93 replies to this topic

[Antonio]

Printing Drachma actually could be more beneficial over a longer period vs the suggested austerity

I,partly,agree with you!  On one hand,during the transitonal period,things would be very hard,as ccabal86 correctly stated.Drachma would be a very ''weak'' and cheap currency compared to the ''strong'' and expensive Euro.As a result,Greece would not be able to import goods from the Eurozone countries,but from countries that have ''weaker'' currencies,as well,like Romania,Bulgaria,Russia,Turkey etc.On the other hand,however,the currency would probably become ''stronger'' after a year or so,and domestic industry would begin to flourish (OK,at least as much as it can flourish here in Greece  ).So,the economy would get better,and Greece would begin to pay off its debts.Like you said,I also think austerity would be the least beneficial solution,because the suggested terms are too harsh for the Greek people and the country itsself (if you want I can PM them to you),and there won't be any chance for Greece to recover from the crisis until it pays a whole of its dept back.

[JacobZuma]

The EU allowing Greece into the Eurozone was their own mistake, as Greece already had a very bad record of financial accountability. They don't pay their taxes, the government doesn't come knocking on the door when you owe taxes, and the government spends a lot of money because 'socialism' is not a bad thing at all... And now that they're in trouble, because of Greeks and the Greek government, they're acting like typical spoiled brats and put the blame on other parties.

 

If only war was an option...

[Duderonomy]

Can someone dumb this down for a clueless American please?

Germany issued a credit card to Greece, who had a bunch of other credit cards that Germany didn't know about. These other credit cards were issued by other EU countries, like Italy, Ireland, and Spain. Those countries had their own credit cards with Germany and were barely making their minimums, but Greece was paying them extra so there was no problem. Four or five years ago, Greece realized they couldn't make their minimum payment so they cried to Germany about it. 

 

Worried that these other countries would all stop paying their credit card bills because of the money lost in Greece, Germany convinced the IMF and the EU to take over all of the credit cards in exchange for control over Greece's spending. Greece didn't like that, so they went to the mall with their new EU & IMF credit cards and went to some restaurants and bought some movies. When they got home to watch the movies, the lights went out because they hadn't paid their IMF bill. 

 

Now Greece wants lower minimum payments and more credit cards, but wants to keep eating at restaurants and buying movies. They even had a vote to verify it. Germany doesn't think this is a good idea and just wishes it had never issued the cards in the first place.

 

I posted this on the OWF, but I know some people are more visual and don't visit the OWF. The raccoon is Germany. The cat is Greece. The oar is austerity.

[Finster Baby]

Thank you!

 

Much clearer now!

[Duderonomy]

Thank you!

 

Much clearer now!

If it's one thing Americans can relate to, it's credit cards. Oh, we don't understand credit cards, but we can relate to them.

[Antonio]

the government spends a lot of money

 

Excuse me for asking,  but what are these huge expenses? I mean,where,as far as you know,does the government spend money on?

If only war was an option...

 

OK,now your exaggerating...  You can't declare war for economic issues! Then,Greece should have declared war on Germany for the compensations for all the Nazi attrocities and for the money that Nazi Germany forced Greece to borrow to,with conditions that were sooo in favor of the German side...

[Shahenshah]

One key difference is USA can always print more money and create its own debt and keep doing that until dollar remains a global reserve currency, which it will for the foreseeable future. Greece cannot do that.
IMF's own report says austerity has failed. Also 80% of the vaik out fund never went to Greek economy, it went to private creditors, tldr the debt was shifted from big corporate banks to different EU govts and they charged a lot higher interest on those loans from Greeks as a price of that transaction, that money bailed out no one.
Off course Greece has itself to blame for most of the mess, but no one here has done them any favors, private lenders gave the money for profit without due delligence, then they told the politicians to get in line and fix only their mistakes and in return they can squeeze higher interests from Greeks via austerity aka bond slavery.

Not really Shah, fir printing to work you need to have a large export sector, i.e. be an export drifen economy, which Greece is not. Exports contribute only about 13% to the GDP. Printing wont do much for its competitive advantage. If youmcan not achieve that, then you can not service the debt via the currency depreciarion re currency of loans.
IMF doesnt say that, it points out three scenarios, bottom line being that Greece didnt follow true on what it commited tomunder them2nd MoU. In addition, the loans given by the member states weremgiven at substantially better (read lower) interest rates than Greece would have to pay had it gotten said loans on the financial markets.
Finally, Greece borrowed the money and spent it ... Thus it must return it. EU member states already proved,t heir solidarity by preventing a Greek default in 2012. Saying that that is somehow tantamount to 'bond slavery' is false and can nit be supported by facts.

The Greece having the biggest pensions? You joking right? Perhaps 5 years ago before they cut them in half. And some more recently >_>

I did enjoy the "yes" camp shooting itself in the foot by going around and getting public endorsements from the guys who actually made the pile in the frst place (the former government parties).

Relatively apeaking Betsy, having taken in to account the size of the employees contribution, the retirement age, the size of the pension re received pay etc etc

http://www.theguardian.com/world/2015/jun/29/where-did-the-greek-bailout-money-go

"Only a small fraction of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 found its way into the government’s coffers to soften the blow of the 2008 financial crash and fund reform programmes.

Most of the money went to the banks that lent Greece funds before the crash."

Above was the summary of what I mentioned. Private banks gave bad loans to bad customer on high interest rates. However, private banks had their error wiped clean, all the debt was transferred to tax payers, Greeks got peanuts in so called bailout, it was a bailout for the private banks, not Greece. It's unfortunate that Greek government at the time did not have the testicular fortitude to stand up to this blatant robbery.

So my point is, if you're a business (bank), you throw away someone else's savings to a bad customer for.l short term gains, but your poor decisions ends up being fucked, which you as a bank knew was obvious. You ought to be party to the downside, that's why in finance there is a term called 'risk'. But here what has happened is that the big private banks got the upside on risk, and transferred the downside to tax payers of Europe, most of it being on Greeks. What is amazing is all this has happened under so called transparent and liberal democracies, astonishing.

Edited by Shahenshah, 07 July 2015 - 04:43 PM.

[JacobZuma]

Excuse me for asking, but what are these huge expenses? I mean,where,as far as you know,does the government spend money on?

 

The entire reason Greece is about to default on its loans are because the government spends too much money - money it doesn't have. A few years ago Greece had an account deficit of 12.9%, now in bigger countries this might be acceptable because bigger countries are able to pay off the installments, Greece isn't able to. The government has too much debt and cannot repay the installments, but a few years ago government spending was at an all time high. Most countries have an account deficit of around 2-6%. Greece, a small Mediterranean nation has almost double the account deficit that some of your biggest nations have. 

 

To answer your question, the Greek government until very recently has spent 25% of its GDP on social insurance. One quarter of its GDP was spent on pensions, unemployment benefits, insurance etc. That is what the government is spending money on. If you compare this percentage to other nations, even other smaller nations, then it is way out of proportion.

 

The entire deadlock over the Greece issue is because Germany is demanding austerity measures (as in, government needs to stop spending money), so I honestly don't really know why you act like the Greek government isn't spending money. Unless I interpreted your question incorrectly.

 

Me saying "If only war was an option" is an exaggeration, I agree. But when you look at accountability, Greece doesn't know what that word means. Reckless financial management on their part is jeopardizing the whole bond market. Investment will run dry in the EU and countries like Spain, Ireland, Portugal and Italy will feel the impact. It will affect their economies and their future loans tremendously. When you consider the grave economical impact this will have on already fragile European economies, not to mention economies all around the world - then I would say a much cheaper option would be to take control of the Greek government and manage its finances correctly. The EU should have thought about such measures when the Eurozone was first created.

[Fox Fire]

Can someone dumb this down for a clueless American please?

Dumb what down? The Greek financial crisis? Long story short, Greece has been living on borrowed money ever since adopting the Euro. They thought it was acceptable because their GDP kept growing, but in reality that is meaningless when your government is being funded by other countries.

[Fox Fire]

 

the government spends a lot of money

 

Excuse me for asking,  but what are these huge expenses? I mean,where,as far as you know,does the government spend money on?

 

Well for one, the Greece defense budget is one of the highest in the world in comparison to GDP. Not to mention public sector jobs and government programs. As pointed out above, government spending is the primary cause of the whole mess. Of course, the EU itself pretty much incentivised the whole European financial issue by not properly thinking ahead.

[JacobZuma]

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

[Duderonomy]

 

Can someone dumb this down for a clueless American please?

Dumb what down? The Greek financial crisis? Long story short, Greece has been living on borrowed money ever since adopting the Euro. They thought it was acceptable because their GDP kept growing, but in reality that is meaningless when your government is being funded by other countries.

 

Being funded by other countries isn't a complete problem. It depends on what those funds are being used for. Like you said, pensions, military, and many of the other programs did not help Greece. They could have built ports, highways, and rail systems. Or universities and hospitals. The first would have made them a trade hub. The second would have made them a student/expat pensioner hub. Both would have made them money.

 

 

[Fox Fire]

 

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

 

This is actually a perfect explanation. It also explains why the current global capitalism, debt based system can only ultimately fail. 

[JacobZuma]

 

 

Can someone dumb this down for a clueless American please?

Dumb what down? The Greek financial crisis? Long story short, Greece has been living on borrowed money ever since adopting the Euro. They thought it was acceptable because their GDP kept growing, but in reality that is meaningless when your government is being funded by other countries.

 

Being funded by other countries isn't a complete problem. It depends on what those funds are being used for. Like you said, pensions, military, and many of the other programs did not help Greece. They could have built ports, highways, and rail systems. Or universities and hospitals. The first would have made them a trade hub. The second would have made them a student/expat pensioner hub. Both would have made them money.

 

 

 

 

Yeah, you're completely spot on about that. Had Greece used it's ability to borrow more money, and spent it on infrastructure and the growth of the economy then there would be no problem at all. But they decides, because.. socialism, to spend it on pensions, unemployment insurance etc.

There are many small countries with really big economies such as Luxembourg, Switzerland etc. Greece just didn't spend its money correctly, which is why not a lot of people like them right now.

[Duderonomy]

 

 

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

 

This is actually a perfect explanation. It also explains why the current global capitalism, debt based system can only ultimately fail. 

 

Not all debt is bad. Debt incurred to create greater returns is actually good. For a person, a loan for a modest car, a professional degree, or even a modest house is not bad. The car & degree can get you a better job; the house allows you to save some of the money you're already spending on rent. Luxury creates bad debt. Unfortunately, some people have a hard time distinguishing luxuries (like a Lexus or liberal arts degree) from opportunities (like a Civic or Engineering degree), which isn't helped by industries that are determined to make their products look like opportunities. I took out a loan for my vehicle (which got me to good jobs in Louisiana and Houston and I paid off early) as well as my house (which has a much lower payment than my last apartment and has a rate so low, I'm better off investing in the stock market than paying it off).

 

For a country, anything that promotes trade and efficiency can be worth the debt to pay for it. Things like renewable electricity, transportation, and useful education are worthwhile. Indefinite subsidies to workers and industries are not.

[Lysistrata]

Jacob... thank you so much for posting that video. Frightening to find out I should be living in Germany. I would fit right in.

[Fox Fire]

 

 

 

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

 

This is actually a perfect explanation. It also explains why the current global capitalism, debt based system can only ultimately fail. 

 

Not all debt is bad. Debt incurred to create greater returns is actually good. For a person, a loan for a modest car, a professional degree, or even a modest house is not bad. The car & degree can get you a better job; the house allows you to save some of the money you're already spending on rent. Luxury creates bad debt. Unfortunately, some people have a hard time distinguishing luxuries (like a Lexus or liberal arts degree) from necessities, which isn't helped by industries that are determined to make their products look like necessities. I took out a loan for my vehicle (which got me to good jobs in Louisiana and Houston and I paid off early) as well as my house (which has a much lower payment than my last apartment and has a rate so low, I'm better off investing in the stock market).

 

For a country, anything that promotes trade and efficiency can be worth the debt to pay for it. Things like renewable electricity, transportation, and useful education is worthwhile. Indefinite subsidies to workers and industries are not.

 

Yes. And that is the whole idea of capitalism. Unfortunately, the entire system relies on someone, somewhere being in debt. Or exploitation. But to add to that, many of the worlds currencies are still pegged to the US dollar, which in turn is quite literally backed by absolutely nothing but faith in the US Federal Reserve. It's this faith the Fed that has propped up economic expansion across the globe since WW2 and made the US dollar the global reserve currency. Only the Euro really competes these days, and given the disaster in Europe, makes that point kinda meaningless if it is indeed the fate of the EU to collapse.

Now the problem with this is the fact that the Fed has been historically terrible at their job, specifically predicting the future, and the US as a whole still can't get it's debt under control and likely won't in the foreseeable future. If things continue the way they are, faith in the Fed will disappear. And what happens then? 

It almost makes me wonder how we've managed make the world go round on nothing but faith for so long. 

You make it a point that debt is not bad, so long as the debt is used to create growth. Which is the problem. It's blind faith in this idea that everything will just keep growing. But in a finite world, that's physically impossible.

[onbekende]

 

To answer your question, the Greek government until very recently has spent 25% of its GDP on social insurance. One quarter of its GDP was spent on pensions, unemployment benefits, insurance etc. That is what the government is spending money on. If you compare this percentage to other nations, even other smaller nations, then it is way out of proportion.

 

 

Had to reply to this as this sounded odd. Greece is at 24% of GDP expences going to "social part", as seen here. It is 12th in that ranking (even Germany is ahead of it with 25.8%). Obvious winner is France, at 31.9% >_>

 

Belgium is 3rd (30.7%), huzzahi

[Duderonomy]

 

 

 

 

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

 

This is actually a perfect explanation. It also explains why the current global capitalism, debt based system can only ultimately fail. 

 

*snip*

 

Yes. And that is the whole idea of capitalism. Unfortunately, the entire system relies on someone, somewhere being in debt. Or exploitation. But to add to that, many of the worlds currencies are still pegged to the US dollar, which in turn is quite literally backed by absolutely nothing but faith in the US Federal Reserve. It's this faith the Fed that has propped up economic expansion across the globe since WW2 and made the US dollar the global reserve currency. Only the Euro really competes these days, and given the disaster in Europe, makes that point kinda meaningless if it is indeed the fate of the EU to collapse.

Now the problem with this is the fact that the Fed has been historically terrible at their job, specifically predicting the future, and the US as a whole still can't get it's debt under control and likely won't in the foreseeable future. If things continue the way they are, faith in the Fed will disappear. And what happens then? 

It almost makes me wonder how we've managed make the world go round on nothing but faith for so long. 

You make it a point that debt is not bad, so long as the debt is used to create growth. Which is the problem. It's blind faith in this idea that everything will just keep growing. But in a finite world, that's physically impossible.

 

Ah, yes, the zero sum game. That can be a rational belief, but I don't hold to it. There's still a lot of efficiency to be wrung out of the ol' world yet. First will be a revolution in automated transportation. Then renewables. Then lab-grown food. Finally, upload to the interwebz and log out of the real world. After that, growth will be intellectual resources, rather than physical. And all will consume far less energy than we consume now.

 

We've already seen a revolution in entertainment. Experiences that you had to get at inefficient paintball ranges and laser tag venues are now a download away. The electricity used by games is far less than the energy required to maintain old forms of entertainment. You could never imagine a free bowling alley or golf course, but I can have an unlimited simulation of both at home for some electricity and an internet connection. $1 for a mobile game can give more engagement than $12 at a movie theatre. I don't even bother going to theatres anymore unless it's with someone else.

 

When parcels no longer require a meatbag to escort them from Point A to Point B, you'll see a lot of grocery and retail stores shut their doors. At the same time, the middleman and transport costs of products (which can make for half of the retail price) will drop drastically. Restaurants, cafes, and bars will do better, since people will still need places to congregate and their grocery costs will drop.

[Fox Fire]

 

 

 

 

 

Can someone dumb this down for a clueless American please?

 

 

That is a nice video visualizing a simplistic explanation.

 

This is actually a perfect explanation. It also explains why the current global capitalism, debt based system can only ultimately fail. 

 

*snip*

 

Yes. And that is the whole idea of capitalism. Unfortunately, the entire system relies on someone, somewhere being in debt. Or exploitation. But to add to that, many of the worlds currencies are still pegged to the US dollar, which in turn is quite literally backed by absolutely nothing but faith in the US Federal Reserve. It's this faith the Fed that has propped up economic expansion across the globe since WW2 and made the US dollar the global reserve currency. Only the Euro really competes these days, and given the disaster in Europe, makes that point kinda meaningless if it is indeed the fate of the EU to collapse.

Now the problem with this is the fact that the Fed has been historically terrible at their job, specifically predicting the future, and the US as a whole still can't get it's debt under control and likely won't in the foreseeable future. If things continue the way they are, faith in the Fed will disappear. And what happens then? 

It almost makes me wonder how we've managed make the world go round on nothing but faith for so long. 

You make it a point that debt is not bad, so long as the debt is used to create growth. Which is the problem. It's blind faith in this idea that everything will just keep growing. But in a finite world, that's physically impossible.

 

Ah, yes, the zero sum game. That can be a rational belief, but I don't hold to it. There's still a lot of efficiency to be wrung out of the ol' world yet. First will be a revolution in automated transportation. Then renewables. Then lab-grown food. Finally, upload to the interwebz and log out of the real world. After that, growth will be intellectual resources, rather than physical. And all will consume far less energy than we consume now.

 

We've already seen a revolution in entertainment. Experiences that you had to get at inefficient paintball ranges and laser tag venues are now a download away. The electricity used by games is far less than the energy required to maintain old forms of entertainment. You could never imagine a free bowling alley or golf course, but I can have an unlimited simulation of both at home for some electricity and an internet connection. $1 for a mobile game can give more engagement than $12 at a movie theatre. I don't even bother going to theatres anymore unless it's with someone else.

 

When parcels no longer require a meatbag to escort them from Point A to Point B, you'll see a lot of grocery and retail stores shut their doors. At the same time, the middleman and transport costs of products (which can make for half of the retail price) will drop drastically. Restaurants, cafes, and bars will do better, since people will still need places to congregate and their grocery costs will drop.

 

This or something similar is definitely within reason for the future. But I question whether we can make it to that point without fucking ourselves first.