Greece • Hacker News Board

Re: Greece

#11

Post by telepheron » Sat, Jul 04, 2015, 11:00 PM UTC

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

Re: Greece

#12

Post by DangerousPie » Sat, Jul 04, 2015, 11:02 PM UTC

kqr2 wrote: post #8

This is a much better primer on the situation: http://faculty.chicagobooth.edu/anil.kashyap/research/papers...

It's a good primer to describe the facts, but it does not say much in terms of what should have been/should be done.

Re: Greece

#13

Post by tjradcliffe » Sat, Jul 04, 2015, 11:02 PM UTC

seliopou wrote: post #2

Interfulidity is one of the best economics blogs out there. Last year he did a five-part series on welfare economics[0] that, while quite lengthy, was very well-done. Anybody that's interested in political economy, but has a more traditional Econ 101 background, it's a good place to start. [0]: http://www.interfluidity.com/v2/5149.html

I'm not encouraged by statements like this: "There is nothing inherently more scientific about using an ordinal rather than a cardinal quantity to describe an economic construct. Chemists' free energy, or the force required to maintain the pressure differential of a vacuum, are cardinal measures of constructs as invisible as utility and with a much stronger claim to validity as 'science'."

Utility is ordinal not out of some deep desire on the part of economists to "appear scientific" but because it reflects a simple empirical fact about humans. "Utility" is a measure of value to someone, and human values are ordinal: I value my children more than my cats, and no number of cats will ever equal the value of my children. It would be incoherent and wrong to say I value my children ten times more than my cats, and no cardinal relationship between them could possibly represent reality.

This is not mysterious or esoteric. The ordinality of human values is what makes rational choice under uncertainty such a difficult problem, because we can't compute expected values from ordinals (unless there happens to be a market in the things we value, in which case we can get cardinality through prices... but there is no market in children or many other things we value.)

By making it sound like economist's interest in publicly testing ideas by systematic observation, controlled experiment and Bayesian inference--which is what the discipline of science actually is--is some kind of inexplicable fetish instead of a perfectly reasonable goal for anyone who wants to say anything meaningful or interesting about the world, the author does everyone a great disservice.

Re: Greece

#14

Post by konceptz » Sat, Jul 04, 2015, 11:07 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

I think what msabalau is saying is that there are many issues at multiple levels of this system and instead of addressing them as a whole they turned on a single instance.

The implication is that Greek's issues were used as a scapegoat for a systemic problem.

Re: Greece

#15

Post by lhl » Sat, Jul 04, 2015, 11:08 PM UTC

This is an interesting take on things w/ a lot of merit, but I think Vox actually summed it up better here w/ a short video and a longer article: http://www.vox.com/2015/6/30/8867939/greece-economic-crisis

Until/unless the rich European countries are willing to subsidize the poorer countries, as a financial union, the Euro is just a complete non-starter since the fiscal policies these states need are so far apart.

Re: Greece

#16

Post by jeltz » Sat, Jul 04, 2015, 11:09 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

I am leaning towards yes, because it was well known a long time before the crash that Greece was messed up. The incentives were wrong and encouraged irresponsible ledning. The Greek government just happened to be the worst borrower.

Re: Greece

#17

Post by DangerousPie » Sat, Jul 04, 2015, 11:13 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

Yes, pretty much. The author's argument is that everybody knew that their economic state was misrepresented, so the banks should have never lend them money in the first place.

The mismanagement leading up to the financial crises was of course the fault of the Greek government. However, the reforms that the EU has proposed/enforced since then seem to have been more about punishing the Greeks than about actually building a properly functioning economy. That might feel justified (and because of that it has the support of many voters) but long-term it is not a viable solution to the problem.

Re: Greece

#18

Post by [deleted] » Sat, Jul 04, 2015, 11:13 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

[deleted]

Re: Greece

#19

Post by seliopou » Sat, Jul 04, 2015, 11:14 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

In either way it could have gone back in 2010, the profligacy of the Greek state would not have been ignored. Had it defaulted to the private creditors at the time, the country's borrowing costs would have shot through the roof. People hear "default" and think that it's a get out of jail free card. It's not. Money would be harder to come by for the state to fund its operations, which may have provided the backpressure needed for meaningful reforms to take place without shrinking the national income by 1/3.

But since they didn't default, and instead the banks holding the bad debt were bailed out indirectly though loans to Greece (a tiny fraction of which remained in Greece, mind you), national income did shrink by 1/3 because of many of the changes that the institutions insisted take place _did_ take place. Now the likelihood of those loans getting paid back is as close to nil as non-failed state can get. So, to look to the future rather than the past, everybody should be trying to figure out how to repay the institutions as much money as possible. Shrinking national income further isn't going to do that.

With respect to the "completely bogus referendum", not gonna bite.

Re: Greece

#20

Post by skylan_q » Sat, Jul 04, 2015, 11:16 PM UTC

telepheron wrote: post #11

msabalau wrote: post #6

The entire thing is worth reading, but the key take away: "Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flo…

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

Forgiving all the debt to Greece causes a worldwide financial collapse.

Greece's debt was restructured to be drawn out into longer payment terms at a lower interest rate and at a reduced principal to be fair to them and to prevent a financial collapse.

It's containment. It's been 5 years of containment now, and it's working to some extent as nations within the eurozone are much less exposed to the greek situation than they were 5 years ago.