Greece about to default

[fskimospy]

Any other country in the EZ who feels like they can't compete with German prices in Euros are free to leave or to have not joined in the first place. If they want to end austerity, why don't they just leave?

Oh yeah, because they want to have their cake and eat it too. They want other members to pay for the promises their government made.

You are right that there's a decent argument that the Euro never should have been created in this form to begin with. It was a bad idea, and lots of people at the time said so.

This isn't an 'us vs. them' argument, this is showing us that we need to recognize policy failure when it's staring us in the face. EU members probably have two choices long term: much closer fiscal integration (which is members paying for others' mistakes just like we do in the US), or an eventual breakup of the Euro.

From an economics perspective there is no defending Germany's trade position here. It's bad news, and we should be comfortable with calling them out on it.

 

[Murloc]

There are other options available, perhaps Soylent Green, a nice little war, decoupling from the Euro and hyperinflation (think Weimar Republic). Those are three options I came up with in 30 seconds and I don't know a damn thing about what is happening in Greece.

Is this the pivotal event which signals the decline and fall of Western civilization? I don't know. It does appear that most Western countries are set up on a type of pyramid scheme that requires more young people than old people. With the low birth rates and all the old fuckers not dying when they should (at 65), things get kinda grim. The real solution in the Western world is to raise the retirment age to 75. That would pretty much wrap up the problem. Of course it would suck for me....

Not sure this if this a parody post or not.....

Just had another stroke of genuis, ask Russia to help Greece out. I am sure that Russia would be very interested in Greece. Since Europe and America want to write off Greece, what better way than handing her off to Russia. Everybody wins.



So there is definite interest on the Russian end at least.

Joining an international bank requires putting funds into it. Greece can't.
Russia doesn't have any money to give right now.
Nor does it have any reason to do so.
The chinese might want to buy up the naval industry though.

They do make an effort to collect taxes. In fact, they collect a larger share of their GDP in taxes than the US does.

They certainly have a huge problem with tax evasion that needs to be fixed, but saying they 'don't bother to make an attempt to collect taxes' is simply wrong.

they don't tax ship owners, by law. That's called not making an attempt.

Also the problem doesn't stop there. Their pension system is unsustainable and too expensive compared to the economy.

Italy was the same but to its credit they now apply the contributory scheme across the board, have eliminated early retirement, and have made the retirement age proportional to the life expectancy, on par with Germany and other diligent countries. They did this years ago.

 

[echo4747]

I don't have knowledge of the situation in Greece but, Why can't Greece sell off some gov't own property? Kind of like having a garage sale.

 

[theeedude]

Um, those countries got European-imposed austerity as well. Say what you want, but if you blame Germany for all of Europe's ills you should at least recognize that Greece wasn't the only country forced into austerity. Yet, Germany survives, who could've figured that?

Oh wait, exports, turns out Germany mostly exports to other productive European countries.

You can't compare the scale of austerity imposed on Greece and other countries. Spain ran almost 6% deficit last year with creditor's OK.
Greece was expected by the creditors to run < 3% GDP during an austerity induced depression. That is insane.
Here is the deal that Greece got, the creditors have been proven wrong in just about anything in the last 5 years:
http://www.imf.org/external/pubs/ft/survey/so/2010/car050210a.htm

 

[theeedude]

I don't have knowledge of the situation in Greece but, Why can't Greece sell off some gov't own property? Kind of like having a garage sale.

Do you want to buy an insolvent Greek bank?

 

[theeedude]

Hey, you are the one in direct denial of what the IMF, EZ, and EU are saying, not me.


You honestly can't see why giving people money so that they can buy your goods would be self-defeating?

Let me give you a hint. Say you have automobiles you would like to sell for $20,000. Let's assume it costs you $15,000 to build one of these cars, which is a nice healthy profit margin. Along comes a fellow - let's call him Greece - who would like to buy one of your cars, but after paying his monthly bills he has no money left. In fact, each month he already owes more than the month before. One possibility is that you keep the car, which leaves you at a net zero change. You have earned no money, you have lost no money. Another possibility is that you hand him $20,000, he hands it back to you, and you give him the car. You are now out $15,000 (your cost to build the car) plus the cost to do the paperwork. A third possibility is that you simply give him the car, resulting in you losing the $15,000 but no ancillary costs. However, what Greece wants (and what the ultra left wants for Greece) is that you give Greece $20,000 and he agrees to pay you $500/month until you have been paid back the $20,000 plus interest. This is what has been done several times since 2009, and each time Greece has been unable to make his car payment without a fresh additional loan. So now you've agreed that Greece shouldn't have to repay back the whole $20,000, only he now owes you $50,000 because of the additional loans. For anyone who isn't Greece, this is the dumbest possible economic move.

Germany and France et al would have been better served to simply give each Greek citizen an allowance of credits for EU merchandise. When one has a child who refuses to earn his own way, giving him a higher allowance is never going to change that.

That's what you sign up for when you peg your currency down to your trading partner's to make your exports more competitive. Look at how much US debt China and Japan buy up.

 

[Doc Savage Fan]

They do make an effort to collect taxes. In fact, they collect a larger share of their GDP in taxes than the US does.

They certainly have a huge problem with tax evasion that needs to be fixed, but saying they 'don't bother to make an attempt to collect taxes' is simply wrong.

Tax evasion appears to be their national pasttime.

 

[fskimospy]

Hey, you are the one in direct denial of what the IMF, EZ, and EU are saying, not me.

Not really. I'm saying their program has pretty obviously failed so we should try something else. There are plenty of economists who agree. Hell, even the IMF at this point has come out and said that Greek debt will need to be written down.

None of that changes all the ridiculous shit you said earlier that was either totally stupid or dishonest.

 

[cabri]

Yes, of course. If Europe would stop forcing them to pursue policies that make their debt situation worse then maybe Europe would stop needing to shovel money at them.

when you are the creditor, you dictate the terms to try to ensure you get paid.

Greece has shown to have a poor track record.

Two previous bailouts plus manipulation of numbers to get into the Euro.

If the EU does not keep a close eye/tight rein, what will stop Greece from doing what they have done before.

They were expecting to be bailed out in this last round.

 

[echo4747]

Do you want to buy an insolvent Greek bank?

No.. I'm thinking gov't owned equipment (buildings, motor vehicles, art, etc) I'm sure they could raise some cash

 

[BigDH01]

You can't compare the scale of austerity imposed on Greece and other countries. Spain ran almost 6% deficit last year with creditor's OK.
Greece was expected by the creditors to run < 3% GDP during an austerity induced depression. That is insane.
Here is the deal that Greece got, the creditors have been proven wrong in just about anything in the last 5 years:
http://www.imf.org/external/pubs/ft/survey/so/2010/car050210a.htm

It's also insane that the EZ expected Greece to reduce corruption, collect taxes, liberalize labor markets, etc. Ever occur to you that the EZ might be more willing to bargain if Greece would be more willing to make reforms?

 

[TheSlamma]

No.. I'm thinking gov't owned equipment (buildings, motor vehicles, art, etc) I'm sure they could raise some cash

The Acropolis has been under repairs since 1974. I don't think they have any equipment, maybe a few hand tools.

 

[BigDH01]

No.. I'm thinking gov't owned equipment (buildings, motor vehicles, art, etc) I'm sure they could raise some cash

They were required to sell off public assets as part of the 2011 deal.

 

[echo4747]

They were required to sell off public assets as part of the 2011 deal.

thank you. wow

 

[fskimospy]

when you are the creditor, you dictate the terms to try to ensure you get paid.

Greece has shown to have a poor track record.

Two previous bailouts plus manipulation of numbers to get into the Euro.

If the EU does not keep a close eye/tight rein, what will stop Greece from doing what they have done before.

They were expecting to be bailed out in this last round.

The conditions of their previous bailouts have made Greece's debt/GDP ratio worse, not better. If they want to get paid, they are going about it all wrong, haha.

 

[Kwatt]

The Acropolis has been under repairs since 1974. I don't think they have any equipment, maybe a few hand tools.

I wonder if China would like some coastal area and put in a Mediterranean port?
A few subs a couple of destroyers...

.

 

[theeedude]

They will get paid, in Drachmas.

 

[theeedude]

It's also insane that the EZ expected Greece to reduce corruption, collect taxes, liberalize labor markets, etc. Ever occur to you that the EZ might be more willing to bargain if Greece would be more willing to make reforms?

Did the creditors make offer of debt reduction in exchange for reforms? Nope, they took debt reduction off the table.

 

[BigDH01]

Did the creditors make offer of debt reduction in exchange for reforms? Nope, they took debt reduction off the table.

Greeks accepted reforms when they took the money. Why should the creditors have to reduce the debt to get Greece to do something they've already promised they would do? How much should the other EZ nations do for Greece anyway? You going to ask the average Slovakian to support Greek pensioners because the Greeks can't? Good luck with that policy.

 

[theeedude]

Greeks accepted reforms when they took the money. Why should the creditors have to reduce the debt to get Greece to do something they've already promised they would do? How much should the other EZ nations do for Greece anyway? You going to ask the average Slovakian to support Greek pensioners because the Greeks can't? Good luck with that policy.

Because creditors were wrong in their economic assumptions. They assumed austerity would be GDP neutral and make Greece more likely to repay their loans, when every credible economist told them it would be counterproductive, shrink the GDP, and make Greece less likely to repay loans.
When you attach to terms of your loan conditions that cause the debtor's GDP to shrink 25%, then you deserve to lose your money. It's as simple as that.
It's like if I lend you money and then call your boss and get you fired. I will get hosed on my loan, doesn't matter what you agree to, if your income shrinks, you won't be able to repay my loan.

 

[BigDH01]

Because creditors were wrong in their economic assumptions. They assumed austerity would be GDP neutral and make Greece more likely to repay their loans, when every credible economist told them it would be counterproductive, shrink the GDP, and make Greece less likely to repay loans.

Is it possible that if Greece had enacted the reforms they promised to it would've been revenue neutral? We'll never know now. It's inconsequential, Greece is not going to make the reforms and the rest of the EZ isn't going to prop them up.

When you attach to terms of your loan conditions that cause the debtor's GDP to shrink 25%, then you deserve to lose your money. It's as simple as that.

And when you sign a contract and don't fulfill your terms, don't be surprised or angry when the other parties won't sign any more contracts with you.

I agree BTW that the EZ deserves to lose their money for not doing their due diligence. Greece can make them swallow that loss right now by leaving.

 

[AtenRa]

For those that believe Greece has done nothing since 2010,

https://en.wikipedia.org/wiki/Greek_government-debt_crisis_countermeasures

Tax revenue (% of GDP) in Greece

http://www.tradingeconomics.com/greece/tax-revenue-percent-of-gdp-wb-data.html

So to sum up, we increased % of taxes, we increased the tax revenue % over GDP and we still produce less tax revenue because the economy is shrinking and people doesnt have money to give to pay their taxes.

When you people understand that, you will see why Greeks voted NO, why we are asking for no more austerity measures to be taken but we want reforms that will help the economy and thus will help to increase tax revenue.

 

[glenn1]

The conditions of their previous bailouts have made Greece's debt/GDP ratio worse, not better. If they want to get paid, they are going about it all wrong, haha.

We're beyond the point of concern about writing down the debt, that's already baked into the cake and nobody including the Greeks pretend they'll get repaid. The only real question is whether the creditors will continue to add yet more money to the delinquent account which will also need to be written down in turn. As someone said earlier, recognize a €200B loss now or continue to bail out at €50B at regular intervals that add to the €200B already sunk cost. At some point you'll get to where the debt service alone on the ever increasing principal is greater than the principal you would have written off at an earlier stage of the game.

 

[glenn1]

For those that believe Greece has done nothing since 2010,

https://en.wikipedia.org/wiki/Greek_government-debt_crisis_countermeasures

Tax revenue (% of GDP) in Greece

http://www.tradingeconomics.com/greece/tax-revenue-percent-of-gdp-wb-data.html

So to sum up, we increased % of taxes, we increased the tax revenue % over GDP and we still produce less tax revenue because the economy is shrinking and people doesnt have money to give to pay their taxes.

When you people understand that, you will see why Greeks voted NO, why we are asking for no more austerity measures to be taken but we want reforms that will help the economy and thus will help to increase tax revenue.

No one gives a shit what you want. Borrowers have the terms dictated to them by the people who have the money or default, not the other way around. Pay your fucking debts off and you can screw up your economy however you want with your own money. You are not the Germans' charity case.

 

[BigDH01]

For those that believe Greece has done nothing since 2010,
snip

Wow, your tax revenue as percent GDP is lower than I thought. How does that compare with all the nations you are asking to bail you out?

[/B]So to sum up, we increased % of taxes, we increased the tax revenue % over GDP and we still produce less tax revenue because the economy is shrinking and people doesnt have money to give to pay their taxes.

Yep, budgets were cut and other reforms were slow to materialize. Frankly, I'm not a supporter of austerity either, but even the most ardent MMTer would tell you that your country has severe structural problems that need to be fixed.

When you people understand that, you will see why Greeks voted NO, why we are asking for no more austerity measures to be taken but we want reforms that will help the economy and thus will help to increase tax revenue.

You mean like these reform-minded capitalists?

It's all moot anyway, you don't like austerity, drop the Euro. Your country has the power to end austerity right now.