Greek banks are punished on growing worries the country will default (wages, generation)
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Bailouts from the international bankers is how nations are conquered in 2015. While armies like the United States spin their wheels aimlessly in land wars in Afghanistan that will never accomplish victory, the IMF took over Greece with one single bailout that they knew would never be repaid. All they have to do is get Portugal, Spain, Ireland and a couple more to follow suit and they'll officially own half of Europe. Neither the people of Greece, nor their elected officials, control their own destiny, which has been sold to the IMF.
Bailouts from the international bankers is how nations are conquered in 2015. While armies like the United States spin their wheels aimlessly in land wars in Afghanistan that will never accomplish victory, the IMF took over Greece with one single bailout that they knew would never be repaid. All they have to do is get Portugal, Spain, Ireland and a couple more to follow suit and they'll officially own half of Europe. Neither the people of Greece, nor their elected officials, control their own destiny, which has been sold to the IMF.
What you need in Greece is monetary inflation. With QE in the EU what they should do is to deposit 30 billion euros in the Greek central bank and then print Greek only cash with it. Then Bribe the people to stay with Austerity with 3k cash each. That should drive to full employment and even to wage inflation. That would be fun to watch.
What Greece needs is (partial but substantial) default. Monetary inflation is a form of default but if they want to stay in the Euro that's closed (you might support "Greek only cash" but that's not what the Greeks themselves want for the most part) -- an explicit one works just as well though; better really, since you don't have the negative effects of inflation that go along with that. The problem in Greece post-crisis isn't deflation, it's that no-one wants to invest in long-term growth because the government is carrying nearly double the GDP in mostly foreign-owed bonds and at the same time only idiots keep their money in the local banks because of fear of people like you winning the policy argument, which reduces the capital available to invest in business loans (and in Europe that matters much more than here because they rely more on banks for that then we do in the states).
Your policy prescription probably would be better than the status quo, but why do it that way when you can do it without hyperinflation and without having to leave the Euro (unless the Germans push them out, in which case why bother paying even a single penny of the debt afterward)? The only reason the Greeks have to put up with any amount of austerity or pay back any of the debt now that they are both running a primary surplus and locked out of capital markets regardless is because if they don't Germany might try to force them out of the Euro.
What Greece needs is (partial but substantial) default. Monetary inflation is a form of default but if they want to stay in the Euro that's closed (you might support "Greek only cash" but that's not what the Greeks themselves want for the most part) -- an explicit one works just as well though; better really, since you don't have the negative effects of inflation that go along with that. The problem in Greece post-crisis isn't deflation, it's that no-one wants to invest in long-term growth because the government is carrying nearly double the GDP in mostly foreign-owed bonds and at the same time only idiots keep their money in the local banks because of fear of people like you winning the policy argument, which reduces the capital available to invest in business loans (and in Europe that matters much more than here because they rely more on banks for that then we do in the states).
Your policy prescription probably would be better than the status quo, but why do it that way when you can do it without hyperinflation and without having to leave the Euro (unless the Germans push them out, in which case why bother paying even a single penny of the debt afterward)? The only reason the Greeks have to put up with any amount of austerity or pay back any of the debt now that they are both running a primary surplus and locked out of capital markets regardless is because if they don't Germany might try to force them out of the Euro.
A better explanation of what I intend.
The Greek government puts 33 billion euros in their central bank. They print paper Greek only euros with it. They hand everyone 3k euros. Those euros stay in country. The banks can loan them to Greeks only. The Greek only cash turns into normal euros when they get deposited into the banks. So the money can be transferred out of country by the people. But the cash is in excess reserves. So it can be loaned out. The cash has to stay in Greece and be spent by Greeks. It should inflate the economy. But not drive wage price inflation.
The EU is doing QE. This would just be a variation on that theme.
Bailouts from the international bankers is how nations are conquered in 2015. While armies like the United States spin their wheels aimlessly in land wars in Afghanistan that will never accomplish victory, the IMF took over Greece with one single bailout that they knew would never be repaid. All they have to do is get Portugal, Spain, Ireland and a couple more to follow suit and they'll officially own half of Europe. Neither the people of Greece, nor their elected officials, control their own destiny, which has been sold to the IMF.
Finally, someone here gets it. They're in the process of taking Ukraine right now. I believe their goal in Ukraine is to depopulate it entirely - via war on the eastern ethnic Russians and by destroying the economy in western Ukraine, forcing everyone to migrate east or west.
When Greece is out of almost every needed item and nobody will accept their currency... You'll sing a different song.
For a preview, please examine Venezuela.
Yes, lets compare a country whose main income came from oil....thats now dropped by 50%. While I agree that there are going to be consequences, and they may even be dire ones, your comparison is unrealistic.
If Tsipras veers from the austerity program, how on earth is Greece going to find the money to pay their creditors?
Quote:
Originally Posted by greywar
Yes, lets compare a country whose main income came from oil....thats now dropped by 50%. While I agree that there are going to be consequences, and they may even be dire ones, your comparison is unrealistic.
Try comparing them to Argentina.
Neither would be a good comparison because Greece does not have oil to sustain it's economy, nor does it have much of any industry. The process of transitioning from the euro to the Greek drachma wouldn’t be easy for Greece. Without the backing of the Eurozone, investors or creditors may doubt the strength of the Greek currency. For international creditors like Germany, a Grexit would mean getting a haircut on Greek bonds once the debt was converted from euros to the devalued drachma. A lack of confidence in a currency is often a first step toward a run on the banks. A Greek exit will likely trigger a flight of capital from the country, prompting its government to exercise certain capital control measures to retain foreign investments. Furthermore, a rapidly depreciating currency would also make imports costlier for the Greeks, fuelling inflation and leading to a loss of business confidence.
There was already a voluntary waiver by private creditors; Greece has already been exempt from billions by the banks. I don't see a further debt haircut," she told German daily Die Welt in an interview published in its Saturday edition.
"Europe will continue to show solidarity for Greece, as for other countries hit particularly hard by the crisis, if these countries undertake their own reforms and savings efforts," Merkel added in a thinly veiled threat to Athens.
Last edited by chicagogeorge; 01-31-2015 at 04:38 PM..
The Greek government puts 33 billion euros in their central bank. They print paper Greek only euros with it. They hand everyone 3k euros. Those euros stay in country. The banks can loan them to Greeks only. The Greek only cash turns into normal euros when they get deposited into the banks. So the money can be transferred out of country by the people. But the cash is in excess reserves. So it can be loaned out. The cash has to stay in Greece and be spent by Greeks. It should inflate the economy. But not drive wage price inflation.
The EU is doing QE. This would just be a variation on that theme.
So --
1) ECB effectively lends an additional $33 billion to Greek central bank.
2) Greek central bank distributes to citizens and forces them to deposit the money in Greek banks to get real Euros, so they do that
3) Once deposited that money becomes real Euros.
Isn't that just the equivalent of the ECB lending Greece an additional 33 bilion Euros with the stipulation that it be deposited directly into citizens bank accounts on a per-capita basis? Why the needless complexity of going through the intermediate step? Beyond that it's a short term shot in the arm but it only makes Greece as a country more insolvent and insofar as some of the money is spent on imports and sent to foreign banks as soon as it is washed through the local system makes the balance of Euro assets to liabilities even worse. You still have that giant wall of foreign held debt discouraging investing or keeping financial assets in the country, except now it's even bigger.
At its heart this is a solvency crisis -- the Greek government is insolvent, full-stop, and trying to austerity out of it will (has) impoverish the country. Short term attempts to boost demand will fail to permanently solve the situation because as soon as the stimulus ends you need to go back to austerity to service the debt, and knowing this people won't want to make long term capital investment nor will they want to keep their money in local financial institutions.
Yes, lets compare a country whose main income came from oil....thats now dropped by 50%. While I agree that there are going to be consequences, and they may even be dire ones, your comparison is unrealistic.
Try comparing them to Argentina.
No, I'm comparing countries who planned their economies on completely worthless projections of future revenue, who borrowed all they could, and began confiscating every possible bit of currency they could get their hands on, who then decide that they can pretend that printing money will have no effect on trade.
Venezuela never developed industry to diversify their industrial base away from just oil, they ran it all off.
Greece just thought everyone work for the government would be prosperous ,and so borrowed to grow government spending and hire more people, as if public employment is an economic base.
Both have impossibly stupid ideas, revolving around the idea of manipulating currency and spending for purposes of claims of "public good".
A number of years ago, Victor Davis Hanson, who owns property in Greece and lives there some of the time, wrote about how tax cheating was a way of life, and how oodles of public employee jobs were held by people who did little work, or who actually had another, under-the-table job, because, well, that's just "how it works" there. He actually predicted the current Greek problems, almost perfectly. How borrowed money was spent to give the image of a modern, prosperous country - despite the fact that it produces very, very little wealth of any kind.
Venezuela has the same problems, all the same faults - it just thought oil was means for the state to provide all needs, rather than borrowing. When that did not work, it resorted to taking private wealth. Just like Greece has and will do some more.
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