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Old 26th June 2015, 11:10   #181
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Default Re: Understanding Economics

Another graph from 1979. See how income for top 1% and productivity has grown, but wages(adjusted for inflation)? Nope!
http://www.motherjones.com/politics/...-harder-charts
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Old 26th June 2015, 11:21   #182
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Default Re: Understanding Economics

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In inheritance tax I disagree. Let there be economic incentive for people to grow wealth and in turn leverage the economic cycle higher.
Why should the kids be incentivised for their parents hardwork? So keep it within limits. I know as parents we feel bad if our kids won't inherit the wealth we generated throughout our life. Trust me, I know the feeling. But our kids will become much better individuals if they earn their wealth on their own. A little bit hand holding is fine, but nobody deserves a huge inheritance.

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But then why should people inheriting INR 4.99 crore escape this tax?
It is a one time thing. Let it go... Or tax it at some rate.

Last edited by Samurai : 26th June 2015 at 12:18. Reason: typo
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Old 26th June 2015, 11:33   #183
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The comic gives example of China. By free market logic, Yuan should appreciate, and balance of trade should even out. However, even though Americans are buying from Chinese, Yuan does not appreciate, thanks to bonds etc.,
If China was indeed printing huge amount of Renminbi just to buy USD priced US bonds (sovereign as well as corporate) - shouldn't there be an equally huge inflation happening in China?

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but nobody deserves a huge inheritance.
I just wish the same could be said about other things in life like looks, immunity, susceptibility to diabetes and cancer, mental makeup, musical skills, athletic skills etc

And people in general (the idiotic junta) stop admiring these inheritable traits.


Regarding the taxation rates/slabs - I think it is mathematically more elegant to use polynomial instead of linear tax with slabs.
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Old 29th June 2015, 12:31   #184
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If China was indeed printing huge amount of Renminbi just to buy USD priced US bonds (sovereign as well as corporate) - shouldn't there be an equally huge inflation happening in China?

China is using their huge current account surplus to invest in US dollars. Thus they are insulating the renminbi. Since this is not adding to money supply in the Chinese system, inflation is not a problem.
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Old 30th June 2015, 15:51   #185
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Default Re: Understanding Economics

Poor Greeks!

They're in a terrible position where no one knows what's the best course to take. The Greek government led by Syriza has done the right thing by calling for a referendum.

I hope Greek voters choose wisely in the upcoming referendum. That would mean voting NO.

In the current scenario, I think it's best for both both Greece and the European Union if Greeks choose to exit the Eurozone currency union. They can bring back a new version of their own currency (drachma), and stop using the euro.

However, Greece must remain a full fledged member of the European Union. It would be utterly foolish of the Greeks to even think of exiting the EU, despite the sheer stupidity exhibited by the Brussels-based bureaucracy in recent times.

Despite all their current woes, Greece happens to be the land that laid the foundation of modern Western civilisation which has positively impacted humankind like none other in the entire history of the world. Even in medićval times, it was the Eastern Roman Empire (Byzantium) centered around Greece that played a stellar role in defending Europe from the invading hordes who would have overrun the continent when it was weak and vulnerable.

Europeans must not forget their history. They should treat the Greeks with respect and dignity. Greece simply must not be allowed to come under the influence of a primitive, backward, vicious, violent & murderous force of tyranny that has nothing positive to contribute to the world.

Greeks would obviously have to go through economic pain as they exit the Eurozone and issue a new drachma. The EU should encourage this, and continue to help Greece in various ways.

The Greek people should also do their part by choosing a new government that would take their country forward as it resets economically. What they need is a government that pushes for "minimum government" and a strong manufacturing industry.

If Greece goes back to its own currency, it can utilise the resulting devaluation to build its economy. The overall cost of establishing industries would become cheaper, as would the cost of labour. They can take advantage of this by attracting European companies to invest in a manufacturing industry. However, they should do all they can to prevent foreign interests (especially the non-EU ones) from gobbling up Greek assets at a fraction of their worth.

Greece can also take its tourism industry to great heights with a new currency. Western tourists are becoming increasingly unsafe in Third World tourist spots. The risk of getting slaughtered in cold blood by mad mass-murderers is a prospect that is increasingly staring them in the face in such places, not to mention other ways in which they could be harmed. Greece (with its own devalued currency) would be a great, safe, inexpensive, friendly and fabulous destination to visit for Western tourists.

It would be a slow and painful process, yes. But it's the only one that works in the long run. If non-EU countries like Turkey can build up a manufacturing industry by utilising their proximity to the huge European market, why can't a full-fledged EU member like Greece?!?

Ζήτω η Ελλάδα (Long live Greece)! I'd love to see the Greeks bounce back.

Last edited by RSR : 30th June 2015 at 16:04.
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Old 30th June 2015, 18:15   #186
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Originally Posted by reverse_gear View Post
China is using their huge current account surplus to invest in US dollars. Thus they are insulating the renminbi. Since this is not adding to money supply in the Chinese system, inflation is not a problem.
Thanks.
So it is not that China is printing its currency.
It is earning USD by selling Chinese manufactured stuff and investing those USD by buying US govt and corporate bonds.

This is US's problem that they are not manufacturing anything which China wants. If they were making something worthwhile at competitive prices, then China would spend those USDs to buy American stuff.

Now I see that the econocomix linked in the last page has jingoist political connotations!
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Old 6th July 2015, 13:23   #187
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I hope Greek voters choose wisely in the upcoming referendum. That would mean voting NO.
The Greeks have indeed voted NO, which is the sensible thing to do.

Now I hope the Greek government calls for another referendum on re-issuing their own currency (a new drachma), and I hope the Greeks vote YES in that (as long as the Brussels-based bureaucracy gives them a chance to do that by not kicking Greece out of the Eurozone immediately).

The Brussels-based bureaucrats have gone crazy in recent times, and have greatly exceeded their mandate. They need a serious clipping of their wings. It would be good for the common people of Europe and for their own fat selves. Otherwise, the moronic bureaucrats living in ivory towers in Brussels would force Europe to commit collective suicide. That would be a terrible thing for the entire world.

The only way Europe can be saved is by having less of the bloated Brussels bureaucracts, and more of sensible politicians like Viktor Orbán (the Prime Minister of Hungary).
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Old 6th July 2015, 15:55   #188
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Default Re: Understanding Economics

Here is an interesting take...

https://medium.com/@gavinschalliol/t...d-7b5e7add6fff
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Old 6th July 2015, 16:36   #189
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Originally Posted by RSR View Post
The Greeks have indeed voted NO, which is the sensible thing to do.

Now I hope the Greek government calls for another referendum on re-issuing their own currency (a new drachma), and I hope the Greeks vote YES in that (as long as the Brussels-based bureaucracy gives them a chance to do that by not kicking Greece out of the Eurozone immediately).
I would being by saying Greece has been brought to its knees by the extremely populist and debt invoking measures by the Govt ever since it joined the Euro.

So being in the Euro means that it should've cut the expenses further.
Now that the public has voted no to cuts, it is imperative that Drachma is resurrected, otherwise how will Greek Govt operate??

Drachma will be severely undervalued compared to Euro, so we can expect a great export thrust. But I am sure then most of the other poor and spendthrift Euro users like Spain and Italy will also dream of breaking away, setting back their own currencies, and improve exports.

Of course one thing is clear: Beggar thy neighbor in global trade means lots of votes from local public. And this can happen only when you have your own currency.
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Old 6th July 2015, 16:45   #190
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Default Re: Understanding Economics

I find this very interesting, that if EURO becomes a currency of only "rich, industrial nations", then they would no longer remain rich because their exports will become expensive due to Euro rising in value dramatically.

Having a devalued Euro helps the exporting producing nations like Germany, but is extremely detrimental to tourism dependent countries.

Infact, if your country is primarily a tourism destination, it makes good sense to have your own currency, rather than a industrial nations currency.
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Old 6th July 2015, 17:03   #191
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Drachma will be severely undervalued compared to Euro, so we can expect a great export thrust. But I am sure then most of the other poor and spendthrift Euro users like Spain and Italy will also dream of breaking away, setting back their own currencies, and improve exports.
This is fine, but how do you solve the debt problem? Please see the attached chart on Greece government debt-to-GDP ratio.

Greece government debt-to-GDP %

Most of the government debt is foreign currency debt denominated in EUR. So, if the Drachma is introduced and gets devalued by only 20% (say), it immediately means that Gov Debt/GDP will shoot up from 1.77 to 2.12. And this is before factoring in the contraction of the economy which will further worsen the ratio (Greece economy has contracted 25% in the last few years). Greece also runs a current account deficit at the moment; while this may change with a devalued currency, the immediate future will be extremely painful. Of course, they will also lose all EU funding, which has been their lifeline in the last few years.

Quote:
Having a devalued Euro helps the exporting producing nations like Germany, but is extremely detrimental to tourism dependent countries.

Infact, if your country is primarily a tourism destination, it makes good sense to have your own currency, rather than a industrial nations currency.
In fact, devalued EUR will also benefit tourism dependent nations which receive foreign exchange inflows.

Last edited by reverse_gear : 6th July 2015 at 17:09.
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Old 6th July 2015, 18:02   #192
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Here is an interesting take...
The sheer Germanophobia exhibited by Monsieur Piketty in that interview is very sad and alarming!

From his picture, Thomas Piketty does not look anything like a person who was born before or during World War II. Yet, almost every reply of his reeks of anti-German sentiment. It's one thing to hate the warmongering of Kaiser Wilhelm II & Adolf Hitler and the atrocities committed by the Nazi horde, but completely another to exhibit that kind of Germanophobia, and that too, in an interview to a German media outlet. Very sad.

The funny thing is Monsieur Piketty contradicts himself in the course of the interview. First, he claims Germany never repaid its debts, and then he states that 60% of Germany's post-WW II debt was written off (which means they duly paid back the remaining 40% of that debt with interest).

Then, he goes on to state that France suffered immensely because of war reparations paid to Prussia after the Franco-Prussian war, but refuses to recognise the gross injustice and indignities heaped on Germany after WW I.

It was the attempt to pay back the enormous reparations that sent post-WW I Germany (the Weimar Republic) into terrible hyperinflation & economic collapse, and eventually paved the way for the rise of that diabolical megalomaniac (Hitler).

He also conveniently forgets the huge reparations post-WW II Germany has had to pay to almost everyone (including Greece) for the occupations, injustices & atrocities committed during WW II, while the Allies got away scot-free for literally reducing Germany to rubble, and rewarded themselves by splitting Germany into four zones and occupying one zone each. The former East Germany even continued to be under the occupation (till the fall of Berlin Wall) of the vile, bloodthirsty forces who committed just-as-terrible atrocities as the Nazis during WW II.

The poor West Germans had to slog away like beasts of burden for long decades to not only rebuild their country from total ruin & rubble, but also pay back everyone. Greece continued to get war reparations from Germany till long after WW II, and I think Germany continued to pay reparations to Israel even into the 21st century. On top of it, the extremely hard working & economically prudent West Germans have had to uplift their much poorer East German brethren after the latter were liberated (finally!) from the good-for-nothing forces of tyranny and totalitariansm.

It's a testament to the excellent maturity levels of Germans and the German media, that such an interview bursting at its seams with barely-concealed Germanophobia is published and read widely in Germany!

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I would being by saying Greece has been brought to its knees by the extremely populist and debt invoking measures by the Govt ever since it joined the Euro.

So being in the Euro means that it should've cut the expenses further.
Now that the public has voted no to cuts, it is imperative that Drachma is resurrected, otherwise how will Greek Govt operate??
I believe a country with the economic background of Greece should not have chosen to have the euro as its currency in the first place. The Greeks should have retained their own drachma, while remaining a full-fledged member of the EU. The United Kingdom, Sweden, Denmark and some of the newer EU members successfully follow this model.

Given Greece's economic background, tax collection & spending habits, it was always going to be a huge uphill struggle to stick to the fiscal prudence norms followed by countries like Germany.

The advantages of being in the Eurozone is greatly outweighed by the disadvantages for a country like Greece. Until they can successfully change their politico-socio-economic model (which may take a long, long time), they should stay out of the Eurozone.

Last edited by RSR : 6th July 2015 at 18:32.
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Old 6th July 2015, 18:32   #193
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I find this very interesting, that if EURO becomes a currency of only "rich, industrial nations", then they would no longer remain rich because their exports will become expensive due to Euro rising in value dramatically.
You are right no one can (afford to) become super rich, because then they will become noncompetitive. This is how globalization is actually supposed to work.

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... it immediately means that Gov Debt/GDP will shoot up from 1.77 to 2.12. And this is before factoring in the contraction of the economy which will further worsen the ratio (Greece economy has contracted 25% in the last few years).
Yes, but the point is that in near future it should become a super cheap country. And score well on travel/tourism (by increased traffic), as well as manufacturing/services.

Once the GDP picks up, servicing the debt will get easier.
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Old 6th July 2015, 19:08   #194
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Yes, but the point is that in near future it should become a super cheap country. And score well on travel/tourism (by increased traffic), as well as manufacturing/services.

Once the GDP picks up, servicing the debt will get easier.
In the long term, maybe. Not in the near term. I am afraid that the debt will have to be restructured one way or the other, in the absence of which there is very little hope of this scenario playing out well.

If they go to drachma without proper debt restructuring, there will be immediate devaluation resulting in substantial investment losses. Inflation will also zoom upwards. All this at a time when the economy is contracting. Pensions will plummet in value. Labour will be on strike. Over-indebted government will be in no position to launch Keynesian measures for economic stimulus.

Greece does not have any manufacturing base of consequence and their forex earnings are from tourism. No outsider will invest in Greek economy till there is currency stability and economic clarity. Unless there is political and economic stability, tourists are easily scared off. And tourism by itself is not enough to drag the Greek economy out of this mess.

I can't end up feeling that getting back to the table to work out a restructuring package is really the only workable solution, without causing widespread distress to the Greek public.
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Old 7th July 2015, 12:33   #195
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there will be immediate devaluation resulting in substantial investment losses. Inflation will also zoom upwards. All this at a time when the economy is contracting. Pensions will plummet in value. Labour will be on strike.
Right, but then it is already at this situation.
The only thing is that using window dressing it is able to portray a "developed nation" way of life. Whereas in reality it is in perhaps as pathetic condition as lot of Asian nations.

Fake employment, fake pension, fake benefits, fake sense of future well being. This has been the path that it has been ever since even before joining EU. This fake world was financed by ever increasing govt debt.

It was bound to fail unless backed by solid future growth projections.
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Over-indebted government will be in no position to launch Keynesian measures for economic stimulus.
Yes, this is a cause of huge concern but called upon by Greece politicians only.

Everyone forgets one thing, in Keynes policy of kicking up the aggregate demand by Govt expenditures during "bad times", he also suggested cutting down Govt expenditures (to save for such rainy days) during the "good times".

No politician ever does that for the fear of appearing anti-populist.

Last edited by alpha1 : 7th July 2015 at 12:34.
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