© 2018 by Robert Person.  The views expressed on this website are my own and do not represent the official policy of the U.S. Army, Department of Defense, or U.S. Government.

Apr 14

Debt in Greece

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Greece, the problem child within the European Union in terms of financial stability, has relied on IMF, European Central Bank, and the European Commission bailouts and financial aid. In 2015, Greece had an unemployment rate of a staggering 25%, 15% higher than the average unemployment rate of the European Union. Based on theories we learned in IPE concerning unemployment, the high levels of unemployment means that the supply of workers is high, and the wages should be lower. In theory, this cheaper labor would lead to higher demand for labor, and eventually lower unemployment. However, in order for this process to work, certain institution must be in place to foster the supply of work itself. The article discusses the bailout conditions for Greece to "overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business", all steps to promote an environment that supports an increase in jobs within Greece. However, even with these steps, Greece's problems are far from over. They have already been reduced to their last resort; IMF bailout, and given the current trend of Greece's economy, lenders are weary due to fear of default, and interest rates are bound to be high. The path ahead for Greece is difficult to say the least, but with pressure from the IMF to clean up their institutions and monetary policies, Greece's economy still has hope.

 

New Posts
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  • https://www.nytimes.com/2019/05/09/us/politics/china-trade-tariffs.html Just before a scheduled round of trade negotiations began on Friday, President Trump announced that he was still going to levy additional tariffs on Chinese imports valued at approximately $250 billion. President Trump claimed that these tariffs would bring billions of dollars back to US manufacturers, but the main focus seems to be inflicting pain on China, as opposed to bringing prosperity to the US. China and the US have not been able to reach an agreement that would minimize or end outright the "trade war" between the two, which stems from the Trump Administration's belief that China is not doing all it can to protect American investments and intellectual property in China, as well as the belief that a large trade deficit with China is inherently bad. The Trump Administration's use of tariffs as a negotiating tool is inelegant, but effective. Unilateral tariffs immediately affect the Chinese export industry, whose products become less competitive in US markets. While this inflicts pain on Chinese exports, whose largest market is the US, it also affects US consumers, who have to pay higher costs for consumer goods. Additionally, because China retaliates with target tariffs (on politically-relevant goods like Kentucky Bourbon and soybeans from the Heartland), US exporters are equally hurt by the trade war. The only immediate winner is the US, who collects revenue from the applied tariffs; however, long-term, US domestic industry should improve, as they will become more competitive when Chinese imports are more expensive. Slowly, we are starting to see this happen: Dan DiMicco, the chairman of a lobby group "Coalition for a Prosperous America," explained that American manufacturing is already experiencing gains in their domestic market shares.
  • https://www.washingtontimes.com/news/2019/may/8/feds-release-168k-illegal-immigrant-family-members/ In Stephen Dinan's article in the Washington Times, he explains the unforeseen immigration due to illegal border crossings. ICE border patrol has released 168,000 illegal immigrant family members this fiscal year, and the number is expected to increase as the border situation increases in volatility (Dinan). Dinan reports that 87% of families in this new pilot program skip their court hearings, and with an ill-equipted government to track them down judges deport them in absentia (Dinan). Dinan argues that this increase in illegal immigration in family units is caused by a 2015 court ruling that stated parents who travel with children must be released in 20 days. Since this is too little time try them in court, the families are set free (Dinan). This article is very relevant to this block in IPE as it highlights a crucial phase that the world is going through. As policies towards free and open borders begin to gain more and more traction, we can expect the number of border crossings into the country to continue. As we talked in class, this may actually be a good thing for the economy, as low skill labor is substituted due to a higher rate of college attenuation and graduation. Dinan says that most migrants interviewed are not criminals, they are just seeking jobs, and know that if they bring children they will find asylum in the US (Dinan). One of the unintended consequences is that some of these migrants are being used to smuggle drugs and weapons into the country, and in some extreme cases, children are being sold to impersonate children of felons migrants of south american countries to gain access with ease. As globalization brings countries closer together and as the trend for free an open borders continues incentivizing cheap labor, it will be interesting to see the effects of these policies 10-15 years in time.