|
On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy.
So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis?
Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less?
If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine?
|
On February 23 2012 06:02 karpo wrote:Show nested quote +On February 23 2012 05:54 WallieP wrote:+ Show Spoiler +I'm really done with it. The last bit of compassion that was still there with the Greeks, has evaporated.
Even though there is, under certain conditions, a new agreement, about 130 billion additional aid to Greece instead of overloading us with loads of thanks, Greek politicians bash their benefactors even harder. For the record, does benefactors, that's ultimately you and me.
There will be very little (Dutch) families that are prepared to accept and pay a other extra 1,000 euros to save the Greeks. Even if it would mean that we do not have to save Greece and pay a lot more additional costs in short term thinking. The downfall of Greece could cause a chain reaction in the financial system which would make the costs in the short term 2,500 euros instead of only the 1,000 euros to save Greece.
Even though that is a difference of 1,500 euros, it is not as bad as it sounds. What do citizens get back for that extra 1,500 euros cost?
Punish misconduct:
As painful as the net loss of EUR 1,500 in the short term may be, in economic terms the undergoing of Greece could eventually prove an excellent long-term investment. In the future, no country will ever get it in their heads to screw everyone over and wait with the so badly needed reformation that is need for decades to get the country "good" again.
You get much more for the 1,500 euro. To appreciate this, first a characterization of Greece.
Greece at a glance
A country that on paper has an suspiciously inhabitants older than 100 years. This longevity/old age is not because eating insane amounts of garlic soaked in olive oil since birth.The structural avoidance of any work-related stress makes it likely that the first man that makes 150, is a Greek ..The real reason is that the family of the grandmother/father still wants to rake in a few decades pension, which appear smoothly be slid into the broom closet.
A country where some train drivers hauling one ton euros per year, while - except for periods of strikes - aimlessly new, empty trains riding around on fresh European subsidy paid from adjacent sections.
A country where no one is saying a friendly "thank you" for all the help coming from various countries in the past were misled by the Greeks.
A country that calls (institutional) investors that are prepared to cut down 70 percent of Greece's debt: pernicious speculators dubs.
A country that with even with the cancellation of 100 percent of all debt by everyone including the European Central Bank, the state budget will still not be conclusive.
Even without interest and after all (paper) cuts, the Greek state gives out more than it receives. The Greeks have slept for two millennia and their economic strength is nil.
The structural economic crisis in Greece is actually still worse than the financial, because they can not grow out of the shortages. Normally, a population in a country with so little competitiveness have to live in pure poverty without luxery. Thanks to the parasite on the European Union, the Greeks could live beyond their means over years of time
A country where instead of apologizing for falsifying statistics (within the euro pact to come), Chancellor Angela Merkel is portrayed as a Nazi. Fortunately Merkel has a thick skin and glide past her invective. Gone are the times that "Nazi" is just about the worst insult. Meanwhile, that "Greek" is a lot worse, Merkel probably realized.
A country where instead of finally working very hard, they have massive strikes and demonstrations.
A country that is very normal that significantly poorer EU states should tighten the waist belt, to help the pampered Greeks
That dropping Greece will make sure other countrys will not make the same mistakes, it is rational argument. The above list, however, indicates that there is more. You just dont want to award such a country with salvation. The revenge alone will be worth 1,500 euros, according to me Didn't you learn from you locked thread that it's confusing when you don't put this in a quote or mention that this is from an article? Link?
What are you talking about? Its not locked cause of that, just since its only a translation. My article link is: http://nieuws.nl.msn.com/economie/pvv-heeft-gelijk-over-grieken which i only didnt add right away since people who are against the statement will only use the pvv to say its a right though of the populist Wilders, while the only reason he is mentioned is cause he warned us about greece/this happening years ago
|
On February 23 2012 06:07 Fishball wrote:Show nested quote +On February 23 2012 06:02 karpo wrote:On February 23 2012 05:54 WallieP wrote:+ Show Spoiler +I'm really done with it. The last bit of compassion that was still there with the Greeks, has evaporated.
Even though there is, under certain conditions, a new agreement, about 130 billion additional aid to Greece instead of overloading us with loads of thanks, Greek politicians bash their benefactors even harder. For the record, does benefactors, that's ultimately you and me.
There will be very little (Dutch) families that are prepared to accept and pay a other extra 1,000 euros to save the Greeks. Even if it would mean that we do not have to save Greece and pay a lot more additional costs in short term thinking. The downfall of Greece could cause a chain reaction in the financial system which would make the costs in the short term 2,500 euros instead of only the 1,000 euros to save Greece.
Even though that is a difference of 1,500 euros, it is not as bad as it sounds. What do citizens get back for that extra 1,500 euros cost?
Punish misconduct:
As painful as the net loss of EUR 1,500 in the short term may be, in economic terms the undergoing of Greece could eventually prove an excellent long-term investment. In the future, no country will ever get it in their heads to screw everyone over and wait with the so badly needed reformation that is need for decades to get the country "good" again.
You get much more for the 1,500 euro. To appreciate this, first a characterization of Greece.
Greece at a glance
A country that on paper has an suspiciously inhabitants older than 100 years. This longevity/old age is not because eating insane amounts of garlic soaked in olive oil since birth.The structural avoidance of any work-related stress makes it likely that the first man that makes 150, is a Greek ..The real reason is that the family of the grandmother/father still wants to rake in a few decades pension, which appear smoothly be slid into the broom closet.
A country where some train drivers hauling one ton euros per year, while - except for periods of strikes - aimlessly new, empty trains riding around on fresh European subsidy paid from adjacent sections.
A country where no one is saying a friendly "thank you" for all the help coming from various countries in the past were misled by the Greeks.
A country that calls (institutional) investors that are prepared to cut down 70 percent of Greece's debt: pernicious speculators dubs.
A country that with even with the cancellation of 100 percent of all debt by everyone including the European Central Bank, the state budget will still not be conclusive.
Even without interest and after all (paper) cuts, the Greek state gives out more than it receives. The Greeks have slept for two millennia and their economic strength is nil.
The structural economic crisis in Greece is actually still worse than the financial, because they can not grow out of the shortages. Normally, a population in a country with so little competitiveness have to live in pure poverty without luxery. Thanks to the parasite on the European Union, the Greeks could live beyond their means over years of time
A country where instead of apologizing for falsifying statistics (within the euro pact to come), Chancellor Angela Merkel is portrayed as a Nazi. Fortunately Merkel has a thick skin and glide past her invective. Gone are the times that "Nazi" is just about the worst insult. Meanwhile, that "Greek" is a lot worse, Merkel probably realized.
A country where instead of finally working very hard, they have massive strikes and demonstrations.
A country that is very normal that significantly poorer EU states should tighten the waist belt, to help the pampered Greeks
That dropping Greece will make sure other countrys will not make the same mistakes, it is rational argument. The above list, however, indicates that there is more. You just dont want to award such a country with salvation. The revenge alone will be worth 1,500 euros, according to me Didn't you learn from you locked thread that it's confusing when you don't put this in a quote or mention that this is from an article? Link? Funny thing is, I was only interested in the "150 year old man" statement, which I tried to Google and got nothing. What a load bullocks.
What do you mean? It sais that Greece fraude with ages/pension and that if they keep it going the first men that will ever be 150 will be greece, you know sarcasm?
|
On February 23 2012 06:05 Trollk wrote:+ Show Spoiler +On February 23 2012 05:54 WallieP wrote:
I'm really done with it. The last bit of compassion that was still there with the Greeks, has evaporated.
Even though there is, under certain conditions, a new agreement, about 130 billion additional aid to Greece instead of overloading us with loads of thanks, Greek politicians bash their benefactors even harder. For the record, does benefactors, that's ultimately you and me.
There will be very little (Dutch) families that are prepared to accept and pay a other extra 1,000 euros to save the Greeks. Even if it would mean that we do not have to save Greece and pay a lot more additional costs in short term thinking. The downfall of Greece could cause a chain reaction in the financial system which would make the costs in the short term 2,500 euros instead of only the 1,000 euros to save Greece.
Even though that is a difference of 1,500 euros, it is not as bad as it sounds. What do citizens get back for that extra 1,500 euros cost?
Punish misconduct:
As painful as the net loss of EUR 1,500 in the short term may be, in economic terms the undergoing of Greece could eventually prove an excellent long-term investment. In the future, no country will ever get it in their heads to screw everyone over and wait with the so badly needed reformation that is need for decades to get the country "good" again.
You get much more for the 1,500 euro. To appreciate this, first a characterization of Greece.
Greece at a glance
A country that on paper has an suspiciously inhabitants older than 100 years. This longevity/old age is not because eating insane amounts of garlic soaked in olive oil since birth.The structural avoidance of any work-related stress makes it likely that the first man that makes 150, is a Greek ..The real reason is that the family of the grandmother/father still wants to rake in a few decades pension, which appear smoothly be slid into the broom closet.
A country where some train drivers hauling one ton euros per year, while - except for periods of strikes - aimlessly new, empty trains riding around on fresh European subsidy paid from adjacent sections.
A country where no one is saying a friendly "thank you" for all the help coming from various countries in the past were misled by the Greeks.
A country that calls (institutional) investors that are prepared to cut down 70 percent of Greece's debt: pernicious speculators dubs.
A country that with even with the cancellation of 100 percent of all debt by everyone including the European Central Bank, the state budget will still not be conclusive.
Even without interest and after all (paper) cuts, the Greek state gives out more than it receives. The Greeks have slept for two millennia and their economic strength is nil.
The structural economic crisis in Greece is actually still worse than the financial, because they can not grow out of the shortages. Normally, a population in a country with so little competitiveness have to live in pure poverty without luxery. Thanks to the parasite on the European Union, the Greeks could live beyond their means over years of time
A country where instead of apologizing for falsifying statistics (within the euro pact to come), Chancellor Angela Merkel is portrayed as a Nazi. Fortunately Merkel has a thick skin and glide past her invective. Gone are the times that "Nazi" is just about the worst insult. Meanwhile, that "Greek" is a lot worse, Merkel probably realized.
A country where instead of finally working very hard, they have massive strikes and demonstrations.
A country that is very normal that significantly poorer EU states should tighten the waist belt, to help the pampered Greeks
That dropping Greece will make sure other countrys will not make the same mistakes, it is rational argument. The above list, however, indicates that there is more. You just dont want to award such a country with salvation. The revenge alone will be worth 1,500 euros, according to me The thing that bothers me about this, is that the last time we economically punished a state in Europe by effectively letting it go bankrupt & not aiding help while other important states could but decided not to because of revenge, occured in the 1920s... and twenty years later they were not very happy with the 'valuable lesson' we learned them.
I see where you are going/went but i am not that worried about that.. and its pretty much a other situation and also a different reason for the "revenge"... if the thing you say would be the outcome, im ready to pay the 1000eu since i am not waiting for that either
|
On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy.
So like you say, impossible, not realistic... what is the second option? Or is the only thing that can and will happen A "lost decade" at any rate ?
User was warned for this post
|
On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy.
The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating
On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price.
|
+ Show Spoiler +On February 23 2012 06:15 Hider wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis? Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less? If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine?
They were able to borrow at unreasonably low interest rates given their position and history. My point is that this was bad lending by whoever did it / allowed for it, and this is the cause of the debt crisis. The interest rates should have gone up long time before 2007. Also, they should never have been close to the German rates (clearly). To flip it over: The market failed to factor in risk of a sovereign debt default before the larger financial crisis begun to erupt. I would link it to the "great crisis" through there: A lot of uncreditworthy people were receiving loans they couldn't hope to repay (2001-2007). Greek gov. was just one of those uncreditworthy agents.
Is it an unreasonable proposition that Greece would be doing "okay" in the sense that Portugal / Spain / Italy are doing "okay", if the Greeks didn't have a bankcrupt government? I don't think it is unreasonable.
I did shortly explore the trade position case in my 2nd post right below what you quoted. But saying that was what caused reckless lending and borrowing to one agent (Greek gov.) to take place isn't very credible. It certainly has contributed greatly to the slump of the south, and private sector indebtedness there, but government indebtedness? Highly disputable.
|
+ Show Spoiler +On February 23 2012 06:24 WallieP wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So like you say, impossible, not realistic... what is the second option? Or is the only thing that can and will happen A "lost decade" at any rate ?
Greece leaves the eurozone - it's financial sector collapses (bye bye all savings, pensions, etc). Civil unrest, military rule and balkan region going nuts. A lot of people die and most lose hope. Is that what we want for the greeks? It's not an easy path to send them on. 10 or 15 years until they begin to recover, life under a military junta.
So I make the case for aiding them, and not just bailing them out. Say, hypothetically, we manage to have their economy flatline in 2 years, followed by 3 years flat and then back to growth? The owners of the greek debt will have been the once who took the biggest hit, we get a good, maybe 50% of what we put in, out. 8 or so years of hardship, followed by recovery. And we have to shield our banks anyway. Greece goes - we bail out the banks again.
If the 'internal deflation' succeeds during the next few years (and greece remains in the union), it brings Greece back to life (wage levels fall enough to make it a competitive country to invest in). 200bn for a democratic nation in the east mediterranean? It's not cheap, but that isn't exactly a lot either.
|
On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price.
Why does Greece have to contract precisely at the time that it's getting screwed? Of course the country has to pay back its debt eventually. The intelligent thing to do is to stabilize the economy and then pay back big time when things get better.
No one benefits from austerity now. We're on the 5th or so bailout package for Greece, each of which has required austerity measures. And every time you see GDP contracting in response, lowering tax revenue, prompting cries for more austerity.
It's been 3 years since the financial sector melted down, and we keep getting more and more austerity, and the Eurozone keeps getting pushed further into the brink. So where's the evidence that any of this works?
|
+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price.
Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway.
The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not.
Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in.
That's all for me for tonight.
|
On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight.
Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414).
|
On February 23 2012 06:58 Kontys wrote:+ Show Spoiler +On February 23 2012 06:15 Hider wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis? Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less? If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine? They were able to borrow at unreasonably low interest rates given their position and history. My point is that this was bad lending by whoever did it / allowed for it, and this is the cause of the debt crisis. The interest rates should have gone up long time before 2007. Also, they should never have been close to the German rates (clearly). To flip it over: The market failed to factor in risk of a sovereign debt default before the larger financial crisis begun to erupt. I would link it to the "great crisis" through there: A lot of uncreditworthy people were receiving loans they couldn't hope to repay (2001-2007). Greek gov. was just one of those uncreditworthy agents. Is it an unreasonable proposition that Greece would be doing "okay" in the sense that Portugal / Spain / Italy are doing "okay", if the Greeks didn't have a bankcrupt government? I don't think it is unreasonable. I did shortly explore the trade position case in my 2nd post right below what you quoted. But saying that was what caused reckless lending and borrowing to one agent (Greek gov.) to take place isn't very credible. It certainly has contributed greatly to the slump of the south, and private sector indebtedness there, but government indebtedness? Highly disputable.
So greece should have been able to borrow less? (less debt). But how would that have changed anything? If debt was 30-40% percentage point less, does that magically solve anything? Are you assuming that if Greece had borrowed less they would have had a more sustainable long term economy today?
|
On February 23 2012 08:01 Hider wrote:Show nested quote +On February 23 2012 06:58 Kontys wrote:+ Show Spoiler +On February 23 2012 06:15 Hider wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis? Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less? If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine? They were able to borrow at unreasonably low interest rates given their position and history. My point is that this was bad lending by whoever did it / allowed for it, and this is the cause of the debt crisis. The interest rates should have gone up long time before 2007. Also, they should never have been close to the German rates (clearly). To flip it over: The market failed to factor in risk of a sovereign debt default before the larger financial crisis begun to erupt. I would link it to the "great crisis" through there: A lot of uncreditworthy people were receiving loans they couldn't hope to repay (2001-2007). Greek gov. was just one of those uncreditworthy agents. Is it an unreasonable proposition that Greece would be doing "okay" in the sense that Portugal / Spain / Italy are doing "okay", if the Greeks didn't have a bankcrupt government? I don't think it is unreasonable. I did shortly explore the trade position case in my 2nd post right below what you quoted. But saying that was what caused reckless lending and borrowing to one agent (Greek gov.) to take place isn't very credible. It certainly has contributed greatly to the slump of the south, and private sector indebtedness there, but government indebtedness? Highly disputable. So greece should have been able to borrow less? (less debt). But how would that have changed anything? If debt was 30-40% percentage point less, does that magically solve anything? Are you assuming that if Greece had borrowed less they would have had a more sustainable long term economy today?
You're arguing that Greece's economic problems today are structural. It's your job to justify this, with empirical evidence. Let's see it....
|
On February 23 2012 08:03 SerpentFlame wrote:Show nested quote +On February 23 2012 08:01 Hider wrote:On February 23 2012 06:58 Kontys wrote:+ Show Spoiler +On February 23 2012 06:15 Hider wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis? Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less? If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine? They were able to borrow at unreasonably low interest rates given their position and history. My point is that this was bad lending by whoever did it / allowed for it, and this is the cause of the debt crisis. The interest rates should have gone up long time before 2007. Also, they should never have been close to the German rates (clearly). To flip it over: The market failed to factor in risk of a sovereign debt default before the larger financial crisis begun to erupt. I would link it to the "great crisis" through there: A lot of uncreditworthy people were receiving loans they couldn't hope to repay (2001-2007). Greek gov. was just one of those uncreditworthy agents. Is it an unreasonable proposition that Greece would be doing "okay" in the sense that Portugal / Spain / Italy are doing "okay", if the Greeks didn't have a bankcrupt government? I don't think it is unreasonable. I did shortly explore the trade position case in my 2nd post right below what you quoted. But saying that was what caused reckless lending and borrowing to one agent (Greek gov.) to take place isn't very credible. It certainly has contributed greatly to the slump of the south, and private sector indebtedness there, but government indebtedness? Highly disputable. So greece should have been able to borrow less? (less debt). But how would that have changed anything? If debt was 30-40% percentage point less, does that magically solve anything? Are you assuming that if Greece had borrowed less they would have had a more sustainable long term economy today? You're arguing that Greece's economic problems today are structural. It's your job to justify this, with empirical evidence. Let's see it....
Greece has a different structure ... and it gets problematic when you give greece and germany the same currency because their different economic strength won't be balanced by the currency.
And they have every right to handle their country the way they wish to.
I think we as not greeks have no right to tell the greek what to do, but we should also keep our own rules ....
|
On February 23 2012 07:46 SerpentFlame wrote:Show nested quote +On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight. Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414).
Yeah, because official statistics from Greece are totally reliable. Probably the dead retirees receiving pension put in some overtime.
Seriously though, Greece staying in the Euro only hurts the Greek by eliminating any chance of recovery as long as their currency cannot be devalued according to their own needs and also the countries bailing them out. All it does is transferring money from the giver states to the banks which -irresponsibly- loaned the money, while at the same time further impoverishing worker-class Greeks. The idea of a shared currency without a shared government/economy had to fail unfortunately. Either make some bold steps towards a United States of Europe (unrealistic with the uninspired politicians we currently have and the too rapid expansion of the EU to eastern European countries that were just not ready yet) or some countries need to quit the Union. Anything else is just delaying now.
|
On February 23 2012 08:12 ACrow wrote:Show nested quote +On February 23 2012 07:46 SerpentFlame wrote:On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight. Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414). Yeah, because official statistics from Greece are totally reliable. Probably the dead retirees receiving pension put in some overtime.
No evidence for your claims, no counter-citation indicating otherwise. Just some baseless assumptions about what "must" be true. Never mind the consistent readings since 2001, long before any bailout was needed. Never mind that the OECD statistics are widely cited and accepted by just about everyone in the Eurozone, including Germany.
Yawn.
|
On February 23 2012 08:16 SerpentFlame wrote:Show nested quote +On February 23 2012 08:12 ACrow wrote:On February 23 2012 07:46 SerpentFlame wrote:On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight. Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414). Yeah, because official statistics from Greece are totally reliable. Probably the dead retirees receiving pension put in some overtime. No evidence for your claims, no counter-citation indicating otherwise. Just some unfounded biases about what "must" be true. Yawn.
I have no proof whatsoever - and I didn't even say your claim was untrue. It might be true. However, statistics, especially international ones such as this one from the OECD always need to be taken with a grain of salt. They rely on cooperation with national statistics centers or other kind of local governmental organizations, and, sorry to say, there is a lot of evidence that the Greek government is not functioning very good. A lot of economic data provided by Greece (not only them, I'm sure, I don't want to single out Greece) unfortunately was proven to be manipulated (I hope you do not deny this...). In addition, what is "annual work hours" supposed to show? Is it even similarly defined in every country? Would it not widely differ for any industry sector and thus from country to country? Is it the only measurement for the efficiency of a work force? Just saying that -assuming this statistic is true- it is not meaningful at all.
|
On February 23 2012 08:30 ACrow wrote:Show nested quote +On February 23 2012 08:16 SerpentFlame wrote:On February 23 2012 08:12 ACrow wrote:On February 23 2012 07:46 SerpentFlame wrote:On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight. Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414). Yeah, because official statistics from Greece are totally reliable. Probably the dead retirees receiving pension put in some overtime. No evidence for your claims, no counter-citation indicating otherwise. Just some unfounded biases about what "must" be true. Yawn. I have no proof whatsoever - and I didn't even say your claim was untrue. It might be true. However, statistics, especially such as this one from the OECD always need to be taken with a grain of salt. They rely on cooperation with national statistics centers or other kind of local governmental organizations, and, sorry to say, there is a lot of evidence that the Greek government is not functioning very good. A lot of economic data provided by Greece (not only them, I'm sure, I don't want to single out Greece) unfortunately was proven to be manipulated (I hope you do not deny this...). In addition, what is "annual work hours" supposed to show? Is it even similarly defined in every country? Would it not widely differ for any industry sector and thus from country to country? Is it the only measurement for the efficiency of a work force? Just saying that -assuming this statistic is true- it is not meaningful at all.
Ok, fair enough. But unless some reliable source indicates the worker hours is not the case, I'm quite inclined to believe this is relatively accurate (this, unlike national debt or total GDP, is much easier to check via surveying, and there's much less of a reason for data manipulation: especially since the data has been consistent for 10 years).
No the hours is not a measure of efficiency; German and US GDP / work hour ratios are much better. It's simply a refutation to the idea that Greeks are in trouble because somehow their system makes them lazy, or something like that...
|
On February 23 2012 08:34 SerpentFlame wrote:Show nested quote +On February 23 2012 08:30 ACrow wrote:On February 23 2012 08:16 SerpentFlame wrote:On February 23 2012 08:12 ACrow wrote:On February 23 2012 07:46 SerpentFlame wrote:On February 23 2012 07:41 Kontys wrote:+ Show Spoiler +On February 23 2012 06:52 Felnarion wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. The austerity measures contract the economy because it needs to contract. Greece grew artificially based on extremely cheap money they had no intention of ever repaying. The contraction is a necessary consequence. The answer isn't giving them all the money they need to pump into the economy and keep up spending, that's just another way of further inflating On top of this, you have a society that just steadfastly refuses to take responsibility for themselves. Everyday we see a protest, often violent, that laments the fact that they were simply irresponsible with their spending and now must pay the price. Yes, well, the pay levels should go down anyway. The ideal world would be one where we can somehow minimize the effect of that on real economic activity. That is not a cheap something to do, but being the jerk I am, I'd recommend doing it anyway. The rioters are from the worker union movement, which is a good thing to have in a country. And it's not exactly unheard of for people to protest when outside forces push your face into the mud(government, a foreign government, the financial sector.. I am sure you are familiar with the Occupy Wallstreet movement and the British riots from last summer: You create a standoff between groups of people and stuff starts flying). I try not to be too absolving here, but really, I'd rather blame the banks and the politicians over regular people, hardworking or not. Having said that I do recall a statistic presented in a lecture not too long ago, that greeks actually worked the longest hours per week of all europeans. I seem unable to find that stat on the internet as of now. I would much like to find it, since it took me minutes of shocked disbelief to take it in. That's all for me for tonight. Here's your statistic: http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS. Greece's average annual work hours puts it second in the developed world (2109) right under Korea (2139), above the United States (1778), and far above Germany (1414). Yeah, because official statistics from Greece are totally reliable. Probably the dead retirees receiving pension put in some overtime. No evidence for your claims, no counter-citation indicating otherwise. Just some unfounded biases about what "must" be true. Yawn. I have no proof whatsoever - and I didn't even say your claim was untrue. It might be true. However, statistics, especially such as this one from the OECD always need to be taken with a grain of salt. They rely on cooperation with national statistics centers or other kind of local governmental organizations, and, sorry to say, there is a lot of evidence that the Greek government is not functioning very good. A lot of economic data provided by Greece (not only them, I'm sure, I don't want to single out Greece) unfortunately was proven to be manipulated (I hope you do not deny this...). In addition, what is "annual work hours" supposed to show? Is it even similarly defined in every country? Would it not widely differ for any industry sector and thus from country to country? Is it the only measurement for the efficiency of a work force? Just saying that -assuming this statistic is true- it is not meaningful at all. Ok, fair enough. But unless some reliable source indicates the worker hours is not the case, I'm quite inclined to believe this is relatively accurate (this, unlike national debt or total GDP, is much easier to check via surveying, and there's much less of a reason for data manipulation: especially since the data has been consistent for 10 years). No the hours is not a measure of efficiency; German and US GDP / work hour ratios are much better. It's simply a refutation to the idea that Greeks are in trouble because somehow their system makes them lazy, or something like that...
I'm pretty sure they're not lazy, they are just as hard-working as anyone else  They have just a really messed-up government and I'm afraid the current austerity measures and bailouts won't help Greece nor the rest of Europe. It's bandaids that help some greedy banks.
|
On February 23 2012 08:03 SerpentFlame wrote:Show nested quote +On February 23 2012 08:01 Hider wrote:On February 23 2012 06:58 Kontys wrote:+ Show Spoiler +On February 23 2012 06:15 Hider wrote:Show nested quote +On February 23 2012 04:36 Kontys wrote:
My take (second year economics, intermediate level macro, courses on crises and finance)
Of the causes:
1. 2000-2007 or so, Greece had access to German interest rate level government funding from the financial markets. The markets didn't see this coming, at all, and it's possible they didn't care even if someone in there did see this coming. Did see but didn't care is supported by the historical evidence that Greece has a very bad record of repayment.
Somehow the markets just thought that things are good now.
2. When the debt crisis became a reality (around 2009) the only prescription has been government austerity in the face of a depressed economy. This is standard practice, in that, it's what is usually done in better times with countries that require international funding to survive (this is handled through the IMF, the IMF exists for this purpose, and is funded by the governments of developed nations).
The cut spending and hope for a private sector led recovery is what has gone totally wrong with Greece. Cut and hope for the best just does not work in the face of a depressed (contracting) economy. The reason is two fold: (i) Cutting back government spending causes the economy to contract further (The public sector accounts for roughly 20%-50% of the economy of any nation). (ii) Government indebtedness is not measured as an absolute figure: It is instead measured as % of GDP (GDP = economy) that the government serves. Government indebtedness is B / Y where B is the euro value of debt, and Y is the euro value of the economy. If B goes down, good. (Most governments in normal times are in debt 40%-60% of GDP, and it's ok)
But if Y goes down as well, no gain for the pain.
And austerity is painful, it shuts down businesses, it forces people to rethink their lives, it shuts down schools, medical centers and reduces the money income of anyone in anyway connected to the public sector (which is everyone).
2. What has been done?
In april 2010 Greece received it's first truckload of bailout money, and it came stitched together with tight austerity measures. The greek economy was (is) depressed, and the austerity measures made it worse. The Greek government's indebtedness has not gone down at all, any recovery that we might have had has been postponed indefinitely and this month we agreed on more bailout money. And again we have demanded, and been assured of, MORE austerity measures.
What's different? America seems to be on the road to a slow recovery. Will that help the Greeks? No. What else is different? Nothing really. Conservative economists have pivoted from their confidence rhetoric to simply arguing that we can't afford to do anything about it even if we wanted to. Kinda depressing really.
3. What will happen?
Greece will remain depressed, AFAIK the optimistic scenario is that their economy flat lines (stops contracting) in 2-3 years, and the B / Y debt level starts to go down. Youth unemployment to remain in the 50% region and general unemployment to remain around 20% for the next 5 years. It could well take 5+ years too for the economy to flat line. A "lost decade" at any rate.
The consequences of Greece leaving the euro? Some bad shit goes down in the balkan region. Total greek economic collapse: entire banking system wiped out (all savings, all pensions, everything), political upheaval (certainly), military rule(quite possibly), serious tensions with neighbouring countries (perhaps). European governments will have to nationalise more banks.
4. What should be done?
Proper bailout, with measures to get growth going. Impossible of course. Moral hazard yadda yadda, the ECB is prohibited by law from helping it's member states. Not realistic, for uncountable political reasons. Also not realistic due to traditional german views on government involvement with economy. So Greece could borrow to "artificially" low interest rate 2000-2007. But how did that cause a crisis? Is your theory that if greece debt wasnt insured by rest of european countries, then greece interest rates would be higher, which would cause them to borrow less, and hence make the debt problem less? If the above is true then your (indirectly) stating that the current problem is only a debt problem, and if debt was less (lets say they had borrowed 40% less if interest rates were higher), then greece would be fine? They were able to borrow at unreasonably low interest rates given their position and history. My point is that this was bad lending by whoever did it / allowed for it, and this is the cause of the debt crisis. The interest rates should have gone up long time before 2007. Also, they should never have been close to the German rates (clearly). To flip it over: The market failed to factor in risk of a sovereign debt default before the larger financial crisis begun to erupt. I would link it to the "great crisis" through there: A lot of uncreditworthy people were receiving loans they couldn't hope to repay (2001-2007). Greek gov. was just one of those uncreditworthy agents. Is it an unreasonable proposition that Greece would be doing "okay" in the sense that Portugal / Spain / Italy are doing "okay", if the Greeks didn't have a bankcrupt government? I don't think it is unreasonable. I did shortly explore the trade position case in my 2nd post right below what you quoted. But saying that was what caused reckless lending and borrowing to one agent (Greek gov.) to take place isn't very credible. It certainly has contributed greatly to the slump of the south, and private sector indebtedness there, but government indebtedness? Highly disputable. So greece should have been able to borrow less? (less debt). But how would that have changed anything? If debt was 30-40% percentage point less, does that magically solve anything? Are you assuming that if Greece had borrowed less they would have had a more sustainable long term economy today? You're arguing that Greece's economic problems today are structural. It's your job to justify this, with empirical evidence. Let's see it....
No I asked him.
|
|
|
|
|
|
EPT
