Yannis: The Return

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Clio
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Yannis: The Return

Postby Clio » Mon Mar 26, 2018 4:56 pm

Varoufakis today launched his new Greek political party with a view to fighting elections next year. Perhaps someone better than me at economics could have a look at the Greek New Deal link in the following, and let us know if his programme is a) a Good Thing and b) achievable?

I hope the manifesto is more beguiling than the new party's awful title. MeRA25 doesn't have much of a ring, does it?

http://www.keeptalkinggreece.com/2018/0 ... -new-deal/

Guy M
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Location: Kalamitsi Alexandrou

Re: Yannis: The Return

Postby Guy M » Tue Mar 27, 2018 7:50 am

Yannis Varoufakis: the ego has landed.Not a good thing.

Kilkis
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Re: Yannis: The Return

Postby Kilkis » Tue Mar 27, 2018 5:14 pm

Varoufakis is a very good economist but I don't think he is a good politician so I suspect that if he is leading this new party then it will not be very successful. In many people's eyes he was responsible for the failure to negotiate a better deal for Greece with its creditors after Syriza came to power so, rightly or wrongly, he is carrying a lot of baggage.

His ideas on taxation have merit. The US economist Arthur Laffer has become associated with a phenomenon now known as the Laffer curve which tries to relate revenue received and rate of taxation. The exact form of the curve is unknown but the concept is simple to understand. If you start with a 0 % rate of taxation then you obviously get €0 revenue. If you now start to increase the rate above 0 % the revenue increases. Suppose, however, you imposed a 100 % rate of taxation. I think it is pretty certain that nobody would work, or at least not openly, so at 100 % rate revenue must again fall to €0. Clearly there must be a rate of taxation where revenue peaks and then starts to fall. If Greece is operating at a rate above the peak, and there is some evidence that it is, then reducing the rate could actually increase revenue. Will it work? I have no idea.

The Laffer curve is based on the elasticity of income. Basically if you raise the rate of taxation income vanishes so even though the rate is higher the amount being taxed is lower and you get lower revenue. The income vanishing may be quite genuine and legal. Imagine someone has a basic income of €24,000 per year and overtime income of €12,000 per year. He gets €12,000 tax free and pays 20 % tax on the rest. Now suppose the government introduces a higher tax band so that he still gets €12,000 tax free and pays 20 % on the next €12,000 but has to pay 40 % on the next €12,000, i.e. all his overtime. He may simply stop doing overtime. The tax rate has gone up but revenue has gone down. He might devote the time he worked overtime to investing and pay 10 % tax on his capital gains. If he is successful and manges to make €12,000 per year on his investments he has the same income but the revenue is again lower. Alternatively income may reduce through fraud, i.e. people working in the black economy and not declaring it. There can also be grey areas. The problem arises when the process is reversed. If you reduce the tax rate back to what it was before will the vanished income reappear? That is not at all clear. If the income stays vanished, reducing the tax rate could simply reduce the revenue again, i.e. increasing and reducing tax rates can act like a ratchet.

Another possibility is to scrap progressive taxation altogether and introduce a flat tax rate. People may not realise but up to the middle of the nineteenth century flat tax rates were the norm around the world. The idea of progressive taxation was first proposed by Marx and Engels in their Communist Manifesto, i.e. most people's taxation today is based on the old hated communist principles. Strangely enough the ex-Soviet block countries are the ones that tended to introduce flat taxation in place of progressive taxation when they were free of Soviet control. Estonia was the first to adopt it in 1994 followed by Russia (2001), Slovakia (2004), Georgia and Romania (2005), Macedonia and Albania (2007), the Czech Republic and Bulgaria (2008), Bosnia (2009) and Hungary (2011). Slovakia has since abandoned it in 2013 but it still has a very flat tax structure with the original flat rate of 19 % and a single higher rate of 25 % above about €34,400. Considerably less than Greece's very steep progressive tax curve. All these countries have experienced rapid growth and massive investment, something Greece badly needs. Would it work here? I have no idea but I doubt if the creditors would allow it.

His other idea of restructuring debt is also badly needed but I doubt again if the creditors will concede much in this direction. Nearly all Greece's debt is now official debt, i.e owed to the ECB, the ESM, the IMF and EU member states. I think they are less likely to allow any significant restructuring if it is proposed by Varoufakis than if the proposal comes from elsewhere. He is universally loathed by those in power following his attempted negotiation with the Eurogroup in 2015. Simply tinkering with interest rates and maturity dates will not achieve a lot since the former are already pretty low and the latter are typically very long. The only thing that would help Greece would be to cancel some of the debt and Germany will never allow that to happen.

Not sure that helps, Clio, but something to think about.

Warwick

Guy M
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Re: Yannis: The Return

Postby Guy M » Wed Mar 28, 2018 12:06 am

Is he a good Economist? Mmm, Possibly, but his own description of ‘accidental economist’ is probably more accurate. What he is not is a good politician. Based on the EU debt negotiation farce of a few years ago, he doesn’t seem to understand how people think or react - which suggests he doesn’t understand Behavioural Economics, which is THE thing in economics given the Kahneman and Richard Lather Nobel prizes.

What is definitely the case is he is a rubbish politician, nearly, but not quite, as damaging as PASOK. And when it is all over, he can speed off on his motorbike to profitable speaking tours while the poor are left behind. Sad.

mouche
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Re: Yannis: The Return

Postby mouche » Wed Mar 28, 2018 6:12 am

The self-proclaimed ‘accidental economist’ is expected to adopt a constructive approach to tough debt negotiations.

Yes, sure, he was really constructive!

https://www.theguardian.com/business/ec ... e-minister

Yanis Varoufakis: How I became an erratic Marxist.


https://www.theguardian.com/news/2015/f ... ic-marxist

I'm sure he is going to do great negotiating with the EU! What an idiot!

Kilkis
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Re: Yannis: The Return

Postby Kilkis » Wed Mar 28, 2018 6:52 am

Guy M wrote:Is he a good Economist? ...


It depends on how you describe a good economist, Guy. Over 90 % of economics taught today is based on neo-classical economic theory plus monetarism. All policy making is based on the same theory. The major mainstream economic journals will not print articles unless their foundations are in that theory. All their referees ascribe to that theory and reject papers that don't. That theory is so flawed it is unbelievable that anybody uses it at all. Basing policy on that theory has resulted in most of the economic problems in the world today. That theory is the reason that the outcome of austerity in Greece was so different from the projections of the IMF and the other creditors. The economy suffers repeated cycles of boom and bust but it is impossible to manipulate the parameters in that model to predict a financial crash. It simply doesn't represent reality in any meaningful way.

Varoufakis is one of the 10 %. That alone makes him a "good economist" in my book. Added to that, his analysis of what was wrong with the policy being pursued by the creditors was pretty accurate. He failed because you cannot associate the word "wrong" with the actions of the sort of people who make up the Eurogroup. They are never "wrong". Somebody else is always wrong. Further, his ideas for changing the policy were also pretty good. I don't see anybody else putting forward solutions that might help Greece recover. As far as the creditors are concerned if the solution isn't working just do more of it because their solution must be the correct one. I think Einstein had something to say about that approach.

Warwick

PS The modern definition of an idiot: "Anybody who disagrees with you".

mouche
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Re: Yannis: The Return

Postby mouche » Wed Mar 28, 2018 9:08 am

Someone who cost his country 200 billion euro is an idiot!

http://www.ekathimerini.com/226341/arti ... -bln-euros

Maybe the figure should be "only" 100 billion, maybe ten billion, doesnt matter nor does it make a diffence. He is an idiot!

Jean
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Re: Yannis: The Return

Postby Jean » Wed Mar 28, 2018 10:42 am

http://www.ekathimerini.com/226341/arti ... -bln-euros a really impartial newspaper quoting a really impartial member of the Euro mafia

Kamisiana
Posts: 54
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Re: Yannis: The Return

Postby Kamisiana » Wed Mar 28, 2018 11:23 am

Well spotted Jean, Thomas Wieser key member of the EU dictatorship.

Yes Mouche we are overrun with idiots :?:

mouche
Posts: 600
Joined: Sat Jan 15, 2011 5:43 pm

Re: Yannis: The Return

Postby mouche » Wed Mar 28, 2018 12:22 pm

The Greek people voted yes to the EU and yes to the Euro contrary to "others" who voted Good bye and the pound rules the waves? :roll:

Kilkis
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Re: Yannis: The Return

Postby Kilkis » Wed Mar 28, 2018 12:36 pm

Jean wrote:... a really impartial newspaper quoting a really impartial member of the Euro mafia


I love it, Jean.

Warwick

moved 2 crete
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Re: Yannis: The Return

Postby moved 2 crete » Thu Mar 29, 2018 6:46 pm

2 points, 1 is the ruling party worried and, 2 how are the Greek people inclined to vote... :?
Dave H

Mackie
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Re: Yannis: The Return

Postby Mackie » Thu Mar 29, 2018 10:13 pm

I like the guy and follow / respect his economical views . I don’t think he is an idiot at all
Finance ministers do not run governments or even listened to in many of the countries round the world!!

Jeffstclair
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Location: The centre of the universe

Re: Yannis: The Return

Postby Jeffstclair » Fri Mar 30, 2018 8:36 am

Yes me to, and so do the young Greeks I speak to ...

mouche
Posts: 600
Joined: Sat Jan 15, 2011 5:43 pm

Re: Yannis: The Return

Postby mouche » Fri Mar 30, 2018 9:18 am

Yes, he's cool (rides his big bike, fancy rich wife, talks big) and will have others to pay the bills. A good sell for votes but ain't gonna work! If he ver gets into position he will be an absolute disaster for the Greeks (once again)!


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