A bit of helpful advice for the Greek Government:

[pp05]

Rave it is because in 70s the worlds elite decided no nation should be allowed to default at all costs. Hence the constant remortgaging, new money paying off old money to keep the champagne rolling. Lenders know the countries cannot afford to pay it back. Paper clippers.

The Greeks should give serious consideration to defaulting or debt moratorium for 10 years to get their house in order. Keep their national infrastructure under their own control. Utilities, telecoms for the time being etc. As they say owe a bank 1 million it's your problem, owe them 10 billion, it's theirs.

Greece needs to work towards a more accountable government. Transparent so that they don't get this situation again and leave their grandchildren to pay for it.

[Rave]

While the UK is not exposed to Greek debt (to much) it, it is exposed to Irish debt, and our banking system would not be able to handle multiple Europian country defaults.

More fool us.

We can print more money, however the inflation we are seeing now is due to all currencies being devalued. So Rage I would be be careful what you wish for, the pound in your pocket is not worth the same (no mater what they tell you). You just have to see the corrosive effect of inflationary money supply, in the 1930's Blechley park was bought for 7,500 pounds. That is not EVEN one hundred years ago.

I'm no fan of Fiat money. Sooner or later I'll get my act together and buy some gold.

However, I've never been so blind as to trivially encourage a default like that. Look at the effects on argentina, granted its a bit different because greece don't have their own currency to play about with but are you seriously suggesting going through that?!

For a nice simple comparision between the two:
http://www.northerntrust.com/pws/jsp...941043_858.xml

What was the alternative? In Argentina, the middle classes got their savings wiped out. They seem to be doing OK now though. TBH, I read your link and it merely confirmed my opinion that defaulting early is the sensible course of action.

Even Jack Straw (who must be jumping up and down saying "I TOLD YA, BUT YA WOULDNA LISTEN")
http://www.bbc.co.uk/news/uk-politics-13839381
Doesn't like the idea of a default for the people:

That's not how I read it?

.This is a view that isn't shared by many people in the field, I'll go as far as to say I've not seen anyone say that.

Try hanging around on housepricecrash.co.uk then (link in my sig).

I won't go as far as to say that it was done deliberately, just that it was allowed to happen in the face of overwhelming evidence that low ECB interest rates were causing destructive bubbles in the PIIGS economies. The Germans sold the rest of Europe their well made cars, washing machines etc. on the back of money that their influnce over the ECB had made it cheap for everyone else to borrow. Now they seem aggrieved that these countries can't actually come up with the readies to pay them back, even though it was patently obvious to anyone with a brain that the PIIGS countries don't actually have very much to offer in return except beaches / loads of jerry built houses.

Very true, probably more so than you appreciate, I don't know if you ever read any of the german papers, the population are pissed off, because the greeks work less hard

Demonstably a myth

Now this I'm completely confused by? Like they did in the UK? We've not had a bond crisis! Our debt trades rather well (helped by this euro feck up!).....

Give it time.

The issues of a default are very complex and far reaching, its not like bankrupcy where its oh well administrators come in, or it just folds completely and a few fraction of a percent are out of a job. Its really gresume. You know we (as in brits) are still after the state of missuri? Some 150+ years later its not traded in London...

I never said it would be easy, just that it's the least worst option.

Apparently the Irish government now has a debt equivalent to 500% of their GDP. Their population speaks English, and they're not going to stick around out of sheer loyalty to pay it all off over the next 40 years. It's a debt that simply will never be repaid. Face the facts- default is the only option.

[TheAnimus]

What was the alternative? In Argentina, the middle classes got their savings wiped out. They seem to be doing OK now though. TBH, I read your link and it merely confirmed my opinion that defaulting early is the sensible course of action.

Having known a few people who lived through it, I've never met one person who started off middle class and came out middle class, I know some powerful connected families that came out wealthy, everyone else not so much. Yes its not fair to compare the level of suffering between the two, because the normal level was higher in Argentina, but still, its very brutal, and there must be a softer way. I would also add they are not out of the woods yet, the 10% inflation is still hurting so many people at the bottom rung.

The other problem with comparing the two is that they are very different, Argentina had a lot of natural resources, from mining to farming. They also export more than they import.

Those recovery factors don't apply to Greece, this is why I'd be saying they should be learning from Argentinas recovery plans, not trying to emulate it.

That's not how I read it?

Erm unless the beeb missquoted, it seems quite clear that the man is expressing concern about what might happen if they do default, I suppose thats not to say he opposes the idea outright, just that he is aware of the downside. Which I know you might be too, but I don't think they are 'there' yet.

Try hanging around on housepricecrash.co.uk then (link in my sig).

Ah the forum of the guys who've been getting it wrong year on year
*Looks at how much his London flat has probably risen by in the last 6 months alone*, *compares rental price riseses*, *acts smug*.

I won't go as far as to say that it was done deliberately, just that it was allowed to happen in the face of overwhelming evidence that low ECB interest rates were causing destructive bubbles in the PIIGS economies. The Germans sold the rest of Europe their well made cars, washing machines etc. on the back of money that their influnce over the ECB had made it cheap for everyone else to borrow. Now they seem aggrieved that these countries can't actually come up with the readies to pay them back, even though it was patently obvious to anyone with a brain that the PIIGS countries don't actually have very much to offer in return except beaches / loads of jerry built houses.

That again is a gross over simplification, the PIIGS do not represent a overwhelming export market for germany. Whilst its true they do call all the shots with the ECB (something I've ranted about before) they didn't encourage the countries to borrow! I just can't see the argument that a government pigged out just because 'it was cheap'. I would also say that the way people price bonds for these governments had an effect, it sounds silly that a country would run itself in to the ground via gearing, just because it could.
http://www.bloomberg.com/apps/quote?ticker=GGGB10YR:IND
I don't see why Germany could or should be held responsible for the free market valuing their bonds at 5%. We quite simply had too much money needing to be invested so there was someone willing to invest in a 10Y.

Demonstably a myth

Remember I'm talking about what the average german joe thinks. Pick up any tabloid and they don't hold back, lazy, tax dodgers:
http://www.bild.de/news/bild-english...2236.bild.html
I'm sure that people have linked to bild before on hexus, I wouldn't be surprised if that very link has come up!
Regardless of the mean average hours indicating working hard (come on, surely that should be median for someone in full time? The germans also have a culture of its better to work 12 hours a week and scrape by than be on the dole.)

Give it time.

Shame we have nothing left to sell, we spent it all on our good times!

I never said it would be easy, just that it's the least worst option.

Apparently the Irish government now has a debt equivalent to 500% of their GDP. Their population speaks English, and they're not going to stick around out of sheer loyalty to pay it all off over the next 40 years. It's a debt that simply will never be repaid. Face the facts- default is the only option.

Hmm the Irish one, that would be intresting to see what would happen to a lot of the corperates who are based there. They can deflate away a lot of their debt. Their defecit is walking the fine line of managable (not had chance to get check but iirc its <18% GDP?) So ultimately provided the markets don't gang up and charge more intrest they are ok.

Almost all governments are vulnerable to the 'Northern Rock' effect, they borrow for huge long term projects, and typically refinance on the shorter end of the curve which is cheaper because people prefer to get their money back in 3months, rather than 10 years. As such some think its better just to roll their debt every few months to keep the cost down, this is what northen rock did. Then when credit isn't available they are up ****ty creak, because they spent it based on a 5% cost say, and all of a sudden refinancing is 10%+ this is one of the things that hit Greece so hard.

Ireland aren't there yet, and thats not to say they aren't going to spiral down, they could, just that they mustn't start stearing the ship on the worst course because it might one day be required.

[G4Z]

I was reading about this last night so I am glad Rave has raised this topic.

Now.. I am no economist (thankfully) however a quick calculation based on the greek population and the current new proposed bailouts gioves the following :

11mil population, first bailout is proposed to be 10 or 12 bn euros which is 1,000 euro per capita.

Second proposed bailout however is 100bn euros, i.e 10,000 euro per capita!!!!


This is just in new loans and on a per capita basis, quite a good proportion of those 11million people will be economically inacive in some way and the only industry to speak of is finance (and what the hell do they produce?), state owned banks and services and tourism. I don't see how it will be possible for Greece to pay back this debt ever short of a complete interest amnesty of some sort and decades of austerity and tax rises.

now I gather the average greeks don't feel they really need to pay tax and that has to change however even if you had all 11 million people being as productive as possible and paying all their tax its probably not enough to even maintain current spending much less pay the debt back.

If I was a young unemplyed greek right now can't say I would fancy sticking around. Much like I don't feel like sticking around in the UK to help pay off our debt mountain that I benefitted little from in the 'good years'.

Overall, think I am with Rave on this one.

A few banks are going to get hurt, well I won't cry over that. Quite simply they shouldbn't be in the business of lending out 9 times their reserve capital and increasing the money supply and back dooring inflation on the rest of us anyway. This whole ponzi scheme ride needs to change anyway. i for one am sick of going to work every day and seeing my taxes pay for sheer greed.

Thats the thing with this greek bailout as well, it is really just rescuing the banks yet again. That money won't go into greek coffers, at least not for long. It will go straight into paying off bondholders.

I realise this is going to affect investments and pensions of ordinary people and that does suck. However investments can go up as well as down and frankly the baby boomer generation has already sold any chance I have of a long retirement well down the river and I am only 30. So in a sense... unlucky people but its nothing some of us aren't already facing. Oh and while I am on the subject, women whinging about the pension age on the news the other night... you do realise you live longer than men on average anyway right???? probably a whole nother thread there.

Well that was a longer post than expected, probably time for my mid morning cuppa now...

[TheAnimus]

Thing is G4Z, there are downsides to a default:
http://notesfromthebartender.wordpre...-debt-default/
This guy has some fun examples.

Also 10,000 euros per head over 20 years isn't that much.

Now in a way yes constant bailing out does help bankers, but it also will help the Greek population too.

[G4Z]

Just checked my numbers, 270 billion euros total debt and only 5 million economicaly active.

That is 54k Euros each

I would say the wheels have already fallen off this wagon.

[G4Z]

Well TheAnimus, I would say it is quite a lot of borrowing when you consider that before paying any debt the greek government needs to fund whatever public services and the fact that intrerest is going to increase that headline number all the time. Which is in fact 20k euros not 10k because of the amount of non tax payers.

Worth bearing in mind that at 20% income tax (if the average greek even pays that given the alleged corruption) assuming an average income of 20k euros (wiki reckons 27k in USD) you are talking 4k per person per year. I realise ther are corperation taxes etc as well so you could probably double that figure and that is 8k per year. So just to pay off the new loan and not counting the other nearly 300bn you would have to take a massive chunk of that money over 20 years.

The fact is they can't even cover the public services they have now out of taxes so 54k + another 20k is an awful lot of debt for such a small country with its problems.

[b0redom]

The problem is, even if they do that, will it help?

Of course it will.

Prime minister's Press release: "As of today, Greece will revert to using Drachmas. Each Euro is now worth 100 Drachmas"

Prime minister to Finance minister: "Fire up the printing presses, we've got quantitative easing to do!"

Sure the people will be pissed, but it gets Greece out of a BIG hole quickly.

[roachcoach]

They could legalise drugs, pretty big income stream/employment created right there. Do wonders for tourism and the overall coffers.

Probably a touch controversial though. Equally probably better than a nation state defaulting (the blasé way in which that idea is flung around is a bit scary).

[G4Z]

Thing is G4Z, there are downsides to a default:
http://notesfromthebartender.wordpre...-debt-default/
This guy has some fun examples.

Also 10,000 euros per head over 20 years isn't that much.

Now in a way yes constant bailing out does help bankers, but it also will help the Greek population too.

Very interesting article.

However, I don't think those consequences are as dire as you are making out. Personally I would like to see governments unable to borrow vast amounts of money and leaving future generations and governments to sort it out.

Governments should be responsible, if only our government had been unable to borrow all of that money. I dare say there are quite a few white elephant mega projects that would never have happened. (millenium dome, Trident mk 2, eurofighter, concorde etc etc) These big investment projects should be thought through very carefully, too often its just some pointy heads vanity project. If Government was restricted to simply saving the money for mega projects I think the ones we did get delivered would be of a much higher standard and much more useful!

Apart from mega projects and war I am not sure I see the advantages to ever spiralling debt piles. Unless you are a banker. where do you work again theanimus..?

[G4Z]

They could legalise drugs, pretty big income stream/employment created right there. Do wonders for tourism and the overall coffers.

Probably a touch controversial though. Equally probably better than a nation state defaulting (the blasé way in which that idea is flung around is a bit scary).

Just think of the tourism potential alone... Greece could be the new Ibiza.

[roachcoach]

Yes, I was quite serious.

I've tried not to read much about it to be truthful the media are worse than useless and frankly, what's going to happen, is going to happen.

[G4Z]

roachcoach, I also believe legalising drugs is a really good option.

I think it is wrong that they are illegal to begin with but even ignoring the potential tax take the cost of enforcement alone is astronomical and would no doubt make a dent in the deficit.

[roachcoach]

Yup, we get what? Nearly 10 billion a year in revenue to the treasury from tobacco? It would put a massive dent in a deficit.

The trouble is, no government has the spine to put that kind of change through, which is a real shame because times like these call for inventive solutions.


Hrm, one wonders what the public reaction would be here if the government suggested it as an alternative to all the cuts and so forth....I suspect the daily fail would implode in a logical error.

[Saracen]

I'd like to see answers to a few fundamental issues from those in power proposing to give away (sorry, "lend") taxpayers money to Greece.

Q1. Do you think Greece will ever be able to pay this back?

Q2. Do you think this will prevent Greece from defaulting, or merely defer it to a year or two's time?

Q3. If the answer to Q2 is "yes", what gives you any confidence that another 130bn Euros will work when the last 110bn apparently didn't.

Q4. If you impose strict austerity measures on Greece as a condition of the loan, what on earth makes you think this will actually happen. It didn't when the austerity measures were promised as a condition of the last (and "one-off") loan.

Q5. Is this loan in either the interests of Eurozone taxpayers or even the Greek people, or is it just stubborn blindness to refuse to accept that the Euro project hasn't worked, at least, not in it's current form?


There is, at the very least, a large chunk of the Greek population that don't want yet more debt, though it's far from clear that that is the majority of the Greek people. It's also clear that while public sector workers and unions are adamantly opposed to public sectors cuts (as indeed, is the case here), that isn't necessarily the view of those in the private sector, and there is at least a good body of opinion that wants a rebalancing between private and public sector (as, again, there is here).

What I really don't get, though, is how public sector workers think defaulting is going to avoid austerity measures in Greece. If the loans don't come from the EU and/or IMF to stave off collapse, then Greece is going to have to fund it's own public sector, and it's in the mess it's in now because it's unable to do that. It can't borrow on the open capital markets now, except perhaps at absolutely punitive rates because the money markets have worked out (as Eurozone finance ministers seem to be unable to do) that it won't get paid back.

Personally, I'm of the opinion that, sooner or later, a default is pretty much inevitable, and that further huge loans now do neither the Greek people nor the Eurozone taxpayer any favours. The only credible financial reason for doing it that I can see is to give bankers a chance to get further out from under the impending doom, and they can only do that by shifting the liability from bank's balance sheets to tax-payer's balance sheets, and we've had enough of that from last time, thank you very much.

When the Greek default happens, and in my view, it is going to be it now or in 2013/14, it's going to cause huge problems, and not just for either Greece or even Greece plus the Eurozone. Indeed, we'll be lucky if it's just Greece plus Euro countries. But I can't help but feel that all another 130bn Euro loan is going to do is to defer it, and quite possibly, make it worse when it does come.

I also think it almost inevitably will get another loan, unless the Greek protesters can squash in inside Greece, because a default will severely damage and most likely destroy the Euro currency, at least in it's current form, and because that is unacceptable to the those politicians that are determined to see the Euro harmonisation project through, for political purposes not economic ones, and regardless of the views of their respective populations.

My view is that almost certainly Greece will default eventually anyway, and the questions are quite when, and what it will have cost us before it happens.

[TheAnimus]

The leaglising thing is a great example of another economic exchange which is going on completely un-taxed.

Not to mention the costs associated with prohibition:
http://www.prohibitioncosts.org/ an overtly biased site about it in the US!