Maybe this will look more credible
Untitled topic
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#42What I didn't understand about the Greece situation is why they caved to the massive privatization and austerity measures when they should have realized that they are the ones in the drivers seat. If Greece defaults it's the German banks who will pay instead of the Greek public. Of course if the German banks fail it will put the whole Euro project in danger, but why should it be up to ordinary Greeks to save the Euro…
The past Greek government blatantly lied about the debt they were accumulating to appease their voters. In a democratic system, unfortunately, nobody can say "it's not my fault" (this is unfortunately true for me too, here in Italy, even if I never voted Berlusconi).
That said:
- if you default as a Country and don't pay back your debts who is going to trust you again? Greece needs foreign investment
- if they were forced out of the Euro, what kind of inflation and interest rates would they get in Greece?
- don't forget that Greece got a lot of money from the EU programmes for poorer countries. If they were kicked out they wouldn't get any more
There are many more reasons not to default, but I think these are more than enough.
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#43I'm Icelandic, here are a few notes from the top of my head. -- Iceland is not an EU member. Iceland is a part of EFTA (European Free Trade Association) and Schengen (border control) but not a full member. An application to join the European Union has been filed by the Icelandic government but it is generally considered to be a first step in negotiations as opposed to being a commitment to join. -- Iceland did not go…
Thank you for your detailed account. I am curious about the following:
The consensus in Iceland was and is that the Icesave debt should be repaid (if only for moral reasons) - but only on fair terms and according to EU legislation.
What currencies are these debts denominated in? Is there a plan to convert them to ISK, if they are not already denominated in that currency?
The reason I am asking is that Modern Monetary Theory tells us that it is very unwise for a government to take foreign-currency denominated debts. It creates the danger that, should exports drop for some reason, the nation's exports are no longer sufficient to offset the flow of payments servicing the debt, which can cause severe depreciation of the currency causing inflation.
In fact, most of the horror stories of failed economies and hyperinflation involve foreign-currency denominated debt, usually together with some other factor. This includes the turn-of-the-century crisis in Argentina, and the Weimar Germany and Zimbabwe hyperinflations.
Just something to think about. Oh, and...
A couple of thousand people gather outside the parliament building for a few days to make noise and listen to speeches.
If you scale that up to e.g. the US, it would be like a couple of million people going to Washington. Nothing to sneeze at ;)
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#44Beware: This article is filled with factual errors. I was making a list as I went along, and when I afterwards read the comments section I realized I had overlooked many more. That does not by itself affect the validity of the author's overarching thesis, but if someone can't be bothered to get their basic facts straight (e.g. Iceland's EU membership status), it casts serious doubt on their ability to perform the muc…
This is a naive question but why did Icelandic banks allow such a bubble to happen? I realize it's not easy to see the forest from the trees, but isn't there some point at which banks start to see that they are taking on too much debt?
There was a great article in Vanity Fair back in 2008 or 2009; I can only find a pdf of it here:
http://depts.washington.edu/teclass/articles472/Wall%20Stree...
Money quote:
"His job, he say s, was to sell people, mainly his fellow fishermen, on what he took to be a can’t-miss speculation: borrow yen at 3 percent, use them to buy Icelandic kronur, and then invest those kronur at 16 percent. "I think it is easier to take someone in the fishing industry and teach him about currency trading," he says, "than to take someone from the banking industry and teach them how to fish.""
(article is much more thorough and balanced than that, don't get me wrong - it's just that these few paragraphs about this guy drive home who really was driving the bubble in 2008).
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#45Icelanders refused to be held responsible for private banks failures in two referendums, in March 2010 and in April 2011. Can you imagine a similar referendum in US? Tells something about the state of democracy in both countries.
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#46What I didn't understand about the Greece situation is why they caved to the massive privatization and austerity measures when they should have realized that they are the ones in the drivers seat. If Greece defaults it's the German banks who will pay instead of the Greek public. Of course if the German banks fail it will put the whole Euro project in danger, but why should it be up to ordinary Greeks to save the Euro…
The past Greek government blatantly lied about the debt they were accumulating to appease their voters. In a democratic system, unfortunately, nobody can say "it's not my fault" (this is unfortunately true for me too, here in Italy, even if I never voted Berlusconi). That said: - if you default as a Country and don't pay back your debts who is going to trust you again? Greece needs foreign investment - if they were f…
If you look at the example of Argentina's default their economy has recovered nicely, and Iceland is also starting to recover. The economies go through an initial shock but then they can recover without the burden of the debt. After a default Greece would have to immediately stop borrowing and close their budget deficits, but what is happening now is a fantasy, they are only borrowing so they can pay their previous debt, it's just a way to bailout the German banks on the backs of the Greek people. When banks make risky loans they sometimes have to take a loss, that's the point of the risk premium after all.
If Greece defaulted and was kicked out of the Euro the new drachmas would be very devalued, but that would make Greek products very cheap to the rest of Europe and would increase exports. Euro monetary policy is designed for the German economy and is too tight for Greece. By the way, it's also too tight for Italy, Spain and Portugal's economy.
The only way Greece can recover is to grow their economy, the austerity measures and the tight Euro are hindering not helping their growth.
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#47Beware: This article is filled with factual errors. I was making a list as I went along, and when I afterwards read the comments section I realized I had overlooked many more. That does not by itself affect the validity of the author's overarching thesis, but if someone can't be bothered to get their basic facts straight (e.g. Iceland's EU membership status), it casts serious doubt on their ability to perform the muc…
Who cares if Iceland is a member or almost a member. That's not the point of the article. Can we discuss the main point please, that is a country's population refusing to bail out the criminals of the financial sector.
By "criminals of the financial sector" you mean UK individuals, charities and local councils who were foolish enough to believe that Vikings honour their word.
http://www.timesonline.co.uk/tol/news/politics/article491012...
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#48Earlier quoted context omitted.
The past Greek government blatantly lied about the debt they were accumulating to appease their voters. In a democratic system, unfortunately, nobody can say "it's not my fault" (this is unfortunately true for me too, here in Italy, even if I never voted Berlusconi). That said: - if you default as a Country and don't pay back your debts who is going to trust you again? Greece needs foreign investment - if they were f…
If you look at the example of Argentina's default their economy has recovered nicely, and Iceland is also starting to recover. The economies go through an initial shock but then they can recover without the burden of the debt. After a default Greece would have to immediately stop borrowing and close their budget deficits, but what is happening now is a fantasy, they are only borrowing so they can pay their previous d…
I agree with you that the BCE policy is too tight, but, for one, what makes you think that Greece, using competitive devaluations, could still be admitted in the EU common market without barriers and tariffs? Maybe a little economy like the Greek one could be allowed, but I'm pretty sure that it wouldn't be the same for Italy and Spain.
And in the case of Banks that invested in Greek bonds, don't forget that the accounting was falsified exactly to get low interest rates which albeit higher than the German ones were VERY much lower than what they would have been without the Euro, to the benefit of all the Greeks. I'm sorry for those who are getting the direst consequences, but I don't see the Greeks having any moral high ground in this situation, not even against the evil German banks who lent them money.
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#49What I didn't understand about the Greece situation is why they caved to the massive privatization and austerity measures when they should have realized that they are the ones in the drivers seat. If Greece defaults it's the German banks who will pay instead of the Greek public. Of course if the German banks fail it will put the whole Euro project in danger, but why should it be up to ordinary Greeks to save the Euro…
Greece did not bail out any banks, it was the government that was lending recklessly, not the private sector. There are many people who claim greece should not pay back its debt but there is no moral or legal ground to that. There are only 2 options: more lending or a default. Guess which one doesn't work.
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#50Earlier quoted context omitted.
If you look at the example of Argentina's default their economy has recovered nicely, and Iceland is also starting to recover. The economies go through an initial shock but then they can recover without the burden of the debt. After a default Greece would have to immediately stop borrowing and close their budget deficits, but what is happening now is a fantasy, they are only borrowing so they can pay their previous d…
I agree with you that the BCE policy is too tight, but, for one, what makes you think that Greece, using competitive devaluations, could still be admitted in the EU common market without barriers and tariffs? Maybe a little economy like the Greek one could be allowed, but I'm pretty sure that it wouldn't be the same for Italy and Spain. And in the case of Banks that invested in Greek bonds, don't forget that the acco…
I'm not talking about morality, I'm talking about what would make the most sense for a rational Greek people to do going forward. I'm arguing that a default would make the most sense, but in reality the interwining of the euro makes these issues very complicated.
The larger picture is that this is the biggest crises the euro has faced and it might not survive, especially since the nationalistic politics make it so hard to have a coordinated response. The leaders seem to think that the austerity measures throughout all of Europe will allow them to muddle through, but that looks to me like a decade of hardship and slow growth which will bring political instability and even riots as seen in England. I think the only hope would be the creation of a euro bond which would allow borrowing to be backed by the full faith and credit of the Euro Zone as a whole, but that would mean tighter political integration between the countries which seems to be the opposite of what people want at this point.