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On June 04 2015 04:33 Toadesstern wrote:
He's been advocating "just cut costs until you're in black digits" for a while now
They don't even have to cut current expenditures to make my plan work. My plan, is just a more extreme version of the Krugman plan, which I explained why I think it has more potential for failure. His plan is also theoretically sound, just not practical because it has too many loopholes and requires prolonged commitment from a democratic society.
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On June 04 2015 04:42 accela wrote:Show nested quote +On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. Show nested quote +The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source
A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well.
You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide.
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Yes, you can't just act like completely defaulting on your debt is fine as long as you're running a primary surplus. If Greece defaults on it's debt it will have to leave the Euro, there will probably be bank-runs, and how is the economy supposed to function in that environment? Varoufakis himself said that a re-introduction of a new currency would probably take eight months or more.
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On June 04 2015 05:37 RvB wrote:Show nested quote +On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide.
Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false.
You wish to define balanced budget as primary surplus minus interests? Very well as you wish.
The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last.
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as far as I am aware there is no scenario in which Greece defaults inside the Eurozone. The current political stance seems to be that if Greek were to default they're out. If that happens there is no currency left to even pay somebody. It would be a completely disaster. If defaulting would make any sense the current government would have already done it.
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On June 04 2015 06:25 accela wrote:Show nested quote +On June 04 2015 05:37 RvB wrote:On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide. Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false. You wish to define balanced budget as primary surplus minus interests? Very well as you wish. The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last.
I don't get people's fascination with a Greek default. I cannot see any single way in which the Greeks would be better off. Sure they'd have their own currency, which they will be able to devalue, but then what? It's not as if the structural issues pervading the Greek political system will disappear overnight with the Euro. It's not as if a vibrant, job-providing private sector will suddenly appear overnight. Food prices would increase drastically since Greece doesn't grow enough food itself to meet its own needs.
It would be a disaster..
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On June 04 2015 06:25 accela wrote:Show nested quote +On June 04 2015 05:37 RvB wrote:On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide. Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false. You wish to define balanced budget as primary surplus minus interests? Very well as you wish. The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last.
I'm not defining anything, a primary surplus is a surplus excluding interest payments. If you include interest payments Greece is still on a deficit. The whole point is that they don't have the revenues to cover all their expenditure so they can't actually keep paying th epensions/wages even if they choose to this month. The consequence of a default will be huge uncertainty, capital flight, bankruptcy of banks and a renewed recession. Sure you can pay those wages/pensions this month but without access to capital markets the government won't be able to the month after.
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The main idea is that if you have a primary surplus, and expect to keep that even if you default, defaulting is not scary anymore. The main problem with defaulting is that people stop lending you money afterwards because of the lack of trust in you to repay them. If you have enough money to pay your bills, that is actually not that big of a problem.
Of course, this is probably not a very realistic view of the greek situation.
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On June 04 2015 23:23 maartendq wrote:Show nested quote +On June 04 2015 06:25 accela wrote:On June 04 2015 05:37 RvB wrote:On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide. Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false. You wish to define balanced budget as primary surplus minus interests? Very well as you wish. The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last. I don't get people's fascination with a Greek default. I cannot see any single way in which the Greeks would be better off. Sure they'd have their own currency, which they will be able to devalue, but then what? It's not as if the structural issues pervading the Greek political system will disappear overnight with the Euro. It's not as if a vibrant, job-providing private sector will suddenly appear overnight. Food prices would increase drastically since Greece doesn't grow enough food itself to meet its own needs. It would be a disaster..
The answer is that it's already a disaster. And all you're doing is delaying a large spike of pain to a later day, but wrapping it up to hit everyone even harder when it eventually arrives. Yet, that "can" is capable of going a long ways down the road, as we've seen with Japan.
This is what happens with Debt-fueled Asset Bubbles. Bad debt eventually has to be written off, one way or the other. There's no economic way out of this mess, which is why they should have defaulted years ago.
But the tidbits leaking out seems like the Greek government will collapse, which seems to be the political objective of the major parties at the moment. They better just hope that the next government will be more willing to "accept an offer it can't refuse". Then we get to see this same song & dance in August, I believe, when even larger debt payments are due.
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On June 05 2015 00:05 RvB wrote:Show nested quote +On June 04 2015 06:25 accela wrote:On June 04 2015 05:37 RvB wrote:On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide. Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false. You wish to define balanced budget as primary surplus minus interests? Very well as you wish. The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last. I'm not defining anything, a primary surplus is a surplus excluding interest payments. If you include interest payments Greece is still on a deficit. The whole point is that they don't have the revenues to cover all their expenditure so they can't actually keep paying th epensions/wages even if they choose to this month. The consequence of a default will be huge uncertainty, capital flight, bankruptcy of banks and a renewed recession. Sure you can pay those wages/pensions this month but without access to capital markets the government won't be able to the month after.
Well if definitions are very important to you then Greece is running a negative primary deficit (primary surplus) and a positive total deficit. When we talking about deficit we mostly always refer to the primary deficit simply because a country can run (primary) surplus and still covering its debt obligations through loans, but still will run a surplust.
What would be the consequences of Greece getting off the eurozone depends on how well will be prepared. We already have more than 5 years of uncertainty, capital flights and banks going bankrupt and a huuuuuuge recession as you are well aware. The worst of those is for sure the uncertainty and the common belief that the can will be keep getting kicked for the many decades to come and that pretty much was the ultimatum from EU/IMF that was given to the greek side yesterday night.
The uncertainty has to stop now, one way or another.
2:30:36 PM DJN - DJ GREECE SUBMITTED A REQUEST FOR BUNDLING JUNE IMF PAYMENTS INTO ONE -- GREEK GOVERNMENT OFFICIAL
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On June 04 2015 23:23 maartendq wrote:Show nested quote +On June 04 2015 06:25 accela wrote:On June 04 2015 05:37 RvB wrote:On June 04 2015 04:42 accela wrote:On June 04 2015 04:17 Nyxisto wrote:On June 04 2015 04:13 cLutZ wrote:
Greece takes in more than enough in taxes to run a functional central government, its just not the kind of government the Greek people want.
Where is that coming from? Greece does not take in enough to run a functional central government or they wouldn't be in the situation they are in. At the moment their whole pension system hangs on transfer payments from several institutions. "Flipping the finger" would result in a humanitarian crisis and probably complete loss of confidence in their government. What are you talking about? Greece is running a balanced budget, the transfer of the reserves happened because in March Greece had to make a payment to IMF and that's the whole discussion about how external debt is not viable. But obviously Greece will soon have to choose who to pay, pensions and wages or the debt. The State Budget Primary Balance amounted to a surplus of 2,103 million Euros, against the target for primary deficit of 310 million Euros and the primary surplus of 1,046 million Euros performed at the same period of the previous year. source A primary surplus is not a balanced budget since it excludes interest costs. In the end you'll have to pay that as well. You don't have to choose to pay the IMF or pensions/wages. You have a choice to come to an agreement with the institutions that are providing with liquidity and default. Whether that's worth itiss for the Greeks and their government to decide. Nyxisto explicitly refered to greek gov being unable to pay wages and pensions which is something apparently false. You wish to define balanced budget as primary surplus minus interests? Very well as you wish. The thing is that the greek government already made the choice of covering the monthly pensions/wages of June while the IMF payment on Friday is most possibly going to be skipped. Will they acknowledge it as a default? So be it. The sooner the better. It's not the first this five years anyway, hopefully will be last. I don't get people's fascination with a Greek default. I cannot see any single way in which the Greeks would be better off. Sure they'd have their own currency, which they will be able to devalue, but then what? It's not as if the structural issues pervading the Greek political system will disappear overnight with the Euro. It's not as if a vibrant, job-providing private sector will suddenly appear overnight. Food prices would increase drastically since Greece doesn't grow enough food itself to meet its own needs. It would be a disaster..
Another delay , bundle all imf payments at 30 June as was expected.
A legal option that every country has. This off course is not a good signal.
Am not fascinated by a Greek default , just think the whole situation is interesting.
A default and own currency to devaluate wont solve all Greek problems off course but it would make their economy more competitive versus other countries and give them more options to adjust their monetary policy (they have none now and have to go with the policy for the euro) If they devaluate and then enter the euro again after say 3 years at a 50% conversion rate then that's also a huge transfer of wealth from Greece to the eu ,maybe even equal to the debt outstanding but far less painful then paying it directly. Ecb could then write of a lot of debt as compensation. Most of it has been taken out of the hands of the private banks already.
They would need to import food but not that much, they are 94% self sufficient when it comes to food according to http://www.organicgr.com/greece-self-sufficient/ Am not saying it will be a pleasure but the alternative is hardly better.
Just imagine all products from Greece and holidays to Greece being 50% cheaper, that should give their economy a decent boost. The debt could be quarantined for the time Greece has their own currency ,it looks like its not going to be paid anyway.
Reforms in the society will be needed, Greece has a very rich elite that seems to escape all pain and retirement age is 57 (not sure if acurate,just info from the web) where in the north people retire at 67.
It takes a lot of time for population to accept reforms though and the pain usually has to be pretty high unfortunately and it wont solve everything. You will still have to provide for the people who now get a pension one way or the other.
What realistic options do you see instead of a default?
Well I dunno,just some thoughts.
Hope I don't offend anyone with my observations and thoughts about the subject,i do understand how horrible it must be to live in that uncertainty for such a long time, no human being should have to endure that. Its just that I like to look at it as a study case.
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I haven't been paying a lot of attention, but it seems to be that two points of contention for Greeks are:
- They want more independent in national economic affairs;
- They argue their public debt levels are not sustainable.
The second point I believe is being a little bit overstated, at least in the short term. The interest rates agreed with the troika are actually pretty low with payback dates set very late. Greece is actually paying much less interest as % of GDP than other European countries.
So why not set up some scheme where:
- Greece is given total independence for its economic and fiscal policy starting in 2017, granting the Greek government a moral victory;
- Greece agrees to sensible primary surplus targets of positive 1% of GDP in 2015 and 2016. Not a lot of other economic concessions in the agreement (no talk of pensions and whatnot);
- Starting in 2017, the interest rate set on all troika loans is defined as something like:
3pp. over the German 10yr bond rate if primary surplus is 0
2pp. over the German 10yr bond rate if primary surplus is 1
1pp. over "" "" if primary surplus is 2
and so on. Of course this would only work if the market rate for Greek bonds goes down to levels at least below 6-7%.
The idea here is to 1. Save face for the Greek government; 2. Avoid default; 3. It's still a fiscal transfer to Greece, but politically it might be a lot more palatable for the north Europeans than other types of concessions; 4. Create an incentive for the Greek governments of the foreseeable future to run sensible fiscal policy, and not have the troika be perceived like condescending bullies.
It's a half baked idea. Glad to be told how wrong I am. 
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On June 05 2015 04:23 warding wrote:
The second point I believe is being a little bit overstated, at least in the short term. The interest rates agreed with the troika are actually pretty low with payback dates set very late. Greece is actually paying much less interest as % of GDP than other European countries.
High rate as they were with the first bailout or low rates you have to understand that we are talking about a bankrupt country, you do NOT give more loans AT ALL whatever the rates are before you make sure that the debt is sustainable. And there is no later than now:
+ Show Spoiler +
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On June 05 2015 05:15 accela wrote:Show nested quote +On June 05 2015 04:23 warding wrote:
The second point I believe is being a little bit overstated, at least in the short term. The interest rates agreed with the troika are actually pretty low with payback dates set very late. Greece is actually paying much less interest as % of GDP than other European countries. High rate as they were with the first bailout or low rates you have to understand that we are talking about a bankrupt country, you do NOT give more loans AT ALL whatever the rates are before you make sure that the debt is sustainable. And there is no later than now: + Show Spoiler +
Sustainable debt is an abstract concept when you can have the backing of the IMF+EU+ECB. What is ultimately important for the functioning of the government is the interest on public debt as % on GDP. If you can keep that as a reasonable level, I don't really see the point of claiming that the level of debt is unsustainable.
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On June 05 2015 05:30 warding wrote:Show nested quote +On June 05 2015 05:15 accela wrote:On June 05 2015 04:23 warding wrote:
The second point I believe is being a little bit overstated, at least in the short term. The interest rates agreed with the troika are actually pretty low with payback dates set very late. Greece is actually paying much less interest as % of GDP than other European countries. High rate as they were with the first bailout or low rates you have to understand that we are talking about a bankrupt country, you do NOT give more loans AT ALL whatever the rates are before you make sure that the debt is sustainable. And there is no later than now: + Show Spoiler + Sustainable debt is an abstract concept when you can have the backing of the IMF+EU+ECB. What is ultimately important for the functioning of the government is the interest on public debt as % on GDP. If you can keep that as a reasonable level, I don't really see the point of claiming that the level of debt is unsustainable.
Sustainable debt means to decline to normal levels in satisfactory rate. Currently the greek debt is about 180% of gdp. Greece is still in recession (despite the fixing by old gov and EU) and currently the debt costs about 4% of gdp.
According to the IMF projections (that is synonymous to comedy) in 2019 the greek debt is going to decline to the levels of 2009 (when the crisis started) IF Greece have a growth of more than 3% AND a surplus of 4% continuously starting from today. Those conditions are simply impossible to satisfied, surely not for an economically half destroyed country, very unlikely even for a normal economy.
Realisticaly, Greece will be incapable to address its debt obligations (as it is right now) for the many years to come and having IMF/EU demanding more catastrophic deforms for a decade or more it's an absolutely no way.
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This current mess is a testament to supremely inept politicians having their heads right in the ground and refusing to budge.
The current situation is this: Greece cannot pay back its debt. No fucking way in hell. This is true today and it was true 5 years ago. 5 years of the biggest austerity push the world has ever known produced a catastrophe, economic and social. One need only look at the numbers, after all.
Voodoo economics (Rogoff-Reinhart paper about austerity induced growth) do not work. Here's some data about the period after the 1929 crash. You can find data about the period after the 2008 crash until today easily enough. Compare the numbers. Europe has done worse in most cases. This is unbelievable!
Judging from the plan Juncker put forward to Tsipras, the troika wants a repeat of the previous austerity cycle! But we already know this will not work, and around 2018 (or whenever the newest 'bailout' ends) Greece will once again be a major issue - only a little more destroyed this time.
So what has historically happened with indebted/insolvent/defaulting countries anyway? Why, they've had their debt written off, of course. Can't pay, won't pay, that's one rule that trumps any other. Even in the cases where the IMF interfered (and generally destroyed the social fabric of any nation it touched) the debt was written off. Bad investments necessarily mean losses for the investor. And yet, apparently this time it is different because Schaeuble or whoever says so. Debt can't be written off, Greece must pay everything back even though it can't, blood will be squeezed from this particular stone whether there exists any or not. Complete insanity.
Why would Greece accept this for itself, corrupt politicians notwithstanding? Assuming Tsipras is a leader that genuinely cares for his nation, why would he go along with a plan doomed to failure? Grexit and going it alone is FAR preferable, no matter how much pain one has to go through in the short term. The alternative is the abyss!
It is also worth noting that Tsipras's 47pg proposal is anything but socialist/populist/handout filled garbage. This isn't about economics at this point.
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The current situation is this: Greece cannot pay back its debt. No fucking way in hell. This is true today and it was true 5 years ago. 5 years of the biggest austerity push the world has ever known produced a catastrophe, economic and social. One need only look at the numbers, after all.
Strangely enough, I remember a younger Taguchi preaching a different truth those 5 years ago.
last, about the bailout
germany borrows with a 3% interest rate and then gives that money to greece for a 5% interest rate, which greece thinks is ok since borrowing from the private sector right now goes with a 9% interest rate
so unless greece defaults - which u can make sure doesnt happen since u now can dictate economic policies until the market finds a new trend, forgets all about this problem and starts refinancing as normal - ure making money out of thin air, pretty much like a bank
why dont u like that :p? sure theres a risk involved, and apparently the market thinks ure undervaluing that risk, but that hinges on the market actually being correct, and thats a pretty big if
I'd be interested in whether Taguchi has come full circle on the stages of loss and grief on this subject.
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On June 07 2015 21:32 MoltkeWarding wrote:Show nested quote +The current situation is this: Greece cannot pay back its debt. No fucking way in hell. This is true today and it was true 5 years ago. 5 years of the biggest austerity push the world has ever known produced a catastrophe, economic and social. One need only look at the numbers, after all. Strangely enough, I remember a younger Taguchi preaching a different truth those 5 years ago. Show nested quote +last, about the bailout
germany borrows with a 3% interest rate and then gives that money to greece for a 5% interest rate, which greece thinks is ok since borrowing from the private sector right now goes with a 9% interest rate
so unless greece defaults - which u can make sure doesnt happen since u now can dictate economic policies until the market finds a new trend, forgets all about this problem and starts refinancing as normal - ure making money out of thin air, pretty much like a bank
why dont u like that :p? sure theres a risk involved, and apparently the market thinks ure undervaluing that risk, but that hinges on the market actually being correct, and thats a pretty big if I'd be interested in whether Taguchi has come full circle on the stages of loss and grief on this subject.
That was referring to the very first bailout since I mentioned a 5% interest rate. After 2012 debt restructuring that went down quite a bit.
I don't see the relevance, however. It is true I believed a few years ago that the situation was salvageable through growth - and I believe it still is. Creditors can make sure Greece doesn't default, that hasn't changed. The newest bailout funds go straight to creditors, after all, not to Greek state financing. The market is way too distorted for me to analyze, what with central banks buying assets left and right so can't really say anything about that.
And Germany has profited immensely from the crisis, even though it's apparently ready to risk everything now. As have other EU states that offered bilateral loans during the first bailout. And they're still in a position to protect their own investments, if only they didn't push policies that don't enable this (can't pay, won't pay will not miraculously change unless anti-austerity policies are adopted along with a host of other prerequisites).
Have I come full circle? Knowing what I do now I believe we (Greece) would've been better off with a Grexit back in 2010. But I still could never have advocated it back then because I believe in the EU. I want a US of EU. But sure doesn't look like I'm ever going to get that. A technocracy that exists only to serve vested interests isn't my idea of a union.
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The relevance is in responsibility and self-serving thought. The 2010 bailouts were not the product of a short-sighted German master plan to bolster its exports sector, contrary to the blather of pundits. In 2010 the debate was over the stability of the Euro, whether that warranted the deliberate violation of the Maastricht treaty, and whether the belief in the “European” project could be pushed through the German parliament in face of public hostility to the bailouts. If there had been no austerity agreement, the bailouts would never have happened. To say five years down the line, after Germany had spent nearly 80 billion Euro bailing out Greece, that actually, Germany bears moral responsibility for imposing the disastrous deal which you (not your country, not bad economic theorists, but you as a private thinker) were begging her to sign five years ago, is considerable feat of ethical dexterity.
Five years ago, you thought it was a good idea for Germany to loan Greece her share of a 110 billion Euro bailout package at 5% interest, since it was a guaranteed profit-making scheme for Germany. You were not naïve; you recognized that austerity would be imposed on Greece as a corollary, and presumably you either believed that “growth” would be viable under such conditions, or you did not, in which case you were cynically advocating sovereign theft backed by a collective lie, so that your country could hobble along for a few more years.
Assuming that you really did believe what you claimed to believe back then, you were presumably misinformed by the self-serving illusions conjured up by your press, and felt that instead of using common sense and “only look at the numbers, after all,” you had to surrender to a collective partisanship on behalf of your nation’s parochial interests. Back then, Germany was going to serve its own “interests” by using her investments in Greek debt as a passive piggy bank. Today, Germany should do what you want because she needs to refill her piggy bank after the previous deposits fell out of a hole. The idea that your benefactor was really benefiting himself all along, the belief in his selfish selflessness, are probably cognitive biases necessary for the maintenance of your own selfless selfishness. But in the end, Germany is not better off: her private debt-holders have already lost better than half the value of their investments, and you would be perfectly happy to see them lose the remainder. Every German taxpayer has loaned nearly two thousand Euro to Greece, which will be a complete loss. Five years ago, I have no doubt you would have argued that Germany should commit public money to save private money in Greece, while you would have had no problem with Germany losing all her private investments as long as she infused bailout money under any pretext. I have no doubt that when the European governments infuse further money into Greece to repay themselves, that when 5 years down the line, repayment of that not availing, you will again advocate a haircut on the principal.
Whether you have fallen victim to a collective cognitive bias, or whether you are speaking out of cynical self-interest is actually irrelevant. The argument as a whole is unconvincing to anyone who can “only look at the numbers.”
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EPT![[image loading]](http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/05/Greek%20payments.jpg)
