4 ms·

Excellent comment, one of the most informative so far ITT. I realize that this borders on fortune-telling, but you seem to have a decent grasp on the situation,

by koanarc 16y ago

Excellent comment, one of the most informative so far ITT. I realize that this borders on fortune-telling, but you seem to have a decent grasp on the situation, and you say RE: bailing out Greece that "it really is damned if you do, damned if you don't", so I'd like to ask -- in your personal opinion, what impact do you see this (the impending collapse of the Euro) having internationally over the coming decade? In other words, is this necessarily the beginning of a chain reaction, or is there, in your opinion, some route by which the effects of Greece's economic death rattle may be confined locally? Also, can anyone elaborate on "they all share a promise that no one will let any fail"? Does this 'promise' have a strong legal basis, or is that simply an implied economic obligation in the face of mutually-assured destruction (i.e., as per the California comparison, is leaving Greece out in the cold even an option, legally?)

marcamillion 16y ago
koanarc....very interesting questions. Due to the clearly increasing interest in this topic, I am going to write a series of blog posts on the crisis (according to what I know - not claiming to be a fortune teller or a sage of any kind, but it seems people are interested). Well, I wouldn't say the Euro is near collapse just yet. The Obama Administration would never let that happen...i.e. assuming that the Eurozone bigwigs (i.e. Germany, France, etc.) want it to collapse - which I don't see why they would - a collapse of that nature right now would threaten the overall economic recovery. So the powers that be, are doing (and will do) everything in their power to prevent that from happening. In terms of the impact over the long term, i.e. coming decade, I would say that provided that the Euro can get through this it should prove good for the EU. Because the only way they are going to get through it, is if the EU + IMF bailout the problem states. We have already seen the major sacrifices that have been demanded of Greece as a condition for getting the bailout - http://news.bbc.co.uk/1/hi/8656649.stm http://news.bbc.co.uk/1/hi/8656649.stm Although Greeks might be pissed at the 'financiers' for imposing 'harsh' conditions to the bailout, in the long term it will be healthy for Greece. They have to go through a bitter, deep, cleansing period (kind of like the bankruptcy proceeding that GM had to go through to get out of their onerous contracts they had with labor unions & dealer network) to get to a more healthy fiscal position. Unless I am mistaking the resilience of the politicians to weather the storm, I strongly suspect that they will persevere through the political maelstrom and do what needs to be done. Then in 5 - 10 years, we could see some strong growth coming from Greece again - however it all depends on what policies (aside from the austerity measures) they implement. By bailing out Greece and demanding significant austerity measures, they are attempting to contain it locally. The issue is that if they don't take their pound of flesh, the other states/countries will expect the same. So to nip the moral hazard element of it, they (the EU & the IMF) have to be harsh. It's for everybody's own good. In terms of the strong legal basis...I will cover this in my blog post. I believe there is some legal basis for it - but I am drawing a blank right now. I am going to do some research and include it in my post. Stay tuned, will post on HN once I am done. At the very least, even if there isn't an explicit legal basis for the bailouts, there is a strong implied economic obligation - because it is in everybody's best interest to bail out the weakest state. Just like it was in America's best interest to bail out the banks - as annoying as it was to do, with them paying record profits - the alternative would be significantly worse. Emphasis on significantly.
- _delirium 16y ago
  Among Greeks at least, there's a significant feeling that Greece won't come out ahead, and that these measures are being imposed for the benefit of: 1. other EU countries; and 2. bond investors, some of whom are the same as #1 (e.g. a bunch of German banks). May or may not be true, but there's a large sentiment (maybe even a majority) that the average Greek, especially those in, say, the bottom 75% of wealth/income, would be better off if the government just defaulted on the bonds. They point to Argentina, among others, as a successful example of taking that route.
  - marcamillion 16y ago
    Hah! I am glad you pointed out Argentina as an 'example' of 'a successful example'. I will definitely cover this in my blog post. This recent crisis has shown that Argentina never did recover from that initial default and has had to default a second time. Talk about going back to the well!
    - _delirium 16y ago
      The "going back to the well" I think might actually be part of it: a lot of Greeks consider that a perfectly viable option, because they remember a past of periodic defaults / currency devaluations every 10 to 20 years or so (and remember Italy doing the same), and don't remember it being particularly bad. Probably a significant proportion would rather go back to that, even if it meant pulling out of the Eurozone, than enact neoliberal reform.
      - marcamillion 16y ago
        Well...the thing is, back in the day it probably was bad - but not as bad as it would be today. Today, everything is so interconnected. Society has progressed so much, and wealth has been generated at such a fast clip, that cutting off your nose would do nothing but spiting your face. The reality is that when you look at what has been powering Greece's astounding growth from 1996 - 2006, it was mainly tourism + foreign direct investment. If you do an Argentina-type default, tourism will instantly be hit and FDI will go to nearly zero (or very close) VERY quickly. The unfortunate truth is that pulling out of the Eurozone wouldn't be a cure all. Without the discipline being forced on the politicians by the EU + IMF, what will force them to change and be fiscally prudent? Nothing will. If anything, things would only get worse because they would be able to print their own money again. You know what happens when a profligate government can print their own money? Ask Zimbabwe.

by koanarc 16y ago

marcamillion 16y ago

koanarc....very interesting questions. Due to the clearly increasing interest in this topic, I am going to write a series of blog posts on the crisis (according to what I know - not claiming to be a fortune teller or a sage of any kind, but it seems people are interested). Well, I wouldn't say the Euro is near collapse just yet. The Obama Administration would never let that happen...i.e. assuming that the Eurozone bigwigs (i.e. Germany, France, etc.) want it to collapse - which I don't see why they would - a collapse of that nature right now would threaten the overall economic recovery. So the powers that be, are doing (and will do) everything in their power to prevent that from happening. In terms of the impact over the long term, i.e. coming decade, I would say that provided that the Euro can get through this it should prove good for the EU. Because the only way they are going to get through it, is if the EU + IMF bailout the problem states. We have already seen the major sacrifices that have been demanded of Greece as a condition for getting the bailout - http://news.bbc.co.uk/1/hi/8656649.stm http://news.bbc.co.uk/1/hi/8656649.stm Although Greeks might be pissed at the 'financiers' for imposing 'harsh' conditions to the bailout, in the long term it will be healthy for Greece. They have to go through a bitter, deep, cleansing period (kind of like the bankruptcy proceeding that GM had to go through to get out of their onerous contracts they had with labor unions & dealer network) to get to a more healthy fiscal position. Unless I am mistaking the resilience of the politicians to weather the storm, I strongly suspect that they will persevere through the political maelstrom and do what needs to be done. Then in 5 - 10 years, we could see some strong growth coming from Greece again - however it all depends on what policies (aside from the austerity measures) they implement. By bailing out Greece and demanding significant austerity measures, they are attempting to contain it locally. The issue is that if they don't take their pound of flesh, the other states/countries will expect the same. So to nip the moral hazard element of it, they (the EU & the IMF) have to be harsh. It's for everybody's own good. In terms of the strong legal basis...I will cover this in my blog post. I believe there is some legal basis for it - but I am drawing a blank right now. I am going to do some research and include it in my post. Stay tuned, will post on HN once I am done. At the very least, even if there isn't an explicit legal basis for the bailouts, there is a strong implied economic obligation - because it is in everybody's best interest to bail out the weakest state. Just like it was in America's best interest to bail out the banks - as annoying as it was to do, with them paying record profits - the alternative would be significantly worse. Emphasis on significantly.

_delirium 16y ago
Among Greeks at least, there's a significant feeling that Greece won't come out ahead, and that these measures are being imposed for the benefit of: 1. other EU countries; and 2. bond investors, some of whom are the same as #1 (e.g. a bunch of German banks). May or may not be true, but there's a large sentiment (maybe even a majority) that the average Greek, especially those in, say, the bottom 75% of wealth/income, would be better off if the government just defaulted on the bonds. They point to Argentina, among others, as a successful example of taking that route.
- marcamillion 16y ago
  Hah! I am glad you pointed out Argentina as an 'example' of 'a successful example'. I will definitely cover this in my blog post. This recent crisis has shown that Argentina never did recover from that initial default and has had to default a second time. Talk about going back to the well!
  - _delirium 16y ago
    The "going back to the well" I think might actually be part of it: a lot of Greeks consider that a perfectly viable option, because they remember a past of periodic defaults / currency devaluations every 10 to 20 years or so (and remember Italy doing the same), and don't remember it being particularly bad. Probably a significant proportion would rather go back to that, even if it meant pulling out of the Eurozone, than enact neoliberal reform.
    - marcamillion 16y ago
      Well...the thing is, back in the day it probably was bad - but not as bad as it would be today. Today, everything is so interconnected. Society has progressed so much, and wealth has been generated at such a fast clip, that cutting off your nose would do nothing but spiting your face. The reality is that when you look at what has been powering Greece's astounding growth from 1996 - 2006, it was mainly tourism + foreign direct investment. If you do an Argentina-type default, tourism will instantly be hit and FDI will go to nearly zero (or very close) VERY quickly. The unfortunate truth is that pulling out of the Eurozone wouldn't be a cure all. Without the discipline being forced on the politicians by the EU + IMF, what will force them to change and be fiscally prudent? Nothing will. If anything, things would only get worse because they would be able to print their own money again. You know what happens when a profligate government can print their own money? Ask Zimbabwe.