Austerity: The Transcript

Ok today we're discussing Austerity, Solution or Problem?, but before we start, I just want to point this out, since I hear people say this wrong a lot:
Greece = the country
Greek = the adjective "the Greek economy"
Greek = the people "the Greeks"

Okay, so today, what I'm hoping, is that we can build on what we figured out in the Apple Economics discussion, and try to sort of apply that to the austerity problem. Like, see if we can apply austerity, or Paul Krugman's solutions to our simplified Apple Economy and see what we can learn from it.
So, how did this problem with the euro get started in the first place?
When Europe was created, they were afraid that each country in Europe would spend too much, so they set a kind of rule to limit each country's spending.
Why were they afraid they would spend too much?
You mean Greece, or Germany or something?
It was called the the Maastricht Treaty.
Each country in the European union should follow this rule.
So what's the benefit? They created the euro system, so what's the benefit of the euro?
For Germany, the benefit was that their exports were increased.
Because the currency is higher?
The currency is lower. Because the real value of the mark is higher than the euro, so when it changed to the euro, it means the value decreased.
It means that they had more money.
So they created the euro because of this?
Because they wanted to fight against the prices of America, right?
It has to do with oil prices and currency strength. Before the euro, the global currency was the American dollar. Major commodities like oil were priced in US dollars. This is very convenient for the US gvt, because it doesn't have to buy currency to buy oil so it saves a lot of money on currency conversion, and a lot of headache with currency prices rising suddenly, and actually it can just print money to buy it if it needs. So the US had this built in advantage. So people wanted to have a currency as strong as the dollar as an alternative. You know, after the euro was started up, Iraq threatened to sell oil in Euros only. I wonder if that was one of the reasons for the US invading Iraq.
I think you can think about the Apple Economy to explain why they need a euro. Because we just said that the real economy needs to be equal to the virtual economuy. The value of currency should be equal to the real economy. The American economy produces a huge growth in the world. So if it can create, combine the European countries, to become another big country, then the euro just equals this product.

But actually they have different tax systems and social welfare.
Yeah, that's another problem. But at the beginning, they just want to unite all the countries in Europe to compete with the dollar.
Also you can't have a war if you have the same currency.
Because you're in the same economic boat.
Like the US and china.
Because the currency represents this country's productivity, and this country's future. It's like a person's credit. if they have a war, it has a bad future and the productivity will decrease and the value of the currency will decrease.
And it's bad for the currency to decrease?
Sure, your money decreasing?
If you have 50 dollars, it could translate to 2 euro, or one euro say, but afterward you might only be able to buy half a euro, so your money has less value.
The article says that in textbooks, in a recession the government has to spend more to offset falling private demand. Can anyone explain why?
It's just like 1+1 = 2. My economics teacher said the factor to increase growth from spending is from 4 groups, that is, people, compaines, governments and exports.
So when people, companies spend less, and exports decrease, the govt should increase their spending.
Money is the representation of moving value. It's not whether people HAVE money in the economy, it's whether it's moving around. People could have lots of savings but the economy is bad, because noone is spending money, so no-one is making money. An economy is not about people having money, it's about people trading money back and forth. You can have an economy with just a single dollar bill passing around this room, and everyone could derive value from it. Money doesn't represent a fixed value, it represents a trading value. Gosh, this is so hard to explain clearly.
So if the governmnent has to spend money, the government gives money to whom?
They can give money to people.
Or construction I guess.
Or they can give out 'consumer tickets'.
Oh, like a couple of years ago, everyone got 3,600NT.
Do you think that was effective?
Why not?
All the economists said it was not effective.
Really, but the japanese government came to taiwan to learn something about it.
But it was just a temporary effect.
It was only meant to be temporary.
But for actual growth, you need longer-term investment, like buidling.
A few years ago when there was the world depression, my dad said that the Taiwanese economy was not affected as much as the world. I don't understand why.
Why not affected?
Did you say the taiwan economy was not as affected?
In 2008.
Compared to European countries and America, taiwan was less affected. But actually Taiwan was still affected. But not as badly.
Because we are not euro or dollar?
Oh, I wonder!
Because those banks are not in Taiwan, they are in the US and Europe. Banks are just like the heart of our body.
So we didn't have a heart attack
Haha, yeah, we only just had a headache.
But the price rises recently, everyone is complaining.
That's because our central bank devalued our currency.
When did they do that?
To stimulate exports?
How do you devalue a currency, print more?
Buy more US dollar or euro.
What does devalue mean?
Make our currency worth less
Against the dollar you mean?
That was just recently?
They often do that.
Yes. You could say, 'usually'.
I knew that China did that, to keep their currency stable.
Also Korea.
But if they devalue the currency, how do they buy more US dollars?
Hey, good question!
Because we have the central bank reserves.
So we have money to buy or sell to control the currency.
The central bank will buy a lot of foreign currency, like dollar or euro or Japanese yen. And how do they buy the currency? They use Taiwanese dollar to buy foreign currency. They sell Taiwanese dollars in the market to buy US dollars, and in the market, when you sell something, the value of that thing will decrease, and when you buy something, the value of that thing will increase. So the central bank, they sell Taiwanese dollar to devalue it.
Who do they sell it to?
People in the market.
People actually buy the taiwan dollar?
Like companies in taiwan or foreign investors.
Oh, god, this is like an interview!
You didn't know you would be tested today!!
We really appreciate it though.

Okay, so why does Paul Krugman say austerity is bad?
What does austerity mean?
So you know, in gradeschool, it was explained to us that WWII saved the US economy from the great depression. Everyone in the US knows that the war was a good thing for the US. Afterwards, we were so rich, in the 50s.
I don't understand that.
Okay, so the US decided to go to war, so it sold 'war bonds', and everyone bought them. This means people were lending money to the US gvt...
But people didn't have any money, becuase the economy was bad.
It wasn't that there was no money, it was that money wasn't moving around. Also, it wasn't just American citizens who bought them, companies did too, and maybe even other gvts, who knows.
Like China!
I don't know if China bought US war bonds in the 30s, they were having a lot of their own problems then, right? But who knows, maybe!
...So, okay, then the US gvt went out and bought all these war things, like guns, bombs, vehicles. From an economic point of view, war is great, because it breaks everything, and then people have to go out and buy new things, so you can constantly make new things all the time, and people will buy them. Like, okay, you buy a washing machine, maybe the next time you buy one is in 20 years, meanwhile, what does the company do to make money? But if you're a gvt buying stuff for war, you're like buying an exploding washing machine. You use it, it explodes, and then you need to buy a new one right away. Of course, they actually want the washing machine to explode, because it's a bomb, and they need the bomb to do the thing for making the war.
Oh, so you sell lots and lots of washing machines!!
Yes. So wars are really good for the economy. In fact, I think that's the only way we know so far to make a really broken economy work again, is go have a war. Why do you think the US has got these perpetual wars going on? Because you can make money in a war. Actually, the Rothschilds became the richest family on the planet because they funded wars in Europe for hundreds of years. Wars are can be really profitable, and they also create a huge demand in the economy.
So but now we just have Americans buy all the products.
But American's garages are full, and their economy is kind of broken now, remember?
So you're saying that to save the economy, we have to crate a war?
Yes, that's the traditional way yes.
And it should be outside your own territory.
Right! Look at Iraq.
The US is always creating wars in the name of peace.
And also justice.
Yes, they always need to do that, because Americans need to feel they're morally correct, to support a war.
I don't think we need war, we just need to get rid of capitalism.
Thank you! Yes! We don't need the traditional way, we need a new way!

Recently I found out a movement called alter-globalization...
Oh, like alternative globalization.
...and so, right now the globalization is focused on GDP and capitalism, but in alter-globalization, the economy is still important, but it places focus on human rights, environment, climate change and so on.
Do they have an alternative to our current money system?
I didn't go that far into it yet.
Angela, we discussed this issue, in the Ripple Economy.
Yeah, okay.
Because capitalism is depriving human rights, making the rich richer and the poor poorer.
Yes, I agree with you.
And recently I also read, a book called, the Story of Stuff
Yes, we discussed that before, they were awesome.
The story of stuff?
The cartoon
Oh, yes.
It talks about free trade is created by WTO, IMF, and…
the World Bank?
Yeah, something like that
What's that!
The Organisation for Economic Co-operation and Development.
(we looked up the website, it says it's in partnership with the World Bank.)
You know, I don't trust anyone with the World bank, they're full of shit.
The book talks about how they fooled the world for like 50 years about the economic system, and people didn't realize about the conomic system, and then in the 1990s, in Seattle there was a conference, and there was a big fight against the WTO.
So, after the leaders of the WTO retire, they usually work for American banks. So they are intertwined.
Bank of America?
Banks in America.
Oh, so here's the thing, if you look at countries who took IMF prescriptions, they're in real trouble, and the ones that gave the IMF the finger and defaulted on their debt, like Malaysia, they're basically doing fine. You know after I talked about the Apple Economy at Wenhua University, I talked with some of the students their who're from Indonesia, and they told me, the debt they owe to the IMF, and this really shocked me, they told me they're going to be paying the INTEREST, not even the actual debt, just the interest, for 10 generations.
Not 10 years, 10 generations?
So the IMF isn't expecting them to pay it off.
That's what I think actually, it's a kind of virtual slavery
One thing I don't understand, why when the developing countries get independence, why do they have to pay a huge debt to the IMF?
Me too, I don't understand that
We are not a developing country.
I guess maybe those countries they borrowed money from IMF
No, I mean, when they gained independence, the IMF says you need to pay a huge amount of money for independence.
It's the 'independence tax'.
I'm joking.
It's a huge amount, they can't ever pay, right now they're all still in debt.
What I don't understand, is they didn't ask for the people to come to their country, and their resources were taken by the developed countries, and now they want to be independent and they have to pay to the developed countries, but the devloped countires didn't pay for all the deprivation they caused.
So if taiwan wants to be an independent country, then they have to pay money?
They're not on the countries list.
Yes, but if we wanted to be there, should we need to pay?
IMF and World BANk usually pick the weakest economic entity to take advantage of. And they usually trade benefit with the authorities of the country.
'Trade benefit with', means?
Maybe they will say to Ma Yingjiu that, if you don't want to be independent, we will give you some benefit something like that?
IMF and World bank will offer their aid to the authorities of the country.
Ahhh, so aid is not free!
And the authrity have to follow thier instructions, so that they can screw up their economy.
Ok, and I just want to say...
So they can impose their virtual currency into that country and gain control of the real economy of that country.
They use the virtual economy to control the real economy.
Holy cow.
Oh, and you said that people in the IMF & WB are all intertwined with people in the US. OHHH. Everything becomes clear.
Just like our banks, they usually want the public to borrow money from them, so that they can turn the public into their slaves.
The head of the IMF is always fro the US, usually nominated for...
If not US then Europe.
But this year, some people say should nominate another one, from a developing country.
That's no guarantee. That's like saying, oh, the CEO is a woman, so she'll be kinder to women.
So it changes every year?
This year one of the candidatees
I thought the Korean American...?
But in the end, he's American.
So the final winner is those bankers in America.
Who just got bailed out by the US government.
Oh yeah! And those people are, not only Americans bailed them out, but people in the whole world bailed them out
How do you mean?
Because we suffereed a world depression because of those banks.
They are connected to each other, so.

Who was bailed out by the US government?
The banks.
American banks and companies were bailed out by the government?
And saved by them.
In 2008. They let Lehman brothers die, but saved Goldman Sachs and AIG.
So I think Lehman Brothers probably pissed someone off, so they let them fall.
And lose a lot of money.
You lost money in Lehman Bros.
But I did nothing wrong.
The mistake is just investing in...
An american bank?

Closing Statements
So, actually I still wonder that why they construct the euro system, because they're, actually maybe I could do some research about this so we could discuss next week, I still want to know why, the reason. But actually, I still have little understanding about the economic system, because I'm studying scientific, you know medicine. So I don't have the exactly comment on this, so thank you, next! Maybe next week I could talk more about this.

Well, after the discussion tonight, it confirmed me again, that our class is the best one!
That is an advertisement!
I'm so putting this up on facebook, now!
Is it because there's someone new?
Yes, we have a newcomer, who brings us brand new ideas, and also Jennifer gives us new ideas about WTO, and our new classmate helped me understand that the final winner is those bankers in America.
You never thought about this?
Because I'm a loyal capitalist! Was! And about the topic, I've said a lot in this discussion, so next!
Cheater, getting out of your 2 minutes!

This discussion group really blew me away. And, it's good to have a bunch of people to discuss this issue. From my vantage point, the more arrogant or snobbish you are, the more you feel its justified for you to monopolize all the resources. By this i mean, you feel like you deserve the best, and you are above everyone else, so you should control others. Just like the leader in developed countries.
Yeah. Privelege.
We talked about privelege several times, but I still think it's an interesting topic, every time.
Yeah, it is.
Because privelege is everywhere.

Well, I know too little about the economy, but everytime we talk about it, I feel depressed. Really. And I don't see any optimistic future ahead of us, and...
So sad!
...maybe that's because only naive people can be optimistic.
I disagree! I am certainly not naive, I'm accused of being cynical all the time, and I'm still optimistic.
We are trying to find the way out, and we are all in the same boat, which is going to sink.
We need to bail...
who's going to?
...we! we have to bail ourselves out
Or swim!
Yeah, why not
the whole world is sinking, where are we going to swim, outer space?
But we live on a small island.
Are you done depressing us now?
I was depressing you?
I wasn't depressed until you said that!

Um, well, I think free trade and capitalism is a vicious cycle, and for example, the US gives a lot of money to the farmers, subsidies, and the rice and the food is so cheap that the developing countries cannot sustain, because their food grown organically is of course more expensive than that in the US. So this whole system is a bad system. And, right now, although, some people are getting richer, in the US, in some parts of the world, I don't think these people are happy. Why is there so much depression in the US, and anti-depressants are so popular in the US.
It's a worldwide trend.
I think these people, they make a lot of money, I think they are hypnotized, kind of, so they think that making money is the correct thing, and because they are unhappy thye think earning money will make them happy, and but then there's not an end to it. So, finally, I think we need a new system.

I just think that, why the globalization become so popular recently? That's maybe because our virtual economy increased so fast, and we need more faster real economy, so Americans have limited resources, so companies in America they need to gain resouces outside of America.
This has been going on for 400 or 500 years. Colonialism was really about feeding the virtual economies in Europe. Making the real economy match the virtual one in Europe. But now there's no more colonies to exploit.
So imperialism is also linked to capitalism, and linked to the virtual economy.
Well, this business of fractional reserve banking has made the problem very acute lately, but we've always been headed towards this point sooner or later.
But the Virtual Economy is like the faster better imperialism.
So someone said, developing countries are not going toward somewhere, some kind of development, they are the result of development.
Oh, thank you! You just blew my mind!
They are the result of the process of developing the first world.
You mean the developing world is the result of the process of developing the first world.
They're always going to be in second place, and messed up.
The inevitable outcome.

So, you see, in the beginning of this discussion, someone was like, "Oh, I'm not an economist, I don't know much about the economy", and I said, all of us know some things, and we can build on our knowledge together, because we have six brains here, not one. And look at how far we got! This discussion was not very focussed, but it's like the beginning of a longer conversation we can have. What I would like to do is that all of us go out and look for alternative economic systems we could discuss, see what we can do differently. Like for the next two or three meetings, see if we can figure something out! Or at least understand things better. Because I don't want to think about the economy and be depressed, I want to see what we can change. I want to see what people are already thinking about or doing to change things.