB has already begun tightening the screws, making access to
> funds more and more difficult.</P><P class="indent">This is not the end of
> the world: Currencies come and go. The euro is just a 16-year-old
> experiment, poorly designed and engineered not to workâ€"in a crisis money
> flows from the weak country’s banks to the strong, leading to divergence.
> GDP today is more than 17% below where it would have been had the relatively
> modest growth trajectory of Europe before the euro just continued. I believe
> the euro has much to do with this disappointing performance.</P><P
> class="indent">Managing the transition from the euro to the Greek euro may
> not be easy, but Argentina and others have shown how it can be done. The
> government would recapitalize the banks in the new currency, continue with
> capital controls, restrict bank withdrawals, and facilitate the transfer of
> money within the banking system from one party to another. The money inside
> the banking system would be slightly discounted (i.e. worth slightly less
> than cashâ€"in the case of Argentina, the discount was a few percentage
> points for ordinary transactions). Pensioners would need to get special
> treatment.</P><P class="indent">Meanwhile, Greece would begin the process of
> debt restructuring: Even the IMF says that it’s absolutely necessary. The
> Greeks might take a page from Argentina, exchanging current bonds for
> GDP-linked bonds, where payments increase with Greece’s prosperity. Such
> bonds align the incentives of debtors and creditors (unlike the current
> system, where Germany benefits from the weaknesses in Greece).</P><P
> class="indent">Greece can easily survive without the funds from the IMF and
> the eurozone. Greece has done such a good job of adjusting its economy that,
> apart from what it’s paying to service the debt, it has a surplus. It
> isn’t even dependent on the IMF and the eurozone for foreign exchange: At
> least before the most recent stranglehold that Greece’s creditors had
> imposed, it was running a current account surplus of 1%â€"5% if we exclude
> oil exports. (What it was buying abroad in imports was 1% less than what it
> was selling in exports.) Especially if oil prices remain low, and if its
> lower “new†exchange rate attracts more tourists and encourages exports,
> it can weather the storm.</P><P class="indent">After Argentina restructured
> its debt and devalued, it grew rapidlyâ€"the fastest rate of growth around
> the world except for Chinaâ€"from its crisis until the global financial
> crisis of 2008. Every country is different. Economists debate about how
> responsive exports and imports are to changes in exchange rates. Argentina
> benefited from a large increase in exports as a result of the commodity
> boom. There are, however, some striking similarities: Both countries were
> being strangled by austerity. Both countries under the IMF programs saw
> rising unemployment, poverty, and immense suffering. Had Argentina continued
> with austerity, there would have just been more of the same. The Argentina
> people rose up and said no. So, too, for Greece: If Greece continues with
> austerity, it would be depression without end.</P><P class="indent">The U.S.
> was generous with Germany as we defeated it. Now, it is time for the U.S. to
> be generous with our friends in Greece in their time of need, as they have
> been crushed for the second time in a century by Germany, this time with the
> support of the troika. At a technical level, the Federal Reserve needs to
> create a swap line with Greece’s central bank, whichâ€"as a result of the
> default of the ECB in fulfilling its responsibilitiesâ€"will have to take on
> once again the role of lender of last resort. Greece needs unconditional
> humanitarian aid; it needs Americans to buy its products, take vacations
> there, and show a solidarity with Greece and a humanity that its European
> partners were not able to display.</P></DIV><p style="text-align: right;
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