Greeks embrace some new myths about life with the euro

[KoTeMoRe]

Assuming that what you say is true (which it isn't), how does that justify a 79% increase in annual expenditures?! We're talking about using Euros which in fact were appreciating compared to other currencies in that time period.



What kind of twisted socialist reasoning is this? Government does not spend on its people (on a per capita basis), it steals from them in that fashion (with a uniform tax code). The only people receiving the handouts were those corrupt enough to milk the system.



Oh... so now the tax issue is therefore resolved, correct? Did Greece reached a balanced budget this year or is it still 15 BILLION in the red?
And yet you're still calling for more tax collection efforts. Impressive.



So by your own figures (flawed as they are), Greece is collecting a higher percent of GDP in taxes than Germany, at least in 2012.
As far as comparing it with other developed countries, let's see what valid statistical sources have to say:
World Bank (excluding social contributions): http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS
Eurostat (including social contributions): http://epp.eurostat.ec.europa.eu/sta...nue_statistics

The average (by GDP) for the EU-27 is 36%, which is still no indication of government spending or debt. Bulgaria for example has the lowest tax collection (27%) but also one of the lowest government debt figures (16%).

Eurostat clearly shows that raising tax revenue (as has been the case in the past could of decades) has not relieved the debt issue, it has in fact exasperated it:

Attachment 180351

So more revenue, higher debt/GDP ratio. Socialism at work.

Bulgaria, rally? Been there lately?

Man you keep talking out of your arse.

Inflation numbers (cpi) Greece.

Prices and interest rates
*	Inflation rate: all items	Annual growth %	3.5	2.9	3.5	3.2	2.9	4.2	1.2	4.7
*	Inflation rate: all items non food non energy	Annual growth %	3.2	3.2	3.3	2.5	2.9	2.9	2.6	3.3
*	Inflation rate: food	Annual growth %	5.0	0.5	0.6	3.7	3.2	5.4	1.9	0.1
*	Inflation rate: energy	Annual growth %	3.7	6.2	13.9	9.0	2.1	13.3	-11.8	28.8
*	Producer Price Indices (PPI): manufacturing	Annual growth %	2.1	3.8	6.4	7.9	3.5	9.7	-7.2	6.9
*	Long-term interest rates	%	4.27	4.26	3.59	4.07	4.50	4.80	5.17	9.09
*

And Socialism? FFS I lived under a socialist regime for roughly 30 years. Not your Swedish paradise, the real deal, ration coupons, cooperative work, travel permits and the whole shabang. And you are speaking about socialism. How old are you, 5?

FFS you said advanced economies? Do you have any shame at all? EU27? Well try EU 28.

[mechin]

Bulgaria, rally? Been there lately?

Can you kindly stick to a topic or do you need to keep moving the goal post when your ignorance is clearly exposed? Bulgaria has low tax revenues (as a percent of GDP) as well as low levels of debt. Obviously the problem is not with revenue but with government spending. I also provided a Eurostat graph that shows the rapid growth of nominal tax revenues while debt was ballooning. Again, the issue is not government revenue but spending. Get that through your head already.

Man you keep talking out of your arse.

I quoted the WB and Eurostat. Nice try.

Inflation numbers (cpi) Greece.

Again you're responding like a clueless contrarian with no valid argument. WTF does inflation within Greece have to do with government spending? If anything, it was the government domestic spending that fueled the inflation. Greece was still however using the Euro and its purchasing power compared to other currencies or as a national currency (in places like Germany) did not depreciate. Germany (while using the same Euro note) experienced inflation of less than 2% a year and even saw deflation in months of 2009.

And Socialism? FFS I lived under a socialist regime for roughly 30 years. Not your Swedish paradise, the real deal, ration coupons, cooperative work, travel permits and the whole shabang. And you are speaking about socialism. How old are you, 5?

And you still haven't learned the lesson that "government that governs least governs best"?! You think that the Eurozone's problems will be solved by yet more revenue (as the chart indicates was taking place) instead of cuts in government expenditures? It's insanity to keep repeating the same mistakes and expecting different results.

[JRT]

Can you kindly stick to a topic or do you need to keep moving the goal post when your ignorance is clearly exposed? Bulgaria has low tax revenues (as a percent of GDP) as well as low levels of debt. Obviously the problem is not with revenue but with government spending. I also provided a Eurostat graph that shows the rapid growth of nominal tax revenues while debt was ballooning. Again, the issue is not government revenue but spending. Get that through your head already.



I quoted the WB and Eurostat. Nice try.



Again you're responding like a clueless contrarian with no valid argument. WTF does inflation within Greece have to do with government spending? If anything, it was the government domestic spending that fueled the inflation. Greece was still however using the Euro and its purchasing power compared to other currencies or as a national currency (in places like Germany) did not depreciate. Germany (while using the same Euro note) experienced inflation of less than 2% a year and even saw deflation in months of 2009.



And you still haven't learned the lesson that "government that governs least governs best"?! You think that the Eurozone's problems will be solved by yet more revenue (as the chart indicates was taking place) instead of cuts in government expenditures? It's insanity to keep repeating the same mistakes and expecting different results.

You two speak in different languages here, one in neoclassical friedmanian language and the other in keynesian language. Hence your difficulties in understanding each other.

Inflation is increased by the following ways:

- decreased production, equal demand (roughly the reason for 1930's Germany and 2000's Zimbabve hyper inflations)
- equal production, increased demand (less of an issue these days because of global logistical chain)
- increased public spending, equal taxation
- equal public spending, decreased taxation

Government spending is thus a method to pump money into the private sector, as one way or another the money ends up in private hands (corporations, companies or individual public sector workers pay). If spending is increased but tax % stays the same, demand is increased.

Because countries of Southern Europe suffer from chronic foreign trade deficit, it leads to decreased demand in the private sector which eventually leads to increased debt in the private sector and then recession with all it's social problems unless money is pumped through public spending. Greece tried to offset the foreign trade deficit this way (just like for example the US does) but Greece does not have what the US has: a national central bank that can "print" money. When investors raised their interests on Greek loans, pumping money to the private sector decreased dramatically and here we are. Cutting government spending does not solve the issue, on short term it only makes it worse. If eurozone is to be kept intact, 1) countries with trade surplus must subsidize those with trade deficit, or, 2) trade surpluses need to be controlled the same way as public deficits or 3) ECB must be allowed to purchase government bonds. Cuts on Greek public spending will only diminish the already badly hurt Greek private sector.

The above is roughly the Keynesian approach to the issue.

You think that the Eurozone's problems will be solved by yet more revenue (as the chart indicates was taking place) instead of cuts in government expenditures?

This is the Friedmanian approach to the issue, which in my opinion does not consider very thoroughly what affects cuts in government expenditures have on private sector, as those are always connected (along with trade deficit/surplus) and not separate. It must be duly noted that to control inflation, increased public expenditures must go hand in hand with increased taxation. "Printing money" in itself is not a source of inflation, what matters is the money in circulation.

[mechin]

You two speak in different languages here, one in neoclassical friedmanian language and the other in keynesian language. Hence your difficulties in understanding each other.

Thanks for the intelligent response. I'm quite familiar with the language he's trying to use, and why it is wrong based on every economic indicator there is.

Inflation is increased by the following ways:
- increased public spending, equal taxation

Which was the case in Greece (a 97% increase is annual government spending in just 7 years), plus the availability of cheap credit to consumers. The ECB was and is focused on the core countries and their perception of inflation instead of what was/is going on in the periphery. What policy did they follow when the housing bubble was expanding in Spain (cutting rates) or when the bottom fell in Greece (increased rates)?

Government spending is thus a method to pump money into the private sector, as one way or another the money ends up in private hands (corporations, companies or individual public sector workers pay). If spending is increased but tax % stays the same, demand is increased.

That's simply incorrect. Assuming that government does not borrow money from foreign sources, all you're accomplishing is taking money from the private sector (via taxes or selling bonds) so that you can throw it back into the economy. That's like taking money from one pocket and putting it in the other. Money that would not have been "raised" by government would have been spent/invested by the private sector. In fact, the propensity to spend and the velocity of money in private hands can have a greater impact on GDP growth than if government appropriated the money in order to spend it. A growth in GDP results in increased tax revenues for government with the exact same tax rate.

Now, if you want to talk about the impact of foreign borrowing on a domestic economy, then let's have a debate on the most efficient and sustainable way to have that capital infusion. In that regard the prudent method is to achieve high FDI instead of creating external debt in order to fuel private consumption.

Because countries of Southern Europe suffer from chronic foreign trade deficit, it leads to decreased demand in the private sector which eventually leads to increased debt in the private sector and then recession with all it's social problems unless money is pumped through public spending.

Define "chronic" and what scale you're using. Prior to EEC/EU entry the trade balance was negative but not massive. Since then and especially after EMU entry the deficit more than doubled in just a few years (and would perhaps still be growing if the periphery was not in financial trouble). Having the Euro for currency simply fueled the desire for more merchandise (consumption) that had no positive effect on the local economy but did benefit the "core" manufacturing ones.

That's also another of the "new" methods of inflation, which is the strong currency in the EU or the "equity" Americans had in their houses. Both in the end were nothing but means to draw on more credit to fuel consumption.

Greece tried to offset the foreign trade deficit this way (just like for example the US does) but Greece does not have what the US has: a national central bank that can "print" money.

Correct, but as I mention, they also had a central bank that followed a monetary policy that made matters worse (cheap credit with an overheating economy, tight in a massive recession).

When investors raised their interests on Greek loans, pumping money to the private sector decreased dramatically and here we are.

But public spending hasn't really decreased (nominally). Where government has decreased spending is on payments to individuals that have the highest propensity to spend - "poor" people. Additionally it further burdens these same people with additional tax obligations. Less money in the pockets of these people results in the recession you're seeing.

Cutting government spending does not solve the issue, on short term it only makes it worse.

What is making it worse is that the government is taking even more money out of the pockets of citizens. They should be reducing taxation and spending at the same time in order to spur on the economy. Obviously taking on more debt and spending it (as they have done now for about 5 years) is not working.

If eurozone is to be kept intact

4) The ECB needs to set a policy that works for all economies.

This is the Friedmanian approach to the issue, which in my opinion does not consider very thoroughly what affects cuts in government expenditures have on private sector, as those are always connected (along with trade deficit/surplus) and not separate. It must be duly noted that to control inflation, increased public expenditures must go hand in hand with increased taxation. "Printing money" in itself is not a source of inflation, what matters is the money in circulation.

The only way government can spend is by taking/stealing money from its citizens or by borrowing. Greece has hit a limit on borrowing, and so will many other governments with sustainably high debt obligations. And that's why the Greek governments have been taxing ordinary citizens to the breaking point.

Better for a government to default on its obligations than to tax their citizens into oblivion in order to send that money to foreign creditors. The more money that stays in every citizen's pocket the quicker a recovery will occur.

[Telmar]

@Mechin

I'd think twice before using Bulgaria as an example. I really would. I would recommend you try to do some business there. You will meet colorful young capitalists. Pick Czech Republic, Slovakia, Poland...sure. Bulgaria....no.

[KoTeMoRe]

Meh he will use every possible argument that could remotely fit his views. He has never set foot here, yet is willing to offer advice. Legit.

[mechin]

I'd think twice before using Bulgaria as an example.

The example of Bulgaria was with regard to how low government revenues (as a percent of GDP) does not equate into high government indebtedness.

[Telmar]

The example of Bulgaria was with regard to how low government revenues (as a percent of GDP) does not equate into high government indebtedness.

I would take Bulgaria numbers with a pinch of salt young man.

Cheers

[KoTeMoRe]

The example of Bulgaria was with regard to how low government revenues (as a percent of GDP) does not equate into high government indebtedness.

Out of the blue, off course. The Social contributions in Bulgaria are around 29%

The total social contributions rate for the employees working under conditions of the most general 3rd category of labour in 2010 is 29.3% and is distributed by funds as follows:  Pensions – 16 % , of which 5 % are contributed to Universal Pension Fund but only for persons born after 31.12.1959; General disease and motherhood – 3.5 % ;
 Unemployment – 1 %;
 Labour accident and occupational disease6 – 0.7 % ;
 Guaranteed receivables of workers and employees – 0.1 %;
 Health Insurance – 8 %.
5 The National classification of economic activities is applied which is in compliance with the European classification NACE Rev.2.
6 Percentage varies depending on economic activity of the employer, on average it is 0.7%.

Ie it is a pittance and hardly comparable with world class economies.

[JRT]

Thanks for the intelligent response. I'm quite familiar with the language he's trying to use, and why it is wrong based on every economic indicator there is.

It's wrong only based on the school of economy you believe in.

Which was the case in Greece (a 97% increase is annual government spending in just 7 years), plus the availability of cheap credit to consumers. The ECB was and is focused on the core countries and their perception of inflation instead of what was/is going on in the periphery. What policy did they follow when the housing bubble was expanding in Spain (cutting rates) or when the bottom fell in Greece (increased rates)?

No contest on ECB policies here, however the ECB in itself is perhaps not the one to blame but the Maastricht treaty that dictates the powers of the ECB.

That's simply incorrect. Assuming that government does not borrow money from foreign sources, all you're accomplishing is taking money from the private sector (via taxes or selling bonds) so that you can throw it back into the economy. That's like taking money from one pocket and putting it in the other. Money that would not have been "raised" by government would have been spent/invested by the private sector. In fact, the propensity to spend and the velocity of money in private hands can have a greater impact on GDP growth than if government appropriated the money in order to spend it. A growth in GDP results in increased tax revenues for government with the exact same tax rate.

This is where the ideologies collide. A financially sovereign government does not need to borrow money from foreign sources, it has infinite funds at it's disposal through it's national central bank. It can thus throw into the economy as much funds as is needed and through taxation it can reduce as much funds needed from circulation as it deems necessary to prevent inflation. As a financially sovereign government has infinite funds, taxation should not be seen as a source of income for the government but a mere method of reducing money the private sector holds. This is why the US or Japanese debt which in dollars or yens is huge is not really an issue, because when a government borrows from its central bank it is in debt to itself.

The issue is that there are no financially sovereign countries in the EU. While the British and Swedish for example are not euro members, they have agreed that they operate their central banks the same way eurozone does. Thus eurozone countries do not have infinite funds because the Maastricht treaty explicably forbids ECB to purchase government bonds and governments are forced to "raise funds" by both taxes and foreign borrowing.

Now, if you want to talk about the impact of foreign borrowing on a domestic economy, then let's have a debate on the most efficient and sustainable way to have that capital infusion. In that regard the prudent method is to achieve high FDI instead of creating external debt in order to fuel private consumption.

That debate would become obsolete if Eurozone would follow Keynesian policies.

Define "chronic" and what scale you're using. Prior to EEC/EU entry the trade balance was negative but not massive. Since then and especially after EMU entry the deficit more than doubled in just a few years (and would perhaps still be growing if the periphery was not in financial trouble). Having the Euro for currency simply fueled the desire for more merchandise (consumption) that had no positive effect on the local economy but did benefit the "core" manufacturing ones.

Ongoing for decades. As the private sector alone cannot generate any money, funds into the private sector must and will in all cases come either from foreign trade surplus or increased public debt. As is the case here, it does not seem that the trade deficit is going to disappear and the calls for reduced government spending will only result in either decreased GDP (which no-one wants) or the growth of GDP under increased private debt, which cannot be sustained, as we've seen in so many cases in history. Current Spain is an obvious example.

That's also another of the "new" methods of inflation, which is the strong currency in the EU or the "equity" Americans had in their houses. Both in the end were nothing but means to draw on more credit to fuel consumption.

Agreed.

Correct, but as I mention, they also had a central bank that followed a monetary policy that made matters worse (cheap credit with an overheating economy, tight in a massive recession).

Which raises the question, is Eurozone unmanageable with such variety in member economies?

But public spending hasn't really decreased (nominally). Where government has decreased spending is on payments to individuals that have the highest propensity to spend - "poor" people. Additionally it further burdens these same people with additional tax obligations. Less money in the pockets of these people results in the recession you're seeing.

What is making it worse is that the government is taking even more money out of the pockets of citizens. They should be reducing taxation and spending at the same time in order to spur on the economy. Obviously taking on more debt and spending it (as they have done now for about 5 years) is not working.

This is where the Friedmanians stumble. Calls for reduced government spending (one way or the other) results in negative GDP growth when there is a foreign trade deficit.

Taking on more debt would not be an issue if the debt was not collected the way it is, ie. investors setting the interest rates of the debt. If Greece had it's own central bank, it could issue bonds at whatever interest rate they wish and those bonds that are not sold to foreign investors are bought by the central bank, the same way for example how Canada sells it's bonds. This is what we these days call "printing money".

4) The ECB needs to set a policy that works for all economies.

It is questionable whether there could be one.

The only way government can spend is by taking/stealing money from its citizens or by borrowing. Greece has hit a limit on borrowing, and so will many other governments with sustainably high debt obligations. And that's why the Greek governments have been taxing ordinary citizens to the breaking point.

No, the other way a government can spend is to sell its bonds to its own central bank ie. to itself, because sovereign central banks have infinite funds available. Because there is none, Greece indeed has hit a limit on borrowing. No such thing as sustainable or unsustainable debt obligations exist for countries that are financially sovereign. You can see neoclassical economists claim "if it's over 70% or 80% or X% of GDP it's unsustainable" Those assessments are valid only in the cases of common currency and a restricted central bank, as in the case of eurozone.

Better for a government to default on its obligations than to tax their citizens into oblivion in order to send that money to foreign creditors. The more money that stays in every citizen's pocket the quicker a recovery will occur.

If I was the dictator of Greece, I would pull out of Euro instantly and nationalize all my debts in euro currency to a new national currency.

[mechin]

It's wrong only based on the school of economy you believe in.

It's not just the school of thought (a theory), it is based on the economic indicators (a practice).

This is where the ideologies collide. A financially sovereign government does not need to borrow money from foreign sources, it has infinite funds at it's disposal through it's national central bank.

Of course it does if it wishes to debase its fiat currency. Even Friedman advocated increasing money supply, but only by modest amounts. But besides the printing press, other methods of controlling the money supply is by adjusting the bank leverage ratios and setting central bank borrowing rates. In all of these regards the ECB/EU has been a failure as it allowed the money supply to grow and feed the periphery economies without actually needing to "run the presses". That is of course on top of the expansionary fiscal policies of the national governments.

It can thus throw into the economy as much funds as is needed and through taxation it can reduce as much funds needed from circulation as it deems necessary to prevent inflation.

Tax policy is not set overnight, so that is not an effective means to control circulation.

As a financially sovereign government has infinite funds, taxation should not be seen as a source of income for the government but a mere method of reducing money the private sector holds.

No, it's simply called robbery. The purpose of taxation is not to control money supply it is to expropriate wealth and redistribute it as government wishes. If it was as you present it, government would not coerce its citizens into paying taxes, it would simply sell bonds (or limit the money supply via the numerous avenues available to do so).

This is why the US or Japanese debt which in dollars or yens is huge is not really an issue, because when a government borrows from its central bank it is in debt to itself.

A growing and significant percent of US debt is held by foreign nations and nationals, and should not be viewed as "debt to itself". It is a fiat currency that has as much value as its holders attribute to it. If confidence in this currency erodes its real purchasing value (as a global reserve currency) will decrease, as it has been decreasing over these past decades (if the price of oil, gold, and other commodities indicates).

The issue is that there are no financially sovereign countries in the EU. While the British and Swedish for example are not euro members, they have agreed that they operate their central banks the same way eurozone does. Thus eurozone countries do not have infinite funds because the Maastricht treaty explicably forbids ECB to purchase government bonds and governments are forced to "raise funds" by both taxes and foreign borrowing.

Agreed.

That debate would become obsolete if Eurozone would follow Keynesian policies.

So far most of the EMU members are well above the 60% debt/GDP ratio that was set as a limit. Many have gone well beyond the 3% deficit limit. If these are the policies that should be encouraged I'd (on both sides of the Atlantic) I'd like to know who is going to keed feeding these government expenditures. If government can fully control the money supply and does not need to find lenders, kindly inform all the pension funds to stay away from the mounts of paper they're buying.

As the private sector alone cannot generate any money, funds into the private sector must and will in all cases come either from foreign trade surplus or increased public debt.

The private sector cannot generate money?! Heck, even World of Warcraft can generate money. Get the government out of the monopoly business they created (often controlled by private bankers like the Fed) and then comment on what the private sector can or cannot do.

As is the case here, it does not seem that the trade deficit is going to disappear and the calls for reduced government spending will only result in either decreased GDP (which no-one wants) or the growth of GDP under increased private debt, which cannot be sustained, as we've seen in so many cases in history. Current Spain is an obvious example.

As was pointed out earlier, 39% of Greek GDP is collected by government via taxation. You are assuming that the velocity of this money will be greater than if it stayed in private hands. You are assuming that government will make more efficient use of this money in engaging in economic activity that could help balance the trade deficit. Besides making for efficient use of all this collected money, they will also make more efficient use of any borrowed foreign money. Well, excuse me if I wholeheartedly disagree with you!

Which raises the question, is Eurozone unmanageable with such variety in member economies?

Of course it is. This was a political objective that paid little attention to the economic realities. They could have started with pegging the currencies for a decade to flush out any endemic problems. Instead you had economies like Greece devaluing their currency by upwards of 10% just before entering the EMU and thinking another "reset" would not be needed in the future.

This is where the Friedmanians stumble. Calls for reduced government spending (one way or the other) results in negative GDP growth when there is a foreign trade deficit.

Wrong. It results in temporary shortages, which in turn establish a new market equalibrium due to the level and elasticity of demand (which encourages local production/supply or the use of substitute products). In practicle terms, it means fewer new (imported) cars for Greeks (one of the top import products by value and a significant contributor to the trade deficit). It might mean the local production of vehicles as was the case some decades ago.

Taking on more debt would not be an issue if the debt was not collected the way it is, ie. investors setting the interest rates of the debt. If Greece had it's own central bank, it could issue bonds at whatever interest rate they wish and those bonds that are not sold to foreign investors are bought by the central bank, the same way for example how Canada sells it's bonds. This is what we these days call "printing money".

So instead of the market setting a value for investing in your fiat currency (based on various factors like money supply, investment risk, exchange rate, government stability, etc.), the government should simply debase it and destroy whatever value a citizen has in his savings. If that's your position I'm fine with it provided citizens can freely use any currency they like (including precious metals). We are free people after all, correct?

Besides the local citizens, you might have to consider foreign investors that would like to realize a profit from their FDI as well as trade partners that might be holding some of that newly debased currency.

It is questionable whether there could be one.

Agreed, but it seemed that the experience of the periphery did not even make it into their decision making process.

No, the other way a government can spend is to sell its bonds to its own central bank ie. to itself, because sovereign central banks have infinite funds available. Because there is none, Greece indeed has hit a limit on borrowing. No such thing as sustainable or unsustainable debt obligations exist for countries that are financially sovereign. You can see neoclassical economists claim "if it's over 70% or 80% or X% of GDP it's unsustainable" Those assessments are valid only in the cases of common currency and a restricted central bank, as in the case of eurozone.

And yet Argentina, Russia, and Iceland all defaulted (one way or another) in recent history. Argentina in fact turned that trade deficit into a surplus (to go back to my point above).

If I was the dictator of Greece, I would pull out of Euro instantly and nationalize all my debts in euro currency to a new national currency.

100% in agreement on you on that.

[HK in AK]

And in other news:

Pensioner hangs himself in Nikaia park

A 61-year old pensioner was found hanging from a tree on Wednesday, in the Agios Filipos park of the Nikaia area. The lifeless body of the pensioner was discovered by a park attendant, who also found his suicide note which read as follows:

"The police does not know me. I have never touched a drink in my life. Of women and drugs I have never even dreamed of. I have never been to a kafenio (coffee house), I just worked all day! But I commited one horrendous crime: I became a professional at age 40 and I plunged myself in debt. Now, I’m an idiot of 61 years and I have to pay. I hope my grandchildren are not born in Greece, seeing as there will be no Greeks here from now on. Let them at least know another language, because Greek will be wiped off the map! Unless of course there was a politician with Thatcher’s balls so as to put us and our state in line.

Signed, Alexandros 29/5/2012”

His neighbours described the pensioner – a father of two- as a hard working man. He had been employed in ship repairs and construction sites and up until recently, he had been working as an electrician on a merchant ship.

He was facing sizeable financial problems and it was these that pushed him over the edge.

According to neighbours, prior to taking his own life, he was seen wearing his work overalls, carrying his tools and sitting on a bench in the park.

None however, imagined what he had in mind.

[JRT]

It's not just the school of thought (a theory), it is based on the economic indicators (a practice).

Which we interpret in the ways that suit our theories.

Of course it does if it wishes to debase its fiat currency. Even Friedman advocated increasing money supply, but only by modest amounts. But besides the printing press, other methods of controlling the money supply is by adjusting the bank leverage ratios and setting central bank borrowing rates. In all of these regards the ECB/EU has been a failure as it allowed the money supply to grow and feed the periphery economies without actually needing to "run the presses". That is of course on top of the expansionary fiscal policies of the national governments.

A possible solution alright, although doesn't answer the obvious question: why are monetarists so opposed to running the presses? (The answer is obvious too, they fear, based on little to no facts, a swell of inflation.)

Tax policy is not set overnight, so that is not an effective means to control circulation.

A more immediate mean to control circulation is to increase/decrease public expenditure. Taxation in itself is efficient, albeit slow.

No, it's simply called robbery. The purpose of taxation is not to control money supply it is to expropriate wealth and redistribute it as government wishes. If it was as you present it, government would not coerce its citizens into paying taxes, it would simply sell bonds (or limit the money supply via the numerous avenues available to do so).

What numerous avenues? How taxation is seen is indeed the core difference here. The government (a sovereign one) does not need to rob, it has all the funds it needs. Yes, it is a method to distribute wealth or to be more precise, a method to decrease the wealth of the wealthiest and also a method to create demand for the currency.

A growing and significant percent of US debt is held by foreign nations and nationals, and should not be viewed as "debt to itself". It is a fiat currency that has as much value as its holders attribute to it. If confidence in this currency erodes its real purchasing value (as a global reserve currency) will decrease, as it has been decreasing over these past decades (if the price of oil, gold, and other commodities indicates).

The reasons behind the growing US debt to foreign actors is the works of US monetarist policy. A government creates the demand for its currency through taxation and trough the sell of bonds.

So far most of the EMU members are well above the 60% debt/GDP ratio that was set as a limit. Many have gone well beyond the 3% deficit limit. If these are the policies that should be encouraged I'd (on both sides of the Atlantic) I'd like to know who is going to keed feeding these government expenditures. If government can fully control the money supply and does not need to find lenders, kindly inform all the pension funds to stay away from the mounts of paper they're buying.

Those limits are artificial and based on nothing per se. Controlling deficits does not make any sence if there is no control of surpluses. In the intra-EU trade no-one is controlling for example German surpluses, instead everyone is clapping their hands on how well the "north" is doing and being angry at how bad the "south" is doing with all their deficits. One country's surplus will always lead to another's deficit.

Two examples come to mind how governments of today do not necessarily need to find lenders, Argentina and Canada. Finding them is not a negative thing in itself, as long as the Lender of Last Resort - policy is carried out.

The private sector cannot generate money?! Heck, even World of Warcraft can generate money. Get the government out of the monopoly business they created (often controlled by private bankers like the Fed) and then comment on what the private sector can or cannot do.

Individuals can generate money, as can corporations. A private sector as a whole cannot, it's a simple matter of basic accounting. All in all, there are three ways of inserting new money into a private sector of a nation. 1) Borrowing money from the central bank , 2) public expenditure or 3) the foreign sector. Hypothetically if a country would not have foreign trade and the central bank would never issue new notes (except for replacing the notes and coins that are destroyed, worn out or disappeared), the amount of money in the economy as a whole would never change. Thus increasing revenues in the private sector will always require either a surplus in the foreign trade (a deficit for someone else) and/or the "printing press".

It is natural for the private sector to seek growth. Everyone wants more dough in their pockets, even the Homo Sovieticus wanted. So, money is generated to the private sector either by selling more stuff abroad than what you buy from there or borrowing the money (from central bank or abroad) or by public expenditure (financed by the printing press). Let's look at case Spain, no printing press available there and a foreign trade deficit. As the private sector seeked growth, a swell of private debt occurred because of the limitations of the public debt. Private debt can fuel the growth for several years but when it becomes unsustainable (and the printing press ain't rollin'), a recession happens. The same is the truth for the public debt in the cases of non-sovereign countries.

The US housing bubble is another example of how private debt becomes unsustainable. I challenge you to find an example where a public debt of a sovereign nation came unsustainable when there were no major changes in supply (that pretty much excludes Zimbabwe and 1930's Germany)

The power of issuing currency and the power of collecting currency should definately be in the hands of democracy. In the age of "independent" central banks, only the collecting part currently is.

As was pointed out earlier, 39% of Greek GDP is collected by government via taxation. You are assuming that the velocity of this money will be greater than if it stayed in private hands. You are assuming that government will make more efficient use of this money in engaging in economic activity that could help balance the trade deficit. Besides making for efficient use of all this collected money, they will also make more efficient use of any borrowed foreign money. Well, excuse me if I wholeheartedly disagree with you!

I'm by no means suggesting that government will make more efficient use of this money, as I stated taxation is a means to control circulation, to distribute wealth and to create a demand for a currency. However it is less harmful for the public sector to be in debt than the private sector which is why the public sector should, in the times of trade deficit, discourage the increase of private debt at the expense of public debt.

The public expenditures are already right now funded by central bank financing, indirectly (central bank borrows to a business bank that borrows to an individual who pays taxes) What I am suggesting is that it would be done directly.

Wrong. It results in temporary shortages, which in turn establish a new market equalibrium due to the level and elasticity of demand (which encourages local production/supply or the use of substitute products). In practicle terms, it means fewer new (imported) cars for Greeks (one of the top import products by value and a significant contributor to the trade deficit). It might mean the local production of vehicles as was the case some decades ago.

Without the means to devaluate currency, Greece does not and will not have the industrial capabilities to straighten it's trade deficit. If you believe that decreasing Greek public expenditure would suddenly result in Greekwagen factories popping out all over Hellas, I'm sort of speechless. Trade deficit does not straighten out by cutting public expenditures. Public expenditures offset trade deficits. Public expenditures increase inflation in cases of trade surpluses, unless taxed away.

So instead of the market setting a value for investing in your fiat currency (based on various factors like money supply, investment risk, exchange rate, government stability, etc.), the government should simply debase it and destroy whatever value a citizen has in his savings. If that's your position I'm fine with it provided citizens can freely use any currency they like (including precious metals). We are free people after all, correct?

Why would the printing devalue the fiat currency? Look at the inflation rates in Canada, a country that has a central bank that has a Lender of Last Resort policy (unlike the ECB). Excess printing does devalue the currency in times of trade surplus, if not taxed.
http://www.tradingeconomics.com/canada/inflation-cpi

Besides the local citizens, you might have to consider foreign investors that would like to realize a profit from their FDI as well as trade partners that might be holding some of that newly debased currency.

Canada and Argentina seem to be doing fine in that regard, too.

And yet Argentina, Russia, and Iceland all defaulted (one way or another) in recent history. Argentina in fact turned that trade deficit into a surplus (to go back to my point above).

Argentina defaulted when it followed a monetarist policy. After the default Argentina turned to Keynesian policy and you yourself described the outcome.