This article is centered around lack of consumer confidence in the Greek economy. After one year of slow-down, people are unwilling to trust the banking system, fearing their houses will be taken away.
55% plus Greeks signalled pessimism in the economy, which I am guessing will cause a fall in consumer expenditure. Unemployment is rising and disposable income has fallen rapidly in the past year.
Should the government pump in more money to boost the economy? If so, why has it not done so already?
http://www.theguardian.com/business/2016/jan/04/greeces-economic-crisis-goes-on-odyssey-without-end
Well they could definitely benefit from some inflation, but they don't control their money supply. The EU does. So Germany would have to be willing to increase their money supply. Its not looking so good over there right now.
ReplyDeleteThat's right, EU controls money supply. So now that the LM curve cannot be effected, how else can Greece build up consumer confidence and stimulate the economy?
ReplyDeleteAlso, can Greece not even affect velocity of money?
This is honestly sad to see. With the EU having so much control, specifically on the money supply (so Greece themselves cannot pump more money into the economy), not much can be done to help out the country's multiple economic issues. The fall in consumer expenditure/confidence is detrimental for the greek economy leading to the fall is disposable income/rise in unemployment. Germany can really help out Greece with added money supply but this is just much more easily said than done. There will still be distrust with the greek banking system. I hope things work out for Greece somehow.
ReplyDeleteI am positive that if Greece had the option to create inflation to counter the massive debts that they have accumulated they would certainly do so. However, as a member of the EU, they have no control of how many Euros are being printed. Germany is the controller of the EU's central bank and inflation of the Euro would drastically hurt the German economy. This is one of the problems of political unions and maybe joining the EU wasn't the correct move for the Europeans.
ReplyDeleteIt is rather unfortunate that Greece's situation has fallen to such a low point. The Greek economy has been in a sense of turmoil for quite a few years now and has required the help of the European community to keep some sort of safety and insurance. Without consumer trust in the banking system, it is difficult to restore confidence in the country's markets as a whole, meaning that any policy changes will struggle to infiltrate the economy. There is quite a bit of work left to do in Greece, and it may not see normalcy for quite a while.
ReplyDelete