In Germany since 2010, the most dirty words have been 'transfer union.' Yet our own US of A is a giant transfer union-where ironically rich blue states subsidize poor red states as Ezra Klein has documented.
http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html
Yet you never hear blue states complaining about this.
http://www.huffingtonpost.com/2015/03/24/most-dependent-states-in-the-us_n_6930634.html
Yet this is exactly what Germany does. Steve Liesman on CNBC this morning said that after being in Germany recently has given him a lot of sympathy for the German position.
You would never hear him saying he has sympathy for NY not wanting to pay Texas. We don't have all this anguished talk every time the Fed cuts rates or does monetary easing.
Which shows that the eruo at this point is simply a failed idea.
Another thing that's different in the US than the EU: in the US even if we didn't send the bankers to jail we don't see them as victims.
"Pandemonium erupted in Congress yesterday as senators disagreed on how to deal with the subprime problem. Borrowers are still finding it difficult to repay, despite the government buying these mortgages from the banks seven years ago and imposing strict conditions on the borrowers. Some senators favour continuing the program of compulsory community service and self-improvement lessons, but now others in the senate are openly talking about revoking the US citizenship of these borrowers."
"The Great Recession and the Eurozone crisis are normally treated as different. Most accounts of the Great Recession see this as a consequence of a financial crisis caused by profligate lending by - in particular - US and UK banks. The crisis may have originated with US subprime mortgages, but few people blame the poor US citizens who took out those mortgages for causing a global financial crisis."
"With the Eurozone crisis that started in 2010, most people tend to focus on the borrowers rather than the lenders. Some ill-informed accounts say it was all the result of profligate periphery governments, but most explanations are more nuanced: in Greece government profligacy for sure, but in Ireland and other countries it was more about excessive private sector borrowing encouraged by low interest rates following adoption of the Euro. Seeing things this way, it is a more complicated story, but still one that focuses on the borrowers."
"However if we see the Eurozone crisis from the point of view of the lenders, then it once again becomes a pretty simple story. French, German and other banks simply lent much too much, failing to adequately assess the viability of those they were lending to. Whether the lending was eventually to finance private sector projects that would end in default (via periphery country banks), or a particular government that would end up defaulting, becomes a detail. In this sense the Eurozone crisis was just like the global financial crisis: banks lent far too much in an indiscriminate and irresponsible way."
"If borrowers get into difficulty in a way that threatens the solvency of lending banks, there are at least two ways a government or monetary union can react. One is to allow the borrowers to default, and to provide financial support to the banks. Another is to buy the problematic loans from the banks (at a price that keeps the banks solvent), so that the borrowers now borrow from the government. Perhaps the government thinks it is able to make the loans viable by forcing conditions on the borrowers that were not available to the bank."
"The global financial crisis was largely dealt with the first way, while at the Eurozone level that crisis was dealt with the second way. Recall that between 2010 and 2012 the Troika lent money to Greece so it could pay off its private sector creditors (including many European banks). In 2012 there was partialprivate sector default, again financed by loans from the Troika to the Greek government. In this way the Troika in effect bought the problematic asset (Greek government debt) from private sector creditors that included its own banks in such a way as to protect the viability of these banks. The Troika then tried to make these assets viable in various ways, including austerity. Two crises with the same cause but very different outcomes."
http://mainlymacro.blogspot.com/2015/07/the-great-recession-and-eurozone-crisis.html#comment-form
In the US we see it as a story of irresponsible lending but the EU story sees it as a story of irresponsible spending which shows yet again that the euro is a failed idea.
http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html
Yet you never hear blue states complaining about this.
http://www.huffingtonpost.com/2015/03/24/most-dependent-states-in-the-us_n_6930634.html
Yet this is exactly what Germany does. Steve Liesman on CNBC this morning said that after being in Germany recently has given him a lot of sympathy for the German position.
You would never hear him saying he has sympathy for NY not wanting to pay Texas. We don't have all this anguished talk every time the Fed cuts rates or does monetary easing.
Which shows that the eruo at this point is simply a failed idea.
Another thing that's different in the US than the EU: in the US even if we didn't send the bankers to jail we don't see them as victims.
"Pandemonium erupted in Congress yesterday as senators disagreed on how to deal with the subprime problem. Borrowers are still finding it difficult to repay, despite the government buying these mortgages from the banks seven years ago and imposing strict conditions on the borrowers. Some senators favour continuing the program of compulsory community service and self-improvement lessons, but now others in the senate are openly talking about revoking the US citizenship of these borrowers."
"The Great Recession and the Eurozone crisis are normally treated as different. Most accounts of the Great Recession see this as a consequence of a financial crisis caused by profligate lending by - in particular - US and UK banks. The crisis may have originated with US subprime mortgages, but few people blame the poor US citizens who took out those mortgages for causing a global financial crisis."
"With the Eurozone crisis that started in 2010, most people tend to focus on the borrowers rather than the lenders. Some ill-informed accounts say it was all the result of profligate periphery governments, but most explanations are more nuanced: in Greece government profligacy for sure, but in Ireland and other countries it was more about excessive private sector borrowing encouraged by low interest rates following adoption of the Euro. Seeing things this way, it is a more complicated story, but still one that focuses on the borrowers."
"However if we see the Eurozone crisis from the point of view of the lenders, then it once again becomes a pretty simple story. French, German and other banks simply lent much too much, failing to adequately assess the viability of those they were lending to. Whether the lending was eventually to finance private sector projects that would end in default (via periphery country banks), or a particular government that would end up defaulting, becomes a detail. In this sense the Eurozone crisis was just like the global financial crisis: banks lent far too much in an indiscriminate and irresponsible way."
"If borrowers get into difficulty in a way that threatens the solvency of lending banks, there are at least two ways a government or monetary union can react. One is to allow the borrowers to default, and to provide financial support to the banks. Another is to buy the problematic loans from the banks (at a price that keeps the banks solvent), so that the borrowers now borrow from the government. Perhaps the government thinks it is able to make the loans viable by forcing conditions on the borrowers that were not available to the bank."
"The global financial crisis was largely dealt with the first way, while at the Eurozone level that crisis was dealt with the second way. Recall that between 2010 and 2012 the Troika lent money to Greece so it could pay off its private sector creditors (including many European banks). In 2012 there was partialprivate sector default, again financed by loans from the Troika to the Greek government. In this way the Troika in effect bought the problematic asset (Greek government debt) from private sector creditors that included its own banks in such a way as to protect the viability of these banks. The Troika then tried to make these assets viable in various ways, including austerity. Two crises with the same cause but very different outcomes."
http://mainlymacro.blogspot.com/2015/07/the-great-recession-and-eurozone-crisis.html#comment-form
In the US we see it as a story of irresponsible lending but the EU story sees it as a story of irresponsible spending which shows yet again that the euro is a failed idea.
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