Comments on Libya and Greece

As usual, some of my friends have strong views of their own and interesting observations to add. Here are a few comments mainly on my Greek referendum blog.

Thanks, Warren

I totally agree with you regarding Greece.  I wonder if a similar referendum might be a good thing for the U.S., with the implication that if the majority of the population does not wish to cut spending and unsustainable entitlements, then the Federal Reserve will be mandated to expand the money supply to cover the shortage by inflation.  Actually, a referendum should put the choice that starkly.

Alternatively, we could rerun the election of 1896  — Fiscal conservative William McKinley versus Inflationist William Jennings Bryan (“free monetization of silver”)…  Then Bryan lost  — I wonder if he would win today.

Obama seems in many ways like another Bryan (without the Bible belt), but where is McKinley when we need him?

Ron [Bird, Virginia]

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I am not that keen on this referendum… It Will take 2 more months to have an answer and as you know, Time is money. Moreover they Will say no, do you know a kid who say yes when his father tell him at a party “do you want to go to Sleep”? They are not masochistic as far as I know.

Finally, it s a complete lack of balls from the politicians who are afraid to take strong decisions. However, that s what they were elected for!

Hugo [Gervais, Paris]

********************

Warren is smoking crack.

He writes, “If they accept it and embrace and stand behind the reforms

needed, the crisis for Greece will be over.”

And I say that if I grow 10 inches overnight and learn to play

basketball, I’ll be in the NBA.

The only difference between our two statements is that mine has a

.000000000001 chance of happening.

Dan [Mitchell, Washington DC]

***********************

Greetings, Warren

I’m surprised that no one seems as yet to have noticed the irony that the country that invented democracy, and coined the term for it, is the first to be rounded on by a supra-governmental gang of unelected ideologues. I agree with you that the referendum is a good thing but not quite for the same reason you suggest. A ‘yes’ vote might give the Greek government enough political clout to clear out some of the Augean stables. But a ‘no’ vote would be even more fun: it would mean no bailout and lead to default and the exit of Greece from the euro and thus begin the unraveling of the entire misbegotten enterprise. The current prevailing message from the europhiliacs is that the eurozone must not be allowed to fragment, but there may come a time when they see the costs of a no-exit policy as too high and will then ditch the Greeks (and then the Portuguese? and then?) so as to save the currency for the handful of fiscally continent countries still left.

And I’m appalled by the fact that none of the commentators I’ve read has thrown up any hands at the suggestions of ‘closer fiscal union’ as a way of safeguarding the euro. That means, very clearly, taxation without representation, and from there it’s only a small step to tyranny. So the sooner Greece buggers the euro in the grand manner, the better for us all.

Cheers

Martin [Anderson, London]

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hi Warren,

Thanks for sending these.. though I disagree with both. On Libya: it’s way too early to count our chickens. But as I see it, the US got dragged into this by the French and the British on spurious grounds and then overthrew a dictator by force, which was nowhere in the UN mandate, however nasty that dictator was to his own people (for over 40 years, I might add, although we choose to overthrow him only now, and only after he gave up all his nasty weapons and was, so far as anyone could tell, no threat whatsoever to us).

On the Greeks, I’m dumbfounded by the referendum move. Your case makes nice sense in theory but hardly on the ground. How is it possible that Papandraeou, who has been negotiating on a more or less hourly basis with his European counterparts for at least the past six months, could pull off such a surprise? What is really going on? It suggests, at least to me, that the EU is so dysfunctional that there’s nothing to hope for at all. The Greeks voted to join the EU and then the euro. Now is not the time–particularly during the peak of a crisis right after a major negotiation–to second guess that by referendum in the name of validating an EU-wide decision. The EU is not the US but we did away with the doctrine of nullification a long time ago and I suggest the same holds for the EU. This referendum is essentially asking the Greeks to decide to pull out, and if they do it, anyone else can. It’s mad.

Ken [Weisbrode, Boston]

_______________

Ken,

 On Libya, I was saying almost the same thing (see my five earlier warning blogs against getting involved: https://wcoats.wordpress.com/2011/03/10/libya-and-the-drums-of-war/, https://wcoats.wordpress.com/2011/03/13/libya-lets-not-make-it-our-war/, https://wcoats.wordpress.com/2011/03/21/another-long-war/,   https://wcoats.wordpress.com/2011/04/22/libya-further-down-the-slippery-slope/,  https://wcoats.wordpress.com/2011/08/23/libya-part-ii/ ). I am not optimistic about Chapter 2 now starting and glad that we have some chance of staying out of it (though I am worried about that too).

Warren

______________

************************

Warren

All forms of brinksmanship are pretty much welcome at this point. If you think, like I do, that the problem in Greece and Italy is fundamentally a price competitiveness issue, and not a financing one, then things have to get much worse before people change their ways, start cooperating and stop fighting each other.

It will probably not work out, but hey, that’s cheaper holidays in Italy!

Sahil [Mahtani, Jakarta]

**************************

Dear Warren,

I liked your Greek piece.  Insufferable fools.  They’d trade simple (but not so simple…) bankruptcy for a 50% write down and a road back to prosperity.  I’m going to write about it for my column next week.  I wonder how much looking up at Parthenon makes them still think they’re special? The DNA now is mostly Turkish anyway.

I’ll be back in Manila in time for my book launch with ex-president Ramos in a couple of weeks.  I am starting new quickie the Manila publishers want, “For love of a country: 40 years in and out of the Philippines,” which I can write in my sleep.  Though it is amazing how much comes back one had forgotten. Sometimes it’s just hard to believe we’ve been at this game for over 40 years.

I feel my whole life has been a study of empires falling (UK, now USA), new ones emerging (and in Asia no less).  Obama understands…as you pointed out he did the right thing in Libya.  And isn’t it wonderful to say, let the Europeans do this and that, not coming to us with a begging bowl.  A true silver lining to loss of empire.  George W Bush merely hastened the decline.

Scott [Thompson, Bali]

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About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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