5 ms·

Um, what? It will be forced into austerity? I'm sorry, but they have been. Past tense, like…years ago. That's why they're suffering a 25% unemployment rate and

by alexqgb 11y ago

Um, what? It will be forced into austerity? I'm sorry, but they have been. Past tense, like…years ago. That's why they're suffering a 25% unemployment rate and a contraction of GDP that exceeds what the U.S. saw in the Great Depression.

tptacek 11y ago
Yes, but wherever they are now (after troika-mediated austerity), it's going to be worse after they lose their funding, isn't it?
- alexqgb 11y ago
  Not necessarily. In the short run, perhaps, but that's not the point. The point is that your analysis reflects a very poor grasp of what's happening.
  - tptacek 11y ago
    I believe you, but could you flesh that critique out some more? My understanding of Greek's fundamentals start here: http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronism/ http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronis... (this was linked from the Interfluidity thing everyone was talking about before) and continues through here: http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf (which I read when someone claimed Greece had a 2014 primary surplus, which IMF disputes), and is colored by Tyler Cowen: http://marginalrevolution.com/marginalrevolution/2015/07/the-greeks-vote-for-austerity-now.html http://marginalrevolution.com/marginalrevolution/2015/07/the... ... who I do not agree with on most things, to the extent that matters, but whose commentary on Syriza and Greek financing I now understand a little better.
    - JamesBarney 11y ago
      Hope the following helps, I think we all are trying to learn as much as possible about this as it unfolds. I thought the article about Peronis Democracy was interesting but I need some help seeing the connection to the current crisis. Judging from your comments it seems like you believe the Greek government is spending more than it's taking in(primary budget deficit). Which is not true at least for 2014 according to the Wall Street Journal. The Greek government needs to borrow more money not to fund additional purchases but to pay off debt that is coming due. For example they have $5 billion(not sure on exact number) worth of debt that matures in 2015 but they will run a primary budget surplus of $2.25 billion so they need to borrow an additional $2.75 billion to pay off the additional debt. The next few years will be very terrible for Greece, but so have the last few years. The fundamental problem with Greece comes down the idea of a fiscal multiplier, which is how much gdp changes when government spending is cut[1]. Right now the IMF estimates that the fiscal multiplier is 1.7.[0] This means that every dollar the government cuts(increasing the primary budget deficit) reduces the size of the economy by $1.7(which also reduces the governments tax revenue). So the current austerity measures of a surplus of $2.24 billion reduce the size of the Greece economy by at least $3.8 billion[2]. The current Great Depression level unemployment in Greece is the result of cuts in government spending that generated a surplus of just 1%. Imagine what Greece would be like if they achieve their target of 3.5%(was 4.5%). P.S. excuse any spelling or grammatical errors, its too late for me to be on hacker news. [0]http://www.eurointelligence.com/news-details/article/imf-admits-it-underestimated-the-fiscal-multiplier.html http://www.eurointelligence.com/news-details/article/imf-adm... [1]http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654 http://www.wsj.com/articles/greece-misses-target-on-budget-s... - behind paywall unfortunately, so there will be a need to google. [2]https://en.wikipedia.org/wiki/Fiscal_multiplier#Net_Government_Spending https://en.wikipedia.org/wiki/Fiscal_multiplier#Net_Governme... [3](at least because of the feed back loop of +surplus-> -gdp -> -taxes -> -surplus so to achieve a surplus of 2.24 billion more than 2.24 billion in cuts would need to be mead)
      - mike_hearn 11y ago
        Greece stopped having a primary surplus the moment Syriza came to power, as one of the first things they did was reverse tax rises and rehire fired civil servants.
      - tptacek 11y ago
        Thank you! The IMF analyzed the 2014 primary surplus and found it illusory: * They counted revenue sources that aren't conventionally accounted for in primary budgets * They undercounted liabilities, notably from tax refund and pension payables * Some of the unorthodox revenue they counted were privatization proceeds, which turned out less lucrative than projected The IMF's trued-up numbers suggest there was no 2014 primary surplus.
- parasubvert 11y ago
  It would be bankruptcy rather than austerity - all businesses will likely go belly up in the coming weeks, including the government. Work will be on the honor system, barter, and IOUs. So it's a rock and a hard place choice - austerity for 15-20 years or bankruptcy followed by maybe a new deal, betting that Europe won't let one of its own starve to death. If they lose their funding they need to do both of: 1. negotiate a new deal with their creditors 2. Get emergency humanitarian funding to feed people and keep hospitals running 3. start paying people in IOUs (which could eventually turn into the new drachma if #1 doesn't work out). Exiting the Euro completely would be disastrous for both Europe and Greece - there's a year or more of IT work required to introduce a new currency and one can't run an advanced economy on cash only. And Europe would have a €250 billion hole across the major powers that would need to be covered by its taxpayers if it can't get it from Greece. Legally by EU law they could sue Greece for its actions which then opens up questions about membership in the EU itself.

by alexqgb 11y ago

tptacek 11y ago

Yes, but wherever they are now (after troika-mediated austerity), it's going to be worse after they lose their funding, isn't it?

alexqgb 11y ago
Not necessarily. In the short run, perhaps, but that's not the point. The point is that your analysis reflects a very poor grasp of what's happening.
- tptacek 11y ago
  I believe you, but could you flesh that critique out some more? My understanding of Greek's fundamentals start here: http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronism/ http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronis... (this was linked from the Interfluidity thing everyone was talking about before) and continues through here: http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf http://www.imf.org/external/pubs/ft/scr/2015/cr15165.pdf (which I read when someone claimed Greece had a 2014 primary surplus, which IMF disputes), and is colored by Tyler Cowen: http://marginalrevolution.com/marginalrevolution/2015/07/the-greeks-vote-for-austerity-now.html http://marginalrevolution.com/marginalrevolution/2015/07/the... ... who I do not agree with on most things, to the extent that matters, but whose commentary on Syriza and Greek financing I now understand a little better.
  - JamesBarney 11y ago
    Hope the following helps, I think we all are trying to learn as much as possible about this as it unfolds. I thought the article about Peronis Democracy was interesting but I need some help seeing the connection to the current crisis. Judging from your comments it seems like you believe the Greek government is spending more than it's taking in(primary budget deficit). Which is not true at least for 2014 according to the Wall Street Journal. The Greek government needs to borrow more money not to fund additional purchases but to pay off debt that is coming due. For example they have $5 billion(not sure on exact number) worth of debt that matures in 2015 but they will run a primary budget surplus of $2.25 billion so they need to borrow an additional $2.75 billion to pay off the additional debt. The next few years will be very terrible for Greece, but so have the last few years. The fundamental problem with Greece comes down the idea of a fiscal multiplier, which is how much gdp changes when government spending is cut[1]. Right now the IMF estimates that the fiscal multiplier is 1.7.[0] This means that every dollar the government cuts(increasing the primary budget deficit) reduces the size of the economy by $1.7(which also reduces the governments tax revenue). So the current austerity measures of a surplus of $2.24 billion reduce the size of the Greece economy by at least $3.8 billion[2]. The current Great Depression level unemployment in Greece is the result of cuts in government spending that generated a surplus of just 1%. Imagine what Greece would be like if they achieve their target of 3.5%(was 4.5%). P.S. excuse any spelling or grammatical errors, its too late for me to be on hacker news. [0]http://www.eurointelligence.com/news-details/article/imf-admits-it-underestimated-the-fiscal-multiplier.html http://www.eurointelligence.com/news-details/article/imf-adm... [1]http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654 http://www.wsj.com/articles/greece-misses-target-on-budget-s... - behind paywall unfortunately, so there will be a need to google. [2]https://en.wikipedia.org/wiki/Fiscal_multiplier#Net_Government_Spending https://en.wikipedia.org/wiki/Fiscal_multiplier#Net_Governme... [3](at least because of the feed back loop of +surplus-> -gdp -> -taxes -> -surplus so to achieve a surplus of 2.24 billion more than 2.24 billion in cuts would need to be mead)
    - mike_hearn 11y ago
      Greece stopped having a primary surplus the moment Syriza came to power, as one of the first things they did was reverse tax rises and rehire fired civil servants.
    - tptacek 11y ago
      Thank you! The IMF analyzed the 2014 primary surplus and found it illusory: * They counted revenue sources that aren't conventionally accounted for in primary budgets * They undercounted liabilities, notably from tax refund and pension payables * Some of the unorthodox revenue they counted were privatization proceeds, which turned out less lucrative than projected The IMF's trued-up numbers suggest there was no 2014 primary surplus.
parasubvert 11y ago
It would be bankruptcy rather than austerity - all businesses will likely go belly up in the coming weeks, including the government. Work will be on the honor system, barter, and IOUs. So it's a rock and a hard place choice - austerity for 15-20 years or bankruptcy followed by maybe a new deal, betting that Europe won't let one of its own starve to death. If they lose their funding they need to do both of: 1. negotiate a new deal with their creditors 2. Get emergency humanitarian funding to feed people and keep hospitals running 3. start paying people in IOUs (which could eventually turn into the new drachma if #1 doesn't work out). Exiting the Euro completely would be disastrous for both Europe and Greece - there's a year or more of IT work required to introduce a new currency and one can't run an advanced economy on cash only. And Europe would have a €250 billion hole across the major powers that would need to be covered by its taxpayers if it can't get it from Greece. Legally by EU law they could sue Greece for its actions which then opens up questions about membership in the EU itself.