French politicians ignorant fuckwit froggies

That\’s not quite how Martin Feldstein puts it but it is what he means:

The French government just doesn’t seem to understand the real implications of the euro, the single currency that France shares with 16 other European Union countries.

French officials have now reacted to the prospect of a credit rating downgrade by lashing out at Britain. The head of the central bank, Christian Noyer, has argued that the rating agencies should begin by downgrading Britain. The finance minister, Francois Baroin, recently declared that, “You’d rather be French than British in economic terms.” And even the French Prime minister, Francois Fillar, noted that Britain had higher debt and larger deficits than France.

French officials apparently don’t recognize the importance of the fact that Britain is outside the eurozone, and therefore has its own currency, which means that there is no risk that Britain will default on its debt. When interest and principal on British government debt come due, the British government can always create additional pounds to meet those obligations. By contrast, the French government and the French central bank cannot create euros.

Just further proof that there hasn\’t been a Frenchman who understands economics since Frederic Bastiat and he died in 1850.

9 comments on “French politicians ignorant fuckwit froggies

  1. The daughter of a friend of mine is graduating from SciencesPo, currently doing time in an investment bank as part of the last year. She is bulimic with stress.
    I’ve tried to reassure her that’s it’s nothing personal. People treat her with contempt because the markets don’t give a fuck for the jejune economic opinions drilled into her by her profs.
    I’m not sure my attempt at comfort worked. She still insists she knows better – after all, she’s at SciencesPo.

  2. “By contrast, the French government and the French central bank cannot create euros.” … brilliant, what a fantastic thing – one less cheat and lie that governments can resort to.

    Tim, I would have thought you would love to remove the power to create fantasy money from governments – on the reasonable grounds that they will surely abuse such a power.

    “British government can always create additional pounds” … we are all worse off if governments devalue against each other – similar to tit for tat trade restrictions – hurts everyone with transient gain for the perpetrator.

    Also, I find it hard to believe that we have a good credit rating because we can repay our creditors with fantasy money. Surely the prospect of being repaid in fantasy money is just the sort of thing that gives you a BAD credit rating.

    This is how Greece got into so much trouble, they had a credit rating commensurate with there being no danger of being repaid with fantasy devalued Greek currency.

    You can hate the “grand political project to unite the West” because you feel it is bad and wrong or whatever, but loss of ability to devalue the currency is not a good reason to be a europhobe.

    The world is a better place if governments cannot mess with their money – there will be more jobs paying higher wages everywhere. The sainted Margaret Thatcher was herself very clear on the harm that governments can do to their people when they mess with the money.

  3. Thankfully not true, Charles Gave has been a great economic financial market commentator for many years, founding the firm GaveKal, based in Hong Kong, with Anatole Kaletsky.

  4. Johnny Bonk wrote:

    “we are all worse off if governments devalue against each other “. I know what you mean, but if, say, a German Mark rose in value, it’s citizens would be richer in relative terms, as imports would be cheaper. Trade imbalances between nations are not a good idea in the long run, as we have seen.

  5. Johnny Bonk

    I think the more important point is that the UK has control of its monetary policy as well as its fiscal policy. Eurozone countries do not. So, for example, if the UK needs to raise interest rates to counter inflationary pressures, it can do so. France, on the other hand, can only use fiscal policy to counter such pressures, and may find itself fighting a monetary policy that is pulling in the wrong direction because the German economy, which dominates the Eurozone, requires different medicine. In fact the damaging effect of running a one-size-fits-all monetary policy when there is insufficient economic convergence is to a large extent the ultimate cause of the current Eurocrisis. France is subject to this problem just as much as the rest. No wonder CRAs and markets don’t trust it.

  6. Well, the German Mark rising would make Germans imperceptibly richer over some geological timescale (the past several years of soaring euro value have not made things noticeably cheaper here, for example), except for those Germans who lost their employment because of the uncompetitive currency rate.

    If the euro broke up, the German government would probably have to follow the Swiss in forcing the New Mark down, to stop the economy suffering from the perceived safe-haven status of what would be a rather small new currency.

    And I’m not saying the French guy is right, but the US, with a sovereign currency, has also had a ratings downgrade, so the ratings agencies do seem to consider the risk of inflationary money printing (which would happen instead of default in such countries), not just the risk of a real, proper, no brand new banknotes default because the money is no longer there (which will happen in at least one eurozone country).

  7. From the quote: “By contrast, the French government and the French central bank cannot create euros.”

    Yet the French government merrily borrowed. Why? Either they are cretins who did not realise that using a currency that they cannot print themselves is in some ways like returning to a gold standard, or they bet the farm on eventually being able to change the rules and print their way out of trouble.

  8. @sandgrownun: And would that be the perceptive outfit of great commentators that published a book in 2005, now out of print:

    ‘The reason so many analysts drag their feat in admitting that History has failed to rhyme this time around is that it would lead one to the dreaded conclusion that “things are different this time”. And yet, this is exactly what we do in our latest effort entitled Our Brave New World.’ … ?

  9. Sorry, but this truly is some hilarious economics you’re teaching here. Yes, Britain can print as many pounds they want and wouldn’t default on that note. The problem is that this wouldn’t help Britain the least. Given its dependence on imports, a devaluation of the pound would create way more problem than it solves, as it would require Britain to become self-sufficient while having nothing but fantasy money. Last year’s riots would appear like a small-scale schoolyard brawl against the consequences.

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