Open letter to German readers: What you were never told about Greece • Hacker News Board

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

#231

Post by yxhuvud » Sat, Jan 31, 2015, 11:29 AM UTC

seizethecheese wrote: post #110

yxhuvud wrote: post #89

Earlier quoted context omitted.

No, Germans are not more frugal than other people. The main issue behind lacklustre German consumption is that neither their wages nor their investment in infrastructure has kept pace with their productivity growth.

What's your source, your intuition? Germany is one of the highest savers in the Euro area; much higher than Greece. http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS

That Germany, the state, is living beneath its means does not say anything at all about the German people or if they save their wages or not.

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

#232

Post by nhaehnle » Sat, Jan 31, 2015, 12:02 PM UTC

mathattack wrote: post #185

nhaehnle wrote: post #132

Earlier quoted context omitted.

1 & 2 basically elaborates on what I said ;) And no, FDIC protection intentionally protects deposits at bad banks. This is not an accident. Trying to put the burden of evaluating what a bad bank is onto regular people is not going to end well, so you guarantee deposits at all banks, full stop. Besides: Deposit insurance for deposits at good banks is pretty pointless, don't you think? It would never be used by definit…

I think we agree on 99%. My point is just that a good bank can still have a run in the absence of the FDIC guarantee. Let's say a bank has $100 million in deposits. They keep $10 million in liquid assets, and lend out $90 million in un-securitized loans to local businesses. There's a false market rumor of something bad happening at the bank, and all of a sudden $20 million in depositors want their money back. The ban…

I think you're right about our mostly-agreement :)

Just to clarify, I think we have to distinguish between the likeliness of a bank run and the effects of a bank run.

Indeed, the FDIC makes a bank run extremely unlikely. Perhaps this is what you mean by "protecting the bank".

However, even if there were no FDIC, a bank run on a good (solvent) bank would not cause that bank to collapse, due to the central bank's lender of last resort function.

The bank run would "merely" cause a shrinking of the bank's balance sheet, which the bank would have to offset by selling its assets over time.

It is true that a big change in the balance sheet like that could still lead to the eventual death of the bank, e.g. because the bank has high fixed costs (in the form of physical branches, non-fireable employees, and so on) which can no longer be covered by profits from its regular business. However, this eventual death is (a) not certain since the bank has plenty of opportunity to turn things around and (b) a slow death, very much unlike the sudden implosions that people usually think of when they hear "bank run".

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

#233

Post by netcan » Sat, Jan 31, 2015, 1:07 PM UTC

nationcrafting wrote: post #141

netcan wrote: post #122

Earlier quoted context omitted.

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 t…

All well and good. There are lots and lots of ideas for making states work better, be me effective, responsible and everything else.

That all has nothing to do with this. This is about what happens when governments fail financially. Financial commitments that exceed tax revenues and no way to balance them. European austerity measures can work (as they sort of are in Ireland) when the political situation is relatively stable and the underlying financials are not too severe. But, Greece is a case where it cannot work.

Printing money (aka monetary easing) is not just an alternative to what you suggest, it's what you do when the state's financials collapse.

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

#234

Post by mhd » Sat, Jan 31, 2015, 4:05 PM UTC

seliopou wrote: post #206

mhd wrote: post #53

Earlier quoted context omitted.

I doubt that every country works on the same political scale as the US…

I assure you, it's an international standard. In fact, this is almost certainly ghostwritten by the finance minister, Yanis Varoufakis.

Who's not a politician?

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

#235

Post by panarky » Sat, Jan 31, 2015, 4:58 PM UTC

netcan wrote: post #230

panarky wrote: post #108

Earlier quoted context omitted.

Why do news reports keep saying that Greece got bailed out? Let's say you lend $100,000 to my startup. I have to pay you $10,000 a year until the loan is paid off. I hire a thief as a CEO who gives the $100,000 to his friends and family, and my startup has nothing to show for it. Now my startup is bankrupt. I'm working as a waiter in a restaurant to pay the rent. I can't make my annual payments to you, much less pay…

Analogies are tricky. The fundamental difference in my opinion is that you can't shut down a government. So, this startup is still going and it's still borrowing to keep itself afloat. Makes it harder to say 'lets move on.' I agree though, the EU should have a bankruptcy for states. The problem is that introducing that in crisis time raises borrowing costs. France, Italy, and other countries would suffer a lot of imm…

> it's still borrowing to keep itself afloat

That's not actually true. After the severe austerity, Greece is now running a "primary surplus". Excluding interest payments on the debt, revenues are greater than expenses[1].

The issue is not whether you can shut down a government. The issue is that the debt burden is too large to ever be repaid based on the revenue-generating capacity of the economy.

And austerity only makes that worse. Banks and bondholders freely made loans to Greece that now cannot be repaid. The people of Greece didn't benefit much from these loans, as the vast majority was siphoned off by corrupt officials.

Why were rich banks and bondholders bailed out, while generations of ordinary Greeks must suffer in poverty and unemployment?

[1] http://blogs.wsj.com/brussels/2014/04/23/greek-primary-surpl...

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

#236

Post by atmosx » Sat, Jan 31, 2015, 5:21 PM UTC

bibabo wrote: post #215

bibabo wrote: post #210

Earlier quoted context omitted.

I agree Germany should pay war reperations. As should Greece to Turkey and the Balkan for their invasions there, as should France to Germany for the napoleonic wars, Sweden to my hometown where they've killed nearly everyone and razed the city, the US for Vietnam to Laos. All the colonial powers should pay what they stole from their colonies, the UK to India, France to Africa. The US to the Philipines. France and the…

@atmosx: So your point is, only WW reperations need to be paid, if you invade a neighbour and massacre the people there, you needn't? Looks a little too specialized to be a general moral rule.

There is a reason the WW is called like that but you choose to bypass that. I understand, after all you created an account just to comment on the topic didn't you?

Anyway, I've had enough feeding trolls. Won't comment on the topic anymore, it's hot enough as it is.

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

#237

Post by eli_gottlieb » Sat, Jan 31, 2015, 5:30 PM UTC

peterfirefly wrote: post #181

lithander wrote: post #158

Earlier quoted context omitted.

You're cynical. The tone of the open letter is nothing compared to the tone of your comment. If you truely believe that we Europeans aren't living in a democracy anymore and that politics shouldn't be about the peoples wellbeing in the first place then stop worrying about PEGIDA or Dschungelcamp and do something about that. You stance of "this is how the world works and I'm lucky to be on the winning team" is both sh…

I am not worried about PEGIDA. I am worried about the mischaracterisations of PEGIDA. I am also /very/ worried about Antifa.

Why are you more worried about anti-fascists than about fascists?

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

#238

Post by peterfirefly » Sat, Jan 31, 2015, 7:19 PM UTC

eli_gottlieb wrote: post #237

peterfirefly wrote: post #181

Earlier quoted context omitted.

I am not worried about PEGIDA. I am worried about the mischaracterisations of PEGIDA. I am also /very/ worried about Antifa.

Why are you more worried about anti-fascists than about fascists?

Because the "anti"-fascists are fascists and PEGIDA are anti-fascists. Their anti-fascism is one of the reasons why they are against Islam -- anyone who is against suppresion, violence, and fascism ought to be against Islam, just as they should be against Communism and Nazism.

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

#239

Post by peterfirefly » Sun, Feb 01, 2015, 12:05 AM UTC

atmosx wrote: post #212

bibabo wrote: post #210

Earlier quoted context omitted.

I agree Germany should pay war reperations. As should Greece to Turkey and the Balkan for their invasions there, as should France to Germany for the napoleonic wars, Sweden to my hometown where they've killed nearly everyone and razed the city, the US for Vietnam to Laos. All the colonial powers should pay what they stole from their colonies, the UK to India, France to Africa. The US to the Philipines. France and the…

LOL, you can go as back as Sparta if you like but the fact remains: NO other country started 2 WWs.

The German battles in WWI were defensive. That they happened outside the borders of Germany doesn't change that.

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

#240

Post by mathattack » Sun, Feb 01, 2015, 4:19 AM UTC

nhaehnle wrote: post #232

mathattack wrote: post #185

Earlier quoted context omitted.

I think we agree on 99%. My point is just that a good bank can still have a run in the absence of the FDIC guarantee. Let's say a bank has $100 million in deposits. They keep $10 million in liquid assets, and lend out $90 million in un-securitized loans to local businesses. There's a false market rumor of something bad happening at the bank, and all of a sudden $20 million in depositors want their money back. The ban…

I think you're right about our mostly-agreement :) Just to clarify, I think we have to distinguish between the likeliness of a bank run and the effects of a bank run . Indeed, the FDIC makes a bank run extremely unlikely. Perhaps this is what you mean by "protecting the bank". However, even if there were no FDIC, a bank run on a good (solvent) bank would not cause that bank to collapse, due to the central bank's lend…

Once a run happens, the central bank has to make a choice on who to lend to based on imperfect information, though. The central bank might say, "I don't know about all these local real estate loans, let's let them fail."

It's the FDIC that removes this possibility.

Thanks for engaging in this conversation!