And here we see the Greek policeman in his natural state ...

Yes, you do have to look at all points of view. You do have to look at all the consequences. Now go back and actually read all of my posts. I am. Posted a link to a Financial Times article on the German perspective on this, have talked about the political problem in all of this, the "bottomless pit" as you put it. A view I completely understand, because I live in one of those countries being asked to pump money into Greece, while the domestic budget is being cut (Austria). The perfect solution would be to go back in time and not let Greece (or Portugal, Spain or Italy) into the Euro. But since Doc from Back to the Future isn't around to lend us the Delorean, we have to look at what will get us out of the mess European (and American) politicians in the 90s and 00s got us into.

And no, economics is not a perfect science. Lots of variables moving at the same time. But go back and look at the predictions made by various economic

 

But , as we're clearly seeing over the past year, austerity is not helping the problem it's meant to solve, getting the Greeks back on their feet, and stabilizing the Euro zone as a whole. In fact, the opposite is happening: the Greece situation continues to spiral downward, and continues to suck other countries into the vortex with it. Just as critics of the austerity solution (mainly Keynesians, but even more economically "liberal" camps like The Economist) said it would.[/quote]

But this is not what you said. You can revise your perspective of this discourse to make you feel better about your behavior all you like, but had you said something measured like this, we would never have "derailed" the thread. You said austerity was making things worse. I pointed out that you don't know this for sure (and that I found it ironic you would say something like that so shortly after saying that the problem is very complex). Then you proceeded to defend that position. I repeated the same criticism again and again. You've responded since with insults to my intelligence (cute).

There can't be debate when we're on not even talking about the same thing.

It is absolutely true to say that austerity measures have not corrected the problem that they were meant to correct and that they may actually be making matters worse. Given the complexity and newness of the problem as it broke, it is easy to find economic prognosticators on both sides of the austerity debate from that time period, each with their own solutions and with their own predictions of economic calamity should their recommendations not be followed. There is no need to overstate how wrong the austerity measures were--the evidence that it didn't work is overwhelming. Saying that austerity is making things "much, much worse", is a political ploy used by Krugman and his types to advocate massive bailouts. And when their approach doesn't work, their answer is always that we simply didn't spend enough.

I'm glad you've become enlightened and found Krugman in the last 6 months. Congratulations. Just because I haven't doesn't mean I'm sticking my head in the sand.

As for solutions, I don't see much point in speculating beyond "Eurozone stupid".

 

It's not just Krugman who believes that deliberate contractionary policies lead to economic contraction. It's nearly every economist. It's only politicians and talk radio blowhards who dispute this. The burden of proof is on you to offer evidence of a legitimate alternative theory for how economies function.

 

Ah, the classic "burden of proof" and "everyone says so" argument. It works better in global warming discussions.

The problem is:

a) if by "nearly every economist" you mean "greater than 50%", sure but there are plenty of economists who disagree with this whole line of thinking and have spent far more time working to do just that than I'm inclined to do here
b) if "because nearly all the experts agree" were a valid argument in scientific circles, we wouldn't have advanced nearly as much as we have
c) this is the problem I have with social science being treated like real science--you can postulate whatever the hell you want, create a model that supports your postulate, and then take data that fits your model and point to it and say "see?" Then, when someone points out the limitations of your model, you make up a bunch of excuses about this variable or that one you failed to consider (which is, btw, the criticism in the first place) rather than accept the fact that problem is more complex than your model.
d) I don't have to prove anything. That's science. "Widely accepted" economic theory has to hold itself up to scrutiny and defend itself. It must be subject to rigorous economic interrogation. All I have to do is point out how the science failed and my work is done. Do I really need to go through any number of economic stimulus predictions that have failed to come to pass to make the point? Hand-waving about expertise is stupid and is the height of anti-intellectualism. This is precisely the kind of dangerous thinking Karl Popper warned against.

 

You missed my point. Standard economics predict that contractionary policies like A, B, and C will cause effects D, E, and F.

In Greece, austerity measures have imposed A, B, and C on the domestic economy. D, E, and F have been observed.

Theory proposed, theory makes predictions. We observe outcomes. Outcomes match predictions of theory. What more do you want? At some point objections begin to look reactionary. And ignorant.

This is where you come in with an alternative theory and proof to back it up.

 

Looks like Merkels getting ready to pull the plug on Greece.

And an Economist Link

Head wind seems to be building up for a Greek default and exit.

 

As long as the Troika (really the ECB) is ready to provide the liquidity to see Portugal/Italy through the turbulence following a Greek exit, that is probably for the best. I'm unconvinced austerity can work without monetary policy in concert, and that's simply unfeasible until Greece exits the Eurozone.

 

Indeed. Greece needs default and devaluation. Its the only possible course avaliable that brings the possibility of recovery within a few years as opposed to a generation or more on the current trajectory.

I'm not convinced Italy and Portugal can be defended long term though and my guess is that in the end they will follow Greece out of the euro (possibly Spain, too)

 

You missed my point. Even if I explained it (again), I suspect you'll miss it (again). This is a waste of time.

 

There is a (somewhat) case to be made that a Greek exit is what Merkozy had in mind all along, that the half-measures they've been implementing have essentially had the purpose of "showing" their voters that there was no other option than pushing them (and likely Portugal) out.

Italy and Spain are the question -- they're solvent (for now), but were never a good match for Germany, France, etc, in a common currency zone. There's a good chance that Greece defaulting and dropping out would push them over the edge as well (though latest reports indicate that that may no longer be the case).

 

From today's Economist link

 

Had to share a picture of this Merkozy carnival float in Düsseldorf, Germany

[image=http://i.telegraph.co.uk/multimedia/archive/02144/merkozyGermany_2144357i.jpg]

EDIT: And a FT article on how bad theGreece mess really is link

 

So Greece has their bailout, but will they be able to stay in the euro in the medium term? I still have my doubts. The society is already at breaking point and the price for his bailout is far deeper austerity.

I heard one frightening statistic the other day. Greece is facing double the level of cuts than Britain faced in the depths of the Great Depression. That kind of austerity is virtually unimaginable. Truely a Greek Tragedy.

 

Another thing is that both Greece and France have national elections coming up this year. (I'm assuming Greece's aren't postponed due to the crisis). Sarkozy is behind in the French polls at this point. I'm not sure when Merkel's term is up. I wonder if the agreement will survive the elections. And I think the Dutch and a couple of other countries have to ratify the agreement in their equivalents of Parliament.