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CEQLS Lecture: Philipp Bagus: The Tragedy of the Euro
 

CEQLS Lecture: Philipp Bagus: The Tragedy of the Euro

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Conservative Institute organized to another of the CEQLS Lectures: Philipp Bagus was our guest on June 13, 2011 in Bratislava and on June 14, 2011 in Žilina. More information is available at ...

Conservative Institute organized to another of the CEQLS Lectures: Philipp Bagus was our guest on June 13, 2011 in Bratislava and on June 14, 2011 in Žilina. More information is available at www.institute.sk

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    CEQLS Lecture: Philipp Bagus: The Tragedy of the Euro CEQLS Lecture: Philipp Bagus: The Tragedy of the Euro Presentation Transcript

    • The Tragedy of the Euro Philipp Bagus Conservative Economic Quarterly Lectures Series June, 13, 2011 21.06.11 Philipp Bagus: The Tragedy of the Euro
      • INTRODUCTION:
      • Political analysis
      • Economic analysis
      understand € 21.06.11 Philipp Bagus: The Tragedy of the Euro
    • TWO VISIONS FOR EUROPE : 21.06.11
      • LIBERTARIAN:
      • Individual liberty
      • Christian parties
      • Treaty of Rome
      • 4 Liberties
      • SOCIALIST:
      • Central state
      • Socialist parties
      • Fortress Europe:
      • Interventionist to inside
      • Protectionist to outside
      Philipp Bagus: The Tragedy of the Euro
    • TWO VISIONS FOR EUROPE : 21.06.11
      • Socialist tactic: Use crises to enhance power of central state
        • Protectorate Greece
      • Germany, NL, GB vs. France (substitute for the lost empire)
      • Socialist vision appeared to be winning
      • Fall of the Berlin wall changes dynamics
        • Germany grows, Eastern Europe against empire
      • Socialist reaction: go one step ahead. Means for centralization: €
      Philipp Bagus: The Tragedy of the Euro
    • TWO VISIONS FOR EUROPE : 21.06.11
      • Discipline imposed by the dreaded Bundesbank
      • Fall of Berlin Wall: Unique opportunity
      • Mitterand demands common currency in exchange for reunification
      • Euro provokes sovereign debt crisis -> more centralization
      • End of € = End of socialist vision
      Philipp Bagus: The Tragedy of the Euro
    • Why inflation prone countries wanted the € : 21.06.11
      • Get rid of Bundesbank
      • Prestige
      • Seniorage
      • Lower interest rates (government debt)
      • Excuse for austerity measures
      • Stronger currency (Imports)
      • Monetary redistribution
        • Consumption and construction boom
      Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Three month monetary rates of interest in Germany, Greece, Spain, Ireland, Italy and Portugal (1987-1998) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Balance of Trade 1994-2009 (in million Euros) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Competitiveness indicators based on unit labor costs, for Mediterranean countries and Ireland 1995-2010 (1999Q1=100) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Competitiveness indicators based on unit labor costs, for Belgium, The Netherlands, Austria and Germany 1995-2010 (1999Q1=100) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Retail sales Germany, USA, France, UK (1996=100) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Retail sales Spain (2000=100) Philipp Bagus: The Tragedy of the Euro
    • 21.06.11 Philipp Bagus: La tragedia del euro Increase in M3 in percent (without currency in circulation) in Spain, Germany, Italy, Greece, and Portugal (1999-2010) Increase in M3 in percent (without currency in circulation) in Spain, Germany, Italy, Greece, and Portugal (1999-2010)
    • Why German elites wanted the € : 21.06.11
      • Population, economists, lawyers were against it
      • “ Mitterand forderte Euro als Gegenleistung für die Einheit,” Spiegel online (2010)
      • Also get rid of the Bundesbank
      • Interest groups (Harmonization of regulation)
      • Exporters, banks
      • Prevent a sovereign and financial collapse
      Philipp Bagus: The Tragedy of the Euro
    • Money monopoly of the ECB : 21.06.11
      • Creates monetary base
      • Sthe banking system creates money on top
      • Privilege of fractional reserves in exchange for financing the deficit
      Philipp Bagus: The Tragedy of the Euro
    • Government ECB Banking system Bonds Money Bonds Reserves Profits Interests Interest Interest
    • Bank holdings of government debt (EU)
    •  
    • Government Banking system Insurers, hedge funds, pension funds Bonds Money Invest Interests Interests Interests Credit expansion Owners of factors of production (workers…) Bonds Money ECB Bonds Reserves
    • Incentives to run deficits : 21.06.11 Philipp Bagus: La tragedia del euro
      • Deficit-> print bonds-> used as colateral -> new money
      • Cantillon effects: redistribution
      • Tragedy of the commons
      • Governments with highest deficits win
      • Comparable: Printing press with different owners
      • Cartelization: Stability and Growth Pact: Failure
      • Run for deficits
    • Euro generates conflicts : 21.06.11
      • Bastiat
      • Free trade
      • Generates peace
      Philipp Bagus: The Tragedy of the Euro
    • Euro generates conflicts : 21.06.11 Philipp Bagus: La tragedia del euro
      • Deficits to maintain welfare state -> uncompetitive
      • Deficit -> trade deficit
      • Money extends and pushes up prices
      • Unsustainable: bailout
      • Generates conflicts
    • Conclusion : 21.06.11
      • Political project
      • Leads to centralization (deficits -> bailouts and finance ministry)
      • Three possibilities
        • Reform SGP (harsh austerity measures and structural reforms)
        • Eurozone splits
        • Transfer unions, centralization
      Philipp Bagus: The Tragedy of the Euro
    • Thank you 21.06.11 Philipp Bagus: La tragedia del euro