9 ms·

Be a lot better if Germany, France, and the US were on there. You'd see how tiny Greece is in the big picture. A lot of people are going to get hurt just to tea

Be a lot better if Germany, France, and the US were on there. You'd see how tiny Greece is in the big picture. A lot of people are going to get hurt just to teach a few Greeks a lesson.

dylangs1030 15y ago
I agree, but putting the U.S. on there would involve North America and, to be accurate, Asia too.
jeffdavis 15y ago
"A lot of people are going to get hurt just to teach a few Greeks a lesson." What is happening now that you object to, and what solution do you propose?
- barrkel 15y ago
  Greece is being forced to destroy its economy through pro-cyclical austerity; right at the bottom, when the economy is doing poorly, it is being forced to reduce economic activity further by cutting government spending. The solution is for the ECB to monetize government debt, and combine that with much tighter fiscal monitoring to ensure it isn't abused; but the ECB is forbidden by treaty from lending to governments and the German public is implacably opposed to changing this.
  - nakkiel 15y ago
    This is not correct. At least you can't say that without depicting the full picture. Greece is a country that can't afford it operations. It has no economic growth and large unemployment. It survives by borrowing money. In a "normal" situation, it would go bankrupt and its money would be devaluated. Then in several troubled years it could experience growth again because with a devaluated money you are in a better economic position to make things and sell them. In reallity, Greece is part of the Euro zone so its money is the Euro and it has no control over it. Greece's situation is comparable to that of California (although not to the same extent). While many economist agree that austerity doesn't bring growth, at least it stops the bleeding. Also, we "don't know better" is the general concensus. Not to mention it worked for Iceland.
    - scotch_drinker 15y ago
      In a normal situation, they wouldn't necessarily have to go bankrupt. If they had a national lender of last resort, they could essentially monetize the debt, causing inflation, and pay their way out with their devalued currency. The Greek economy is not fundamentally different than it was when it was accepted into the EU. France and Germany knew that then and know it now. They just want to have their cake and eat it too. They loaned money to a country that had little hope of paying it back. It's fun to say "it's all the debtor's fault" but there are two sides to every debt relationship and in this case, as much fault lies with France and Germany as it does with Greece. Also, Iceland didn't go through the forced austerity that is being pushed upon the Greeks. The Icelandic government essentially defaulted when it nationalized the banks. There was no "We'll give you a bailout if you crush your economy through austerity programs" from the EU because Iceland is not an EU country. Austerity only stops the bleeding to foreign creditors at the expense of the country's citizens. It does not stop the bleeding internally in the local economy. The Greek population knows this and that's why they are strongly resisting.
    - barrkel 15y ago
      I fully agree that if Greece had its own currency, devaluation would be a viable solution, but it doesn't, so there's no point talking about it. Government spending isn't "bleeding"; economies are feedback systems, and changes to spending in one location directly reduces income in other areas, which results in lost productivity until the system readjusts. Adjusting the system when productivity is already low is one of the worst times to do it, because there's very little to take up the slack. On the other hand, Greece probably needed a crisis like this in order for it to face up to its governance problems. I don't know why you quoted "don't know better"; I didn't say that, nor anything like it, as far as I understand. Iceland is not very relevant, again, since it had its own currency; in sudden devaluation, it reduced the value of monetary wealth of its citizens massively. You could view it has a massive government appropriation of citizen assets.
      - meric 15y ago
        >> massive government appropriation of citizen assets. Hardly; The government got itself into so much debt in the first place because of tax evasion lowering tax revenue and high government expenditure. i.e The government spent too much servicing its own people, now it needs to grab the citizens' assets back to repay it all.
  - meric 15y ago
    Austerity may cause internal devaluation. Lack of government spending - economy activity reduced and prices deflate. Lower prices means exports increase and imports decrease, eventually allowing the economy to grow again. At the same time, debts are paid and the government will have more money to spend again. Yes, deflation is dangerous, but here it is the only way to get around the fixed Euro currency to lower prices.
    - jeffdavis 15y ago
      "Austerity may cause internal devaluation." I'm confused. Devaluation is inflation, right? You're saying that lower government spending may lead to inflation? And you think deflation is the more desirable outcome? I'm not disagreeing, but I haven't heard that line of reasoning before.
      - meric 15y ago
        Devaluation is deflation. Normally when the government gives a whole stack of money to its citizens, the country's currency inflates. Its exports will then be cheaper to others. Greece cannot do this; Its currency is fixed with its major trading partners. There is no way to lower prices of its exports... besides deflation. There's two ways out of it. Quit the Euro (default on debts) and inflate the economy to lower export prices (look where that got the US, I'm starting to be skeptical of this tactic), or cut public spending, start deflation, to lower export prices. Since in France, Germany, prices are not deflating, deflation in Greece will lower Greece's export prices. While consumers in Greece may stop spending... "Ooo my money goes up in value by simply holding it", importers in France and Germany will not stop spending "Buying from Greece is cheaper than buying from France, Germany. No brainer". They're not going to stop spending because if they stop spending money to import they also stop earning money from selling the imports to their home countries. Lower export prices -> Increased exports. Eventually, hopefully, it will bring the country back into growth. I think deflation is more dangerous when your currency isn't fixed with others, because then banks/companies will be able to manipulate your currency to take advantage of the deflation in the country. When the currency is fixed, there is just as much point for an importer to play with currency as US Steel plays with US Dollars. (i.e Not their business). This is all what I think Germany is trying to make Greece do. I don't have evidence for any of it.
  - artsrc 15y ago
    Destroying the economy is the worst thing for Greek bond holders. However I don't know if real damage is being done. Greece has import agriculture and tourist industries. Are the fields being left untendered? Is are there hotels being left half constructed? I agree that unemployment is waste of human capital. Perhaps the government should have just halved all there employees wages rather than laying them off?
    - gaius 15y ago
      are there hotels being left half constructed? Yes, but this is normal for Greece; leave your building unfinished, even if only cosmetically, and you pay no tax on it. A desperately needed tweak to the law is to start taxing buildings when they are actually used.
RockyMcNuts 15y ago
It's gotten bigger than Greece... if the recovery was intact it would just be the weak countries like Greece that couldn't pay their debts, if the economy dips then the big countries like Spain and Italy can't either. It turns into a death spiral, the more people panic over the crisis, the worse the economy gets, the more countries are at risk of default. Meanwhile, German economic policy essentially consists of: 1) Tight fiscal policy to crush any signs of a recovery. 2) Tight monetary policy to crush any signs of recovery. 3) Tie yourself to some profligate countries so that you have a cheap exchange rate and can sell s***loads of exports. 4) When the countries you provided vendor finance to start having trouble paying you back insist that they follow 1) and 2). 5) Wonder why everyone hates you. ..."It's a pulley system - you throw everyone over the cliff and let the rope take you higher. But eventually you reach the pulley." http://macro-man.blogspot.com/2011/11/raising-dead-and-axis-of-evil.html http://macro-man.blogspot.com/2011/11/raising-dead-and-axis-... reminds me of Air France 447, the people running the show initially reacted by pushing the stick in the wrong direction, they're still way behind the curve, by the time they react with sufficient force, might be too late, crash of markets, governments defaulting, countries abandoning the Euro.
- DuncanIdaho 15y ago
  For one I believe that Germans know what they're doing. They might be a little bit too bent on saving Framany's banks - however if these banks drop then Framany drops. If that happens Eurozone has no steering wheel and no engine to get anywhere. So in fact it is essential that in eurozone: 1. Germany and France be saved from the worst. 2. Germany and France beat the other juvenile countries into fiscal submission. 3. The new "germanized" europe lifts itself out of ash. Whatever people think, the whole point of eurozone is "germanization" of Europe. It's not as some people state that Germany is trying to occupy the Europe. The fact is that Europe wants to occupy Germany. Thats the whole point, the whole Europe and its citizenry would like to live in Germany. And Germans know full well what they're doing - I'd even dare to say that they know what they're doing even better than 'mericans. Don't forget that Germany annexed DDR 20 years ago and that DDR was in much worse shape than any of PIIGS. Alo Angela Merkl along with many people in charge, grew up in DDR.
Confusion 15y ago
If you think this is about 'teaching a few Greeks a lesson', then you really don't understand the severity and complexity of the current situation. The Greeks are a symptom that can't be dealt with by being nice to them, because then they won't change a damned thing. Why would they, if the others want to keep them in the Euro so much they can get away with anything they want? And worse, by not being severe with them, the other countries will think similarly and cater to their population instead of the population of the Eurozone as a whole. That's just how the incentives are, so they are forced to impose strong counter-incentives.

Be a lot better if Germany, France, and the US were on there. You'd see how tiny Greece is in the big picture. A lot of people are going to get hurt just to teach a few Greeks a lesson.

dylangs1030 15y ago

I agree, but putting the U.S. on there would involve North America and, to be accurate, Asia too.

jeffdavis 15y ago

"A lot of people are going to get hurt just to teach a few Greeks a lesson." What is happening now that you object to, and what solution do you propose?

barrkel 15y ago
Greece is being forced to destroy its economy through pro-cyclical austerity; right at the bottom, when the economy is doing poorly, it is being forced to reduce economic activity further by cutting government spending. The solution is for the ECB to monetize government debt, and combine that with much tighter fiscal monitoring to ensure it isn't abused; but the ECB is forbidden by treaty from lending to governments and the German public is implacably opposed to changing this.
- nakkiel 15y ago
  This is not correct. At least you can't say that without depicting the full picture. Greece is a country that can't afford it operations. It has no economic growth and large unemployment. It survives by borrowing money. In a "normal" situation, it would go bankrupt and its money would be devaluated. Then in several troubled years it could experience growth again because with a devaluated money you are in a better economic position to make things and sell them. In reallity, Greece is part of the Euro zone so its money is the Euro and it has no control over it. Greece's situation is comparable to that of California (although not to the same extent). While many economist agree that austerity doesn't bring growth, at least it stops the bleeding. Also, we "don't know better" is the general concensus. Not to mention it worked for Iceland.
  - scotch_drinker 15y ago
    In a normal situation, they wouldn't necessarily have to go bankrupt. If they had a national lender of last resort, they could essentially monetize the debt, causing inflation, and pay their way out with their devalued currency. The Greek economy is not fundamentally different than it was when it was accepted into the EU. France and Germany knew that then and know it now. They just want to have their cake and eat it too. They loaned money to a country that had little hope of paying it back. It's fun to say "it's all the debtor's fault" but there are two sides to every debt relationship and in this case, as much fault lies with France and Germany as it does with Greece. Also, Iceland didn't go through the forced austerity that is being pushed upon the Greeks. The Icelandic government essentially defaulted when it nationalized the banks. There was no "We'll give you a bailout if you crush your economy through austerity programs" from the EU because Iceland is not an EU country. Austerity only stops the bleeding to foreign creditors at the expense of the country's citizens. It does not stop the bleeding internally in the local economy. The Greek population knows this and that's why they are strongly resisting.
  - barrkel 15y ago
    I fully agree that if Greece had its own currency, devaluation would be a viable solution, but it doesn't, so there's no point talking about it. Government spending isn't "bleeding"; economies are feedback systems, and changes to spending in one location directly reduces income in other areas, which results in lost productivity until the system readjusts. Adjusting the system when productivity is already low is one of the worst times to do it, because there's very little to take up the slack. On the other hand, Greece probably needed a crisis like this in order for it to face up to its governance problems. I don't know why you quoted "don't know better"; I didn't say that, nor anything like it, as far as I understand. Iceland is not very relevant, again, since it had its own currency; in sudden devaluation, it reduced the value of monetary wealth of its citizens massively. You could view it has a massive government appropriation of citizen assets.
    - meric 15y ago
      >> massive government appropriation of citizen assets. Hardly; The government got itself into so much debt in the first place because of tax evasion lowering tax revenue and high government expenditure. i.e The government spent too much servicing its own people, now it needs to grab the citizens' assets back to repay it all.
- meric 15y ago
  Austerity may cause internal devaluation. Lack of government spending - economy activity reduced and prices deflate. Lower prices means exports increase and imports decrease, eventually allowing the economy to grow again. At the same time, debts are paid and the government will have more money to spend again. Yes, deflation is dangerous, but here it is the only way to get around the fixed Euro currency to lower prices.
  - jeffdavis 15y ago
    "Austerity may cause internal devaluation." I'm confused. Devaluation is inflation, right? You're saying that lower government spending may lead to inflation? And you think deflation is the more desirable outcome? I'm not disagreeing, but I haven't heard that line of reasoning before.
    - meric 15y ago
      Devaluation is deflation. Normally when the government gives a whole stack of money to its citizens, the country's currency inflates. Its exports will then be cheaper to others. Greece cannot do this; Its currency is fixed with its major trading partners. There is no way to lower prices of its exports... besides deflation. There's two ways out of it. Quit the Euro (default on debts) and inflate the economy to lower export prices (look where that got the US, I'm starting to be skeptical of this tactic), or cut public spending, start deflation, to lower export prices. Since in France, Germany, prices are not deflating, deflation in Greece will lower Greece's export prices. While consumers in Greece may stop spending... "Ooo my money goes up in value by simply holding it", importers in France and Germany will not stop spending "Buying from Greece is cheaper than buying from France, Germany. No brainer". They're not going to stop spending because if they stop spending money to import they also stop earning money from selling the imports to their home countries. Lower export prices -> Increased exports. Eventually, hopefully, it will bring the country back into growth. I think deflation is more dangerous when your currency isn't fixed with others, because then banks/companies will be able to manipulate your currency to take advantage of the deflation in the country. When the currency is fixed, there is just as much point for an importer to play with currency as US Steel plays with US Dollars. (i.e Not their business). This is all what I think Germany is trying to make Greece do. I don't have evidence for any of it.
- artsrc 15y ago
  Destroying the economy is the worst thing for Greek bond holders. However I don't know if real damage is being done. Greece has import agriculture and tourist industries. Are the fields being left untendered? Is are there hotels being left half constructed? I agree that unemployment is waste of human capital. Perhaps the government should have just halved all there employees wages rather than laying them off?
  - gaius 15y ago
    are there hotels being left half constructed? Yes, but this is normal for Greece; leave your building unfinished, even if only cosmetically, and you pay no tax on it. A desperately needed tweak to the law is to start taxing buildings when they are actually used.

RockyMcNuts 15y ago

It's gotten bigger than Greece... if the recovery was intact it would just be the weak countries like Greece that couldn't pay their debts, if the economy dips then the big countries like Spain and Italy can't either. It turns into a death spiral, the more people panic over the crisis, the worse the economy gets, the more countries are at risk of default. Meanwhile, German economic policy essentially consists of: 1) Tight fiscal policy to crush any signs of a recovery. 2) Tight monetary policy to crush any signs of recovery. 3) Tie yourself to some profligate countries so that you have a cheap exchange rate and can sell s***loads of exports. 4) When the countries you provided vendor finance to start having trouble paying you back insist that they follow 1) and 2). 5) Wonder why everyone hates you. ..."It's a pulley system - you throw everyone over the cliff and let the rope take you higher. But eventually you reach the pulley." http://macro-man.blogspot.com/2011/11/raising-dead-and-axis-of-evil.html http://macro-man.blogspot.com/2011/11/raising-dead-and-axis-... reminds me of Air France 447, the people running the show initially reacted by pushing the stick in the wrong direction, they're still way behind the curve, by the time they react with sufficient force, might be too late, crash of markets, governments defaulting, countries abandoning the Euro.

DuncanIdaho 15y ago
For one I believe that Germans know what they're doing. They might be a little bit too bent on saving Framany's banks - however if these banks drop then Framany drops. If that happens Eurozone has no steering wheel and no engine to get anywhere. So in fact it is essential that in eurozone: 1. Germany and France be saved from the worst. 2. Germany and France beat the other juvenile countries into fiscal submission. 3. The new "germanized" europe lifts itself out of ash. Whatever people think, the whole point of eurozone is "germanization" of Europe. It's not as some people state that Germany is trying to occupy the Europe. The fact is that Europe wants to occupy Germany. Thats the whole point, the whole Europe and its citizenry would like to live in Germany. And Germans know full well what they're doing - I'd even dare to say that they know what they're doing even better than 'mericans. Don't forget that Germany annexed DDR 20 years ago and that DDR was in much worse shape than any of PIIGS. Alo Angela Merkl along with many people in charge, grew up in DDR.

Confusion 15y ago

If you think this is about 'teaching a few Greeks a lesson', then you really don't understand the severity and complexity of the current situation. The Greeks are a symptom that can't be dealt with by being nice to them, because then they won't change a damned thing. Why would they, if the others want to keep them in the Euro so much they can get away with anything they want? And worse, by not being severe with them, the other countries will think similarly and cater to their population instead of the population of the Eurozone as a whole. That's just how the incentives are, so they are forced to impose strong counter-incentives.