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Bootles, Bad Advice for the Greeks, Misunderstands Basic Economics The Market O

Bootle's, Bad Advice for the Greeks, Misunderstands Basic Economics  /  Oct 15,[url=http://www.blazinmohaa.com/copper-strategic-metal-market-oracle-financial-market]Is Copper a Strategic Metal  The Market Oracle  Fi[/url], 2012 - 12:40 PM GMT
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[img]http://www.marketoracle.co.uk/Article37025.html[/img]Patrick Barron writes: This summer Roger Bootle won Lord Wolfson's £250,000 prize for the best   advice for a country leaving the European Monetary Union (one may assume that   this advice is aimed at Greece). A more statist, anti-liberal policy than his   could hardly be envisioned, which is a sad commentary on the mindset of the   judges chosen by Lord Wolfson,[url=http://www.cheapbagsmulberrysale.co.uk]Mulberry bags[/url]. His advice contrasted sharply with that of , whose liberal, transparent,[url=http://www.christinloubtincheapsalecl.co.uk]louboutin[/url], and free-market-oriented policy advice   was rejected in favor of Mr. Bootle's call for state secrecy and coercion.

[img]http://www.marketoracle.co.uk/Article37025.html[/img]Mr,[url=http://www.outletmulberrysalecheapbags.co.uk]Mulberry bags[/url]. Bootle's statist advice stems from his misunderstanding of basic   economics in which he views symptoms as causes,[url=http://www.cheapbagsmulberrysale.co.uk]Mulberry outlet[/url]. He offers no explanation for   Greece's unsustainable debt burden, high cost structure, and high unemployment   other than the standard Keynesian explanation of inadequate aggregate demand.   Once this fallacious view is swallowed, the prescription follows axiomatically,   i.e., devalue the currency to restore competitiveness vis-à-vis foreign markets,   which will increase aggregate demand and reduce unemployment. Oh,[url=http://www.cheapsalemulbarry.co.uk]Mulberry handbags[/url], and the Greeks   may have to default on their foreign debt,[url=http://www.christinloubtincheapsalecl.co.uk]christian louboutin uk[/url], but history shows that this is not a   problem. Really?
Despite his lengthy and repetitive prize submission, Mr. Bootle's   recommendations can be summarized in this one sentence: In complete secrecy   and with no prior discussion, redenominate all Greek euro-denominated bank   accounts into drachma-denominated accounts and devalue the drachma.
That's it! There is no need to cut public spending. Quite the contrary,   because public spending adds to the Keynesian concept of aggregate demand, and   aggregate demand cannot be allowed to fall. The secrecy part is essential for   Mr. Bootle's plan. If the Greek people got wind of what was to happen, they   would take measures to protect their property, such as transferring their   euro-denominated bank balances to banks in Germany. Mr. Bootle refers to such a   development as a crisis, but a crisis for whom? Taking measures to protect one's   property would not be a crisis for the common Greek citizen. It would be   exercising rational self-interest. Mr. Bootle's so-called plan is nothing more   than robbing Greek citizens in the middle of the night!
Give the Greeks a Better Currency
The aim of currency reform — and do not mistake my intention; currency reform   is needed — should be to replace a poor currency with a better one. But   Mr. Bootle (and his Keynesian colleagues) see the world upside down. In their   world of aggregate demand, a weaker currency always is preferable to a stronger   one, because a weak currency purportedly makes a nation more competitive in   international markets. But this is pure propaganda. A weak currency not only   makes necessary imports more expensive,[url=http://www.longchampcheapbagsuk.co.uk]longchamp uk[/url], reducing prosperity, but it also is an   outright subsidy to foreign buyers of a nation's goods. As I have argued in  and as James Miller has argued in  currency devaluation is merely a transfer of wealth from all   of a nation's citizens to politically favored industries, usually export   industries. It is no different from giving a subsidy to any domestic producer.   The subsidy is paid by all the citizens of the subsidizing country, not by the   foreigners who buy the subsidized good. They get a bargain.
Furthermore, devaluation does not make a nation more competitive,[url=http://upid.edu.do/index.php/forum/2-welcome-mat/45155-stock-market-and-the-ongoing-death-of-the-euro-the-market-oracle-financial-markets-analysis-forecasting-free-website#45155]Stock Market and the Ongoing Death of the Euro   The Market Oracle  Financial Markets Analysis & Forecasting Free Website[/url]. It   does nothing to spur increased domestic saving or external capital investment,   which lead to the increased application of capital per capita, the only sources   of increased worker productivity and the only sources of increased real wages.   Devaluation does not reveal the onerous, wealth-destroying effect of economic   regulation, not does it reveal the true costs of the welfare state, which relies   on high taxes to fund present consumption at the expense of future prosperity.   What the state spends cannot be saved and invested, no matter how cheap the   currency.
And, contrary to Mr. Bootle's statement that "improving competitiveness is at   odds with the objective of reducing the debt burden," Greece will not be able to   reduce its debt until it does become more competitive. It may well be impossible   for Greece to pay all of its debts, but this merely reveals the dire reality of   current policy; it does nothing to change that reality. The increase in the debt   burden must stop! It must stop now,[url=http://www.wakeupforautism.com/cms/forum/topic/japans-economy-collapses-into-economic-depression-the-mark?replies=1#post-602633]Japans Economy Collapses into Economic Depression   The Mark[/url]!
Mr. Bootle misses the cause of the euro debt crisis completely when he fails   to see that ECB euro-denominated loans to captive national banks, with worthless   sovereign debt as collateral, is the manner in which the European Monetary Union   subsidizes failed economic policies. As long as the Greek government can get   unlimited euro loans from the ECB, there is no real reason to reform the   nation's economy and there will be no end to the debt crisis.
So, Mr. Bootle proposes an even worse currency, a devalued drachma, as   the replacement for a bad one, the euro. And if the Greek people resist outright   theft through devaluation, then the government must trap their wealth   internally, where it can be plundered later, by using capital controls to stop   euro transfers to safer, foreign banks. The fact that the free movement of   capital was one of the pillars of the European project apparently must be   sacrificed for the benefit of the state. In fact Mr. Bootle admits that capital   controls are illegal under current EU law, but he recommends them anyway,[url=http://www.cheapghdstraightenerghdsale.co.uk]ghd straighteners[/url]. All   tyrants love a crisis, because it can be used as an excuse to break the law.
Truly Liberal Alternatives
Dr. Philipp Bagus of King Juan Carlos University, Madrid,[url=http://www.louboutinclcheapshoes.co.uk]christian louboutin[/url], . He proposed a long period of public discussion about   alternatives to leaving the euro, which would allow ample time for Greeks to   move their property out of the greedy reach of their own government, should they   decide to do so. The currency crisis might be solved in this manner as Greek   banks closed and the Greek government shut down its welfare and regulatory   system for lack of funds. The Greek government could repeal legal-tender laws,   which currently require Greek citizens to transact business in one currency only   — always that issued by the state itself. Concomitantly it could reinstate the   drachma as a strong currency backed by gold. Then good money would drive out   bad,[url=http://www.cheapghdstraightenerghdsale.co.uk]ghd[/url], as people freely chose which currency to use. They would choose the one   that is most marketable. One element of that marketability would be that it   would retain its purchasing power.
Of course, Mr. Bootle desires the opposite, i.e., an ever depreciating   currency that robs currency holders of their purchasing power. Naturally Greeks   will resist this; therefore, the Greek government must install capital controls.   Yet the essence of self-government and democracy and the great triumph of   postwar Europe was the freeing of the individual first from fascist tyranny and   then communist tyranny, whose primary means of enforcement were control of the   economy.
The future of Europe will emerge from the euro debt crisis. Mr. Bootle   desires a return to state currency controls as a means to prop up the decaying   welfare state. Dr. Bagus desires a step back from this unfortunate detour, which   took concrete form with the formation of the euro. Rather than compound the   errors of the euro with even more state intervention, the alternative is to   anchor currencies in gold. This will force individual nations to engage in true   democratic processes to determine the scope of state action. It will end the   stealth transfer of wealth via euro monetary expansion. In that regard it will   force each nation to live within its own means. What's wrong with that?
Patrick Barron is a private consultant in the banking industry. He teaches in   the Graduate School of Banking at the University of Wisconsin, Madison, and   teaches Austrian economics at the University of Iowa, in Iowa City, where he   lives with his wife of 40 years. Read his . Send him . See Patrick Barron's .[img]http://www.marketoracle.co.uk/Article37025.html[/img]
This article is an address delivered by Patrick Barron at the European   Parliament in Brussels on March 16, 2011.
© 2011 Copyright Ludwig von Mises  - All Rights Reserved Disclaimer: The above is a matter of opinion   provided for general information purposes only and is not intended as investment   advice. Information and analysis above are derived from sources and utilising   methods believed to be reliable, but we cannot accept responsibility for any   losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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