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On February 09 2012 10:01 Skilledblob wrote:Show nested quote +On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:
[quote]
If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency.
So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea  Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all.
So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest 
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On February 09 2012 10:02 GoTuNk! wrote:Show nested quote +On February 09 2012 09:59 Skilledblob wrote:On February 09 2012 09:49 Hider wrote:
Less wages ---> More goods produced. Why do you btw think that PSI wants greece governemnt to decrease minimum wage?
stil lcant figure out how you got to this assumption that low wages would mean more produced and consumed goods. Lower wages mean that less can be consumed which leads to less being produced. And even if the production does not decrease because of good exports it still doesnt mean shit for the domestic market because there is still no money to be spend. Economy 101 - less wages, cheaper to produce products (labor costs less). Your logic is totally flawed; under what you are saying, you could just raise waiges artificially, which would increase purchasing power and increase production, which is obviously not true, because if it was we would have solved poverty already.
Yes, you cant just artificially raise everyones wages and expect the solution to poverty but slashing the wages in Greece right now might not end their problems either. Think about your logic for Greece: They slash their wages to barley subsistence level, no longer can afford anything the Germans make. Will import substitution really roar back? Do you imagine the Greeks will make really cheap Greek cars that only Greeks and other poor people would want? And really cheap Greek televisions also?
The only thing the Greeks can do is try to become the next Slovakia and offer a really good place for German car makers to set up factories at a cheap employment rate. But that will still ultimately depend on Germany being able to run a trade surplus against some other country.
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On February 09 2012 10:08 Probulous wrote:Show nested quote +On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:
[quote]
Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest
Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No?
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On February 09 2012 09:42 Probulous wrote:Show nested quote +On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out.
One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit.
Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising.
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On February 09 2012 10:17 Schnullerbacke13 wrote:Show nested quote +On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. Someone will still have to pay though -- if your German banks fail because they lent too much to olive zone or bought too many American real estate mortgage bonds then credit dries up in Germany as well. So no credit cards, no trade credits, no payment systems, etc. Thus banks are able to hold the wider economy, because the more 'modern' it is the more finance is involved in all aspects.
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On February 09 2012 10:13 Sub40APM wrote:Show nested quote +On February 09 2012 10:08 Probulous wrote:On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:
[quote]
How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money?
Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No?
Yes but we have a federal government setting budgets for all states (the country budget at least). Sure each state can issue bonds but the currency if predominantly determined by what the economy as a country does, not by state. So having a central budget setting agency for the entire country makes sense. To compare with the EU, it would be like if the AUD was our currency but all the governmental spending was done by individual states. Then yes we would have similar problems.
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On February 09 2012 10:17 Schnullerbacke13 wrote:Show nested quote +On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising.
But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states.
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On February 09 2012 10:22 Probulous wrote:Show nested quote +On February 09 2012 10:13 Sub40APM wrote:On February 09 2012 10:08 Probulous wrote:On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:
[quote]
Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No? Yes but we have a federal government setting budgets for all states (the country budget at least). Sure each state can issue bonds but the currency if predominantly determined by what the economy as a country does, not by state. So having a central budget setting agency for the entire country makes sense. To compare with the EU, it would be like if the AUD was our currency but all the governmental spending was done by individual states. Then yes we would have similar problems.
Well yes, that is why one solution for the EU is to draw closer together.
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On February 09 2012 10:12 Sub40APM wrote:Show nested quote +On February 09 2012 10:02 GoTuNk! wrote:On February 09 2012 09:59 Skilledblob wrote:On February 09 2012 09:49 Hider wrote:
Less wages ---> More goods produced. Why do you btw think that PSI wants greece governemnt to decrease minimum wage?
stil lcant figure out how you got to this assumption that low wages would mean more produced and consumed goods. Lower wages mean that less can be consumed which leads to less being produced. And even if the production does not decrease because of good exports it still doesnt mean shit for the domestic market because there is still no money to be spend. Economy 101 - less wages, cheaper to produce products (labor costs less). Your logic is totally flawed; under what you are saying, you could just raise waiges artificially, which would increase purchasing power and increase production, which is obviously not true, because if it was we would have solved poverty already. Yes, you cant just artificially raise everyones wages and expect the solution to poverty but slashing the wages in Greece right now might not end their problems either. Think about your logic for Greece: They slash their wages to barley subsistence level, no longer can afford anything the Germans make. Will import substitution really roar back? Do you imagine the Greeks will make really cheap Greek cars that only Greeks and other poor people would want? And really cheap Greek televisions also? The only thing the Greeks can do is try to become the next Slovakia and offer a really good place for German car makers to set up factories at a cheap employment rate. But that will still ultimately depend on Germany being able to run a trade surplus against some other country.
Nothing can help greece short term. However the only way to recovery mid term is a) to get an own currency and devalue or to b) keep the euro and drastically lower wages (same as devaluation).
The current actions and bailouts are not designed to help greece people, but to prevent a meltdown of german+french banks. A default of greece will trigger credit insurances and most of the sellers of those insurances will not be able to pay, so a meltdown of a lot of capital investment institutions (banks, ensurances, pension fonds) might fail.
Regarding Germany: Germany is not the center of the world and greece is a small country. German exports won't be hurt if greece stops importing and there are many other countries which might invest in greece as long conditions are ok (which is not the case currently).
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On February 09 2012 10:08 Probulous wrote:Show nested quote +On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:
[quote]
Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest
The big plus of the Euro is that Germany as an export nation does not have to pay tolls anymore when shipping products to other Euro members, what this also means is that fluctuations between currencys dont affect us as much anymore. So these two are the big pluses that keep the Euro alive for the german government. This made it possible to sell our crap everywhere in Europe and on the same time destroy local industries at the cost of german domestic wages which are in teh gutter right now, which means the germans themself have to buy even cheaper chinese crap
So you can always rely on Germany when it comes to keeping the Euro alive our government will do everything and so far no bailout really was expensive enough to justify destroying the Euro and going back to the old currencies. Like you said this is exploitation at its best but at the same time nobody was forcing Greece into the Euro zone and they certainly brought this crisis they are having upon themself.
Greece really cant refuse any help from the EU now they depend way too much on it to try to be stubborn. One important thing about german history is the big inflations we had in the 1920s this is still inside the minds of a lot of people so inflation is something that really scares people here so I doubt that the german government would willingly support such measures without risking its next reellection.
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On February 09 2012 10:25 Sub40APM wrote:Show nested quote +On February 09 2012 10:22 Probulous wrote:On February 09 2012 10:13 Sub40APM wrote:On February 09 2012 10:08 Probulous wrote:On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:
[quote]
If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy.
greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No? Yes but we have a federal government setting budgets for all states (the country budget at least). Sure each state can issue bonds but the currency if predominantly determined by what the economy as a country does, not by state. So having a central budget setting agency for the entire country makes sense. To compare with the EU, it would be like if the AUD was our currency but all the governmental spending was done by individual states. Then yes we would have similar problems. Well yes, that is why one solution for the EU is to draw closer together.
Thanks guys, I am slowly coming to a decent understanding (well I think so anyway).
Question: Are there any better solutions than a central budget office for all euro denominated states?
Other options considered:
+ Show Spoiler [Euro breakup] +
This would involve some members of the EU leaving. This seems highly unlikely because as explained they can't be kicked out. Plus they benefit from having leverage over their neighbours. This would also damage countries with a trade surplus as the euro would increase in value.
+ Show Spoiler [Bailout] +
This is where a european banks and governments put together a massive savings account to protect against future debt issues. This seems to be the way the crisis is being dealth with but does not solve the fundamental problem of fiscal union. Namely that with each country allowed to spend in euro whilst having no accountability for their spending. Ultimately most of this debt is held within the EU and so when a country looks to default, it is the EU left holding the doozy. I don't see this as a long term solution
Any other options?
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On February 09 2012 10:24 Probulous wrote:Show nested quote +On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:On February 09 2012 07:55 vetinari wrote:
Greece will have to default and leave the euro. Its going to be chaos for them, but staying in the euro is economic suicide, because austerity during a recession is unbelievably retarded. If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency. So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states.
They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction.
Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation.
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well currently the EU is going for the bailout option you described. They want to set up a permanent fond ( yeah a fond that can lose all of its money because of speculations on the market ) to bail out countries in the future. But with Italy on the horizon and its likeliness to go down the drain too this bailout fond is doomed to fail sooner or later.
Personally I only see the way of the EU growing together as one "country" if you want to call it that way. That is just my opinion though and I have no clue how that would pan out.
Most likely though the EU will soon make an addition to it's treaties allowing them to kick out countries. If they see no other way to save greece and the rest of the endangered countries.
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On February 09 2012 10:34 Probulous wrote:Show nested quote +On February 09 2012 10:25 Sub40APM wrote:On February 09 2012 10:22 Probulous wrote:On February 09 2012 10:13 Sub40APM wrote:On February 09 2012 10:08 Probulous wrote:On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:
[quote]
greece got into the Euro zone because they faked their records. That's really all there is to it.
What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No? Yes but we have a federal government setting budgets for all states (the country budget at least). Sure each state can issue bonds but the currency if predominantly determined by what the economy as a country does, not by state. So having a central budget setting agency for the entire country makes sense. To compare with the EU, it would be like if the AUD was our currency but all the governmental spending was done by individual states. Then yes we would have similar problems. Well yes, that is why one solution for the EU is to draw closer together. Thanks guys, I am slowly coming to a decent understanding (well I think so anyway). Question: Are there any better solutions than a central budget office for all euro denominated states?Other options considered: + Show Spoiler [Euro breakup] +
This would involve some members of the EU leaving. This seems highly unlikely because as explained they can't be kicked out. Plus they benefit from having leverage over their neighbours. This would also damage countries with a trade surplus as the euro would increase in value.
This is where a european banks and governments put together a massive savings account to protect against future debt issues. This seems to be the way the crisis is being dealth with but does not solve the fundamental problem of fiscal union. Namely that with each country allowed to spend in euro whilst having no accountability for their spending. Ultimately most of this debt is held within the EU and so when a country looks to default, it is the EU left holding the doozy. I don't see this as a long term solution
Any other options?
From a german point of view, this would mean to permanently move cash to economical weaker countries. Some countries have a tradition of disorganization and political disorder which is not likely to change. Does the german tax payer want to pay Berlusconis Bunga Bunga ? I don't think so :-). So any german politician proposing this, will not be elected again.
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On February 09 2012 10:38 Schnullerbacke13 wrote:Show nested quote +On February 09 2012 10:24 Probulous wrote:On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:On February 09 2012 07:58 Hider wrote:
[quote]
If labour markets were very flexible they could continue staying in the euro. But since the labour markets aren't able to accept that wages need to be lower, and some people need to befired, the country would benefit from a devalulation of the currency.
So while austerity is the solution to the problem of too much spending, the crises will be prolonged when unions has too much power, and government insitutions interfer with the market. Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states. They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction. Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation.
See that is why I don't think letting Greece default makes sense. It affects so many other EU countries that the cost would outweigh the benefits. Surely this is the lever to be used to get a more centralised budget setting system up. Every country has a basic choice, either let the EU have more control over your budget or get out.
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On February 09 2012 10:42 Schnullerbacke13 wrote:Show nested quote +On February 09 2012 10:34 Probulous wrote:On February 09 2012 10:25 Sub40APM wrote:On February 09 2012 10:22 Probulous wrote:On February 09 2012 10:13 Sub40APM wrote:On February 09 2012 10:08 Probulous wrote:On February 09 2012 10:01 Skilledblob wrote:On February 09 2012 09:55 Probulous wrote:On February 09 2012 09:47 Skilledblob wrote:On February 09 2012 09:42 Probulous wrote:
[quote]
Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. You cant get kicked out of treaties inside the EU. Nobody can kick anybody out all you can do is leave on your own. And people still think the euro is a good idea Based on this it seems that they euro is at the mercy of the people setting individual national budgets. How is that viable? To me it seems like a family where everyone has access to the credit card. Am I missing something? well basically the Euro is a good idea but not for everyone. For Germany in particular it is a great idea because we can sell lots of stuff but for countries like Italy, Greece or Spain which allready had some Inflation going the Euro certainly did not help at all. So I guess as long as Germany's increased income through the lowered euro value outweighs the income lost through "lending" to Greece they will continue supporting bailing out Greece? Seems a little exploitative but I guess that is expected. The problem is that it doesn't solve the issue for those with a trade deficit. What happens when Greece refuses to accept more debt without cancellation of current debt? Surely Germany is then on the hook? I guess the devaluation of the euro through a partial default would benefit them even more. Talk about a conflict of interest Isnt that the case with all federal units? Surely in Australia some states are richer than other states and presumably to maintain a relatively comparable standard of living transfer payments are made from the federal budget to the poorer states while citizens of the poorer states emigrate out of those states and into the more prosperous ones. No? Yes but we have a federal government setting budgets for all states (the country budget at least). Sure each state can issue bonds but the currency if predominantly determined by what the economy as a country does, not by state. So having a central budget setting agency for the entire country makes sense. To compare with the EU, it would be like if the AUD was our currency but all the governmental spending was done by individual states. Then yes we would have similar problems. Well yes, that is why one solution for the EU is to draw closer together. Thanks guys, I am slowly coming to a decent understanding (well I think so anyway). Question: Are there any better solutions than a central budget office for all euro denominated states?Other options considered: + Show Spoiler [Euro breakup] +
This would involve some members of the EU leaving. This seems highly unlikely because as explained they can't be kicked out. Plus they benefit from having leverage over their neighbours. This would also damage countries with a trade surplus as the euro would increase in value.
This is where a european banks and governments put together a massive savings account to protect against future debt issues. This seems to be the way the crisis is being dealth with but does not solve the fundamental problem of fiscal union. Namely that with each country allowed to spend in euro whilst having no accountability for their spending. Ultimately most of this debt is held within the EU and so when a country looks to default, it is the EU left holding the doozy. I don't see this as a long term solution
Any other options? From a german point of view, this would mean to permanently move cash to economical weaker countries. Some countries have a tradition of disorganization and political disorder which is not likely to change. Does the german tax payer want to pay Berlusconis Bunga Bunga ? I don't think so :-). So any german politician proposing this, will not be elected again.
Seriosuly mate, thanks for the responses, always nice to get a better understanding.
Aren't in effect doing that anyway? Standard opportunity cost says that by giving Greece debt at vastly lowered interest rates Germany is losing money. Plus there is the vey real possibility that the debt will not be repaid and Germany has no leverage over Greece other than debt repayment.
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On February 09 2012 10:44 Probulous wrote:Show nested quote +On February 09 2012 10:38 Schnullerbacke13 wrote:On February 09 2012 10:24 Probulous wrote:On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:
[quote]
Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states. They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction. Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation. See that is why I don't think letting Greece default makes sense. It affects so many other EU countries that the cost would outweigh the benefits. Surely this is the lever to be used to get a more centralised budget setting system up. Every country has a basic choice, either let the EU have more control over your budget or get out.
actually the EU allready has an agency that watches over the budgets of the various countries. But the problem is nobody really cares what they say.
So far the german government seemed fairly certain that Greece would pay its debt back. IF it takes them 50 years or not that doesnt matter really much, we would still make money off them through the interests.
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On February 09 2012 10:50 Skilledblob wrote:Show nested quote +On February 09 2012 10:44 Probulous wrote:On February 09 2012 10:38 Schnullerbacke13 wrote:On February 09 2012 10:24 Probulous wrote:On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:
[quote]
How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money?
Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states. They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction. Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation. See that is why I don't think letting Greece default makes sense. It affects so many other EU countries that the cost would outweigh the benefits. Surely this is the lever to be used to get a more centralised budget setting system up. Every country has a basic choice, either let the EU have more control over your budget or get out. actually the EU allready has an agency that watches over the budgets of the various countries. But the problem is nobody really cares what they say.
But there are no consequences for not caring. That is the problem, there have to be very reall, very painful consequences for not following the rules.
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On February 09 2012 10:53 Probulous wrote:Show nested quote +On February 09 2012 10:50 Skilledblob wrote:On February 09 2012 10:44 Probulous wrote:On February 09 2012 10:38 Schnullerbacke13 wrote:On February 09 2012 10:24 Probulous wrote:On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:
[quote]
Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states. They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction. Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation. See that is why I don't think letting Greece default makes sense. It affects so many other EU countries that the cost would outweigh the benefits. Surely this is the lever to be used to get a more centralised budget setting system up. Every country has a basic choice, either let the EU have more control over your budget or get out. actually the EU allready has an agency that watches over the budgets of the various countries. But the problem is nobody really cares what they say. But there are no consequences for not caring. That is the problem, there have to be very reall, very painful consequences for not following the rules.
Sure but the problem is nobody is following the rules and when nobody follows them there is nobody to enforce them ^^
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On February 09 2012 10:44 Probulous wrote:Show nested quote +On February 09 2012 10:38 Schnullerbacke13 wrote:On February 09 2012 10:24 Probulous wrote:On February 09 2012 10:17 Schnullerbacke13 wrote:On February 09 2012 09:42 Probulous wrote:On February 09 2012 09:37 Skilledblob wrote:On February 09 2012 09:31 Probulous wrote:On February 09 2012 09:28 Skilledblob wrote:On February 09 2012 08:38 Hider wrote:On February 09 2012 08:05 vetinari wrote:
[quote]
Greece's problem isn't too much spending, its too little spending. Too much spending is when you have full employment and inflation increasing. This is why entering the euro is such a dumb idea: because a nation sovereign in its currency has the ability to spend however much it needs to maintain full employment indefinitely. How did greece ever get into this mess? By spending too much when times were good? But according to that logic they should never experiment a contracticing GDP? Cus they spend a lot of money? Greece has these problems now because their government is crap. Rampant tax fraud and an economy that was largely tourism based. This could only lead to desaster when the harsh years in other countries started and not as many tourists were coming anymore. If it is so obvious now, why were they let into the euro in the first place? It must have been clear that having access to cheaper credit would not stop this behaviour even if there were so called penalties for it. A far more important question is how will this be prevented in the future. I have yet to hear a decent explanation aside from a central fiscal policy. greece got into the Euro zone because they faked their records. That's really all there is to it.What Greece has to do is get it's fiscal politics in order. I cant think of anything more. The greece industry is hardly exsisting, most of it's money comes from tourism. But through entering the Euro zone and probably out of greed too, vacations in greece became really expensive compared to maybe ten years ago. So this means they destroyed lots of their own tourism income through too high prices. This led to tourists going to Turkey instead of Greece. Then why is the euro keeping them in? I know Germany is benefitting through their exports but it has already lead to a bailout for Ireland and Spain, Italy and Portugal are or were close at points. The issue here is how the EU will deal with this in the future. What stops a country faking their records after this is settled? What are the punishments? How are they enforced? I can't see rational (do they exist?) investors having any faith in the euro if these issues are not sorted out. One simple punishment is to *not* bailout them. Greece could get into depth, because the market anticipated they'd get a bailout. Without this silent assumption greece would not have been able to rise that depth, because yield rates would have been much higher and they would not have been able to get that much credit. Although the public perception is, that the debt market needs regulation, the current crisis is the result of too much regulation (forcing yields down etc.) and bailouts. A country like e.g. Argentina simply cannot rise that much debt because yield rates will skyrocket. Vice versa banks should not get bailouts. If they lend money to a country and the country can't pay, the money is lost. That's why they receive yield payments (reward for risk). All those bailouts lead to unpunished (or very delayed punishment) debt rising. But aren't those bonds denominated in euro? So the rest of the EU has an inherent interest in keeping Greece afloat. If Greece defaults, the euro defaults and so by proxy do all other euro states. They are, but yield rates are different for each country. If greece fails, german bonds will not suffer. However if it becomes clear, that the EU is willing to let greece default, yield rates for other weak economies (portugal, spain, italy, ireland) will get a reality injection and will rise pretty quick. The yield rates of those countries are still not completely realistic as there is still the hope, that the debt will be payed by the EU in case. If greece defaults, this phantasy bubble will plop and yield rates for e.g. itally will go >10% which will let them default pretty quick. Its a chain reaction. Blaming the market for this chain reaction is wrong, actually yield rates are unrealistic and do not reflect the real default risk. They will default in the long run anyway, politics can delay this but in the end there are only 2 ways out: mass default or inflation. See that is why I don't think letting Greece default makes sense. It affects so many other EU countries that the cost would outweigh the benefits. Surely this is the lever to be used to get a more centralised budget setting system up. Every country has a basic choice, either let the EU have more control over your budget or get out.
"If you gonna fail, fail fast". Greece *will* default (actually a haircut of 70% is pretty close to a default, isn't it?). Delaying this default artificially will make the final default even more expensive.
A fiscal union with central control might be a souktion, but is not realistic, because
* the richer northern countries refuse to permanently pay disorder and mismanagement in the south, so they demand strong control over their budgets
* the poorer countries will never accept "Germans to take control" over their spending policy
* who will define the policy of a central budget control ? If it is democratic, the poor countries will robber the richer ones (because there are more weak economies). If it would not be democratic, it won't be accepted.
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EPT
