NGDP in Cyprus

by on March 22, 2013 at 8:42 pm in Current Affairs, Economics | Permalink

It seems to be falling:

Luscious strawberries – €3.50 a box on Monday – are now €1.45. The prices of other perishables have also plummeted. “People are buying only what they needed.”

No one knows how telephone, water and electricity bills paid monthly on instructions to banks will be settled. No one knows when and if they will be paid their salaries.

Here is more.

MC March 22, 2013 at 9:07 pm

Question from a non-economist- in a cash crunch like this, is the price drop concentrated among perishable goods, or does absolutely everything go down? Might canned goods go up in price?

Ray Lopez March 22, 2013 at 9:10 pm

Answered like a non-economist: the price of something in demand (essentials) will go up as demand increases (and vice versa), while the non-essentials, not in demand, go down (and vice versa), assuming they are Ordinary Goods. Unless they are Giffen Good, Veblen Goods, Inferior Goods or Superior goods.

Ray Lopez March 22, 2013 at 9:25 pm

Technically, by price I mean expected price, not actual price, since it’s really Q, quantity, we’re talking about. So like GDP you must make seasonal adjustments. Hope that makes my answer more complete, if not more clear. Ah economics.

Ray Lopez March 22, 2013 at 9:08 pm

There, but for the grace of ___, goes the USA, Japan, rest of EU, [your country here].

It will be an interesting experiment on the value of money.

I bet more people start hoarding cash in other countries too…get those printing presses running.

So Much for Subtlety March 23, 2013 at 2:35 am

Not sure it is hoarding cash that is going to be the big killer. It is moving cash offshore. It must be obvious to everyone that a euro in a German bank is a lot more convenient than a euro in a Greek, Portuguese, Spanish or even Italian bank. Especially if the euro collapses because the new German currency will appreciate.

I would expect pressure on all the Latin banks as people move their money some where safer.

But I disagree about the There but the Grace of God stuff. If this is proving anything, it is proving Max Weber right – Capitalism is a White, Northern European Protestant thing. No one else does it particular well. The Cypriots have a long Greek Byzantine/Ottoman history and hence their economy remains thoroughly Ottoman.

JWatts March 23, 2013 at 10:16 am

But I disagree about the There but the Grace of God stuff. If this is proving anything, it is proving Max Weber right – Capitalism is a White, Northern European Protestant thing. No one else does it particular well.

I think the Japanese & South Koreans are doing a pretty good job of it.

So Much For Subtlety March 24, 2013 at 4:44 am

I used to think that Japan proved Weber wrong. How many years have they been stuck where they are? As long as they were just trying to catch up with the West, they were doing fine. Having got there, they are doing what?

Maybe South Korea will turn out different.

Marton March 25, 2013 at 5:00 am

“They are doing what?” — Enjoying the highest living standard in the world outside of petro-states, enjoying the longest lives in the world, and boasting intangibles like clean streets, low crime and punctual public transport.

Stagnation in absolute volumes of output is not that bad if it is getting distributed across a smaller number of people. GDP *per capita* is growing.

Alexei Sadeski March 22, 2013 at 9:44 pm

Fortunately it’s just Cyprus.

DocMerlin March 22, 2013 at 10:02 pm

Yet another reason to use bitcoin.

Mark Thorson March 22, 2013 at 10:34 pm

Linden dollars are a far more stable currency. Bitcoins fluctuate wildly while Lindens barely fluctuate at all.

mulp March 23, 2013 at 12:30 am

Ok, loan me a million bitcoin I won’t repay if bitcoin defaults do not cause the losses that defaults on debt in Euros do.

Remember that the bank failures before 1930 or so were on dollars backed by gold and silver – banks were capitalized by gold and silver, and often kept gold and silver on hand.

Yet, banks with money backed by gold and silver with loans that were in default when bankrupt and depositors lost their money. Even after States began to insure deposits in State chartered banks. When all the banks in a State failed, the State government couldn’t make good on all insured deposits.

The idea that what is going on in the EU is unique is absurd because it merely replicates banking in the US from 1860-1933.

Robert Olson March 22, 2013 at 11:09 pm

I would say these are not sticky, but that’s more like extra lubricated

sam March 23, 2013 at 7:28 am

The sticky variable is nominal wages. Recessions don’t cause disequilibrium unemployment in luscious strawberries.

Ivan Jankovic March 23, 2013 at 12:41 am

They need to prop the damn thing up. Why not use a helicopter? Russians have good military ones.

dearieme March 23, 2013 at 2:28 am

“telephone, water and electricity bills paid monthly on instructions to banks”: why is he explaining what a Direct Debit is? Do some countries not have them?

prior_approval March 23, 2013 at 3:59 am

The U.S. does not have too much in the way of banking that most Europeans are accustomed to, though that has been gradually changing.

And don’t even ask about how mobile phones and providers work (or more precisely, don’t) in the U.S. compared to essentially the rest of the world.

bluto March 23, 2013 at 4:40 am

As much as people whine about the US mobile phone system, we use our mobiles considerably more than most nations (generally 2-3x as many MOU as all European nations). On a per minute of use basis US plans are cheaper than basically everywhere in the world.

Someone from the other side March 23, 2013 at 6:00 am

Except we have 20EUR flat fee options in much of Europe, so no.

JWatts March 23, 2013 at 10:23 am

The US has low cost cell phone plans.
Cricket phones are generally $35/ month for standard unlimited text and calling.

JWatts March 23, 2013 at 10:25 am

The U.S. does not have too much in the way of banking that most Europeans are accustomed to, though that has been gradually changing.

I’m not sure what p_a is referring to. I think Europe got a quicker start to auto-bill pay or direct debit, but it’s pretty universally available in the US and has been for quite some time.

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