[pp.int.general] [Pp-leaders.discussion] EU: ESM-treaty

[Philip Hunt]

On 5 November 2011 20:16, Amelia Andersdotter <teirdes at gmail.com> wrote:
> The EFSF is a good thing :)
> [...]
> This type of stabilizing fund is meant to correct that. The fund can push
> money into "poor" regions while their crisis sorts out.

If that was what was being done, then I would support it. But the EFSF
is a bank guarantee facility: if a country cannot pay its debts to a
bank, the EFSF pays the bank. So the money doesn't go to people in
poor regions, it goes to the bankers.

But the banks already calculated the likelihood of a borrower
defaulting when they lent the money (and set the interest rate
accordingly). So why should we, the people, bail out the banks for
making incompetent decisions?

> The other (and much
> better) alterantive could be to increase the European Union budget which is
> currently 5% of EU GDP

1.1% according to Wikipedia.

>  to maybe 40-50% of the EU GDP.

Politically, that's a non-starter, of course.

My solution would be that if some countries, for example Greece, are
insolvent, let them default on their debts. They would then have to
choose whether to say in the Euro or not; if they did stay in, they
would have to have a balanaced budget, because no-one would lend to
them. If they left, they would be able to finance a deficit by
printing money (but obviously if they did too much, they would just
get hyperinflation).

If some banks go bust, and this causes other banks to go bust, then
let them go bust. If this causes deflation, the solution would be for
the Eurozone to print money; the way it should be allocated would NOT
be to just give it to the banks (as Britain has done in it's
quantitative easing), but to give an equal amount to each person in
the Eurozone.

-- 
Philip Hunt, <cabalamat at gmail.com>