Iruzkinak (4)

• 

  joseba says:

  2015/07/24 at 13:14

  Euro exit will not be enough for Greece

  http://bilbo.economicoutlook.net/blog/?p=31373

  “… exit is not a sufficient condition for restoring prosperity to a nation. They would also have to simultaneously abandon the neo-liberal Groupthink that holds the Eurozone economy in a vice-like grip of austerity. Under those provisos, the Greek economy would return to growth immediately and they could eliminate unemployment within a few quarters.
  (…)
  I agree that exit is not sufficient for nations in the Eurozone.
  (…) The dominance of free market thinking has so perverted the European Project, that the failure of the economic plan is now endangering the beneficial political and legal aspects that have accompanied the formation of the European Union.
  (…)
  Greece, for example, would be destroyed if it exited and retained the neo-liberal austerity bias in its domestic policy.
  It would have to not only exit and follow the known guidelines for introducing their new currency but also abandon the fiscal rules that they endured as members of the Eurozone.
  They would have to abandon the focus on the fiscal outcome and instead see it as a response to movements in the real economy.
  (…) introducing a new currency from scratch.(…) there would be very strong reasons for the rest of the Eurozone to ensure the new currency doesn’t crash given that I would advise the exiting government to redenominate all official liabilities in their new currency…
  (…)
  But even if there was real wage effects – and the reality is that a nation’s real wage measured against import purchasing capacity depends on the movements in import prices – the government could assist by introducing a national Job Guarantee to ensure that anyone who wanted to work could earn a respectable minimum wage and add to public production and community well-being.”

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  joseba says:

  2015/07/24 at 16:55

  Bill Mitchell-en artikulua: Some IT considerations of a Greek exit:
  http://bilbo.economicoutlook.net/blog/?p=31420

  Yesterday (July 23, 2015), they reproduced an article – Once Again on the IT Challenges in Converting to the Drachma – which is written from a ‘left’ perspective and the author claims to be one of the very few people who has any “inkling of the problem”. The author explicitly referred to my recent blog – A Greek exit is not rocket science – and noted that I had not referred to IT wants in my discussion.
  (…) The exit of one Member State to create a new currency is a much smaller IT challenge.
  (…) I was not only interested in the economics involved in the creation of the Economic and Monetary Union (EMU) but also the technical systems issues involved in converting the 11 national currencies (at the beginning) into a common currency.
  (…) I chose not to devote much space in the book to the technical IT issues involved in an exit by country from the Eurozone for various reasons. First, the book was already very long. Second, while the technicalities are of interest to me, the excruciating detail would be of limited interest and value to a broader audience. Third, I chose to minimise even the economic jargon in the book to make it more accessible. So there would be little reason to delve into technical computer systems type jargon.
  (…) a Greek exit is not particularly challenging from an IT systems perspective.
  That doesn’t mean the process would be trivial, not prone to human error, or rapid.
  (…) the system design was to remain constant and only the currency unit had to be changed, which made sure the process was less complex and less error prone. It meant that practical things like the production of forms, invoices, statements and the account keeping tasks, pricing catalogues etc would be minimally disrupted.
  (…)
  A Greek exit, aiming to restore full currency sovereignty which includes full currency issuance powers, the capacity to set its own monetary policy (interest rate etc) and a currency float on foreign exchange markets could in fact involve only a fairly small first step.
  The government could make that first step by announcing that it was spending in drachma from some date and would require all taxes to be paid in that currency. It would also announce it would redenominate all its outstanding euro liabilities in the new currency (barring those which the IMF had cooked up under foreign jurisdictions as part of the previous bailouts).
  In those cases, the new government would just offer restructuring or default to the creditors.
  That would give the new nation time to make all the other necessary and relatively time-consuming steps in changing over and eventually banning the euro from daily use. But, even then, it would not matter if people still dealt in euros. As long as they were required to get the new currency to extinguish their tax liabilities, the new currency would stick.
  Which means that the exit would have to make tax reform a priority in the first instance to ensure the tax base was enforceable. This would not be required to raise funds to allow the government to spend but rather to ensure the new currency is in demand.
  (…)
  I agree that “Leaving the Euro is not a sufficient condition to break with austerity”. My Eurozone book discusses, at length, the need to also undergo an economic transformation and a rejection of the neo-liberal Groupthink that promotes the Recession Cult of Austerity.
  I also made that point in the blog – Euro exit will not be enough for Greece – among many other blogs I have written on that topic over the past decade.
  (…) as I noted in an earlier blog, in June 2012, Bloomberg tested in its foreign exchange screens a possible Greece exit. Traders suddenly saw a new code XGD appear on the screens with “among the options listed, a spot exchange rate for a post-euro Greek drachma”. See – Bloomberg Tests Post-Euro Greek Drachma Code.
  The transition to the euro was in fact a much larger challenge from a systems perspective than a single currency exit would be.
  (…)
  But most of the issues that were pertinent then would not apply to say a Greece exit and introduction of a new currency. In the first instance, it would simply be the replacement of a currency code with another and the euro would be added to the lists of currencies that already require conversion in the Greek system.
  (…) I don’t predict a sharp devaluation in the currency. First, it will be floated which means the term ‘devaluation’, which only applies to fixed parity arrangements that undergo discretionary adjustments by central bankers etc is inapplicable. Second, it will initially be in short supply. It is not akin to the situation where a nation breaks a peg with another currency and has plenty of the domestic currency circulating around foreign exchange markets.
  (…)
  I don’t want to suggest there would be no problems. But I assess the costs of transition (doing the work and fixing the glitches) would be dwarfed many times over by the costs of on-going austerity.
  (…) Greece can exit in stages just as the euro introduction was in stages. As noted above, it only has to establish a creditable tax base in the new currency and start spending in that currency for it to regain the capacity to end austerity and start rebuilding the wrecked economy.
  (…) The only thing that could happen is if the ECB bans any interaction with the Greek monetary system thus freezing it out altogether. That is not an IT problem and a highly unlikely political development. I don’t believe they would do that because it would not only wreck Greece but also significant financial and productive interests elsewhere in Europe.
  (…) see A Greek exit is not rocket science – and I am sure there are few bridges left for Greece to take back to prosperity.
  They all lead out of the Eurozone.”

• 

  joseba says:

  2015/07/24 at 17:14

  IT considerations of a Greek exit – Part 2
  http://bilbo.economicoutlook.net/blog/?p=31437

  “… a good friend … is an expert in IT solutions, has one of the best understandings of the technical structure of the financial system and the computer systems that support it.
  (…)
  He provided three excellent insights concerning the Naked Capitalism article.
  First, while a Grexit is surely a major undertaking what the Naked Capitalism author clearly fails to mention (and probably doesn’t know) is that the Euro was integrated ‘on-top’ of the existing legacy IT payment systems.
  So for instance the payment gateways still support the Greek Drachma (GRD) as a currency. So ‘switching’ the Drachma back on would not be such a major task. The same is true for major acquirers and banks.
  Second, (…) the Grexit should be accomplished by stealth. (…) leave everything in place as it is for now. Then establish, in secret, a public bank (like the German KfW), procure the banking software out-of-the-box, sign a contract with a major card-scheme to use its network for transactions and hook the bank up with the official Bank of Greece, the nation’s central bank.
  Once ready the Greek government would announce that any legal entity in Greece has a Drachma account at this bank. Everybody would then receive their Online Banking credentials and Drachma Maestro/Vpay debit card in the following week.
  Then the government would look for vital services and/or taxes to define where Drachma payment would be mandatory. Ideal targets include public transport and perhaps a Fee for foreign exchange transaction to facilitate imports.
  Third, (…) the Greek government would be advised not to issue cash. That is, to make the new Drachma a digital currency only.
  The reason for this is that Greeks are notorious at evading taxes, a fact that has been well documented. (…) Greece is the country with the lowest rate of cashless transactions in the European Union.
  (…) the best way to enforce tax compliance is to monitor it gently via digital transactions only.
  (…)
  Once again, I conclude that an exit would not be rocket science and the IT issues are fairly trivial. So why is Naked Capitalism supported those who clearly haven’t the first-hand knowledge (…)?”

• 

  joseba says:

  2015/07/28 at 08:58

  Bill Mitchell: IT matters and Greece

  (http://bilbo.economicoutlook.net/blog/?p=31441#more-31441)

  It seems that the Columbia University IT professor helping the former Finance Minister had a system up and running within about a week and they had planned “a payment system that could operate in euros but which could be changed into drachmas ‘overnight’ if necessary”.

  So much for all those IT problems.