Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
How about a reasonably honest appraisal of what Greece can actually afford? Seems to me that if this were a commercial situation bankruptcy and a new start would be a serious consideration. And then maybe a little more care about who we offer large loans to? You know, "credit rating", "due diligence" and all that kinda stuff? You suppose that the same mentality that threw loans at folks for home loans that could never be repaid might be responsible here too? Let the clowns who made those stupid loans eat them. I'm sick of picking up after them.
? Who says anything about that? Let the troika who helped create it handle it. It's not that large in the scheme of things. They have already done all the austerity feasible, and economically it is and has been a terrible idea, just satisfaction of angry revenge fantasies. Time to swerve substantive.
"You mention the Marshall Plan and Germany." "Germany used the Marshall Plan to get back on their feet... These loans by the EU, IMF and banks to Greece, do nothing to improve the prospects of their economy, but only to keep them on welfare."
I did not initiate the mention of the Marshall Plan: I was pointing out an inconsistency in it's reference by a commentator of the referred link. With respect to that very inconsistency, it is ludicrous to compare an economy such as Greece to a major economy such as Germany, or any other developed industrial nation with historically abundant natural and industrial manufacturing resources. For the nth time: Greece has neverhad any significant industrial, manufacturing or international commercial base. It is a fractured small-agriculture, small shop-owner, tourist service oriented economy, with major deficiencies in natural resources. Why is that difficult to understand?
With respect to the Marshall Plan, and other major forms of US sponsored international aid: it is typically based on the perceived self-interest of the United States, not because we are such a wonderfully compassionate nation. In the case of Greece specifically it was a ploy to diminish or negate Communist influence after WW2, and as such, was reasonably successful. Subsequently, it was deemed advantageous to NATO, for essentially the same reasons. Perhaps we have already obtained what we spent our money for.
"Remember how many on this board said in 2008 and even now, that we can't let banks and investment companies fail, because it would cause a huge financial calamity."
To deliberately precipitate the financial destruction of our own major world economy just to punish the clowns is just a bit counterproductive, unless you're a financial masochist. It was indeed unfortunate that to protect ourselves we had to also cover their asses.
"members of this board can rally on raising taxes year after year in the US, but have rivers of tears when someone suggests that Greece raise taxes."
Raise taxes on what resources, exactly? By your own observation Greece is in an economic death spiral. Unlike major industrial countries, Greece is a poor, broke, subsistence-economy. Raise taxes on WHAT? How reminiscent of the revenue-raising mentality in Ferguson, Missouri! Let's tax or fine the folks who don't have much of anything to start with. Great plan.
Let the clowns do what they can. Let Greece do what it wants. It's not going to affect the world economy in any significant way, simply because Greece is not important to that economy. To hell with the whole thing!
I would keep an eye on MBIA (MBI), Assured Guaranty (AGO) and Ambac (AMBC) in regards to their exposure to Puerto Rico, which is not insignificant. If Puerto Rico pulls a Greece, these three would be effected significantly.
I believe what Germany is trying to get across here is that Greece should at least take on some changes to reduce their debt. Otherwise throwing money at them will do no good and this scenario will play on for eternity.
Portugal has taken steps to pull itself out of their hole they dug and they are making progress as well as earning the respect of the rest of Euro.
The reference to the Marshall plan was a second-hand reference by an article commenter to a Thomas Piketty column on the matter, as he describes a German corollary to the current situation. The link to his column is noted below.
"Otherwise throwing money at them will do no good and this scenario will play on for eternity."
Absolutely correct. Cut the losses now, let Greece do whatever it thinks best for itself. Learn from the mistakes, for a change. A danger is that Putin may see an opportunity to do mischief and extend Russia's influence to the Mediterranean. Perhaps forget the loans- just funnel enough in annual payments to maintain bases there. If that's bribery, so be it. World military power games don't come cheap, as we recently found in the mideast.
"Portugal has taken steps to pull itself out of their hole they dug and they are making progress as well as earning the respect of the rest of Euro."
I hear that Putin and the Greek PM have already spoken to each other. Russia wants access to Greece's ports. Nothing like having a fleet in the Med sea. I'm sure the rest of Europe and the U.S. are watching closely.
One thing I don't hear discussed is the fact that Greece has a significant shadow economy of people who don't pay any taxes or under-report their income and pay less tax than they should. While raising taxes on an imperiled economy may not be the greatest idea, closing some of those loopholes that allow people to evade tax could help the government out. Some debt forgiveness and some more aggressive taxation combined--in other words some sort of compromise--could solve the problem.
>> Greece should at least take on some changes to reduce their debt
I have already posted many links showing that this has been the case, so suggest further study of the actual facts
>> the fact that Greece has a significant shadow economy of people who don't pay any taxes or under-report their income and pay less tax than they should.
mostly true, yes, but ditto: this is not really the problem
Lewis, I do agree, but after traveling there for a while I have to wonder if it's really feasible. There aren't a lot of large cities in Greece- there are many, many small villages and farms fairly widely scattered across the mainland and on the islands. It would take an army of resolute and unbribed tax collectors to actually take an honest and verifiable tax census, meaning that each and every small shop owner in each and every village would need an extensive audit to even establish the proper tax amounts. Additionally a large number of the Greeks work in undocumented barter/under the table jobs: how to deal with that?
This isn't a matter of closing paper "loopholes" as we think of it here in our tax system. This involves somehow changing the customs, concepts and civil behavior of an entire society. Assuming this is even possible (and I really wonder if it is) the process would take years to establish and maintain.
This is primarily why I'm inclined to throw up my hands at the whole situation- their culture doesn't rate tax-paying and international interests as a priority, to say the least. Look, all of this isn't exactly a great secret. The situation either was well-known, or certainly should have been, to the entities who extended those stupid loans to the country. How exactly did they think that the government, ANY elected Greek government, was going to collect enough to repay all those loans?
On the other hand, there's not much to be gained by throwing more money in that direction, either. Time for some real honesty on the part of all involved: up to this point it's jut been a series of games on all sides. Democracies come in many different colors and flavors. Why would anyone think that they are all going to have the same value systems?
"How exactly did they think that the government, ANY elected Greek government, was going to collect enough to repay all those loans?"
Because there is a philosophy by governments around the world that easy money and/or throwing money at a problem will successfully make it go away at least until it's another elected official's problem.
When clients have asked me to explain the Greece debacle, I have likened it to a financially dysfunctional family. We all know what they look like. When times are good, they spend a lot of money to acquire stuff, much of which they really don't need. They accept every credit card offer in the mail, and proceed to run them up to the max. They can make the minimum payments since they have good jobs. They don't save a dime for retirement, or if they do save it's a bare minimum. They have no emergency cash reserve fund. They have a big mortgage on a home that is much grander than they need, and they have two car loans on pricey autos.
The other family has an emergency savings fund to cover 6 months of cash flow needs. They have two credit card accounts, but pay the balance each month. They have two cars, one of which is an 8-year old sedan, the other a sensible family car bought because of its safety features, and it is on a 3-year lease. They max out their 401k plans at work almost every year. Even when things are tight, they put enough in to get their employer's match. They converted their 30-year mortgage to a 15-year loan twelve years ago are are excited to know they will have no mortgage in 3 years. That cash will be put into savings for retirement.
When tough times hit the first family, they go to their relatives, the second family, and ask for help. The second family, being assured the loan they give their cousins will be repaid on time, take money from their own savings. Two years go by, and the second family has received no payments on their loan to the first family, not even interest. When they ask the first family to at least pay interest on the loan, the first family tells them they are struggling to make ends meet, that they have cut back on expenses, and that if the second family will only give them more time and loan them some more money, they promise to repay them in full in three more years. Of course the second family fears the first family will lose everything if they do not help, so they loan them more money.
This time, the first family takes out four more credit cards and runs them up to their limit, since they cannot possibly ask their family members to give up some of their goodies. It doesn't matter that both parents have lost their jobs. It is important that their children still be able to go to private schools, drive their nice cars, take vacations, ride their horses, and eat at nice restaurants. They have taken out loans on both of their 401k accounts so that almost nothing remains.
Three years later, the second family demands the principal and interest on all the loans be paid immediately, the first family says they cannot possibly repay the debts. "We have no money to pay you. We cannot even pay our credit card minimum payments. Our children are suffering. How can you be so cruel? If you don't forgive the loans you made to us, we are never going to speak to you again.
Does this sound familiar? Welcome to Greece (first family) and Germany (second family). Yeah, it is really the eurozone, but we can agree the eurozone is really Germany.
Germany is so cruel to Greece. Don't they realize how hard Greece has worked to get into the place they are in now? They cannot possibly ask their family members to go without any more, because the family members might discover how they have been taken to the cleaners by lousy parents for years and years.
So does the second family simply decide to accept all of this as a bad experience, wash their hands of it, and move on? Does the eurozone realize the loans will never be repaid, and push Greece out of the family? Does Greece, sensing impending doom, blame all of their problems on the mean eurozone?
Some commentators have suggested that since virtually all of Greek debt to the eurozone is owned by the ECB, not individual banks, it is much easier to write off and let Greece go on their own, down the tubes, goodbye. The current Greek government has done a great job of portraying themselves as victims of the eurozone, and they have popularized this very well, too. The Greek people, at least the majority of them, seem to have no clue as to what crappy government they have had for generations. There is no good solution to this mess, but their are solutions.
1. Goodbye, Greece. Please leave the eurozone, and don't let the door hit you in the butt.
2. No more loans, Greece. We forgive your debts. Find out a way to fix your mess. If China and/or Russia want to help, God bless them.
3. You can stay in the eurozone, Greece. But you can no longer use the euro as your currency. You have shown you are not responsible. Go use your worthless drachma.
There seems to be a groundswell of opinion that austerity is cruel. I wonder if these same people were owed money would they just let their borrowers off themselves?
If Greece needs more printing presses for drachmas, I heard they make good ones in Zimbabwe.
Comments
https://twitter.com/ValaAfshar/status/616951520546959360/photo/1
Marshall Plan or no, Greece today is farmland, not an "industrial power".
? Who says anything about that? Let the troika who helped create it handle it. It's not that large in the scheme of things. They have already done all the austerity feasible, and economically it is and has been a terrible idea, just satisfaction of angry revenge fantasies. Time to swerve substantive.
I did not initiate the mention of the Marshall Plan: I was pointing out an inconsistency in it's reference by a commentator of the referred link. With respect to that very inconsistency, it is ludicrous to compare an economy such as Greece to a major economy such as Germany, or any other developed industrial nation with historically abundant natural and industrial manufacturing resources. For the nth time: Greece has never had any significant industrial, manufacturing or international commercial base. It is a fractured small-agriculture, small shop-owner, tourist service oriented economy, with major deficiencies in natural resources. Why is that difficult to understand?
With respect to the Marshall Plan, and other major forms of US sponsored international aid: it is typically based on the perceived self-interest of the United States, not because we are such a wonderfully compassionate nation. In the case of Greece specifically it was a ploy to diminish or negate Communist influence after WW2, and as such, was reasonably successful. Subsequently, it was deemed advantageous to NATO, for essentially the same reasons. Perhaps we have already obtained what we spent our money for.
"Remember how many on this board said in 2008 and even now, that we can't let banks and investment companies fail, because it would cause a huge financial calamity."
To deliberately precipitate the financial destruction of our own major world economy just to punish the clowns is just a bit counterproductive, unless you're a financial masochist. It was indeed unfortunate that to protect ourselves we had to also cover their asses.
"members of this board can rally on raising taxes year after year in the US, but have rivers of tears when someone suggests that Greece raise taxes."
Raise taxes on what resources, exactly? By your own observation Greece is in an economic death spiral. Unlike major industrial countries, Greece is a poor, broke, subsistence-economy. Raise taxes on WHAT? How reminiscent of the revenue-raising mentality in Ferguson, Missouri! Let's tax or fine the folks who don't have much of anything to start with. Great plan.
Let the clowns do what they can. Let Greece do what it wants. It's not going to affect the world economy in any significant way, simply because Greece is not important to that economy. To hell with the whole thing!
I would keep an eye on MBIA (MBI), Assured Guaranty (AGO) and Ambac (AMBC) in regards to their exposure to Puerto Rico, which is not insignificant. If Puerto Rico pulls a Greece, these three would be effected significantly.
Portugal has taken steps to pull itself out of their hole they dug and they are making progress as well as earning the respect of the rest of Euro.
http://www.zeit.de/2015/26/thomas-piketty-schulden-griechenland/komplettansicht
press
Absolutely correct. Cut the losses now, let Greece do whatever it thinks best for itself. Learn from the mistakes, for a change. A danger is that Putin may see an opportunity to do mischief and extend Russia's influence to the Mediterranean. Perhaps forget the loans- just funnel enough in annual payments to maintain bases there. If that's bribery, so be it. World military power games don't come cheap, as we recently found in the mideast.
"Portugal has taken steps to pull itself out of their hole they dug and they are making progress as well as earning the respect of the rest of Euro."
Yes.
I have already posted many links showing that this has been the case, so suggest further study of the actual facts
>> the fact that Greece has a significant shadow economy of people who don't pay any taxes or under-report their income and pay less tax than they should.
mostly true, yes, but ditto: this is not really the problem
This isn't a matter of closing paper "loopholes" as we think of it here in our tax system. This involves somehow changing the customs, concepts and civil behavior of an entire society. Assuming this is even possible (and I really wonder if it is) the process would take years to establish and maintain.
This is primarily why I'm inclined to throw up my hands at the whole situation- their culture doesn't rate tax-paying and international interests as a priority, to say the least. Look, all of this isn't exactly a great secret. The situation either was well-known, or certainly should have been, to the entities who extended those stupid loans to the country. How exactly did they think that the government, ANY elected Greek government, was going to collect enough to repay all those loans?
On the other hand, there's not much to be gained by throwing more money in that direction, either. Time for some real honesty on the part of all involved: up to this point it's jut been a series of games on all sides. Democracies come in many different colors and flavors. Why would anyone think that they are all going to have the same value systems?
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/03/18-key-facts-about-greece-that-will-leave-you-totally-up-to-date-about-a-huge-crisis/
Because there is a philosophy by governments around the world that easy money and/or throwing money at a problem will successfully make it go away at least until it's another elected official's problem.
The other family has an emergency savings fund to cover 6 months of cash flow needs. They have two credit card accounts, but pay the balance each month. They have two cars, one of which is an 8-year old sedan, the other a sensible family car bought because of its safety features, and it is on a 3-year lease. They max out their 401k plans at work almost every year. Even when things are tight, they put enough in to get their employer's match. They converted their 30-year mortgage to a 15-year loan twelve years ago are are excited to know they will have no mortgage in 3 years. That cash will be put into savings for retirement.
When tough times hit the first family, they go to their relatives, the second family, and ask for help. The second family, being assured the loan they give their cousins will be repaid on time, take money from their own savings. Two years go by, and the second family has received no payments on their loan to the first family, not even interest. When they ask the first family to at least pay interest on the loan, the first family tells them they are struggling to make ends meet, that they have cut back on expenses, and that if the second family will only give them more time and loan them some more money, they promise to repay them in full in three more years. Of course the second family fears the first family will lose everything if they do not help, so they loan them more money.
This time, the first family takes out four more credit cards and runs them up to their limit, since they cannot possibly ask their family members to give up some of their goodies. It doesn't matter that both parents have lost their jobs. It is important that their children still be able to go to private schools, drive their nice cars, take vacations, ride their horses, and eat at nice restaurants. They have taken out loans on both of their 401k accounts so that almost nothing remains.
Three years later, the second family demands the principal and interest on all the loans be paid immediately, the first family says they cannot possibly repay the debts. "We have no money to pay you. We cannot even pay our credit card minimum payments. Our children are suffering. How can you be so cruel? If you don't forgive the loans you made to us, we are never going to speak to you again.
Does this sound familiar? Welcome to Greece (first family) and Germany (second family). Yeah, it is really the eurozone, but we can agree the eurozone is really Germany.
Germany is so cruel to Greece. Don't they realize how hard Greece has worked to get into the place they are in now? They cannot possibly ask their family members to go without any more, because the family members might discover how they have been taken to the cleaners by lousy parents for years and years.
So does the second family simply decide to accept all of this as a bad experience, wash their hands of it, and move on? Does the eurozone realize the loans will never be repaid, and push Greece out of the family? Does Greece, sensing impending doom, blame all of their problems on the mean eurozone?
Some commentators have suggested that since virtually all of Greek debt to the eurozone is owned by the ECB, not individual banks, it is much easier to write off and let Greece go on their own, down the tubes, goodbye. The current Greek government has done a great job of portraying themselves as victims of the eurozone, and they have popularized this very well, too. The Greek people, at least the majority of them, seem to have no clue as to what crappy government they have had for generations. There is no good solution to this mess, but their are solutions.
1. Goodbye, Greece. Please leave the eurozone, and don't let the door hit you in the butt.
2. No more loans, Greece. We forgive your debts. Find out a way to fix your mess. If China and/or Russia want to help, God bless them.
3. You can stay in the eurozone, Greece. But you can no longer use the euro as your currency. You have shown you are not responsible. Go use your worthless drachma.
4. Create your own solution.
There seems to be a groundswell of opinion that austerity is cruel. I wonder if these same people were owed money would they just let their borrowers off themselves?
If Greece needs more printing presses for drachmas, I heard they make good ones in Zimbabwe.