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Timothy Geithner and the floundering European economy

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    Europe is calling for countries around the world to continue to help bail its economy out, calling for global economic stability.  Timothy Geithner, U.S. Treasury Secretary for Obama's Administration, sees progress in Europe's economy and calls for them to not rest on recent progress they've made in tackling a crisis that remains "deeply consequential" to the prospects of a global economic recovery. 

    However, the administration and the U.S. as a whole seem to be against loaning more money to Europe.  Geithner seems to be basically saying that we gave them some money. Along with countless other factors, it seems to be helping.  But, they can't rely totally on us.  They have to work even harder to get past this.  We are not a bottomless ATM. 

    That's my take anyways.  Anyone have a different angle on Geithner's views or the U.S. views as a whole on this issue?
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    MMT economists have been warning about the 'incomplete' Euro system since it was founded.

    Eurozone nations are like US States. They cannot issue their own currency. They are currency users.

    USG clears its own checks (Treasury + Federal Reserve System=consolidated government balance sheet). When Treasury deficit sales (either new issue by Treasury or by the FED in secondary markets) remove excess reserves; this is a method of interest rate maintenance, per policy objectives + laws requiring Treasury to issue bonds to 'cover' its deficit spending.  Taxes and savings (bonds are functionally a savings account @ the FED) create 'space' for government deficit spending w/o creating undesirable inflation (current policies create too much 'space' in my opinion).   

    Greece does not clear its own checks and Eurozone nations issue competing bonds w/o coordinated timing.  Greece does not coordinate tax deposits, spending, and borrowing with the ECB. It must acquire funding by borrowing or taxing before spending. 

    In the US, the Treasury deposits govt revenue in Treasury Tax and Loan accounts, keeping the funds in private sector on loan to private banks....until the funds are needed to 'cover' Treasury spending on its account at the FED, which it cannot overdraft on, by law. So by deficit spending...the government is creating the funds to 'cover' future spending, and this could all be sped up into a simultaneous 4 step transaction where Treasury spends (increasing reserves), borrows (drains reserves), deposits borrowing revenues in TT&L accounts, and withdraws from its TT&L accounts to 'cover' its FED account balance, all at the same time...this is possible because the FED + Treasury target the costs of government borrowing, as monopoly price-setters, via FED's LLR authority + interest rate mandate.

    FED intervention in secondary market influences prices of new Treasury issuance, and this is done with daily, short-term, and long-term measures (repo swaps, long term bond buys, "Bernanke" lending). It's all a way of Treasury getting around laws banning direct bond buys and direct lending by the FED to the Treasury. Net effect is the same. Debt service is a means of interest rate maintenance, per FED's monetary goals. Deficit spending creates demand for bonds.

    Bonds provide nominal returns and safety for otherwise idle excess reserves. Ultimately, bonds combat the reserve requirement tax and provide a means for the private system to save outside of itself in interest bearing savings accounts @ the FED. 

    Greece does not enjoy consolidated account budgeting by its government + central bank (ECB).
    Its government does not, effectively, spend first, then borrow and tax, and coordinate all the while with the ECB to smooth out the effects of its fiscal regime on Eurozone reserve balances.  And the size of its account balance is governed by law, per Eurozone treaty, not by the net savings desires of its citizens, or an existing need to combat the demand leakage from its massive current account deficits. This is why steps to cut the Greek deficit have only increased its size, while dramatically hurting Greek citizens and the Greek economy. Austerity is the disease.

    Never discount Europe's penchant for "blood-in-the-streets" outcomes.

    Frankly, the Europeans are acting like idiots (e.g., announcing a terrible idea like the  Greek Hair-Cut on its sovereign debt right before an Italian bond auction is not what one would call a sense of proper timing). 
    Conventional wisdom teaches that government deficit spending inevitably adds to our government's costs of borrowing. Why on Earth then are Treasuries at historic lows? Why did the interest rates on Treasuries fall after S&P's laughable downgrade? MMT is the only economic school of thought anywhere near capable of accurately explaining why. 

    Being right needs to start counting for something.


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    There is only one remedy to the problem in Europe, an end to austerity. The conditions imposed on Greece by the European Union, as part of the bailout, will only lead to more bailouts in the future. When are Governments going to stop punishing 'ordinary' citizens for the mistakes of Fat Cats, immoral corporations and a corrupt system of capitalism. In the so called 'good years' before the economic crash, who benefitted?