Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Open letter to German readers: What you were never told about Greece

syriza.net.gr

Post reply on HN
Print view View original

141–150 of 249 posts

Re: Open letter to German readers: What you were never told about Greece

#141

Post by nationcrafting »

netcan wrote: post #122
vijayboyapati wrote: post #20

This one sentence sums up what I think is the fundamental problem: "An insolvency problem was thus dealt with as if it were a case of illiquidity." That is, the problem isn't some ephemeral panic where people are temporarily unwilling to lend. The problem is there are massive capital losses that have yet to be acknowledged. The problem is that Euro politicians believe that by continuing to bankroll Greece they will s…

I disagree. The solvency problem is ongoing, even regardless of current debts. Greece cannot raise more taxes. It's trying, but taxes are declining. A government system can't be reformed in a few years and achieve 40% savings without (a) causing mass unemployment and knock on effects, further reduction in tax base, etc and (b) massive reduction in government services, including those necessary for economic activity t…

You make some good points. I think the solution has to be one that looks at the state as a service provider. Until the issues have been depoliticised, decisions will be made for political reasons rather than good business reasons.

As a service provider, the state has 2 sources of revenue, primarily: private customers i.e. people, and corporate customers i.e. companies. Both those customer groups pay for services in the form of taxes. Now, those customer groups must be, by and large, wealth creators for there to be any wealth that can be taxed or even redistributed (if that is your political inclination).

So, it simply won't do to just reform the state, to spend less, etc. A system has to be put in place rapidly that boosts wealth creation. This includes: minimal bureaucratic lag in the creation of new companies (Chile, for example, enables new company creation within 2 days), very low taxes, easy interaction with regulation bodies, a business-friendly environment, etc.

If the state is too sclerotic to reform, it can be set up through free-trade zones in isolated parts of the country. This was China's route, when they essentially replicated Hong Kong in Shanghai, Shengzen, and all the other FTZs. It allows to you to be ultra-reformist in small experimental areas without putting at risk the power structures that exist in the state at large.

Re: Open letter to German readers: What you were never told about Greece

#142

Post by woud420 »

tomp wrote: post #104
teamhappy wrote: post #88

Earlier quoted context omitted.

I'm not entirely sure what it is you're suggesting. The EU is designed to make us (Germany, France, etc.) more competitive. That unfortunately also means that countries like Greece don't profit as much (or at all, for that matter), but then again, nobody was forced to join to EU. > I think it's time Germany admits to that and pays its dues, by which I mean help finance the rest of EU (via a fiscal union). Do you real…

> I'm not entirely sure what it is you're suggesting. The EU is designed to make us (Germany, France, etc.) more competitive. That unfortunately also means that countries like Greece don't profit as much (or at all, for that matter), but then again, nobody was forced to join to EU. I'm suggesting that Euro (this has nothing to do with EU directly) can't survive if PIGS countries keep on loosing while Germany keeps on…

Just out of curiosity, how would Greece having control of it's own currency reduce the real value of it's debt at this point? Considering 90%+ (to my knowledge but I could be wrong) of it's debt is to foreign countries and currently in Euro, even if it left the Euro and returned to the Drachma, wouldn't printing more money just reduce the debt's real value to it's internal creditors (pensions)?

Wouldn't that also be against what the current government is trying to achieve?

Re: Open letter to German readers: What you were never told about Greece

#143

Post by squozzer »

The situation bears a certain resemblance to a period of history in the USA between the successful bid for independence and the ratification of its constitution. During that period, the articles of confederation was the document in force and among its many disasters was economic chaos. It was a monetary union (actually not even that as each state printed its own money but efficient currency exchanges were still a century or two in the future) without a political union.

I didn't invent that phrase - Der Speigel mentioned it several years ago in reference to the Greek crisis.

And while I lack the expertise to prescribe the form of a "more perfect union" in Europe, the USA can at least address competitive imbalances bewteen states through a process of income redistribution. Take for example West Virginia. It perennially ranks in the top of USA states that receive more federal money than it generates in federal taxes. Some people complain about this, but most accept it if for no other reason than the knowledge that WV is DC's fallout shelter.

Last time I checked, only two or three German Laender (sorry for not using umlauts) generated net positive federal revenues. Certainly some Germans complain about it, but it's not realistic to expect every political jurisdiction to break even on the tax / revenue ledger.

Both Germans and Greeks (and everyone else in the EU as well) should be willing to bear some of the blame and some of the burden as well.

The Germans are smart enough to know one cannot maintain a competitive advantage forever without bankrupting one's customers. If beggaring the Greeks was part of the plan, then EU rests upon a foundation of bad faith and does not deserve to exist.

The Greeks are smart enough to know that remaining uncompetitive is also not sustainable. If mooching off the Germans was part of the plan, then the EU rests upon a foundations of bad faith, you know the rest.

Re: Open letter to German readers: What you were never told about Greece

#144

Post by atmosx »

bibabo wrote: post #60

Some notes: 1. Greece is talking about Germany because it helps mobilize masses. Germany does not decide on it's on on this nor is the most agressive player. Most northern and eastern countries are more agressive in their opinion against Greece. But it helps to mobilize Greek masses with a simple enemy. 2. Greece has defaulted have a dozen times in modern times. This is the Greek way of doing things and will continue…

Some counter-notes:

1. That's b*shit. It's Germany all way. The Fins and Dutch are easy to bend.

2. Germany has defaulted 3 times in the last 100 years. The Marshall plan was issued in 1948, otherwise now Germany would be worse than you date to imagine + wars damages to Greece were never paid.

3. Why don't you come live in Greece and find out. Try to deal with the state, then run a business WITHOUT tax-evading in this environment. Then share your knowledge, show us how you did it.

Re: Open letter to German readers: What you were never told about Greece

#145

Post by brianwawok »

mysticllama wrote: post #136
brianwawok wrote: post #107

Earlier quoted context omitted.

Here is something that maybe I am not understanding.. but saying that 6/10 greeks pay no income tax does not tell us how much tax evasion there is, right? From what I can google: http://www.taxpolicycenter.org/taxtopics/federal-taxes-house... 43% of Americans do not pay federal income tax (and some % of those get a net gain of federal income tax). Sure 60% is > 40%... but that could be due to a ratio of more people r…

saying that 6/10 greeks pay no income tax does not tell us how much tax evasion there is, right? You're right, the 6 in 10 figure seems rather misleading. Those people shouldn't be characterized as tax evaders as I suggested. That said, it probably points to an issue of not enough tax contributors. The numbers for America are interesting, I wouldn't have guessed the rates were that high. Anyway, as far as tax evasion…

I mean that is the trick right? You have a doctor making 100k claiming he makes 10k and paying no tax. I have seen individual stories of it, but is that really the common case? Or is it more like rich business owner making 300k claims he made 200k because of the cash heavy economy in Greece?

Re: Open letter to German readers: What you were never told about Greece

#146

Post by notahacker »

tspareme wrote: post #106
frandroid wrote: post #96

Earlier quoted context omitted.

Yeah, but unless you have massive disinformation, you can't create a panic on a solvent bank in today's world. The examples you use were ones where capital had been destroyed.

I guess you have to define what a solvent bank is. I don't think any bank can handle a sustained run given their liability duration mismatch. So I am not sure what do you mean that you can't create a panic. Its always possible to have runs just not very easily. The financial crisis showed that bank liabilities are really liabilities of the country that the bank incorporates in. So in case of Ireland, Greece, Iceland,…

I'd argue a solvent bank is one whose expected return on assets, adjusted for expected losses, is sufficient to ensure it can repay money lent to it at the discount window rate [for all plausible trajectories of the base interest rate over the lifetime of its outstanding assets]

There's no logical reason why a central bank wouldn't lend to such a bank at the discount window even if some irrational hysteria caused its depositors to withdraw en masse, or why another bank not suffering from depositor hysteria wouldn't buy its loan portfolio.

The problem of national governments' economic policy lacking credibility is largely orthogonal[1]; central banks that underwrite private banks print money rather than borrowing it

[1]except to the extent really inept inflation-boosting fiscal policies compel the central bank to make aggressive and unanticipated interest rate rises that drive banks into insolvency.

Re: Open letter to German readers: What you were never told about Greece

#147

Post by tomp »

woud420 wrote: post #142
tomp wrote: post #104

Earlier quoted context omitted.

> I'm not entirely sure what it is you're suggesting. The EU is designed to make us (Germany, France, etc.) more competitive. That unfortunately also means that countries like Greece don't profit as much (or at all, for that matter), but then again, nobody was forced to join to EU. I'm suggesting that Euro (this has nothing to do with EU directly) can't survive if PIGS countries keep on loosing while Germany keeps on…

Just out of curiosity, how would Greece having control of it's own currency reduce the real value of it's debt at this point? Considering 90%+ (to my knowledge but I could be wrong) of it's debt is to foreign countries and currently in Euro, even if it left the Euro and returned to the Drachma, wouldn't printing more money just reduce the debt's real value to it's internal creditors (pensions)? Wouldn't that also be…

Yes. My answer was assuming that Greece never took up Euro in the first place. In that case, it would probably issue debt in Drachmas (although not all countries do - e.g. Argentina issued it's debt in USD under NY jurisdiction, because having defaulted so many times, it couldn't sell bonds in Pesos under its own jurisdiction).

Re: Open letter to German readers: What you were never told about Greece

#148

Post by Fiahil »

leroy_masochist wrote: post #44

tl;dr: "This time it's different." The piece was more persuasive than I thought it would be, and Tsipras' diagnosis of the cause of the problem is dead-on: this is a crisis of insolvency, not illiquidity. The problem with what Tsipras is asking for is that markets get a vote, too, and the outright forgiveness of Greek debt would cause massive upheaval -- potentially to the point of making the EU itself unsustainable.…

The "wild card" scenario seems especially accurate, as he speaks a lot of "ill-gotten privileges" and "major reforms" towards the end.

Re: Open letter to German readers: What you were never told about Greece

#149

Post by atmosx »

arca_vorago wrote: post #66

Here is what I want to know. What role does the Greek central bank play? What is the fractional reserve rate in Greece? What is the interest rate set by the central bank? How is the money generated in the first place and what are the return rates and restrictions on that method (eg: in US it's treasury bonds)? I'm increasingly convinced that central banks operate only marginally on the interest of the country they se…

What role does the Greek central bank play? None. Just distributes the money it gets from the ECB to local banks. Like a post-office for money.

Re: Open letter to German readers: What you were never told about Greece

#150

Post by anextio »

teamhappy wrote: post #123
smacktoward wrote: post #113

Earlier quoted context omitted.

> Germany is one of the riches countries on this planet. We will do almost anything to keep it that way. If the only practical effect of European union will be to enrich Germany at the expense of its neighbors, European union will fail, and rightly so. > I appreciate that he needs to sell his own agency to his people, but if he actually believes he can control the fate of his country even so slightly, I'm afraid he's…

> Just a suggestion: before Germans start telling other people to get over the idea of having any control over their own affairs, it would probably be wise to reflect on how well that message went over the last two times they tried it. You should have gone with how we suck up the the US all the time; that would have been a way better put down. Given what went on in Greece over the last couple of years, I'd recommend…

Indeed. There are many better examples of post-war soft power projection through economic meddling that this case could be compared to.

Not the nazis. They are far on the other side of the economic meddling coin.

Post reply on HN