Friday 3 December 2010

Courtesy of Portugal, the Daily Show within the New York Times

A lesson from thinking about economics is that the evident truths are, on closer inspection, just plain false or even silly. This piece in the New York Times looks like a sketch out of the Daily Show where a somber "analyst" makes grave statements without realizing how hilariously ridiculous it all is. According to the reporters, the problems of Spain, Portugal, and Greece are that:

i) "You can’t build an economy on real estate, finance and tourism."
ii) "’s an absurd idea to have the same currency in a country like Greece or Portugal as in Germany, which has totally different habits and culture."
iii) "They lived on a bubble of credit and real estate development that sent wages and debt soaring."
iv) Deficits and debt are high.

These reporters were looking outside their window to face Manhattan just as I am right now. Funny that they didn't notice that the city in front of them has:

i) An economy built on real estate, finance and tourism.
ii) The same currency as Alabama, Alaska, and California.
iii) Very large increases in credit, real estate development, wages and debt in the last decade.
iv) A huge amount of debt and current deficits in the state government.

Jon Stewart couldn't have done it any better.


  1. It just shows how silly the media can be and how misinformed the public some times his.
    One more reason for economists like yourselfe to spread more words, even if they sound difficult to hear.
    Let's put more dynamics to the blog. Bold ideas for Portugal please!!!!

  2. What makes me, even more dazzle, is that it is not only poor trained news journalists who make such claims. By these last weeks, many well trained and well paid financial managers in Lisbon, are spreading the same stupid idea of Portugal opts out of Euro currency... It makes me wonder if they are longing of the times driven by the crawling-peg, and if they really believe devaluation is still a good receipt to shadowing plain government managerial incompetence?

  3. What are Euro-fighters (people who fight the Euro, and would rather leave it) fighting for?
    The chance to restore competitiveness (by means of a devaluation)? No, wrong answer!
    This goal can be achieved within the Euro.
    If the government decrees a tax of 1% on all bank accounts and a cut of 1% on all salaries and all prices (that can be partially or totally reversed in the future), it will achieve a similar effect to a 1% currency devaluation (I leave the technical details to Professor Ernani Lopes).
    But people will notice.
    What is lost within the Euro is the chance to do it unnoticed. The lack of transparency!
    Euro-fighers are basically fighting transparency.

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