Greece 2015+...

[Roamer]

If they move to their own currency and deflate it relative to their neighbors, however, they can enhance the inflow of tourism cash, make exports more attractive thus increasing manufacturing, shipping, and services jobs, consequently raising tax collections and ultimately GDP, and thus with that increased revenue be in a much better position to care for their people and pay off their debts more quickly in parallel.

 

I believe that and some debt forgiveness is the obvious solution here... Of course, that is only if people can get past the morality issue of "they borrowed thus must pay now now now."

 

Well, if they would print their own currency(let's call it the drachme) they would have to exchange all the physical and i suppose fiscal euros in the country for drachmes,

and quite possibly those euros wouldn't be enough to repay their debt to the ECB, if so a strong argument for debt-relief arises.

[Delbert]

...a strong argument for debt-relief arises.

So, if you lent someone a shedload of money that you subsequently discover they can't payback, you'd be quite happy to right-off most - if not all - of the loan?

 

And if they retain the present currency, lend them another shedload of money?

 

Try that one with your local Bank.

[Roamer]

So, if you lent someone a shedload of money that you subsequently discover they can't payback, you'd be quite happy to right-off most - if not all - of the loan?

 

And if they retain the present currency, lend them another shedload of money?

 

Try that one with your local Bank.

 

This isn't some personal loan that someone took out and blew on booze that we're talking about.

 

It's an institutional one, and institutions have made mistakes in this regard, not only Greek institutions.

Most of the people ending up paying for these loans had no say in this in the first place.(both lenders and recipient)

[michel123456]

So, if you lent someone a shedload of money that you subsequently discover they can't payback, you'd be quite happy to right-off most - if not all - of the loan?

 

And if they retain the present currency, lend them another shedload of money?

 

Try that one with your local Bank.

Greece has entered a deadful spiral of debt. The new loan is ONLY to pay interests on ancient debt. Not any one Greek sees a cent of this money. It comes from a bank and go to another bank, increasing in the meanwhile by the amount of the interest. That is why I said in another thread that debt is a way to create money. of course, money is created on the shoulder of the dupe. In this case, the dupe was the Greek government, now it is the Greek population.

 

Most people out of Greece still believe that when they loan, they pay the Greek. In fact the Greek pay.

Of course, now they have been pushed too far and cannot pay anymore. Ouk an laveis para tou me echontos ("ουκ αν λάβοις παρά του μη έχοντος"), There is nothing you can take from the one who has nothing. And when that will happen (or has happened already) people from Europe will most probably become the dupes in place of the Greek because the bankers are too clever to accept becoming the dupes.

[Externet]

 

Well, if they would print their own currency(let's call it the drachme) they would have to exchange all the physical and i suppose fiscal euros in the country for drachmes,

and quite possibly those euros wouldn't be enough to repay their debt to the ECB, if so a strong argument for debt-relief arises.

Printing their own drachme does not invalidate the euro currency already in hands of greek population, their foreign accounts and matresses. Greeks will keep using their euros; new drachmes will fall into deep devaluation to the point of being useless and ignored, except perhaps for minor daily commerce, taxes or giving change to tourists.

 

There is no way a 'printing machine entity' will convince the Greek population to surrender their held euros in exchange of new drachmes.

 

The debt can remain unpaid, their exports/tourism can still collect in euros, imports will diminish. Industry will self focus into more exports production of vessels, wine or whatever they do better.

 

I resided many years in a country were the inflation was fought by also using a parallel US dollar currency for important transactions and matress/foreign savings. The poor went poorer, the wealthy became more.

 

A close friend there advised me to buy US dollars constantly; which I did as much as my paychecks allowed for a decade+. I kept afloat if not actually ahead of average allowing a better future.

Inflation in double digits (well over 20%) is a brutal strike against personal progress, and a life of frustration. I think Greeks experienced that before the euro and stays in their retina. Drachmes will not work.

[Roamer]

Printing their own drachme does not invalidate the euro currency already in hands of greek population, their foreign accounts and matresses. Greeks will keep using their euros; new drachmes will fall into deep devaluation to the point of being useless and ignored, except perhaps for minor daily commerce, taxes or giving change to tourists.

 

There is no way a 'printing machine entity' will convince the Greek population to surrender their held euros in exchange of new drachmes.

 

Are you implying the greek government has no legal authority over greek people and should just accept the ECB to hold monopoly over their money-printing ??

 

 

The debt can remain unpaid, their exports/tourism can still collect in euros, imports will diminish. Industry will self focus into more exports production of vessels, wine or whatever they do better.

 

 

1) An unpaid debt is never a good thing, but for Greece it might be the only way out.

But by then they will NEED drachmes, since the ECB isn't going to (again) print them euros for no payback.

2) Imports/exports(trade deficit/surplus) are greatly influenced by the money that is used, not using an own currency will hurt the economy.

 

 

I resided many years in a country were the inflation was fought by also using a parallel US dollar currency for important transactions and matress/foreign savings. The poor went poorer, the wealthy became more.

 

A close friend there advised me to buy US dollars constantly; which I did as much as my paychecks allowed for a decade+. I kept afloat if not actually ahead of average allowing a better future.

Inflation in double digits (well over 20%) is a brutal strike against personal progress, and a life of frustration. I think Greeks experienced that before the euro and stays in their retina. Drachmes will not work.

 

 

Since the euro the greek people have experienced more then 20% loss of, umm, purchasing power.

Before the euro they had a high inflation, but at least they weren't going bankrupt.

[iNow]

For those out there arguing (implicitly or otherwise) that Greece simply refuses to cut spending, let's be clear that they already have in pretty significant ways and that's partially why they're struggling so much now (because austerity doesn't work in these circumstances).

 

http://inthesetimes.com/article/18161/greece-spending-cuts

Hmm…. Can Greece be trusted to trim its spending? Let’s take a look:

 

 

...from 2010 to 2015, Greece has cut government spending from roughly 13 billion euros to 10 billion euros—a cut of 23 percent. Unsurprisingly, this has had a devastating effect on Greece’s economy, with unemployment stuck above 25 percent since the end of 2012.

http://www.cnbc.com/id/102359709

To be sure, Greece has cut its government spending, from a high of $11.1 billion euros ($12.7 billion) in the fourth quarter of 2009 to 9.6 billion euros ($11 billion) in the third quarter of 2014.

http://www.tradingeconomics.com/greece/government-spending

Government Spending in Greece decreased to 9571.90 EUR Million in the first quarter of 2015 from 10984.50 EUR Million in the fourth quarter of 2014. Government Spending in Greece averaged 10532.16 EUR Million from 1995 until 2015

 

It's a bit like a medieval doctor putting leeches on a patient, bleeding them, then when their immune system gets worse due to lack of blood the doctor yells,"more bleeding is clearly needed!" Well, no. That just exacerbates the issue, and these calls for more austerity are like calls from the middle ages doctor that more blood must be taken to make the patient well again.

[Delbert]

 

This isn't some personal loan that someone took out and blew on booze that we're talking about.

I'm sorry, but it is. They took out the money and spent it. Booze is not the only thing one can blow money on.

 

 

Most of the people ending up paying for these loans had no say in this in the first place.(both lenders and recipient)

Had no say! Yes they did and do, as in case you've missed the point, it is a democracy. The people get the government they vote for.

 

Not any one Greek sees a cent of this money.

How did you work that one out? They did see the money, they saw it in the form of the level or lack of taxation and the result of state spending.

 

And as for this business of printing money, money is a representation of human labour. And printing the stuff is nothing more than undermining labour; which like death and taxes, a certain way to descend into chaos and destitution - similar to borrowing.

[dimreepr]

I'm sorry, but it is. They took out the money and spent it. Booze is not the only thing one can blow money on.

 

Had no say! Yes they did and do, as in case you've missed the point, it is a democracy. The people get the government they vote for.

 

How did you work that one out? They did see the money, they saw it in the form of the level or lack of taxation and the result of state spending.

 

And as for this business of printing money, money is a representation of human labour. And printing the stuff is nothing more than undermining labour; which like death and taxes, a certain way to descend into chaos and destitution - similar to borrowing.

 

 

Are you trying to display a lack of understanding (of the economy, humanity and democracy)?

Personal debt doesn’t equate to national debt.

[waitforufo]

Of course, that is only if people can get past the morality issue of "they borrowed thus must pay now now now."

I think you need to work a little harder explaining this morality issue. I'm not getting it. Still simply a business issue in my opinion.

 

Also, I think you are being disingenuous with your "They borrowed thus must pay now, now, now." I think they borrowed, borrowed again, borrowed some more, and were then showered with free money. Now nations like Germany are saying enough is enough. No one is taking about "pay, now, now, now. They know that money is gone, gone, gone, and never to return. Germany must be thinking "if we are going to throw money down a rat hole at lest we should get a few more of those pretty windmills as reward for the farce." Merkel must be thinking "how do I explain to my own people (voters) that they should work hard so the Greeks can get free money. Instead of giving the Greeks free money, Merkel could subsidize beer and brats and become a national heroine.

[dimreepr]

I think you need to work a little harder explaining this morality issue. I'm not getting it. Still simply a business issue in my opinion.

 

Also, I think you are being disingenuous with your "They borrowed thus must pay now, now, now." I think they borrowed, borrowed again, borrowed some more, and were then showered with free money. Now nations like Germany are saying enough is enough. No one is taking about "pay, now, now, now. They know that money is gone, gone, gone, and never to return. Germany must be thinking "if we are going to throw money down a rat hole at lest we should get a few more of those pretty windmills as reward for the farce." Merkel must be thinking "how do I explain to my own people (voters) that they should work hard so the Greeks can get free money. Instead of giving the Greeks free money, Merkel could subsidize beer and brats and become a national heroine.

 

 

 

 

Let’s suppose this issue is the same as an alcoholic in a bar run by the Germans (and French); who’s to blame when he/she gets drunk?

Edited July 8, 2015 by dimreepr

[iNow]

None of these comments below have anything to do with economics. None are about solving the issue at hand. That's my point. My comments have been focused on economics, and on solving the underlying crisis instead of shooting ourselves in the foot and making it worse.

 

The comments below (and also throughout the media and throughout Europe), however, have everything to do with enforcing a personal sense of fairness or justice (what I've summarized as "morality"). These comments are not about smart economics or solving the situation. They're about "making Greece pay!" be damned what acting on that desire for justice will actually do to the broader system.

 

Too easy living for too long causes unreal expectations for the future to be even easier.

They borrowed, they are required to pay. <snip> By entering into debts they cannot pay, they will suffer the consequences <snip> "just" need to give money that they acquired through their own labor to Greeks for free.

celebrating a decision to tell the hand that feeds you to, basically, "fuck off" is not going to enamour you to your creditors or facilitate conciliation.

Greece must take responsibility for its predicament.

by robbing Peter to pay Paul, Paul will always be on your side.

So, if you lent someone a shedload of money that you subsequently discover they can't payback, you'd be quite happy to right-off most - if not all - of the loan?

They took out the money and spent it. Booze is not the only thing one can blow money on. <snip> [this is] nothing more than undermining labour

"if we are going to throw money down a rat hole at lest we should get a few more of those pretty windmills as reward for the farce." <snip> "how do I explain to my own people (voters) that they should work hard so the Greeks can get free money.

Again, these comments have nothing to do with economics. They're about morality. Consider taking morality out of the equation.

 

If we want the broader system to heal, the solution is simple.

 

Get past our desire for fairness, overcome our psychological need for actions to have consequences, lending to be always and absolutely paid back, offer debt forgiveness, and allow Greece to leave the Euro so they can deflate a local currency. Or, you know... Don't... and let things further deteriorate or get unnecessarily worse in our quest for some arbitrary and facile notion of justice.

[dimreepr]

The notion of justice, in this and many other modern issues, is born of ‘Hollywood’ justice rather than ‘actual’ justice.

[Delbert]

 

Also, I think you are being disingenuous with your "They borrowed thus must pay now, now, now." I think they borrowed, borrowed again, borrowed some more, and were then showered with free money.

I would go along with the view that lenders lent too much, for whatever reason - probably for the same old reason of the way dealers or sales people are paid. But that's just one side of the equation, the other side is (as I've indicated) the leaders were voted for. The candidates' mantra probably being something like: we can fix this and that by throwing money about if you vote for me - which, as we know, is usually misrepresented as justified borrowing for investment.

 

 

Personal debt doesn’t equate to national debt.

You're probably right, as national debt doubtlessly only ends up in destitution and chaos with workers from another country or countries probably paying for it from their tax burden by providing further loans. On the other hand, personal debt probably ends in bankruptcy, sequestration of assets and the inability to obtain credit in future.

 

In other words personal borrowing and debt is terminated with no further donations for a considerable period. Whereas national debt probably goes on and on and on in cycles. Each cycle consisting of borrowing a shedload and then, in the fullness of time, resulting a in debt right-off. The cycle then repeats with borrowing restarting. The painful bit is when one cycle comes to an end, with lots of brinkmanship and poker playing as we can see, before the next cycle starts. Anyway, a borrowing restart following a fudge about agreed fiscal changes (but in reality there'll be no changes), is what my money is on in regard to Greece.

[Unity+]

There are obvious economic solutions to this, but they're really not even being considered because this is being framed as a moral issue where Greeks need to be punished. The proposal to cut spending and impose austerity is politically popular, but likely to make matters worse.

 

Economically, they just need the IMF to open some liquidity and/or forgive some debts. Boom, problem solved, but nobody is willing to do that because so many feel that the Greeks shouldn't be rewarded for making poor choices and not managing their books well in the past.

 

Alternatively, if Greece had its own currency they could devalue it to erode the real value of the debt, but nobody wants to do that either because it would mean breaking the political union and potentially causing other euro countries to do the same... Leave the Euro.

 

What's lacking here is political leadership, not economic solutions, and the "solutions" under discussion like austerity really aren't solutions at all.

Forgiving such a high debt would lead to some economic issues, I would think. There would be major inflation in nations that lent the money, would it not?

[iNow]

Forgiving such a high debt would lead to some economic issues, I would think. There would be major inflation in nations that lent the money, would it not?

I'm doubtful on that. Greece makes up only 1.3% of the overall EU economy... hardly enough to be reason for concern (at least, relative to everything else we're talking about in context, that is).

 

https://en.wikipedia.org/wiki/Economy_of_the_European_Union#Economies_of_member_states

Edited July 8, 2015 by iNow

[dimreepr]

Forgiving such a high debt would lead to some economic issues, I would think. There would be major inflation in nations that lent the money, would it not?

 

 

Only if ‘leading economists’ decided that was the case, thus leading to both certainty in the prophecy and uncertainty in what that might mean for the future.

[waitforufo]

Again, these comments have nothing to do with economics. They're about morality. Consider taking morality out of the equation.

 

What exactly is the moral conundrum? Please state it explicitly. I just don't see a moral issue here.

 

You seem to be saying "yes the Greeks morally owe this money and morally they should pay it back, but lets not bring that up because it makes the Greeks feel bad and won't solve the problem"

 

Well forgiving there debts and lending them more money won't fix the problem either. The forgiveness and more lending will just happen again at a later date.

None of these comments below have anything to do with economics. None are about solving the issue at hand. That's my point. My comments have been focused on economics, and on solving the underlying crisis instead of shooting ourselves in the foot and making it worse.

 

Get past our desire for fairness, overcome our psychological need for actions to have consequences, lending to be always and absolutely paid back, offer debt forgiveness, and allow Greece to leave the Euro so they can deflate a local currency. Or, you know... Don't... and let things further deteriorate or get unnecessarily worse in our quest for some arbitrary and facile notion of justice.

Nobody thinks the Greeks can pay the money back. Nobody expects fairness at this point. Nobody however is willing to lend, a nice way of saying give at this point, the Greeks more money to perpetuate this madness. There economy is structured to do nothing but consume money. They are suggesting nothing to change that. The rest of Europe is treating Greece that same way I treat my alcoholic brother. He owes me money. I know I'll never get it back so I have written it off. The only time I bring up these debts is when he asks to borrow more. I say "look you already owe me $10k. Pay that back and I will consider lending you more." I know he will never pay it back, but it shuts him up, so I consider it the best $10k I ever spent.

 

[iNow]

You seem to be saying "yes the Greeks morally owe this money and morally they should pay it back, but lets not bring that up because it makes the Greeks feel bad and won't solve the problem"

I'm saying if we hope to resolve the matter, we need to move beyond our psychological need for justice and the persistent concept of what is and is not fair.

 

Of course, it's unfair that money lent may go unrepaid, but that's likely what's needed to escape the downward spiral. The economics of this situation are easy. It's the emotion and the politics that are getting in the way.

 

Well forgiving there debts and lending them more money won't fix the problem either.

On what basis or analysis do you base this conclusion? Seems more of an opinion than a fact, no matter how strongly you may believe it.

 

Also, to be clear, you've moved the goal posts. I discussed debt forgiveness, not the lending of additional monies in the future once that occurs. The crisis essentially vanishes immediately when the debts become classified as sunk costs, and future lending is a separate issue entirely.

[waitforufo]

The crisis essentially vanishes immediately when the debts become classified as sunk costs, and future lending is a separate issue entirely.

The trap of sunk costs is fallacy that you can't walk away from the money already lost. What is a little more? You are the one falling into that trap.

[iNow]

I referred to treating costs as sunk, not the sunk cost fallacy. Thought that was clear, but in case not it should be now.

[Delbert]

The crisis essentially vanishes immediately when the debts become classified as sunk costs, and future lending is a separate issue entirely.

Vanishes! Au Contraire, the issue would only just begin.

 

Money represents labour, and others hard work just being effectively thrown into the dustbin would create a significant precedence, for starters. You know, one lot working hard and paying taxes that go to others as a loan, and in the fullness of time that loan is written-off! What on earth are we doing they might say; let's all go on the razzle, to express it simply. In other words the likelihood is - nay, the certain likelihood is - things degenerate, possibly into chaos.

 

And what example would it be to those countries that have done the right thing in sorting out their past profligacy?

 

Anyway, I'm a great believer in democracy, and in the power of democracy. Yes, democracy can lead to robbing Peter to pay Paul situation, with the robbers always being able to rely on Paul's support. But perhaps in the current situation it may be that the Peters' may be able to turn the tables by exercising their power should their leader acquiesce to Paul.

 

I repeat the question I asked previously - which, apart from one suggestion that it's different from personal debt, which it isn't, because national debt is someone else's taxed hard work, didn't appear to be answered. Would those in favour of writing-off said debt be quite happy to write-off a loan they may have lent someone because they couldn't repay?

[swansont]

I think you need to work a little harder explaining this morality issue. I'm not getting it. Still simply a business issue in my opinion.

 

Also, I think you are being disingenuous with your "They borrowed thus must pay now, now, now." I think they borrowed, borrowed again, borrowed some more, and were then showered with free money. Now nations like Germany are saying enough is enough. No one is taking about "pay, now, now, now. They know that money is gone, gone, gone, and never to return. Germany must be thinking "if we are going to throw money down a rat hole at lest we should get a few more of those pretty windmills as reward for the farce." Merkel must be thinking "how do I explain to my own people (voters) that they should work hard so the Greeks can get free money. Instead of giving the Greeks free money, Merkel could subsidize beer and brats and become a national heroine.

 

Which shows the hypocrisy and, frankly, stupidity of the Germans. They know a pathway that works to resolve such a crisis, and they are insisting on a different method. It's not just a matter of ignoring history, it's ignoring their own history.

[iNow]

Money represents labour, and others hard work just being effectively thrown into the dustbin would create a significant precedence, for starters. You know, one lot working hard and paying taxes that go to others as a loan, and in the fullness of time that loan is written-off! What on earth are we doing they might say; let's all go on the razzle, to express it simply. In other words the likelihood is - nay, the certain likelihood is - things degenerate, possibly into chaos.

 

And what example would it be to those countries that have done the right thing in sorting out their past profligacy?

So, instead of using clear economics, your argument relies on appeals to moral hazard and the slippery slope fallacy. While I understand why you feel this way, it too has nothing to do with the economics of the current situation, which are clear.

 

Would those in favour of writing-off said debt be quite happy to write-off a loan they may have lent someone because they couldn't repay?

"Quite happy" to do it and recognizing that it needs to be done are two entirely different concepts. Of course I'd want to be repaid if I lent someone money. That's not the point, though, and this has been explained to you before.

 

Our personal budgets and debt transactions are not comparable to national budgets and debt transactions for a multitude of reasons. For starters, if I refuse to forgive your debt it won't cause the larger economy to further stall, people to starve, or unemployment to soar.

 

Here's a primer, start with this: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/11/what-if-a-typical-family-spent-like-the-federal-government-itd-be-a-very-weird-family/

 

More below covering similar points about this flawed analogy between individual/family budgets and debts with those budgets and debts of nations and governments:

 

http://www.rooseveltinstitute.org/new-roosevelt/federal-budget-not-household-budget-here-s-why

Whenever a demagogue wants to whip up hysteria about federal budget deficits, he or she invariably begins with an analogy to a households budget: No household can continually spend more than its income, and neither can the federal government. On the surface that, might appear sensible; dig deeper and it makes no sense at all. A sovereign government bears no obvious resemblance to a household. Let us enumerate some relevant differences. <continue reading>

http://www.msnbc.com/rachel-maddow-show/why-government-family-budgets-arent-th

Given how common this sentiment is, its worth taking a moment from time to time to occasionally reemphasize why this analogy is so very wrong.

 

At first blush, I can appreciate its appeal the argument has a certain down-home, common-sense sort of quality to it. If American families and American businesses cant run massive deficits and borrow billions from China, the argument goes, why does the American government?

 

The point that generally gets lost is the detail that matters: families and businesses borrow money and run deficits all the time. This is a positive, not a negative, development.

 

When a family goes to buy a home, for example, its members dont simply write a check; they take out a mortgage. Almost no one can afford to simply and literally buy a home outright, so we take out very large loans, and make payments, with interest.

 

The same is true when a family wants a car, tackles college tuition, or thinks about starting a small business. American families, in other words, take on debts, some of them huge relative to their incomes, all the time. Theres nothing wrong with any of this these are just routine examples of people investing in themselves, as they should.

 

Businesses to do this, too, borrowing money to make capital improvements, expand locations, buy smaller companies, etc. Companies generally create jobs this way, and do so with the blessing of investors.

 

The governments debts arent identical, but officials take on debts to invest in things they consider worthwhile, too. A family that relies on student loans to pay for college should be able to relate to a government that relies on loans to pay for public services. The family thinks itll be worth living in the red for a while, so long as it can make the payments and afford the interest, because theyll be better off in the long run and the government believes the exact same thing.

 

And theyre both correct.

[waitforufo]

I referred to treating costs as sunk, not the sunk cost fallacy. Thought that was clear, but in case not it should be now.

And yet your solution is to borrow and spend more.