Austerity bitchslap!






Just messing around...

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The myth of internal devaluation and of competitiveness after Grexit (also in Greek)

Perhaps, I am seeing things the wrong way, but here is my thought: Following the 5th review of the IMF  and Athanasoglou (2011, Chart4, p.11)  on "The role of product variety and  quality and of domestic supply in foreign trade"  it is more than obvious that Greek firms are the largest importers. That is to say, Greece imports, heavily, factors of production other than labor. So, if Greece's non-labor production factors come from abroad, their prices are, also, set abroad... Therefore, the Greek firms may find it rather difficult to reduce their costs - no matter how labor cost might (?) be reduced - since the non-labor costs are set abroad. With firms finding difficult to reduce their costs, they will, subsequently, find it difficult to reduce their prices. This is a reason why prices did not deflate as wages did, so far, and why the the trade balance ameliorated mostly by the reduction of imports following the contraction of income and economic ...
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The good, the bad and... the austeritist!

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Monetizing Eurozone's Sovereign Debts: it is now or never

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So, Mario Draghi said that an inflation much lower than 2% is against his mandate. And it is! If you ask me, early 2015 is the right time, if not too late, to buy sovereign bonds. Let me, please, tell you what I think. First of all, given that Eurozone economy is below its potential, inflation risk will remain low, and the zero lower bound will prevent monetary policy to be "hazardously" inflationary. But, this is an argument why we should not fear of inflation, if the ECB decides to take bold action. True! For now... Moreover, given that we remain below our potential output, member states have begun to deviate from austerity and call for more expansionary budgets. Sooner or later, they will start creating budget deficits as a mean of expansion. And this has two implications. The first one, which relates to my previous argument is that budget deficits will boost expansion, and, hence, the return to the potential output. Therefore, the later the ECB decides to act, the mo...
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