7 ms·

What's most interesting to me in this entire crisis is the moral discourse surrounding debt. More often than not, you'll hear stuff like: "Of course Greece must

What's most interesting to me in this entire crisis is the moral discourse surrounding debt. More often than not, you'll hear stuff like: "Of course Greece must pay its debt", "You mean to say you can just take money and not pay?", "Why should taxpayers bail Greece out?"... All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece. Somehow, a creditor is deemed morally superior to the debtor. What repulsive rhetoric!

themartorana 11y ago
Well, not exactly. The people are rather loud about it (at least here in the U.S. where we lock up petty drug offenders for life, but there's nary a single banker in jail for the 2008 worldwide economic collapse), but it doesn't matter if we make noise about it. As long as no one in government does, and the media mostly ignores it, the result is the same.
Natsu 11y ago
I guess that depends on whether you see making a promise you have no reason to believe you can keep is better or worse than being dumb enough to believe it.
- sooheon 11y ago
  Don't discount the third option, that creditors are neither dumb or gullible, but predatory.
  - CamperBob2 11y ago
    Well, they've "preyed" themselves into substantial losses. Even if the EU makes good on the principal on Greece's behalf, it was still a dumb idea to lend money to them.
  - Natsu 11y ago
    Usually predatory lenders have more recourse over you: they'll take your car from the car title loan, etc. What do they gain from this situation, exactly? It seems to me like everybody loses here... and I'm not entirely certain they won't find some bailout and have it happen again. Right now, I feel sorry for the people in Greece, it seems like they work long hours for nothing and their government is completely underwater.
    - learnstats2 11y ago
      >they'll take your car from the car title loan, etc. they'll take your pensions from the pension pot, etc. This deal is about giving predatory lenders political power over nation-states.
      - Natsu 11y ago
        The point of this vote is that they can't take anything unless Greece agrees to it. They will have to control spending in order to get the economy back on track, just as you have to take in more money than you spend to get out of debt, but the whole thing is so broken, I don't know if anyone can fix it and I feel bad for the people who have to suffer from the effects of poor governing. And with this rejected, who will give Greece money now? I mean, who's going to lend money to someone when you know they're going to tell you that you were a sucker if you thought they'd pay you back?
        learnstats2 11y ago
        > I mean, who's going to lend money to someone when you know they're going to tell you that you were a sucker if you thought they'd pay you back? It is perfectly normal for countries to default. That is an expected part of lending. Here's the list: https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises
        Natsu 11y ago
        I'm not sure 'normal' is the word I'd use there, unless one counts the collapse of Russia, the Napoleonic wars or WW1 as 'normal'. If you read the section under IMF on the Latin American debt crisis, you'll see quite a few parallels with the Greek situation: https://en.wikipedia.org/wiki/Latin_American_debt_crisis https://en.wikipedia.org/wiki/Latin_American_debt_crisis
Lazare 11y ago
> All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not sure you really understand the situation. Everything which you said "isn't happening" already happened. There was already a massive haircut on privately held Greek debt (but not the publicly held greek debt), and the banks already ate a huge loss. Something like 80% of Greek debt is now owed to the "troika", with much of the remainder held domestically. The reason that EU governments focus on debt repayment, and why people talk about taxpayers is because they own the debt, and it's their taxpayers who will eat the loss. > Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece. Probably because that didn't happen. Private investors lost something north of 75% of the value of the loans they've made; what haircut has the IMF or French government taken on their holdings of Greek debt? (Hint: Zero.)
- deleted 11y ago
  [deleted]
- landryraccoon 11y ago
  Do you have a citation for this? I looked on Google and didn't see any evidence that creditors were asked to take a haircut on Greek debt. In fact this article on cnbc seems to suggest that Europe is resisting any suggestion of a haircut: http://www.cnbc.com/id/102371294 http://www.cnbc.com/id/102371294 I could definitely be wrong, just want to know where you're getting your information from.
  - Lazare 11y ago
    From the wikipedia overview[1]: "A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme revealed the need for Greece to receive a second bailout worth €130 billion (including a bank recapitalization package worth €48bn), while all private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% face value loss." When you do the math (the maturity extension and interest rate cuts were steep), the total haircut was 75%+, with the bulk of the losses absorbed by French banks. It got a HUGE amount of press back in 2012—at least in the financial press. Google for "greece", "2012", "bond swap", "haircut", "debt swap", etc., you'll find hundreds of articles. Many of which boiled down to "um, if the troika doesn't take a haircut too, it won't fix the core problem, and we'll be right back here in another 2-3 years". They were right too. :( Edit: Your link is part of that. All that's left is government held debt, and they STILL insist on avoiding any haircut, just as they have been this entire time. They were happy to see other people lose their money, but by now we're out of people with skin in the game. All that's left is the troika. Their insistence on avoiding a haircut is why everyone else had to have a 75%+ haircut..and why even that wasn't enough. [1]: https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2010.E2.80.932014 https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2...
MarkMc 11y ago
No, there was a huge amount of anger and condemnation directed towards banks who received a bailout. The difference is that a collapse of so many large banks would have wrecked the German economy. That is why they received a bailout - not because of any 'moral superiority'
maaku 11y ago
Not to mention what is actually happening here -- publicizing private debts. Why should European taxpayers be on the hook for risky bets made by Deutschebank et al? That's what's really going on here. Nearly all of the bail out funds received by Greece have gone to paying back debt. Which sounds like a good, moral thing. But what that actually means is that public money (IMF or ECB loans, backed by governments and therefore taxpayers) is used to pay off the mainly private debt holders which hold Greek national debt. The banks which made the risky bets in the first place are getting their money back -- with interest* -- and the risk is being entirely taken on by taxpayers. So that when Greece does default -- and austerity is making that inevitable -- the bankers which made those stupid loans will have long since skipped the country, cash in hand. TL;DR - the European bail out of greek debt is really a public bail out of the private banks -- Deutschebank, Goldman Sachs, etc. -- who made the stupidly risky bets in the first place. DB and GS are getting face value* for their worthless greek bonds, and the taxpayers are left on the hook. But good luck getting that side of the story ever told in the media. DB and GS shareholders need their profits. * There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it. It was still a profitable investment. (Lesson for anyone aspiring for a profitable career in international finance: find the weakest member of an organization like the Eurozone, and offer them as much debt as you can get them to take. It will have stupidly high interest rates (e.g. >7%) because it will be so risky. But importantly, make sure that you take on so much debt that a default would ruin you. This is vitally important. Now wait for the inevitable to happen and your own government to bail you out because you are Too Big To Fail. Be sure to have a golden parachute in place in case a socialist is in power when it happens, but don't worry at worst you might lose one year's bonus. You will never go to jail.)
- Lazare 11y ago
  First, a minor point: The biggest holders of Greek debt were French banks by far, followed by UK banks and only then German banks. So when you say "Deutschebank, Goldman Sachs, etc." what you mean is BNP Paribas. But if you don't even know which banks—or countries—were involved, it raises questions. And I have no idea why you tossed Goldman Sachs in there; they never held significant amounts of Greek debt. They helped sell the debt; they were much too smart to buy it, much less keep it. The suckers here were, overwhelmingly, the French banks. Second: "There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it." That's utterly wrong. It's so wrong, I'm not even sure how you could make that sort of error in good faith. Private banks lost 75%+ of the value of their Greek debt, in large part due to a forced reduction in interest rates. It's almost worthless because they have no ability to make it up via interest. As a result, the private sector has basically written the entire thing off as a bad idea and walked away; the only real holders of Greek debt left are the troika and domestic Greek institutions. We're discussing matters of public record. BNP Paribas loss on it's greek debt holdings is in their accounts in black and white. Who owns the debt, what the terms are, what the yield is; all of that is readily available, and none of it is what you imply. If you want an example of publicizing private debts, look at the Irish bailout, not the Greek haircut.
kriro 11y ago
It seems that these days corporations (banks, car manufacturers) can easily gain the magical exemption of "too big to fail" but countries can not. Megacorp SciFi is close.
jeffdavis 11y ago
I thought default was always considered an option for Greece. The way I understood it, a "bailout" was a plan to give Greece a bunch of money so they could avoid default. Please correct me where I'm wrong.

themartorana 11y ago

Well, not exactly. The people are rather loud about it (at least here in the U.S. where we lock up petty drug offenders for life, but there's nary a single banker in jail for the 2008 worldwide economic collapse), but it doesn't matter if we make noise about it. As long as no one in government does, and the media mostly ignores it, the result is the same.

Natsu 11y ago

I guess that depends on whether you see making a promise you have no reason to believe you can keep is better or worse than being dumb enough to believe it.

sooheon 11y ago
Don't discount the third option, that creditors are neither dumb or gullible, but predatory.
- CamperBob2 11y ago
  Well, they've "preyed" themselves into substantial losses. Even if the EU makes good on the principal on Greece's behalf, it was still a dumb idea to lend money to them.
- Natsu 11y ago
  Usually predatory lenders have more recourse over you: they'll take your car from the car title loan, etc. What do they gain from this situation, exactly? It seems to me like everybody loses here... and I'm not entirely certain they won't find some bailout and have it happen again. Right now, I feel sorry for the people in Greece, it seems like they work long hours for nothing and their government is completely underwater.
  - learnstats2 11y ago
    >they'll take your car from the car title loan, etc. they'll take your pensions from the pension pot, etc. This deal is about giving predatory lenders political power over nation-states.
    - Natsu 11y ago
      The point of this vote is that they can't take anything unless Greece agrees to it. They will have to control spending in order to get the economy back on track, just as you have to take in more money than you spend to get out of debt, but the whole thing is so broken, I don't know if anyone can fix it and I feel bad for the people who have to suffer from the effects of poor governing. And with this rejected, who will give Greece money now? I mean, who's going to lend money to someone when you know they're going to tell you that you were a sucker if you thought they'd pay you back?
      - learnstats2 11y ago
        > I mean, who's going to lend money to someone when you know they're going to tell you that you were a sucker if you thought they'd pay you back? It is perfectly normal for countries to default. That is an expected part of lending. Here's the list: https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises
        Natsu 11y ago
        I'm not sure 'normal' is the word I'd use there, unless one counts the collapse of Russia, the Napoleonic wars or WW1 as 'normal'. If you read the section under IMF on the Latin American debt crisis, you'll see quite a few parallels with the Greek situation: https://en.wikipedia.org/wiki/Latin_American_debt_crisis https://en.wikipedia.org/wiki/Latin_American_debt_crisis

Lazare 11y ago

> All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not sure you really understand the situation. Everything which you said "isn't happening" already happened. There was already a massive haircut on privately held Greek debt (but not the publicly held greek debt), and the banks already ate a huge loss. Something like 80% of Greek debt is now owed to the "troika", with much of the remainder held domestically. The reason that EU governments focus on debt repayment, and why people talk about taxpayers is because they own the debt, and it's their taxpayers who will eat the loss. > Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece. Probably because that didn't happen. Private investors lost something north of 75% of the value of the loans they've made; what haircut has the IMF or French government taken on their holdings of Greek debt? (Hint: Zero.)

deleted 11y ago
[deleted]
landryraccoon 11y ago
Do you have a citation for this? I looked on Google and didn't see any evidence that creditors were asked to take a haircut on Greek debt. In fact this article on cnbc seems to suggest that Europe is resisting any suggestion of a haircut: http://www.cnbc.com/id/102371294 http://www.cnbc.com/id/102371294 I could definitely be wrong, just want to know where you're getting your information from.
- Lazare 11y ago
  From the wikipedia overview[1]: "A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme revealed the need for Greece to receive a second bailout worth €130 billion (including a bank recapitalization package worth €48bn), while all private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% face value loss." When you do the math (the maturity extension and interest rate cuts were steep), the total haircut was 75%+, with the bulk of the losses absorbed by French banks. It got a HUGE amount of press back in 2012—at least in the financial press. Google for "greece", "2012", "bond swap", "haircut", "debt swap", etc., you'll find hundreds of articles. Many of which boiled down to "um, if the troika doesn't take a haircut too, it won't fix the core problem, and we'll be right back here in another 2-3 years". They were right too. :( Edit: Your link is part of that. All that's left is government held debt, and they STILL insist on avoiding any haircut, just as they have been this entire time. They were happy to see other people lose their money, but by now we're out of people with skin in the game. All that's left is the troika. Their insistence on avoiding a haircut is why everyone else had to have a 75%+ haircut..and why even that wasn't enough. [1]: https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2010.E2.80.932014 https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2...

MarkMc 11y ago

No, there was a huge amount of anger and condemnation directed towards banks who received a bailout. The difference is that a collapse of so many large banks would have wrecked the German economy. That is why they received a bailout - not because of any 'moral superiority'

maaku 11y ago

Not to mention what is actually happening here -- publicizing private debts. Why should European taxpayers be on the hook for risky bets made by Deutschebank et al? That's what's really going on here. Nearly all of the bail out funds received by Greece have gone to paying back debt. Which sounds like a good, moral thing. But what that actually means is that public money (IMF or ECB loans, backed by governments and therefore taxpayers) is used to pay off the mainly private debt holders which hold Greek national debt. The banks which made the risky bets in the first place are getting their money back -- with interest* -- and the risk is being entirely taken on by taxpayers. So that when Greece does default -- and austerity is making that inevitable -- the bankers which made those stupid loans will have long since skipped the country, cash in hand. TL;DR - the European bail out of greek debt is really a public bail out of the private banks -- Deutschebank, Goldman Sachs, etc. -- who made the stupidly risky bets in the first place. DB and GS are getting face value* for their worthless greek bonds, and the taxpayers are left on the hook. But good luck getting that side of the story ever told in the media. DB and GS shareholders need their profits. * There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it. It was still a profitable investment. (Lesson for anyone aspiring for a profitable career in international finance: find the weakest member of an organization like the Eurozone, and offer them as much debt as you can get them to take. It will have stupidly high interest rates (e.g. >7%) because it will be so risky. But importantly, make sure that you take on so much debt that a default would ruin you. This is vitally important. Now wait for the inevitable to happen and your own government to bail you out because you are Too Big To Fail. Be sure to have a golden parachute in place in case a socialist is in power when it happens, but don't worry at worst you might lose one year's bonus. You will never go to jail.)

Lazare 11y ago
First, a minor point: The biggest holders of Greek debt were French banks by far, followed by UK banks and only then German banks. So when you say "Deutschebank, Goldman Sachs, etc." what you mean is BNP Paribas. But if you don't even know which banks—or countries—were involved, it raises questions. And I have no idea why you tossed Goldman Sachs in there; they never held significant amounts of Greek debt. They helped sell the debt; they were much too smart to buy it, much less keep it. The suckers here were, overwhelmingly, the French banks. Second: "There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it." That's utterly wrong. It's so wrong, I'm not even sure how you could make that sort of error in good faith. Private banks lost 75%+ of the value of their Greek debt, in large part due to a forced reduction in interest rates. It's almost worthless because they have no ability to make it up via interest. As a result, the private sector has basically written the entire thing off as a bad idea and walked away; the only real holders of Greek debt left are the troika and domestic Greek institutions. We're discussing matters of public record. BNP Paribas loss on it's greek debt holdings is in their accounts in black and white. Who owns the debt, what the terms are, what the yield is; all of that is readily available, and none of it is what you imply. If you want an example of publicizing private debts, look at the Irish bailout, not the Greek haircut.

kriro 11y ago

It seems that these days corporations (banks, car manufacturers) can easily gain the magical exemption of "too big to fail" but countries can not. Megacorp SciFi is close.

jeffdavis 11y ago

I thought default was always considered an option for Greece. The way I understood it, a "bailout" was a plan to give Greece a bunch of money so they could avoid default. Please correct me where I'm wrong.