Thomas Piketty: “Germany has never repaid.” | Hacker News Reader

Thomas Piketty: “Germany has never repaid.”

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427 pointsThevet337 comments

At the risk of being a moralizing bore, may I remind everybody that "Germany", "Greece" etc. are not people, and that people are not countries? I am surprised by the national coloring, however faint, of some comments here and there https://news.ycombinator.com/item?id=9834721. "I am a German" or "Greek here" should have no relevance to the ideas put forth. "Your money" and "your banks" are not really "my money" and "my banks" once I have paid the tax and don't own the bank!

The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest.

Please, be civilized and don't let yourselves be infected by nationalistic passions.

Your moralizing nanny...

(No seriously, I am starting to get concerned.)

Try using that line of thought when you're talking to a customs agent, let us know how it works out.

> The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest.

I'm interested in those ideas. Can you give a link to any information about them?

Some of my personal favorite resources on this topic:

http://www.amazon.com/Introduction-General-Systems-Thinking-...

http://www.amazon.com/The-Systems-Bible-Beginners-Guide/dp/0...

http://www.amazon.com/Ackoffs-Best-Classic-Writings-Manageme...

I really enjoyed these books, but I am not super well-read in this area, so there may be better ones out there. You could try searching for "systems theory" and see what other resources are out there.

Systems theory is a very broad topic, so you'll find it attached to many specific disciplines, but the general idea is that you can take a bunch of simple things, hook them together, and produce a "being" that has totally weird behavior in aggregate.

https://en.wikipedia.org/wiki/Emergence

Awesome book by Nobel price winning Thomas Schelling: Micromotive and Macrobheavior http://www.amazon.com/Micromotives-Macrobehavior-Thomas-C-Sc...

This one seems to stand out: http://www.amazon.com/Thinking-Systems-Donella-H-Meadows/dp/...

You are not wrong, nationalism is making a big comeback in aging europe.

> Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest.

You don't need game theory of this, you just need history. Game theory is the hammer that thinks every problem is a nail.

Just that history, other than logic, won't help people to solve problems.

At the end of the day, every historic fact ruthlessly stretched into some assumed future is a risk for the people relying on unjustified assumptions.

OK, I'll try to shed some light on why this subject tends to inflame some of the europeans nationalistic sentiment with a concrete example:

1. Meet Portugal (my country). Some may know us derisively as the P in PIGS because of our financial problems (much similar to the Greek one in nature and extent).

In 2010 and 2011 as one of the 14 member states of the EU that were part of the Greek loan facility Portugal contributed with 1102 million euros into the 52.9 billion loan that greece received [1].

Yes, that's correct, not all of the debt that people are so eager to expect that German forgives is from their coffers, it was actually pooled from the following countries: Belgium, Cyprus, Germany, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia and Spain.

2. As you may know, about the same time we had our own problems and also had to be bailed out. As part of the measures put in place to reduce our deficit a massive tax hike was implemented in the end of 2012 [2]

I'll draw attention to single one of those measures: the 3.5% extraordinary tax on the income paid by every single person with income above minimum wage (485€/month) including pensioners.

Now, for the money quote [3]: "Minister of Finance Vitor Gaspar said the tax would bring in 1025 million euros".

Less than what Portugal contributed to the Greek bailout fund. 3.5% of the income of every citizen in this country.

In conclusion, that's one of the reasons for the nationalistic outrage against Greece defaulting the loan. It is not only the money of the richest bankers of Europe that won't be repaid, it is the taxpayer money of each of those countries that contributed to their rescue.

To put in perspective, 1102 million euros means that default would cost every inhabitant in this country 110 euros (about 330€ per household) and not only hypothetically but in practice too as demonstrated above.

EDIT: Changed second link as it was paywalled for the same news, but on CNN

[1] http://www.rekenkamer.nl/english/Publications/Topics/EU_gove...

[2] http://edition.cnn.com/2012/12/31/business/portugal-fiscal-t...

[3] http://www.eurofound.europa.eu/observatories/eurwork/article...

Thank you for clearly explaining where some of the money came from, and pointing out this subtlety. It is perhaps interesting to compare Portugal's contribution to Germany's after crudely normalising by GDP:

* Portugal contributed about 0.48% of its GDP in loans, compared to Germany's contribution of around 0.41%.

* Portugal's GDP / capita is a bit less than than half of that of Germany

No doubt you should be annoyed, but you should direct most of that ire at the troika than at Greece. The money that went to "bailout" Greece really made its way to EU lenders by way of Greece. A real bailout would have consisted of of policies and loans that went to rebuilding the Greek economy, not toward squeezing every last drop of tax revenue from the few Greeks who are still employed and pay taxes.

That is really not the right way to understand it.

The buying and refinancing of bonds is a very direct support of the Greek economy as the bonds are used by the Greek banks as collateral when they go to the central bank to get cash euros to give to their customers.

Greeks have taken out billions of fresh euro bank notes from their ATMs in the past few months. Without the Troikas support this would not have been possible.

Very well said.

And this is why there is little support in the rest of the EU for further transfer of wealth to Greece at this point.

The problem with "your money" (as well as Belgium's etc etc etc) is that it didn't "go to Greece": it went to private lenders, aka French and German banks which were holding Greek debt. The honest people of Portugal were swindled out of their money, in the tradition of socializing private losses (while privatizing profits wherever possible).

So I would suggest you redirect your complaints towards the real responsible parties: European bankers and the elites who keep enabling them. Portugal would benefit from getting together with other countries and ask for their money back from the (mostly German and French) financial sector, or at least a big haircut. This is also true of Italy, Spain, Ireland and so on.

Yes, basically that money was used to bail out irresponsible lenders. Now, Greece were irresponsible borrowers, but the bailouts basically solved none of their problems, they were just delayed a few years, and here we are again.

Now for the economical elites this is a much better situation, they get to present the whole situation as lazy Greeks causing problems, present the rest of Europe as the good guys, and pretend that the money we lent them should have saved them somehow.

It's important not to forget all the sides that caused the problems on 2008, just because we already solved the problems of one of the sides it doesn't absolve them from the responsibility.

Actually we are not quite in the same situation as before - now the lenders are mainly just the governments not the banks, so the problem is completely socialised.

> The problem with "your money" (as well as Belgium's etc etc etc) is that it didn't "go to Greece": it went to private lenders, aka French and German banks which were holding Greek debt. The honest people of Portugal were swindled out of their money, in the tradition of socializing private losses (while privatizing profits wherever possible).

Can I borrow 100€ from you to pay back this other guy from whom I borrowed 100€ which I then spent on alcohol? Yes please? Okay, thanks, now unfortunately you didn’t actually give me any money and it’s not my fault if I can’t pay you back because actually your money went to this other guy. It had nothing to do with me or those empty bottles you see back there, it really went directly to this evil person OVER THERE AND YOU SHOULD ONLY TAKE IT UP WITH HIM!

In other words, the money of course did go to Greece, it’s just that Greece was so far in debt by this point that they couldn’t decide for themselves on how to spend it because they first had to pay back other people. On the other hand, there is still plenty of private property in Greece so the country itself is far from bankrupt. It’s just the people deciding they would rather default on their loans and continue living than to tax the rich and wealthy.

so to recap, it's totally true that the first bailout didn't aid Greece but rather bailed out dodgy German, et al, bank loans to Greece by transferring them to the Greek public sector?

I'm not sure why you fervently believe the banks deserve this. No-one held a gun to their head and forced them to make a loan to Greece, and it's not as if the, ah, looseness of Greek gdp calculations was exactly a secret.

Perhaps consider being pissed at the bankers that swindled all the aforementioned taxpayers into buying out their bad loans. A cynic might think this is how European government disguised the rather unpopular act of writing their banks a huge-ass check.

Sorry, but in which way did Greece not get some 300 billion euros? Whether they first borrowed that money from private banks and then the rest of the eurozone paid back the banks for Greece or whether they received the money directly from the other eurozone countries, the end result is still that banks now have roughly as much as before (modulo minor interests etc.), Greece has some 300 billion more and the rest of the eurozone has some 300 billion less.

You're determined to ignore where the money went.

German, Dutch, et al banks -- specifically banks that had unacknowledged bad loans to Greece -- have several hundred billion more than before. Public sector balance sheets have that much less.

The money from the bailout programme went into the banks, sure. But that only happened because those banks had given out loans to Greece before. I agree that banks made some income from interest rates and also because they bought Greek bonds at lower-than-face value. However, somehow these bonds were still issued by Greece and bought by someone.

Where did the money from all these bonds go? To Greece.

No, the banks didn't "make some money" -- they dramatically reduced their exposition to junk bonds at a point in time when that was an existential threats to them. For a number of European banks, that bailout kept them alive. Which is what the bailout was granted in the first place: because European authorities knew it was a bailout for their own banks, who had made terrible decisions in their continuous search for a quick buck.

So junk bonds now just materialise out of nowhere in banks’ books and nobody got money from the bank in the first place? That seems slightly unusual…

Of course it takes two to tango; but if I give you $50 knowing full well that you're never going to repay it, who "deserves" to be punished? Even more so when I know that my $50 will actually be used to buy (weapons|etc) from my friend.

In this unjust world, as it happens, "I" was bailed out by the taxpayer community that stepped in and made me whole; however, it's clear that you still can't repay them like you couldn't repay me. What are they supposed to do? One option is enslaving your family for a long time (austerity); another is to just let go and forget about the money, you just won't do business with them anymore (which is what is happening, with the previous Greek elite being slowly kicked out); another still is knocking on my friend's door. Note how this last option is always absent from public discourse. In any case, now I'm free to pontificate on how bad you are and how I shouldn't have given you money in the first place because you're a lazy scumbag, although of course I knew this from day 1. Is that fair?

As well as ignoring the banks culpability here, you're doing the same thing the original starter of this thread wanted to point out. Greece is a country, not a person. Did all Greeks benefit equally from that money? Or is large amounts of it sitting in accounts of corrupt politicians and the corporations (not necessarily Greek ones) that the money got spent on.

I've seen accusations that the high military spending goes to northern European arms dealing countries. I have no idea if that's true but the pattern is very familiar, the UK have a long history of giving "foreign" "aid" which is basically giving taxpayer money to arms dealers.

Some info from 2011: http://www.independent.co.uk/news/business/analysis-and-feat...

And again in 2012, it was widely speculated that the bailout was granted on condition that Greece kept up buying stuff from Germany: http://www.theguardian.com/world/2012/apr/19/greece-military...

And these are the first two google hits, really.

Adding a bit of context: Greece basically had a full-out war with Turkey over Cyprus about 40 years ago, and tension has been high ever since. The Cyprus issue is one of the many sticking points that resulted in Turkey being refused EU membership. If you look carefully at maps, you'll see that many Greek islands are extremely close to the Turkish mainland (tourist guides joke that you can get "instant Greece" when visiting Turkey with a quick boat trip). Part of the reconstruction process of Turkish national identity after the end of the Ottomans involved ethnic cleansing against long-time Greek enclaves. This is complicated further by the Cold War and the strategic location of both countries, which means they both "have to be" NATO members by hook or by crook (i.e. the US will never let them go). In this framework, high defence spending is not unnatural; however, reliance on specific northern-European dealers is a bit suspect.

Wait a minute. Isn't Greece a democracy with government responsible to citizens? Greece gov has been spending for decades on military and no one argued with that while credit cards worked.

That's a good question, is it? Are any other modern countries?

One of the things people have been laughing at the Greeks for is that they don't even have a Cadastre listing who owns what land. Apparently this is proof the Greeks are all lazy, tax-avoiding thieves. In Scotland they're trying to achieve the same thing as they only know who owns about a quarter of the country.

Unfortunately the very rich aristocrats who own this land have been trying to prevent it since apparently knowing who owns land is some dark secret they're worried about getting out. They've been writing articles, such as the one by the UK prime minister's father-in-law Lord Astor, comparing this compiling of a list of ownership to the behaviour of Mugabe in Zimbabwe.

So, are we living in democracies with government responsible to citizens? I'd say to a great degree we don't, and like many soldiers who fought in European wars last century I think it becomes clear that you have more in common with the ordinary people of other European nations than you do with the ones guiding you into wars, or continuations of the same via diplomacy or economic shock doctrines.

Of course it is a proof the Greeks are lazy, tax-avoiding thieves. They don't care about Cadastre. They're on the streets for their comfy government jobs and social benefits.

Please don't sell me that socialist BS. I live in ex-socialist country and there is always trash talk about elites, aristocrats and capitalism on our long coffee breaks but guess what? You know what those people cry for? Socialist dictators and God-All-Mighty state.

Grow up. It is your fault mostly.

You can be socialist and selfish and still be in favour of a Cadastre, since you personally are unlikely to own the land. Lazy, selfish people should support knowing who owns all the land, because that tells you who to tax efficiently via a Land Value Tax. Unless they are lazy, selfish people who already know who own the land, because it's them that owns it. Which brings us back to powerful elites, which you think don't exist for some reason. Your ex-socialist state must have been an extreme outlier both then and now if it doesn't have them.

I'm not saying that Greeks are not in favour of a Cadastre. They probably think it is a great idea. Only problem is they are too lazy to implement it and too selfish to give power to non-lazy people who might then make them work.

Elites exist, it is not a mystery cloaked in enigma. Most of people on Earth could say I'm part of elite just for being European. But you are talking about powerful elites who work in mysterious ways to control all Greek people votes.

> Greece is a country, not a person. Did all Greeks benefit equally from that money?

If they haven’t, that’s an issue internal to Greece to be sorted out by Greek people. You can’t continuously elect corrupt oligarchic governments for 40 years and then turn around and shout “Not my fault!!” if these governments don’t act in your best interest.

> You can’t continuously elect corrupt oligarchic governments for 40 years and then turn around and shout “Not my fault!!”

Oh, like Americans complaining that they didn't want to invade Iraq? Those same Americans who have elected Bushes and Clintons for about 30 years now? Yup, quite unacceptable, really. They don't even have the excuse of having been ruled by a dictatorship for 10 years because of the Cold War, or having been born on one of the most strategic bits of land in the world from a military perspective, or having to fight ethnic wars with their immediate neighbours.

Someone once said something about beams in your own eye...

Hu? Of course Americans are responsible for the war in Iraq, where did I ever say something else?

I fail to understand this argument. Of course you have to save the banks to save an economy. Greek was bankrupt 5 years ago, yet the cash machines never stopped dispensing money.

As Portuguese you should also be honest and mention how we tend to have similar corruption cases like Greece.

How people avoid asking for bills when going to the doctor to avoid the extra 20 euros being added to the bill.

How people get things done, because someone has a friend that knows a guy... Of course without anything written and payed in cash.

How many small businesses closed down because they couldn't afford the new computer systems required by IRS.

How Portuguese are fleeing the country to countries like Angola, Mozambique and south American ones in the hope of finding a job that helps pay the bills to those that stay back.

Lots of many other cases that don't make us far from the Greek situation.

Yet, the Portuguese media has the outrage to call us a success case?!

Hi there fellow country mate. Refer back to the first point where it's clearly referred to our situation as "much similar to the Greek one in nature and extent".

The purpose of that answer is not to identify the party at fault or to explain what went wrong. It is to explain one reason for the increase of nationalistic rhetoric when there are talks of defaulting that loan.

Many people weren't aware that the money didn't come of an abstract "European fund" but from individual countries and helpfully it shed some light on why nationals of those countries consider it "their money".

Also, by showing the amount of money that countries (specially the weakest ones like Portugal) have contributed compared to the sacrifice the population (specially the weakest ones like the minimal wage pensioners) had to make to collect about the same amount (3.5% of all income) hopefully it helps in the understanding that the sacrifices are not being made by abstract concepts and organizations but by the people living in those countries.

As for the rest of your comment it doesn't help advancing or refuting the points explained above so they are a little bit out of place.

I guess you are right, but as someone that knows the southern Europe quite well, I find distasteful the way that we and other southern European countries talk about Greece in the media, as if we had an higher moral ground.

Yet, on our daily lives we and our politicians do exactly the same things they get accused for.

So sorry if I went a bit too much off topic.

When people say their government's money is "their money", they are not being literal; they mean "I contributed to that government's money supply, so I nominally have some say in how it is spent/symbolic partial ownership".

For what it's worth I thought the interview was moralizing too. I find it too much on the blame side, even though it's an attempt at being honest, but it's hard to consider post-war state and economic crisis. Also bringing back war isn't the best way to avoid nationalism.

Bringing a little more egoless theory in the picture is a nice idea.

A little nationalism is healthy for a country, though I grant too much is a problem.

Nationalism is healthy when it centers on positives about the country. Being proud of good things made or achieved by people from your country is fine, for example, especially as a call to action for achieving further good.

It is unhealthy when it centers on negatives about other countries. Being proud that you're so much better than those lazy freeloaders across the border is not so great, for example.

I tend to disagree. With nationalism/patriotism, you cannot avoid highlighting positivies of the past and skipping darker parts, which then gives twisted "we're the best country in the world" impression. US is a fine example, but I believe all countries are in, one way or the other.

One should view critically the past and present of its own nation, focus on all aspects, and learn from mistakes. But nationalism/patriotism and objective critical thinking tend to go against each other in real world out there. So no, I prefer to not like patriotism, of any kind. Anyway, I feel more of a citizen of this world, rather than some area that belonged somewhere else 100 years ago, elsewhere 1000 yeats ago, and will for sure in another 1000 years in future. Once a person moves a bit around the world, perspective on this topic is changed for good (classic House quote - "Patriotism is nothing but loyalty to real estate")

I think this is implicit in Pikettys argument.

e.g. from the article:

> But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s.

Oh but the current generation of Germans has a moral responsibility to help the current generation of Greeks because Germany got debt forgiveness 60 years ago ???

The idea isn't that Germans have incurred a special moral responsibility (which they otherwise would not have) because Germany received debt forgiveness 60 years ago. Rather, the idea is that the debt forgiveness Germany received 60 years ago ended up working out quite well, most of us would agree. Thus, we would do well to learn from this history, instead of dogmatically keeping debt forgiveness off the table.

Perhaps. But Germany back then, before the war and now, has/had a large industry and infrastructure to work with (albeit a large part of it destroyed in the war). Greece doesn't have that. I don't disagree we should consider pumping up the Greek economy, but I do not believe the results will be like the German one.

Every debt has a lender and a borrower and the borrower does not force the lender to lend.

At this point it is pretty clear that Greece can never pay off the debt which is just another way of saying that they should never have been lent the money in the first place. Write off the debt and vow to never lend the Greek state any money ever again. Both sides are at fault here.

No one's saying Greece will become Germany.

Just that it will be doing better than if don't forgive its debt.

Although I agree with you, the situations are a bit different. In the case of post WWII it was widely recognised that Germany's debt and war reparations were a major cause of WWII and helped with the rise of the National Socialist Party in Germany.

Greece doesn't have a modern history of military aggression. Germany did. What the Allies put in place was in their own interests.

The Allies didn't want to make that mistake twice (one could argue 3rd time). Hence they made sure that Germany [a] had a political system that was extremely balanced and stable (ironically much more than their own).

And [b] (most importantly of all), they made sure that they Germans had hope. Hope to be able to dig themselves out of what must have appeared to be almost a impossible mess at the beginning. Hope is like a virus. It starts small and becomes a self fulfilling cycle upwards (the reverse is also true).

That is what the Greece requires now. It needs to restructure its debt in order to take advantage of the quantitative easing policy of the ECB and low interest rates.

It also needs time to put its house in this order and it needs stability (politically and economically) to build itself back up.

The EU powers that be hates referendums. The people always vote that opposite to what they want. Welcome to democracy.

Greece did though have a military coup in the 1960s[1]

[1] https://en.wikipedia.org/wiki/Greek_military_junta_of_1967%E...

They did, but domination of Europe and beyond wasn't really really in their scope.

Wait, are you saying that if Greece had a national socialist party, then it would be rational to extend debt relief?

What I see missing in those analogies between historic debt forgiveness events and a possible approach to the current Greek situation is that those historic cases all happened in the context of a complete reboot of the debter state right down to the constitution. Ironically, the one that happened within a democratic framework is the kind of reboot you absolutely don't want to see repeated anywhere.

I apologise if this sounds bad, because it is. Maybe there's some truth to the "Germany should show compassion like the allies did".

To quote, "he Allies also confiscated large amounts of German intellectual property (patents and copyrights, but also trademarks).[27] Beginning immediately after the German surrender and continuing for the next two years the US pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany"

Reference here, https://en.m.wikipedia.org/wiki/Allied_plans_for_German_indu...

If you do the research, the U.S. Leveraged a similar deal over the UK to obtain all patents royalty free as an incentive to enter WWII.

There may be some leverage that can be applied. These corporate and IP raids netted the U.S. hundreds of trillions of dollars.

I was first devastated when I first found this out. It reminded me that the line between the "goodies" and "baddies" was not so clear.

The US not only confiscated large amounts of intellectual property, they also extracted a significant number of highly qualified academics (e.g. Operation Paperclip). These people weren't all innocent victims of the nazi regime either -- not that we will ever find out as nearly all of them were pardoned in return for working for the US government.

Germans are somewhat aware that the Soviet Union practically strip mined the industry in East Germany after the war but what the other Allies (and the US in particular) did is less widely known. Especially the fact that the original (pre-Marshall) plan was to convert Germany to a pre-industrial level (which would have been a death sentence for a large part of the population which would have been unable to sustain itself on agriculture alone) to avoid a repeat of the mobilization that enabled the Blitz.

Also, there was quite a bit of reparations going on after WW2. I'd wager that every German adult has heard stories from their grandparents about stealing supplies off those trains -- something that became so frequent the archbishop of Cologne (Cardinal Frings) absolved the practice and people began calling it "fringsen".

War means everybody loses -- even the "winners". There are no good guys, just various degrees of badness.

> moral responsibility to help

No. No one is saying that. People are saying that Germans should help Greece because it's a rational thing to do. No one, except complete idiots, is saying that they have moral obligation to do it. Here's the quote from OP:

> Nonsense! This had nothing to do with moral clarity; it was a rational political and economic decision

Actually, plenty of people are saying that, including the Syriza government who unwisely kept bringing up World War II reparations over the last few months.

> except complete idiots

I would be very surprised if a person who's so invested in a situation would act intelligently and rationally about it.

Its pretty much an ignorant statement. Which younger generation is he referring too? Those born after Greece joined the EU, those who happen to be 18-21, what?

I am pretty sure we can segment society in any means necessary to excuse one group or another from responsibility. I can just as well blame the same younger generation for bringing in a firebrand Marxist and voting to support saying NO when its going to wreck their economy even further; likely closing the banks for electronic transfers for business may have done too much damage.

As for the article, I could care less what Germany did or didn't do back then. Times were different then, we were all recovering from a incredible war and no one wanted to see conditions repeated that may lead to a third. Reparations and the restrictions on Germany after the first world war led to someone like Hitler gaining power so why repeat the situation?

As usual, some of the most frank moralistic discussion on this topic can be found in the Moral Maze on BBC Radio 4 http://www.bbc.co.uk/programmes/b0608nlb (I think that's available worldwide).

What really gets me going is how "we" helped the banks fill their coffers and socialize the losses. Again. Lending Greece money went along with earning (comparably) a lot of interest exactly because of the high (perceived) threat of Greece defaulting. And now that it has (nearly) come to that, all the risk has been moved to the EZB, etc.

I called my local elected representative about it, SPD (social democrat), and "voiced my concern", but only got met with talk about chain reactions and responsibility. Perhaps I shouldn't have shouted.

> I called my local elected representative about it, SPD (social democrat), and "voiced my concern", but only got met with talk about chain reactions and responsibility. Perhaps I shouldn't have shouted.

I think the problem is, that nobody really knows what had happened if we've let the banks die.

The fear that the results might be a lot worse than the current situation is perhaps the driving force of politics of the last years.

If the banks were going to default without taxpayer help, why didn't we just nationalize them and let the share holders take the loss they themselves have set themselves up for? Then we could shoulder the cost of getting the banks afloat again, and then subsequently regain some of the cost at least by selling them (instead of just giving taxpayer money to the risk-taking share holders like we do now)

> If the banks were going to default without taxpayer help, why didn't we just nationalize them and let the share holders take the loss they themselves have set themselves up for?

That sounds a bit like only risk-taking share holders would have been harmed and that wouldn't be much harm for the society at all.

I really don't think that the harm would be that focused, because banks aren't only about risk-taking share holders and because of the interconnection of banks at the end someone might be harmed you've never thought about.

I really don't envy any politician having to make a decision in such a case.

> nobody really knows what had happened if we've let the banks die.

I'm not even an economist, so obviously I have no idea what would have happened (even as is in "they don't really know" but I know even less).

My reasoning is this: if I remember correctly Greek government bonds were already trading at ~70% of their nominal values two or even three years ago (cannot check, currently on a train along the Rhine with very limited internet access). To me this means, that the banks had already written off ~30 of the value of that bonds, and I bet if we look at their balance sheets we'll see that fact reflected.

This makes me lose respect for Piketty. There's a very clear difference between a country that comes out of two world wars, with everything all but destroyed, including millions dead. I'm sorry, no matter how bad 2008 was, it was no World War. His inability to grasp this just boggles the mind.

There's a very big difference between war caused debt and economic caused debt (note that I'm basically making these two "debts" up, and things are more nuanced obviously, but I'm going to ignore the nuances for now, these are very broad strokes.) When you come out of war, you're either the loser or the victor (one way or another, there are very few true "ties" in war.) And while capital may be destroyed in both cases, an economic crises doesn't necessarily leave your physical infrastructure and entire social system completely unrecognizable.

Further, Piketty seemingly completely ignores the Marshall Plan and all that it included in rebuilding Europe. And yes the Marshall plan was a form of debt forgiveness, but as a huge portion of the European continent was a smoking crater, things were different in 1945 than Greece in 2015.

Further, some historians/economists will argue that the "German miracle" (and "Japanese miracle" as well) were in part because of the destruction cased by the wars. With all the manufacturing capabilities destroyed, they were able to rebuild with the latest and greatest technology of the time. (and if you take this further, as the US was able to rest on it's un-destroyed capital equipment and make huge profits during the rest of the 1940's, 50's and early 60's, and never re-invested as Germany and Japan were forced too, this eventually lead to the downfall of the US Industrial might, in part.)

Personally, I think this has more to do with his French nationalism than anything else, at least as it appears to me in the interview.

You seem to place an awful lot of value on the cause of debt being war. The interview gives no indication that Piketty would be unable to grasp the difference of the Greek and post-war German situation. That this "boggles the mind" seems to be a bit disingenuous.

Also, the 2008 crisis isn't the direct cause of the crisis in Greece right now. That crisis has been building ever since Greece joined the monetary union in 2002. As Piketty notes: "The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books". Papandreou finally revealed this (indeed, around 2008), and the current Greek crisis and European monetary instability followed suit.

When Greece borrowed money, it was sustainable. Their GDP was growing, in large part because the European economy was growing before the crisis.

When the European and world economy went down, it dragged Greece with them. The debt became unsustainable. Instead of the creditors losing out (much as an investor or normal creditor would when they invest in something that loses), the Europeans decided to bail out the initial creditors, and convinced the then-current Greek government to take a bad deal, all the while basically 'socializing' the risk. Their shitty economics led to a 25% contraction in the Greek economy.

If you follow the chain of events, this crisis is as much Germany's fault as Greece's.

Another thing to keep in mind, is that it doesn't matter whose fault it is. If Greece stops paying its creditors and stops taking loans, Germans will lose out. It's actually in Germany's best interest to forgive some of the debt, and have Greece pay the rest. Greece's economist/finance minister knows this, that's why they can play this game.

I haven't followed Greece that closely but this story about Greece hiding its debt to gain entry into the Euro has been mentioned more than once:

http://www.nytimes.com/2010/02/14/business/global/14debt.htm...

The stats I can find suggest Greece ran a primary deficit pretty consistently starting in 2002 --- long before the crisis --- in fact, they appear to have run a primary deficit during the boom years that preceded the crisis.

A deficit isn't necessarily unsustainable over a period of economic growth. If growth and inflation outpace the cost of borrowing, it's worthwhile to borrow. Kind of like the US is doing right now.

That's a good point, but the obvious next Google search suggests that Greece's economic growth was unspectacular during the early 00s, and began lagging in '06.

http://www.tradingeconomics.com/greece/gdp

Greece's GDP nearly tripled from 2000 to 2008. Their debt to GDP was comparable to other European nations until 2008 (105% of GDP).

And we're treating those figures as trustworthy are we? Eurostar consistently failed to validate numbers provided by the Greek government in that period.

This is a super important point. One that needs to come into the debate in Germany more.

Greece may have been run by a ridiculously irresponsible government (and electorate), but it was the troika (Germany, mostly) put the fallout on the German (and EU) public's tab. That was and is a debt guaranteed to go bad.

How can a group of the ECB, the IMF and the EU be "mostly German"? Seems pretty international to me. In fact Germany is under-represented in the ECB and the commission, because it has only one seat, as do countries that have a tenth of the German population.

Well… I don't really know the ins and outs but Angela Merkel seems to be the primary spokesperson and negotiator for the Troika. I'm not sure how/who provides the funds for the ECB & IMF. I think it's ultimately Germany too. At least the German public seem to believe they are on the hook for and troika loans that aren not repaid.

The reason Germany have a particular interest/power here (apart from being a large eurozone member) is that it is/was their banks that are owed money by the Greek government.

This is vagueness kind of part of the problem, these oblique and vague institutions representing oblique and vague interests. What is the ECB exactly? How is it funded? What does it want?

In any case, it doesn't really matter if this is germany or if Angela and the electorate are just playing the role. The Troika made a (unrealistic) loan to Greece so that Greece could pay back "creditors" (who I'm assuming are largely German banks, but am possibly mistaken).

Germany does pay the most in absolute terms. This does nothing to the fact that the Troika is not mostly German. I do not think that HN is a place for these kinds of polemic arguments. Lets leave them to the right wing eu-critics that try to built up enemy stereotypes.

Angela Merkel is not part of the Troika. Angela Merkel plays a prominent role in the debate because she is the unofficial leader of the northern states, while François Hollande unofficially represents the southern states. Both can only influence one vote of the EU commission and have very limited influence on the ECB or the IMF.

I wasn't trying to be polemic, it's just easier to understand "Germany" than "Troika", since there's an obvious public purse and a visible public figurehead to attach to in your mind's eye.

Also, there is more to it than polemics. I think Germany's political traditions and biases largely driving these policies and also their interests (as direct lenders and as the country housing the interested banks). Angela Merkel is not officially part of the Troika, but her role in it is still real. Germany underwrote loans.

You are right that it's not strictly true. But using the terms Troika or listing the institutions isn't more true, it's obfuscating. It's not clear what those acronyms mean.

I'm also not right wing (or left). I'm critical of the EU, but I care because I want it to succeed. I disagree with a lot of technical aspects but I am wholeheartedly in favor of the true goals of the EU: solidarity and peace. I believe the EU will give us our first 100 years of peace and our second.

It is simply not true, that this whole debate is about Germany vs. Greece. Greek media and Greek demonstrators created it and the German yellow press and right-wing parties gladly answered. If you have the same narrative than these guys, you are by definition being polemic.

In reality though there are Eastern European with lower standards of living than Greece that had a hard time getting these measures through parliament but ultimately took part in the rounds, too.

Germany is because of its size the biggest actor in most European things, that does not make them German.

I do not think the concept of a Troika of a central bank, the European government and the International Monetary Fund is that hard to understand, either.

Of course it is. Where did they get the money for the loans? Who loses if they don't get paid?

We don't have a European taxation system, an empowered European parliament, figurehead or any such thing.

The way things work in this case is that "The Troika" is a mechanism. As I said it's all foggy. But insisting that this Troika is ultimately the decision make, is independent and so forth is disingenuous, I think. Behind this troika is EU member state government that funded the laons, decided on the rules and will be on the hook if loans are defaulted on. Chief among them is Germany. It is their public interest at stake (sharing with other members, etc.). Also it is their banks (not only their) that these loans will go to repay, so it is also their economic interest. It is also their political traditions, biases and ideologies that are being largely represented by the "Troika"

The media depiction of Germans and Greeks is not just a made up populist Greek media invention. It's in the German media as well. Angela Merkel herself (with finance ministers of other member states taking a sort of deputy role) is speaking and acting a way that assumes this role.

To me, saying "germany" in this case is no different tan saying "The US" in the Afganistan War. You could be legalistic and say "International Security Assistance Force" or "Coalition." You could say NATO, of which the US are the biggest member. You might even say the "Afghan Transitional Administration and their allies" if you are willing to push it. But, we say the "US invasion/mission/force" as shorthand and that is more honest than all the rest. All those terms are mechanisms or sometimes euphemisms given form.

In any case, in my original comment it was a shorthand given that I don't know the ins and outs of this (purposely?) obtuse collection of acronyms and it wasn't particularly important to the comment.

I said "it was the troika (Germany, mostly) put the fallout on the German (and EU) public's tab."

What exactly are you claiming anyway? That germany isn't the key decision maker? They aren't they key lender in these troika bailout loans? That it isn't mostly the German public that will be liable for these loans when they are defaulted on?

I agree that this "Germany vs Greece" media dynamic is unhelpful. The media has been playing to nationalism in both countries. That stil doesn't mean pretending that these acronyms are real independent bodies is more honest.

Yes. I should have added, it's not that I don't have sympathy for Greece and how their debt has been structured. I also don't think Europe should let them fall. It's also not that I don't think Piketty is correct in some of his solutions (though I have differences of opinion with some of them), I just found his reasoning to be wrongheaded and somehow "dumb." At least for someone who is supposed to be a great world economist. (My own take away should be "Don't believe the hype.")

> it doesn't matter whose fault it is. If Greece stops paying its creditors and stops taking loans, Germans will lose out. It's actually in Germany's best interest to forgive some of the debt, and have Greece pay the rest.

Absolutely. It's bizarre that in a country with bankruptcy laws (which Germany must have), they argue that it's 'immoral' for Greece to have some debt relief.

> When the European and world economy went down, it dragged Greece with them.

Remember who started the Great Recession (the U.S.). The Greeks probably had less to do with it than most nations.

>There's a very clear difference between a country that comes out of two world wars, with everything all but destroyed, including millions dead.

Which allows us to provide a further distinction: the country who had everything destroyed was directly responsible for that destruction. Yet, the debt that they racked up because they tried to take over eurasia while killing and torturing millions in the process, was forgiven not many years after the killings and torturings took place.

I think there should be a distinction between a country that kills and tortures millions and one that does not. So, why again should we forgive the debts of those responsible for killing and torturing millions, but not those of a country who has done nothing comparable?

> I think there should be a distinction between a country that kills and tortures millions and one that does not.

There isn't a major economy in the world that this does not describe. Perhaps not India. The "Race for Africa" was a low point for the UK and France, for example.

Please list one instance when the modern Greek state did as described.

Greek invasion of Turkey in 1919 was pretty ugly although the scale was different.

Please list one resource which describes the modern Greek state as a 'major economy'.

They can still claim some moral high ground in that, were they to go bankrupt today, colonialism was not directly the cause. That's not the case with Germany in the 40s/50s.

The debt forgiveness of Germany post-WWII shouldn't just be seen as altruism. The Soviet Bear was seen as a major threat by the Allies, and having a healthy buffer state was a significant factor in making policy around West German finances.

If Greece was a buffer state against some monstrously powerful ideological opponent, you can bet that we'd be seeing considerably different politicking going on.

I wouldn't see it as altruism either, but I think you discount the fact that the Allies did not want a third war with Germany. There were factions within the American government that wanted to turn Germany into a deindustrialized field, but instead they built Germany up into a strong ally. It was more than to just counter the Soviets: They removed the German threat for good.

Of course India (or its historical antecedents) have killed millions, though it's been primarily other folks on the subcontinent. I agree with your point otherwise.

I'd draw a distinction between debts incurred by a democratically elected government and otherwise.

I also think reparations are fundamentally different than loans. Comparing war reparations to loans is blurring the lines to make a political point.

Think of it like this: when a country needs to 'borrow', they're selling bonds. An investment vehicle. If you buy bad bonds as a typical investor, no one bails you out - you lose your investment. That's how it should have gone for Greece. Their 'investors' should have lost during the crisis, like everyone else, instead the Euro governments bailed them out and created this prolonged mess...

That ingores the impact on the poor and pensioners of Greece. Just let them starve?

They wouldn't starve. Many countries have survived a default without people starving. Presumably, in the case of a Greek default, the government would be using the money to pay pensioners and give welfare instead of paying bond-holders...

Sorry, I misread what you were saying. I agree.

The bond holders with Greek government bonds did lose, their debt was restructured with a 50% haircut. It was the bank loans that were bailed out.

> I'd draw a distinction between debts incurred by a democratically elected government and otherwise.

I think that's a good point in principle, but remember that the Greece's poor suffer the most. Drive through a poor neighorhood in town and consider how much influence the residents have over national economic policy.

No one's questioning that Greece's poor will be hit the hardest. But neither does it help them to blur the meanings of reparations and debt for the sake of creating a scape-goat.

What makes you think they will be helped by loans if they are made to Greece? Won't those funds just go to a slightly different permutation of politically connected folks? Moreover, you point to the poor in Greece. Why should they be privileged over the slightly poorer in, say, Bulgaria, who will hear a fractional brunt of a Greek bailout?

Okay, but why are you doing backflips to avoid placing any blame on reckless creditors? If idiotic European governments elected to bail out the private, sub-prime lenders whose bets in Greece had gone bad (due, in large part, to the credit bubble inflated by the same lenders) why should the Greek people pay for a shitty decision made by French and German politicians?

The Nazi government was more or less democratically elected, at least as much as Greece's government.

Germany had loans forgiven less than one decade after they were systematically killing tens of thousands of people per day in gas chambers, human ovens, or worse and barely twelve years after they had firebombed London and other cities, resulting in 40,000 dead civilians.

This is beyond ridiculous and in fact insulting to recent Greek governments. Come on, do you really think the media landscape and average knowledge of voters in 1933 in Germany was anywhere comparable to elections in Greece from 1990 onwards? Germany only became democratic after the 1st world war, had totally unstable governments, a head of state who openly did not believe in democracy (Hindenburg), the great depression hit and SA troops were beating people up in the streets.

I wonder why Germany never suffered any consequences for what they did in WW2.

Oh, wait. They did. https://en.wikipedia.org/wiki/Yalta_Conference

I'll put it this way.

World War I: Germany loses, is forced to pay not just debt, but reparations. Huge economic and political instability as a result leads to a new leadership which leads directly to World War II.

World War II: Germany loses, is split up, due to the Marshall plan (in part do to a fear of Communism, so not solely due to compassion), West Germany given millions of dollars to rebuild, a rather thriving democracy and economy is created as a result.

Which of these is the better option?

Probably the one where the country that is indebted and in need of development gets 60% of their debt forgiven and an stimulus plan.

I guess it's not clear what you're arguing then. It seemed as though you believe Greece's debt should not be forgiven.

[Note: Germany paid less than half of its WWI reparations, until recently. I'm not sure what WWI debt you are referring to though.]

In "The Economic Consequences of the Peace", there is argument that the original reparations were make-believe and impossible. The 1929 revision was probably closer to reality and Germany did recently repay them. [at least according to news articles from 2010]

Germany was _forgiven_ over 50% of it's post war debts. By my rough calculation, 35B+ in today's dollars.

Yes, it was "forgiven" 50%, but at least in that book, the author explains that the process of how the original sum was calculated was that France asked for an unreasonable sum in the first place.

West Germany did repay some of the defaulted WWI debt to help rebuild their reputation after they lost WWII.

Also, there is another gigantic difference here, Germany lost a bloody war and we told them how it was going to be, we restructured their economy, wholesale, and they were in no position to disagree. About half the debt was forgiven because they did what we made them do. If Greece wants to put their sovereignty on the table and let their creditors structure their economy for them, that's a very different negotiation than what they've had. Further, the west wanted a strong Germany between them and the communists, what's Greece got to bring to that table?

All this hypocrisy talk misses the point. Greece should go elsewhere to finance their debts if they don't like dealing with Germany. With their history, lifestyle, economy and government, I think that will be a challenge. Nothing prevents BRICs from investing there, they just don't seem that interested. Nations aren't individuals but try to go negotiate with a pawn shop or payday lending place, it sucks to need money and not have options. Sure, Germany has defaulted in the past, Greece can crap on then when the tables are reversed...

> the west wanted a strong Germany between them and the communists, what's Greece got to bring to that table?

Continued loyalty to NATO and the EU? http://www.reuters.com/article/2015/07/03/eurozone-greece-ru...

Wow. I wonder how the default talks go with Putin...

Strangely enough, that's exactly what Piketty was talking about in a recent interview with the digital edition of Le Monde. "Let's just kick Greece out of the eurozone" people have no idea of what they're doing.

According to e.g.:

http://www.spiegel.de/international/germany/legacy-of-versai...

Germany did repay the WWI reparation debt.

In 2010! That's almost a century from 1918. If Germany had to repay reparations from 1945, it would probably be repaying WWI debt to this day.

Lets not forget that Germany also lost a third of its territory, so its not as if they got away that easily.

> If Greece wants to put their sovereignty on the table and let their creditors structure their economy for them, that's a very different negotiation than what they've had.

Given that even the IMF have admitted that pretty much all their projections were flat out wrong for Greece, of course the Greek government would be total idiots if they did this.

> All this hypocrisy talk misses the point. Greece should go elsewhere to finance their debts if they don't like dealing with Germany.

This is missing the point: Sure, Greece can't demand whatever they like. But at the same time, it is irrational for Europe to treat Greece this way, because all it achieves is weakening the Greek economy further, which nobody benefits from.

If the EZ governments wants to lose all the debt, that's a good approach. If they want some of it repaid and would like Greece to remain a viable part of the common market, it's not.

In other words, Greece should declare war, and get occupied? (It probably would be better for them than what's going to happen). If only there was a way to resurrect Marshall and Ike, and make them dictators over Greece…

https://en.wikipedia.org/wiki/The_Mouse_That_Roared

Following your lead: Then let's start by assigning a value to each person killed in WWII and the moral righteousness (or lack thereof) leading to the person's death. Yes quite the humane and reasonable trait in a time of total destruction. Very helpful.

Your post actually prove's the other author's point: Your clear opinion of responsibility is shown and thus it would be clear to me, how you as a winner's negotiator in that time after WWII would have "accounted" that debt.

I'm not sure what you're arguing. Are we going to assign values to each fault of Greece as well and then compare them to your WWII calculation?

>Your post actually prove's the other author's point: Your clear opinion of responsibility is shown and thus it would be clear to me, how you as a winner's negotiator in that time after WWII would have "accounted" that debt.

My clear "opinion of responsibility"? You mean, my assertion that Germany was responsible for the destruction mentioned by sgnelson and the killing and torturing of millions that I brought up? Do you reject that assertion?

Modern debt is an inherently ridiculous proposition. It can only ever expand or collapse. The longer the world tries to solve its problems using it, the more comical it becomes.

>I think there should be a distinction between a country that kills and tortures millions and one that does not. So, why again should we forgive the debts of those responsible for killing and torturing millions, but not those of a country who has done nothing comparable?

Because the Treaty of Versailles was tried the first time, to penalize Germany with onerous debts for starting WW1, and WW2 was the direct result. After WW2, the Allied occupiers weren't thinking, "How can we penalize Germany?", they were thinking, "How can we prevent another damned war!?".

Unfortunately, this time people are still thinking, "How can we penalize Greece?", as if that will help the EU at all in the future.

But they are thinking "how can we prevent this again?" with respect to Greece - for example measures against corruption, unaffordable levels of welfare, and high tax avoidance. Without those measures, if they just hand over money with no strings attached, it will just be kicking the can down the road.

No, they're thinking "How much money can we rescue tomorrow."

And that's all they're thinking.

Piketty is right - it's atrategic idiocy of the first order.

As for tax avoidance - some countries, including the UK, have based significant sectors of their economy on tax avoidance.

In the same way that it's immensely hypocritical of Germany to lecture Greece on debt, it's equally hypocritical of the Eurozone to lecture Greece on tax avoidance, when the bankers and corporates know damn well that if they weren't avoiding taxation at least as aggressively, austerity would be completely unnecessary.

But of course they mean tax avoidance by working class people, which is a very bad thing, and not tax avoidance by corporations, banks, and oligarchs, which is a very good thing.

It's this kind of twisted self-serving nonsense that has created the situation in Greece. Sovereign debt is a symptom of much deeper problems, not a final cause.

A little from column A, a little from column B. Of course creditors are after their money, that's what loans are for. And anti-corruption measures do have the ability to work well.

For example, during the early 90s, Australia had a recession. Due to this recession, more stringent banking laws were introduced. Fast forward to the GFC, and the entire globe is running for cover. The Australia dollar tanked because everyone thought that the economy would die and the banks would collapse. On the contrary, due to the tightened banking laws, the 'big four' Australian banks all kept their credit rating. All of them. At a time when most banks were slipping.

Times of national pain like this are the times to slip in significant reform. Greece has an endemic corruption problem, and independent of anything else, this is a good excuse to 'stop the rot'. Or we could just point fingers everywhere, make it no-one's problem and no-one's responsibility, and not progress at all.

And if you've been watching the news lately, the big economies are all looking at ways to counter tax avoidance by corporations, as it's a significant problem. It's a complete misrepresentation to say that there's no concern or effort being made there.

Australia was bailed out in the financial crisis by high and rising commodity prices, and the banks are supported by a massive house price boom.

> In the same way that it's immensely hypocritical of Germany to lecture Greece on debt, it's equally hypocritical of the Eurozone to lecture Greece on tax avoidance, when the bankers and corporates know damn well that if they weren't avoiding taxation at least as aggressively, austerity would be completely unnecessary.

Especially with the head tax avoidance manager at his head, Jean-Claude Juncker.

That said, my understanding is that there are real issues with the Greek state - not only cronyism and corruption, but lack of fundamental mechanisms like a proper welfare system or a cadastre. These issues need to be addressed, but seems at odds with the creditors' obsession with slashing public spending at all costs.

I also agree with Piketty about the way the crisis served to highlight systemic issues in the EU. Unfortunately, EU leaders appear completely unwilling to address them, apparently pretending nothing is wrong is much easier.

Indeed, the Greek government has many problems to solve, but many require investment. Rooting out corruption costs money and is hard to do in a crisis where you may not be able to pay your bills at all from day to day.

And austerity has been shown to be a remarkable failure for any form of economic recovery not just the first, but pretty much every time any country has tried it

Why would you try it on Greece then?

How would you define austerity for the Greece? To have public spending at 58% of GDP?

If your economy collapses, partially because of global recession and partially due to corruption enabled by cheap foreign money looking for a quick buck, your GDP ratios all look worse all of a sudden.

I'd define it as me paying 90% taxes last year, while my country is still getting worse.

Austerity isn't about rising taxes, as much, as about lowering government costs.

There's an argument to be made that the debt forgiveness came after the realization that maybe the WW2 was also a result of the crushing debt imposed on Germany after WW1.

It's questionable how directly Versailles caused WW2.

WW2 was caused in no small part by the Wall St Crash, which was a direct cause of hyperinflation in Germany, and by delusional industrialists who thought that financing Hitler would be a good way to avoid a revolution.

At least one of them - Thyssen - ended up in a concentration camp. So that didn't work out so well for him.

The others have never been held accountable.

Weimar could easily have been rescued if the Nazi party hadn't received literally millions in external funding and other forms of corporate support. In a counterfactual reality, Europe would probably have united more quickly and peacefully. Technology wouldn't have developed as quickly, but there would have been an arms race and perhaps a war with the Soviet Union sooner or later.

Some background:

http://www.businesspundit.com/10-global-businesses-that-work... https://en.wikipedia.org/wiki/Fritz_Thyssen

> WW2 was caused in no small part by the Wall St Crash, which was a direct cause of hyperinflation in Germany

Could you please clarify how the Crash of '29 caused hyperinflation in Germany in the early 1920's?

Or do you mean the August 1919 to December 1920 slide? That doesn't suffer from violations of the law of causality, but nor is there any evidence that it caused the Weimar government to print ever increasing amounts of money in higher and higher denominations, which started in June 1921, six months after Wall Street had started to recover.

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...

> I think there should be a distinction between a country that kills and tortures millions and one that does not.

Which reminds me...

https://en.wikipedia.org/wiki/Greek_Civil_War

158,000 killed due to those bloody stupid Communists :(

Here's another take on it:

[1]"As the war’s outcome became apparent, British Prime Minister Winston Churchill was determined to return Greece to the prewar rule of the monarchy and the old regime. He was motivated by fear of Communist influence within the resistance movement.

Churchill tried to get the Anglo-American army that was getting ready to invade Italy to attack Greece instead. Indeed, he tried so hard to change the war plan that he almost broke up the Allied military alliance; when he failed, he threw all the soldiers he still controlled into Greece and precipitated a civil war that tore the country apart."

[1] http://www.democraticunderground.com/10026942363

You mean damn those Greeks wanting to run their own lives? Something that was violently crushed and kept through an oppressive military junta?

As a left-wing guy, I find that comment funny. Ask Poland or Hungary how much Warsaw Pact nations enjoyed "running their own lives". And the junta was not before the end of the sixties.

who started World War II ?

> There's a very big difference between war caused debt and economic caused debt

not if you started the very war that put you in debt.

Your sibling posts pick much, much stronger arguments.

"This is not a peace. It is an armistice for twenty years"

Maybe Greece should declare war on Germany to get rid of their debt?

>This makes me lose respect for Piketty. There's a very clear difference between a country that comes out of two world wars, with everything all but destroyed, including millions dead.

Yes. The main difference being that Greece didn't invade anyone, didn't cause millions of deaths and didn't exterminate 6 million Jews.

Just over-borrowed. And it has paid for it with 5 years destruction of its economy (40-50% effective less buying power per person among other things and unemployment rates similar to the Weimar republic). Hey, Greece didn't even ask for its loans NOT to be repaid -- they just asked for a better deal, without heavy taxation and anti-business austerity measures that prevent development and make it even more impossible to reboot.

The idea that the first case is somehow more justified to relieve is ludicrous -- not to mention insulting to the victims of the Holocaust and WW.

[EDIT] Besides, the main historical reason Germany was "forgiven" wasn't that it had suffered losses too (war agressors have no right to complain about that), but because it suddenly was in the right place to serve as a nice Cold War ally, half to the West/NATO and half to the USSR, so both sides wanted it to be in good standing.

>Yes. The main difference being that Greece didn't invade anyone....

Actually Greece Invaded Turkey in WW-I.

https://en.wikipedia.org/wiki/Greco-Turkish_War_(1919%E2%80%...

Well, not exactly. You get a better context if you say that the two countries have a sweet little history going back to byzantium, where turks invaded, greeks invaded, turks invaded, greeks invaded, turks invaded,...

PS: And yes, it was the ottoman empire, etc, but that's semantics.

Does that change the fact that this was an invasion? Last time Ottomans invaded Anatolia was 12th century. Current Greece was invaded in end of 15th century. And Greece tried to invade Anatolia in 20th century.

Context, please.

Greece, the nation, emerged after liberating its land from centuries of Turkish (then Ottoman) occupation (with several failed smaller scale attempts at independence in between).

After the Ottoman Empire was collapsing, the succeeding regime, the "new turks" who created Turkey, started an ethnic cleansing attempt, killing millions of Greek Pontians, Armenians, Assyrians etc.

https://en.wikipedia.org/wiki/Greek_genocide https://en.wikipedia.org/wiki/Armenian_Genocide https://en.wikipedia.org/wiki/Assyrian_genocide

After a decade of this happening, Greece (and with the assistance and encouragement of Western powers) invaded Asia Minor, where 1.5 million of Greek ethnicity were still living among the other local populations. Then the Greek army had the not so brilliant idea to march forward to the inner Turkey, and they got slashed. A massacre followed, with the Turkish army slaghtering the Greek population of Asia Minor (including in a great fire), and creating huge swarths of immigrants.

https://en.wikipedia.org/wiki/Great_Fire_of_Smyrna

So, I'd say Greece paid quite hard for that "invasion", but also that: a) 1.5 million of your people living in a place, b) some centuries of occupation, c) a decade of genocide, more or less justifies some kind of military campaign.

Context was that Greek army invaded Asia minor during WWI, period. The reasons of the invasion is always justifiable by the invader.

That land was invaded by Turkish Tribes during 12th century. So historical occupation that far cannot be justified with 20th century invasion. Greek people living in the invaded areas were around %18 of the population.

Besides, Atrocities goes both ways.

https://en.wikipedia.org/wiki/Yalova_Peninsula_massacres_(19...

https://en.wikipedia.org/wiki/Greco-Turkish_War_(1919%E2%80%...

https://en.wikipedia.org/wiki/Siege_of_Tripolitsa

https://en.wikipedia.org/wiki/Navarino_massacre

Edited for wording and some corrections.

The underlying assumption in the German "NO" to Greek pleas of debt relief is the "moral hazard" of writing off a country's debt just because they cried really hard.

Why don't we talk about the moral hazard of writing off a country's debt after they kill 60 million people?

Well, as part of their debt relief, Germany got a new government. Is that what Greece wants?

Greece has a new government. One that has no connection with either the thieves that caused the problem in the first place nor the incompetent idiots that didn't solve it in the last 5 years.

Wikipedia tells me the Greek constitution dates to 1975. Is that wrong?

A constitution under which it is illegal to fire state workers unless by law!

Unless by law? Well, at least that one isn't a problem for a government.

Yes it is. Laws require debate and public voting in Parliament which exposes many/all members of the governing coalition to lots of bad press, which is /so/ unfair since all they really wanted was to get reelected and, honest, they didn't want to be a bother to anyone.

You can make it a general law with a different focus and then you alter it with a court. This is a non issue in contemporary democratic procedures.

Wha?! Their new government has doubled down on the bad policies that led Greece to this state. It absolutely DOES have a strong connection to the people who caused the problem - they were put in power because the Greeks turned their back on the previous government that was at least trying to go along with the required reforms.

Well, I guess that depends on your perspective of the reforms... IMO, the required reforms, and austerity in grneral, were all wrong (as in, unrealistic and economically unsound).

This is the new government. They were not in charge in 2010, they did not cause the crisis.

From the perspective of lending, it doesn't matter if a borrower is church attender, a drug dealer, beats his kids, or goes to work half an hour early every day. It is simply a matter of perceived ability to repay.

Germany, especially after complete restructuring following the war was manifestly a decent credit risk. Greece is another story. The moral arguments in this scenario are just noise.

Never forget that the term "moral hazard" has—until very recently—referred to policies that increase the dangers posed by reckless lenders. The realization behind this expression was that the existence of an onerous collections regeime would tempt creditors into making otherwise indefensible loans.

I won't say the victims of predatory lending have a moral obligation to default, since this could get them killed. But in the absence of good government, this is the only way to drive predatory lenders out of existence.

And yes, good governance includes making life unprofitable for loan sharks.

The Greek economy has shrunk by a quarter over the course of the crisis. Not quite a smoking crater, but not exactly a trifle either, and not incomparable to the impact of a war, I'd say..

> The Greek economy has shrunk by a quarter over the course of the crisis. Not quite a smoking crater

I disagree; that's a smoking crater. I'd bet the U.S. economy hasn't experienced that since 1900, or maybe only in the Great Depression.

You'll excuse me if I express some skepticism about the "downfall of the US Industrial might". Only China produces more and only a handful of G20 countries' industrial base is growing faster.[1]

1. https://www.quandl.com/collections/economics/industrial-prod...

Yeah, it's more the rise of China than the downfall of the US.

I'm also not clear on what Germany's payment history has to do with the crisis. The problem isn't simply that Greece is defaulting on loans, but that it's doing so while asking for more loans, without which it will be forced into austerity.

Um, what? It will be forced into austerity? I'm sorry, but they have been. Past tense, like…years ago. That's why they're suffering a 25% unemployment rate and a contraction of GDP that exceeds what the U.S. saw in the Great Depression.

Yes, but wherever they are now (after troika-mediated austerity), it's going to be worse after they lose their funding, isn't it?

Not necessarily. In the short run, perhaps, but that's not the point. The point is that your analysis reflects a very poor grasp of what's happening.

I believe you, but could you flesh that critique out some more? My understanding of Greek's fundamentals start here:

http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronis...

(this was linked from the Interfluidity thing everyone was talking about before) and continues through here:

http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf

(which I read when someone claimed Greece had a 2014 primary surplus, which IMF disputes), and is colored by Tyler Cowen:

http://marginalrevolution.com/marginalrevolution/2015/07/the...

... who I do not agree with on most things, to the extent that matters, but whose commentary on Syriza and Greek financing I now understand a little better.

Hope the following helps, I think we all are trying to learn as much as possible about this as it unfolds.

I thought the article about Peronis Democracy was interesting but I need some help seeing the connection to the current crisis.

Judging from your comments it seems like you believe the Greek government is spending more than it's taking in(primary budget deficit). Which is not true at least for 2014 according to the Wall Street Journal. The Greek government needs to borrow more money not to fund additional purchases but to pay off debt that is coming due. For example they have $5 billion(not sure on exact number) worth of debt that matures in 2015 but they will run a primary budget surplus of $2.25 billion so they need to borrow an additional $2.75 billion to pay off the additional debt.

The next few years will be very terrible for Greece, but so have the last few years. The fundamental problem with Greece comes down the idea of a fiscal multiplier, which is how much gdp changes when government spending is cut[1]. Right now the IMF estimates that the fiscal multiplier is 1.7.[0] This means that every dollar the government cuts(increasing the primary budget deficit) reduces the size of the economy by $1.7(which also reduces the governments tax revenue). So the current austerity measures of a surplus of $2.24 billion reduce the size of the Greece economy by at least $3.8 billion[2]. The current Great Depression level unemployment in Greece is the result of cuts in government spending that generated a surplus of just 1%. Imagine what Greece would be like if they achieve their target of 3.5%(was 4.5%).

P.S. excuse any spelling or grammatical errors, its too late for me to be on hacker news.

[0]http://www.eurointelligence.com/news-details/article/imf-adm...

[1]http://www.wsj.com/articles/greece-misses-target-on-budget-s... - behind paywall unfortunately, so there will be a need to google.

[2]https://en.wikipedia.org/wiki/Fiscal_multiplier#Net_Governme...

[3](at least because of the feed back loop of +surplus-> -gdp -> -taxes -> -surplus so to achieve a surplus of 2.24 billion more than 2.24 billion in cuts would need to be mead)

Greece stopped having a primary surplus the moment Syriza came to power, as one of the first things they did was reverse tax rises and rehire fired civil servants.

Thank you!

The IMF analyzed the 2014 primary surplus and found it illusory:

* They counted revenue sources that aren't conventionally accounted for in primary budgets

* They undercounted liabilities, notably from tax refund and pension payables

* Some of the unorthodox revenue they counted were privatization proceeds, which turned out less lucrative than projected

The IMF's trued-up numbers suggest there was no 2014 primary surplus.

It would be bankruptcy rather than austerity - all businesses will likely go belly up in the coming weeks, including the government. Work will be on the honor system, barter, and IOUs.

So it's a rock and a hard place choice - austerity for 15-20 years or bankruptcy followed by maybe a new deal, betting that Europe won't let one of its own starve to death.

If they lose their funding they need to do both of:

1. negotiate a new deal with their creditors

2. Get emergency humanitarian funding to feed people and keep hospitals running

3. start paying people in IOUs (which could eventually turn into the new drachma if #1 doesn't work out).

Exiting the Euro completely would be disastrous for both Europe and Greece - there's a year or more of IT work required to introduce a new currency and one can't run an advanced economy on cash only. And Europe would have a €250 billion hole across the major powers that would need to be covered by its taxpayers if it can't get it from Greece. Legally by EU law they could sue Greece for its actions which then opens up questions about membership in the EU itself.

Personally, I thought his argument was very reasonable, and I also appreciated that the interviewer pressed him where appropriate to draw out some quality discussion.

(I am not an expert on anything.)

It's probably a bit unfortunate that this Piketty interview is getting prominence, because the whole question of analogies or disanalogies to Germany's war-related sovereign debt problems is mostly beside the point. The most urgent disanalogy in Greece's case is to what happens to just about every other country from A to Z that goes broke and needs to enter an IMF program. The SOP is for their pre-existing sovereign debt to be haircut as far as is necessary (if it is necessary) to make their debt burden clearly sustainable from then on, as a central part of the program designed and supervised by the IMF. This is what the IMF was designed to do from Day 1 and no-one, including Germany or any Eurozone core countries, is running around shouting that the IMF system is morally depraved, or a source of unacceptable moral hazard or a surrender to blackmail etc. etc. because it frequently results in program countries defaulting on a large chunk of their sovereign debts. And compared to the rogue's gallery of mostly developing countries that enter IMF programs Greece is probably not exceptionally profligate, corrupt, structurally rigid, unreformable and so on.

Instead Greece was moved onto the special, ad hoc Troika scheme, in which a country with a greatly unsustainable debt burden was given more loans but originally no debt relief at all, and great efforts were made to make the country run primary surpluses so that the creditors would not only get all their money back but make a profit. Greatly inadequate debt relief was only added later on when the original plan had collapsed. I'll let the former head of the Bundesbank explain why:

http://www.spiegel.de/international/germany/former-central-b...

Politically this was a wonder solution for the EU core leadership: bail out their banks by stealth, avoiding the anger of their taxpayers by camouflaging it as a rescue mission for the wayward Greeks. Even better, the whole cost of the EU-wide bank bailout could be sweated out of the Greek taxpayer! Well, not really of course: probably no-one ever expected the official creditors to actually get their money back, but hopefully the defaults would be acceptably far in the future for the politicians, who live hand-to-mouth and election to election. Now that the whole thing has exploded, perhaps sooner and harder than they expected, those EU core politicians are trapped by their earlier lies.

There is one further wrinkle: not only was the Troika fix-up job vastly harsher on Greece as a creditor than a normal IMF program, it was specifically forbidden by the treaty of Lisbon (the solemn document I was asked to vote on twice, as an Irish citizen) articles 123 http://euwiki.org/TFEU#Article_123 and 125 http://euwiki.org/TFEU#Article_125 while at the same time the treaty had been crafted to allow Euro member countries continued access to normal IMF programs while remaining inside the Euro. Or at least, everyone thought that it was specifically forbidden, until this prohibition was no longer convenient, and the wizards at the ECJ (the same visionaries who recently discovered the "right to be forgotten") helpfully made it go away.

But if we do want to talk about the German example, we don't have to go back to the Marshall Plan either. The US Fed's cross-border largesse in 2008 would be a good place to start.

Although you and I probably disagree on root causes and perhaps solutions, this was a great summary. Thank you.

Reading the HN comments, it occurs to me what a total mess this is. People on all sides are not happy. Furthermore it's one of those he-said, she-said stories where each party has a long and detailed argument for why outsiders should consider things one way or another.

Along those lines, I am very unhappy that Piketty chose to give this interview on this topic. I want to see his ideas about wealth being put under harsh light and deep scrutiny -- after all, he's supposed to have something important to say in this matter. But now he's just turning into another Krugman -- economist-cum-pundit. That's probably great for his career, but it makes honest and objective evaluation of his ideas much more difficult because from now on everybody's going to conflate his political views on various matters with his academic ones. Bah.

So what you're saying is Greece needs to declare war on the rest of the Eurozone, and then lose badly?

> I'm sorry, no matter how bad 2008 was, it was no World War. His inability to grasp this just boggles the mind.

Ss far as I could understand, that's not the point he's making, at all. He's saying that financially punishing countries is shortsighted and counterproductive and that we have recent examples of doing just that (1918), and doing the opposite (1945/1953), and clearly different outcomes.

The rest of your points are irrelevant - he's not discussing post WW2 recovery in Germany in a void or for fun, like we are, he's trying to steer a super important debate about a Greek exit, which has so far been very simplistic and populist (the greek are lazy and must learn their lesson, even if it means they'll be in debt for 40 years). So he's also pointing out that it just so happens that the same countries are involved, then and now, and calling for a bit of a look at _recent_ history.

Also, points for dropping 100% unsubstantiated nationalism accusations right at the end, great!

Are you saying that initiating (and losing) two world wars is less bad than financial mismanagement and corruption?

Keep in mind that Nazi Germany did a lot of damage in Greece, and still hasn't repaid that debt either. Insisting that Greece pays back all their debts when Germany is so good at avoiding to pay their own, is outright hypocritical.

Sending an economy into destruction like this is a terrible idea, and goes against everything the EU should stand for. It's disgusting to see Germany at the helm of such a ride to hell.

It actually reads to me that he is saying something quite similar to what I have been thinking recently: countries go bankrupt, we need a bankruptcy court/procedure for governments.

The US needs it for its bankrupt local governments. The EU needs it for member states.

The rationale behind bankruptcy is this: if a borrower cannot repay their debts in full, the lender cannot receive them in full. This isn't negotiable. It's an artefact of reality. Given that the lender will not receive their payment in full, it makes sense we may as well have a process that acknowledges this fact and moves things forward. There is no point to debtors prisons. Debt means risk and if bankruptcy happens, that risk plays out.

The current Greek situation is exactly that. The troika cannot receive its repayments in full. Greece simply cannot repay them. It's not marginal. It's not possible if only Greece would... It's not going to happen. They owe too much and their economy is in collapse. It is game over for these loans.

Sovereigns don't need bankruptcy protection, they just stop paying.

Somebody will always lend money to states, even poorly managed states. At the end of the day, three people with the most to lose are the richer countries of the world, because they are also in debt, and a sovereign default will screw up all of the debt models.

In the U.S., there is municipal bankruptcy. U.S. States cannot go bankrupt, which will be interesting when states run as poorly as Greece (ie Illinois) get hit by a tidal wave of retirement obligations.

For a court to mean anything, you need an authority to enforce its decision. You would need some form of international army. Who would control it? Who will enforce a decision against Russia or China (or the US!).

EDIT: (I should have read to the end): I disagree with Pickety on his "maximum allowable budget" committee. It's an unnecessary violation of sovereignty, and I think that sovereignty is important.

If bankruptcy norms existed, they could create a market discipline. As government approached the intervention threshold, their bonds would decrease a little in value. Also in my governments-can-declare-bankrupcy world, this can happen a lot sooner and the defaults can be much smaller.

The only rational argument for 'a country MUST repay its debts!' that I can make is if it is being charged interest on those debts no higher than the CPI increase of that currency.

The whole point of interest in a loan is to cover 2 points: 1) The lost purchasing power of that money i.e.: the cost of inflation over the period of the debt, and 2) The priced-in risk that the loan will not be repaid in a small portion of cases. This is why unsecured debt attracts a higher interest rate than secured debt and is why all debt incurs a higher interest rate than inflation.

I don't understand why popular opinion towards debt seems to invert at some point. I'm sure if you asked these same people whether bankruptcy processes should be outlawed many would say no, but yet at some point between 'person' and 'nation state' their opinion changes without changing any of the inbuilt mechanisms for supporting that process (interest on a loan to price in risk).

It's a fascinating example of once you make something sufficiently faceless, peoples' views towards it changes. See also: politics towards social classes, etc.

This all reminds me of what we've learned about forest management. You see, for a long time we thought that all forest fires were bad, and set out to extinguish fires whenever even a small one broke out in a forest. After a few decades of almost no fire, a huge amount of burnable debris collected in the forests, and now, when fires break out, they're gigantic and far, far more damaging than normal forest fires.

Likewise, central banks have been working very hard to keep interest rates near zero. Any interest is perceived to be a bad thing (the big piles of money held by the large private interests become relatively smaller under inflation), and has thus been held in check. Normally, when things go somewhat badly for a country, they can issue a bunch of bonds and inflate their currency a bit to take up the flack. But with the Euro, there's no opportunity for member countries to inflate their own currencies to smooth out the bumps, and strong pressure from the overall Eurozone to keep interest rates low. The normal control mechanisms are suppressed, leading to bigger explosions when things go really wrong...

Hey sdenton,

I agree with a lot of what you say about how Greece needs it's own currency to inflate, but sometimes I don't know if someone has a non-mainstream opinion or just needs a little help with consensus economics. So if you are like me a student of economics this post will hopefully help clear some things up. If not then I guess we disagree and the next person to read this post will have a better understanding of the different views of monetary policy present in economics :).

The consensus view in economics about issuing bonds is that it moves the needle away from inflation and towards deflation. Think of money in a very simple supply and demand model. More (supply)money means it is worth less. When the government issues bonds it auctions them off and takes money from people(out of circulation) in return, reducing the supply of money. This leads to less money, which is worth more(deflation, or disinflation).

The consensus view about lowering interest rates is that it leads to inflation. Imagine a country with a long term interest rate of 10%, then the FED turns the dial down to 0%. Vick the VC, previously had to average 10%+ on all of his start up investments because investors would move their money to banks(and make 10%) if he made less. So Vick previously only invested in the best start ups, all ex-googlers and previous entrepreneurs. But now he only needs to break 0%, so he invests in all the maybes. This leads to more start ups and more dev positions. Now if we go back to supply and demand, more openings(demand) means greater price. This same things happens across the entire economy. Many projects/start ups/buildings get funded that weren't before because of the drop in interest rate. And these projects create openings, leading to higher wages. Since labor composes most of the goods and services we consume, when we pay more labor, we pay more for good and services call it inflation.

> When the government issues bonds it auctions them off and takes money from people(out of circulation) in return, reducing the supply of money.

Where did you get that idea? Governments usually borrow money so they can spend it. That money isn't deleted or burned, it heads right back out of the government into the economy.

this is wrong. in the Eurozone the target value for inflation rates was 3%. problem was that while most countries got over 3% Germany was much lower, thus damaging the relative competitiveness...

recently the euriborturned negative- the reason for that was to increase the money available to the economy as saving on bank accounts lost attraction and turned to stock exchanges...

Everyone here seems to be criticizing Piketty for weird reasons. He is not saying post-war Germany's debt is the exact same thing as the current Greek crisis. Pointing out parallels isn't same thing as saying two situations are equivalent.

His point is that this isn't a "moral" decision between two peoples. It's an economic decision between nations.

Thank you. When a specific comparison is made between two things, people are too quick to emotionally point out the obvious and irrelevant fact that some differences exist, too.

..especially when he's specifically expanded on that point in the same article. In a situation that certainly warrants more nuance than can be conveyed in a Tweet-sized headline, the supposedly "enlightened" HN crowd should really RTFA.

This is just stupid. The German regime that racked up the WWII debts was destroyed and its leaders suicided or executed. The entire country was split in half by the war. The regime in power when those debts were rescheduled was a completely different entity. And Greece enjoyed similar, if not proportionately greater, economic support at exactly the same time. The Marshall Plan started in Greece, after all.

And there are enormous differences in the uses of the new debt capacity. Germany used the capacity to rebuild its economic capacity. Greece would use its new capacity to fund further welfare transfers and tax dodgers. Germany did not use the new capacity to repeat the same mistakes that created the old debt (and the vastly more important war). Greece would continue the exact same policies, and arrive at the same point of demanding debt concessions.

> The German regime that racked up the WWII debts was destroyed and its leaders suicided or executed.

Yes, but most of the people who enabled that regime to do its work, were still around. It's not as though the entire population of Germany was swapped out for a different one, after the war. The average German was not a murdering genocidal maniac, but he did fall under the sway of idiotic fascism, and while it would have served no one's interest to force him to pay the price, there is nothing wrong with pointing out that he did not, in fact, pay the price.

> Greece would use its new capacity to fund further welfare transfers and tax dodgers.

Let's talk about those tax dodgers, then. You make it sound as though the Greek government has some sort of policy in place where they encourage people not to pay their taxes. Rather, the Eurozone is set up in such a way that it is very easy for the rich to avoid paying taxes by putting all their asset in tax havens e.g. Luxembourg and with very little oversight. And the wealthier nations in the EU tend to support this status quo, not the poorer ones.

Greece actually does have such de facto policy, through its miserable and corrupt tax collection mechanisms.

Those other countries seem able to collect tax to fund their governments.

Are you denying the existence of tax havens in the EU?

There is a difference between having tax loopholes and being a state that doesn't collect taxes properly and where tax avoidance and black work is everywhere.

Greece is the latter. Having been in Greece several times, it is very unsettling to being issued fake bills all the time for everything.

A famous example is the swimming pool tax avoidance:

http://www.zerohedge.com/article/greek-tax-avoidance-101-cov...

Some more information:

http://uk.businessinsider.com/this-is-the-real-reason-greece...

Without knowing anything about the details of it, I am immediately suspicious of the truth of the swimming-pool allegation simply because of how universally it is mentioned in discussions of Greece's economic situation. Anything which gets used that ubiquitously, in my experience, ends up debunked on Snopes or Politifact sooner or later.

There's one way in which Picketty is right: it's impossible to force a country to repay their debt.

After WW1 France tried first through international (England) enforcement bodies, and then ultimately by occupation of the Ruhr valley (Germany's most productive region then).

Both approaches failed. Eventually the Weimar inflated their currency until the French debt was worth nothing, workers in the Ruhr valley striked, and extremist political parties promising a return of German dignity flourished.

Once the Greeks decide to refuse to pay, there isn't a good way to force them, short of enslavement.

"short of enslavement"

And that might not work either. My understanding is that some slaves eat more than they produce.

There are ways. See the case of Argentina.

To the best of my knowledge, they haven't repaid. Their access to capital markets is very inconvenient right now -- but they haven't repaid.

If you are willing to accept payment in land, it's quite easy.

You also have to be willing to kill all the people currently living on it.

Wha?

No, they're a pack-in deal.

I don't often hear war as described as "easy". I don't think any of Greece's creditor nations are willing to start a shooting war over a default.

It's not a shooting war unless Greece refuses to pay.

That argument gets thrown around a lot, but it is quite a terrible one.

After WW2, the only Germany which acknowledged war and pre-war debts was the FDR. This was a state in ruins under foreign military occupation, with about half the territory and population of the former German state that had incurred those debts.

If post-war Germany is your standard for debt relief, then Greece is still very, very far away from qualifying.

This was a state in ruins under foreign military occupation, with about half the territory and population of the former German state that had incurred those debts.

OK. So, the Greek government officials who ran up Greece's debt are responsible for that debt. The current government isn't, and in fact the current Greece is in economic ruin courtesy of years of "austerity" imposed forcefully by foreign powers.

This can't be upvoted enough.

It's also ironic that Greece was one of the creditors that forgave a large amount of German debt.

Not only that, but Greece was the country that suffered the second most after WWII (in terms of GDP loss, not human life loss), at least according to this article (point 5)

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7...

Lecturing Germany on its own history is just about the most useless contribution to this debate possible.

Germany and everyone else who foolishly loaned Greece money in 2010--and before--wants to get paid. There is nothing wrong with that. Dredging up the irrelevant past? Not so much.

Or: if I owe someone money, it doesn't matter if they are a nice person or not. I still owe them money, and must suffer the legal consequences if I fail to pay. This is what the rule of law is all about. It protects everyone, even people who are not nice. Even people who are hyopcrites. Even people who are Germans.

This moralization is childish. By all means dismiss the German government's moralization as silly and irrelevant. But don't engage in far more silly and far less relevant moral hectoring of your own.

He's not engaging in moralising. The entire point is that while there's nothing wrong with wanting to get paid, it's entirely irrational to try to force payment no matter the consequences. Especially when both historical examples of similar steps and numbers from the last few years in Greece demonstrates that such a policy is likely to make matters worse, not better, not just for Greece but for the creditors as well.

It's incredibly disingenuous to compare defaults on war reparations, like the Treaty of Versailles, with loans willfully entered into by democratic governance.

"Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War."

Actually I remember an article posted a while ago right here on HN about the last payments for WW1. It is possible that Mr. Piketty may not have updated information, but it is also possible that he deliberately ignores some facts in order to stir a bigger debate.

This one http://www.bbc.com/news/world-europe-11442892 ?

"By the time country was reunified, in 1990, the world had changed dramatically since the days of Versailles, and policymakers decided to write off most of the original sum."

So he's still correct.

"This one http://www.bbc.com/news/world-europe-11442892 ?"

It was a similar article.

"So he's still correct."

The Germany's case was very, very different than that of Greece. After the both wars the winning forces just dictated the sum and the loosing forces had very little saying in the mater. It was most likely an exaggerated figure to start with, probably out of PR reasons - "we made them pay, dear people!" Later, when the emotions faded for the most part, a more realistic figure could be put in discussion and sold to the wide public as an act of generosity. Now let's talk about Greece and how many parallels can be drawn here. Greece was not being dictated figures of debt, Greece took the money willingly. Well, one could argue that only a small political elite made the decisions, but the money were actually reaching the average persons too, as budgetary salaries and pensions (and I bet they all enjoyed it). Write off some of the debt? There's no real reason to do that (but if that would be what it takes to bring them to saner fiscal practices, I would be OK with it anyway). So, Mr. Piketty may be "correct" in some twisted view in which paid-in-full war compensations are not actually recognized as such¹ and more importantly - he wants to be correct in an even more twisted context that puts on the same footing a subject of dictated-upon debt and the one of self-inflicted debt.

¹ Because the war winners have chosen later to adjust low the asked war compensation, and by doing that they manage to morally deny the "repaid" status. They could however have managed to achieve just the same by adjusting high (i.e. continuously calling for higher and higher sum so that it could never be paid in full).

Help me understand something.

Piketty seems like he is in favor of repaying this debt by "inflation, a special tax on private wealth, and debt relief."

But, he is against Greece leaving the Eurozone. So, how can they inflate their currency?

Instead of inflation, which is impossible if Greece shares the Euro currency, is he suggesting that some percentage of Greece's debts just get knocked off? That would achieve the same result, I think.

So I've been vaguely following the Greece and Puerto Rico situations (the Greece situation is causing me to put some trading strategies on hold), but there is something I don't understand about it. How come so many left wing advocates (Piketty, Krugman, etc) are coming out advocating for Greek bailouts?

Greek debt is literally impossible to pay as it is. They're not advocating default; they're advocating for the creditors to accept reality, write down their losses, and move on.

Because Greece has a radical left wing government.

The term "bailout" is too ambiguous. The lefties prefer some form of debt-forgiveness combined with other measures for eventual partial debt repayment. Most importantly, the lefties don't want to cut Greek pensions and certain other state spending. As Varoufakis explained it, he wants qualitative reforms rather than parametric reforms. Instead of "cut spending by another X percent", he wants reforms such as consistent enforcement of tax collection. In contrast, the IMF, etc. are trying to take the easy way out by asking for parametric austerity increases -- keep doing the same thing, just more harshly -- which is unlikely to succeed.

24 In the process, one of his debtors was brought in who owed him millions of dollars.[c] 25 He couldn’t pay, so his master ordered that he be sold—along with his wife, his children, and everything he owned—to pay the debt.

26 “But the man fell down before his master and begged him, ‘Please, be patient with me, and I will pay it all.’ 27 Then his master was filled with pity for him, and he released him and forgave his debt.

28 “But when the man left the king, he went to a fellow servant who owed him a few thousand dollars.[d] He grabbed him by the throat and demanded instant payment.

“His fellow servant fell down before him and begged for a little more time. ‘Be patient with me, and I will pay it,’ he pleaded. But his creditor wouldn’t wait. He had the man arrested and put in prison until the debt could be paid in full.

Germany was rescued after WW2 to drive the European economy. Without German exports the continent would have had no chance to recover. It's sure ironic that Germany first destroyed the continent and then profited by rebuilding it, but history doesn't seem to care about irony much.

I think the 'Germany never paid'-argument is flawed. The Marshall plan would not have worked if Germany had been indebted. Instead this happened: https://en.wikipedia.org/wiki/German_reparations_for_World_W...

If Greek defaults without paying their debt Germany (=tax payers) is about to lose 90 billions. I'm not sure how this is profiting...

That Wikipedia article says that Germany did not fully pay its debt to Greece. So, I don't see your point.

If Greece was not on the Euro, it would simply print money and inflate its currency until it could easily pay off it's debts. That gives you the same result as what Germany did, which was to basically only pay off some of their debt and just forget about the rest. The debtors lose, but hey, that's the risk for loaning money, right?

Sure there is some debate about a possible debt from Germany to Greece for crimes committed in WW2. That's a big discussion by itself. Doesn't change the fact that the original article ignores the Marshal Plan.

Anyways if Greek was not in the Euro it could devalue its currency. Which would benefit their exports, if they had any. However their debt would still be payable in Euro and the new currency would have a terrible exchange course. So no win. There are scientist who say the real estate market might boom in such a case. Since most Greeks are home owners that may provide some cash in the short run: International investors and rich Greeks who transfered their assets out of the country before the crash will buy in.

It's still unclear if a state can actually default. I guess if you're not dependent on import you could risk not paying back your international partners(/enemies). There are examples of countries regaining some power in isolation.

I agree about the risk of lending money, that's probably the reason why so much of this money was used to decouple Greece finance market and ensure existing (private) contracts were honored.

> However their debt would still be payable in Euro and the new currency would have a terrible exchange course.

Ahh, I didn't realize this, but yeah, you're right. The debt would stay in Euros...

Or would it? Maybe you switch to a new currency at 1:1 (at the start, of course it drops immediately) and your debt uses the new currency too? Who knows

> It's still unclear if a state can actually default.

Its happened numerous times in the past, so its eminently clear that it can actually happen.

Yes you are right. I meant if a state can get out of his financial obligations by defaulting. I read somewhere there is nothing like personal bankruptcy for states. Argentina even lost a court case?

Everyone always seems to forget in these discussions how fantastic for German exports having instability in the Eurozone is...

Exports have been an important part of the German economy for decades. People aren't buying German products because they happen to be cheaper now and the won't stop buying them should they get more expensive.

>>> People aren't buying German products because they happen to be cheaper now

Well, I suppose you can just make up statements like that if you want. I could say that basic economics disagrees with you, but what would be the point?

Basic economics don't disagree with me at all. Production in Germany is expensive. If price were the deciding factor German industry would be irrelevant. The reason it isn't is because these products are specialized high quality products. You don't buy them because they are cheaper than some competitor, you buy them because there isn't an alternative product.

The current euro situation certainly helps keeps prices down and allows more people to buy German products and that's a big part of why the German economy is doing so much better than anyone else. It wouldn't be much worse with a German currency either though.

Yes, I get it, German exports are fantastic and they have been made even better by the Greeks devaluing your currency! It's great that you agree with me!

One must note, that this interview was given to the German newspaper "Die Zeit". So its important to note, what he did not mention:

The repayment of Germans debt is only delayed till Germany has a peace treaty. The 2+4 contract is not a peace treaty, but deliberate "instead a peace treaty" just allows the Russian occupied part to join the US, UK and French occupied parts.

The Euro-Zone is facing a dilemma. A debt cut, followed by inflation and taxing of private assets, would require that Greece still has monetary sovereignty. But all Euro states, even Germany and France, gave up their monetary sovereignty. None of them is a complete sovereign state anymore. An obscure bureaucracy in Brüssel is creating laws, that national governments just have to sign. And entering EU is like a roman Catholic marriage. A nation can join, but not leave EU.

it's not at all anything moral. it's business. the french and german banks lent to Greece not out of charity, but of profit, a profit earn at the risk of insolvency. Now the Greeks can pay back, that is, the french and german banks failed their business. if the EU is to bail out, it's bailing out the BIG BANKS, not the Greek People. Clear ? Business is business. why the banks would do this risky business, because their principle amount and the interest earned are guaranteed by EU. the situation now is that if the banks win, they have it all; if the banks lose, the eu people pay for them. if you cant help blaming someone, blame the BANKS and their ruthless risk taking.

Wow, he did not ever back down. An enjoyable read.

i'm sure that if the Greeks have the potential of killing as many people and as cruelly as the German do, they would be tolerated and excused, whatever they have done. It just happens that Greece is a small and weak nation that everybody can safely point a finger at and accuse them of every problem there is. it does not just happens to the Greek, but to all the disadvantaged.whenever there's a crisis, some group would be targeted. they caused it because they are lazy, they're indulgent, they're irresponsible, they are weak, they're immoral,etc.be it women, colored, the poor,the illiterate, Jews, you name it.

I feel sorry for the Greek people, but I personally favour throwing them out of the Eurozone if they default on the debt.

It will be a very dangerous signal to send that you can borrow money, and not pay it back without any retribution. This is particularly important since more countries are going in the same direction as Greece (I think Spain and Puerto Rico are close, but I might be wrong).

Besides that, it also hurts the confidence towards the Eurozone if the countries in it can behave this way.

Also, am I the only one that finds it weird that they wait until after the deadline, to vote on whether or not to pay the debt back?

Pikkety's case is essentially that debt is not sacrosanct, and that treating it as you are is counterproductive.

Sometimes the creditor must share some of the pain, in order to save (even himself) more pain down the line.

They did. They took a hefty haircut of more than 50% (some sources say 70+%) in exchange for near certainty of getting paid, i.e. basically the rest of the EU taking over the remaining debt.

I'm interested in the source(s) for these numbers, if you have them.

Private creditors took a haircut. Government owned entities, including the German and French national banks did not take any kind of haircut at all. And at that time, it was clear that the debt write down wasn't enough --- but for political reasons, the German and French national banks didn't take a writedown, but instead pushed the Troika to play a game of "extend and pretend". (i.e., let's pretend Greece will eventually be able to make the German and French banks whole, no matter what the cost to Greece.)

What you don't understand is that a debt represents a risk to the lender, not a guarantee. If a debt were a guarantee, then there would be no basis for charging interest.

In a well regulated system, the people who make bad bets are not entitled to retribution. They are "entitled" (read: expected) to go out of business. At the very least, they suffer embarrassing losses that they must explain to their shareholders.

"Moral hazard", properly understood, is a term used to describe conditions that encourage reckless lenders. The threat of default is a good thing. That's what keeps otherwise rapacious lenders fearful enough to excercise good judgment and prudent restraint. Indeed, in advanced economies, the power of bankruptcy judges to wipe out debt is seens as an essential component of healthy capital markets. Bad lenders get wiped out, and take the money of their imprudent investors with them.

That's what should have happened to the private lenders who originated the Greek debt. Instead, they got bailed out by EZ members who are following up one bad choice with another in promising their electorates that they can collect from a nation manifestly unable to pay.

>If a debt were a guarantee, then there would be no basis for charging interest.

That's going a bit far. The borrower would still pay interest for the use of the money. Just not very much.

> If a debt were a guarantee, then there would be no basis for charging interest.

Time value of money?

Well put. Yet all our banks who have been reckless lenders have simply been led to the trough of unlimited QE to short circuit this healthy mechanism that you cite. We'll pay more in the end because of it.

According to this guy's argument, we have:

- People and businesses who save money instead of spending it, get their wealth confiscated by the state indirectly through inflation or directly through the "special tax on private wealth"

- People, businesses, and other countries who help the state out by loaning it money have those loans retroactively converted into outright gifts by debt relief measures.

So the solution to fiscal irresponsibility is to turn the fiscally responsible into...I believe the technical term would be "suckers," or maybe "bag holders."

Economics isn't a morality play. Throughout history there has been debt relief and debtor jail... It depends on circumstance and power.

The blame here, like the GFC, has to lie with the lenders, who are sophisticated investors making very large profits from loans to unsophisticated or (politically) pressured borrowers. The lenders in this case assumed the loans have sovereign risk, but countries have risk too and judgement day has come. Take your licks, write down the loans so they are repayable and move on. If not then this will likely become a far bigger problem for the world, and the lending institutions.

The lenders presumed that Greek debt would always be acceptable to the ECB as collateral, and thus would always be worth face value. This analysis of ECB collateral policy proved correct. The blame, then, lays in the policies and signals of the ECB, which were transparently dictated by the political urgency of keeping Greece in the Euro.

Had the Eurozone and the ECB adhered strictly to their budget rules, and penalized departures through ECB collateral policy, we'd be in a very different place. Of course, had those players had used proper accounting and figures, Greece would never have been qualified for the euro in the first place.

Sovereign debt is inherently unsecured. It's a credit card for the government, nothing more. The primary motivation for servicing the debt is that it will enable more borrowing. And like people, countries don't pay off their debts for all sorts of reasons...not every default is created equally. At the least, Piketty is being intellectually dishonest. Personally, I think he is really just trying to appeal to the underdog by pointing out this poor analogue.

The medium page is not viewable for me apparently due to a copyright issue. Here is an alternative site for the full transcript:

http://www.zerohedge.com/news/2015-07-06/piketty-germany-has...

I'm not qualified to judge whether Piketty is correct but I can offer this analogy. In the past, when I have loaned money to friends and family, my attitude was "kiss the money goodbye". If the money was spent wisely and served a useful purpose, I was happy. It's nice to get repaid, but it's not essential.

Here's the problem: Merkel can't politically justify to give Greece more german taxpayer money because it isn't spent wisely. After 5 years of crisis, Greece still has a primary deficit, while maintaining more extensive welfare programs than most EU Members. Even in the case of debt forgiveness, they would still have a massive household deficit and be in the same situation again soon.

So it's not about getting money back, it's about not burning more money.

> After 5 years of crisis, Greece still has a primary deficit,

Greece had a primary surplus in 2014.

http://finance.yahoo.com/news/greece-revises-down-2014-prima...

> while maintaining more extensive welfare programs than most EU Members.

What extensive welfare programs would that be? The 12 months of unemployment insurance? They don't even have a means-tested program to ensure a subsistence minimum for people younger than 45 years!

http://www.keepeek.com/Digital-Asset-Management/oecd/governa...

Sorry, first the outburst, then the argument:

Such a load of bullshit!

The reason: What are you talking about? Generous? Currently, Germany is profiting from Greece as it extends loans at comparatively high interest rates.

The interviewer suggests with his question that it's about generosity? (come on!) Piketty responds that Germany is profiting.

Using the math I learned, adding up say 5 years of 5% doesn't even come close to the 50%-80% haircut that's gonna be needed. So how is there profiting?

Even worse: In the end, the creditors of sovereigns are rarely other sovereigns but banks and funds. The former will be probably bailed out by the taxpayer, the latter is usually pensions of taxpayers. Of course, the sovereigns themselves are funded by the taxpayer, too.

So no matter the result, it's not about generosity, there is no profiting (except for the few) and someone's got to pay (debts don't disappear) and he (the taxpayer) is not even mentioned.

I sincerely get angry when I read such "elitist" opinions that completely contort and ignore facts.

http://www.nationofchange.org/2015/07/05/greece-what-you-are...

Debt cuts are one thing, but I see no reason to believe that there's a wide enough acceptance for a EU-wide fiscal policy to go along with the unified monetary policy. I might see France and Germany going along with that (mostly because it'll basically be their policy), but the UK won't have none of it -- and I don't think the PIIGS states would accept it either.

On the other hand, if things keep going wrong, people might just be forced to accept this as a fact, I just hope it won't be too late by then.

So, Piketty wants to forgive debt, and he thinks it's a bad idea to kick states out of the Eurozone, since that supposedly will hurt confidence. And he wants a new European institution that will determine the maximum allowable budget deficit, in order to prevent the regrowth of debt. But if kicking states out is taboo, then I wonder what he would do if a state exceeds this maximum allowable budget deficit?

If you believe Piketty, debt is never meant to be repaid and no one should therefore ever invest in sovereign debt. That would solve the debt debate. No creditor = no need to worry about whether we want to pile more debt.

And he has a point. I personally don't believe that any of the US, Japanese and European sovereign debt will ever be repaid. The whole thing is a ponzi scheme. Investors hope that their investment will mature before the music stops. That's worth AAA...

It is not a Ponzi scheme if it is not always and necessarily growing.

Most western countries can't even afford paying the interest of their debt. So as it is, it is kinda necessarily growing.

But the ponzi scheme aspect is rather the fact that countries can only pay back debt with new borrowing. If investors stop rolling their debt, even the US would collapse within a few months.

I thought the whole premise of modern economics relies on the assumption that the economy has to grow. Time value of money implies that the money has to create value -- in more specific term, if bank lend out $100 and want $102 back, without the economy growing the money supply can't have the extra $2 (printing more money without the economy growing cause inflation, then the bank will want more than $2 interest and it's the same, so we can ignore that).

> Most western countries can't even afford paying the interest of their debt.

If that were true, the countries would be in default. And yet they are not.

France for instance has a primary deficit: https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=325.GFS.A.... I.e. the state budget is in deficit even before the interest on the debt. So it borrows just to repay the interest plus that primary deficit.

These countries are not in default but they are definitely broke and reliant on debt to an insane level.

I agree that almost all countries in the world are in an insane situation, but that's still not a Ponzi scheme. They can repay the debt if they want, they have other sources of income other than loans -- and these are still much larger than these loans they take every year plus interest --, namely their taxpayers pockets.

I agree that this is not good, not fair, and that it should be a crime to get other people's money like that, but it is not a Ponzi scheme.

They cannot repay this debt. France debt to gdp is reaching 100%. They cannot even gather the political steam to stop increasing their debt, and they have a pension wall coming their way, an ageing population, an increasingly illiterate and unemployed youth. This debt will never be repaid.

And like all individuals who keep borrowing more to sustain their life style, and who use the credit card to repay the interest on their loan, it stops when creditors loose trust in them and stop bringing fresh money. And then it collapses. It is an almost identical mechanism than a ponzi scheme.

A GDP growth of 0%, let alone "negative growth" is considered a disaster for any country.

Wouldn't that be a pyramid scheme? A ponzi scheme is fine as long as everyone doesn't want their principal back at once.

There are multiple ponzi schemes here: first and foremost the very idea of nations (victim: the individuals), then that of centrally issued money (victim: the individuals), then that of a regional zone of political unity built upon these established ponzi schemes (victim: the individual's already questionable right to self-determination through their 'nations'), and finally that of the global economy' incorporating other major examples such systems - chiefly the US and China (victim: the planet).

One can scream "debt must be repaid!" while running limited liability companies that can declare bankruptcy and allow them to walk away, in countries where political will can be bought on the open market, and media is openly dominated and subtly influenced by corporate and political contributions and donations, all while the global environment suffers and we are soon to have serious issues meeting even our basic human needs like fresh air and water. One may even consider oneself to be 'right' in doing so, however, one is also ignorant of a wider truth.

What we really need here are some proposals for alternatives, and some people willing to try them - such as Greece.

It's interesting that Piketty is advocating perpetual debt slavery for the people he pretends to champion the most: the non-rich.

It's not the 0.1% that need worry about nations taking on ever increasing debt burdens, and the pressure the interest puts on budgets (including entitlement and welfare systems). It's everyone else that will be crushed by it.

It might not be the 0.1% but it is certainly the 10% or 20% that should worry. Savings and pensions will be wiped out. One can find comfort in physical assets (property, gold) but the history of Europe and of the US tells us that it is easy to get expropriated (all property in the communist bloc, gold in the US, property in Germany after the war, etc...).

I'm not sure we read the same interview. Piketty called for debt relief across the board in Europe. Debt jubilees are a thing throughout history. Similar to the ending of Fight Club, but voluntary and without the bombs.

It's not a Ponzi scheme. As long as investors have confidence in the faith and credit of the debtor to meet the contract, we're good.

Otherwise, the debtor will just ship pallets of printed currency to the creditors.

> The whole thing is a ponzi scheme.

It absolutely is. If you think of money as units of labour instead of 'wealth', it makes more sense. Every year, more people are born, the workforce grows, more things are produced, more food is eaten, etc...

The money supply has to reflect that there's always more of everything. This means inflation. And it's not a bad thing.

> The money supply has to reflect that there's always more of everything. This means inflation. And it's not a bad thing.

Wait, what?! You don't understand inflation. If there was always "more of everything", the result would be deflation. More food -> food costs less. More cars -> cars cost less. More apartments -> apartments cost less. Economics 101.

You're forgetting that, as part of more 'everything', that also means more consumers, and more money printed...

Historically, a small amount of inflation has been beneficial. Nobody likes to take a wage cut. Also, even a small amount of deflation quickly makes debt repayment unsustainable. It's hard to repay your loan when you're taking in less money. Greece will never get out of this cycle until it's economy picks up.

That's not a problem for as long as you can print money (and are willing to suffer from high inflation).

This guy is a reknowned economist? He's conflating "war reparations" with "external debt", and also seems to have missed the big fanfare recently when Germany paid the last of it's WWI reparations - instead he claims they never paid any WWI or WWII reparations. Similarly, 'England took 100 years to repay' he claims as the way forward, yet ignores that Germany took 92 to pay their WWI debt[1]. Not hard, I guess, since he thinks that there was no repayment at all.

He also talks of Germany's post WWII debt completely independently of the Marshall Plan and the Allies pouring money in to counter the Soviets. This is clearly just an axe being ground.

[1]http://www.dailymail.co.uk/news/article-1315869/Germany-end-...

Germany was given a significant discount on its external debts in 1960, and very generous repayment terms.

"The total under negotiation was 16 billion marks of debt resulting from the Treaty of Versailles after World War I which had not been paid in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the U.S., France and Britain. Another 16 billion marks represented postwar loans by the U.S. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.

An important term of the agreement was that repayments were only due while West Germany ran a trade surplus, and that repayments were limited to 3% of export earnings. This gave Germany’s creditors a powerful incentive to import German goods, assisting reconstruction." [1]

[1]https://en.wikipedia.org/wiki/London_Agreement_on_German_Ext...

"Making 50% of the reparations" is considerably more than "never paid their debts", and while on favourable terms, we're also talking about half of Germany doing this - the country was torn in two, and was at the pointy end of the Cold War.

Forgiveness of some of the debt has also been part of the Greek proposals. It's not like debt forgiveness is unique to the German situation. Pretty much any time some entity is in risk of default, there'll be some degree of debt forgiveness; cue news stories of "creditors getting 30/50/70 cents on the dollar".

Keep in mind also that Germany underwent massive social changes as part of their recovery process - it certainly wasn't 'business-as-usual'. That Germany managed to do so well speaks to the industriousness of German culture, not that they were 'let off lightly'. If Greece gets handed money without significant reforms, what will be some fundamental social, political, or cultural differences between 2010 Greece and 2020 Greece?

> He's conflating "war reparations" with "external debt"

War reparations are a type of debt. The terms aren't mutually exclusive. Nor is Piketty saying they are the exact same thing. I fail to see your point here.

> instead he claims they never paid any WWI or WWII reparations.

Where did he say never paid "any"? He very clearly outlines two methods of eliminating debt, and makes the case that Germany used the very method that it is now denying Greece.

Your post seems very straw-mannish.

> The terms aren't mutually exclusive.

'Conflate' doesn't mean that the terms are supposedly mutually exclusive.

> Nor is Piketty saying they are the exact same thing.

The only example of 'external debt' Piketty is talking about is war reparations. There is nothing else suggested there - it's all war reparations. That's not the same kind of debt as the debt that Greece faces.

War reparations are an arbitrary debt anyway, only paid by losers. Where are the war reparations the US is paying Iraq for storming in and destroying everything? Germany doesn't shoulder sole responsibility for WWI; they simply lost, so the other guys got to demand payment. It's not like Germany exchanged that debt for goods or services rendered, living beyond their means. And even when the war reparations were being decided on, there were plenty of people on the victor's side saying "whoah, this is ridiculous!".

What does it mean to be accused of 'not paying your debts' when even people on the other side are calling for the arbitrary punitive measures to be smaller?

> Where did he say never paid "any"?

True, he didn't say 'any', but there's still plenty of other problems in what he's saying - such as the timeframes for repayment. And there is zero mention of any of the other political factors involved, such as staving off the Soviets. The situation that postwar Germany is in has little to do with modern-day Greece.

Edit: Another thing that doesn't show up on the balance books in the aftermath of a world war is the redrawing of borders. After both world wars, Germany had it's borders redrawn, and disasterously in the case of WWII. Also, in addition to the financial debt from war reparations, after WWI, Germany had it's colonial holdings stripped.

Neither of these two things are anything like what's happening in Greece at the moment.

Germany's reperations were cut subtantially from the baseline, and he did not claim what you are saying, at all.

You're exemplifying Dunning-Kruger at its maximum: critiquing a world-renowned economist who wrote an 900-page book on the state of income inequality of this century as someone who wouldn't be aware of the history of European debt relief. Get a grip.

Now that this thread's on the first spot of the front page, can we admit HN isn't a libertarian echo chamber?

Was it supposed to be?

You hear the claim annoyingly often.

I am still new here but as far as I understand upvoting is not the same as agreeing.

On HN it is. Let's face it, that's the way it works on Reddit too, the difference is that HN aren't sanctimonious pricks about it.

This has the ring of truth.

Who here is a real economist that has the ability for pointed criticism? Share your thoughts, please.

The countries that were the Allied powers are in no position to call out Germany for not repaying its debts after the second world war because they originated from the way the Allied powers handled the money situation during and after the Great War.

Look at this quote:

> We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s. We need to look ahead. Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.

In my opinion, this economist just wants to be the next Finance Minister for Greece. If the "older generation" (and I don't know how we can call what happened until six years ago a different generation but we'll let that slide) forged books, then cut them off. Cut their pensions. Cut their retirements. Make them come back to work. You can't blame the "older generation" and still let them retire at 50.

It is incredibly insensitive to blame the German victims of the Versailles Treaty. Do people blame Germany for France's greed? I mean it is pretty evident that the growth of Nazis in Germany came directly from what the Allies levied on Germany.

Moreover, to say that the situation in 2008-09 was equivalent to the horrors that people faced before and during the second world is nothing short of rewriting history. I don't think the people who lived through the great depression would take very kindly of statements like:

> To deny the historical parallels to the postwar period would be wrong. Let’s think about the financial crisis of 2008/2009. This wasn’t just any crisis. It was the biggest financial crisis since 1929. So the comparison is quite valid. This is equally true for the Greek economy: between 2009 and 2015, its GDP has fallen by 25%. This is comparable to the recessions in Germany and France between 1929 and 1935.

With all that being said, I must agree with him in one key point:

> A restructuring of all debt, not just in Greece but in several European countries, is inevitable.

Eurozone must stick together. However, the Greeks must realize a compromise consists of a give and take. They must seek answers from those who were in power in Athens before 2009.

In hindsight, even organizing the 2004 Olympics was a horrible idea. But then hindsight is 20/20.

"> We cannot demand that new generations must pay for decades for the mistakes of their parents. The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books. But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s."

Agree with your point. While the quote does have some merit, Germany had bottom up drastic structural change forced upon it before the "youth" were excused.

However, the Greeks must realize a compromise consists of a give and take.

OK, how much more would you like them to give? Another 20% of GDP? 30%? 40%? 50%? Since it's apparent that the goal is to squeeze blood from a stone, just how much blood would satisfy you?

> Do people blame Germany for France's greed? I mean it is pretty evident that the growth of Nazis in Germany came directly from what the Allies levied on Germany.

It's also pretty evident that the rise of Syriza and Golden Dawn in Greece came directly from what the EU levied on the Greek people.

The interviewer completely oversteps his boundaries here. In case anybody wonders: "Die Zeit" is Germany's tabloid version of a politics paper (similar in lack of quality to "Der Spiegel"). This interview illustrates whats wrong with these tabloids very clearly: Bias, ignorance and uneducated employees.

Piketty brings up some good points but the interview is painful to read, like dragging a wet mattress up a stairwell.

So Die Zeit is on the same level as the New York Times, you mean.

It seemed to me that the interviewer was setting up the popular German objections so that Piketty could knock them down rather than actually believing those pretty naive arguments. Or is that the issue you have with it in the first place?

Good point. Still, I would prefer a coherent dialogue instead. I feel like debunking uninformed objections gives those objections more recognition then they deserve. I wish for smarter or at least less stale questions.

Die Zeit is not a tabloid, either literally or figuratively. Maybe you don't like Die Zeit which is fair enough but calling it a tabloid is very misleading.

DER SPIEGEL lacks quality? Would you care to back that up? It's one of the most respected publications in Europe, with excellent investigative reporting.

"Das ehemalige Nachrichtenmagazin aus Hamburg" has it's name for a reason.

breaking: Some random footballer changed from a random team to a different random team!

..now let's push this to all devices.

This is the time to show solidarity by activating our resources and bootstrap a new economy.

The banks together with our rampant financial illiteracy all need to go, are we still not able to scale blockchain transactions? Is there a secure "libbitcoin" written in Rust yet? Do we have super secure and crypto currency focused "micro" operating systems / servers on open hardware?

Where are the people working on this? As a global economy - and civilization - we need to stick together and show some love and ingenuity.

This guy may be pretty good with data collection but his ability to interpret anything is compromised by ideology. His early academic work was solid with only a bit of political bias but now that he is famous he feels compelled to opine about all sorts of things he barely understands so his politics shine through. This Q&A just confirms this trend.

I hope he realizes that he and other progressive economic pundits (Krugman, Stiglitz) are in part responsible for the disaster that is now unfolding in Greece.

"The second method is much faster. ... Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief."

So Piketty is advocating a special tax on the poor. The group of people that can least deal with inflation, with no ability to shift assets or income to avoid it, nor deal with the increased cost of goods in relation to their debased incomes.

The poor don't get taxed if the special tax is progressive (or non-existent at lower levels of income/wealth). Of course, the argument that such a tax being effective is impossible these days due to contemporary mobility of wealth may well be true. That still doesn't amount to a special tax on the poor, and I'm sure you realize Piketty wouldn't advocate for that, whether or not you agree with his positions.

How do you go from "tax on private wealth" to "tax on the poor"?

Inflation is tax on the poor.

Except it's not.

I'm sure you can do better than that as a student of economics...

Of course I can. But I don't need to.

If someone says the sky is green with no justification or explanation, do I need to write a paragraph about why it's not green?

I guess inflation is tax on those who hold cash. Inflation is tax on people who hold cash (or are on a fixed income that will not go up as inflation drives prices up). My thought was that inflation hurts the poor the most. If someone is rich, they probably hold more than just bank notes and government bonds. They hold controlling interests in the markets. As inflation goes up, they will hurt but the rich will not hurt as much as the poor will.

Inflation is a "tax" on those who have savings. In some cases (e.g. elderly retired) those who have savings are poor, but mostly if you have enough money left over after eating and keeping the lights on to save, you're not poor.

Inflation always hits the non-rich the hardest. The rich have countless options for avoiding inflation. Those that are primarily wage dependent, do not.

This is why the wealth gap has expanded so much in the US the last 15 years: the abuse levied on the dollar. Take a look at how nearly every single thing priced in dollars zoomed after 2001, including the GDP of every nation on earth and commodities - all went up simultaneously, often dramatically, and all stopped going up simultaneously. That was the dollar losing value, aka the non-rich in America having their standard of living hammered, while the rich were able to shield themselves from the damage, leading to a vastly expanded wealth gap.

Your first sentence makes some sense, but your second is way off base.

Over a time scale of generations the wealth gap is controlled by larger social/taxation/etc questions. (For one example, in the US more public money is spent educating a rich student than a poor one) However, in the shorter day-to-day or year-to-year time scales it's mostly just a reflection of equity values. The rich have a lot of their money in equities and the poor have none. If at the closing bell the stock markets are up then the wealth gap just increased that day; if they're down it has shrunk.

The "dollar losing value" argument is silly. The opponents of loose monetary policy (and especially gold bugs and bitcoin fanboys) have been predicting sky-high inflation. When it didn't show up on cue their line morphed into this wishy-washy claim that inflation is somehow secretly high. Believe me, when inflation is high its not a secret.

Qua? A 'special tax on private wealth' would presumably be a progressive tax, rather than a tax on the poor. And the tax would presumably be distributed amongst the richer countries of the EU to forgive the debt of the poorer country (Greece, in this case).

Meanwhile, inflation has been kept in check for many many years by the manipulation from central banks. Who does inflation hurt? Well, turns out it hurts people sitting on top of big piles of money, as their pile of money is worth relatively less. So generally, capitalists don't like inflation because it hurts their capital.

Inflation can also hurt the poor if their wages aren't on track with inflation, as has been the case in the US for quite a long time. Annual raises are supposed to offset the effect of inflation, though: The morale of the story is that if you have a politically weak labor sector, the 'cost' of inflation can be transferred from owners to workers. But on the whole, the main impact of inflation should be on the big piles of money, rather than the people with none.

> The group of people that can least deal with inflation

Inflation in the cost of goods and services = wages go up. If you're involved in any economic activity beyond hoarding cash, inflation isn't a bad thing.

>Inflation in the cost of goods and services = wages go up.

In theory, yes.

In practice, the poor also have higher job-switching costs (because of higher uncertainty that they'll find another one), which means their wages can be inflation-sticky upward as well.

Also, what little savings they have tends to be in cash and they find it harder to store it in inflation hedges.

>If you're involved in any economic activity beyond hoarding cash, inflation isn't a bad thing.

Hold on -- all usage of money involves some kind of hoarding, in the sense of "store money in liquid form for some unknown future need". But that's the entire freakin' point of money in the first place: that you don't have perfect knowledge of your future needs. (The coincidence of wants problem by itself doesn't include this -- far more important -- role of money.)

You can see this role during hyperinflation -- people are no longer able to indefinitely defer choosing where to spend their money, but must spend it immediately on something else that will hold some of its value or which sates a current need, and they bear a tremendous cost in having to choose this way.

Monetary policy must strike a balance between "no one spends ever" vs "everyone must spend now", and leaning toward one or the other bears some of the downsides of the extreme cases. Spending too soon and too late have their own costs. It's not as simple as "any storage/hoarding of money should be discouraged".

I wonder if this will end up being "The Interview" in Piketty's career. I realize it was translated but even so it seems the most inartful discussion of a complex subject by someone considered an expert that I've seen in a long while. I reminds me a bit of Linus Pauling's interviews about vitamins where he goes off the rails.

Historical context aside, he does have a good point in the end. Greece's credit card is maxed out and it doesn't appear that any amount of restructuring will make it possible to repay in full.

We will certainly see. Given the rhetoric I expect Greece to simply disavow the debt, leave the Euro Zone, and let them figure it out. It isn't like you can repossess a country.

The interesting question then is what happens next. Either they recover their economy (at least briefly) because they aren't carrying any sort of debt costs and the rest of the EU does nothing? Look to see Spain and maybe Portugal jump ship as well. The EU freezes them out, basically letting the black market set the value of the drachma, and we see hyper inflation in Greece where the price of everything goes up several hundred percent a year (maybe even a month) like it did in Argentina. Or maybe we see the Russians bail them out and give them a favorable exchange rate to roubles which can then be converted into dollars or euros. That sort of "help" comes with some strings that perhaps the Greek people will put up with, perhaps not. No matter what we'll get to see what happens when a country does the equivalent of filing for bankruptcy.

My guess is that Greece will see economic turmoil like the various South American countries for the next 50 years, but its only a guess as I don't think we've been in this sort of situation in Europe since the end of WWII.

I think Piketty could have said that without insulting the Germans.

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