Greece about to default

[werepossum]

A primary surplus is by definition the exact opposite of spending more money than you take in. You may be a bit confused about the terms here.

Funny thing is that those fiscal multipliers are most likely the reason why Greece is in the dire condition it's in. When the multiplier is above 1 cutting spending shrinks your economy faster than it shrinks your debts, making it self defeating. Just another addition to the annals of austerity's failure.

The strangest part to me is that Greece has been trying it the way of austerity for half a decade now, with utterly catastrophic results. How is it that people are facing the reality of that failure with a call for even more austerity? When do you admit failure? Ever?

Read the preliminary IMF report. It makes crystal clear that Greece has NOT been making the required changes - unlike, say, Spain, who did make the required changes and actually loaned money to Greece on the premise that Greece too was making the required changes.

As to definitions, Greece's primary surplus has been shown to be just like all other Greek socioeconomic numbers. Freed from its crushing debt payments, Greece should be swimming in cash if it truly had a primary surplus. Instead Greece cannot function for even a few weeks without more gifts even without making any payments. Thus my comment about spending more than one takes in - even if one calls it nasty old austerity.

 

[fskimospy]

Read the preliminary IMF report. It makes crystal clear that Greece has NOT been making the required changes - unlike, say, Spain, who did make the required changes and actually loaned money to Greece on the premise that Greece too was making the required changes.

I have read the preliminary IMF report. You realize that Greece has implemented far more severe austerity than Spain did, correct? The reason why Greece is still in trouble is because they made too many of the required changes too quickly and it has tanked their economy.

As to definitions, Greece's primary surplus has been shown to be just like all other Greek socioeconomic numbers. Freed from its crushing debt payments, Greece should be swimming in cash if it truly had a primary surplus. Instead Greece cannot function for even a few weeks without more gifts even without making any payments. Thus my comment about spending more than one takes in - even if one calls it nasty old austerity.

No matter how you try and spin it, what you wrote was pure word salad. Greece is not freed from its crushing debt payments, and it would not be swimming in cash if it truly had a primary surplus anyway, as that surplus was not large.

It's true they may not end up having a primary surplus after all, but that doesn't make what you said any less nonsensical.

 

[werepossum]

Greece is the biggest patsy in the scheme of malfeasance by the international banking elite & the leaders of their former govt. They knew all along that the day would come that Greeks wouldn't be able to pay but they made oodles of money in the meanwhile. At this point, they must have made enough so that they can just break the deadbeat's legs & be done with it. It'll keep the other debt slaves in line, paying the vigorish. Otherwise, they wouldn't drive such a hard bargain.

Idiot. Perhaps you can explain how these bankers come out ahead making their "oodles of money" in less than eight years' interest while writing down the principle 50%.

 

[theeedude]

But it would avoid even larger losses in the future and avoid the moral hazard that would cause Spain, Italy and other southern countries to also hold a gun to the head of the northern countries.

Only if Greece does poorly with a devalued currency. If Greece restores cost competitiveness and does better than Spain, then it will create an even bigger moral hazard.

And then they expanded the public sector again and now they are once again running a deficit. Basically, Greece has a problem with tax evasion, corruption, and cronyism, if those aren't fixed (has an attempt been made there?) then Greece is not going to succeed.

Impose austerity to wipe out 25% of GDP and create 25%+ unemployment, and the public sector expands? You don't say. That's what it's supposed to do in a depression.

I could see it going either way. Greece isn't that large and writing them off might be worth it to send a message to the PIIGS that the rest of the EZ won't be held hostage.

Again, this depends on how well Greece does with a normally functioning independent monetary policy. If it does well, it's lights out for the Euro.

The black market in Greece accounts for 25% of their GDP. You really think it's just island owners participating in that? Or how about the fact that professionals are the primary tax dodgers?
http://www.theguardian.com/world/2012/sep/09/greece-tax-evasion-professional-classes?CMP=twt_gu
Would you rather talk about economic freedom or corruption? Greece is terrible in those measurements as well.

If you squeeze more money out of the middle class to pay the creditors, it's only going to reduce consumption and make the depression worse, which will shrink the GDP more than it shrinks the debt and make the debt even less sustainable. A lot of these reforms are interesting in the long term, but in the near term, you don't take money out of the economy during a recession. Even Obama postponed expiration of Bush tax cuts while the country was in a recession, no matter how much he didn't agree with them as a long term fiscal strategy.

I don't have a problem with Greece wanting to avoid austerity, I just don't think the other EZ nations (or the US) should pay for their corrupt system. Ditch the Euro, end austerity, and fix yourself.

They will pay either way. If Greece exits Euro, it will default on all of the money loaned to it by the creditors. That said, I agree they should exit the Euro. Euro is a dead end currency without fiscal integration, and it doesn't look like Eurozone is ready for that.

 

[werepossum]

I have read the preliminary IMF report. You realize that Greece has implemented far more severe austerity than Spain did, correct? The reason why Greece is still in trouble is because they made too many of the required changes too quickly and it has tanked their economy.

No matter how you try and spin it, what you wrote was pure word salad. Greece is not freed from its crushing debt payments, and it would not be swimming in cash if it truly had a primary surplus anyway, as that surplus was not large.

It's true they may not end up having a primary surplus after all, but that doesn't make what you said any less nonsensical.

lol Word salad, the latest term for that which does not align with the ideology. The preliminary IDF report clearly blames Greece for NOT implementing the agreed-on reforms, and blames the failure of the projections squarely on that failure. If you wish to argue with the IMF, be my guest.

If Greece is running a primary surplus, then Greece should have no trouble paying its obligations, so let's break it down into couplets:

Is Greece making it's agreed-upon loan payments?
Yes - goto "It's swell to be Greece and it's swell to be Greece's creditors."
No.

Is Greece paying its obligations without difficulty as long as it does not make its agreed-upon loan payments?
Yes - goto "It's swell to be Greece and hell to be Greece's creditors."
No - goto "Greece is not actually running a primary surplus."

Seems pretty simple to determine. If Greece was actually running a primary surplus - however small - then Greece would be able to pay its obligations as long as they do not make their payments. Whether or not Greece is logically "freed from its crushing debt payments", it isn't paying them, so the effect is the same.

 

[BigDH01]

Only if Greece does poorly with a devalued currency. If Greece restores cost competitiveness and does better than Spain, then it will create an even bigger moral hazard.

Why? If that happens, then the EZ realizes that it may not be a good idea to impose a monetary regime without fiscal. If Greece recovers, then it might actually be in the best interest of the entire EZ to abandon the Euro. That's not a moral hazard, that's simply a possible outcome.

Impose austerity to wipe out 25% of GDP and create 25%+ unemployment, and the public sector expands? You don't say. That's what it's supposed to do in a depression.

That's true if you have monetary sovereignty, something Greece doesn't have. It's also not as if Europe walked into Athens and forced them to use the Euro, Greece accepted the Euro and the conditions that came with it. While I don't think austerity helps Greece, it's a condition of using the Euro. Don't want austerity? Don't use the Euro.

Again, this depends on how well Greece does with a normally functioning independent monetary policy. If it does well, it's lights out for the Euro.

I guess I don't see this as being as negative as you do. If countries are better off without the Euro then they are better off without the Euro.

If you squeeze more money out of the middle class to pay the creditors, it's only going to reduce consumption and make the depression worse,

I'm not sure Greece is doing a good job squeezing anyone. I think that's one of the primary complaints, Greeks are dodging taxes.

which will shrink the GDP more than it shrinks the debt and make the debt even less sustainable.

I understand Keynes, Mises, Marx, Hayek, Friedman, Wray, etc. I understand monetary/fiscal policy, chartalism, MMT, etc. But that describes how many works in an independent and sovereign monetary regime, which is NOT the situation in Greece.

A lot of these reforms are interesting in the long term, but in the near term, you don't take money out of the economy during a recession. Even Obama postponed expiration of Bush tax cuts while the country was in a recession, no matter how much he didn't agree with them as a long term fiscal strategy.

The US has sovereign monetary control, Greece does not. The EZ gave Greece money with stipulations. Greece cannot meet the stipulations and they are once again out of money. It's fairly simple. If Greece wanted monetary control, they should've avoided the Euro.

They will pay either way. If Greece exits Euro, it will default on all of the money loaned to it by the creditors.

In all likelihood, that's going to happen anyway. I don't see Greece weening itself off the productivity of northern Europe.

That said, I agree they should exit the Euro. Euro is a dead end currency without fiscal integration, and it doesn't look like Eurozone is ready for that.

On this we agree. I have no issues with Greece leaving, my issue is with Greece staying and demanding they maintain their quality of life on the backs of other Europeans (even those that are poorer than they).

 

[fskimospy]

lol Word salad, the latest term for that which does not align with the ideology. The preliminary IDF report clearly blames Greece for NOT implementing the agreed-on reforms, and blames the failure of the projections squarely on that failure. If you wish to argue with the IMF, be my guest.

If Greece is running a primary surplus, then Greece should have no trouble paying its obligations, so let's break it down into couplets:

Is Greece making it's agreed-upon loan payments?
Yes - goto "It's swell to be Greece and it's swell to be Greece's creditors."
No.

Is Greece paying its obligations without difficulty as long as it does not make its agreed-upon loan payments?
Yes - goto "It's swell to be Greece and hell to be Greece's creditors."
No - goto "Greece is not actually running a primary surplus."

Seems pretty simple to determine. If Greece was actually running a primary surplus - however small - then Greece would be able to pay its obligations as long as they do not make their payments. Whether or not Greece is logically "freed from its crushing debt payments", it isn't paying them, so the effect is the same.

I have to admit this style of argumentation is baffling. You said something obviously wrong, as in definition of the term wrong, and then when called on it declared that people correcting you were somehow ideological zealots for doing so.

I guess it just comes back to what I said earlier. Too proud to admit a mistake.

 

[Doc Savage Fan]

Greece lied about their debt (understated) when they joined the Euro and lied many times since (overstated debt) to get financial aid before their little Ponzi scheme caught up to them. Now they're getting their just deserts. Unfortunately their people will suffer for a long, long time. Sad.

 

[glenn1]

Greece lied about their debt (understated) when they joined the Euro and lied many times since (overstated debt) to get financial aid before their little Ponzi scheme caught up to them. Now they're getting their just deserts. Unfortunately their people will suffer for a long, long time. Sad.

Why is it sad? Because they ran up unsustainable debts to support a lifestyle beyond their means, and now their creditors refuse to maintain them in that unsupportable lifestyle? That's not sad, it's long overdue and entirely due to a word the Greeks themselves invented - hubris. Now it's time for Nemesis to make her appearance.

 

[theeedude]

Why? If that happens, then the EZ realizes that it may not be a good idea to impose a monetary regime without fiscal. If Greece recovers, then it might actually be in the best interest of the entire EZ to abandon the Euro. That's not a moral hazard, that's simply a possible outcome.



That's true if you have monetary sovereignty, something Greece doesn't have. It's also not as if Europe walked into Athens and forced them to use the Euro, Greece accepted the Euro and the conditions that came with it. While I don't think austerity helps Greece, it's a condition of using the Euro. Don't want austerity? Don't use the Euro.



I guess I don't see this as being as negative as you do. If countries are better off without the Euro then they are better off without the Euro.



I'm not sure Greece is doing a good job squeezing anyone. I think that's one of the primary complaints, Greeks are dodging taxes.



I understand Keynes, Mises, Marx, Hayek, Friedman, Wray, etc. I understand monetary/fiscal policy, chartalism, MMT, etc. But that describes how many works in an independent and sovereign monetary regime, which is NOT the situation in Greece.



The US has sovereign monetary control, Greece does not. The EZ gave Greece money with stipulations. Greece cannot meet the stipulations and they are once again out of money. It's fairly simple. If Greece wanted monetary control, they should've avoided the Euro.



In all likelihood, that's going to happen anyway. I don't see Greece weening itself off the productivity of northern Europe.



On this we agree. I have no issues with Greece leaving, my issue is with Greece staying and demanding they maintain their quality of life on the backs of other Europeans (even those that are poorer than they).

I don't disagree with you. Greece should exit the Euro is my baseline scenario. If Europeans want Greece to stay in the Euro for whatever reason, it's up to them to come up with conditions that offset the downsides of not having an independent monetary system for member countries.

 

[Doc Savage Fan]

Why is it sad? Because they ran up unsustainable debts to support a lifestyle beyond their means, and now their creditors refuse to maintain them in that unsupportable lifestyle? That's not sad, it's long overdue and entirely due to a word the Greeks themselves invented - hubris. Now it's time for Nemesis to make her appearance.

It's sad because many innocent people are affected.

 

[Phynaz]

Nice summary of what's next here:

http://finance.yahoo.com/news/whats-next-greece-stumbles-toward-154417485.html

 

[Charmonium]

Nice summary of what's next here:

http://finance.yahoo.com/news/whats-next-greece-stumbles-toward-154417485.html

Very ominous

A: Perhaps the biggest drop-dead date is July 20. That's the day Greece must pay 3.5 billion euros on a bond held by the European Central Bank. If it doesn't pay, the ECB could withdraw all the emergency credit, collapsing Greece's banking system.
Many analysts think that would result in Greece leaving the euro.
If the government defaults to the ECB itself, the thinking goes, it would be impossible to deny the government is bankrupt. And that could extend to the banks that are tied to it.
In that case, the ECB could not only cap its credit, as it has done so far, but withdraw the existing 89 billion euros it has already extended to Greek banks. With the banks broke, the ECB's supervisory arm would likely order that they either be wound down or saved with new investment.
Yet Greece doesn't have enough euros for a bank rescue. So, barring a deal with creditors to refloat the banks, it would have to print a new currency.

 

[Oric]

The referandum in Greece is not only a victory for the left wing prime minister and democracy but also a decent sign that average Greek person has better understanding of simple economic facts than the economic elite of the European financial system. Greece and most of Europe for that matter is struggling with recession ( meaning lack of growth if German politicians cannot understand the term). The only known way to cure recession is increased spending not austerity measures. In fact proposed measures will only deepen recession, create lower government income due to lower taxes and faster default. Although structural reforms are needed in Greece, and for the rest of Europe including Germany, insisting on these reforms now but not when Greece first entered Union and France and Germany grasped Greek assets at fire sale prices is beyond partnership ethics. Of course Germany can circulate arguments such as pension salary in Greece is twice of Slovakia (again having a currency without a unified tax system, fiscal and monetary policy, pension system has not been designed by smaller members of Europe) people with the knowledge that prices in Greece is higher than Slovakia because higher number of German retirees with thick saving accounts and pension salaries must be higher to have a similar living standard, will not buy such arguments. The real problem of EU is not the Southern countries but Germany. The economic policy of EU only fits and benefits Germany and this country is masking its structural problems with these policies. Yet they don't want to pay the price. In fact instead of Grexit, better to talk about Gerexit.

 

[werepossum]

I have to admit this style of argumentation is baffling. You said something obviously wrong, as in definition of the term wrong, and then when called on it declared that people correcting you were somehow ideological zealots for doing so.

I guess it just comes back to what I said earlier. Too proud to admit a mistake.

You feel I've misused primary surplus because I also said Greece was spending more than it takes in. Yet you have admitted that Greece may not have a primary surplus at all. I'm arguing that Greece definitely does not have a primary surplus, because since they aren't making debt payments, with even a tiny primary surplus they should be solvent. Are you arguing that Greece is solvent? Or are you arguing that we should pretend Greece has a primary surplus even though we all know they do not?

Very ominous

I do not believe that Greece lasts until the 20th unless someone bails them out. I think they will be issuing IOUs before then.

The referandum in Greece is not only a victory for the left wing prime minister and democracy but also a decent sign that average Greek person has better understanding of simple economic facts than the economic elite of the European financial system. Greece and most of Europe for that matter is struggling with recession ( meaning lack of growth if German politicians cannot understand the term). The only known way to cure recession is increased spending not austerity measures. In fact proposed measures will only deepen recession, create lower government income due to lower taxes and faster default. Although structural reforms are needed in Greece, and for the rest of Europe including Germany, insisting on these reforms now but not when Greece first entered Union and France and Germany grasped Greek assets at fire sale prices is beyond partnership ethics. Of course Germany can circulate arguments such as pension salary in Greece is twice of Slovakia (again having a currency without a unified tax system, fiscal and monetary policy, pension system has not been designed by smaller members of Europe) people with the knowledge that prices in Greece is higher than Slovakia because higher number of German retirees with thick saving accounts and pension salaries must be higher to have a similar living standard, will not buy such arguments. The real problem of EU is not the Southern countries but Germany. The economic policy of EU only fits and benefits Germany and this country is masking its structural problems with these policies. Yet they don't want to pay the price. In fact instead of Grexit, better to talk about Gerexit.

Those dastardly Germans. What aren't they responsible for? Obviously Hitler is still alive and running things.

So, are you volunteering your nation to step up and provide these wise average Greeks with enough money to spend their way to solvency? If you are correct, it's a foolproof investment. If the EuroZone and the IMF are correct, it's a gift of your tax dollars, which will come out of your social programs. Which will it be?

 

[theeedude]

Live updates on the Greek situation:

http://www.theguardian.com/world/li...isis-meeting-as-bailout-rejected-live-updates

I think Grexit is close to a done deal now, based on passivity of EU (telling Greece to come up with a new proposal, not proposing any debt relief themselves), ECB (on ELA collateral), and IMF(no new loans while in arrears).
Eurocrats are just going through the motions at this point to not be blamed for it.

 

[werepossum]

It's sad because many innocent people are affected.

This is true. The Greeks that pay their taxes and earn their way are going to get screwed as badly as the least responsible Greek, maybe more so. Some of the people affected will be 50 year old hairdressers, but many will be people too old to easily return to the workforce even if they could find jobs.

 

[werepossum]

Live updates on the Greek situation:

http://www.theguardian.com/world/li...isis-meeting-as-bailout-rejected-live-updates

I think Grexit is close to a done deal now, based on passivity of EU (telling Greece to come up with a new proposal, not proposing any debt relief themselves), ECB (on ELA collateral), and IMF(no new loans while in arrears).
Eurocrats are just going through the motions at this point to not be blamed for it.

I suspect you are correct. Personally I can't imagine any scenario where it makes sense to loan Greece more money. It will be painful, but it's necessary, and maybe the Greeks can make it work on their own currency.

If all else fails, they still have beautiful beaches with gorgeous people. If one has to have a failed economy, that's mo' debinitely the way to do it.

 

[theeedude]

I suspect you are correct. Personally I can't imagine any scenario where it makes sense to loan Greece more money. It will be painful, but it's necessary, and maybe the Greeks can make it work on their own currency.

If all else fails, they still have beautiful beaches with gorgeous people. If one has to have a failed economy, that's mo' debinitely the way to do it.

Creditors are about to eat a full blown $200B default, because they didn't want to proactively write down $50B in debt that they already knew they'd have to write down. Plus potentially still need to lend/give money to Greece post default to avoid a failed state in the EU. Plus potentially higher interest rates for remaining PII_S because Euro's future is now in question.
But they showed them Greeks

 

[werepossum]

Creditors are about to eat a full blown $200B default, because they didn't want to proactively write down $50B in debt that they already knew they'd have to write down. Plus potentially still need to lend/give money to Greece post default to avoid a failed state in the EU. Plus potentially higher interest rates for remaining PII_S because Euro's future is now in question.
But they showed them Greeks

It's not about eating $200B rather than $50B to "show them Greeks". It's about eating $200B rather than eating $500B in $50B bites.

 

[DucatiMonster696]

Those dastardly Germans. What aren't they responsible for? Obviously Hitler is still alive and running things.

So, are you volunteering your nation to step up and provide these wise average Greeks with enough money to spend their way to solvency? If you are correct, it's a foolproof investment. If the EuroZone and the IMF are correct, it's a gift of your tax dollars, which will come out of your social programs. Which will it be?

Of course let's remember its not just the Germans who are holding firm. Other poorer EU nations (which have made deeper cuts and have stuck to their limited spending obligations for their bailout requirements) also have not shown any sympathy toward Greece. So, while it's nice to paint a narrative of "Wealthy Germans screwing over poor little Greeks" the truth of the matter is other poorer EU nations (Bulgaria, Latvia, Lithuania, Croatia, etc who have their representatives attending these talks) are also not happy with Greece. In their view they too are not willing to shoulder the burden of paying for Greece to maintain its status quo toward what they view as "Lavish" Greek pensions in relation to what their citizens are receiving. However, I take Greece's attempt to re-frame the debt solely around Germany and to ignore all other parties involved as a way to try to split public opinion but the truth of the matter is the situation is different in terms of who exactly supports Greece vs who does not in the EU. Of which it is this difference/disconnect that has turned Greece and its government (along with its former finance minister) into pariahs with the bulk of EU creditors and finance negotiators.

 

[Charmonium]

According to one article I read, one of the issues the EU has with a wholesale debt write down is that the other struggling economies like Spain, Italy and Portugal would see that as their cue to renegotiate their bailouts.

 

[theeedude]

According to one article I read, one of the issues the EU has with a wholesale debt write down is that the other struggling economies like Spain, Italy and Portugal would see that as their cue to renegotiate their bailouts.

Why are those economies struggling? Could it be that maybe their bailouts should be negotiated?
Is fiscal austerity during 22% unemployment, in case of Spain, a good idea?
Has it been effective in reducing debt to GDP ratio and improving debt sustainability?

 

[waggy]

According to one article I read, one of the issues the EU has with a wholesale debt write down is that the other struggling economies like Spain, Italy and Portugal would see that as their cue to renegotiate their bailouts.

It's not about eating $200B rather than $50B to "show them Greeks". It's about eating $200B rather than eating $500B in $50B bites.

/this

they have been bailed OUT TWICE. and yet refuse to do what they need to. they want to continue to live high on the hog.

now they have no choice but to face it now.

well unless they get bailed out yet agian. i think that will be a mistake.

 

[norseamd]

/this

they have been bailed OUT TWICE. and yet refuse to do what they need to. they want to continue to live high on the hog.

now they have no choice but to face it now.

well unless they get bailed out yet agian. i think that will be a mistake.

https://en.wikipedia.org/wiki/Political_psychology