Greece's financial crissis

[Mr Rayon]

Anybody hear the news about what's happened in Greece?

 

How did they get into the position they're now in and when will it get better?

 

What does everyone think? ...your speculations please...

[michel123456]

I live in Greece, and I feel deeply the crisis.

How did they get into the position they're now in

 

IMHO the problem is not the greeks. The problem arsises from the fact that Greece happens to be the weakest economy of the Euro zone.

For its neighbours of the balkan peninsula, Greece was a paradise: Democracy, european country, Eurozone. Something that Turkey dreams of, Albany, FYROM (Macedonia), Serbia and others.

 

As the weakest economy of the Eurozone it has been attacked first. Now that the problem seems to resolved (it is not), Portugal faces frontal attack, and the european politicians begin to understand what is going on. All developped countries are possible victims. Including the U.S.

 

A lot of people here in Greece strongly believe that they made a lot of errors, that politicians drove the country to bankrupcy, that corruption and tax evasions are to blame, etc etc. Sure, but that is not the reason for crisis.

A huge part of Greece's debt is caused by interest on loans to pay other loans. Interests are demanded by banks, and the percentage is related to the possibility of paying back. When a country is rich, the interests are low. When a country is poor (Greece now) the interest is high. The poor pays more than the rich for the same loan. That is not the fault of the poor, that is the fault of the system.

 

when will it get better?

That's our question here.

The good scenario is that attack appeared during the winter, the low season when Greece has about no income. The touristic season will be great, except for Athens town which suffers from overinformation about riots provoked by 200 people in central Syntagma square. (Athens has about 4 millions inhabitants and I work in Athens centre and never been annoyed by anything. Tourists have no problem anywhere) following that scenario, a lot of cash money will flow into the economy after Semptember, and everything will go slightly better.

 

The bad scenario is not about Greece. it is about the collapse of the Eurozone, bankruptcy of the U.S., and so on.

Edited July 10, 2011 by michel123456

[Marat]

The usual story that capitalists would like you to believe is that the Greeks are fat and lazy and don't pay their taxes, so as a result they got their economy in a mess, and now the hard-working part of Europe is sick of bailing them out, so the Greeks have to endure the cruelties of government belt-tightening to get their debt under control.

 

But if you look at the percentage of the GDP that the Greek government collects in taxes, you will see that they take in about 33%, which is a much higher collection of taxes than the U.S. government at all levels has at a mere 26.9%. So the Greek tax income is adequate, and so this cannot be blamed for its debt crisis.

 

In essence, what is happening now is that the people who make their incomes by risking their cash in loaning it out to people on interest -- the banks and speculators -- now don't want to pay the price that they ought to pay for having made a bad gamble on Greece. Having to pay for making the occasional bad loan decision is the fair social cost of the high interest income that banks and speculators make from loaning their money successfully in most cases. But of course, since this is a loss for capitalists we are now talking about, governments, the media, and other capitalists are getting together to insist that they should not have to pay for their gambles when they go bad, but that instead the pain should be shifted to the debtors, in this case the Greek people. The upshot is that to save the loan investments of French and German bankers and speculators, the Greek people will be made to endure unemployment, cruel adjustments in welfare, and cutting of humane social services.

[swansont]

!

Moderator Note

Moved. Mr Rayon, please make an effort to post in the appropriate part of the forum. Dumping politics and religion discussions in the Lounge is just lazy.

[Cap'n Refsmmat]

In essence, what is happening now is that the people who make their incomes by risking their cash in loaning it out to people on interest -- the banks and speculators -- now don't want to pay the price that they ought to pay for having made a bad gamble on Greece. Having to pay for making the occasional bad loan decision is the fair social cost of the high interest income that banks and speculators make from loaning their money successfully in most cases. But of course, since this is a loss for capitalists we are now talking about, governments, the media, and other capitalists are getting together to insist that they should not have to pay for their gambles when they go bad, but that instead the pain should be shifted to the debtors, in this case the Greek people. The upshot is that to save the loan investments of French and German bankers and speculators, the Greek people will be made to endure unemployment, cruel adjustments in welfare, and cutting of humane social services.

But if the capitalists were forced to pay for their bad gamble, they would not be likely to gamble on Greece again, and the country would still endure unemployment and welfare cuts, because it would not be able to get loans to finance its activities. Right?

[Brainteaserfan]

The usual story that capitalists would like you to believe is that the Greeks are fat and lazy and don't pay their taxes, so as a result they got their economy in a mess, and now the hard-working part of Europe is sick of bailing them out, so the Greeks have to endure the cruelties of government belt-tightening to get their debt under control.

 

But if you look at the percentage of the GDP that the Greek government collects in taxes, you will see that they take in about 33%, which is a much higher collection of taxes than the U.S. government at all levels has at a mere 26.9%. So the Greek tax income is adequate, and so this cannot be blamed for its debt crisis.

 

In essence, what is happening now is that the people who make their incomes by risking their cash in loaning it out to people on interest -- the banks and speculators -- now don't want to pay the price that they ought to pay for having made a bad gamble on Greece. Having to pay for making the occasional bad loan decision is the fair social cost of the high interest income that banks and speculators make from loaning their money successfully in most cases. But of course, since this is a loss for capitalists we are now talking about, governments, the media, and other capitalists are getting together to insist that they should not have to pay for their gambles when they go bad, but that instead the pain should be shifted to the debtors, in this case the Greek people. The upshot is that to save the loan investments of French and German bankers and speculators, the Greek people will be made to endure unemployment, cruel adjustments in welfare, and cutting of humane social services.

Just because the government takes in more than the US (who need to do something too about their debt), doesn't mean that they are doing their share. If they give back welfare and the like, (back to those who paid taxes), then that is not really a fair tax estimate.

[swansont]

http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?currentPage=all

[michel123456]

http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?currentPage=all

 

Very good presentation of the exposed dirty laundry.

 

3 points to say:

_about monks, there is no separation of church and state in Greece. Any attempt in the past has caused the enterprenaiting Minister's demission. Curch pays no taxes and does not allow general taxation upon land assets.

 

_about economy. Before the Euro, Greece went every 5 or ten years into devaluation of the drachma. It is not possible today. There is a lack of such mechanism in the Eurozone.

 

_all descriptions of the article are true. But it is well known for decades (see devaluations of the seventies, eighties, nineties). I have a theory that says it is not the cause of crisis. Besides there are no Greeks in Iceland nor in Ireland. Nor in Portugal, Spain, Italy. The champion of debt is Japan where there are no Greeks. Crisis is now hitting the U.S., I hope no-one will blame the Greek diaspora for that.

Edited July 11, 2011 by michel123456

[swansont]

Very good presentation of the exposed dirty laundry.

 

3 points to say:

_about monks, there is no separation of church and state in Greece. Any attempt in the past has caused the enterprenaiting Minister's demission. Curch pays no taxes and does not allow general taxation upon land assets.

 

_about economy. Before the Euro, Greece went every 5 or ten years into devaluation of the drachma. It is not possible today. There is a lack of such mechanism in the Eurozone.

 

_all descriptions of the article are true. But it is well known for decades (see devaluations of the seventies, eighties, nineties). I have a theory that says it is not the cause of crisis. Besides there are no Greeks in Iceland nor in Ireland. Nor in Portugal, Spain, Italy. The champion of debt is Japan where there are no Greeks. Crisis is now hitting the U.S., I hope no-one will blame the Greek diaspora for that.

From what I recall of the article and what you point out, the problem has been exacerbated by Greece joining the EU, which happened based on an incorrect accounting of the debt. I have no argument with the position that the inability to devalue the currency has made the problem worse.

 

But regardless of the veracity of the 33% taxation rate (and I wonder where that number comes from, this OECD table (pdf) says around 31.3% for recent years, and below 30% before 2000; in 2000 was it 34.1%. These numbers are several points below the EU average) I think there's a valid argument that the situation is worse when tax collectors don't collect taxes* and where government jobs pay significantly more (almost 3x as much) than private-sector jobs. Then there's the pension system.

 

*the US faces a similar problem in that some want to cut the IRS enforcement funding, which makes it harder to collect taxes. IIRC at current levels, IRS collection enforcement brings in $10 for every dollar spent, i.e. it more than pays for itself.

[Marat]

Devaluations are essentially state defaults on loans, since the loans are denominated in the nation's currency and so can be paid back at less cost than their value. But why, given this equivalence, did lenders keep lending to Greece throughout its history of devaluations? The fact that they were willing to continue lending suggests that if Greece were now to default and the investors rather than just the poor were required to bear the burden of this financial dislocation, the result would be equivalent and the lenders would come back to extend loans. All capitalists make money by selling their commodities to those who want them, and the commodity sold by lenders is cash, and their consumers the debt-prone.

 

What makes the necessary adjustments is just the interest rate paid. Now, for example, Irish government bonds are paying around 12.5% annual return, in contrast to the 2% return you can get on most bank accounts.

[Cap'n Refsmmat]

I'm not sure I follow how devaluations are essentially defaults. A default, by definition, requires that the government be unable to pay back its debts; a devaluation is simply a way for the government to create a "discount" while it pays back said debts. A default is an order of magnitude more serious than a devaluation.

 

And Greece could afford to pay higher interest rates on its debt without substantial welfare cuts and government restructuring?

[Brainteaserfan]

I'm not sure I follow how devaluations are essentially defaults. A default, by definition, requires that the government be unable to pay back its debts; a devaluation is simply a way for the government to create a "discount" while it pays back said debts. A default is an order of magnitude more serious than a devaluation.

 

And Greece could afford to pay higher interest rates on its debt without substantial welfare cuts and government restructuring?

Not always unable, but failure to repay the debt.

[michel123456]

Devaluations are essentially state defaults on loans, since the loans are denominated in the nation's currency and so can be paid back at less cost than their value. But why, given this equivalence, did lenders keep lending to Greece throughout its history of devaluations? The fact that they were willing to continue lending suggests that if Greece were now to default and the investors rather than just the poor were required to bear the burden of this financial dislocation, the result would be equivalent and the lenders would come back to extend loans. All capitalists make money by selling their commodities to those who want them, and the commodity sold by lenders is cash, and their consumers the debt-prone.

 

What makes the necessary adjustments is just the interest rate paid. Now, for example, Irish government bonds are paying around 12.5% annual return, in contrast to the 2% return you can get on most bank accounts.

 

You answered your own question.

speculators kept lending to Greece because interest rates were about 15%. Nowadays 4 belgian banks have several billion euros in Greek bonds, and through them other banks like Barclays. If Greece went on bankruptcy, the 4 belgian banks would encounter bankruptcy as well, and most probably entire Belgium. I have no good information about other countries (like France) but it is evident that a greek default would cause problems almost everywhere in those beautiful places where everybody is honest and working hard sitting on a chair waiting for the over-interests to come in while the greek employee try to survive by all means with an income of about 700 euros a month.

 

IMHO the system is to blame, not the people. Not exactly that capitalism is that bad, but capitalism without rules is jungle. There is a great impact of the Chaos Theory in economy. Some theorists argue that when you set a system free it comes to an equilibrium. Yes but in order to get this equilibrium sharks and tigers will eat humans. I prefer civilisation & democracy.

Edited July 12, 2011 by michel123456

[Dekan]

You answered your own question.

speculators kept lending to Greece because interest rates were about 15%. Nowadays 4 belgian banks have several billion euros in Greek bonds, and through them other banks like Barclays. If Greece went on bankruptcy, the 4 belgian banks would encounter bankruptcy as well, and most probably entire Belgium. I have no good information about other countries (like France) but it is evident that a greek default would cause problems almost everywhere in those beautiful places where everybody is honest and working hard sitting on a chair waiting for the over-interests to come in while the greek employee try to survive by all means with an income of about 700 euros a month.

 

IMHO the system is to blame, not the people. Not exactly that capitalism is that bad, but capitalism without rules is jungle. There is a great impact of the Chaos Theory in economy. Some theorists argue that when you set a system free it comes to an equilibrium. Yes but in order to get this equilibrium sharks and tigers will eat humans. I prefer civilisation & democracy.

 

 

For Heaven's sake - everyone knows, the reason Germany isn't in debt, is that the Germans work hard.

 

And the reason Greece is in debt, is that the Greeks don't work hard.

 

"System"? "Chaos Theory"? My backside!

Edited July 12, 2011 by Dekan

[michel123456]

For Heaven's sake - everyone knows, the reason Germany isn't in debt, is that the Germans work hard.

 

And the reason Greece is in debt, is that the Greeks don't work hard.

 

"System"? "Chaos Theory"? My backside!

 

No.

Germany received the Marshall plan. After WWII, the frenchies who didn't get Marshall's money produced Citroen's 2cv for their own people who had no money to buy Cadillacs. Germans produced Mercedes-Benz- not because they work harder. Greeks who didn't get help from nobody, asked for their gold back (stolen by the Nazis look here this 1998 article long before the crisis) and went into civil war (that was the way allies helped fighting communism, bringing another war after the war). No way to produce even bicycles. While Germany had recovered, France was still producing 2cv, and Greece was under dictatorship. In 1974 the Greek Junta made the terrible mistake to try to incorporate Cyprus and found itself opposed to mighty Turkey. As it seems, the U.S. stopped supporting to Greeks, not willing to abandon Turkey, and Junta collapsed.

From this date, Greece is trying to come back (I won't go before WWII where things are much worse).

Greece still asks for its gold from Germany but who listens? Greece is still asking for war indemnities, something more than its debt, but who listens?

 

Greeks are hard workers, and when they go abroad in need of a better chance, they don't beg. They work, they create enterprises, they sell products. The Greek-owned maritime fleet is the largest in the world. where there is room for enterprising the Greeks are there. Where the doors are closed, you'll find British, Germans, Japanese, Americans, Russians.

 

And Germany is in debt. Germany is ranked number 19 on the list of 128 countries. Like many other countries. Debt is not a problem, debt is a normal element of todays economy. Nobody asked fro the Germans to pay their debt, nor has anyone asked the Japanese (world record). Why do you ask the Greeks? Because you know they can't? But who can? Even the U.S. cannot do that. What they must do, and can do, is diminish the percentage to GDP. And IMHO the best way to do that is to reduce the interest rates. i would even propose negative rates but when I say that they call me naive.

 

Look also at this article from Jacques Delpa from economics newspaper com, here a small part of it:

 

Germans forget their debt policy. We must remind them. In 1945 the victors of the war have drawn a line on human capital and physically destroyed by the Nazis. It was the ECSC and the Treaty of Rome. The political and financial liability of Germany for the war amounts to 16 times the German GDP, you can call it the implicit debt of the Germany. We do not claim it in return, he was asked to play the European game, a politically and financially. Today, it means saving Greece.

Edited July 12, 2011 by michel123456

[Marat]

The notion that the present day state of Germany, in which there are almost no survivors who could have had any personal responsibility for World War II, somehow still owes the victors of that war reparations is nearly racist. Why not say that modern Tunisia owes Spain, France, and Italy reparations because of Hannibals depridations as he and his Carthaginian army marched through those territories on his way to Rome? How do you apportion the 'tort award' for any war in the first place? In 1939 countless ethnic Germans were living under Polish control for no better reason than that the victorious Allies in World War I wanted to punish Germany by giving the Poles the Danzig Corridor. Since WW II started because Poland would not cede its anti-democratic control over this alien people, was Germany's starting the war 100% guilty? In any modern legal system, in determining tort award size you have to establish a line of causality and determine the degree of fault of the various actors, so for WW II we have dozens, going all the way back to the vicious Treaty of Versailles. You also have to establish foreseeability of damage, the illegal nature of the cause of the damage in negligence, the existence of a protected right against the damage caused, and the fact that the damage caused was within the proximity determined by the reason that the duty to avoid the damage was imposed. These things can be conventionally simplified and calculated within a single social system in ordinary, everyday life, but not on the vast stage of history.

[michel123456]

That is the position of Germany. Shee feels right in her shoes, the past is forgotten, she owes nothing.

Greece see things differently. She remembers what happened 3000 years ago, and what happened 66 years ago looks terribly close. They are still some individuals in court claiming for damages.

 

Anyway, both opinions exist.

 

The point is about ingratitude.

Greeks don't ask for a gift, they ask for a loan. In 2010, the Greek population payed 75 million Euros in interest rates to friend nation Belgium. I have no information for Germany or France, but it must be about 10 times larger there. I feel a great injustice when the poor ones pay the rich ones for sitting on a chair.

 

Where is Mr Rayon?

[michel123456]

 

No comment.

[imatfaal]

Have Golden Dawn's activities since the elections caused a decrease or an increase in their popular appeal - it is clear that the press here believe and say that they should be/are failing; but my gut tells me they might still be gaining in popularity despite/because of their brutality

[michel123456]

They are creating a private army (already counting 2000 men)*, they have weapons hidden in places all over Greece, they are creating printed press, a tv channel, internet press. They get money (some millions Euros) from the state as a party of the parliament. Their voices (their screams) are heard everywhere. They say the crisis is injustice. They give free food for the hungry Greeks (ONLY for the Greeks). They patrol 6 by 6 in disregarded urban areas. They protect Greek people and Greek shops from robbery. When an old lady does not dare coming back late at night, she calls Chreessee Avgee and she gets a free escort. They gently ask (6 by 6 with baseball bats) the Chinese owners to leave the corner, or other Pakistanese, Roma, etc. whoever is not Greek. Leaving the area clean. The same goes in rural areas.

 

Who is waiting for a loss in popularity?

 

A couple of days ago, one of them committed a murder (against a Greek citizen and not a foreigner - dramatic error)

Today they are in a bad political situation.

 

Tomorrow, in 2 years from now, at the next elections, who will remember that?

 

* Golden Dawn, upon it's own declaration, is organized as an army. It is an army.

Edited September 23, 2013 by michel123456

[imatfaal]

Chilling. I have just come back from Greece and it was very hard to get a handle on opinion. My knowledge of greek is rudimentary; but my colleagues and friends in Athens and in the Islands speak perfect English - but the conversation kept going back to Greek and low voices and serious tones when this topic was approached.

[waitforufo]

I have been visiting Greece since I was in high school. I have many friends who live there and visit about every other year.

 

My comments will be anecdotal so they may not be worth much but here goes.

 

From my first visit until the EU went to the common euro currency Greece could be best described as quaint. Most people had two jobs. One in the morning and one in the afternoon. This allowed Greeks to take a midday nap. Since they took a midday nap most Greeks stayed up into the late evening where they would promenade at conveniently located city or village social areas.

 

The above is a rather positive spin describing the day to day activities of a poor country. Yes, Greeks were poor, but it always seemed to me that Greeks simply had a different social contract than most other western countries. I remember Greeks being happy.

 

I also remember Greece being a very inexpensive place to visit and live. Everything was cheap. Greece was a country with beautiful beaches, great weather, good food, lots of historical sites, and all at bargain basement prices. Tourism was of course their major industry.

 

Then along came the Euro. Suddenly prices went up. All I can assume is that Greeks decided if a tourist had to pay a euro of a bottle of water in Paris, they should pay a euro for a bottle of water in Chania. I always purchased food in markets and local stores and I saw those prices go up as well, so it wasn't just impacting tourists. Next, there were many infrastructure projects in Greece. For example Athens now has a subway and a new airport. Suddenly Greece was modern country not a quaint back water. Finally, visitors from other EU countries started buying property in Greece creating a real estate bubble.

 

When prices went up, the impact of Greek poverty became more acute. When the financial crisis hit, the real estate bubble burst, the economy collapsed and Greece couldn’t pay for all those infrastructure improvements.

 

Like I said, antidotal, but that is what I saw and felt. I’m sure there is more to it than that.

[Delbert]

How did they get into the position they're now in and when will it get better?

Very simple, they've spent more than they were earning. Or, to put it another way: they voted for a government that spent more than they were earning. Or, to put it yet another way: they voted for a government who's policies didn't prioritise aspiration, ambition and any other necessary attribute.

 

Who wouldn't vote for cheap or free this and that?

 

As for getting better, that's very difficult as they've got a large debt to pay off (assuming they don't try to get rid of it by going bankrupt). Like so many things in life: easy to get into, not so easy to get out of.

[michel123456]

Call that debt. That is not new.

 

IMHO I think that Greece's debt is upon an exponentional curve. It does not matter how much money the Greeks have consumed, what matter is the amount of money interests growth have created.

 

IOW the fault is not only on the Greeks, the fault is also on the mathematics of the actual banking system.

 

See here a brilliant explanation of the results of the exponential function.

[overtone]

 

 

Very simple, they've spent more than they were earning. Or, to put it another way: they voted for a government that spent more than they were earning. Or, to put it yet another way: they voted for a government who's policies didn't prioritise aspiration, ambition and any other necessary attribute.

not really. It's more that they were unable to levy taxes on their rich people, and got robbed by the international bankers.

 

They came out of their post WWII US-imposed fascism with a ruling class dominated by essentially organized crime - the socialist programs they wanted as a civilized industrial people require the taxation of the rich, and their government (hampered by international sabotage as well as domestic corruption) couldn't collect.