17 ms·

Once Greece goes...

300 points by andrewcooke 15y ago

deleted 15y ago
[deleted]
yaakov34 15y ago
I feel like I should have stopped reading this missive after the first phrase, which is "The economic crisis in Greece is the most consequential thing to have happened in Europe since the Balkan wars." The Balkan wars were in 1912-1913. I can think of a few other significant things that happened in Europe since then. This crisis - it is really more of a tantrum than a crisis, since the Greeks know perfectly well they are on the hook for the money they spent on themselves - doesn't even register as a blip. It's not going to collapse the economy of the 400 million people within the EU/eurozone area, and even if it did, it still wouldn't reach the significance of 70 years of revolutions and communism and dictatorships and the freaking Holocaust and a couple of world wars, now would it? This sort of wild-eyed panic mongering by people who take a bath on their real estate or stock purchase, and think that they are living through the worst crisis in the 7,000 years of recorded history, is beginning to wear thin. It's annoying even as deliberate hyperbole. On top of this, the economic points made are stale and unconvincing. He talks about low interest rates being appropriate for Germany, but not for Greece. Well, guess what? You don't have to lend at low rates to Greek institutions. You can take a risk premium on top of the basic Euro central bank rates. People weren't doing that because they thought that Greece would catch up economically to the Euro average; it didn't, and the risk premiums went up. Hardly worth killing the Euro zone over this. EDITED to add: he probably meant the wars in former Yugoslavia, rather than what's actually known as the Balkan wars. OK, but frankly, this is still crap, since clearly the creation of the Euro block itself and the unprecedented economic expansion in its new members is far more significant than a tantrum in 3% of the Eurozone. And the economic points are absolute garbage: yes, Argentina recovered, because it is a mining/exporting country and commodity prices skyrocketed. Not very relevant to Greece.
- deleted 15y ago
  [deleted]
- tspiteri 15y ago
  I think the author means the Yugoslav Wars of the 1990s, which have been called the War in the Balkans by some.
- idonthack 15y ago
  he is obviously referring to the breakup of Yugoslavia http://en.wikipedia.org/wiki/Breakup_of_Yugoslavia http://en.wikipedia.org/wiki/Breakup_of_Yugoslavia
- Someone 15y ago
  It is fairly common to describe what Wikipedia calls the Yugoslav Wars (http://en.wikipedia.org/wiki/Yugoslav_wars http://en.wikipedia.org/wiki/Yugoslav_wars) as de Balkan War(s) that broke out after Yugoslavia fell apart. I read it as referring to those conflicts. I think that makes more sense, too, as the target audience wouldn't really know of those earlier wars (I knew, but not even for a monument thought of them when reading this)
  - yaakov34 15y ago
    OK, OK, I agree now that that's what he meant. But for me, "the Balkan wars" is standard terminology referring to those wars, which really did involve all of the Balkans, and I thought he was making some kind of a point about a century of history in Europe coming full circle - some people like to do that. And I still think that the article is panic-mongering badly-argued long-winded garbage.
    - cstross 15y ago
      +1 on this unfortunate terminological crash: "Balkan wars" to me means the stuff that happened between 1830 and 1913 as the Ottoman empire withdrew from eastern Europe; "Yugoslavian civil war" is what happened in the 1990s/00s. (Oh, and the First Gulf War was 1980-88, the Second Gulf War was 1992-93, and the Iraq Invasion was the Third Gulf War. It's odd how wars get air-brushed out of the record if America wasn't involved ...)
      - guelo 15y ago
        > the First Gulf War was 1980-88, Are you referring to the Iran-Iraq war? If so, that seems a strange name for it since it mostly had nothing to do with the Persian Gulf. Though admittedly neither did the other Iraq wars except that that's where the American ships attacked from.
- mcantelon 15y ago
  >it is really more of a tantrum than a crisis, since the Greeks know perfectly well they are on the hook for the money they spent on themselves The Greeks didn't know the gov was in debt because Goldman Sachs colluded with corrupt government officials to hide the debt[1]. They have ample reason for a "tantrum" against their corrupt government. [1] http://www.spiegel.de/international/europe/0,1518,676634,00.html http://www.spiegel.de/international/europe/0,1518,676634,00.... Goldman Sachs has made a good business out of contributing to, and capitalizing on the, collapse of countries by corrupting their officials (Greece, Russia, the US). In my opinion, they should be treated like a dangerous cult (which is how they operate).
  - yaakov34 15y ago
    Come on, have you actually read the article that you quoted? It says that GS helped Greece borrow an additional $1 billion in 2002 by having it assume unrealistic exchange rates. Assuming for the sake of argument that this is completely true, this sum barely passes the threshold of significance in the mismanagement of Greece. The Greeks ran a corrupt, overspending government all by themselves, and they have themselves to blame. Maybe GS evaded half the Greek taxpayers' taxes for them, too?
    - danenania 15y ago
      The main problem with your reasoning is the assumption that the government of Greece is a legitimate democratic representative of its people. If ordinary Greeks had significant power in the political process that shapes the course of their lives, perhaps they would share responsibility, but the fact is that all the critical decisions were made and continue to be made by unelected, unaccountable, extremely wealthy elites. Terming an economically oppressed people's outrage a "tantrum" simply reveals your own bias, conscious or otherwise, in favor of the corrupt establishment, along with a distasteful bit of arrogance. This isn't about Greeks taking responsibility for themselves, it's about Greeks challenging the rampant criminality of international banks, multinational corporations, and the governments they control. It's the same challenge that faces people in every nation on this earth, and we won't see a truly free and fair global society until every nation's people have overcome it.
- corin_ 15y ago
  I was thinking what you suggest in your edit, though it seems weird to say "the Balkan wars" (plural) if you're referring to what is sometimes (and only sometimes) called the "third Balkan war". If that is what he meant, then I think it's hard to debate what is "more significant", a change in the continent's politics with economic impact, or hundreds of thousands of lives ended and ruined, albeit in only a limited region of the continent. I wouldn't really know where to come down on that fence. On the other hand - my history is very rough, but I do believe there is at least a case for claiming that the first two Balkan Wars had a hand in leading to the first world war, which in turn lay the foundation for the second world war... if you make that logic stick, then suddenly they were crazily important to the entire continent/world.
  - yaakov34 15y ago
    That's what I thought he was going for - some kind of a history-comes-full-circle argument involving the Balkans. Also, please note that I did not say that I think that economics is more important than the wars in (former) Yugoslavia. I don't know how to compare that, either. What I said is that there were more significant events since the wars in FY, and this seems clearly true to me, even just sticking to the economy.
- wnight 15y ago
  > the Greeks know perfectly well they are on the hook for the money they spent on themselves You mean they're more able to influence their politicians than we are? Because I certainly don't spend the money my politicians take from me, or borrow in my name. Also, why should they pay back their debt? Nobody else is going to. We printed trillions to bail out the banks to avoid paying back our debts.
fleitz 15y ago
Markets are pricing greek debt as defaulted because it's the most rational thing for the greeks to do, and the most rational outcome. Greece holds power over the EU to the degree that its financial insolvency can bring the whole system down. (Technically, it's a power transfer from the EU to US as the fed has already bailed out the EU banks in anticipation of the Greek default) When you owe the bank $1 million the bank owns you, when you owe the bank $469 billion, you own the bank. The average greek is smart enough to know this and knows that the closer they get to default the better the deal they will get. The banks have two options, get nothing, or get something. Also, if the Greeks' can't pay at a AAA rating they certainly can't pay at AA rating, nor A, not BB, so the end game for rational thinkers is default because as the rating drops the inability to pay increases. Since Greeks hold EU notes and EU denominated assets they can't even be screwed via an exchange rate mechanism. If Greece defaults Europe basically has to eat it, and it puts Europe in a much worse negotiating position with Spain and Portugal. Furthermore, with regard to bond pricing there is no such thing as a bad bond, only a bad price, hence they are quickly being priced to zero. It's similar to the whole subprime thing, guys who bought subprime post Aug 2008 actually did alright because the prices were so low that you'd be somewhat likely to get your money back.
- fleitz 15y ago
  As a side note a 2 year Greek T-bill pays 26%, at that rate Greece would be better off phoning up Capital One for a VISA.
  - ignifero 15y ago
    Although, since at the moment greece borrows from emergency sources, one can't be sure how representative the price is (up or down)
  - redthrowaway 15y ago
    Inflation in Greece is currently sitting at 4.5%, so the T-bills are essentially offering a real 8.5%/year ROI. How on Earth is that affordable to them? I get that they need money now, but they can't expect to be in a better position to repay in 2 years. Also, what happens if (when) Greece defaults? Do the T-bills become worthless, or are they considered a different kind of debt than other national debts?
sek 15y ago
The reason for this big imbalance is the focus of the German industry on exporting goods. Every time the Euro is lowered the German exports are heavily increasing what makes the problem even worse. Different countries with the same currency was a stupid idea to begin with.
- fleitz 15y ago
  Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency. NYC and LA are MUCH further apart than Berlin and Athens. I fear your view of the modern economy is rather mercantilist and zero-sum rather than the capitalist view that the economy grows via increases in productivity. (Personally, I feel we are moving away from the productivity view towards an attention based economy) Most of the arguments in regard to national economies make little sense in smaller geographic contexts, there is little worry that NYC is 'stealing' jobs from Wichita because of the various subsidies in NYC compared to the idea that China is 'stealing' jobs from the US. No one worries about the trade imbalance between Iowa and Alaska. Why are we not worried about cheap Kentucky labour spilling into San Francisco? Most of the arguments made with regard to trade policies and imbalances are irrational, especially in light of the reserve currency status of the US dollar.
  - dpapathanasiou 15y ago
    "Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency." The problem is that you cannot have monetary union without political union. EU rules notwithstanding, Germany and Greece are run by different governments, with different laws, constituencies, and operational capabilities (or lack thereof, in Greece's case).
    - daliusd 15y ago
      As far as I know different states in USA have different laws (e.g. in Philadelphia you can't buy single bottle of beer in supermarket). Different states have different taxes. Some laws are nation wide but that's the same in Europe. If country does not put laws into its law base it should pay penalties (and you don't even have to be member of euro-zone for that). The only real difference between USA and EU is language however even that is not big problem (e.g. my country lost about 18% of population because of emigration to richer EU countries).
Aloisius 15y ago
The Eurozone could go belly up because of a cascading failure. The US may default because conservative politicians think it is "not that big of a deal." China is scared of an economic slowdown and inflation. And everyone thinks we're in a bubble and we're about to hit a point of irrational exuberance. Interesting times.
- j_baker 15y ago
  If you haven't already, I'd suggest reading This Time is Different. It turns out that our current situation isn't unique, and is in fact a pretty vanilla financial crisis. The elements are the same: large deficits that artificially prop up the economy causing a bubble, sovereign debt defaults, loss of investor confidence caused by political division (think it was a coincidence things came to a head during the 2008 election?), and bank runs. Sad how we always forget 800 years of financial history. http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobile/189-0608408-3382258 http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobil...
  - katovatzschyn 15y ago
    To be simplistic, it seems that things are quite different this time. The fundamentals of crises may be the same or similar, but the world has -never- been linked in the way it currently is, and the world population, and total consumption has -never- been as high as it currently is. I hate to argue against an entire book with a sentence like that, but claiming that this is a "pretty vanilla financial crisis" seems to take the overall situation in a dismissive light that I don't agree with.
    - j_baker 15y ago
      I think you and the book agree. The title "This Time is Different" is a reference to how economists tend to see the same signs that always indicate a financial crisis and say "This time is different". When I said that this is a vanilla financial crisis, I meant that the things the grandparent post mentions aren't necessarily unique, albeit more widespread than normal. In fact, it's surprising how frequently you see the same patterns appearing.
lyudmil 15y ago
Every time I bring this up I get down-voted, but I cannot resist. No one argues that the Greek economy was in good shape. It clearly had severe problems with corruption and inefficiencies, which were brutally exposed when the global financial crisis hit. Everyone suffered, but because of the problems in the fundamentals of the economy, Greece suffered disproportionately more. However, the European Central Bank lent the "bailout" money demanding cuts to public spending that, in the current economic situation, would have very likely worsened the Greek economic situation. Greeks realized this and protested, but were (understandably) dismissed as spoiled brats, demanding an unsustainable, comfortable lifestyle. Now that the likely, predictable outcome is looking even more likely (namely, default), journalists are still omitting that crucial part of the analysis. Many economists warned that in a crisis of demand, which is what we're experiencing now, cutting government spending is a bad idea. In a situation of such great uncertainty in the market, the government is the only source of demand big enough to make a dent. It must, of course, borrow the money and therefore increase its deficit by doing so, but that's a worthwhile thing to do when the alternative is default. After the economy has stabilized, the deficit problem can be overcome by growth. Moreover, even if deficit reduction is your priority, if the economy is shrinking you're always going to be fighting a losing battle no matter how many spending cuts you make. To summarize my point, the Greek economic turmoils are less of a cautionary tale of the perils of uncontrolled spending (although they clearly are also that), and more an illustration of the negative effect the austerity measures recommended by the ECB are having on the economies they are imposed on. It should give leading European nations pause when considering what to do with the rest of the troubled economies in the eurozone.
- yaakov34 15y ago
  I think the element you are missing is that the Greek government spending is very inefficient; they're not investing in some kind of economy-growing infrastructure revolution, they're spending money on totally unreasonable union contracts and extraordinarily early retirement for large classes of pensioners. The cuts they agreed to are something like 78 billion euros over more than 10 years, which is quite moderate, for all the screaming. The European central banks are lending money to Greece well below market rates, and they're quite within their rights to demand a reasonable budget which might actually result in this money being repaid. If Greece wants to increase government spending on infrastructure and investments, they can do that after getting their budget in order and convincing their own population to part with some money for the sake of these programs. P.S. I don't think downvoting/upvoting should be a poll on whether someone agrees with a message; it's a decision of interesting/unhelpful.
jamesgagan 15y ago
"There is a good moment in one of the otherwise terrible Star Trek movies..." - a knife to the heart in an otherwise interesting article. ;)
- afterburner 15y ago
  Yeah, Star Trek VI was one of the good ones! :)
patfla 15y ago
I found this more compelling and succinct: http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/ http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/...
- idonthack 15y ago
  more succinct, yes, but it imparts the reader with much less background information, which makes it much less useful to anyone who is not already informed about the situation.
mkramlich 15y ago
This article reminded me of the larger issue: why do so many modern, national governments seem incapable or unwilling to ever operate with a balanced budget? Why do deficits and debt seem to be the norm? Why all the excuses? Is it a kind of stupidity brought about by having a large group of people each pulling in different directions? Or is it by design and due to malevolent intent? Just curious what everyone thinks.
- killerswan 15y ago
  Elected politicians have to aim for the short-term goal of getting re-elected. Money, and both monetary and fiscal policy, are based on collective hallucinations that people rarely think clearly about. No politician wants to be seen idle, and killing projects makes enemies, so they make new projects and spend more money. As Bob Kerry once pointed out, sometimes it can be truly heroic to simply do nothing.
- brown9-2 15y ago
  In a down economy, a requirement that the budget be balanced simply leads to a downward spiral - the state takes in less tax revenue and has to cut it's spending, which removes a large portion of demand from the economy, which results in less tax revenue, etc.
  - sunsu 15y ago
    Balancing a budget in a recession does not subsequently mean that the state will take in less tax revenue. It also does not necessarily mean that a "large portion of demand" will go away. That would depend entirely on what was cut. However, consistently running an unbalanced budget will most definitely lead to a "downward spiral".
    - brown9-2 15y ago
      What kind of government spending can you cut that does not reduce demand of some kind in another part of the economy? If the answer is "entitlement spending", where do you think the money spent by the government on Social Security/Medicaid/Medicare/welfare/jobs programs/etc goes? Into consumer's hands and right back into the economy.
cynusx 15y ago
In my opinion the EU needs to trace the contagion effect and limit its effects. It can do this by offering to take over all credit default swaps on Greece's bonds, no sane economic actor is going to refuse that when a default is imminent. What happens then is that the ECB absorbs all losses from a Greece default, blowing a large hole in its balance sheet. However the ECB can just print itself back into solvency. The aftermath will be a period of high inflation.
jodrellblank 15y ago
Is there any personal punishment for leaders ruining a country? There would be if the Greek ministers were committing war crimes, or if they were driving without due care and attention. Why not for "running a country without due care"?
- j_baker 15y ago
  You're going to need one hell of a prison to keep all the prisoners you'd end up with. The US is possibly the only country to never have defaulted on its debt (at one point in time, France would default by executing its debtors every couple of years). Granted, most industrialized nations haven't defaulted in a long, long time. But the point still stands that Greece is hardly the only nation defaulting on its debt right now. Only the most significant.
  - josephcooney 15y ago
    Australia has never defaulted.
    - j_baker 15y ago
      You're right. There's about 10-15 countries that haven't. Still, the point that default is the rule and not the exception stands.
  - Symmetry 15y ago
    We haven't defaulted yet, but our current crop of politicians seem fixated on resolving this oversight... EDIT: Oh, and if you want to get really technical the 1933 decision to not pay back bond-holders in gold but only in US dollars might have been a default (though most people dont' consider it that). And there was one point where we were late with a few payments in the 1970s due to a bureaucratic snafu.
sprovoost 15y ago
Some people have jokingly suggested that Greece should just sell a few islands. I'm just curious how much they'd have to sell to make e.g. $100 billion. I think it would be kind of cool (and historically ironic) if they sold some land to China and let them build a few descent city-states in the area in the next year or so. A couple of million extra people should prop-up the Greek and EU economy.
- sprovoost 15y ago
  Maybe the folks a Quora know the answer to this: http://www.quora.com/How-much-is-a-typical-Greek-island-worth http://www.quora.com/How-much-is-a-typical-Greek-island-wort...
JanezStupar 15y ago
There are two sides to this article one is correct and the other is deceitful. I assume that this article was written by a Greek (I infer this from the first person accounting of situation). The true part of the article is the part about debtors options and possible scenarios. The deceitful part is the part about "ordinary Greek not understanding the situation and having no part in it". In eastern Europe we have a saying that someone is "indebted as a Greek", meaning that someone is perpetually taking loans to repay old ones while having not a slightest intention of ever paying them off. And this proverb is centuries old AFAIK. So all this protesting going on, pleas of "ordinary Greek people" are an elaborate scheme of shedding guilt. Modern Greeks as a nation are an entitled (an order of magnitude more than attributed to gen-Y) and lazy bunch. Boasting their "heritage", while they have nothing in common with the antic culture. Any businessman worth his salt will be weary of doing business with Greeks - thats how bad in general their ethics situation is. While I cannot offer any meaningful opinion about how to get out of this mess. I can try to provide some insight into how Germany and France got into this mess. The first would be that greedy coke powered bankers got all optimistic that Greeks will repay their debts this time and went on to issue insane amounts of subprime loans, ok this is not what happened. What did happen was that western world knew full on from the beginning what would happen - but proceeded anyway, since Greece was too strategically placed in the cold war and could not be lost to Soviet influence. The Greeks being smart, knew that and took full advantage. What happened after the cold war, was basically the subprime mortgage scenario of US played on a national scale - it is fraud committed by German and French bankers over the people of EU. I'm not believing anyone "in the know" telling me with a straight face that they didn't know that Greeks were cooking their books. So in a sense like US subprime fiasco is fraud committed by US elites over people of US, European sovereign subprime debt crisis is also a fraud committed by European elites over their peoples. I recommend reading this analysis of Greek[1] and Irish[2] debt crisis. It has to be some of the best journalism I have ever read. [1] http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010 http://www.vanityfair.com/business/features/2010/10/greeks-b... [2] http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 http://www.vanityfair.com/business/features/2011/03/michael-... Let the Greek diaspora and leftist lunatic downmodding begin!! Edit: Indeed it was not written by a Greek. But the part about people of Greece not knowing what is going on is pure bullshit - I am not accusing the author of having an agenda. However I am accusing him of not having balls and bringing it out.
Tomek_ 15y ago
If you haven't already you should also read http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?currentPage=all http://www.vanityfair.com/business/features/2010/10/greeks-b... to get more of a perspective on what went wrong in Greece.
abalashov 15y ago
A recent Der Spiegel article (http://www.spiegel.de/international/europe/0,1518,769329,00.html http://www.spiegel.de/international/europe/0,1518,769329,00....) made a titular remark that I found noteworthily pithy: "The Euro Is a Fair-Weather Construct"
tluyben2 15y ago
What does Greece 'do'? I can tell you what France exports/makes, Germany, Netherlands, Italy, even Portugal, but Greece; do they actually do anything? Is anything created there? Do the Greek actually work? I've been on vacation there a few times, and i've never seen people so lazy; we went into restaurants and actually had to literally kick the waiters to serve us; they were annoyed that customers came in.
- amurmann 15y ago
  When I read the first half of your post I first had to laugh because I thought it was ridiculously insulting and simplifying. However, reading the part about the waiter, I quickly realized that I made the exact same experiences on my Corfu vacation years ago. The best thing was this: Our hotel had free coffe till 4pm. We ordered coffee at 3:59 or something like that. The waitress starts making coffee, but stops all the sudden. Sais "it's 4pm, no more coffee" and pures the coffee powder back into the container. We were just speechless.
joe_the_user 15y ago
The Greek economic situation is unsustainable. The US housing market is unsustainable. The Chinese housing market is unsustainable. I could make a longer list if anyone wanted. My point is that this article seems to imply that Greece will be the first to go. Maybe but maybe not. If doubt shifts to US, say, the euro might look at great investment by contrast for a while.

300 points by andrewcooke 15y ago

deleted 15y ago

[deleted]

I feel like I should have stopped reading this missive after the first phrase, which is "The economic crisis in Greece is the most consequential thing to have happened in Europe since the Balkan wars." The Balkan wars were in 1912-1913. I can think of a few other significant things that happened in Europe since then. This crisis - it is really more of a tantrum than a crisis, since the Greeks know perfectly well they are on the hook for the money they spent on themselves - doesn't even register as a blip. It's not going to collapse the economy of the 400 million people within the EU/eurozone area, and even if it did, it still wouldn't reach the significance of 70 years of revolutions and communism and dictatorships and the freaking Holocaust and a couple of world wars, now would it? This sort of wild-eyed panic mongering by people who take a bath on their real estate or stock purchase, and think that they are living through the worst crisis in the 7,000 years of recorded history, is beginning to wear thin. It's annoying even as deliberate hyperbole. On top of this, the economic points made are stale and unconvincing. He talks about low interest rates being appropriate for Germany, but not for Greece. Well, guess what? You don't have to lend at low rates to Greek institutions. You can take a risk premium on top of the basic Euro central bank rates. People weren't doing that because they thought that Greece would catch up economically to the Euro average; it didn't, and the risk premiums went up. Hardly worth killing the Euro zone over this. EDITED to add: he probably meant the wars in former Yugoslavia, rather than what's actually known as the Balkan wars. OK, but frankly, this is still crap, since clearly the creation of the Euro block itself and the unprecedented economic expansion in its new members is far more significant than a tantrum in 3% of the Eurozone. And the economic points are absolute garbage: yes, Argentina recovered, because it is a mining/exporting country and commodity prices skyrocketed. Not very relevant to Greece.

deleted 15y ago
[deleted]
tspiteri 15y ago
I think the author means the Yugoslav Wars of the 1990s, which have been called the War in the Balkans by some.
idonthack 15y ago
he is obviously referring to the breakup of Yugoslavia http://en.wikipedia.org/wiki/Breakup_of_Yugoslavia http://en.wikipedia.org/wiki/Breakup_of_Yugoslavia
Someone 15y ago
It is fairly common to describe what Wikipedia calls the Yugoslav Wars (http://en.wikipedia.org/wiki/Yugoslav_wars http://en.wikipedia.org/wiki/Yugoslav_wars) as de Balkan War(s) that broke out after Yugoslavia fell apart. I read it as referring to those conflicts. I think that makes more sense, too, as the target audience wouldn't really know of those earlier wars (I knew, but not even for a monument thought of them when reading this)
- yaakov34 15y ago
  OK, OK, I agree now that that's what he meant. But for me, "the Balkan wars" is standard terminology referring to those wars, which really did involve all of the Balkans, and I thought he was making some kind of a point about a century of history in Europe coming full circle - some people like to do that. And I still think that the article is panic-mongering badly-argued long-winded garbage.
  - cstross 15y ago
    +1 on this unfortunate terminological crash: "Balkan wars" to me means the stuff that happened between 1830 and 1913 as the Ottoman empire withdrew from eastern Europe; "Yugoslavian civil war" is what happened in the 1990s/00s. (Oh, and the First Gulf War was 1980-88, the Second Gulf War was 1992-93, and the Iraq Invasion was the Third Gulf War. It's odd how wars get air-brushed out of the record if America wasn't involved ...)
    - guelo 15y ago
      > the First Gulf War was 1980-88, Are you referring to the Iran-Iraq war? If so, that seems a strange name for it since it mostly had nothing to do with the Persian Gulf. Though admittedly neither did the other Iraq wars except that that's where the American ships attacked from.
mcantelon 15y ago
>it is really more of a tantrum than a crisis, since the Greeks know perfectly well they are on the hook for the money they spent on themselves The Greeks didn't know the gov was in debt because Goldman Sachs colluded with corrupt government officials to hide the debt[1]. They have ample reason for a "tantrum" against their corrupt government. [1] http://www.spiegel.de/international/europe/0,1518,676634,00.html http://www.spiegel.de/international/europe/0,1518,676634,00.... Goldman Sachs has made a good business out of contributing to, and capitalizing on the, collapse of countries by corrupting their officials (Greece, Russia, the US). In my opinion, they should be treated like a dangerous cult (which is how they operate).
- yaakov34 15y ago
  Come on, have you actually read the article that you quoted? It says that GS helped Greece borrow an additional $1 billion in 2002 by having it assume unrealistic exchange rates. Assuming for the sake of argument that this is completely true, this sum barely passes the threshold of significance in the mismanagement of Greece. The Greeks ran a corrupt, overspending government all by themselves, and they have themselves to blame. Maybe GS evaded half the Greek taxpayers' taxes for them, too?
  - danenania 15y ago
    The main problem with your reasoning is the assumption that the government of Greece is a legitimate democratic representative of its people. If ordinary Greeks had significant power in the political process that shapes the course of their lives, perhaps they would share responsibility, but the fact is that all the critical decisions were made and continue to be made by unelected, unaccountable, extremely wealthy elites. Terming an economically oppressed people's outrage a "tantrum" simply reveals your own bias, conscious or otherwise, in favor of the corrupt establishment, along with a distasteful bit of arrogance. This isn't about Greeks taking responsibility for themselves, it's about Greeks challenging the rampant criminality of international banks, multinational corporations, and the governments they control. It's the same challenge that faces people in every nation on this earth, and we won't see a truly free and fair global society until every nation's people have overcome it.
corin_ 15y ago
I was thinking what you suggest in your edit, though it seems weird to say "the Balkan wars" (plural) if you're referring to what is sometimes (and only sometimes) called the "third Balkan war". If that is what he meant, then I think it's hard to debate what is "more significant", a change in the continent's politics with economic impact, or hundreds of thousands of lives ended and ruined, albeit in only a limited region of the continent. I wouldn't really know where to come down on that fence. On the other hand - my history is very rough, but I do believe there is at least a case for claiming that the first two Balkan Wars had a hand in leading to the first world war, which in turn lay the foundation for the second world war... if you make that logic stick, then suddenly they were crazily important to the entire continent/world.
- yaakov34 15y ago
  That's what I thought he was going for - some kind of a history-comes-full-circle argument involving the Balkans. Also, please note that I did not say that I think that economics is more important than the wars in (former) Yugoslavia. I don't know how to compare that, either. What I said is that there were more significant events since the wars in FY, and this seems clearly true to me, even just sticking to the economy.
wnight 15y ago
> the Greeks know perfectly well they are on the hook for the money they spent on themselves You mean they're more able to influence their politicians than we are? Because I certainly don't spend the money my politicians take from me, or borrow in my name. Also, why should they pay back their debt? Nobody else is going to. We printed trillions to bail out the banks to avoid paying back our debts.

fleitz 15y ago

Markets are pricing greek debt as defaulted because it's the most rational thing for the greeks to do, and the most rational outcome. Greece holds power over the EU to the degree that its financial insolvency can bring the whole system down. (Technically, it's a power transfer from the EU to US as the fed has already bailed out the EU banks in anticipation of the Greek default) When you owe the bank $1 million the bank owns you, when you owe the bank $469 billion, you own the bank. The average greek is smart enough to know this and knows that the closer they get to default the better the deal they will get. The banks have two options, get nothing, or get something. Also, if the Greeks' can't pay at a AAA rating they certainly can't pay at AA rating, nor A, not BB, so the end game for rational thinkers is default because as the rating drops the inability to pay increases. Since Greeks hold EU notes and EU denominated assets they can't even be screwed via an exchange rate mechanism. If Greece defaults Europe basically has to eat it, and it puts Europe in a much worse negotiating position with Spain and Portugal. Furthermore, with regard to bond pricing there is no such thing as a bad bond, only a bad price, hence they are quickly being priced to zero. It's similar to the whole subprime thing, guys who bought subprime post Aug 2008 actually did alright because the prices were so low that you'd be somewhat likely to get your money back.

fleitz 15y ago
As a side note a 2 year Greek T-bill pays 26%, at that rate Greece would be better off phoning up Capital One for a VISA.
- ignifero 15y ago
  Although, since at the moment greece borrows from emergency sources, one can't be sure how representative the price is (up or down)
- redthrowaway 15y ago
  Inflation in Greece is currently sitting at 4.5%, so the T-bills are essentially offering a real 8.5%/year ROI. How on Earth is that affordable to them? I get that they need money now, but they can't expect to be in a better position to repay in 2 years. Also, what happens if (when) Greece defaults? Do the T-bills become worthless, or are they considered a different kind of debt than other national debts?

sek 15y ago

The reason for this big imbalance is the focus of the German industry on exporting goods. Every time the Euro is lowered the German exports are heavily increasing what makes the problem even worse. Different countries with the same currency was a stupid idea to begin with.

fleitz 15y ago
Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency. NYC and LA are MUCH further apart than Berlin and Athens. I fear your view of the modern economy is rather mercantilist and zero-sum rather than the capitalist view that the economy grows via increases in productivity. (Personally, I feel we are moving away from the productivity view towards an attention based economy) Most of the arguments in regard to national economies make little sense in smaller geographic contexts, there is little worry that NYC is 'stealing' jobs from Wichita because of the various subsidies in NYC compared to the idea that China is 'stealing' jobs from the US. No one worries about the trade imbalance between Iowa and Alaska. Why are we not worried about cheap Kentucky labour spilling into San Francisco? Most of the arguments made with regard to trade policies and imbalances are irrational, especially in light of the reserve currency status of the US dollar.
- dpapathanasiou 15y ago
  "Please explain why it is rational for Athens and Berlin to not share the same currency, but is rational for NYC and LA to share the same currency." The problem is that you cannot have monetary union without political union. EU rules notwithstanding, Germany and Greece are run by different governments, with different laws, constituencies, and operational capabilities (or lack thereof, in Greece's case).
  - daliusd 15y ago
    As far as I know different states in USA have different laws (e.g. in Philadelphia you can't buy single bottle of beer in supermarket). Different states have different taxes. Some laws are nation wide but that's the same in Europe. If country does not put laws into its law base it should pay penalties (and you don't even have to be member of euro-zone for that). The only real difference between USA and EU is language however even that is not big problem (e.g. my country lost about 18% of population because of emigration to richer EU countries).

Aloisius 15y ago

The Eurozone could go belly up because of a cascading failure. The US may default because conservative politicians think it is "not that big of a deal." China is scared of an economic slowdown and inflation. And everyone thinks we're in a bubble and we're about to hit a point of irrational exuberance. Interesting times.

j_baker 15y ago
If you haven't already, I'd suggest reading This Time is Different. It turns out that our current situation isn't unique, and is in fact a pretty vanilla financial crisis. The elements are the same: large deficits that artificially prop up the economy causing a bubble, sovereign debt defaults, loss of investor confidence caused by political division (think it was a coincidence things came to a head during the 2008 election?), and bank runs. Sad how we always forget 800 years of financial history. http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobile/189-0608408-3382258 http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobil...
- katovatzschyn 15y ago
  To be simplistic, it seems that things are quite different this time. The fundamentals of crises may be the same or similar, but the world has -never- been linked in the way it currently is, and the world population, and total consumption has -never- been as high as it currently is. I hate to argue against an entire book with a sentence like that, but claiming that this is a "pretty vanilla financial crisis" seems to take the overall situation in a dismissive light that I don't agree with.
  - j_baker 15y ago
    I think you and the book agree. The title "This Time is Different" is a reference to how economists tend to see the same signs that always indicate a financial crisis and say "This time is different". When I said that this is a vanilla financial crisis, I meant that the things the grandparent post mentions aren't necessarily unique, albeit more widespread than normal. In fact, it's surprising how frequently you see the same patterns appearing.

lyudmil 15y ago

Every time I bring this up I get down-voted, but I cannot resist. No one argues that the Greek economy was in good shape. It clearly had severe problems with corruption and inefficiencies, which were brutally exposed when the global financial crisis hit. Everyone suffered, but because of the problems in the fundamentals of the economy, Greece suffered disproportionately more. However, the European Central Bank lent the "bailout" money demanding cuts to public spending that, in the current economic situation, would have very likely worsened the Greek economic situation. Greeks realized this and protested, but were (understandably) dismissed as spoiled brats, demanding an unsustainable, comfortable lifestyle. Now that the likely, predictable outcome is looking even more likely (namely, default), journalists are still omitting that crucial part of the analysis. Many economists warned that in a crisis of demand, which is what we're experiencing now, cutting government spending is a bad idea. In a situation of such great uncertainty in the market, the government is the only source of demand big enough to make a dent. It must, of course, borrow the money and therefore increase its deficit by doing so, but that's a worthwhile thing to do when the alternative is default. After the economy has stabilized, the deficit problem can be overcome by growth. Moreover, even if deficit reduction is your priority, if the economy is shrinking you're always going to be fighting a losing battle no matter how many spending cuts you make. To summarize my point, the Greek economic turmoils are less of a cautionary tale of the perils of uncontrolled spending (although they clearly are also that), and more an illustration of the negative effect the austerity measures recommended by the ECB are having on the economies they are imposed on. It should give leading European nations pause when considering what to do with the rest of the troubled economies in the eurozone.

yaakov34 15y ago
I think the element you are missing is that the Greek government spending is very inefficient; they're not investing in some kind of economy-growing infrastructure revolution, they're spending money on totally unreasonable union contracts and extraordinarily early retirement for large classes of pensioners. The cuts they agreed to are something like 78 billion euros over more than 10 years, which is quite moderate, for all the screaming. The European central banks are lending money to Greece well below market rates, and they're quite within their rights to demand a reasonable budget which might actually result in this money being repaid. If Greece wants to increase government spending on infrastructure and investments, they can do that after getting their budget in order and convincing their own population to part with some money for the sake of these programs. P.S. I don't think downvoting/upvoting should be a poll on whether someone agrees with a message; it's a decision of interesting/unhelpful.

jamesgagan 15y ago

"There is a good moment in one of the otherwise terrible Star Trek movies..." - a knife to the heart in an otherwise interesting article. ;)

afterburner 15y ago
Yeah, Star Trek VI was one of the good ones! :)

patfla 15y ago

I found this more compelling and succinct: http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/ http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/...

idonthack 15y ago
more succinct, yes, but it imparts the reader with much less background information, which makes it much less useful to anyone who is not already informed about the situation.

mkramlich 15y ago

This article reminded me of the larger issue: why do so many modern, national governments seem incapable or unwilling to ever operate with a balanced budget? Why do deficits and debt seem to be the norm? Why all the excuses? Is it a kind of stupidity brought about by having a large group of people each pulling in different directions? Or is it by design and due to malevolent intent? Just curious what everyone thinks.

killerswan 15y ago
Elected politicians have to aim for the short-term goal of getting re-elected. Money, and both monetary and fiscal policy, are based on collective hallucinations that people rarely think clearly about. No politician wants to be seen idle, and killing projects makes enemies, so they make new projects and spend more money. As Bob Kerry once pointed out, sometimes it can be truly heroic to simply do nothing.
brown9-2 15y ago
In a down economy, a requirement that the budget be balanced simply leads to a downward spiral - the state takes in less tax revenue and has to cut it's spending, which removes a large portion of demand from the economy, which results in less tax revenue, etc.
- sunsu 15y ago
  Balancing a budget in a recession does not subsequently mean that the state will take in less tax revenue. It also does not necessarily mean that a "large portion of demand" will go away. That would depend entirely on what was cut. However, consistently running an unbalanced budget will most definitely lead to a "downward spiral".
  - brown9-2 15y ago
    What kind of government spending can you cut that does not reduce demand of some kind in another part of the economy? If the answer is "entitlement spending", where do you think the money spent by the government on Social Security/Medicaid/Medicare/welfare/jobs programs/etc goes? Into consumer's hands and right back into the economy.

cynusx 15y ago

In my opinion the EU needs to trace the contagion effect and limit its effects. It can do this by offering to take over all credit default swaps on Greece's bonds, no sane economic actor is going to refuse that when a default is imminent. What happens then is that the ECB absorbs all losses from a Greece default, blowing a large hole in its balance sheet. However the ECB can just print itself back into solvency. The aftermath will be a period of high inflation.

jodrellblank 15y ago

Is there any personal punishment for leaders ruining a country? There would be if the Greek ministers were committing war crimes, or if they were driving without due care and attention. Why not for "running a country without due care"?

j_baker 15y ago
You're going to need one hell of a prison to keep all the prisoners you'd end up with. The US is possibly the only country to never have defaulted on its debt (at one point in time, France would default by executing its debtors every couple of years). Granted, most industrialized nations haven't defaulted in a long, long time. But the point still stands that Greece is hardly the only nation defaulting on its debt right now. Only the most significant.
- josephcooney 15y ago
  Australia has never defaulted.
  - j_baker 15y ago
    You're right. There's about 10-15 countries that haven't. Still, the point that default is the rule and not the exception stands.
- Symmetry 15y ago
  We haven't defaulted yet, but our current crop of politicians seem fixated on resolving this oversight... EDIT: Oh, and if you want to get really technical the 1933 decision to not pay back bond-holders in gold but only in US dollars might have been a default (though most people dont' consider it that). And there was one point where we were late with a few payments in the 1970s due to a bureaucratic snafu.

sprovoost 15y ago

Some people have jokingly suggested that Greece should just sell a few islands. I'm just curious how much they'd have to sell to make e.g. $100 billion. I think it would be kind of cool (and historically ironic) if they sold some land to China and let them build a few descent city-states in the area in the next year or so. A couple of million extra people should prop-up the Greek and EU economy.

sprovoost 15y ago
Maybe the folks a Quora know the answer to this: http://www.quora.com/How-much-is-a-typical-Greek-island-worth http://www.quora.com/How-much-is-a-typical-Greek-island-wort...

JanezStupar 15y ago

There are two sides to this article one is correct and the other is deceitful. I assume that this article was written by a Greek (I infer this from the first person accounting of situation). The true part of the article is the part about debtors options and possible scenarios. The deceitful part is the part about "ordinary Greek not understanding the situation and having no part in it". In eastern Europe we have a saying that someone is "indebted as a Greek", meaning that someone is perpetually taking loans to repay old ones while having not a slightest intention of ever paying them off. And this proverb is centuries old AFAIK. So all this protesting going on, pleas of "ordinary Greek people" are an elaborate scheme of shedding guilt. Modern Greeks as a nation are an entitled (an order of magnitude more than attributed to gen-Y) and lazy bunch. Boasting their "heritage", while they have nothing in common with the antic culture. Any businessman worth his salt will be weary of doing business with Greeks - thats how bad in general their ethics situation is. While I cannot offer any meaningful opinion about how to get out of this mess. I can try to provide some insight into how Germany and France got into this mess. The first would be that greedy coke powered bankers got all optimistic that Greeks will repay their debts this time and went on to issue insane amounts of subprime loans, ok this is not what happened. What did happen was that western world knew full on from the beginning what would happen - but proceeded anyway, since Greece was too strategically placed in the cold war and could not be lost to Soviet influence. The Greeks being smart, knew that and took full advantage. What happened after the cold war, was basically the subprime mortgage scenario of US played on a national scale - it is fraud committed by German and French bankers over the people of EU. I'm not believing anyone "in the know" telling me with a straight face that they didn't know that Greeks were cooking their books. So in a sense like US subprime fiasco is fraud committed by US elites over people of US, European sovereign subprime debt crisis is also a fraud committed by European elites over their peoples. I recommend reading this analysis of Greek[1] and Irish[2] debt crisis. It has to be some of the best journalism I have ever read. [1] http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010 http://www.vanityfair.com/business/features/2010/10/greeks-b... [2] http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103 http://www.vanityfair.com/business/features/2011/03/michael-... Let the Greek diaspora and leftist lunatic downmodding begin!! Edit: Indeed it was not written by a Greek. But the part about people of Greece not knowing what is going on is pure bullshit - I am not accusing the author of having an agenda. However I am accusing him of not having balls and bringing it out.

Tomek_ 15y ago

If you haven't already you should also read http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?currentPage=all http://www.vanityfair.com/business/features/2010/10/greeks-b... to get more of a perspective on what went wrong in Greece.

abalashov 15y ago

A recent Der Spiegel article (http://www.spiegel.de/international/europe/0,1518,769329,00.html http://www.spiegel.de/international/europe/0,1518,769329,00....) made a titular remark that I found noteworthily pithy: "The Euro Is a Fair-Weather Construct"

tluyben2 15y ago

What does Greece 'do'? I can tell you what France exports/makes, Germany, Netherlands, Italy, even Portugal, but Greece; do they actually do anything? Is anything created there? Do the Greek actually work? I've been on vacation there a few times, and i've never seen people so lazy; we went into restaurants and actually had to literally kick the waiters to serve us; they were annoyed that customers came in.

amurmann 15y ago
When I read the first half of your post I first had to laugh because I thought it was ridiculously insulting and simplifying. However, reading the part about the waiter, I quickly realized that I made the exact same experiences on my Corfu vacation years ago. The best thing was this: Our hotel had free coffe till 4pm. We ordered coffee at 3:59 or something like that. The waitress starts making coffee, but stops all the sudden. Sais "it's 4pm, no more coffee" and pures the coffee powder back into the container. We were just speechless.

joe_the_user 15y ago

The Greek economic situation is unsustainable. The US housing market is unsustainable. The Chinese housing market is unsustainable. I could make a longer list if anyone wanted. My point is that this article seems to imply that Greece will be the first to go. Maybe but maybe not. If doubt shifts to US, say, the euro might look at great investment by contrast for a while.