Greek Crisis continues

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Tyndmyr
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Re: Greek Crisis continues

Postby Tyndmyr » Wed Jul 01, 2015 7:27 pm UTC

cphite wrote:The IMF didn't cause this problem, and neither did the Eurozone. The leaders of Greece caused this problem, with a heck of a lot of support from the people who put them into positions of leadership. They were given help when it was asked for, along with an expectation that they get their shit together; and they failed to get their shit together. Not because they couldn't but because they wouldn't do what was needed. And - big surprise - they're in trouble again.


You can only help people so much if they don't want to fix the problem. And yeah, getting finances sorted out often isn't pleasant...it's something a *lot* of governments struggle with to some degree, but yeah, this isn't really the IMF's doing.

We've got a somewhat similar situation in the US with Puerto Rico. They're tanking hard, and it isn't due to austerity, because their budget just keeps getting bigger, they refuse to lay anyone off, etc. It's just uncontrolled spending, combined with a tanking economy. That's a nasty combo.

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Re: Greek Crisis continues

Postby elasto » Wed Jul 01, 2015 10:07 pm UTC

Tyndmyr wrote:You can only help people so much if they don't want to fix the problem. And yeah, getting finances sorted out often isn't pleasant...it's something a *lot* of governments struggle with to some degree, but yeah, this isn't really the IMF's doing.

We've got a somewhat similar situation in the US with Puerto Rico. They're tanking hard, and it isn't due to austerity, because their budget just keeps getting bigger, they refuse to lay anyone off, etc. It's just uncontrolled spending, combined with a tanking economy. That's a nasty combo.

OTOH, there is a school of thought that when the economy is tanking, that's not the time for the government to be cutting back on spending and borrowing. In fact that will just double-down on the contraction in liquidity. This school of thought says that government spending should be counter-cyclical - spend madly during recessions to keep the economy moving and only begin to contract borrowing once the recession is firmly over.

For example, the UK did engage in some austerity measures for sure, but they also increased borrowing by about a trillion dollars and got the Bank of England to print about $500Bn in brand new currency, magicked from thin air. And we have seen greater subsequent growth than almost all (or fully all?) of Europe, which relied much more heavily on austerity alone.

I think Greece would like to follow the UK (and US) model rather than the European model is all - and who can blame them? The European model does seem heavily prone to a vicious circle of deeper recession and lower tax take.

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Re: Greek Crisis continues

Postby Dark567 » Wed Jul 01, 2015 10:20 pm UTC

elasto wrote:OTOH, there is a school of thought that when the economy is tanking, that's not the time for the government to be cutting back on spending and borrowing. In fact that will just double-down on the contraction in liquidity. This school of thought says that government spending should be counter-cyclical - spend madly during recessions to keep the economy moving and only begin to contract borrowing once the recession is firmly over..
The problem is, that no one trusts that Greece will actually cut back when they are out of the recession. For the most part large reforms(which is what Greece needs) only happen in crises, not when everything is going well. If Greece can't take the correct measures now(particularly in regard to tax reform) no one is going to think they ever will.
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Re: Greek Crisis continues

Postby elasto » Wed Jul 01, 2015 10:31 pm UTC

Dark567 wrote:The problem is, that no one trusts that Greece will actually cut back when they are out of the recession. For the most part large reforms(which is what Greece needs) only happen in crises, not when everything is going well. If Greece can't take the correct measures now(particularly in regard to tax reform) no one is going to think they ever will.

Then make it a condition of being a member of the Euro. Fine them or kick them out or whatever. But don't deliberately deepen their recession just because they're over a barrel right now. That's immoral.

My understanding is that Greece basically cooked the books to get in. And the rest of Europe basically turned a blind eye - because the political goal of a single currency was the overriding interest, no matter the economic argument.

Well, it's a chicken that has come home to roost, and the rest of the EU has to take their share of the blame for it.

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Re: Greek Crisis continues

Postby Dark567 » Wed Jul 01, 2015 10:45 pm UTC

elasto wrote:
Dark567 wrote:The problem is, that no one trusts that Greece will actually cut back when they are out of the recession. For the most part large reforms(which is what Greece needs) only happen in crises, not when everything is going well. If Greece can't take the correct measures now(particularly in regard to tax reform) no one is going to think they ever will.

Then make it a condition of being a member of the Euro. Fine them or kick them out or whatever. But don't deliberately deepen their recession just because they're over a barrel right now. That's immoral.
To a certain extent it is being made a condition of being a member of the euro. And you could say the same argument about Greece being immoral. If Greece had no intention on following through with the stipulations of its bailouts, it shouldn't have taken them (yes, I get this is more complicated with changing governments and what not). Moreover its not like by not paying back Greece isn't hurting other nations that aren't as well off. Sure this is ultimately just a blip to German, and more about preventing moral hazard to them then the actual amount of money, but for the Baltic states, Poland, Slovakia etc. that considerable poorer than Greece, why is it moral for Greece to hurt them?

And lastly, kicking them out I think would cause a significantly worse deepening to their recession than the austerity. In short, austerity for Greece is inevitable, it will be either forced up on them by their creditors and remain a part of the Eurozone(where I think the long term prospects look better) or it will get kicked out and without any creditors and no way to currently pay for its current standard of living(and I think the long term prospects here are bleak).
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Re: Greek Crisis continues

Postby elasto » Wed Jul 01, 2015 11:04 pm UTC

Dark567 wrote: To a certain extent it is being made a condition of being a member of the euro.

Yeah, but after the event. If taxation policy was fundamental to being part of the single currency (and it SHOULD have been for it to be remotely workable*) it should have been a pre-condition to entry.

And you could say the same argument about Greece being immoral.

Not really - assuming you buy into the argument that governments should increase borrowing and spending during recessions and cut back during growth periods.

And lastly, kicking them out I think would cause a significantly worse deepening to their recession than the austerity.

I meant kick them out before this recession started - assuming they cooked the books to pass a pre-condition that they didn't actually pass. Either EU oversight was incompetent, or it was corrupted by political ideology...


*Basically, all the Euro countries should have near identical taxation and welfare policies - or at least 'federal level' taxation and welfare payments (think the US federal/state split of finances and responsibilities), and there should be EU-wide democratic voting on this: The people should decide what level of federal taxation and welfare they want to be subject to, not faceless and unaccountable technocrats...

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Re: Greek Crisis continues

Postby Dark567 » Wed Jul 01, 2015 11:20 pm UTC

elasto wrote:
Dark567 wrote: To a certain extent it is being made a condition of being a member of the euro.

Yeah, but after the event. If taxation policy was fundamental to being part of the single currency (and it SHOULD have been for it to be remotely workable*) it should have been a pre-condition to entry.
It was a precondition to being bailed out and Greece didn't follow it after they agreed on it.


elasto wrote:
And you could say the same argument about Greece being immoral.

Not really - assuming you buy into the argument that governments should increase borrowing and spending during recessions and cut back during growth periods.
You didn't even address how Greece's decision effects other countries, arguably acting just as immorally by your same logic, or the moral hazards involved defaulting. Again, austerity is coming for Greece, its just a matter of which pill they will be swallowing.

I meant kick them out before this recession started
Well, sure. Greece probably should never been let in. But they're in now, and something needs to be fixed.


Anyway, it sounds like today Syriza will reverse course and agree to the IMF/ECB's terms. So it looks like they might be staying and reenacting many of the austerity measures.
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Re: Greek Crisis continues

Postby Vahir » Wed Jul 01, 2015 11:32 pm UTC

I think that, regardless of your position on austerity vs Keynesianism, this kind of tug of war going on in Greece is only making things worse. The greeks think spending will solve the situation, the euros think austerity will, but because they're both compromising on the matter, neither party's plan has a chance of succeeding.

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Re: Greek Crisis continues

Postby Dark567 » Wed Jul 01, 2015 11:45 pm UTC

Vahir wrote:I think that, regardless of your position on austerity vs Keynesianism, this kind of tug of war going on in Greece is only making things worse. The greeks think spending will solve the situation, the euros think austerity will, but because they're both compromising on the matter, neither party's plan has a chance of succeeding.

I really don't think its anywhere close to that its as simple as solving Greece's growth troubles. Its also about paying back its debtors in a timely enough fashion that it doesn't impact their growth.

I don't think Greece has the option of Keynesianism, period. Who will borrow it money without heavy stipulations? Looks like the answer is no one.
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Re: Greek Crisis continues

Postby elasto » Wed Jul 01, 2015 11:48 pm UTC

Dark567 wrote:It was a precondition to being bailed out and Greece didn't follow it after they agreed on it.

I don't think the detail had been agreed at that point, had it? Else why all these negotiations now?

You didn't even address how Greece's decision effects other countries, arguably acting just as immorally by your same logic

I don't agree. Very few moral systems have a moral equivalence between the poor stealing from the rich and the rich stealing from the poor. In fact, under many moral codes, stealing a loaf of bread to feed your starving family is the moral thing to do.

(The rich stole from the poor because this was a bank-driven recession, yet the banks have barely suffered financially ('too big to fail') and the bankers even less so than that (very few asked to repay bonuses earned basically fraudulently). Yet the EU are demanding Greece raise taxes on medicines and pensions to pay for the fallout...)

Well, sure. Greece probably should never been let in. But they're in now, and something needs to be fixed.

And, personally, as I've said, I think Greece leaving will be better in the long run both for Greece and the rest of Europe.

Anyway, it sounds like today Syriza will reverse course and agree to the IMF/ECB's terms. So it looks like they might be staying and reenacting many of the austerity measures.

I think that will save a lot of pain today but result in even greater amounts of pain tomorrow. A typical politician's folly.

I hope the Greek people overwhelmingly reject any terms in the referendum. Better to rip off the plaster today than let it fester...

I don't think Greece has the option of Keynesianism, period. Who will borrow it money without heavy stipulations? Looks like the answer is no one.

Yup. Again, the result of past mistakes - on both sides.

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Re: Greek Crisis continues

Postby Dark567 » Thu Jul 02, 2015 12:25 am UTC

elasto wrote:
Dark567 wrote:It was a precondition to being bailed out and Greece didn't follow it after they agreed on it.

I don't think the detail had been agreed at that point, had it? Else why all these negotiations now?
It was negotiated as part of the bailout in 2011. Its being negotiated now because Greece reigned on it in 2014.


I don't agree. Very few moral systems have a moral equivalence between the poor stealing from the rich and the rich stealing from the poor. In fact, under many moral codes, stealing a loaf of bread to feed your starving family is the moral thing to do.
Right. Then why should poorer Estonia be responsible for bailing out richer Greece?
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Re: Greek Crisis continues

Postby maybeagnostic » Thu Jul 02, 2015 7:14 am UTC

elasto wrote: This school of thought says that government spending should be counter-cyclical - spend madly during recessions to keep the economy moving and only begin to contract borrowing once the recession is firmly over.
The Greek government borrowed huge amounts when its economy was doing well and when the inevitable recession came, they were unable to even keep up with their old payments, let alone borrow more money. This all with the benefit of an interest rate about half what they would have had without the support of the Eurozone. And then the true crisis started when people discovered that Greece would have eventually been unable to make its payments even if there had been no recession. What part of that situation can possibly make you want to pay off all their debts now and hope that in the future when you have no say in how they borrow they won't do it again?

elasto wrote:Yeah, but after the event. If taxation policy was fundamental to being part of the single currency (and it SHOULD have been for it to be remotely workable*) it should have been a pre-condition to entry.
Taxation policy wasn't a specific condition, it was expected that each country will continue to responsibly take care of their own finances as they had been doing before but they would get the benefits of lower interest rates and a single currency. The financial crisis showed that "responsibly" part to be a complete fantasy* but you are putting the blame on the affected parties that held to the spirit of the agreement and were lied to for not policing the other states (over which they had no authority and any such action would have been strongly resented) while at the same time criticizing them now for putting conditions on the support they are willing to give.

elasto wrote:I don't think the detail had been agreed at that point, had it? Else why all these negotiations now?

It had but the Greek government agreed to it and then decided not to carry it out. Same reason no reasonable person believes their plan form last week to raise taxes in a few months' time- not only is the Greek government unable to collect taxes, it has a history of making promises to receive bailout money and then not carrying out those promises.

elasto wrote:In fact, under many moral codes, stealing a loaf of bread to feed your starving family is the moral thing to do.

So according to your morality the baker is the villain because he demands that you find a way to start paying him back for all that bread you "borrowed" over the years before he gives you any more.

* So, yes, you are right. The current system is broken and is unlikely to survive in this form in the long run. There is no organization or nation in the Eurozone that can take the authoritarian stance of the Federal government in the US and it is extremely unlikely that one will be created without a major crisis.
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Re: Greek Crisis continues

Postby Tyndmyr » Thu Jul 02, 2015 3:01 pm UTC

elasto wrote:
Tyndmyr wrote:You can only help people so much if they don't want to fix the problem. And yeah, getting finances sorted out often isn't pleasant...it's something a *lot* of governments struggle with to some degree, but yeah, this isn't really the IMF's doing.

We've got a somewhat similar situation in the US with Puerto Rico. They're tanking hard, and it isn't due to austerity, because their budget just keeps getting bigger, they refuse to lay anyone off, etc. It's just uncontrolled spending, combined with a tanking economy. That's a nasty combo.

OTOH, there is a school of thought that when the economy is tanking, that's not the time for the government to be cutting back on spending and borrowing. In fact that will just double-down on the contraction in liquidity. This school of thought says that government spending should be counter-cyclical - spend madly during recessions to keep the economy moving and only begin to contract borrowing once the recession is firmly over.


Well, they've tested the shit out of that theory, refusing to fire ANYONE, and continuously embracing more spending with every budget. This additional spending is primarily funded through lots of borrowing, though additional taxation is also a thing. At no point as austerity even been attempted.

It's a long term trend, and things are getting a lot worse as a result. I cannot think of a better example to show the dangers of this "fix".

This is not to say that counter-cyclical actions are wholly bad...just that it's way more complex than spending your way out of the jam. You have to be prudent in the good times to balance the spending in the bad. Loans, savings, whatever. You can't just dial up spending without ever dialing back down. If you've been sufficiently profligate in the past, you have less latitude with which to be free with money when the bad times do hit. Even embracing counter-cyclical spending does not mean you should just always wantonly increase spending indefinitely. Everyone acknowledges that has limits.

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Re: Greek Crisis continues

Postby Dauric » Thu Jul 02, 2015 3:20 pm UTC

Tyndmyr wrote:This is not to say that counter-cyclical actions are wholly bad...just that it's way more complex than spending your way out of the jam. You have to be prudent in the good times to balance the spending in the bad. Loans, savings, whatever. You can't just dial up spending without ever dialing back down. If you've been sufficiently profligate in the past, you have less latitude with which to be free with money when the bad times do hit. Even embracing counter-cyclical spending does not mean you should just always wantonly increase spending indefinitely. Everyone acknowledges that has limits.


True counter-cyclical spending though isn't about wantonly increasing spending though, if you're wholly embracing the concept then in good times the government saves everything it can and leaves the lions share of the economic spending to the private sector.

Now getting -any- government, or rather the elected (or not) officials that make up that government, to embrace prudent saving in times of plenty is the hard part.

Edit:

Wild question: One of the austerity measures on the table in front of Greece is significant reductions in current pensions and an increase in the retirement age. Given that people still need the money to pay bills, what could we expect from the Greek economy with a sudden influx of formerly retired workers competing for jobs? I had thought that high unemployment was one of Greece's major economic issues.
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Re: Greek Crisis continues

Postby Tyndmyr » Thu Jul 02, 2015 3:30 pm UTC

Dauric wrote:
Tyndmyr wrote:This is not to say that counter-cyclical actions are wholly bad...just that it's way more complex than spending your way out of the jam. You have to be prudent in the good times to balance the spending in the bad. Loans, savings, whatever. You can't just dial up spending without ever dialing back down. If you've been sufficiently profligate in the past, you have less latitude with which to be free with money when the bad times do hit. Even embracing counter-cyclical spending does not mean you should just always wantonly increase spending indefinitely. Everyone acknowledges that has limits.


True counter-cyclical spending though isn't about wantonly increasing spending though, if you're wholly embracing the concept then in good times the government saves everything it can and leaves the lions share of the economic spending to the private sector.

Now getting -any- government, or rather the elected (or not) officials that make up that government, to embrace prudent saving in times of plenty is the hard part.


Right. The difficult part is not convincing spending when it's bad. It's promoting fiscal responsibility when times are good*. In practice, what seems to happen is that governments overspend cheerfully when things are economically alright, and ignore this until economic contraction makes the problem too big to ignore. At that point, introducing the overdue austerity will hurt MORE...but they'd rather just increase spending over the current level that got them in this mess.

You can fix this problem with relatively little pain in advance, but by that stage...not really. It's merely a debate between soaking the pain up now, or trying to punt some of it off into the future, because responsibility is already a lost cause, and in any case, even if you started being responsible now, that doesn't make the effects of the past vanish.

So, all the solutions suck somewhat. Other than "other people give us very large amounts of free money we don't have to pay back", I suppose. But you can't reasonably expect other people to like that solution. Especially because it doesn't really fix the poor discipline behind the problem, and it'll no doubt just recur.

*I'm avoiding the word "saving" because people always get distracted on saving vs borrowing, etc. Both are useful, and not really intrinsic to the concept.

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Re: Greek Crisis continues

Postby elasto » Thu Jul 02, 2015 4:29 pm UTC

Dauric wrote:Now getting -any- government, or rather the elected (or not) officials that make up that government, to embrace prudent saving in times of plenty is the hard part.

I'd argue this is less a problem with government and more a problem with democracy. Parties that don't give away freebies in the good times will eventually get voted out in favour of ones that do.

Not that it's a good thing overall, but China can keep most of its population in poverty and keep reinvesting its GDP in high growth areas, thinking only of the medium and long term - whereas most governments are never more than a couple of years from yet another election cycle...

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Re: Greek Crisis continues

Postby Carlington » Thu Jul 02, 2015 4:57 pm UTC

Tyndmyr wrote:So, all the solutions suck somewhat. Other than "other people give us very large amounts of free money we don't have to pay back", I suppose. But you can't reasonably expect other people to like that solution. Especially because it doesn't really fix the poor discipline behind the problem, and it'll no doubt just recur.

This part of your post in particular interests me. I apologise for the link to Wikipedia, but it's got the nicest table I could find at short notice: Take a look at the second table in this section of the page I linked, and then tell me whether you think North Dakota's economy is a particularly contentious issue in the US. (Actually, I found another analysis while writing this, which is here, so South Carolina could also be used as an example). This comparison may not seem apropos, but I'd put it to you that it's actually very relevant, in that Europe (and especially the economically stronger nations in Europe) wants all the benefits of a fiscal union with none of the drawbacks. The link here, is that it's accepted and uncontroversial and not a crisis in the US that richer states are putting more into the federal piggybank than they ever get out of it, and the reverse is true of poorer states. Effectively, this amounts to a neverending transfer of money from rich states to poor states, and that's kinda just how it is, and it seems like it's kinda how it has to be if you want one currency for a whole continent with disparate sub-regions of economic power. Having the Euro and playing at being one big, happy Europe is all well and good, as long as everyone's willing to actually do their bit.

As for the whole discussion about blame: If you're going to have an entire region use the same currency, you need to homogenise the decision-making process for the direction of the economy. From my perspective, it looks very much like only the stronger and richer economies are being taken into account when decisions about the Euro are being made. Maybe putting conditions x, y, and z on the continued use of the Euro seem reasonable if you're German - if you're Greek, the same conditions are probably going to seem downright oppressive. That said, Greece is a little bit implicit in their own downfall in this case. They defrauded quite a lot of people, and did so quite flagrantly, to get where they are now - so it's at least a little bit the fault of both Greece and the rest of Europe/the Troika. But even so, it would be folly to ignore the effect of the GFC. maybeagnostic seems to have touched on this, but I don't think they've quite done it justice - they've set up a nice dichotomy between being able and being unable to make the repayments on your debt. But it's not quite as simple as the fact that Greece wouldn't have been able to make even the repayments even without the recession - they would've been much closer in that situation, and while it would've been bad, it would still have been fixable. As it stands, I don't know whether it is fixable.

Ultimately, yes Greece needs to make some pretty big reforms, but "reform" isn't synonymous with "austerity measure" and it wouldn't be outside the realm of possibility for the Troika to continue to prop Greece up while the reforms are being implemented. I don't think negotiating, as Syriza ostensibly has been trying to do, can be done any longer - maybe in 2008 when people still held Greek debt and Greece leaving the Euro would have had some effect on anything outside of Greece, but not anymore. The only thing Europe's got to lose if Greece leaves is face, and they'll probably lose some of that no matter how this turns out. So in my view, either Europe has to become more like America, and get used to the idea that having a unified currency entails propping up the weaker members of that economic union; or else Greece has to bring back the Drachma (whether it replaces or runs alongside the Euro), and then radically devalue it to try and kick the economy back into gear. No matter which way it goes, it's got to go soon. The situation as it stands can't go on much longer.
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Re: Greek Crisis continues

Postby Dark567 » Thu Jul 02, 2015 5:59 pm UTC

Carlington wrote:Ultimately, yes Greece needs to make some pretty big reforms, but "reform" isn't synonymous with "austerity measure" and it wouldn't be outside the realm of possibility for the Troika to continue to prop Greece up while the reforms are being implemented. I don't think negotiating, as Syriza ostensibly has been trying to do, can be done any longer - maybe in 2008 when people still held Greek debt and Greece leaving the Euro would have had some effect on anything outside of Greece, but not anymore. The only thing Europe's got to lose if Greece leaves is face, and they'll probably lose some of that no matter how this turns out. So in my view, either Europe has to become more like America, and get used to the idea that having a unified currency entails propping up the weaker members of that economic union; or else Greece has to bring back the Drachma (whether it replaces or runs alongside the Euro), and then radically devalue it to try and kick the economy back into gear. No matter which way it goes, it's got to go soon. The situation as it stands can't go on much longer.
The problem is any sort of reform is going to feel exactly like austerity. Let's say Greece reforms its tax collection system and actually collects taxes (probably the biggest cause of Greek debt, isn't actually the government over spending, but not collecting the revenue it claims). That takes money out of peoples pockets the same way reducing pensions would.

On the other point, I'm not sure in this sense Eurozone isn't somewhat like America. Europe seems to have no problems with some amount of transfer of funds from Germany to Poland, Lithuania, Estonia, Slovakia, etc. The issue with Greece is that the problems are vastly more structural and also the extent required; Before the crisis Greece would have been considered more of a middle income country in the Euro and not one of the poorer. I also think your underestimating how the US would react if a state went this far in debt, I'd be willing to bet it would force it through some sort of default mechanism.
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Re: Greek Crisis continues

Postby elasto » Thu Jul 02, 2015 6:32 pm UTC

Europe seems to have no problems with some amount of transfer of funds from Germany to Poland, Lithuania, Estonia, Slovakia, etc.

I'm not sure how true that is. I think it's a key portion of why many in the UK want to break from the EU and just have a trade agreement, for example.

Governments don't mind because, for example, Germany benefits hugely from countries like Greece being part of the common currency, because it keeps the Euro exchange rate lower than it would be otherwise, benefiting German exports. So privately they don't mind some transfers of funds from the rich to the poor. But I am quite unsure how German taxpayers feel about their taxes going to prop up welfare payments in other countries. I suspect they like it not one little bit...

This is the folly of this halfway house of a federation of independent countries. It either needs to be all-in like the US - or it needs to be much smaller groupings of countries - the so-called 'two-tier' Europe.

And I really don't think that most European electorates want a fully federal Europe. We just don't identify as Europeans as strongly as the average American identifies with America.

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Re: Greek Crisis continues

Postby Dark567 » Thu Jul 02, 2015 6:44 pm UTC

elasto wrote:
Europe seems to have no problems with some amount of transfer of funds from Germany to Poland, Lithuania, Estonia, Slovakia, etc.

I'm not sure how true that is. I think it's a key portion of why many in the UK want to break from the EU and just have a trade agreement, for example.

.... But I am quite unsure how German taxpayers feel about their taxes going to prop up welfare payments in other countries. I suspect they like it not one little bit...
I mean we have the exact same thing in the US.


This is the folly of this halfway house of a federation of independent countries. It either needs to be all-in like the US - or it needs to be much smaller groupings of countries - the so-called 'two-tier' Europe.

And I really don't think that most European electorates want a fully federal Europe. We just don't identify as Europeans as strongly as the average American identifies with America.
Its worth noting here American's didn't really considered themselves Americans before <insert state here>ans until after the heavy Federalization of the late 19th and early 20th centuries. In the Civil War the war cries were much more "For Wisconsin" or "For Virginia" than it was "For the US" or "For the Union". My guess is if Europe federalized, many more Europeans would come around to thinking of themselves as Europeans before <insert country>ian after a couple generations.
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Re: Greek Crisis continues

Postby elasto » Thu Jul 02, 2015 8:16 pm UTC

All very true, but don't overestimate the benefit of a common history and a common language to uniting the states.

It's one thing for a Texan to feel distinct from a Californian, but it's nothing compared to the cultural, linguistic and historical gulf between, say, an Englishman and a Frenchman or German...

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Re: Greek Crisis continues

Postby leady » Thu Jul 02, 2015 8:55 pm UTC

Yeah given the centuries of non-stop warfare between European powers and the separate languages and cultures its going to be a long long time if ever and I'm not convinced its desirable (besides stopping the aforementioned constant war). If I ever had the urge to go to France I want to be served by a dismissive surly waiter that pretends not to understand English :)

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Re: Greek Crisis continues

Postby bentheimmigrant » Thu Jul 02, 2015 11:03 pm UTC

elasto wrote:All very true, but don't overestimate the benefit of a common history and a common language to uniting the states.

It's one thing for a Texan to feel distinct from a Californian, but it's nothing compared to the cultural, linguistic and historical gulf between, say, an Englishman and a Frenchman or German...

They got over all that when they walked into a bar together.
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Re: Greek Crisis continues

Postby Zamfir » Fri Jul 03, 2015 7:14 am UTC

Carlington wrote:As for the whole discussion about blame: If you're going to have an entire region use the same currency, you need to homogenise the decision-making process for the direction of the economy. From my perspective, it looks very much like only the stronger and richer economies are being taken into account when decisions about the Euro are being made. Maybe putting conditions x, y, and z on the continued use of the Euro seem reasonable if you're German - if you're Greek, the same conditions are probably going to seem downright oppressive.

The bolded part is somewhat true, but part of that is intentional, a mutual decision of all the countries involved. Time and time again, Europe ran into conflicts between hard-currency countries and soft-currency countries. And the approach to currency devaluation runs very deep in society: every contract negotiation and every political decision about money is coloured by expectations about a potential future devaluation of the nominal amounts you agree to.

The hard-currency cpolicy wa seen as superior int he long run, and many politicians wanted to shift their own countries towards a hard currency policy. Which is difficult, because the intermediate period gives you all the downsides of soft-currency expectations, but none of its cushioning advantages when a downturn hits.

As result, the Euro is explicitly set up in the style of the hard currency block. It's the BuBa writ large. The idea is that the soft currency countries will have to adapt, and will become 'natural' hard currency economies over time. In the mean time, the Euro works for Germany (and tis neighbours) largely as they were already used to in the D-Mark block, while the people in Spain or Italy have to recalibrate lots of their economic and political traditions.

I don't know how correct this theory of eventual adaptation is, but it's a widely held theory, especially among the political leadership throughout the whole Eurozone. And it gets overlooked in "germany vs the south" narratives. Germany gets a lot of leeway to set a 'German' course of action, but that is not just German strong-arming. It's also because many elite non-Germans expect that a German-style Eurozone will eventually make their own countries "more German".

EDIT: perhaps unnecassary to add, but Germany does obviously use this position to its own advantage.

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Re: Greek Crisis continues

Postby BattleMoose » Fri Jul 03, 2015 7:28 am UTC

From what I can tell, Greece was let into the EU based on a fraudulent assessment of its economy. A central currency might be okay for a group of similarly strong economic countries. Even the less economically strong countries survived the GFC okayish. The only real crisis and remains so is Greece, a country that apparently should not have applied or let into the Eurozone. And appears to be seriously handicapped at the moment without the option of devaluing its currency.

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Re: Greek Crisis continues

Postby Paul in Saudi » Fri Jul 03, 2015 4:29 pm UTC

As technical matter, could the Greeks order several tens of millions of banknotes from some printing company like LaRue secretly? Is there any indication such notes are being prepared?

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Re: Greek Crisis continues

Postby sardia » Fri Jul 03, 2015 5:45 pm UTC

Paul in Saudi wrote:As technical matter, could the Greeks order several tens of millions of banknotes from some printing company like LaRue secretly? Is there any indication such notes are being prepared?

Are you suggesting Greece plans to counterfeit euros? And to do so in such large quantities that they can not only make payments, but claim they found it under the couch?

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Re: Greek Crisis continues

Postby Mutex » Fri Jul 03, 2015 6:41 pm UTC

sardia wrote:
Paul in Saudi wrote:As technical matter, could the Greeks order several tens of millions of banknotes from some printing company like LaRue secretly? Is there any indication such notes are being prepared?

Are you suggesting Greece plans to counterfeit euros? And to do so in such large quantities that they can not only make payments, but claim they found it under the couch?

It's just crazy enough to work!

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Re: Greek Crisis continues

Postby Paul in Saudi » Fri Jul 03, 2015 7:03 pm UTC

Forgive me if I was unclear. Is there any indication someone is printing new drachma notes, just in case?

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Re: Greek Crisis continues

Postby maybeagnostic » Fri Jul 03, 2015 8:40 pm UTC

Paul in Saudi wrote:Forgive me if I was unclear. Is there any indication someone is printing new drachma notes, just in case?

Not any time soon.
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Re: Greek Crisis continues

Postby CorruptUser » Fri Jul 03, 2015 10:50 pm UTC

A very serious question needs to be asked.

Without the interest on top of the debt, would Greece be able to remain solvent?

IF ANSWER = "Yes" THEN IntRate = InflationRate --Technical default, but good deal for everyone.
ELSE LetCollapse = 1 --Even if Greece had no debt whatsoever it'd still be a lost cause. Time to concrete over the money-pit.
END

Second, Greece's main problem stems from all the business owners refusing to pay taxes. Go to Greece, every little shop has their credit card machine "broken" that day. Simplest solution is to implement a law where 1) All business tax returns are public knowledge and 2) anyone can purchase any small business for 50% more than it is worth based on tax filings (via courts). Your pizza shop only is only declaring 1/3 of what it actually makes? Well, that means anyone else can buy it from you for half what it's really worth, so report your income or else.

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Re: Greek Crisis continues

Postby Zamfir » Sat Jul 04, 2015 8:49 am UTC

CU, it's not that simple. Greek interest payments are currently very low. About 2.5% of GDP, plus some portion of EFSF interest which gets deferred automatically. This situation is entirely a political choice from the Troika. Greece's original debt was restructured in 2012, creditors received new bonds with lower face values, low interest and longer maturities. Since then, most Greek debt has been various European loans at very low interest and very long maturities.

Under this situation, Greece could run a primary surplus (they were close this year), perhaps even a structural surplus. But only while they can continuously roll over old debt for new debt under the same beneficial terms. And the Troika only gives out these cheap loans if Greece submits to their demands. Projection forward says that Greece will need cheap loans for several decades to come, even in fairly good times.

On the other extreme, Greece could default on interest plus unilaterally restructure the outstanding debt (mostly to the Troika). That is, they won't pay interest and won't repay most of the outstanding debt. If they do this, they won't be able to loan money for at least several years, probably longer. They would have to run a structural surplus every year and every day.

Based on their present small government and currency deficits, that seems doable. But those include several gdp-percent worth of EU subsidies. And a unilateral default would result in banking and export problems, which would reflect back in their government income and their foreign currency income. So the actual cuts in that scenario would be much larger than a simple extrapolation from the present would suggest.

As a side note, what do you mean with 'concrete over the money pit'? Current European statutes do not allow to concrete over actual people, and changing that would require a time-consuming legal process with many veto points. I am also not sure if our concrete production levels are up to it - Greece is a mountainous place, you'd need a fairly thick layer.

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Re: Greek Crisis continues

Postby Alexius » Sat Jul 04, 2015 3:37 pm UTC

sardia wrote:
Paul in Saudi wrote:As technical matter, could the Greeks order several tens of millions of banknotes from some printing company like LaRue secretly? Is there any indication such notes are being prepared?

Are you suggesting Greece plans to counterfeit euros? And to do so in such large quantities that they can not only make payments, but claim they found it under the couch?


If they're Euros they don't need to "counterfeit" them.The Greek national bank prints Euro banknotes already, so it could well start printing more than it's allowed to. Of course, God only know what this would result in...

maybeagnostic wrote:
Paul in Saudi wrote:Forgive me if I was unclear. Is there any indication someone is printing new drachma notes, just in case?

Not any time soon.


Given that the Greek national bank already prints Euros, it clearly does have printing presses. What were probably destroyed were the printing plates.

I have heard that De La Rue do maintain two "emergency currencies" ready to go...

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Re: Greek Crisis continues

Postby elasto » Sat Jul 04, 2015 6:58 pm UTC

Wow. That scenario had never even occurred to me as to how this thing might play out:

Paradoxically, the idea of Greece leaving the euro is apparently "not an option" for Tsipras. In fact, most of the Greek population also seems not to believe the threat of euro exclusion is real.

But how could the Greeks and Tsipras hope to stay in the eurozone while international aid and credit has stopped and the ECB has refused to give more funds without more concessions?

It is possible, contrary to consensus, that Tsipras does have in mind to keep Greece in the eurozone despite other member countries’ attempts to exclude it. After all, such exclusion has no legal grounds in EU treaty texts. The big question becomes: What then would prevent Greece – facing a refusal of EU aid and clashing with the ECB – to begin simply printing euros, while rejecting the austerity, and possibly even defaulting on its debt? Why would an extreme leftist such as Tsipras bother switching to drachmas – with the disastrous consequences for the Greek population and his own political future – when Greece already has the capacities to simply print euros?

Certainly, the idea seems unlikely in normal times and goes against the current European rules and agreements. However, this is a crisis, and it is theoretically very possible. Why?

First, because in case of a clash between Greece and the EU/ECB, the respect of EU rules by Greek politicians may really not be the priority. Especially in a situation of increasing chaos in a country where, for example, a shortage of medicine is taking shape and power cuts are being discussed.

Second, because Greece has the physical means to create any amount of euros it wants. Indeed, by dint of repeating that Greece cannot print its own currency, the politicians and media seem to have been forgotten that the National Bank of Greece does have its own euro printing press – and this in two ways:

On one hand, it can create euros in a few "clicks" under the cover of the opaque Emergency Liquidity Assistance (ELA) program. Greece is already estimated to have created up to 96 billion euros to help its banks using the ELA.

On the other hand, the Greek central bank is able to turn on the printing press the old-fashioned way. As per the EU constitutional texts, printing euro banknotes (and manufacturing coins) has been physically delegated to the national central banks, including the National Bank of Greece. The Mint of Greece (IETA) thus already prints euro banknotes. It has the latest state-of the art printing presses – it just has to keep running them when no one is looking.

Remember, Greece already lied to Europe on the state of its public finances: once in order to enter the eurozone and then again in 2009, triggering the suspicions of investors. Why not lie again about the amount of euros it is creating? The stakes are certainly higher today.

Such illegal money creation recalls what happened in Yugoslavia in the early 1990s, during one of the worst hyperinflations in history when prices increased by the astounding 5 quadrillion percent between October 1993 and January 1994. The Yugoslav equivalent of the ECB at the time had completely lost control over money creation, while central banks in Serbia, Montenegro, Vojvodina, and Kosovo – in a position similar to that of the Bank of Greece – were heavily printing new quantities of Yugoslav currency.

Turning on the euro printing presses in Greece in a similar way would be less painful for the new leftist government than going back to the drachma, as the main effect would be felt abroad. Instead of the government's massive debt balance being paid with Greek savings, it would dilute the purchasing power of the entire eurozone. Although it is impossible to be certain if this is Tsipras' true strategy, it is a risk of which euro investors should be aware.


Mind you, since international payments are largely electronic, the ability to print banknotes isn't as useful as it once was, but it's still yet another gun the Greeks could hold to EU heads.

It's one of the few things that could make sense of the Greek government's insistence that banks are going to reopen next week come what may...

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Re: Greek Crisis continues

Postby Diadem » Sun Jul 05, 2015 2:48 pm UTC

Wow.

I really hope Greece stays in the Euro, and I wouldn't mind if the rest of Europe made more concessions to keep them in.

But if they start illegally printing euros I'd say it's time to send in the military. That kind of shit really can't be tolerated.
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Re: Greek Crisis continues

Postby Lucrece » Sun Jul 05, 2015 3:27 pm UTC

Image

http://ineteconomics.org/ideas-papers/b ... tters-more

Image

http://thezman.com/wordpress/?p=4860#pq=0qKKxc

That means the people in charge of Europe have been lying to their public all this time. Default was an inevitability. That will then be followed by a restructuring of debt and debt forgiveness. Lying is no surprise as it was always assumed that the EU was buying time to transfer these debts from the private holders to the taxpayers.


TBH I dislike Steve Sailer most of the time, much of the crap coming from his mouth is crazy but I find myself agreeing with him on this point. Greece got screwed over.
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Re: Greek Crisis continues

Postby BattleMoose » Sun Jul 05, 2015 4:13 pm UTC

Greece got screwed over.


Yes, but by who?

Greek debt went from 20% of GDP to 100% between 1980 and 1995. She was in an untenable situation when the crisis hit and the rest is history. But of course its the EU that orchestrated this nonsense somehow...

https://insights.petercam.com/wp-conten ... v-debt.jpg

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Re: Greek Crisis continues

Postby bentheimmigrant » Sun Jul 05, 2015 4:47 pm UTC

No one is blaming the EU for the Greek debt before the crisis. They're blaming the EU and IMF for offering a bailout with stipulated reforms which decreased government revenue, and forced Greece into a economic spiral of self inflicted recessionary policies and new bailouts, instead of admitting that austerity was failing, and that it literally makes no sense for Greece to repay the bailout money until the economy is growing again. All the bailouts achieved was allowing the banks in western Europe time to extricate themselves from the Greek economy.
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Re: Greek Crisis continues

Postby sardia » Sun Jul 05, 2015 4:57 pm UTC

bentheimmigrant wrote:No one is blaming the EU for the Greek debt before the crisis. They're blaming the EU and IMF for offering a bailout with stipulated reforms which decreased government revenue, and forced Greece into a economic spiral of self inflicted recessionary policies and new bailouts, instead of admitting that austerity was failing, and that it literally makes no sense for Greece to repay the bailout money until the economy is growing again. All the bailouts achieved was allowing the banks in western Europe time to extricate themselves from the Greek economy.

There's nothing wrong with austerity per se, since you have to pair it with sufficient debt forgiveness and/or wealth transfers like the US has. Simple example is the US again, states can eat budget cuts more easily because the Federal government transfers money regularly from wealthy states to poorer states (take from everyone, spend on everyone = wealth transfer from rich to poor)

I know the EU does provide some subsidies here, but is it more limited than the US? Or is Greek so bad off, that even heroic levels of wealth transfers wouldn't have worked?

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Re: Greek Crisis continues

Postby BattleMoose » Sun Jul 05, 2015 5:06 pm UTC

bentheimmigrant wrote: They're blaming the EU and IMF for offering a bailout with stipulated reforms which decreased government revenue, and forced Greece into a economic spiral of self inflicted recessionary policies and new bailouts, instead of admitting that austerity was failing, and that it literally makes no sense for Greece to repay the bailout money until the economy is growing again.


What would make sense? Could anything have worked? This whole situation just reeks of, if you try and fix something that is broken, and you fail, then its your fault its broken.

And bear in mind that a large part, if not the majority of the debt repayments are on pre crisis debt.


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