Hacker News Reader

Comment by nugget | Hacker News Reader

All they did was kick the can down the road for the 32nd time. This is the most boring sovereign default in history.

Yes, I feel it will never end. Detroit is almost the size of the greek economy (~ 200 billions USD vs ~ 242 billions USD) and had gone bankrupt without any major waves.

other than it is now a complete and utter wasteland in comparison to the rest of the US?

Yeah but which is the cause and which is the effect?

It was such before the bankruptcy. In fact, the flight of people and businesses out of the city, and resulting collapse in tax base, is part of what caused the bankruptcy.

It was headed that way before the bankruptcy, though. People moving out caused the default, not the default causing people to move out.

The point is that Detroit going broke didn't bring all the capital markets in the US to their knees. It's definitely not good that Detroit went broke. But it didn't break the US economy.

That happened well before. The bankruptcy was the result, not the cause, of Detroit's decline.

Note that "wasteland" is exaggerated. Certainly there are a lot of abandoned buildings and neighborhoods, but many places are still thriving. It's not what it once was, but there's still a lot going on.

Seems that there are a lot of stakeholders who are care a lot more about not having Greece default than was the case for Detroit, while at the same time nobody has enough power to really make anybody do anything. So Greece is coming down to a very long and drawn-out series of negotiations where nobody can put their foot down and say, look, here are the lines you can't cross, and here's where you're allowed some flexibility. Figure it out.

With Detroit, it all happened in an environment with a strong legal system that could keep the various parties under control. The fact that federal (and even state) benefits aren't affected by Detroit's finances no doubt helps a lot too. No matter what happened with Detroit, 70-year-old retired autoworkers living there would continue to receive Social Security. That simplifies things a lot since there's a backstop for how bad things can get in the worst case.

Detroit's insolvency is backstopped by the state of Michigan and the federal government.

Yep, the problem with the greeks is that there is never a crisis. Three months from now we are going to be hearing about this all over again.

This is why Germany and the baltics wanted reform up front - it prevents Greece from screwing around for another 3 years and not making any changes that get it healthy over the long run.

It is in the creditors interest to only provide a short term solution. They want to see reforms actually put in place to ensure the money is going to where it is needed.

If Greece were given enough to tide them over for 10 years how do you think the government would spend it?

Debt management is about a partnership, where financial responsibility is learned but both sides. The creditors are learning to be more cautious and Greece is/has learnt to control its spending.

Reply on news.ycombinator.com