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Greece

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Re: Greece

#51

Post by Amezarak »

Xylakant wrote: post #42
Amezarak wrote: post #37

Earlier quoted context omitted.

> Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy. Greece has a perfectly workable alternative in a Grexit. It would help them enormously and not require austerity but there are political reasons that won't allow it. If Greece was using the dra…

As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? Interest rates even for short term borrowing would be unsustainable. What would happen in the meantime, until such a Grexit could actually be performed? The banks don't have money any more, there's no infrastructure to print new bills, there's no plan on how to actually do that. It's…

> As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit?

As I added in my edit, Greece has a primary budget surplus. There would be no ongoing deficit.

Existing debt would be paid off with the expedient of default and currency devaluation, just as other countries have historically done. A little rough patch and then things look up. Seems a much healthier alternative than decades of economic suffering due to more and more austerity and the consequences thereof.

> there's no infrastructure to print new bills

I can't imagine that is a very hard problem to solve.

> On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis?

Does leaving the Euro mean leaving the Eurozone? That's an honest question. I don't think it does, but I've heard this said before.

On your final point, I don't disagree: at least right now leaving the Eurozone is politically untenable. But I suspect that economically it might be the most sensible thing to do, and not just for Greece. Unless Europe forms a real fiscal union, this kind of madness will happen over and over.

Re: Greece

#52

Post by return0 »

lhl wrote: post #15

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.

Actually there have always been subsidies all across europe, but these are discussed at the EU level and are not related to the euro.

Re: Greece

#53

Post by tacone »

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?

Well, Greece implemented a lot of changes, and it's one of the few Eurozone countries that successfully implemented internal devaluation (salaries halved).

What you call "necessary changes" actually turned out to be "bad changes", and everybody with a grain of salt would say there was no way they could get Greece up again on its feet.

Greece, like many other countries, messed up or not, began sinking after joining the Eurozone. One may wonder a bit before blaming them.

Re: Greece

#54

Post by taki3 »

mike_hearn wrote: post #24
DangerousPie wrote: post #17

Earlier quoted context omitted.

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 buildi…

The reforms are the only long term solution. They're reforms like, maybe Greeks should retire at the same age that other people in Europe do. Maybe hairdressing should not be considered a 'dangerous profession', thus unlocking various benefits. Maybe Greek train drivers should not be paid $130,000 a year to drive near-empty trains. Maybe Greece should be able to grow its own food instead of importing more than half o…

So if you have known all of that you still invite them to the Euro? You still lend them like there is no tomorrow eve though you have known this stuff has been going on for decades? And then you put all the blame on them?

What kind of investor are you? A German banker? Ja wohl! Ich know all of thiz and that I shouldn't lend them any money! But I still lend them because if antyhing happens I call up Die Frau and she get our back.

Nice, really nice. So German too!

Re: Greece

#55

Post by namuol »

This was my main take-away:

"There is one morality tale that says the debtor must repay, or she has sinned and must be punished.

There is another morality tale that says the creditor must invest wisely, or she has stewarded resources poorly and must be punished.

We get to choose which morality tale we most use to make sense of the world. We do, and surely should, use both to some degree.

But if we emphasize the first story, we end up in a world full of bad loans, wasted resources, and people trapped in debtors’ prison, metaphorical or literal.

If we emphasize the second story, we end up in a world where dumb expenditures are never financed in the first place."

Re: Greece

#56

Post by tacone »

mike_hearn wrote: post #24
DangerousPie wrote: post #17

Earlier quoted context omitted.

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 buildi…

The reforms are the only long term solution. They're reforms like, maybe Greeks should retire at the same age that other people in Europe do. Maybe hairdressing should not be considered a 'dangerous profession', thus unlocking various benefits. Maybe Greek train drivers should not be paid $130,000 a year to drive near-empty trains. Maybe Greece should be able to grow its own food instead of importing more than half o…

> The reforms are the only long term solution. They're reforms like, maybe Greeks should retire at the same age that other people in Europe do.

What's the retirement age of the other people in Europe, excuse me?

62 like in Germany? 67+ like in Italy?

> Greece is hosed because, as the article points out, it is an incredibly screwed up and corrupt country.

Japan is often ranked as the most corrupted country in the world, but still is going fine. It resisted many crises, and it's one of the most powerful economies in the world. You may guess that corruption is not part of the equation then. Isn't USA corrupted? Isn't China? The whole idea that economies fall down because of corruption is non-sense. As long as money stealed by corrupted people stays in the country the economy does not suffer that much. Corruption issue is about social justice more than everything else.

Re: Greece

#57

Post by WalterBright »

giggzy wrote: post #22
telepheron wrote: post #11

Earlier quoted context omitted.

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?

The creditors ( banks ) are part of "moral" game here too. If the Euro cannot handle Greek ( and Spanish , Italian, Portuguese , Irish ) default then members of the Euro must share the imbalance. As an american tax payer it hurt to watch bank bailouts here. In europe I keep hearing countries names, but this is a bank bailout fundamentally. Sticking the debt on national governments while also forcing austerity ( defac…

I would expect that austerity would shrink the GDP. After all, if a business is only viable if it receives constant infusions of cash, then shutting off that cash would shut down the company, and its output would no longer contribute to the GDP.

But it was not a productive business, anyway.

Re: Greece

#58

Post by rosser »

telepheron wrote: post #48
rosser wrote: post #40

Earlier quoted context omitted.

If Greece's creditors lent money to the country while knowing of its government's misrepresentations, then whose fault is that again?

Who says the creditors were fully aware of the government's misrepresentations? Those misrepresentations were discovered when the Troika started to investigate Greece's financial state.

When you're lending out billions of dollars, you don't take the debtor's statements at face value. You do very thorough due diligence, and employ very capable people to do it for you. There is no excuse for Deutsche Bank, et al, not to have known exactly how tenuous the strength and solvency of the Greek economy were.

The notion that no-one knew the Greek government was lying about the state of their economy until it was too late is ludicrous on its face.

Re: Greece

#59

Post by snitko »

namuol wrote: post #55

This was my main take-away: "There is one morality tale that says the debtor must repay, or she has sinned and must be punished. There is another morality tale that says the creditor must invest wisely, or she has stewarded resources poorly and must be punished. We get to choose which morality tale we most use to make sense of the world. We do, and surely should, use both to some degree. But if we emphasize the first…

Unfortunately, it's neither. The debtors in this case are the people of Greece, yet the ones who got them indebted are politicians, who misled the population into believing that the expenses the government had were sustainable. Even more important is that the politicians were not voted in by 100% of people, which simply means that many people who lost their money didn't agree with the policy that led to them losing their money.

I don't think anyone with a straight face can now say that democracy is the best solution to running our society, when it, in fact, leads to the situation in which half the population (the ones who vote for the policy) unknowingly oblige the other half (and themselves) to lose their money. This situation is not an exception. This is what's going to happen sooner or later to every other country which has a substantial debt. You can't spend more than you earn without consequences.

Re: Greece

#60

Post by [deleted] »

WalterBright wrote: post #57
giggzy wrote: post #22

Earlier quoted context omitted.

The creditors ( banks ) are part of "moral" game here too. If the Euro cannot handle Greek ( and Spanish , Italian, Portuguese , Irish ) default then members of the Euro must share the imbalance. As an american tax payer it hurt to watch bank bailouts here. In europe I keep hearing countries names, but this is a bank bailout fundamentally. Sticking the debt on national governments while also forcing austerity ( defac…

I would expect that austerity would shrink the GDP. After all, if a business is only viable if it receives constant infusions of cash, then shutting off that cash would shut down the company, and its output would no longer contribute to the GDP. But it was not a productive business, anyway.

[deleted]
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