Once Greece goes...
lrb.co.uk
lrb.co.uk
When you owe the bank $1 million the bank owns you, when you owe the bank $469 billion, you own the bank. The average greek is smart enough to know this and knows that the closer they get to default the better the deal they will get. The banks have two options, get nothing, or get something.
Also, if the Greeks' can't pay at a AAA rating they certainly can't pay at AA rating, nor A, not BB, so the end game for rational thinkers is default because as the rating drops the inability to pay increases. Since Greeks hold EU notes and EU denominated assets they can't even be screwed via an exchange rate mechanism. If Greece defaults Europe basically has to eat it, and it puts Europe in a much worse negotiating position with Spain and Portugal.
Furthermore, with regard to bond pricing there is no such thing as a bad bond, only a bad price, hence they are quickly being priced to zero. It's similar to the whole subprime thing, guys who bought subprime post Aug 2008 actually did alright because the prices were so low that you'd be somewhat likely to get your money back.
Also, what happens if (when) Greece defaults? Do the T-bills become worthless, or are they considered a different kind of debt than other national debts?
They aren't actually paying that. Since the EU/ECB/IMF gave them all that money they have a nest egg and don't have to go to the market and sell more bonds.
AFAIK the 26% is from secondary sales, people who bought a bond before and now, in order to sell it on, have to offer a high rate.
However if the EU/ECB/IMF money runs dry, and they need to go back to the bond market, then this is the rate they would pay. As you said, that's impossible. So if the EU/ECB/IMF money runs dry, they'll default.
even if you could directly invest in greek bonds, you probably would not want to do this...
http://www.pdma.gr/(S(fcxze5rfyjyze2555hw43555))/ODDHX/Stati...
Treasury bonds are actually really easy for a retail investor to buy.
The technical issues of force-conversion of currency their assets are denominated in are probably quite immense, but it is better than losing hundreds of billions of dollars. Moreover, if it can be done, all other troubled economies in Europe will have much greater incentives to follow any rules set up by the EU.
Of course, Greece could still convert them into a currency not controlled by this coalition (Zimbabwean dollar? ;-)), but small currencies in this role cannot support Greek economic downfall and will be significantly affected by Greek economic results. This will still accomplish the goal of getting Greece to take responsibility for their economic decisions. (If the only choices are smaller currencies, Greece will probably choose to set up their own currency instead.)
Also, in 2010 their import is 44.9 billion dollars twice the amount they export, 21.1 billion. Even if their exports go up because of weaker currency, the pain from higher import prices will be much worse than the rises of income in the short run.
Your consequence number 1: trade barrier is an interesting possibility, but 2: the collapse of EU is unlikely to happen given that the Greek economy is only 3% of EU, and this strong measure will have threatened other troubled economies enough they will be much less likely to default and cause more issues. The measure might in fact prevent the collapse of EU at least in the short- to medium- term.
More jobs has a strong political effect too; people will probably tolerate more austerity if it's not combined with unemployment.
The article explains pretty well in my opinion why that 3% is very capable of collapsing the rest of the EU. If Greece defaults, investors lose their money. That's not too bad (although there could be a domino effect with banks), however investors will also start worrying more about a default of Ireland and Portugal, followed by Spain and Italy. Such worry translates to higher interest rates leading to the horror scenario of Spain needing a bailout (which noone can afford to give them).
Anything that amounts to Greece not repaying their debts, will be considered a default by the market, likely leading to what I described in the above paragraph.
Of course, the most mobile part of the population and most companies would emigrate under such circumstances.
Default (in some form) is a very attractive alternative, but the EU will keep coming up with better and better deals to prevent it.
Default is the only realistic option, but Germany and France refuse it for political reasons. The other reason is that a lot of Greek debt is owned by banks from those countries: selling banks bail-out in France or Germany is not that much more popular than in the US nowadays.
What is true is that Germany has put in place a devaluation strategy (by reducing wages instead of devaluating its money), but this has been a catastrophy for Europe as a whole. "Real" gdp growth comes from increase of productivity: devaluation helps hiding this for some time, but not that long.
The EU has to get Greece on track, and this is a good moment to do it. Greece has lied (falsified financial data) to get into the euro, and their internal economic system is not sustainable. These will be tough year for Greece but at the end they will be better off.
There were snide remarks and suggestions a while back of them selling off islands? That might work.
Then I wonder how would the Greeks pay the money back anyway. How much feta-cheese and tourism can they sell? At some point the interest rates are just to high for them to even touch the principle when paying back, even if they start to double their feta cheese production and start actually diligently paying taxes ...
Its no use to help people from the outside. People must learn to run their own countries themselves.
In the case of Greece, they have to learn to not cheat to get money from Europe (like they did to get into the Euro Zone) and to pay taxes if they want that the government does stuff. Especially the wealthier people in Greece seem to be extremely selfish in that regard.
And concerning "old communists that had destroyed Eastern Germany" - Eastern Germany was, like, the richest communist state. It wasn't politically free, sure, but it was fine economically.
Now, why would you expect people "without money" who did have the money (and job, and their life) before reunification, not vote for who they vote for?
They kicked communists (usually agents of the Stasi, the secret police) out of government jobs, most of those had gotten the job because they were party members. That is hardly "nasty". The other way around would have been nasty.
Would you want Gaddhafi's son to keep his military pay after the regime has been overthrown?
Disgruntling teachers and workers would not get you much popularity. People would vote for anyone who is not responsible for that. You insisting that anyone who suffered was a putrid Stasi agent would certainly make matters worse.
If two Koreas one day would unite, this would be their second severe problem after economy.
Of course when we see an intervention of a country, it's a total and complete responsibility of interventor to preserve any economic and industrial infrastructure. Trabant wasn't bankrupt in East Germany. It was bankrupt in Germany. Who do you think is responsible for that?
And your assumption that trabant's factories could be refitted in any way is quite a stretch. Would it really be cheaper to modernize a factory that's 30+ years out of date, rather than start over with a new building? And what would be the point anyway? Just jobs? Would not the investment be better targeted at infrastructure, mass transit, job training, etc?
What I did say: People are rightfully angry because their life was screwed by something not in their control.
It's been twenty years since the Germany reunited; Whatever problems still remaining at the former East Germany, probably aren't caused by communists anymore.
The sovereignty of all European countries is "weakened", that's the whole idea of the euro. There is another level of supervision, and that is really good. Not only in Greece, also e.g. Germany constantly gets told from EU institutions or the EU supreme court to change laws and regulations or to watch the deficit, etc. That's a good thing. Of course the politicians don't like it, takes away some of their power.
Greece has vast opportunities, if they would get their stuff together. Solar power alone could be a great industry in Greece. There is a plan called "DeserTec", with several large EU corporation planing to install a hundred billion in solar cells in Northern Africa. If Greece was smart, they would jump on that train. But they are not, apparently. Its easier to borrow money and whine on payback time.
Well if they have islands that can be used for military bases, or agricultural lands that French farmers can use and so on. Setting a German company in charge of collecting taxes for example and making a profit. These are all draconian measures that basically are one stop short of invading the country, but I am thinking more if this is what is left as a solution. Lending them more money implies having faith that they will be able to pay it back, if that faith is gone, and they cannot be expected to pay back, the the lenders would probably like to get something else back at least, so have them sell their assets (land, control, power) ?
Lending them more money is giving them a chance to get their stuff on track. Better checks and balances. A greater awareness of civil responsibility of each individual, etc. Basically, the stuff that made Northern Europe (and the US/Canada) economically strong. Look up "Social Capital" if you are interested in development policy.
That said, the best would be to inject more money beside the debt into Greece to start some recovery. Given, Greece did cheat on the EU in the past concerning EU money, nevertheless this should get out Greece faster.
No one argues that the Greek economy was in good shape. It clearly had severe problems with corruption and inefficiencies, which were brutally exposed when the global financial crisis hit. Everyone suffered, but because of the problems in the fundamentals of the economy, Greece suffered disproportionately more. However, the European Central Bank lent the "bailout" money demanding cuts to public spending that, in the current economic situation, would have very likely worsened the Greek economic situation. Greeks realized this and protested, but were (understandably) dismissed as spoiled brats, demanding an unsustainable, comfortable lifestyle.
Now that the likely, predictable outcome is looking even more likely (namely, default), journalists are still omitting that crucial part of the analysis. Many economists warned that in a crisis of demand, which is what we're experiencing now, cutting government spending is a bad idea. In a situation of such great uncertainty in the market, the government is the only source of demand big enough to make a dent. It must, of course, borrow the money and therefore increase its deficit by doing so, but that's a worthwhile thing to do when the alternative is default. After the economy has stabilized, the deficit problem can be overcome by growth. Moreover, even if deficit reduction is your priority, if the economy is shrinking you're always going to be fighting a losing battle no matter how many spending cuts you make.
To summarize my point, the Greek economic turmoils are less of a cautionary tale of the perils of uncontrolled spending (although they clearly are also that), and more an illustration of the negative effect the austerity measures recommended by the ECB are having on the economies they are imposed on. It should give leading European nations pause when considering what to do with the rest of the troubled economies in the eurozone.
If Greece wants to increase government spending on infrastructure and investments, they can do that after getting their budget in order and convincing their own population to part with some money for the sake of these programs.
P.S. I don't think downvoting/upvoting should be a poll on whether someone agrees with a message; it's a decision of interesting/unhelpful.
The fact was (and remains now) that they need(ed) money just to keep afloat. The CEB could have put any provision it wanted on the money lent. They chose to force the Greeks to cut spending. My argument, informed by what I've read on the topic, would be that it would have been better for them to force the Greeks to spend the money as a stimulus, making the sort of investments that you talk about. Instead, the CEB likely worsened an already pretty dire situation.
I think you'll agree that the interesting part of this argument isn't Greece at all, but the case study Greece is becoming. It's clear more austerity measures are coming in more European countries and the US. I think it's a bad idea and I'm curious to find out what this community thinks.
1. I'll lend you the money if you get a steady minimum wage job and cut off the spending. 2. Look, I believe in you. I'll lend you a whole bunch of money so that you can go to college, retrain, get a much better job, and then repay me with plenty left over for yourself.
Now I understand that (2.) sounds much better than (1.), but it's just not realistic. He will waste the money again, because he knows he didn't earn it. You have to be tough and force him to get his house in order. Then he can save and borrow to retrain. If Greece is spending its own money on infrastructure and investments, there is at least a chance it will be spent well. If it's spending other people's money - no chance at all.
EDIT: I didn't mean this to sound like I am calling Greeks in general wastrels and boozers. It's more about how other people's money tends to get spent. See the message below.
Shouldn't you then be forced to take a very serious, if not complete, loss on the money you lent to him? It's your own fault you lent it to a wastrel. Why should you be bailed out, exactly?
[EDIT] Disclaimer, I am Greek, I have no illusions about the management abilities of my country (sometimes I think we are born without the part of brain responsible for financial planning ;-), but I have strong opinions about the economy of debt, the way it is manipulated by the "market" and it's implications on the life of people. My opinion is biased, of course.
It's plain simple, the Greek people voted for a government that took more money than they could pay back and lived great with this. I know it's easier to explain the Greek guilt away in this than face reality.
I would argue that if you are aware that a person is not a nation and vice versa, that there are some traps on the way, this analogy is useful indeed.
It seems that basic things like "you need to pay back money we lent you" are still the same? Sure details are different, well, I don't know how different, that is why I am asking ...
Countries (even countries in economically integrated Europe) are closed systems. Increasing the revenue to one sector results in losses to another. In this case, the Greek government can increase its revenue by increasing enforcement and raising the tax rate. However, that results in a cost to the private sector. People paying more in taxes have less to spend on other things, which lower economic activity and lengthens the recession.
As an aside, this is why I get very irritated when politicians use household/business analogies to model national economies. The two are different in kind, not just in size, and trying to compare an open system to a closed system leads to serious errors of judgement.
In your example my friend and I are two economically independent entities. Yes, I care about him on an emotional level, but not lending him money will not affect my income. This isn't so when you talk about Greece and the EU. Also, as any developed economy, Greece has a large economic capacity - it has advanced industry, technology, tourism, education, etc. In short, it has a lot of assets, so lending money to it would be more like lending money to my gambling friend who just happens to be an immortal Stu Ungar - yes, he's wildly dysfunctional, but the potential ROI is almost always worth it.
The main point I was trying to make, though, is that other people's money doesn't get spent efficiently. I've been involved in some EU-financed programs, and the productivity of those compared to private sector or even regular government contracts is in the pits. Taxpayer money doesn't always get spent efficiently, either, but at least there is some kind of accountability of the government to the citizens. The idea that Greece would take money that comes from other countries, and spend it on these really great stimulus programs, doesn't pass the skepticism barrier for me.
I still think this is a separate problem. I think right now it would be more efficient to stimulate the Greek economy than it would be to just bail it out with austerity provisions. The analogy would be to finance your friend to go to school for a year or two and earn a degree to get a better job and pay you back - he wins (gets money in both the short and long-term) and you win (get your money back and a functional friend).
the Bulgarian state nearly went bankrupt in 78 as a result of stupid state-planned 'investment'. The debts which were repaid with the strategic gold reserve which were basically the savings tucked away for about a hundred years.
The Communist government continued to spend unsustainably in IT (it was unsustainable because it was based on non-marked agreements with COMECON countries) and other sectors. Salaries were raised, people bought more Lada cars, times were good.. for a while. The USSR which gave us petrol to resell collapsed and we were unable to find markets for our goods (which apart from weapons were greatly inferior on the open market).
So we had to pay back the debts with even crueler austerity measures. But it wasn't the worst thing. The economy was unproductive. The living levels collapsed in and they reached 89 levels again in 03. Oh and 1 million mostly young Bulgarians left the country.
So instead of getting its act together the government just ignored the problems, made things comfortable for the populace and even worse problems came.
Had the Communists liberalized the economy and be sure to pay debts in the 80s it wouldn't happen.
But we didn't learn the lessons of fiscal responsibility. The Socialist government of Jean Videnov undid the austerity measures and got into an even huger mess (never mind that enterprises continued to fail). Yes, he also yet huge money printing to begin which, the Greeks don't have to deal with, so we can leave this out.
Our governments have more or less learned their lesson, even the former Communist, but the temptation is huge.
The Greeks don't have such recent history and if they don't restructure only a much bigger mess will come.
Few people even understand the issues associated with economics at that level, much less what is right or wrong. It is also pretty safe that, around the world, nobody cares until it affects their wallets directly, which is when e Greeks started complaining.
Expecting decades of mismanagement to get sucked up overnight and not have anybody complain probably isn't reasonable.
...
> The Greek economy was a joke and it definitely needs to change...
Which is it?
If you managed your house well in the good times then large deficit spending is an option in the bad times. However if you end the good times with debt at 100%+ of GDP you have no options.
http://www.businessinsider.com/portugal-irelands-household-a...
So I don't totally understand what you're saying, but I think it's that they need to borrow a bunch more money, spend it to grow their economy, and then pay off their debt once their economy is doing better.
The problem with that is that their finances are already terrible and no one really believes that they can pay back their debt. They're already paying very high rates on their new debt. If they tried to borrow even more, those rates would have to go even higher. So somehow they'll have to borrow enough that they can spend a lot to grow their economy and pay all the debt that's coming due, and then quickly recoup all the money they invested in their economy as even more debt comes due.
So I guess you're arguing that the ECB should give them the cheap loans without them trying to balance their budget in the short term, and trusting that in the long term their economy will grow and they'll pay it back. The ECB doesn't seem to think that would be effective, and a lot of countries are not too happy about the bailouts even with austerity provisions.
I think the political situation is very unfortunate and that the large European economies which effectively control the ECB are screwing up. Partly I think the problem is that the media analysis has ignored the possibility the austerity measures could be the cause the complications. The facts of this article at least seem to lend credence to the "stimulus hypothesis" and to take credibility away from austerity. It is the media's job to point that out in order to inform public opinion so that the political problems you mentioned are overcome.
The problem with the economy of Greece is that it is not diversified, it was heavily de-industrialized in the 90s, with rampant corruption, protectionism and an third-world-level tax collection policies. The governments are mainly at fault for these excesses. As things proved out to be, the growth rates of the 00s (the largest in EU) were fake, based on lending that was not reported (and, guess what, nobody has yet gone to jail for that). The current crisis emerged because they were no longer able to hide the fact that the country is insolvent.
At the current point, I think it's too late to save the Greek economy anyway. The best options we have are either a) the EU guarantees a large part of our debt (like 50% or so, via something like eurobonds that basically amounts to a bailout) or b) we default and leave the eurozone to rebuild the economy from the start.
What's interesting to me is why you think what you think about the Greek economy or the reasons for its collapse? (A sincere question)
References (PDF, sorry):
[1] http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A050...
[2] http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A130...
[3] http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A050...
I am Greek, and know that Greek banks were very little exposed to the international toxic assets. None of them collapsed, in fact they chose not to take govt-offered support money they were offered (28 bil. euro or so) in 2008. There are structural problems here, and although measures are being taken to rationalize the market, it's gonna take years to see the results.
I'm Bulgarian and none of the Bulgarian banks had any problems, but the Bulgarian economy has definitely suffered, for the same reasons as Greece. Both are relatively small European economies, so any dip in the European market has a pronounced effect (easiest to see in tourism). So, you're not proving anything by saying your banks had no problems.
Here in the US, we are not suffering from a crisis of demand at all. We are suffering from structural unemployment - demand and production have both recovered, but people remain unemployed.
http://news.ycombinator.com/item?id=2240468
I'd be very curious to see data indicating that the EU is in a different situation.
For now I will say that (1) because of the tight correlation between employment and demand, you'd need a very solid argument that demand has recovered but employment hasn't and why and (2) the data you have in your comment doesn't show that conclusively. The only measure of demand you site is Manufacturer's New Orders, which does show an increase. However, most of it is due to airplanes, which are volatile by nature (and is partly fueled by public defense spending). Also, the best predictor of future growth in that category (Core capital goods), while growing, isn't back to 2007 levels yet. [1]
I think it's too early to say demand is back, and it's lack also explains unemployment well.
[1] http://www.economicpopulist.org/content/durable-goods-new-or...
This "tight correlation" is a conclusion of Keynesian economics, and is strongly dependent on an assumed correlation between production and employment.
The logic goes: production and employment are highly correlated (i.e., you can't increase production much without increasing employment). Weak AD reduces production, therefore stimulating AD can increase production and employment.
As my data shows, the correlation between production and employment is quite weak, and we can therefore not use employment as a proxy for demand.
However, I do think there is a significant structural change that reflects a little of what you are saying. There is an interesting question on Quora somewhat related: http://www.quora.com/Why-does-the-US-economy-take-increasing... and my answer http://www.quora.com/Why-does-the-US-economy-take-increasing...
[1] This is from 2010, but I can't find anything more recent: http://www.guardian.co.uk/business/2010/aug/24/us-home-sales...
If you push theories in which you you treat real estate separately from the rest of the economy (i.e., you assume construction workers don't immediately go out and become nurses), you are a structuralist rather than a Keynesian.
In any case, the Keynesian assumption that employment increases with production is simply not true of the modern economy. This is quite easy to establish empirically - just compare graphs of production to graphs of employment.
By the way, here is more data on employment across the economy.
http://crazybear.posterous.com/structural-shift-in-the-econo...
I think most Keynesian have moved on from that simplistic view. Stagflation in the 1970s showed that the inflation/unemployment relationship could move, and few would argue against structural change having a similar effect.
In any case, the Keynesian assumption that employment increases with production is simply not true of the modern economy.
That's an effect, not a cause. Traditionally it has happened like that, but anyone who argued it had to be that way would be stupid.
I think we are strongly agreeing about the importance of structural change? (And hence I agree with you about the lack of a strong relationship between production and employment). I don't agree with you that demand has recovered though. Your data (http://research.stlouisfed.org/fred2/series/DGORDER) shows it still at levels around that in 2004/05.
I think he tends to agree with Keynes, in broad terms - austerity measures are a crock, because they come at a time when the government would otherwise be the only bastion of stability. But we didn't think about this when we subjected African (and other third world) economies to the IMF's demands.
What is needed is long-term measures. Gradually raising the pension age, gradually cutting pensions, freezing spending, and so on.
Also, government reform (i.e. better transparency, whistle-blower protection, ombudsmen and auditors) is needed, not just "cutting costs".
The only reliable way of binding the actions of future legislators is to create a politically powerful class of dependents (e.g. old people, government unions) who will fight to protect their cash cow. Unfortunately, that's what got Greece into this mess to begin with.
It is probably worth noting that he's been predicting the Australian Property Bubble to pop any time for quite a while.
He already had to walk to Mt. Kosciuszko (highest mountain in Australia, like 2000m or so) because he had lost a bet on a housing prices to another economist, but all his predictions still point out that house price bubble pops any day (I'm subscribed to his blog and I admire the way he uses mathematics btw).
Every time someone begins a comment or blog post with text that says absolutely nothing about what they are trying to say, they weaken their point. If you cannot resist including meta-commentary, I suggest putting it after your rhetoric, like this:
p.s. I apologize for meta-commentary, obviously this has nothing to do with the Greek Economy.
Interesting times.
http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobil...
I hate to argue against an entire book with a sentence like that, but claiming that this is a "pretty vanilla financial crisis" seems to take the overall situation in a dismissive light that I don't agree with.
When I said that this is a vanilla financial crisis, I meant that the things the grandparent post mentions aren't necessarily unique, albeit more widespread than normal. In fact, it's surprising how frequently you see the same patterns appearing.
In the run-up to the crisis, the economy was largely fuelled by private debt. Think excessive credit card debts and, more importantly, insanely lax mortgage requirements.
What we have been witnessing is a shift of this debt away from the private sector (which cannot sustain an unlimited amount of debt) to the government sector (which, at least in the case of a sovereign government like the US, can sustain an unlimited amount of debt because it's the entity running the system).
The distinction between private and government debt is crucial, because government debt equals private assets.
Different countries with the same currency was a stupid idea to begin with.
Most of the arguments in regard to national economies make little sense in smaller geographic contexts, there is little worry that NYC is 'stealing' jobs from Wichita because of the various subsidies in NYC compared to the idea that China is 'stealing' jobs from the US. No one worries about the trade imbalance between Iowa and Alaska.
Why are we not worried about cheap Kentucky labour spilling into San Francisco? Most of the arguments made with regard to trade policies and imbalances are irrational, especially in light of the reserve currency status of the US dollar.
The problem is that you cannot have monetary union without political union.
EU rules notwithstanding, Germany and Greece are run by different governments, with different laws, constituencies, and operational capabilities (or lack thereof, in Greece's case).
This is a huge stabilising momentum for the economy, because the government does not have to (and indeed it should not) reduce its spending due to financial pressures. There are no financial limitations to how much money the US federal government can spend.
(There are other considerations - in real terms, i.e. real capacity of the economy - that put a limit on how much spending would be wise, but since utilisation drops in an economic crisis, the room for additional non-inflationary government spending actually increases.)
None of this exists in the Eurozone. All spending within the Eurozone is done by actors that are financially constrained, and therefore there is much less momentum to carry on stability in case of a crisis.
"As of September 2004 the U.S. Congressional Budget Office reported that federal government spending for 2004 was projected to be $2.293 trillion, or slightly less than 20% of the GDP. Of that, $159 billion was for net interest, $486 billion for defense, $492 billion for Social Security, $473 billion for Medicare and Medicaid, $191 billion for various welfare programs, $136 billion for "retirement and disability" benefits, and $64 billion was projected to be spent elsewhere." (from http://en.wikipedia.org/wiki/Government_spending)
Therefore your numbers are correct. It is big work to find numbers for the same year but for example military spending between EU and USA can be compared:
"The combined defence budgets of the 27 EU member states in 2008 amounted to €284.9 billion ($406,7 billion). This represents 1.63% of European Union GDP[2], second only to the US military's €477.4 billion ($620.5 billion) 2008 defence budget, which represents 4.5% of United States GDP." (http://en.wikipedia.org/wiki/Military_of_the_European_Union)
In this case we still have different agents but military spending has indirect economic effect on different EU countries (e.g. military airports in countries that do not even have its own war air planes).
Still your argument is really strong having in mind social security of federal budget's spending. Europe Union has its own budget as well but it is way smaller compared to US federal budget (about 1-2% of EU GDP vs 20% of USA).
Finally it is not very good to mix EU and Euro zone (because not all EU members have Euro).
The whole "different language" thing stands in the way of this. Plus, the Okies never had to deal with Californian "nationalism" in the 1930s, while, on the other hand, if you're Polish, Romanian or Bulgarian and you've gone to Western Europe in search of a better job you're always looked at as a foreigner, a guy who "has come to steal our jobs and destroy our identity".
Think of it this way, all forms of social media are basically measuring attention. Pageviews, average visit, etc. Facebook is worth $70 billion because it can monopolize 15 minutes of the average users' attention per day. When people say that Win Phone 7 is doomed the underlying assumption is that developers will not give it attention and consumers will not give it attention because developers have not.
Well... if this is a representative illustration of that "attention-based economy" idea, then I'd argue we've already had that for centuries now.
I assumed something along the lines of "being able to pay for my groceries simply by trading in some of my attention"... such as watching ads or simply spending my valuable time in the store -- both of which I arguably already do, except I still pay cash too.
I see.
The reason the Greek crisis may be more important than the introduction of the Euro is precisely because it may mean the downfall of the Euro, at least in some commentators' opinions. I don't personally have any insight into what might happen if/when Greece defaults.
The founders certainly never envisioned a single unified fiat currency, in fact they were pretty much of the opposite view: Section. 10.No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
The founders mostly envisioned that the unifying currency would be gold and silver, it's understandable that the court would let early USD stand as it was effectively gold, however post 1933 (gold becomes illegal) / 1973 (US withdraws from Bretton Woods) it's difficult to make the argument that USD complies with the constitution, or any state law recognizing USD as payment of debt.
The constitution would only allow enforcement of the USD at the interstate commerce level but at this point interstate commerce means pretty much anything the Federal gov't wants to regulate that wasn't explicitly granted in the constitution.
So one country can do crazy things with it's finances, and the other countries can't really stop it.
That should obviously be "We have no 'european taxes'..."
"The Euro Is a Fair-Weather Construct"
http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/...
The aftermath will be a period of high inflation.
The Balkan wars were in 1912-1913. I can think of a few other significant things that happened in Europe since then. This crisis - it is really more of a tantrum than a crisis, since the Greeks know perfectly well they are on the hook for the money they spent on themselves - doesn't even register as a blip. It's not going to collapse the economy of the 400 million people within the EU/eurozone area, and even if it did, it still wouldn't reach the significance of 70 years of revolutions and communism and dictatorships and the freaking Holocaust and a couple of world wars, now would it?
This sort of wild-eyed panic mongering by people who take a bath on their real estate or stock purchase, and think that they are living through the worst crisis in the 7,000 years of recorded history, is beginning to wear thin. It's annoying even as deliberate hyperbole.
On top of this, the economic points made are stale and unconvincing. He talks about low interest rates being appropriate for Germany, but not for Greece. Well, guess what? You don't have to lend at low rates to Greek institutions. You can take a risk premium on top of the basic Euro central bank rates. People weren't doing that because they thought that Greece would catch up economically to the Euro average; it didn't, and the risk premiums went up. Hardly worth killing the Euro zone over this.
EDITED to add: he probably meant the wars in former Yugoslavia, rather than what's actually known as the Balkan wars. OK, but frankly, this is still crap, since clearly the creation of the Euro block itself and the unprecedented economic expansion in its new members is far more significant than a tantrum in 3% of the Eurozone. And the economic points are absolute garbage: yes, Argentina recovered, because it is a mining/exporting country and commodity prices skyrocketed. Not very relevant to Greece.
I read it as referring to those conflicts. I think that makes more sense, too, as the target audience wouldn't really know of those earlier wars (I knew, but not even for a monument thought of them when reading this)
(Oh, and the First Gulf War was 1980-88, the Second Gulf War was 1992-93, and the Iraq Invasion was the Third Gulf War. It's odd how wars get air-brushed out of the record if America wasn't involved ...)
Are you referring to the Iran-Iraq war? If so, that seems a strange name for it since it mostly had nothing to do with the Persian Gulf. Though admittedly neither did the other Iraq wars except that that's where the American ships attacked from.
The Greeks didn't know the gov was in debt because Goldman Sachs colluded with corrupt government officials to hide the debt[1]. They have ample reason for a "tantrum" against their corrupt government.
[1] http://www.spiegel.de/international/europe/0,1518,676634,00....
Goldman Sachs has made a good business out of contributing to, and capitalizing on the, collapse of countries by corrupting their officials (Greece, Russia, the US). In my opinion, they should be treated like a dangerous cult (which is how they operate).
This isn't about Greeks taking responsibility for themselves, it's about Greeks challenging the rampant criminality of international banks, multinational corporations, and the governments they control. It's the same challenge that faces people in every nation on this earth, and we won't see a truly free and fair global society until every nation's people have overcome it.
And no, debt is not the root cause of tax evasion, tax evasion results in less money for the government so it borrows more and takes on more dept.
On the other hand, once you start getting on the high end of things, you have multiple sources of income, some real-estate, stocks, etc... you have to hire an expert, and even then, it's something of an iffy thing; Even if you are trying to be honest, an audit is to be feared. The tax law is so complex that they usually find errors no matter how hard you try to get it right.
So yeah, I think it's fair to to say that tax evasion is a rich man's crime.
On a more serious note, Greece is a wealthy (by world standards), educated, well-informed society. It is open to the world. It has open press, the internet, freedom of assembly. It has elections, and has replaced several governments when it wanted. It has a sophisticated intellectual class, which is perfectly capable of articulating ideas about social structure to the people. Can you tell me what more, exactly, does Greece need to become responsible for whatever is done on its behalf?
What you wrote in another message - "why pay taxes to a government that you feel doesn't represent you" - is the biggest thing that's wrong. You have to pay taxes because it's the law, and the government is the government, until you vote the next one in. If everyone evades taxes until the government does exactly as he wants, nobody will ever pay taxes.
Oh, and the Greeks are not "oppressed", economically or otherwise. You'd think they were being forced to toil in salt mines and fed gruel.
Greece may have a more democratic government than Saudi Arabia. That doesn't mean its people's interests are represented. They may be one of the more open and prosperous societies in the world, but even the most open and prosperous are run primarily for the benefit of special interests. I didn't think that was controversial.
"What you wrote in another message - "why pay taxes to a government that you feel doesn't represent you" - is the biggest thing that's wrong. You have to pay taxes because it's the law, and the government is the government, until you vote the next one in. If everyone evades taxes until the government does exactly as he wants, nobody will ever pay taxes."
You seem to believe that a government is legitimate simply because it is in power. To me this is both a spineless and a dangerous position. Every third world dictator hosts sham elections and of course they use your exact argument when their people complain. "But we have elections! We have parliament! If you don't like the course we are on, you are free to change it at the polls." The first world is more sophisticated in its deceptions, but the outcome is similar: the government is run for the benefit of powerful interests at the expense of the people, and election law is carefully manipulated to maintain this state of affairs. Intelligent, ethical people will reject this ruse. Legitimacy must be earned.
"You'd think they were being forced to toil in salt mines and fed gruel."
I suppose it's very easy for you to spout your trite little sarcasms from a position of comfort and privilege. Let them eat cake!
> You seem to believe that a government is legitimate simply because it is in power.
No, go ahead and overthrow dictatorships, but it you've got a government that you voted for, with a constitution that you approved, kindly follow the law. And elect another government if you want.
> I suppose it's very easy for you to spout your trite little sarcasms from a position of comfort and privilege. Let them eat cake!
You do realize there is no shortage of cake in Greece, let alone a shortage of bread? But, whatever. The oppressed masses shall rise up and throw off the chains of their class enemy, and then retire at 45! Or how about "workers of the world, unite and claim your union patronage appointments!!" Hey, these are catchy. "Burn down a bank, teach a lesson to the capitalist bloodsuckers who financed your house!!"
The upper classes are the worst tax avoiders. It's unrealistic to expect the lower/middle classes of the Western world to pay higher taxes and get less.
Actually, it's been public knowledge since 2004 that Greece has been cooking the books: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/0...
If that is what he meant, then I think it's hard to debate what is "more significant", a change in the continent's politics with economic impact, or hundreds of thousands of lives ended and ruined, albeit in only a limited region of the continent. I wouldn't really know where to come down on that fence.
On the other hand - my history is very rough, but I do believe there is at least a case for claiming that the first two Balkan Wars had a hand in leading to the first world war, which in turn lay the foundation for the second world war... if you make that logic stick, then suddenly they were crazily important to the entire continent/world.
You mean they're more able to influence their politicians than we are? Because I certainly don't spend the money my politicians take from me, or borrow in my name.
Also, why should they pay back their debt? Nobody else is going to. We printed trillions to bail out the banks to avoid paying back our debts.
EDIT: Oh, and if you want to get really technical the 1933 decision to not pay back bond-holders in gold but only in US dollars might have been a default (though most people dont' consider it that). And there was one point where we were late with a few payments in the 1970s due to a bureaucratic snafu.
My point is that this article seems to imply that Greece will be the first to go. Maybe but maybe not. If doubt shifts to US, say, the euro might look at great investment by contrast for a while.
The true part of the article is the part about debtors options and possible scenarios.
The deceitful part is the part about "ordinary Greek not understanding the situation and having no part in it". In eastern Europe we have a saying that someone is "indebted as a Greek", meaning that someone is perpetually taking loans to repay old ones while having not a slightest intention of ever paying them off. And this proverb is centuries old AFAIK. So all this protesting going on, pleas of "ordinary Greek people" are an elaborate scheme of shedding guilt. Modern Greeks as a nation are an entitled (an order of magnitude more than attributed to gen-Y) and lazy bunch. Boasting their "heritage", while they have nothing in common with the antic culture.
Any businessman worth his salt will be weary of doing business with Greeks - thats how bad in general their ethics situation is. While I cannot offer any meaningful opinion about how to get out of this mess. I can try to provide some insight into how Germany and France got into this mess. The first would be that greedy coke powered bankers got all optimistic that Greeks will repay their debts this time and went on to issue insane amounts of subprime loans, ok this is not what happened.
What did happen was that western world knew full on from the beginning what would happen - but proceeded anyway, since Greece was too strategically placed in the cold war and could not be lost to Soviet influence. The Greeks being smart, knew that and took full advantage. What happened after the cold war, was basically the subprime mortgage scenario of US played on a national scale - it is fraud committed by German and French bankers over the people of EU. I'm not believing anyone "in the know" telling me with a straight face that they didn't know that Greeks were cooking their books.
So in a sense like US subprime fiasco is fraud committed by US elites over people of US, European sovereign subprime debt crisis is also a fraud committed by European elites over their peoples.
I recommend reading this analysis of Greek[1] and Irish[2] debt crisis. It has to be some of the best journalism I have ever read.
[1] http://www.vanityfair.com/business/features/2010/10/greeks-b... [2] http://www.vanityfair.com/business/features/2011/03/michael-...
Let the Greek diaspora and leftist lunatic downmodding begin!!
Edit: Indeed it was not written by a Greek. But the part about people of Greece not knowing what is going on is pure bullshit - I am not accusing the author of having an agenda. However I am accusing him of not having balls and bringing it out.
Also I am not implying that there are no honest Greeks. But from my anecdotal experience their moral standards are quite... flexible.
Edit: Goes the same for people of southern Italy and whole of Balkans. Have you ever been to Balkans? Are you intimately aware of moral and ethical backgrounds of peoples living here? If not - then you might be guilty of "everybody is a good person deep inside" type of thinking yourself.
Disclaimer: I am Slovenian, as you may have noticed discussions that we might be next in line to join PIIGS. And I have to admit that our nation is guilty quite of some of balkanisms ourselves (no matter how some might try to deny it).
From my own business experience and from discussions with various businessmen that have done business on Balkans as a region. I know only of handful of people that made money there (Slovenia, Serbia, Croatia, Bosnia, Kosova, Romania, Bulgaria, Greece, Macedonia and Albania).
Everybody else got shafted one way or the other.
Are accounts of Chinese shafting foreign investors/businessmen whenever they can also prejudicious and xenophobic?
I would be glad to accept your (although anecdotal) experience that proves my point wrong. Is writing by lewis (Beware of the Greeks bearing Bonds) also xenophobic and prejudicious?
Or are you guilty of wishful thinking?
but i wont follow the conventional politically correct wisdom and say that your comment is rubbish because of that.
Yes.
That people get shafted when doing business outside their network (cultural or national or ethnic) isn't news or specific to any region, although it's certainly worse in some places than others. But that's not what I'm objecting to.
My problem is you could have made this point without saying, essentially, "the greeks are lazy and cannot be trusted, as we have known for centuries". This type of 'harmless' bullshit popular wisdom is the ground level of every extremist pyramid.
I might even argue it's also a cultural thing, in greece almost all laws are enforced loosely. Paying taxes is usually considered the dumb thing to do; you won't find many greeks being "proud to pay their taxes". Politics is impenetrable to new ideas, it's considered to be obscure like voodoo, passed on from generation to generation between 3 families (even now, the current prime minister and the opposition leader used to be college roommates).
Not all greeks are the same though, you just hear the loudest voices. Greece has a large, educated (and largely unemployed) youth that could fuel a new wave of growth now that markets are opening here. You might hear of riots, but these were concentrated on a square in Athens. I might be wrong, but there is a growing feeling that we are expecting the impending default as a chance to start over the economy, to actually do some work.
Things are changing, in the eleventh hour, for sure, but one can only be optimistic. The country is about to enter some tectonic shifts and looking to the past has nothing to offer.
Edit: When I said "people in the know" I meant Greek officials of all degrees, European officials, bankers and officials of economic institutions. The little man, deceived by demagouges could very well be oblivious to the situation.
As Bob Kerry once pointed out, sometimes it can be truly heroic to simply do nothing.
However, consistently running an unbalanced budget will most definitely lead to a "downward spiral".
If the answer is "entitlement spending", where do you think the money spent by the government on Social Security/Medicaid/Medicare/welfare/jobs programs/etc goes? Into consumer's hands and right back into the economy.
Let's say you cut the budget by X. Part of this X (X') doesn't get invested in money making enterprises any more, and less money goes back as taxes (X" less money).
Now, unless the economy is super efficient, I'd say X > X' > X". And given the realities of public government, usually X >> X".
How is then any better to borrow X just to get back X" (and still owe X), then to simply lose X"?