Are you watching Greece implode?

[zephyrprime]

couldn't they drop the euro in an attempt to avoid a deflation spiral?

Certainly. But a free floating currency doesn't drop for just no reason. They would either have to lower interest rates or monetize sovereign debt issuance. If they lower interest rates, that will create more bubbles and inflation. The northern europeans want neither. If they monetize sovereign debt, the southern europeans would be getting free money as a reward for their bad behavior. The northern europeans don't want that either.

And of course, imports would rise in price and nobody wants that.

 

[StageLeft]

The Greeks have no choice, but to accept whatever austerity measures necessary to save the finances of their country. The Greek government is damned if they do and damned if they don't. If they listen to the people, but not to the EU and IMF, then they won't get their bailout money, which mean they'll default. If they accept the money, the unions and poorer people will suffer. There is no easy way out. The Greeks brought this mess upon themselves and now some people will pay the price. Thanks god it's not me and I'm glad I'm not Greek.

They have a choice to not accept. but you're right, no easy way out. The poll show the people overall are not happy with this bailout and its required austerity. And think about it, it represents a great increase to retirement age and cut in pay. Not unreasonable AT ALL, in my view (probably not enough), but to a people used to being held at night and have a warm breast put in their mouth from Mommy Government a bitter pill to swallow. And many Greeks still do not realize it's their fault. They really honestly don't, so they are resisting it.

This guy says the package may fall through:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX9pEOY09jQQ&pos=6

Even if it doesn't, is Greece not merely being given a band aid? The austerity is insufficient to turn back their debt spiral anyway, it only slows it; it does not arrest it.

Greece fvcked up but most countries are doing the same, just not quite as severely yet. I dearly hope we can take this lesson and learn something from it ourselves.

If Greece defaults, we will probably have another liquidity freeze like we had in fall of 2008 except worse. If Greece defaults, the ECB will probably attempt to monetize a large portion of EU debt. The increase in sovereign debt would stabilize things for a while but will create even more instability in the system.

I understand they were due to make a payment on May 19th. I'm under the impression this $11B (or Euro) payment could not be made. Is that true? And that the ECB has promised to buy any Greek bonds _regardless_ of underlying strength of them/chances of them being paid? If this is true it's an absolute catastrophe for them. I think their bond prices shot up again today.

There is and always was a very easy lesson in what's happening to Greece and what has happened to the global economy as a whole in this recession. But nobody wants to follow it and so continually ask alchemists to find tricks to avoid abiding by it.

 

[lsquare]

what happens if Greece defaults?

heck, what was the aftermath when Russia defaulted 10yrs ago?

It took years for Russia to recover. Furthermore, your comparison isn't a fair one. The Russian economy is not only bigger than Greece's, but it also has potential for massive growth thanks to the country's natural resources. Having said that, I'm not suggesting Russia is an economic superpower. It's far from it and Russian finances aren't exactly in perfect shape right now.

 

[lsquare]

If Greece defaults, we will probably have another liquidity freeze like we had in fall of 2008 except worse. If Greece defaults, the ECB will probably attempt to monetize a large portion of EU debt. The increase in sovereign debt would stabilize things for a while but will create even more instability in the system.

Ultimately, the US, EU, and Japan will have devalue and/or default. That is the only solution to problems like we are having.

The EU as a whole will not default in its debts. Also, you're not characterizing things properly. The EU is not a country and itself does have no an external debt. Only its members can default and not every Eurozone member will default on its debt.

The US will not default on its debt. It's inconceivable. Japan's debt is mostly held domestically and I doubt it'll default on its debts either.

 

[lsquare]

They have a choice to not accept. but you're right, no easy way out. The poll show the people overall are not happy with this bailout and its required austerity. And think about it, it represents a great increase to retirement age and cut in pay. Not unreasonable AT ALL, in my view (probably not enough), but to a people used to being held at night and have a warm breast put in their mouth from Mommy Government a bitter pill to swallow. And many Greeks still do not realize it's their fault. They really honestly don't, so they are resisting it.

This guy says the package may fall through:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX9pEOY09jQQ&pos=6

Even if it doesn't, is Greece not merely being given a band aid? The austerity is insufficient to turn back their debt spiral anyway, it only slows it; it does not arrest it.

Greece fvcked up but most countries are doing the same, just not quite as severely yet. I dearly hope we can take this lesson and learn something from it ourselves.

The Greeks can whine all they want, but there is no other way out. It won't default because Eurozone members are exerting tremendous amount of pressure on the Greek government to pull through on its austerity program. I think the Greek government would be more inclined to take advice from the Eurozone members than the Greeks themselves. Why? Because it's the Eurozone members that will foot most of the bill and money talks. Democracy will take a back seat here.

Who cares if it takes the Greeks longer to retire? Does it look like it's either my problem or the Eurozone's problem? Clearly they spent and lived recklessly and a price has to be paid. If the Greeks are expecting any sympathy and understanding from me, then they're not going to get it.

I understand they were due to make a payment on May 19th. I'm under the impression this $11B (or Euro) payment could not be made. Is that true? And that the ECB has promised to buy any Greek bonds _regardless_ of underlying strength of them/chances of them being paid? If this is true it's an absolute catastrophe for them. I think their bond prices shot up again today.

There is and always was a very easy lesson in what's happening to Greece and what has happened to the global economy as a whole in this recession. But nobody wants to follow it and so continually ask alchemists to find tricks to avoid abiding by it.

I can probably write a paper on this entire Greek financial saga. The lessons here can be summarized in several key points. Monetary union cannot be successful without closer political cooperation. Monetary union is bound to fail when certain members behave recklessly and have no fiscal responsibility. Greece and the rest of the PIIGS should never have been allowed to join the Euro in the first place.

Greece will make that payment. I cannot imagine Greece will default on any of its debt given what has already transpired. When the situation stabilize, Germany must act and use its influence to change the monetary union for the better. Not only Greece and the rest of the PIGS have to fix its public finances, but there must be discussions on the possiblity of expelling irresponsible members from the club. Either that or Germany should leave the Euro. This mess cannot and should not be repeated again.

 

[JEDI]

how will greeece be punished for violating the 3.5% of GDP debt ratio? (if any?)

 

[lsquare]

how will greeece be punished for violating the 3.5% of GDP debt ratio? (if any?)

By paying 5% for the loan from the Eurozone members and pushing through these tough austerity measures.

 

[yllus]

By paying 5% for the loan from the Eurozone members and pushing through these tough austerity measures.

5% is a sweetheart deal.

 

[BlahBlahYouToo]

It took years for Russia to recover. Furthermore, your comparison isn't a fair one. The Russian economy is not only bigger than Greece's, but it also has potential for massive growth thanks to the country's natural resources. Having said that, I'm not suggesting Russia is an economic superpower. It's far from it and Russian finances aren't exactly in perfect shape right now.

don't forget greece cannot control their own currency.

 

[cubeless]

"Hundreds of black-hooded anarchists roamed the streets, smashing store windows and hacking chunks of marble off buildings to throw at police."... from cnbc report...

these should be target practice for the greek sniper team...

welcome to the collapse of a welfare state...

 

[Jaskalas]

Greece fvcked up but most countries are doing the same, just not quite as severely yet. I dearly hope we can take this lesson and learn something from it ourselves.

Learn from Greece and do what? Our government will not scale itself back. There is no solution within the confines of our system.

 

[zephyrprime]

The EU as a whole will not default in its debts. Also, you're not characterizing things properly. The EU is not a country and itself does have no an external debt. Only its members can default and not every Eurozone member will default on its debt.

The US will not default on its debt. It's inconceivable. Japan's debt is mostly held domestically and I doubt it'll default on its debts either.

I suggest you read a little history. All sovereign debt is eventually defaulted on or devalued. The US has devalued it currency several times throughout its history to deal with its debt the most recent time being when Truman did it.

 

[StageLeft]

Learn from Greece and do what? Our government will not scale itself back. There is no solution within the confines of our system.

I think in theory it would be possible for the US populace to get behind a leader who promotes and actually executes a balanced budget. In practice (and when practice doesn't match theory the theory is wrong) perhaps not. The shape of politics here and in most countries is such that those in power can borrow from the future, as can voters, so the can is habitually kicked down the road.

 

[Pocatello]

I think in theory it would be possible for the US populace to get behind a leader who promotes and actually executes a balanced budget. In practice (and when practice doesn't match theory the theory is wrong) perhaps not. The shape of politics here and in most countries is such that those in power can borrow from the future, as can voters, so the can is habitually kicked down the road.

Too many pet projects, and they cost money. Military spending, health care, or social programs, to name a few. The people are not ready to face the truth so they vote accordingly for politicians who make them feel good.

 

[StageLeft]

Too many pet projects, and they cost money. Military spending, health care, or social programs, to name a few. The people are not ready to face the truth so they vote accordingly for politicians who make them feel good.

I know, it's really unfortunate.

And things continue to get worse in Greece:

http://online.wsj.com/article/SB100...414.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsTop

Moody's today said it may lower Portugal's rating by one or two notches in the next two months.

 

[lsquare]

don't forget greece cannot control their own currency.

I've already mentioned that in the past.

 

[lsquare]

I suggest you read a little history. All sovereign debt is eventually defaulted on or devalued. The US has devalued it currency several times throughout its history to deal with its debt the most recent time being when Truman did it.

I suggest you read a little on the Eurozone itself. There would be no problem with Greece defaulting if it wasn't for the fact that it's part of the Euro.

I never said the US has never devalue its currency. Quite frankly, by controlling its own currency, the US government can do whatever is necessary to resolve its financial problems. Greece can't. That's the difference. You simply cannot compare Greece to the US.

 

[lsquare]

I think in theory it would be possible for the US populace to get behind a leader who promotes and actually executes a balanced budget. In practice (and when practice doesn't match theory the theory is wrong) perhaps not. The shape of politics here and in most countries is such that those in power can borrow from the future, as can voters, so the can is habitually kicked down the road.

In theory, anything is possible. In reality, it doesn't matter whether you have Republicans or Democrats in power, they'll always want to promote their interests first and neither of them are that serious in trying to aggressively balance the budget.

 

[Darwin333]

I suggest you read a little on the Eurozone itself. There would be no problem with Greece defaulting if it wasn't for the fact that it's part of the Euro.

I never said the US has never devalue its currency. Quite frankly, by controlling its own currency, the US government can do whatever is necessary to resolve its financial problems. Greece can't. That's the difference. You simply cannot compare Greece to the US.

I have never heard a single person explain how we are much different because we can "control" our currency.

Our biggest funding issues going forward are our entitlement programs and our debt. Devaluing our currency to get our from under the debt problem sounds nice until you realize that our entitlements are pegged to inflation. So you inflate away 10 trillion in debt and you pick up an additional 100 trillion in entitlement obligations. Do YOU or anyone else here really believe we will remove that peg? Hell, didn't we send people on social security a check this year because inflation didn't go up (at least how we measure it)?

I can not possibly see our politicians pissing off a very large portion of the voting public in order to "pay" our debt (basically not pissing off our debt holders as bad). We will eventually default for the same reasons the Greeks are, our voting public will not tolerate significant changes to what they are entitled to and politicians, for the most part, simply want to get (re)elected. We can't raise taxes enough either, even if that was politically feasible.

Making matters even worse is all the game playing and legalized accounting fraud in both the public and private sectors. Eventually the math always wins.

 

[nick1985]

http://www.liveleak.com/view?i=46d_1273090760

Footage of riots at Greek Parliment


http://www.liveleak.com/view?i=a8eaab1add

Not for the squeemish...

 

[StageLeft]

I have never heard a single person explain how we are much different because we can "control" our currency.

Our biggest funding issues going forward are our entitlement programs and our debt. Devaluing our currency to get our from under the debt problem sounds nice until you realize that our entitlements are pegged to inflation. So you inflate away 10 trillion in debt and you pick up an additional 100 trillion in entitlement obligations. Do YOU or anyone else here really believe we will remove that peg? Hell, didn't we send people on social security a check this year because inflation didn't go up (at least how we measure it)?

I can not possibly see our politicians pissing off a very large portion of the voting public in order to "pay" our debt (basically not pissing off our debt holders as bad). We will eventually default for the same reasons the Greeks are, our voting public will not tolerate significant changes to what they are entitled to and politicians, for the most part, simply want to get (re)elected. We can't raise taxes enough either, even if that was politically feasible.

Making matters even worse is all the game playing and legalized accounting fraud in both the public and private sectors. Eventually the math always wins.

Responsibilities pegged to inflation do not benefit but others do, like bonds sold, so if the dollar loses half its value yes you have to now pay out twice social security but the trillion you owe China is now worth half as much. Obviously any future debt will only be purchased at a premium, though, as they will build their purchases in with the anticipation you will devalue things.

 

[StageLeft]

http://www.liveleak.com/view?i=46d_1273090760

Footage of riots at Greek Parliment


http://www.liveleak.com/view?i=a8eaab1add

Not for the squeemish...

Can you imagine if hundreds of Americans started to storm the house of congress? That would definitely be go-time.

IMO if you're in the police and they are throwing molotov cocktails at you should be breaking out the live ammo immediately and firing indiscriminately.

 

[nick1985]

Can you imagine if hundreds of Americans started to storm the house of congress? That would definitely be go-time.

IMO if you're in the police and they are throwing molotov cocktails at you should be breaking out the live ammo immediately and firing indiscriminately.

Seriously. If I was a cop and someone threw a molotov cocktail at me, they will be getting shot.

 

[StageLeft]

Seriously. If I was a cop and someone threw a molotov cocktail at me, they will be getting shot.

This is probably exactly why I bet those cops are not armed, in great part to keep them in check, but when you're getting a molotov cocktail at you it's no time for mace and batons.

 

[nick1985]

This is probably exactly why I bet those cops are not armed, in great part to keep them in check, but when you're getting a molotov cocktail at you it's no time for mace and batons.

I was wondering that myself, I do not see firearms on the police