socratesthekidd:
Speaking as "not an economist," I've heard over and over again that the way you jumpstart a flagging economy is with spending... getting money in the hands of the people, often the lower and middle classes, so they can spend it. This stimulates job creation and job growth by increasing demand. When the economy is already going down, making moves to take money away from the people you need to have spending money is bad. Or so I'm told.

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The problem is that there comes a point where government spending is no longer an option. Government spending means taking on public debt, which in turn means someone has to be willing to loan you money. Nobody is willing to loan Greece money.

The other option, which is print more money and accept inflation, is not an option because Greece is on the Euro. If Greece had its own currency it could simply deal with massive inflation, which while not fun, is easier to deal with than their current situation.

The lesson being taught here is it is inherently stupid to have wildly disparate economies using the same currency with no strong central oversight. Somewhere in the rush to get everyone on the Euro this was forgotten. Despite what the Paulites think, one of the reasons the dollar is so strong is because it has a very strong autonomous central bank (the Fed) that makes correct economic decisions without too much politics involved. There is no such oversight for the Euro, and it is now failing because of this.

Bob16: One word solution.

ICELAND

You do realize that since Greece doesn't have its own currency you can't really compare the two, right?

You keep trhowing out "iceland" and don't scknowledge that fundamental difference.

My prediction is that Greece ends up being kicked out of the EU/Euro and reinstates the Drackma. The go through severe inflation and depression. A cult of personality will form around apolitician that rallies the people with talk of bringing back greecian excelence and lots of talk about free stuff for the people. A shooting war with Turkey will ensue over Cyprus. This brings in a lot of the middle east in favor of Turkey and the EU will begrudenly side with Greece. WW3.

liam76: For the people against austerity, I am wondering what you suggest?

Link (new window)

Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer's back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland's leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland's citizens responsible for its bankers' debts, and accepted calls for a referendum.

Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: "We were told that if we refused the international community's conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North." (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)

In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.

RanDomino: Kibbler
It won't be just the Greeks. I can't claim to be an economist, but from what I've read, if Greece goes down, everybody goes down. This will not be contained. We're all exposed.

This. The German/French bailouts of Greece are actually bailouts of German and French banks that hold Greek debt.

It's not even that. If it was, the bailout money would be used to try and get the European banks out from under the Greek debt by paying it down, and they aren't. In fact, the banks continue buying and trading on Greek debt, in the belief that a default just won't ever happen (and if it does, they hope someone will bail them out anyway).

Zeno-25: liam76: For the people against austerity, I am wondering what you suggest?

Link (new window)

Iceland had its own currency, greece doesn't.

spawn73: Kibbler: It looks to me like Greece is going down. From what I've read, that will trigger a series of collapses in the EU. Ireland, Portugal, Spain for a start, and maybe Italy.

Nah it wont. Italy is good, they just issued 10 year bonds at 3.5% so they're basicly safe.

Greece /will/ default, what the EU is doing is to get Portugal in order and insuring no banks will collapse because of Greece. Once that is all taken care of, in say 6 months, then Greece can collapse without bothering anyone.

It's awfully cynical of the EU, but hey, fark Greece, they lied to get into the Euro zone, and they don't keep the promises they make anyway, so, they'll be cut off as soon as the EU has secured everything else.


Sucks for Greece, I guess the EU will donate food so they at least don't starve to death.

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I am gonna go out on a limb and guess that Greece figures out a way to stay afloat for just a little less than 9 months. You better believe the Obama administration is using every ounce of goodwill they have with foreign governments to keep that massive amount of economic uncertainty under wraps until after re-election.

DarnoKonrad: Crunch61: Geotpf: It's a death spiral. The rest of Euro needs to take the hit and cover their own ass, or everybody goes down with the Greeks.

A country with a GDP not much larger than Louisiana's can default and take the world's economy down with it? My, what a flimsy house of cards we've created.

Imagine if after Katrina the Federal Government had said, "On your own -- you get no loans, grants, or assistance for rebuilding, and BTW, you need to start repaying us for those levies" Yea, the Fed bungled a bunch of stuff, but it didn't let Louisiana digress into a failed state. That would have caused real problems for the world economy -- at that appears to be where Greece is headed.

But the European Union is not a country with Greece as a state. If it was, things would be much simplier.

That is, in fact, the root of the problem-everybody shares a currency, but has little to no power over the other countries until they come begging because they are completely farked due to massive corruption and over-regulation and tax cheating. If the Greeks had their own currency, the natural course of action would be that it would become worthless quickly. The bonds foreign banks owned would probably be repaid, but in a near worthless currency.

liam76: Zeno-25: liam76: For the people against austerity, I am wondering what you suggest?

Link (new window)

Iceland had its own currency, greece doesn't.

Exactly why the Euro is a farking stupid idea (in retrospect).

Geotpf: DarnoKonrad: Crunch61: Geotpf: It's a death spiral. The rest of Euro needs to take the hit and cover their own ass, or everybody goes down with the Greeks.

A country with a GDP not much larger than Louisiana's can default and take the world's economy down with it? My, what a flimsy house of cards we've created.

Imagine if after Katrina the Federal Government had said, "On your own -- you get no loans, grants, or assistance for rebuilding, and BTW, you need to start repaying us for those levies" Yea, the Fed bungled a bunch of stuff, but it didn't let Louisiana digress into a failed state. That would have caused real problems for the world economy -- at that appears to be where Greece is headed.

But the European Union is not a country with Greece as a state. If it was, things would be much simplier.

That is, in fact, the root of the problem-everybody shares a currency, but has little to no power over the other countries until they come begging because they are completely farked due to massive corruption and over-regulation and tax cheating. If the Greeks had their own currency, the natural course of action would be that it would become worthless quickly. The bonds foreign banks owned would probably be repaid, but in a near worthless currency.


The European Central bank should be the lender of last resort and everyone in the Eurozone should help absorb the mess by bailing their ass out without however much money it requires. The problem with this is two fold -- sovereignty issues, and resentment in the rest of the Eurozone. But that's really implicit in what they wanted to do -- closer ties in Europe can't be a fair weather arrangement. They *need* to act like a nation state if they want to share a common currency -- or it's going to fall apart.

Geotpf: liam76: Zeno-25: liam76: For the people against austerity, I am wondering what you suggest?

Link (new window)

Iceland had its own currency, greece doesn't.

Exactly why the Euro is a farking stupid idea (in retrospect).

Yeah, it's looking like the monetary union should never have extended past the old ECSC. If Greece is going down one way or the other they might as well stick it to the financiers on the way out.

balloot:

I am gonna go out on a limb and guess that Greece figures out a way to stay afloat for just a little less than 9 months. You better believe the Obama administration is using every ounce of goodwill they have with foreign governments to keep that massive amount of economic uncertainty under wraps until after re-election.

It probably, in a slightly smug way, makes Americans feel good that at least the Europeans has it worse, thus making Obama look better.

Your timeline sounds good. The EU spends the next 9 months isolating the problem to Greece (why else are they giving them loans they know wont be repaid ever?), and then let them fall once the exposed banks are secured and Portugal is safe.

Italy has as I posted earlier already made it by being able to issue bonds at normal rates (7% is said to be the limit, they had no problems issuing at 3.5%), the Spanish economy is basicly sound, it's their banks that has issues, but they have massive assets in South America they can sell if they need to.


So, sucks to be Greece. I don't even understand why they themselves just don't default now. The aid package they recieved was under the condition that their debt would fall below 120% of GDP, and that is already farked 24hours later, as their economy has shrunk so much that it only brings it to 129% of GDP.

Ahead of the call, Wolfgang Schäuble, the German finance minister, said in a radio interview Greece might delay its polls and install a technocratic government that does not include politicians like Mr Venizelos and Mr Samaras, similar to the model currently in place in Italy. (new window)

The Germans are now openly suggesting that the Greeks postpone elections and appoint a technocratic government chosen by EU bureaucrats in Brussels. Wow.

Geotpf: liam76: Zeno-25: liam76: For the people against austerity, I am wondering what you suggest?

Link (new window)

Iceland had its own currency, greece doesn't.

Exactly why the Euro is a farking stupid idea (in retrospect).

I don't think its a bad idea.

Maybe some nations shouldn't have been a part of it though, they could have locked their currency to the Euro if they wanted, and still have the safety valve of inflation that way.

imontheinternet: Debt forgiveness, subby. The words you were looking for are debt forgiveness.

Greece is in too far a hole for austerity to do anything but cause more riots. The only alternative is default, sooner or later, depending on how much good money everyone is willing to throw after bad.

What's the point of debt if we just just forgive it away?

No, these Greeks, and their liberal spend-and-spend-some-more ways need to be made an example of. If everyone riots because they can't all be overpaid government clerks, all the better; some of them might die off.

Survival of the fittest. Germany really is the master country.

RanDomino: watson.t.hamster
hey anyone want to give us a loan to get us by? We totally won't default again in a few years.

Is that a fact, or a myth?

Which? That lenders are weary of people who ask for loans after defaulting and who haven't changed anything that made them default? Or that the greeks would just end up doing the same thing again because they have no incentive to ever change?

DarnoKonrad: The European Central bank should be the lender of last resort and everyone in the Eurozone should help absorb the mess by bailing their ass out without however much money it requires.

The question, then, is what happens after Greece is bailed out? They can either enact austerity measures anyway in order to bring expenditures and revenue into balance, or they can continue to spend as they have been, which would either require them to increase revenue substantially or continue to borrow money.

sendtodave: No, these Greeks, and their liberal spend-and-spend-some-more ways need to be made an example of.


Liberals are tax and spend, Conservatives are borrow and spend. If they had paid for their spending with taxes they wouldn't be in this mess.

fracto73: sendtodave: No, these Greeks, and their liberal spend-and-spend-some-more ways need to be made an example of.


Liberals are tax and spend, Conservatives are borrow and spend. If they had paid for their spending with taxes they wouldn't be in this mess.

How about they are both the same? They both spend more than they take in. Who cares how it gets to be a huge deficit. Its still the same end result. The only way to get back to sanity is to STOP OVERSPENDING. Thats it. No one has the political will to do it, except for a one congressman

fracto73: Liberals are tax and spend, Conservatives are borrow and spend. If they had paid for their spending with taxes they wouldn't be in this mess

I agree! It was the the right-wing shoot-the-poor philosophy that caused this in the first place! The banks played Greece for pay, and everyone went along.

Why do banks prosper while countries fall?!

And now Germany is right there to kick them while they're down. Truly a barbaric country.

DozeNutz: How about they are both the same?

And which party should we vote for?

Wolfgang Schäuble.



Evidently he's nicknamed "Dr. Strangelove" for some inscrutable reason.

Greece will be a beta test for when the Republicans gain complete control of the U.S. economy.

canyoneer: The Germans are now openly suggesting that the Greeks postpone elections and appoint a technocratic government chosen by EU bureaucrats in Brussels. Wow.


It's not far removed from their current situation, where their PM is a former VP of the ECB who has never held elected office before, and who was installed after the last guy resigned.

I am not even sure if that was allowed under Greece's constitution, which says the PM is supposed to be the leader of Greece's largest political party.

canyoneer: Wolfgang Schäuble.

[static.guim.co.uk image 460x276]

Evidently he's nicknamed "Dr. Strangelove" for some inscrutable reason.

Because he abandoned plans of a doomsday device because the idea was not a practical deterrent for reasons which at this moment must be all too obvious?

Cubicle Jockey: It's not far removed from their current situation, where their PM is a former VP of the ECB who has never held elected office before, and who was installed after the last guy resigned. I am not even sure if that was allowed under Greece's constitution, which says the PM is supposed to be the leader of Greece's largest political party.

Apparently that's the case in Italy, too, where the current guy was also not elected (IIRC). This alone should give anyone pause to wonder about where this is all going. Is the precedent being set where the more powerful and wealthy European states can now dictate (under the auspices of the unelected, quasi-government in Brussels) who will rule in the poorer states - and how they will be ruled - no matter what the various constitutions say? I wonder what the treaties have to say about this? Are they making it up as they go along? If I lived over there, this all would make me very nervous.

Alphax


Troy McClure: Austerity = depression and a loss of government benefits

No austerity = debt default, which results in a loss of government benefits due to the inability to borrow which then leads to a depression


I'm still missing why austerity is the bad choice.

Kind of prevents any kind of recovery, doesn't it? "Lay off half the people in your country, so that you can't pay me back!"


It really does not make sense to have half of your population working for the government does it? They don't create any new wealth by being paid with tax money. Austerity aside, should they continue to have such a massive public workforce?

/not being snarky, honest question.

moanerific: They don't create any new wealth by being paid with tax money.

Why would that matter? Well, aside from people not paying taxes. But the important thing is having lots of people with a paycheck to support themselves, and put the money back into the economy.

Alphax: moanerific: They don't create any new wealth by being paid with tax money.

Why would that matter? Well, aside from people not paying taxes. But the important thing is having lots of people with a paycheck to support themselves, and put the money back into the economy.

But where is the money supposed to come from in the first place? They can't borrow at non-ridiculous rates. The Germans aren't going to give them money just to waste on useless workers. How should Greece come up with the money to provide paychecks so that workers can 'put the money back into the economy'?

Bob16: The idiots running around saying "well if not austerity then what else can they do " really do highlight why the msm has given almost no coverage to Icelands success.

Here's a hint. They told the austerity proponents to gtfo.

Yes but Iceland had their own currency they could manipulate. Greece doesn't
Apples meet Oranges.

Ishkur: Troy McClure: Really? Is there a solution out there that preserves the government benefits people are rioting about?

Yes. Proscription.



It worked well for L. C. Sulla, and gosh darn it we can make it work right here in America.

Dr. Whoof: Didn't somebody once say "deficits don't matter"? Who was that, again?

Was it you, Dr Woof? Do you think deficits don't matter?

liam76: For the people against austerity, I am wondering what you suggest?

For Greece to not be slaves to the IMF?

Greece really don't need anything than to properly collect it's farkin' taxes.

John Kenneth Galbreath - 1000x>Keynes.

Ishkur: Our governments are broke because the rich people have all the money.

lol

Koalacaust: Ishkur: Our governments are broke because the rich people have all the money.

lol

You're amused by the obvious?

Ishkur: Goodfella: It worked well for L. C. Sulla, and gosh darn it we can make it work right here in America.

I don't understand why no one wants to bring up that option. Our governments are broke because the rich people have all the money. So let's do what Octavian did -- kill them and take their shiat.

It's a perfectly viable solution, in addition to being extremely morally satisfying.

Our governments are broke because the bottom 50% pay no taxes and the bottom 20% just leech off the productive members of society, unable to support themselves. If we would do away with the social safety net that keeps these leeches alive, they'd die off and we'd have incredible savings going forward as well as an improved gene pool. It's a perfectly viable and just solution, in addition we could use their bodies for fertilizer.

/no more ridiculous than your proposal.

Alphax: Koalacaust: Ishkur: Our governments are broke because the rich people have all the money.

lol

You're amused by the obvious?

I'm amused by the idea of collecting an additional $1.3 trillion in revenue by taxing the rich. That amounts to 70% of our current tax receipts. The only thing that is obvious about this proposition is its absurdity.

Ishkur: Who said anything about taxing?

Ishkur: So let's do what Octavian did -- kill them and take their shiat.

I almost forgot, your solution to our budget problem involves both a lynch mob and the elimination of personal property rights.

I'm also amused at how the most ardent "populists" are usually just totalitarians in disguise.