Euro Area

[Furunculus]

so which part of greece should we partition for the next 45 years?

[phonicsmonkey]

These banks that are getting government welfare... Are their execs and senior staff still getting bonuses?

Of course! because they have to retain their talented staff! (largely the same crew of shysters and morons that got us in this mess to begin with)

[InsaneApache]

Simon Jenkins 'gets it' in todays Gruniad...

http://www.guardian.co.uk/commentisfree/2011/sep/15/europe-national-identity-debt-crisis

[rory_20_uk]

Of course! because they have to retain their talented staff! (largely the same crew of shysters and morons that got us in this mess to begin with)

I really, really hope that a load of their stock options which were worth millions are now practically worthless.

~:smoking:

[Philippus Flavius Homovallumus]

Europe is getting fed up with Greece.

Ireland and Portugal are going through very rough times. But they do what is necessary. They deserve our support.

Not Greece. In Greece, Europe is still dealing with the same lying statisticians. The same corrupt, self-serving politicians. They don't want to be bailed out.
Also, ever since day one of its membership, Greece has played the same game of milking Europe for what it's worth. They have come to think, based on actual experience, that the patience and stupidity of Europe is infinite. Add in the costs of a Greek bankryptcy for Europe, and it is clear why the Greeks think they can use this crisis to steal even more money from Europe than before.


Autists.

There is no electoral support anywhere for support for Greeks. It is against any electoral instinct that politicians throughout Europe are still trying to do the responsible thing and keep Greece - an entire European country - afloat. This sense of responsibility is not infinite, there comes a time when one realises that the last effort has been made. There is nobody in Greece to work with. The Greeks have neither the will, nor even the capacity to change their ways. (Capable civil servants, non-politicised semi-governmental agencies, at least some rationally functioning non-corrupt segments of state)

You are correct about the lack of electoral support, but this has been true for some time.

Question: If the Greeks had been given a referendum on EMU would they still have the Drachma? I'd say that bet was, at worst, even money.

To be more blunt, if EU integration had proceeded via plebicite rather than Political Conference, would we be in this mess?

As to the Greeks being corrupt, with the Spanish overfishing everyone's waters, the French and Italians leaching the CAP for every drop of Blood and the English laundering the money that passes through the EU how could the Greeks see it as anything other than a racket to be milked?

[gaelic cowboy]

So USA had there zero doc home loans and the EU Greece.

These banks that are getting government welfare... Are their execs and senior staff still getting bonuses?

yes usually they are unfortunately, the claim is because there employment contracts cannot be reneged on.

Thats what they claiimed in Ireland and I'm sure the same waffle is spouted elsewhere.

[rory_20_uk]

yes usually they are unfortunately the claimm is because employment contracts cannot hardly be reneged on.

Thats what they claiimed in Ireland and I'm sure the same waffle is spouted elsewhere.

Interesting...

If the companies were forced into "pre-packaged" bankruptcy, all contracts can be reviewed / broken. Might have been a better option.

~:smoking:

[phonicsmonkey]

The only time bonuses are contractually provided for is when you poach someone from another bank at a point of time in between bonus periods when you might pay them out for the bonus they believe they have accrued at their current employer and will "lose" by jumping ship. Also CEOs tend to have contracted bonuses (because in most cases they also chair the compensation committee!)

The over-riding reason why bonuses are being paid at the banks that have received government funds is that a) the governments did not give themselves any rights over determining compensation and b) the banks are generating huge profits from trading and are afraid they will lose their best people to competitors if they do not 'keep up with the Joneses'.

To a large extent this is true - most investment banking employees have close to zero loyalty to their employer who they recognise as a soulless money-making machine which will fire them as soon as they stop making money. They are, on the whole, right about that.

[gaelic cowboy]

Interesting...

If the companies were forced into "pre-packaged" bankruptcy, all contracts can be reviewed / broken. Might have been a better option.

~:smoking:

Yes if they were put into examinership or recievership, not if there bailed out or brought into state ownership which is what happened.

[phonicsmonkey]

if they were put into examinership or recievership

Then their bad loans would have to be marked to market, their creditors and the counterparties to all their transactions would realise a whole load of currently unrealised losses, financial contagion would spread like wildfire again as banks would be unable to lend to each other and to industry, the economies of western countries and quite possibly export-driven emerging market countries would fall off a cliff and we'd fall back into a depression the like of which we haven't seen since the 30s.

Which is why the government stepped in to begin with, right?

[Fragony]

Then their bad loans would have to be marked to market, their creditors and the counterparties to all their transactions would realise a whole load of currently unrealised losses, financial contagion would spread like wildfire again as banks would be unable to lend to each other and to industry, the economies of western countries and quite possibly export-driven emerging market countries would fall off a cliff and we'd fall back into a depression the like of which we haven't seen since the 30s.

Which is why the government stepped in to begin with, right?

So they say, plenty a top-economist insists it's better to default, for us and for these feta-munchers

[phonicsmonkey]

So they say, plenty a top-economist insists it's better to default, for us and for these feta-munchers

Let's be clear - to all intents and purposes Greece has defaulted. It can't pay its debts and others are being forced to do so for it. The only debate is whether the resulting loss is taken by governments (via bailout funds) or by the banks that hold its loans.

For me the scariest chart I saw throughout the whole financial crisis in '08 had nothing to do with bank losses but showed the volume of global trade. It fell off an enormous cliff because banks were not extending the finance necessary to keep it going. World trade is the world economy.

Whatever you think about the causes of all these issues (and I am increasingly coming to the view that there was clear fraudulent activity on a massive scale in the origination and packaging of the sub-prime mortgage loans) one thing is clear to me: the banks are in too much of a mess to be simply cut loose. This was true in '08 and it remains true now because substantially the same problem exists and has simply been moved from one place to another.

[Furunculus]

one thing is clear to me: the banks are in too much of a mess to be simply cut loose. This was true in '08 and it remains true now because substantially the same problem exists and has simply been moved from one place to another.

only problem is that western governments no longer have any spare money, or any good credit, with which to launch into round 2.0 of the bailout circus.

[phonicsmonkey]

only problem is that western governments no longer have any spare money, or any good credit, with which to launch into round 2.0 of the bailout circus.

I think Germany and France are creditors of sufficiently good standing to sit behind the eurozone debtors, if the political will were there. Which of course it is not.

[Furunculus]

I think Germany and France are creditors of sufficiently good standing to sit behind the eurozone debtors, if the political will were there. Which of course it is not.

france isn't.

and as you note there is no political will to subsidise non-family massively in perpetuity.

[phonicsmonkey]

france isn't.

and as you note there is no political will to subsidise non-family massively in perpetuity.

Germany and France in combination. Even better for them if others get involved to share the load.

As I've outlined here before there is no realistic alternative to their continuing to stump up the cash required to keep Greece afloat for the foreseable future (aka kick the can down the road and hope for something to happen to help them out).

Either they do so, or they let Greece default which will cause european banks to have to recognise huge losses and hold larger capital reserves against the bad loans, which in turn will kill off trade finance, world trade and impact global growth. Cue market panic!

Or they allow their precious Euro to break apart, Greece devalues and effectively defaults causing the same issues.

Or they create a political and fiscal union and issue Eurobonds to replace the entirety of eurozone sovereign debt. Goodbye Germany and France as sovereign countries!

[InsaneApache]

The will be war if they do that.

[phonicsmonkey]

The will be war if they do that.

Do you mean revolution? Because in order for them to create political union they would need (of course) the consent of governments which would be included. It would be practically impossible otherwise.

Of course that consent will not be forthcoming even if Germany and France were interested in doing so (which I do not believe they are). There is no desire among the public of Eurozone countries for closer political and fiscal union. The draft consitution was rejected en masse in 2005 and I don't believe events since then would have made people more welcoming of it!

Interestingly though, as respected and sensible an economist as Ken Rogoff believes this is what will be the outcome. Perhaps it goes to show why he is an economic and not a political commentator...or perhaps I am missing something important in my inexpert analysis.

[Furunculus]

Germany and France in combination. Even better for them if others get involved to share the load.

As I've outlined here before there is no realistic alternative to their continuing to stump up the cash required to keep Greece afloat for the foreseable future (aka kick the can down the road and hope for something to happen to help them out).

Either they do so, or they let Greece default which will cause european banks to have to recognise huge losses and hold larger capital reserves against the bad loans, which in turn will kill off trade finance, world trade and impact global growth. Cue market panic!

Or they allow their precious Euro to break apart, Greece devalues and effectively defaults causing the same issues.

Or they create a political and fiscal union and issue Eurobonds to replace the entirety of eurozone sovereign debt. Goodbye Germany and France as sovereign countries!

france does not have the leeway, if it commits to to much more liability on behalf of the eurozone it risks its own credit rating being downgraded.

Italy has just been downgraded, that however was expected, but the eurozone cannot afford to have the 'other' supporting pillar beside germany dissolve.

[InsaneApache]

There is no appetite for political union. If one is forced onto people, well look at Jugoslavia as a template for what happens when different cultures are forced together. Ironically the very thing that Monet and the rest of those idiots wanted to avoid.

[phonicsmonkey]

Interesting viewpoint in the Guardian, I think the comparison to Argentina is apt even if I do not agree with his conclusions.

http://www.guardian.co.uk/commentisfree/2011/sep/19/greece-must-default-and-quit-euro

[Philippus Flavius Homovallumus]

Germany and France in combination. Even better for them if others get involved to share the load.

As I've outlined here before there is no realistic alternative to their continuing to stump up the cash required to keep Greece afloat for the foreseable future (aka kick the can down the road and hope for something to happen to help them out).

Either they do so, or they let Greece default which will cause european banks to have to recognise huge losses and hold larger capital reserves against the bad loans, which in turn will kill off trade finance, world trade and impact global growth. Cue market panic!

Or they allow their precious Euro to break apart, Greece devalues and effectively defaults causing the same issues.

Or they create a political and fiscal union and issue Eurobonds to replace the entirety of eurozone sovereign debt. Goodbye Germany and France as sovereign countries!

Default is what is going to happen saying, "there is no realistic alternative to their continuing to stump up the cash" misses the crucial point, neither the populace nor the national Parliaments will wear it. Nor should they.

What EVERYONE needs to consider is how to get on after Greece defaults and exits the Euro. once they have done that a loan to help rebuld their economy might be an idea worth considering, but it is a lot less atractive than it was in 2010. If we had allowed Greece to default in reality and then required them to actually collect their own taxes, after which providing money for recovery, we would be in a much better place than we are now.

Time to get real, the crisis is entering the Second Act and, like all good Tragedies, this is where it gets ugly.

[Louis VI the Fat]

Europe needs strong leaders who accept the consequence of the crisis. The electorate is restless, and is not willing to foot the bill any longer. Therefore, the EU needs to abolish neo-capitalism forthwith. It was always a recipe for disaster.



~~o~~o~~<<oOo>>~~o~~o~~


Switzerland last week pegged the Franc to the Euro. Currency fluctuations have been wreaking havoc on the Swiss economy. The Swiss crave the economic stability of an absense of currency fluctuations with your major trading partners.
To help them out, I vote we fasttrack Swiss EU and Euro membership. :beam:


The Swiss National Bank said Thursday it will
continue to keep short-term interest rates as low as possible and defend
the peg of the Swiss franc to the euro in order to counter the
currency’s appreciation resulting from inflowing capital in search of a
safe haven amid the Eurozone debt crisis.

http://www.forexlive.com/blog/2011/09/15/snb-vows-to-defend-franc-euro-peg-hold-rates-close-to-zero/

[Papewaio]

So Greece doesn't have the marbles to think their way out or The Marbles leftover to pay their way out.

[phonicsmonkey]

neither the populace nor the national Parliaments will wear it.

You may be right about that - if so it will constitute a failure of political leadership at least as bad as the one which has gotten us here in the first place.


What EVERYONE needs to consider is how to get on after Greece defaults and exits the Euro

Move all your investments to cash and prepare for a severe and prolonged global recession. It really is going to be that bad.


once they have done that a loan to help rebuld their economy might be an idea worth considering

Versus lending money to Greece now to prevent global economic armageddon? I fail to see why that is a preferable option.


If we had allowed Greece to default in reality and then required them to actually collect their own taxes, after which providing money for recovery, we would be in a much better place than we are now.

I agree that Greece should be required to fundamentally restructure its tax system in order to ensure government revenues are on a firm footing in future. One suggestion for how to do this is in the Guardian article I posted. But I think allowing Greece to default on its debts rather than stumping up the first set of bailout funds would have been as disastrous as letting it happen now, for all the reasons I have outlined above.

(EDIT: I should add that suddenly and sharply raising (or starting to collect) taxes while at the same time cutting government spending is not exactly the recipe for growth! And it's growth that Greece needs in order to service its debts.)

I don't think you fully appreciate the integral part the European banking system plays in international trade. Literally the only thing keeping the world economy in positive growth at the moment is trade between the developing and developed countries. This is largely financed by the lending of European banks.

These banks are currently holding a vast amount of European sovereign debt. Greek, Portuguese, Irish etc. Capital reserve requirements only require the banks to hold a certain amount of equity (read: cash) against these loans at present. Call it 25%, I'm not sure of the exact figure since Basel 2. This means they have to reserve 25% of the value of the loan as un-used capital. the other 75% can be used to capitalise other loans, for example trade finance and loans to businesses in Europe.

If the Euro sovereign loans go into default they are required to hold closer to 90% of capital against them. This will significantly impact their ability to make further loans. And the sovereign debt that was not Greek will drop dramatically in value, further impairing their balance sheets (or it would do if they were required to mark those loans to market). The short-term shock of all this will drive several banks into bankruptcy. Banks will be unwilling to lend to one another again for fear of counterparty risk and therefore unable to lend to non-banks.

Kiss goodbye to global growth in that scenario.

I can't imagine how anyone except the most extreme anarchist would welcome that chain of events or deliberately choose them.

[Furunculus]

You may be right about that - if so it will constitute a failure of political leadership at least as bad as the one which has gotten us here in the first place.


No, it is a failure of representative democracy, in that their political leaders ceased being interested in representing the will of the people.

Now they've got themselves in a pickle, have been recognised as such by their peoples, who now demand an end to foolishness they never sanctioned in the first place.

[Philippus Flavius Homovallumus]

You may be right about that - if so it will constitute a failure of political leadership at least as bad as the one which has gotten us here in the first place.

That horse has bolted, which is EXACTLY why we are in this mess.


Move all your investments to cash and prepare for a severe and prolonged global recession. It really is going to be that bad.

So... like now where the banks are just recapitalising and won't lend?


Versus lending money to Greece now to prevent global economic armageddon? I fail to see why that is a preferable option.

Hasn't worked, it's just good money after bad at this point. If they had defaulted first we wouldn't have even more bad loans to deal with and Ireland and Portugal might be better off.


I agree that Greece should be required to fundamentally restructure its tax system in order to ensure government revenues are on a firm footing in future. One suggestion for how to do this is in the Guardian article I posted. But I think allowing Greece to default on its debts rather than stumping up the first set of bailout funds would have been as disastrous as letting it happen now, for all the reasons I have outlined above.

(EDIT: I should add that suddenly and sharply raising (or starting to collect) taxes while at the same time cutting government spending is not exactly the recipe for growth! And it's growth that Greece needs in order to service its debts.)

A large proportion of Greeks don't pay taxes, something stupid like 2/3 was a figure I heard once, but no one really knows. If all Greeks payed existing taxes then the deficit would dissapear.


I don't think you fully appreciate the integral part the European banking system plays in international trade. Literally the only thing keeping the world economy in positive growth at the moment is trade between the developing and developed countries. This is largely financed by the lending of European banks.

These banks are currently holding a vast amount of European sovereign debt. Greek, Portuguese, Irish etc. Capital reserve requirements only require the banks to hold a certain amount of equity (read: cash) against these loans at present. Call it 25%, I'm not sure of the exact figure since Basel 2. This means they have to reserve 25% of the value of the loan as un-used capital. the other 75% can be used to capitalise other loans, for example trade finance and loans to businesses in Europe.

If the Euro sovereign loans go into default they are required to hold closer to 90% of capital against them. This will significantly impact their ability to make further loans. And the sovereign debt that was not Greek will drop dramatically in value, further impairing their balance sheets (or it would do if they were required to mark those loans to market). The short-term shock of all this will drive several banks into bankruptcy. Banks will be unwilling to lend to one another again for fear of counterparty risk and therefore unable to lend to non-banks.

Kiss goodbye to global growth in that scenario.

I can't imagine how anyone except the most extreme anarchist would welcome that chain of events or deliberately choose them.

IIRC it's a 5% reserve, or was before the crash. You are thinking like the EU Comissioners, and ignoring the basic facts - high debt and low confidence. Continuing defaults are GOING to happen, if national governments continue to indebt themselves to banks (by borrowing money for bailouts) or banks take on more bad debts theselves you cannot stop the necessary rebalancing, only put it off and make the eventual shock potentially even bigger.

[phonicsmonkey]

There is an excellent article in the Sep 17th Economist called "How to save the Euro". I can't post a link here because it's behind a paywall but I strongly recommend it to anyone interested in this topic.

In essence it argues that:
- the Euro must be saved because the alternative is too terrible (along the lines of what I have outlined above)
- insolvent nations (eg. Greece, maybe Portugal and Ireland) must be allowed to default but only after
- governments use the funds they had earmarked for the Greece bailout to shore up the banks instead and make the strongest possible commitments to stand behind solvent nations which are facing liquidity issues (eg. Italy and Spain)

The thesis being this would stop the horrible chain of events that I believe would follow a Greek default.

PVC with respect to the Greek taxes where is the cash coming from to pay them?

Furunculus that may well be the case but it must be explained to the people of Europe that simply getting fed up with the whole thing and chucking the towel in is not going to help anyone. Maybe no-one wanted the Euro but now we (by which I mean the whole world!) have it and the cost of letting it go to the dogs would be global recession and maybe even depression. Political leadership and not populism is what is required!

[Furunculus]

"sorry, it is too late for you to get het-up about 'freedom', you have a responsibility to everybody else to put up with a system of governance that is neither legitimate nor representative because being the cause of another recession would be EVIL!"

Great message, wonder how well that will go down?

[phonicsmonkey]

"sorry, it is too late for you to get het-up about 'freedom', you have a responsibility to everybody else to put up with a system of governance that is neither legitimate nor representative because being the cause of another recession would be EVIL!"

Great message, wonder how well that will go down?

I'm not suggesting anyone should be railroaded into anything and a recapitalisation of German banks by the German government hardly counts as illegitimate if it's enacted by their democratically elected government. My point is that government should act responsibly in putting the real facts of the matter to their people so that everyone can make an informed decision. As opposed to the current situation where policymakers are basically talking nonsense. Isn't the official position still that Greece is solvent?

[Furunculus]

I'm not suggesting anyone should be railroaded into anything and a recapitalisation of German banks by the German government hardly counts as illegitimate if it's enacted by their democratically elected government. My point is that government should act responsibly in putting the real facts of the matter to their people so that everyone can make an informed decision. As opposed to the current situation where policymakers are basically talking nonsense. Isn't the official position still that Greece is solvent?

if 'saving' the euro is limited to nations recapitalising their banks then fine.......... but it isn't.

[phonicsmonkey]

if 'saving' the euro is limited to nations recapitalising their banks then fine.......... but it isn't.

in the short term it is (at least according to the Economist).

In the longer term it means something else and I agree with you that there is little to no public support for further integration at this point.

Still, better to ride out the short term dangers and make longer-term decisions when things are more stable, in my view.

[Philippus Flavius Homovallumus]

in the short term it is (at least according to the Economist).

In the longer term it means something else and I agree with you that there is little to no public support for further integration at this point.

Still, better to ride out the short term dangers and make longer-term decisions when things are more stable, in my view.

In order to do so we would need to borrow money from somewhere else at this point, and so it goes around.

CPR is pointless on a rotting three-day old corpse.

[Furunculus]

edmund conway on the worthlessness of imposed deadllines:

http://www.telegraph.co.uk/finance/comment/8787064/Eurozone-leaders-comedy-of-errors-brings-monetary-union-to-the-brink.html

[Tellos Athenaios]

As opposed to what other kind of deadline? Obviously mr. Ed Conway can pull out one good scheme and containment plan after another from his rear, but some people like to calculate the ramifications of their idiocy before they propose it anyway... Obviously mr. Ed Conway can make the world magically agree on who pays for what, or who sees his money down the drain without a single effort, but others actually need to negotiate ...

It's a good thing people like Mr. Ed Conway are *not* in charge.

[Furunculus]

lol, the record of failure from self-imposed deadlines within the euro-crisis is pretty stunning; he is more than justified in asking if this one will be any different, and more than qualified to take a stab at the outcome.

your proposal is press both hands together, stare imploringly at the ceiling, and beseech god that this time it will work?

http://www.spiegel.de/international/germany/0,1518,788082,00.html

[Tellos Athenaios]

lol, the record of failure from self-imposed deadlines within the euro-crisis is pretty stunning; he is more than justified in asking if this one will be any different, and more than qualified to take a stab at the outcome.

Yes, so what? Got an alternative? A real alternative? One that takes 25 different countries into account?

[Furunculus]

yes, it's called germany, the netherlands, austria and finland withdrawing from the euro and creating a separate D-mark based currency union.

One is reminded of the following quote:



The fallacy at the heart of this crisis is that every financial problem has a political solution. If only. Yet the Brussels elite and its co-conspirators at the IMF continue to promise that by “doing all it takes” they will, somehow, defy indefinitely economic gravity. This illusion of political primacy is perpetuated because a confession of impotence would not only undermine the worth of those in power but also expose the euro’s fatal flaw: monetary union without fiscal union is a marriage that weds the prudent to the profligate with no control over the latter’s spending. Financial pain will be accompanied by the political humiliation of European Union leaders and their apologists in the commentariat who boasted that such an outcome was impossible because there was the “necessary will” to prevent it occurring.

http://www.telegraph.co.uk/finance/comment/jeffrandall/8788501/Eurozone-crisis-there-are-no-miracles-in-Greek-tragedies.html

[Tellos Athenaios]

And that alternative somehow does not take negotiation? Or a timetable so the currencies can appreciate beforehand?

[Furunculus]

it represents a real solution, one with a hope of success and happiness at the end, totally unlike the endless bailouts that:
a) never solve Greece's competitivness problem
b) never solve the Germany people's bailout problem

[rory_20_uk]

It makes sense for similar countries to group together in the first instance. These groups in turn might choose to coalesce together in the fullness of time. But to add so many at such a pace was frankly asking a massive amount of the system - even if it was well set up with rigorous entry requirements.

~:smoking:

[InsaneApache]

Indeed. The Benelux countries spring to mind.

[gaelic cowboy]

Thought I would see how much of the opening post has happened and it's pretty much all happened.


Basically if one scans the news media in a broad sense you can see a trend here that Portugal is next and therefore Spain. Portugal check Spain in progress


If this all comes to pass the EFSF fund will run out and the Euro has a major problem lots of debt and no money left to bail out Spain. check already topped up a few times now and there meeting to do it again.


The debt will be devalued and banks will be wound up the Euro will be severely weakened and what little gra anyone has for the Euro will go with them. check Anglo and Irish nationwide are all gone, and the Euro down along with our gra for it too.


It seemed such a good idea at the time save the Euro by preventing a default of the PIIGS debt but I don't think it is going to work. check


I also predicted that the bailout rate from the ECB and EU would have to come down and they have indeed come down now about twice in about a month or so.

I also said some bondholders of Irish bank bonds would be scalped and they were indeed scalped no less a man than Roman Arkadyevich Abramovich got burned.:2thumbsup:
The government was going to scalp more this month and basically the ECB begged Noonan not to do it hence the second reduction in the bailout rate.

Pretty much the only thing I didnt get right was that there was no medium term liquidity for banks proposal instead the ECB put pressure on the EU to extend the maturity of the bailout.

The ECB seems intent on protecting banks ahead of anyone as far as I can see.:book:

[Tellos Athenaios]

it represents a real solution, one with a hope of success and happiness at the end, totally unlike the endless bailouts that:
a) never solve Greece's competitivness problem
b) never solve the Germany people's bailout problem

Yes. But back to my point: mocking the EU politico's for setting deadlines and timetables is all good fun, but quickly gets very silly. Even when/if the aforementioned countries create their own monetary union there is no denying that this will involve plenty of deadlines and timetables same way as if we keep on injecting more cash.

[Fragony]

Yes. But back to my point: mocking the EU politico's for setting deadlines and timetables is all good fun, but quickly gets very silly. Even when/if the aforementioned countries create their own monetary union there is no denying that this will involve plenty of deadlines and timetables same way as if we keep on injecting more cash.

Depends on who we drop cold really, don't tell me that isn't possible

[Centurion1]

eh i appreciate the pig countries. its going to make me a tidy profit; the yield on irish bonds is astounding and they don't feel quite like junk bonds that i will likely lose to be honest.

[Fragony]

eh i appreciate the pig countries

Well I don't. At teh Economycelt, if the Netherlands and Germany say kthxbye to everything below the garlic border and put the cash in our own sorry banks, how can it hurt us, what are the scenario's. No EU without the Dutch and Germans and many an economist says we should leave you all to dry.

No logistics without the Dutch, nothing to buy without the Germans. Bye Europe

[Tellos Athenaios]

Depends on who we drop cold really, don't tell me that isn't possible

Huh? Currency must be accepted for it to be useful. Must be available in order for it to be accepted anywhere, too. We must set expiry dates for when we leave the monetary union. We must make agreements about the debts in euro's that we're owed, and the ones which we owe...

Basic logistics. Once you look past a forum rant, there's an awful lot of work to be done before you can actually say “kthxbye”. Took 4 years for the Euro which was a political no-brainer by comparison at the time...

[Fragony]

Huh? Currency must be accepted for it to be useful. Must be available in order for it to be accepted anywhere, too. We must set expiry dates for when we leave the monetary union. We must make agreements about the debts in euro's that we're owed, and the ones which we owe...

Basic logistics. Once you look past a forum rant, there's an awful lot of work to be done before you can actually say ?kthxbye?. Took 4 years for the Euro which was a political no-brainer by comparison at the time...

I don't think it's all that complicated, a new coin for northen-europe, and the euro can stay to pay for drinks everywhere

[gaelic cowboy]

Well I don't. At teh Economycelt, if the Netherlands and Germany say kthxbye to everything below the garlic border and put the cash in our own sorry banks, how can it hurt us, what are the scenario's. No EU without the Dutch and Germans and many an economist says we should leave you all to dry.

No logistics without the Dutch, nothing to buy without the Germans. Bye Europe

Then kiss goodbye to the German export trade which then impacts the Dutch economy.

Neo D-mark will rise massively angainst the PIIGS and hurt German exports which is what the German economy is based on, and if the German economy slows then Holland will hardly be needed for much logistics.

[Fragony]

Then kiss goodbye to the German export trade which then impacts the Dutch economy.

Neo D-mark will rise massively angainst the PIIGS and hurt German exports which is what the German economy is based on, and if the German economy slows then Holland will hardly be needed for much logistics.

They can't do anything without us, no harbour can handle these capacities. Besides, they are not stupid. Doesn't have to be a coin a fund will do

[gaelic cowboy]

They can't do anything without us, no harbour can handle these capacities. Besides, they are not stupid. Doesn't have to be a coin a fund will do

The most likely thing that will happen is they wait till they get paid back by Ireland Frag, then they can just burn the Greek bonds after they have spent a while building a war chest to stuff down there own local banks and whatnot. An orderly attempt at a default by Greece can/may work but the present plan will never work.

We can prob guess there will be another meeting before xmas because of another crisis again blah blah etc etc.

[Fragony]

The most likely thing that will happen is they wait till they get paid back by Ireland Frag, then they can just burn the Greek bonds after they have spent a while building a war chest to stuff down there own local banks and whatnot. An orderly attempt at a default by Greece can/may work but the present plan will never work.

We can prob guess there will be another meeting before xmas because of another crisis again blah blah etc etc.

Beside the euro,, northern european guaranteed, currency doesn't really have to be printed. If we aren't to leave the euro at least we should consider what to do when we do.

[Furunculus]

Yes. But back to my point: mocking the EU politico's for setting deadlines and timetables is all good fun, but quickly gets very silly. Even when/if the aforementioned countries create their own monetary union there is no denying that this will involve plenty of deadlines and timetables same way as if we keep on injecting more cash.

strawman.

i am extracting the urine from euro-delusion, no the concept of decision making itself.

[InsaneApache]

http://www.presseurop.eu/en/content/article/964881-eating-bins-new-make-do

Welcome to the future.

[Furunculus]

quite extraordinary, i wonder how long their tolerance for euro-imposed uncompetitveness will survive?

oh look, more fun and games on useless and decietful deadlines:

http://www.telegraph.co.uk/finance/comment/jeremy-warner/8790524/Recession-pre-baked-as-Eurozone-dithers.html

ooh, and another on the folly of trying to dodge Germany's immutable Basic Law:

http://www.telegraph.co.uk/finance/financialcrisis/8790785/German-turmoil-over-EU-bail-outs-as-top-judge-calls-for-referendum.html


"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said.

"There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people,"

"Germany has a great affinity for the rule of law. People expect the political class to obey the rules."

"Our judgment makes clear that the Bundestag cannot abdicate its fiscal responsibilities to other actors. And no permanent mechanism may be created that entails taking over the liabilities of other states,"

[Husar]

We could also buy the PIIGS countries like we bought East Germany in 1990, then raise a special solidarity tax in the "old countries" to build them up again...

Whether we get out of the Euro or not, I think the constant bailouts look a lot like a waste of money, they hope Greece will recover but Greece keeps spiralling down regardless.
Time to accept reality and let them default, and our banks, too. That way there won't be much need for new legislation as people should be more careful next time all by themselves.
Someone would pay for it anyway, but once the bailouts inevitably fail, we pay for that and the bailouts, so... :shrug:

[Fragony]

We could also buy the PIIGS countries like we bought East Germany in 1990, then raise a special solidarity tax in the "old countries" to build them up again...

Whether we get out of the Euro or not, I think the constant bailouts look a lot like a waste of money, they hope Greece will recover but Greece keeps spiralling down regardless.
Time to accept reality and let them default, and our banks, too. That way there won't be much need for new legislation as people should be more careful next time all by themselves.
Someone would pay for it anyway, but once the bailouts inevitably fail, we pay for that and the bailouts, so... :shrug:

That eastblock workhorse Merkel just agreed to raise the fund though. Money the AAA-countries have to borrow themselves.

[Furunculus]

will china come to the rescue:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012315/china-ruffles-europes-feathers/

"no"

[Fragony]

will china come to the rescue:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012315/china-ruffles-europes-feathers/

"no"

In many ways I welcome this incertainty

[Adrian II]

ooh, and another on the folly of trying to dodge Germany's immutable Basic Law:

http://www.telegraph.co.uk/finance/financialcrisis/8790785/German-turmoil-over-EU-bail-outs-as-top-judge-calls-for-referendum.html

The old Torygraph again, eh?

Well, the Bundestag yesterday voted in favour of the new Euro bail-out fund. And I wouldn't be surprised if the Constitutional Court followed the lead from Berlin - as it usually does.

AII

[Furunculus]

lol, the bundestag did exactly what the the karlsruhr did in saying; "this far and no further".

notably, all the bundestag have done is ratify the greece 2.0 bailout where the efsf was boosted to 440b, and the not the italy/spain crisis which has now created a desire to expand it to 2.0t.

always behind the curve, always dithering through lack of A mandate from A people.

[Adrian II]

Never been to Greece. Maybe what you say is inevitable for Greece, but don't expect me to be impressed by their "austerity".

I'm just back from a week in Athens and believe me, people there are totally desperate. While I was there yet another new property tax was introduced, plus a ruling that families with a yearly income of 5000 euro or above should pay additional income tax as well. Some shop owner or enterpreneur is committing suicide every week because he lost the family business. I had a restaurant owner in Thessaloniki crying at my table because he couldn't afford any staff anymore and had to cook, serve and clean his establishment of 16 tables all by himself every day of the week. Whole streets in Athens that used to be hubs of entertainment only a couple of years ago are now deserted, the shops and restaurants closed, the shutters down for good, many buildings battened down with a few planks and strokes of cardboard, angry graffiti all over the centre of town, beggars and cranks of all descriptions roaming the streets at night. Pretty soon all of Athens is going to look like Omonia. Man, what a way to run a country. :no:

AII

[phonicsmonkey]

Man, what a way to run a country. :no:

AII

The IMF are really good at doing this to countries.

[InsaneApache]

The IMF politicians are really good at doing this to countries.

Fixed.

[Papewaio]

When you have surplus you help the weak and bump up welfare.

When you have a debt you tighten welfare and encourage growth.

Increasin income tax is not austerity it's the wrong side of the budget.

[Beskar]

When you have surplus you help the weak and bump up welfare.

When you have a debt you tighten welfare and encourage growth.

Increasin income tax is not austerity it's the wrong side of the budget.

Exactly, but it is more confounded by the fact they don't have the money for the Welfare and so raises taxes which ends up putting more people on Welfare, which raises taxes again... Fail Economies.

Being honest, the problem with the "Bail Out" is that it isn't actually a "Bail Out". A "Bail Out" would imply we were actually giving them money. We are not. We are simply lending them money so they are still in debt anyway, just a different debtor.

[Nowake]

If you'll allow me to jump in for a moment, the issue with restructuring Greece's debt right now can be found in the rigidity of its european partners.

And while you cannot always agree with Roubini, I've to recommend his latest article: Eight drastic policy measures necessary to prevent global economic collapse (http://www.slate.com/articles/business/moneybox/2011/09/how_to_prevent_a_depression.html)

Also, there was this analysis in zerohedge two-three weeks ago on the slightly desperate report assessing the Eurozone put out by UBS (Euro Break Up - The Consequences): Bring out your dead (http://www.zerohedge.com/news/bring-out-your-dead-ubs-quantifies-costs-euro-break-warns-collapse-banking-system-and-civil-war) -- you can find the whole UBS report enclosed at the end of the article.

[Adrian II]

If you'll allow me to jump in for a moment, the issue with restructuring Greece's debt right now can be found in the rigidity of its european partners.

Indeed, and this (ideological) rigidity is ensconced in the EU institutions. Take for instance Roubini's recommendation that "The European Central Bank should reverse its mistaken decision to hike interest rates". That might be a sensible thing to do, but the ECB's statutory mission is to guarantee "price stability" before everything else.

AII

[Furunculus]

The IMF are really good at doing this to countries.

IA is quite correct; politicians are responsible for dragging the countries down the p00p-hole, and if they want help afterwards it comes with the lenders conditions attached.

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

[Adrian II]

IA is quite correct; politicians are responsible for dragging the countries down the p00p-hole, and if they want help afterwards it comes with the lenders conditions attached.

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

Athens is not going to wait for two years until they have their next national election. Nor is the island Crete. And those two are the main political powerhouses of Greece. There is going to be blood in the streets, I fear. I was very depressed when I left, I must say. I love Greece with all my heart, I love their chaos, their pride, their hospitality, their landscape and sea, their food, their music, I love the way people wear their hearts on their sleeves and I love the fact that Greeks are such tough cookies, always have been. But this is going to end badly. And everybody knows. Taxi drivers, civil servants, shop owners, pensioners, mothers taking their kids to school - they all say the same thing: "It takes only this (they snap their finger) to happen and we burn down our whole parliament with the politicians in it."

:shame:

AII

[Fragony]

They should do that really, it ain't their fault.

[gaelic cowboy]

It's the little things that tell you when things are bad now, like it takes 14hrs to fly Dublin to Greece due to a lack of any meaningful business or tourism contacts between the two.

[Adrian II]

It's the little things that tell you when things are bad now, like it takes 14hrs to fly Dublin to Greece due to a lack of any meaningful business or tourism contacts between the two.

Plus you always need a Plan B because there are massive strikes all the time. One day it's the taxi's, the next day it's all public transport, the day after that it's restaurant owners. And so on, like a relay race.

AII

[InsaneApache]

I wonder when the Army will take over? (again)

My dads making plans as we type to get the hell out of there. Paradise lost indeed.

[Adrian II]

Paradise lost indeed.

You go to the old streets around the Plaka where they used to have the good food, you know, before Athens had the Olympics and they got all fancy - those ramshackle tavernas where only Greeks used to go with huge familes and kids and colleagues from work, where they gave free meals to beggars and where knew all the old songs and tunes.

Nowadays they're half-empty, nobody is dancing - but the beggars are there alright...

:shame:

AII

[Furunculus]

Athens is not going to wait for two years until they have their next national election. Nor is the island Crete. And those two are the main political powerhouses of Greece. There is going to be blood in the streets, I fear. I was very depressed when I left, I must say. I love Greece with all my heart, I love their chaos, their pride, their hospitality, their landscape and sea, their food, their music, I love the way people wear their hearts on their sleeves and I love the fact that Greeks are such tough cookies, always have been. But this is going to end badly. And everybody knows. Taxi drivers, civil servants, shop owners, pensioners, mothers taking their kids to school - they all say the same thing: "It takes only this (they snap their finger) to happen and we burn down our whole parliament with the politicians in it."

:shame:

AII
nothing you have said i disagree with, and it is very sad, but none of the above seems incompatible with what i said above.

[InsaneApache]

You go to the old streets around the Plaka where they used to have the good food, you know, before Athens had the Olympics and they got all fancy - those ramshackle tavernas where only Greeks used to go with huge familes and kids and colleagues from work, where they gave free meals to beggars and where knew all the old songs and tunes.

Nowadays they're half-empty, nobody is dancing - but the beggars are there alright...

:shame:

AII

Oh man those ramshackle tavernas......had few late nights in them!

Tragic for the Greek people.

[Fragony]

I wonder when the Army will take over? (again)

My dads making plans as we type to get the hell out of there. Paradise lost indeed.

You got a dad

[Nowake]

nothing you have said i disagree with, and it is very sad, but none of the above seems incompatible with what i said above.
Sorry to intrude, yet your statement is not necessarily true either :bow:

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.
First of all, Greece is a country, not merely a business. Even when a country defaults, its assets and policies are very much worth negotiating for. In order for lenders to recuperate their investments, they do not need Greece to remain solvent.

In the same way countries holding enough resources or the right resources can choose to nationalize properties of foreign investors whenever they like, indebted countries trying to maintain a credit line or simple remain in the international economic community are often forced to trade off part of their sovereignty. Property transfers, exploitative leases on assets or favourable economic policies towards private or state lenders can repay just as well, and more importantly, often much faster and reliably than should the lender wait for a country to get back on its feet. The only risk is social unrest -- and the French revolution is not guaranteed to be re-enacted; there are enough cases when social revolts were successfully nipped in the bud.

And even when they manifest scruples to imposing such measures, the commitments they will request will only ask for the country to remain solvent until debt is repaid, thus economic recovery in not guaranteed.
That is even more often occurring when a part of the lenders want and have the clout to enforce the preferential repayment of debt towards themselves first.

It's a principle very nicely put by good ol' Louis the XVth

Et après moi, le déluge

[Furunculus]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.

those terms are likely to include reforms that the IMF deem essential to encouraging the growth it beleives will maximise the chance of recieving back both the investment and interest.

a country doesn't have to accept those terms, it can say "no", in which case the IMF will say "no" too.

[gaelic cowboy]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.

Interestingly Ireland agreed totally with IMF terms but the ECB and EU rejected them and we got the bailouts we have now.

It seems like sometimes when you say YES ye still end up in the NO end

[Nowake]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.
those terms are likely to include reforms that the IMF deem essential to encouraging the growth it beleives will maximise the chance of recieving back both the investment and interest.
a country doesn't have to accept those terms, it can say "no", in which case the IMF will say "no" too.
That is a very simplistic view -- please, do not think I am implying you are simple in any way, I am merely stating that your opinion is perhaps uninformed, and thus limited. IMF's SAPs and their succesors, the PSRPs, are questioned even by IMF insiders; e.g. see this internal document:
The Effect of IMF and World Bank programmes on poverty (http://www.imf.org/external/pubs/ft/staffp/2000/00-00/e.pdf) which concludes that "the poor are better off without structural adjustment".

I glanced through this report I had bookmarked a while ago, wanting to extract a few cliff-notes for you, yet I find it rather difficult to do it while regaling you with the full picture it depicts, thus I will link it: Structural adjustment, a major cause of poverty (http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty). It contains a slew of links towards official documents or articles which further illuminate the issue under discussion.

Do peruse it and give me your views :bow:

And if you will allow me a cheap shot, one must never forget that both the IMF and the World Bank are institutions under the control of the G7, and while I am one of the least inclined persons to view these two institutions as mere economic instruments subservient to political pressure and I personally think part of their policies have indeed helped, it should be noted that managers in both organizations have been known to put national interests above those of their clients while in office. The cheap shot was me indulging in a bit of pitchfork-waving by quoting Larry Summers' view shared in an internal memo (then Chief Economist for the World Bank, then US Treasury Secretary in the Clinton Administration etc.):


Just between you and me, shouldn’t the World Bank be encouraging more migration of dirty industries to the LDCs [less developed countries]?… The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that… Under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City… The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-five mortality is 200 per thousand.


— Lawrence Summers, Let them eat pollution, The Economist, February 8, 1992.

[Adrian II]

Surprise, surprise, Greece will reportedly (http://www.reuters.com/article/2011/10/02/us-greece-idUSTRE7900SU20111002) fail its budget targets for 2011 and 2012. The reason: the recession is turning out worse than they thought.

Well, what did they think? Or did they think at all?

AII

[Furunculus]

That is a very simplistic view -- please, do not think I am implying you are simple in any way, I am merely stating that your opinion is perhaps uninformed, and thus limited. IMF's SAPs and their succesors, the PSRPs, are questioned even by IMF insiders; e.g. see this internal document:
The Effect of IMF and World Bank programmes on poverty (http://www.imf.org/external/pubs/ft/staffp/2000/00-00/e.pdf) which concludes that "the poor are better off without structural adjustment".

And if you will allow me a cheap shot, one must never forget that both the IMF and the World Bank are institutions under the control of the G7, and while I am one of the least inclined persons to view these two institutions as mere economic instruments subservient to political pressure and I personally think part of their policies have indeed helped, it should be noted that managers in both organizations have been known to put national interests above those of their clients while in office.

My apparently simplistic view does rather stem from the fact that you have misinterpreted what i said.
At no point have a i laid a value judgement on that the IMF does, i merely noted that if you wish its money then you agree to its terms.
Your own link states as much:

Only when governments sign this “structural adjustment agreement” does the IMF agree to:

Lend enough itself to prevent default on international loans that are about to come due and otherwise would be unpayable.
Arrange a restructuring of the country’s debt among private international lenders that includes a pledge of new loans.

If you will allow me a cheap shot, one must never forget that this conversation thread started further up this page with IA refuting the notion that the IMF was responsible for Greeces woes, by correctly pointing out that Greece's politicians are responsible for the pickle.
The flawed political-union that underlies this glorious currency-union is exactly the reason the IMF was the only possible solution that could have prevented the eurozone sliding beneath the waves in 2010 rather than 2012.

[phonicsmonkey]

If you will allow me a cheap shot, one must never forget that this conversation thread started further up this page with IA refuting the notion that the IMF was responsible for Greeces woes, by correctly pointing out that Greece's politicians are responsible for the pickle.
The flawed political-union that underlies this glorious currency-union is exactly the reason the IMF was the only possible solution that could have prevented the eurozone sliding beneath the waves in 2010 rather than 2012.

Ahem...while I am responsible for my rather glib comment being misinterpreted I should probably clarify. I was not laying the blame for Greece's woes at the door of the IMF but rather attempting to point out that its policies and the terms of its intervention have taken a sick patient and made it worse.

I think it is becoming increasingly clear that killing economic growth through externally-imposed austerity is serving nobody's interests, including Greece's creditors who seem to have lost sight of the principal investment while focusing too much on keeping interest payments current. Do they want to increase their chances of getting their money back?

Interesting to compare the current situation with the IMF's failed intervention in Argentina. A quick google search will find it for you but here (http://www.commondreams.org/views02/0127-03.htm) is a snappy one-pager where some of the parallels are drawn out.

Furunculus, I think you and I largely agree on the causes of this situation. As I said before, it's a failure of political leadership across Europe and over many years that has brought us to this point. You are more apt to frame it in terms of a lack of representation, but I think it's just a different aspect of the same issue.

[Nowake]

Oh, I'm very sorry, perhaps I misunderstood (no sarcasm). The part of your statement with which I was disagreeing was the following:

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.
Basically, my point was that IMF's set parameters more often than not do not include reforms which are necessarily beneficial even in the acception of its own insiders, but rather an arbitrary and rigid set of rules which will sink the country even further down "the p00p-hole".

I do believe your turn of phrase denoted that, in its capacity as the lender, IMF's own interest would dictate that it will aim for a policy to rehabilitate the state. Which is demonstrably wrong in practice and its own economists criticised it for decades now. Genuine economic recovery by the state and the recovery of the loan by the IMF are not linked.
Hence the reports and documents I linked above :book2:

[InsaneApache]

You got a dad

Hasn't everyone? :inquisitive:

:laugh4:

[Ronin]

Hasn't everyone? :inquisitive:

:laugh4:

if you don´t you get to start your own religion.

[Adrian II]

I do believe your turn of phrase denoted that, in its capacity as the lender, IMF's own interest would dictate that it will aim for a policy to rehabilitate the state. Which is demonstrably wrong in practice and its own economists criticised it for decades now. Genuine economic recovery by the state and the recovery of the loan by the IMF are not linked.
Hence the reports and documents I linked above :book2:

I'll leave the reports unread if you don't mind. I've known about the adverse effects of IMF and WB policies for a long time, actually since the 1980's.

And I've just seen the result in Athens:


https://img593.imageshack.us/img593/2264/atheneverval1.jpg

AII

[Fragony]

That are just ruins

[Adrian II]

That are just ruins

It's a street just off Athinas Boulevard, the area where Greeks used to do their utility shopping, from food to pets to kitchenware to DIY tools and everything in between. The district is now dead. The only lively part I found left is Venizelou and the student quarter. The bars, the bookshops and restaurants are still buzzing and the gorgeous, arrogant 21-year-old girls are still out in force there.

AII

[Vladimir]

It's a street just off Athinas Boulevard, the area where Greeks used to do their utility shopping, from food to pets to kitchenware to DIY tools and everything in between. The district is now dead. The only lively part I found left is Venizelou and the student quarter. The bars, the bookshops and restaurants are still buzzing and the gorgeous, arrogant 21-year-old girls are still out in force there.

AII

Well there you go: Arrogance. ~;)

What's this about the money lenders saying the austerity measures have gone too far?

It strengthens my position that the Greek government is responsible for this mess. Greece has a democratic government, therefore it is a problem with the people, the culture, or (likely) both.

[Adrian II]

Well there you go: Arrogance. ~;)

What's this about the money lenders saying the austerity measures have gone too far?

It strengthens my position that the Greek government is responsible for this mess. Greece has a democratic government, therefore it is a problem with the people, the culture, or (likely) both.

Yes, the political system is out-dated and corrupt, it is now in disarray, but neither the ruling PASOK (160 of 300 seats) nor the main opposition party ND (91 seats) is willing to change it because their political and personal interests are bound up with it.

Probably sounds familiar to an American, huh?

AII

[Vladimir]

Yes, the political system is out-dated and corrupt, it is now in disarray, but neither the ruling PASOK (160 of 300 seats) nor the main opposition party ND (91 seats) is willing to change it because their political and personal interests are bound up with it.

Probably sounds familiar to an American, huh?

AII

Oh yea. There's a huge problem with governments becoming vested in failing systems. That's why a little revolution now and then is a good thing. Western (U.S. and many European) governments and economies are coming to the end of the postwar era. America's economy was based on a shattered European economy. Many of Europe's governments have their roots in the aftermath of the war.

Hopefully it won't take another war to sort things out.

Sorry. I'm not being too helpful, am I?

[Fragony]

Gee Greece buys 400 M1A1 Abrams tanks and 20 AAV7A1's. Another reason why we aren't getting our money back

[Adrian II]

Gee Greece buys 400 M1A1 Abrams tanks and 20 AAV7A1's. Another reason why we aren't getting our money back

Their military budget ranks 2nd in Europe. Behind Turkey. Can you guess why?

AII

[Fragony]

Their military budget ranks 2nd in Europe. Behind Turkey. Can you guess why?

AII

Yep. And they probably have to buy these tanks in exchange for the loan.

Send me another accept-gyros sure I'll pay *sigh*

[Vladimir]

Their military budget ranks 2nd in Europe. Behind Turkey. Can you guess why?

AII

Because Turkey is number 1? I'm not sure how they planned on getting all those tanks across the Aegean though...

[Montmorency]

Turkish Thrace.

[InsaneApache]

Gee Greece buys 400 M1A1 Abrams tanks and 20 AAV7A1's. Another reason why we aren't getting our money back

You'd think that they were expecting trouble wouldn't you?

A military junta for them this time next year.

[Fragony]

You'd think that they were expecting trouble wouldn't you?

A military junta for them this time next year.

ya muahahaha incident in the Balkan anyone

[InsaneApache]

ya muahahaha incident in the Balkan anyone


The Greek armed forces now appear to be entering the political and street-level debate in the country over EU- and IMF-imposed austerity, with a group of retired Greek officers storming the defence ministry and the armed forces’ professional organisation issuing a stern warning to the government that the military’s confidence in the “intentions of the state” regarding their pensions has been “shaken”.

http://euobserver.com/13/113821

[Adrian II]

Turkish Thrace.

I travelled through Thrace recently. It's ideal tank country.

AII

[Fragony]

http://euobserver.com/13/113821

Oh dear that's bad, as much as they hate to hear it they are a bit like the Turks, only Greek ones. The Arabs have an old joke that Greeks are Arabs who talk greece. If the military starts to complain it's serious

[Papewaio]

So how will the EU handle a military junta attacking a democratically elected member state?

What is the penalty to the junta members? Complete annihilation and seizure of all assets? Or will the penalty be soninadequate to make military coup an attractive option?

Does the EU have the ability and intestinal fortitude to deal with a member state coup?
Is there anything written in the EU documents to cover such a situation?

Australia's federal model used the American Civil war as a test case so that the Australian Consitution spells out that once a nation joins to become a State it cannot leave by law. Also State power is moderated to avoid such an issue.

So my question is did the EU frame the exit policy at the start with foresight or is it a matter of make it up as they go along and ignore all lessons learnt by other nations who have fused (UK,USA etc)?

[phonicsmonkey]

make it up as they go along and ignore all lessons learnt by other nations who have fused (UK,USA etc)?

This - failure was not to be contemplated!

In the CFA institute journal for July/August the point was made that the theory of optimum currency areas (Mundell, 1961) states that it is in the interests of a group of nations to form a currency union if and only if the mobility of the factors of production (labour and capital) within the proposed union is greater than the mobility without. This is to provide the economic flexibility to offset the loss of the ability for the individual nations' currencies to fluctuate.

For a number of reasons that doesn't hold (and has never held) in the case of the Euro, and that situation has worsened since 2008 with capital being effectively nationalised. Hence the current crisis is almost unavoidable with economic imbalances arising, worsened by irresponsible fiscal decision-making.

[Fragony]

'So how will the EU handle a military junta attacking a democratically elected member state?'

As always, MOAR POWER TO BRUSSELS

[Adrian II]

So how will the EU handle a military junta attacking a democratically elected member state?

It won't happen because (1) the military doesn't know Jack Daisy about economics and doesn't want to take responsibility for the present mess, and (2) Greece would become pariah state within Nato, unable to even buy the mentioned new weapons anymore.

AII

[Papewaio]

If the junta is like a lot of prior juntas think they know best and form a coup.

a) What is the EUs policy? Do they have one?

Basic Business 101 is you build your exit clause at the start even more so if you are forming a partnership.

b). Considering the mixed success of Libya does the EU even have the capacity to effectively stop a coup in Greece?

C). If left to their own devices is the EU prepared for Greece realigning itself with another sphere of powers or worse becomming to the EU what Chechnya is to Russia? After all if a murdering junta came to power in my country because of the policies and then lack of action by outside powers I would expect to see a rise in terrorists going into the nations responsible.

[Fragony]

It won't happen because (1) the military doesn't know Jack Daisy about economics and doesn't want to take responsibility for the present mess, and (2) Greece would become pariah state within Nato, unable to even buy the mentioned new weapons anymore.

AII

You make storming the parliament sound so complicated

[Philippus Flavius Homovallumus]

It won't happen because (1) the military doesn't know Jack Daisy about economics and doesn't want to take responsibility for the present mess, and (2) Greece would become pariah state within Nato, unable to even buy the mentioned new weapons anymore.

AII

I think you a suffering from a recurrence of EUness. It CAN happen, we should make sure it doesn't. The Generals may simply conclude that the restoration of the Drachma is the only sane course and the politicians are refusing to do it for purely political reasons.

Of course, only one country has the tanks to fight an actual land war in Europe right now, and they won't challenge Greek generals directly, so if it does happen it will be hard to undo.

[Furunculus]

So my question is did the EU frame the exit policy at the start with foresight or is it a matter of make it up as they go along and ignore all lessons learnt by other nations who have fused (UK,USA etc)?

there is no exit policy from the euro, but there is an exit policy from the EU as per the Lisbon Treaty.

this is why europhiles FUD to the max when the reject the idea of Greece leaving the eurozone, suggesting that it would mean exit from the EU itself.

this is utter tosh, for as has been demonstrated time after time with the euro-crisis, whenever there is a problem with the rules they show ZERO compunction about tearing them up and creating new ones.

[Fragony]

there is no exit policy from the euro, but there is an exit policy from the EU as per the Lisbon Treaty.

this is why europhiles FUD to the max when the reject the idea of Greece leaving the eurozone, suggesting that it would mean exit from the EU itself.

this is utter tosh, for as has been demonstrated time after time with the euro-crisis, whenever there is a problem with the rules they show ZERO compunction about tearing them up and creating new ones.

It's the definition of insanity, trying the exact same thing over and over again yet expecting different results. You just can't organise Europe it is simply impossible. There is going to be bloodshed in Croatia very soon, I'm gettiing bottled water and beans in tomatoe-sause as this is going to hurt. And if it doesn't I'll have it anyway

[Adrian II]

I think you a suffering from a recurrence of EUness. It CAN happen, we should make sure it doesn't.

I think that no Greek officer will want to take responsibility for the present mess, it's as simple as that. Besides, no one outside Greece will support, encourage even suffer a coup, contrary to 1967.

Of course if public order in Greece breaks down completely the army may appear on the streets, though with what mission or mandate remains to be seen.

If a coup takes place I think Greece will be suspended from or kicked out of the EU.

AII

[gaelic cowboy]

Has anyone considered that the coup were convinced cant happen may do so because the army refuse to put down austerity protests.

That would put them on the side of the people against the government and crucially in control.

[Papewaio]

Hmm how did WWII start... something about over zealous monetary measures slapped on the losing party making their economy collapse.

I don't see Greece rising like an economic phoneix invading the rest of Europe.

But I do see the potential to create with billions of dollars poorly invested and mean spirit a failed state... at least the US went and got Iraq and Afghanistan off the shelf at a much cheaper price.

[Philippus Flavius Homovallumus]

I think that no Greek officer will want to take responsibility for the present mess, it's as simple as that. Besides, no one outside Greece will support, encourage even suffer a coup, contrary to 1967.

Of course if public order in Greece breaks down completely the army may appear on the streets, though with what mission or mandate remains to be seen.

If a coup takes place I think Greece will be suspended from or kicked out of the EU.

AII

But, if there is a publically supported coup, with the army and people uniting against the corrupt politicians, should we not welocme that as we have in Tunisia, Libya and Egypt?

Life is not so simple any more, and the likelyhood of a coup rises with each further twist of the screws on collective Greek thumbs.

[InsaneApache]

All in the name of integration. Bastards.

[Papewaio]

Yeah I hate calculus too! ~;)

[Beskar]

All in the name of integration. Bastards.

That isn't the reason or the cause, more of an excuse.

[Furunculus]

An interesting quote from the economist:


Every euro-zone finance minister should be forced to explain the whitewash “stress tests” that gave even Dexia a clean bill of health earlier this year.

http://www.economist.com/node/21531467

[Fisherking]

Ah yes, this article written after Obama said that Europe is wrecking the US economy.

I guess it is Europe’s fault for investing in US Loan Derivatives in the first place.

Regardless of the euro problem, it is a case of the pot calling the kettle black.

[Nowake]

In truth, they can only accuse us (europeans) of incompetence and a tad of collusion. But then, that only makes one want to slit one's wrists over the desultory state of the eurozone regulatory system.

[Furunculus]

Ah yes, this article written after Obama said that Europe is wrecking the US economy.

I guess it is Europe’s fault for investing in US Loan Derivatives in the first place.

Regardless of the euro problem, it is a case of the pot calling the kettle black.

the question remains; wall-street and london were forced to recapitalise, european banks were even more highly leveraged and were not, and we all (should) have known the stress tests were a political joke.

why has this happened?

http://www.telegraph.co.uk/finance/comment/jeremy-warner/8818937/Banque-de-France-turns-a-blind-eye-to-European-financial-crisis.html

[Furunculus]

moody's wags its finger sternly at france:

http://www.telegraph.co.uk/finance/financialcrisis/8833161/Moodys-warns-France-on-possible-negative-outlook.html

[Furunculus]

The world banking system could collapse if eurozone leaders fail to curb the region's sovereign debt crisis, according to Citigroup's chief economist Willem Buiter.

http://www.telegraph.co.uk/finance/financialcrisis/8834447/Eurozone-crisis-could-cause-collapse-of-global-banking-system-warns-Citigroups-Willem-Buiter.html

[Adrian II]

Athens this afternoon

https://img850.imageshack.us/img850/9374/athenedemonstratie19okt.jpg

Gotta love the Greeks :bow:

AII

[Vladimir]

I consider that constitutionally protected free speech.

I'd shoot the guy throwing the rock though.

[rory_20_uk]

Not free speech, it's public indecency.

~:smoking:

[Vladimir]

Not free speech, it's public indecency.

~:smoking:

I thought it was the Greek mating call.

[Beskar]

https://img443.imageshack.us/img443/3715/bailout.jpg

[Fragony]

Not free speech, it's public indecency.

~:smoking:

It's called 'mooning'

And the Greeks make it very hard to surpress a smile I must admit, I want to riot as well but I don't know how. Give a Greek a nice meal and a drink and he's satisfied for the day, but don't deny him that

[Fragony]

https://img443.imageshack.us/img443/3715/bailout.jpg

Muhaha good one

[Adrian II]

Give a Greek a nice meal and a drink and he's satisfied for the day, but don't deny him that

I'm not so sure about that. But before you step on his ψωλή you better check your insurance policy :laugh4:

AII

[phonicsmonkey]

wall-street and london were forced to recapitalise

While some US banks have had equity injections their balance sheets remain flooded with bad loans which they cannot afford to foreclose on because it would force them into bankruptcy. This is the major reason for the stagnancy of the US economy - there is simply not the lending activity necessary to support growth. In truth the US are doing what Japan did 20 years ago - it's called 'extend and pretend' or as one of my clients put it, 'a rolling loan gathers no loss'

[Fragony]

I'm not so sure about that. But before you step on his ???? you better check your insurance policy :laugh4:

AII

Bit of a pemper in their DNA hehe, they would shame my shri-lankan ex

[Furunculus]

While some US banks have had equity injections their balance sheets remain flooded with bad loans which they cannot afford to foreclose on because it would force them into bankruptcy. This is the major reason for the stagnancy of the US economy - there is simply not the lending activity necessary to support growth. In truth the US are doing what Japan did 20 years ago - it's called 'extend and pretend' or as one of my clients put it, 'a rolling loan gathers no loss'

i thought they were forced to disclose and write down bad-assets, if not as thoroughly as was the case in the UK, then at least far more thoroughly than the eurozone demanded..........?

[phonicsmonkey]

i thought they were forced to disclose and write down bad-assets, if not as thoroughly as was the case in the UK, then at least far more thoroughly than the eurozone demanded..........?

Which bad assets? Certainly the 'sub-prime' mortgage securities and their related derivatives were forcibly marked down through market pressure.

But if you're talking about a loan on a single office building where there have been no comparable transactions for 18 months, whose value are you ascribing to that? And if you foreclose on it, who is going to take over the management of the building and arrange a sale? The banks mostly fired the personnel responsible for all this in the boom years and are now not resourced to do work-outs in the volume required.

What is needed is a bad bank to take all the non-performing loans and market them to private investors who can take possession of the collateral and work it out. Like the RTC in the early nineties which cleared the system after the savings and loan crisis.

But unfortunately the government instead decided it needed to play a part in all this to ensure the taxpayer got the profit instead of private investors and the result is next to zero transactions, because the government is not resourced to work out thousands of bad loans!

Tim Geitner thinks he can turn the US Treasury into Goldman Sachs but he can't.

[Furunculus]

fair enough.

it is certainly the case the british banks are considered at much reduced threat from undisclosed bad-debts than our european counterparts, and i had heard the same for american banks.

gordon brown yesterday:


“The truth is that European banks are in a worse state than American banks, that they never really recapitalized even though they said they would. They didn’t write off their toxic assets. They’re not lending, and they’ve been trying to disguise the extent of the problems they face.”

[phonicsmonkey]

fair enough.

it is certainly the case the british banks are considered at much reduced threat from undisclosed bad-debts than our european counterparts, and i had heard the same for american banks.

gordon brown yesterday:

Yeah, relatively speaking your point is sound - the Euro banks are worse off than those in the US. I'm not so sure about the UK banks, check out the 15th October Economist which has a chart showing that RBS is in the worst capital position of all european banks. I just wanted to correct the potential misconception that all is rosy Stateside when in fact small regional banks are still going bankrupt at a worrying run-rate and bigger national banks are paralyzed.

Interestingly this article from a real estate trade journal suggests there is an additional 'political' element to the European bank's woes, especially in Germany:

A conversation with a German private equity real estate fund manager at the EXPO Real conference in Munich this week threw the spotlight on a deep-rooted reluctance by German lenders to allow large, discounted loan book sales to US private equity houses like in the mid-naughties.
It's a strange state of affairs when you hear a German complaining that his compatriots are not behaving more like Americans. Yet, in the company of PERE at the EXPO Real conference in Munich this week, one head of a Germany-focused private equity real estate firm did precisely that.

Central to that manager’s complaint was a stubbornness among Germany's major real estate lenders to sell loans at discounts that would result in opportunistic returns for businesses like his, even if it would be relatively economically advantageous for them to do so. He noted that Germany's lenders hadn't forgotten how US private equity capital consumed billions of dollars in troubled real estate loans for a fraction of their face value, thereby creating fortunes for themselves, back in the mid-naughties.

Exemplifying with deals like Dallas-based Lone Star Funds' September 2004 capture of troubled real estate loans with a face value of $4.8 billion from Hypo Real Estate Group, the fund manager said: “No German bank would ever do that again. They don't want buyers to make another fortune. They won't stand for that.”

Yet, as the Euro crisis continues to deepen, sentiment in the German real estate market darkens. A King Sturge survey released at the event this week reported a dip in sentiment across all asset classes, as its 1,000 participants expressed a sober view of future growth prospects. More importantly, German lenders, which currently account for €255 billion in commercial real estate debt (according to an August report by Trepp, the New York-based provider of CMBS and commercial real estate information) would rather sell their loans piece by piece over seven to eight years than allow what they would regard as a Resolution Trust Corporation-style mass disposition.

Despite little current evidence to suggest German property would become more valuable during that timeframe, a ‘social resistance’ to US capital means such groups would find it hard even getting a seat at the table. Not so in the US, the fund manager said somewhat enviously, pointing to some of the well-publicised sales that recently have taken place stateside where certain banks have recognised a need to salvage capital today rather than drag out a painful process that risks salvaging even less.

When asked whether structured disposals like that of Royal Bank of Scotland's ongoing sale of Project Isobel – a £1.4 billion loan book expected to be sold shortly to a joint venture led by The Blackstone Group – could work in Germany, his answer was less than encouraging. “Even that would be difficult for them. The problem is they underestimate just why these guys can make 15 percent-plus from their investments,” he said, underlining that private equity’s experience in turnaround situations, regardless of the spoils of their exploits, often help their partners as well.

The frustrations imparted at the world' second largest property jamboree (1,600 exhibitors over 64,000 square metres provides some idea of its scale) are nothing new to PERE's ears. During our Germany roundtable, published in this month's issue, participants painted a picture of concern that against a backdrop of dissipating economic indicators – in domestic consumption, construction and energy production to name a few – there was little evidence of banks injecting any urgency into dealing with their increasingly distressed loan books.

As one participant commented, the banks seem to hold the key – and in some cases, they stand between these real estate professionals and the type of deals they are trying to achieve.

At the roundtable, reference was made to an example of one group of German banks offloading to Colony Capital a package of nonperforming loans with a face value of €370 million made to a single borrower against developments in Berlin and Frankfurt. There also was a belief there existed hidden distress that must come to light and be dealt with shortly, but such mention was at that point anecdotal only.

If the words of the German fund manager at EXPO are to be believed, Germany's lending institutions are not shifting enough from their books. An emotion-led desire to ensure that the control of German real estate doesn't end in the hands of US private equity is at least partly to blame, even if such a outcome might do them some good.

[Furunculus]

Yeah, relatively speaking your point is sound - the Euro banks are worse off than those in the US. I'm not so sure about the UK banks, check out the 15th October Economist which has a chart showing that RBS is in the worst capital position of all european banks. I just wanted to correct the potential misconception that all is rosy Stateside when in fact small regional banks are still going bankrupt at a worrying run-rate and bigger national banks are paralyzed.

Interestingly this article from a real estate trade journal suggests there is an additional 'political' element to the European bank's woes, especially in Germany:


agreed, although RBS still comes with an implicit state guarantee so is unlikely to be targetted in that way.

good germany article, interesting reading.

[Beskar]

EU referendum: Hague likens call to 'piece of graffiti
http://www.bbc.co.uk/news/uk-politics-15425256

William Hague has compared calls by Conservative MPs for a referendum on the UK's membership of the European Union to "a piece of graffiti".

An in-out referendum was not government policy, the foreign secretary said, and "the wrong question at the wrong time".

All Conservative, Lib Dem and Labour MPs have been instructed to vote later against a motion calling for a public vote on the UK's place in the EU.

However, nearly 70 Tory MPs are likely to defy the party whip on the issue.

Although that will not change the result of the vote at 2200 BST, the BBC's political editor Nick Robinson said their action was being seen as a challenge to David Cameron's authority.

The prime minister opposes a public vote on Britain's EU membership and has sought to shift attention onto helping to solve the eurozone crisis.


So much for that promised Referendum the Conservatives kept banging their drum about, they are fighting internally over the issue.

[rory_20_uk]

EU referendum: Hague likens call to 'piece of graffiti
http://www.bbc.co.uk/news/uk-politics-15425256



So much for that promised Referendum the Conservatives kept banging their drum about, they are fighting internally over the issue..

I find it odd that any internal disagreement in a party is made such a big deal of. It's as though "democracy" is restricted to choosing one option and then they all merge into one gestalt which is governed by the leader.

I prefer some internal disagreement as it shows that the MPs are actually capable if independent thought on issues and are not just whipped sheep.

What would a referendum achieve? In other states, those that voted the "wrong" way they merely held another one until they got the "right" answer. If the Tories don't want to join the sinking ship, why waste money in times of little money to keep things the way they currently are?

~:smoking:

[Furunculus]

EU referendum: Hague likens call to 'piece of graffiti
http://www.bbc.co.uk/news/uk-politics-15425256

So much for that promised Referendum the Conservatives kept banging their drum about, they are fighting internally over the issue.

looks like hannan was right! :p

euro issue will continue to be portrayed as tory divisions regardless of the 100,000 public signatures and endless opinion polls that show public disaffection with the euro project.

http://blogs.telegraph.co.uk/news/danielhannan/100111867/the-house-of-commons-will-finally-divide-on-whether-to-give-us-an-inout-referendum-whats-the-betting-that-the-bbc-report-it-wholly-as-a-tory-splits-story/

will the lib-dem's be whipping against the motion................. after the manifesto promise..........? ;)

[InsaneApache]

Watching the daily politics was interesting. The libdem spokesman was a right berk. He kept repeating that this was not the time to have a referendum and that the right wing should shut up. Basically.

Listen you turd.

IT WAS AN E-PETITION SUBMITTED BY MEMBERS OF THE PUBLIC YOU MORON!

[Beskar]

I have to admit, I don't have much faith in our democracy. Beleagued and corrupt self-interest in government and a population who only reacts by doing the opposite to what should be done in popularist hysteria to Inflict vindictive superficial harm to that system which only further entrenches it. No where as bad as America is, but I would hate for us to head that way.

Should there be a referendum? In pure principle, yes there should be. There needs to be transparency in such issues, a platform where we can advance, checks and balances.

However, what will happen is the opposite to what we would really want. Simple "Yes or No" isn't good enough, it doesn't reflect the broad and wide opinions and it forces people to accept things they otherwise don't accept. People may have issues with the current EU system, myself included, but do I simply want us to completely within and go into Isolation off the coast? Definitely not. In this situation, I would be forced in voting for "Yes" even though I dislike the status quo. There are other matters which Furunculus might agree to very good benefits of the EU, but he doesn't want to be roped with the status quo neither and because of this, he is forced to vote "No".

Ultimately, the system is flawed itself and with so many black and white "choices" on issues, it further entrenches the foul feelings of everyone involved. There needs to be an internal "Revolution" of the entire system so we can get together the government we need so we can advance forward as a whole in a truer and purer democratic state.

[Furunculus]

In this situation, I would be forced in voting for "Yes" even though I dislike the status quo. There are other matters which Furunculus might agree to very good benefits of the EU, but he doesn't want to be roped with the status quo neither and because of this, he is forced to vote "No".


true enough if the question is a straight in/out question, but life is full of difficult choices and the one on europe needs answering, now!

Owen Patterson:

"When is the right time for a debate? We're on the cusp of a new European Union treaty, so Germany tells us today; we're on the cusp of a new hard, euro monetary union which would have significant impact on the City of London and the financial district. If not, when? That's what I say to Euro-sceptics. When is it the right time to have a proper, mature debate on this? "

[Lemur]

Paul Krugman, an economist who has the best track record (http://www.poynter.org/latest-news/romenesko/130485/claim-krugman-is-top-prognosticator-cal-thomas-is-the-worst/) of any American pundit, weighs in (http://www.nytimes.com/2011/10/24/opinion/the-hole-in-europes-bucket.html):

If the European Central Bank were to similarly stand behind European debts, the crisis would ease dramatically. [...] But such action, we keep being told, is off the table. The statutes under which the central bank was established supposedly prohibit this kind of thing, although one suspects that clever lawyers could find a way to make it happen. The broader problem, however, is that the whole euro system was designed to fight the last economic war. It’s a Maginot Line built to prevent a replay of the 1970s, which is worse than useless when the real danger is a replay of the 1930s. [...]

The bitter truth is that it’s looking more and more as if the euro system is doomed. And the even more bitter truth is that given the way that system has been performing, Europe might be better off if it collapses sooner rather than later.

[Adrian II]

Paul Krugman, an economist who has the best track record (http://www.poynter.org/latest-news/romenesko/130485/claim-krugman-is-top-prognosticator-cal-thomas-is-the-worst/) of any American pundit, weighs in (http://www.nytimes.com/2011/10/24/opinion/the-hole-in-europes-bucket.html):

If the European Central Bank were to similarly stand behind European debts, the crisis would ease dramatically. [...] But such action, we keep being told, is off the table. The statutes under which the central bank was established supposedly prohibit this kind of thing, although one suspects that clever lawyers could find a way to make it happen. The broader problem, however, is that the whole euro system was designed to fight the last economic war. It’s a Maginot Line built to prevent a replay of the 1970s, which is worse than useless when the real danger is a replay of the 1930s. [...]

The bitter truth is that it’s looking more and more as if the euro system is doomed. And the even more bitter truth is that given the way that system has been performing, Europe might be better off if it collapses sooner rather than later.

Ealier in the thread I already pointed out the ECB's statutory obligation to guard price stability above anything else. Krugman is on the mark in that regard. But a total collapse wouldn't be anyone's solution, eh? The neoliberal (extreme free-market) thinking is what we need to get rid of. The Maginot Line as Krugman called it, designed to ensure an anti-inflationary policy at all cost, is what we need to get rid of. A system that benefits crooked bankers and punishes family businesses is rotten to the core.

AII

[Philippus Flavius Homovallumus]

I have to admit, I don't have much faith in our democracy. Beleagued and corrupt self-interest in government and a population who only reacts by doing the opposite to what should be done in popularist hysteria to Inflict vindictive superficial harm to that system which only further entrenches it. No where as bad as America is, but I would hate for us to head that way.

Should there be a referendum? In pure principle, yes there should be. There needs to be transparency in such issues, a platform where we can advance, checks and balances.

However, what will happen is the opposite to what we would really want. Simple "Yes or No" isn't good enough, it doesn't reflect the broad and wide opinions and it forces people to accept things they otherwise don't accept. People may have issues with the current EU system, myself included, but do I simply want us to completely within and go into Isolation off the coast? Definitely not. In this situation, I would be forced in voting for "Yes" even though I dislike the status quo. There are other matters which Furunculus might agree to very good benefits of the EU, but he doesn't want to be roped with the status quo neither and because of this, he is forced to vote "No".

Ultimately, the system is flawed itself and with so many black and white "choices" on issues, it further entrenches the foul feelings of everyone involved. There needs to be an internal "Revolution" of the entire system so we can get together the government we need so we can advance forward as a whole in a truer and purer democratic state.

Democracy dies when people lose faith, congratulations on adding your nails to the coffin.

[Beskar]

Democracy dies when people lose faith, congratulations on adding your nails to the coffin.

You're welcome. It is why I have advocated changing the system for many years.

[Adrian II]

You're welcome. It is why I have advocated changing the system for many years.

Got a better one?

AII

[Beskar]

Got a better one?

AII

Obviously (In my opinion), I have posted it before but it isn't really the place to discuss such matters.

[Vladimir]

Obviously (In my opinion), I have posted it before but it isn't really the place to discuss such matters.

The Backroom isn't a place to discuss controversial topics???

I've been living a lie!

[rory_20_uk]

I think this thread, rather than the backroom. Rest assured, gunbortion is always welcomed here...

~:smoking:

[Philippus Flavius Homovallumus]

Got a better one?

AII

Our Dear Beskar desires a One World Government, presumably a democracy, which regulates, well, everything.

I desire only a good life and a good death.

In the current context I would be as happy if Prince Charles was running the country as an Autocrat as the current Oligarchy.

[rory_20_uk]

To quote Sir Winston Churchill "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

Another good one has to be "True Socialism, in which everyone is truly equal, does not just resemble a prison - it is a prison. It can not exist unless it is surrounded by high walls, by watchtowers and by guard-dogs, for people always want to escape from any socialist regime, just as they do from a prison. If you continue your attempts to establish a model society you will need to build walls around it. You will be forced to do so sooner or later by the flood of refugees." - Viktor Suvorov

~:smoking:

[Fragony]

Another great one from Churchil 'The problem with socialism is that you will eventually run out on other people's money'

[Lemur]

Rory, Fragony, I found a great page for you (https://www.facebook.com/pages/Communisms-badmkay/134915749868337). 'Cause socialism's bad, mmkay?

Meanwhile, in the real world, I believe the discussion is more about how to set the ground rules for the capitalist model that pretty much everybody's using. How many safeguards? What's allowed and what's not allowed? How do we defend our society against excesses of inequality? Or as that pinko commie Adam Smith wrote, "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable." What a raging socialist! Here's another Stalin-loving thing he wrote: "To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature."

What a drum-beating hippie. And look, he doesn't even trust the Masters of the Universe to ensure that good laws are passed: "Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters. When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters."

[Fragony]

You must be really boring at parties

[Adrian II]

Meanwhile, in the real world, I believe the discussion is more about how to set the ground rules for the capitalist model that pretty much everybody's using. How many safeguards?

Exactly. :bow:

But we don't need moral appeals in the 19th century vein like those of Smith, brilliant observer but moralist nonetheless. Nobody is going to improve man or mankind, that's a dead alley. Christians tried it. Other religions tried it. Old-fashioned Liberalism tried it. Socialism and related ideologies tried it. Failures, all.

What we need are some new checks and balances. Americans will probably like what I'm going to suggest, which is that we take our cue from the Founding Fathers. Instead of setting high ideals for manknd, they assumed that man would follow his the worst and lowest instincts and that society should be governed by a distinct and powerful executive power, balanced and checked by at least two other powerful institutions. We need similar checks on capital, not to kill its energy and spirit of renewal, but to harness it for society.

Now, as for my concrete and precise proposal to do this, um...

I'm working on it!

AII

[Vladimir]

Exactly. :bow:

But we don't need moral appeals in the 19th century vein like those of Smith, brilliant observer but moralist nonetheless. Nobody is going to improve man or mankind, that's a dead alley. Christians tried it. Other religions tried it. Old-fashioned Liberalism tried it. Socialism and related ideologies tried it. Failures, all.

What we need are some new checks and balances. Americans will probably like what I'm going to suggest, which is that we take our cue from the Founding Fathers. Instead of setting high ideals for manknd, they assumed that man would follow his the worst and lowest instincts and that society should be governed by a distinct and powerful executive power, balanced and checked by at least two other powerful institutions. We need similar checks on capital, not to kill its energy and spirit of renewal, but to harness it for society.

Now, as for my concrete and precise proposal to do this, um...

I'm working on it!

AII

*cough* *sputter*

Wut? A distinct and powerful executive power? Is that how you interpreted it? You're correct about checks and balances. They're in place to prevent executives from gaining too much power. Your use of governed is a bit, liberal, too.

I'll stop there because I'm tempted to contribute to the derailing.

[Adrian II]

Your use of governed is a bit, liberal, too.

Oh come on.


In order to lay a due foundation for that separate and distinct exercise of the different powers of government, which to a certain extent is admitted on all hands to be essential to the preservation of liberty, it is evident that each department should have a will of its own; and consequently should be so constituted that the members of each should have as little agency as possible in the appointment of the members of the others.

James Madison, Federalist 51

AII

[Vladimir]

You're just making a case *against* a powerful executive and for a separation of powers. A more relevant example would deal with the Federal Reserve and the original bank of America. Somehow the banks, created by or allowed to exist by the government, have the government working for them.

Is anyone keeping track of the latest talk of Greek debt forgiveness? It pairs nicely with the recent Obama administration action on student loan forgiveness. I hate whenever BBC has live translations of Merkel. So annoying.

Why should anyone pay back loans at all? We're sliding backwards and soon bankers will be accused of usury instead of holding people accountable for the debts they knowingly and voluntarily incurred.

[Philippus Flavius Homovallumus]

You're just making a case *against* a powerful executive and for a separation of powers. A more relevant example would deal with the Federal Reserve and the original bank of America. Somehow the banks, created by or allowed to exist by the government, have the government working for them.

Is anyone keeping track of the latest talk of Greek debt forgiveness? It pairs nicely with the recent Obama administration action on student loan forgiveness. I hate whenever BBC has live translations of Merkel. So annoying.

Why should anyone pay back loans at all? We're sliding backwards and soon bankers will be accused of usury instead of holding people accountable for the debts they knowingly and voluntarily incurred.

Well, the Greeks will default, controlled and limited default is highly preferable to complete and sudden default.

As to student loans, only an idiot issues a loan with no collateral, which is what student loans are. Government needs to fess up and just tax graduates a premium.

[rory_20_uk]

Graduates are taxed a premium in line with what they earn.

The problem is giving loans to those doing courses that are utterly worthless. Do a sandwich course if you really want a piece of paper stating that you couldn't get to a decent uni.

~:smoking:

[Adrian II]

You're just making a case *against* a powerful executive and for a separation of powers.

A presidency can be powerful (and the US presidency is) despite the checks and balances. It can also be distinct (and the US presidency is) from both the legislative and the judicial power.

By the way, I am not making a "case" for any presidency at all. I am merely drawing a comparison.

AII

[InsaneApache]

The Greeks get a referendum.

Oh dear.

Cat and pidgeons come to mind.

[Fragony]

https://img.photobucket.com/albums/v494/Fragony/merkel_sarkozy.jpg
:laugh4:

[Furunculus]

I am pretty sure that the fundamental dysfunction of a collection of nation-states attempting to act as a quasi-supranational government now justifies the branding of its travails as a Headless-Sovereign crisis, rather than a Sovereign-Debt crisis or Bad-Bank crisis. It may have started as one or the other, but bond spreads today are not directly attributable to the original cause.

Let us be crystal clear; the eurozone is a damned shambles BECAUSE of the its inability to formulate radical policy that is perceived as legitimate by its constituent people[s], and that is because the highlighted plural makes governing in a representative [and] accountable manner practically impossible. Especially in tough times such as this!

To return to my original question:

If the purpose of the European project was to create a happier Europe, more at ease with its neighbours and less prone to industrial warfare, at what point did the means become confused with the ends?

That is to say, to the point where ever-deeper-union is deemed to be a good thing regardless of the fact that it is now leading to a less happy Europe, because the model of governance is perceived to be unrepresentative and unaccountable!

[phonicsmonkey]

Well we're back at the conundrum at the heart of the EU....governments, media, commentators, international institutions all think one thing should happen but the people....those pesky people....just won't play ball.

If Greece has a referendum it will be a very hard sell indeed to get them to accept this package. The markets know it which is why they panicked on the news.

[Furunculus]

precisely, hence; headless sovereign - issuing diktats and five-year-plans which have no hope of succeeding, or even being implemented!

[Adrian II]

The Greeks get a referendum.

Oh dear.

Cat and pidgeons come to mind.

The word 'democracy' comes to mind as well. It's a kamikaze act of Papandreou, but even so, the euro is going to get that big phat Greek middle finger we've all been waiting for. It's not going to be a pretty sight, but it's necessary.

AII

[InsaneApache]

The word 'democracy' comes to mind as well. It's a kamikaze act of Papandreou, but even so, the euro is going to get that big phat Greek middle finger we've all been waiting for. It's not going to be a pretty sight, but it's necessary.

AII

Oh I agree totally. You should hear the europhiles foaming at the mouth on the BBC today. You mean let the Greek electorate decide on the future of their country? How very dare they. The bastards.

The EU sure don't like democracy much. It gets in their way of ever greater political union. Now they are the real bastards.

[Furunculus]

Spare a thought for the transnational progressive, for whom the idea of an al-a-carte europe is an anathema, for their dreams are dust. Where Britain leads countries on the periphery with follow, for ever-deeper-union relied on a sense of inevitability and that spell is now broken.

[Fragony]

The EU sure don't like democracy much. It gets in their way of ever greater political union. Now they are the real bastards.

Ya. Bet the federalist apparatski's are feeling kinda bad right now. Which makes me feel good.

[Ser Clegane]

Good move by Papandreou - no matter what the outcome will be.

Here is a commentary that I largely agree with:

Papandreou Is Right to Let the Greeks Decide (http://www.spiegel.de/international/europe/0,1518,795297,00.html)

[Kagemusha]

I think this is the democratic way.Let the Greeks give the finger to the spending cuts and then they can be kicked out from the Euro in order to have more competetive cheaper currency, which suites their economy better. To me similar referendums should be made in every Euro country, so incase they would decide to stay.They have to commit to EMU criteria fullfilling spending and debt imits also.
If EU wants to have any chance of survival and actually possibilities to prosper.The mandate for it have to come from the people. If EU will continue exisiting as an idealistic agenda of certain powerful European politics, who are pushing the agenda nevermind anything. In order to create something "grand" in their lifetimes.Then for sure EU is doomed.

[Adrian II]

Spare a thought for the transnational progressive, for whom the idea of an al-a-carte europe is an anathema, for their dreams are dust. Where Britain leads countries on the periphery with follow, for ever-deeper-union relied on a sense of inevitability and that spell is now broken.

Read the article that Ser Clegane referred to. It has a strong opening:


It must be said right at the beginning: The Greeks will, for a change, decide for themselves how they and their country will move forward. They have had no real opportunity to do so for quite some time. For about a year and a half, this once proud country has been under foreign administration; it is de facto no longer a sovereign state.

The real problem - I keep emphasizing this - is that we all (the US, Third World, even China included) live under the tutelage of the so-called "market" - personified by a bunch of incompetent rating agencies, an independent and irresponsible ECB, a quasi-independent IMF and World Bank, and lots of financial "wizards" who want to sell us bridges in Siberia or make us invest in ice cream parlors on the South Pole.

The EU is not the root problem. The root problem is neoliberalism - the idea that "the market" knows best.

AII

[Furunculus]

Read the article that Ser Clegane referred to. It has a strong opening:

The EU is not the root problem. The root problem is neoliberalism - the idea that "the market" knows best.


good article, i hav no objections to it at all, but i do not agree with your conclusion. This is a Headless Sovereign crisis, because the governance imposed has neither been accountable nor representative, and if they vote "yes" to austerity then at least that question has been answered.

This quote struck me as perinent:


But at least every Greek gets to decide, and can no longer complain about their government bowing to international demands. And even if the Greeks ultimately say no, and in the worst case scenario the country leaves the euro zone, the consequences seem less dicey than they did a year ago.

The first sentence is obvious; will you accept the EU as a legitimate centre of power.
The second is obvious; yes, the whole point of greek bailouts has been to recycle money back to endangered european banks, and since the process has been dragged out as long as is physically possible this end has been achieved. The latest IMF payment from the first bailout was transferred on announcing the third and 'final' greek bailout last week.

[rory_20_uk]

If a country does not want to be ruled by the market... Don't Borrow Money From Them!!!

All any country has to do to not be damaged by them is balance their books, and guess what? Rates on bonds are low. The only thing that forces countries to borrow is the inability to be honest with the electorate and constantly promise things that they can not deliver without borrowing from others. The UK spends a vast amount on both social services and health. Whilst this is all very nice, it does need to be paid for, and sadly that apparently is what Guilts are for.

Every country knows how emotive and reactionary the markets are. Would anyone here borrow from a lender who kept changing their rates based on meaningless factors? It is insane to live this way - yet countries do. Sensible people borrow when the deals are extremely good and not when they are not - and not need to do so.

~:smoking:

[gaelic cowboy]

I think your missing the point though Rory Greece isnt borrowing from the markets which is why it can afford to play hardball with Merkozy.

The EU/Merkozy position is in fact weak in reality this is because it requires that the Greek believe they can return to borrowing money on the open market in the near future.

We all know that is patent nonsense hence the talks about talks about talks.

If I had to guess I would say that the Greeks wanted a bigger haircut on the debt and this way they will probably get it as the EU will prob do anything to prevent an actual vote.

[Furunculus]

If I had to guess I would say that the Greeks wanted a bigger haircut on the debt and this way they will probably get it as the EU will prob do anything to prevent an actual vote.

it will set a nice precedent for britain; announce an out/repatriate referendum, then negotiate for the repatriation, then vote on the result.

a win/win situation from my point of view.

[phonicsmonkey]

My understanding is this: the current deal, in effect, offers the Greeks 50% debt relief in exchange for 'austerity' cuts to public spending in Greece (thereby effectively providing the means to pay off more later).

The Greek government may feel that by threatening a referendum they can improve the situation for their people along the lines gaelic cowboy suggests, for example in order to avoid a vote the EU may accept a larger haircut in exchange for lower value in austerity cuts.

If that's the case I think it's dangerous brinksmanship because it would imply that the Greek government are not committed to the incredible amount of work it would take to have a decent referendum which provides a clear mandate for action on such a complex issue.

This would be sad - in fact, forgetting what might be best for the markets for a second, the prospect of a Greek referendum on this issue is actually a heartening one for those of us who believe the EU's democratic deficit has become unsustainable.

I think it's quite likely that, with the facts and alternatives squarely and honestly laid before them, the Greek people would actually vote in favour of this deal or something like it. But not in the current climate of lack of leadership, misinformation and obfuscation.

[a completely inoffensive name]

Could you guys just kick Greece out of the Eurozone already and let them have financially costly referendums that only bring down their economy? kthxbai

[Furunculus]

Could you guys just kick Greece out of the Eurozone already and let them have financially costly referendums that only bring down their economy? kthxbai

that would be an excellent way to increase the democratic deficit within the eurozone even further.

[Hosakawa Tito]

When you owe someone $20,000 they own you. When you owe someone $200,000,000,000,000 you own them.

[rory_20_uk]

I agree that in this situation GC that things are different.

The Economist had an interesting article today about this. The most interesting bit was that a Union leader (and they are powerful over there) saying that the EU will bail out Greece for ever as the alternative is even worse. As such, there is no need to compromise on anything as the supply of money is infinite. Rather like how train drivers in the Underground get over 50K a year.

Seeing as how most of the Civil Service are union members this hardly is cheering - the divestment of Greek government land was supposed to be 5bn this year. It's been downsized to 1.7bn due to difficulties in packaging land.

Greece should of course never have been let in. That was pretty obvious from the start - that they could without any effort have finances as good as Germany's.

Greek debt should have been collateralised for some time with backing on tangible assets - preferably land for example. Greek debt would now be almost worthless as currently Germany is paying money to Germany via greece.

~:smoking:

[Sarmatian]

My understanding is this: the current deal, in effect, offers the Greeks 50% debt relief in exchange for 'austerity' cuts to public spending in Greece (thereby effectively providing the means to pay off more later).

The Greek government may feel that by threatening a referendum they can improve the situation for their people along the lines gaelic cowboy suggests, for example in order to avoid a vote the EU may accept a larger haircut in exchange for lower value in austerity cuts.

If that's the case I think it's dangerous brinksmanship because it would imply that the Greek government are not committed to the incredible amount of work it would take to have a decent referendum which provides a clear mandate for action on such a complex issue.

This would be sad - in fact, forgetting what might be best for the markets for a second, the prospect of a Greek referendum on this issue is actually a heartening one for those of us who believe the EU's democratic deficit has become unsustainable.

I think it's quite likely that, with the facts and alternatives squarely and honestly laid before them, the Greek people would actually vote in favour of this deal or something like it. But not in the current climate of lack of leadership, misinformation and obfuscation.

I believe this isn't really about getting a better deal, it's about internal political situation. Opposition constantly attacks the government about austerity measures and is getting free points, in addition to making government's job that much harder. With this, Papandreou forced them into a corner - now they have to declare, clearly, publicly, how they believe people should vote. They are aware that rejection of this proposal would be the dumbest thing ever and they will be forced to declare the citizens should vote in favour of it.

After that, they can't really pull the brake constantly and would have to be a loyal opposition.

[gaelic cowboy]

My understanding is this: the current deal, in effect, offers the Greeks 50% debt relief in exchange for 'austerity' cuts to public spending in Greece (thereby effectively providing the means to pay off more later).

The Greek government may feel that by threatening a referendum they can improve the situation for their people along the lines gaelic cowboy suggests, for example in order to avoid a vote the EU may accept a larger haircut in exchange for lower value in austerity cuts.

If that's the case I think it's dangerous brinksmanship because it would imply that the Greek government are not committed to the incredible amount of work it would take to have a decent referendum which provides a clear mandate for action on such a complex issue.

This would be sad - in fact, forgetting what might be best for the markets for a second, the prospect of a Greek referendum on this issue is actually a heartening one for those of us who believe the EU's democratic deficit has become unsustainable.

I think it's quite likely that, with the facts and alternatives squarely and honestly laid before them, the Greek people would actually vote in favour of this deal or something like it. But not in the current climate of lack of leadership, misinformation and obfuscation.

Actually it's nowhere near 50% debt relief there is however 50% relief on a portion of the debt which still means well over 120% debt to GDP for Greece.

People are talking about estimates of Greece returning to the markets in the late 2020s, that just is never going to be sustained or even doable.

[a completely inoffensive name]

that would be an excellent way to increase the democratic deficit within the eurozone even further. i love it when american bankers freak out here because of greece policy and turmoil and now we cant even cut ties.

[phonicsmonkey]

I believe this isn't really about getting a better deal, it's about internal political situation. Opposition constantly attacks the government about austerity measures and is getting free points, in addition to making government's job that much harder. With this, Papandreou forced them into a corner - now they have to declare, clearly, publicly, how they believe people should vote. They are aware that rejection of this proposal would be the dumbest thing ever and they will be forced to declare the citizens should vote in favour of it.

After that, they can't really pull the brake constantly and would have to be a loyal opposition.

I was discussing this with someone a while back - there is, unfortunately, a clear incentive for the political opposition to oppose austerity as a populist measure to get them elected. Once in government they would of course have to face the reality of spending cuts but by then the current government would be in opposition and able to do the same thing.

Worst case scenario this could continue for a few electoral cycles while nothing meaningful gets done. So good for Papandreou if he's trying to short-cut this process.

[Papewaio]

Old rules invade economically inferior country and sell off it's ancient heritage.

New rules pimp your kids future to support an economically inferior country.

[PanzerJaeger]

Jin Liqun says out load (http://www.aljazeera.com/programmes/talktojazeera/2011/11/2011114434664695.html) what everyone knows deep down about Europe.


"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.

"Why should, for instance, within [the] eurozone some member's people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."

Jin Liqun, the supervising chairman of China's sovereign wealth fund

[Nowake]

Yeah, a deep secret no one dares to address... in the current year of our Lord 2005.
Rising retirement ages in Europe compared (http://www.thisismoney.co.uk/money/pensions/article-1696682/Rising-retirement-ages-in-Europe-compared.html)
Countries not listed (e.g. Romania) already set the bar to 65 a while ago.

[gaelic cowboy]

Europe shares fall as Italian bond yields top 7 pct (http://www.reuters.com/article/2011/11/09/markets-europe-stocks-idUSL6E7M93VX20111109)

looks like the game is up for prevarication at last.

[Lemur]

Barclays declares that it's already over for Italy (http://www.zerohedge.com/news/barclays-says-italy-finished-mathematically-beyond-point-no-return). Scary if true.

the math is not pretty, and the conclusion is that "Italy is now mathematically beyond point of no return."

Summary from Barclays Capital inst sales:

1) At this point, it seems Italy is now mathematically beyond point of no return
2) While reforms are necessary, in and of itself not be enough to prevent crisis
3) Reason? Simple math--growth and austerity not enough to offset cost of debt
4) On our ests, yields above 5.5% is inflection point where game is over
5) The danger:high rates reinforce stability concerns, leading to higher rates
6) and deeper conviction of a self sustaining credit event and eventual default
7) We think decisions at eurozone summit is step forward but EFSF not adequate
8) Time has run out--policy reforms not sufficient to break neg mkt dynamics
9) Investors do not have the patience to wait for austerity, growth to work
10) And rate of change in negatives not enuff to offset slow drip of positives
11) Conclusion: We think ECB needs to step up to the plate, print and buy bonds
12) At the moment ECB remains unwilling to be lender last resort on scale needed
13) But frankly will have hand forced by market given massive systemic risk

[a completely inoffensive name]

Jin Liqun says out load (http://www.aljazeera.com/programmes/talktojazeera/2011/11/2011114434664695.html) what everyone knows deep down about Europe. Liquin is probably right about the welfare state, but I really dont care for listening to the Chinese about what hard work is. A good day's work in China is literally 24 hours of working.I am really interested to see how European culture changes over the next 5 years as the welfare state is dissasembled. Cheap education and socialized health care I hope doesn't get thrown out though, because those are the only two things in the welfare state that actually provides a net bonus.

[Kagemusha]

Liquin is probably right about the welfare state, but I really dont care for listening to the Chinese about what hard work is. A good day's work in China is literally 24 hours of working.I am really interested to see how European culture changes over the next 5 years as the welfare state is dissasembled. Cheap education and socialized health care I hope doesn't get thrown out though, because those are the only two things in the welfare state that actually provides a net bonus.

And what else does "welfare" state include?

[phonicsmonkey]

And what else does "welfare" state include?

Maybe unemployment benefit and a state retirement pension?

Lemur, absolutely correct that Italy can't sustain high yields for a long period of time. No country could! But its problem is not insolvency but illiquidity and as such every effort should be made to ringfence its debt and assure the market that the rest of Europe will stand behind it come what may.

[a completely inoffensive name]

And what else does "welfare" state include? pretty much what phonicsmonkey said. most sorts of program where you are essentially handing out money or services to be consumed by the public. stuff like social security in the US, very cozy government pensions etc...

[Kagemusha]

So we should get rid of unemployment benefits and state retirement pensions, which both people are paying a fee from their salaries atleast here in Finland? So one would have to pay the same amount to an insurance companies for the same benefits? The difference being that the surpluss gathered would go to investors, rather then spent on the less fortuned ones of the society.Whats the point?

The financial problem with Southern Europe compared to Northern Europe is that while Southern Europeans want similar or better benefits from their governments.They are not willing to pay similar taxes for those.Thus their public spending becomes unsustainable. It is not some inheritent problem with mixed economy "welfare states" like Nordic countries and Germany for example. The problem is that the benefits of the welfare state will not appear out from thin air, but from hard work.

[phonicsmonkey]

So we should get rid of unemployment benefits and state retirement pensions, which both people are paying a fee from their salaries atleast here in Finland? So one would have to pay the same amount to an insurance companies for the same benefits? The difference being that the surpluss gathered would go to investors, rather then spent on the less fortuned ones of the society.Whats the point?

The financial problem with Southern Europe compared to Northern Europe is that while Southern Europeans want similar or better benefits from their governments.They are not willing to pay similar taxes for those.Thus their public spending becomes unsustainable. It is not some inheritent problem with mixed economy "welfare states" like Nordic countries and Germany for example. The problem is that the benefits of the welfare state will not appear out from thin air, but from hard work.

Hear hear! It's good to get the Nordic view on this.

An overlooked perspective on this whole crisis is that it is not caused by irresponsible government spending but by the collapse of tax receipts due to the global recession. Very few governments run such a surplus that they could be unaffected by a recession of the magnitude we have experienced.

I say this not to make the case that governments have acted responsibly (they have not) but to ensure that both sides of the coin are understood.

For example the Irish government was criticised for funding long term liabilities (like public sector salaries and pensions) with debt secured against short term assets (expected property tax receipts) which were not realised as expected due to the collapsing property market.

This ignores the fact that no government has access to certain tax receipts - every government is always in the position of borrowing against something that might not materialise and it is at inflection points in the world economy that problems like these current ones can expect to be suffered.

[Papewaio]

Essentially as stated we have some states with very high taxes, hard workers, higher education that can afford having a welfare state.

Then there are other states that have low payment of taxes, lazy workers (little work hours, short work life), lower education that can't afford a welfare state.

=][=

Problem is that with the EU the disparity in what a citizen is expected to do to be looked after by their state.

A hard look at most of the PIGS and France will show that they do not have as long working hours, lower commitment to paying taxes, and a shorter working life... how is less supposed to get the same amount as those who work more. Then the expectation that the harder working economies will pay for the short fall.

Essentially two big problems have happened in the last 3 years.
1) That we have 'to big to fail' corporations. Corporate welfare.
2) EU tax money went into propping up banks. Now they don't have the liquidity to prop up their own economies... problem being the lazy ones don't want to pull their fingers out and accept austerity and want to be entire countries on welfare propped up by citizens who work longer, harder or smarter. So we now have Country welfare.

The flip side of austerity packages is that a country that can no longer look after the needs of its citizens can by all rights be overthrown and replaced. Take away too much bread and the revolution will be there.

[Nowake]

A hard look at most of the PIGS and France will show that they do not have as long working hours, lower commitment to paying taxes, and a shorter working life... how is less supposed to get the same amount as those who work more. Then the expectation that the harder working economies will pay for the short fall.
Yes and no.
The system is viable in specific conditions, i.e. France. The country evolved around it and its largely technocratic government makes the most of it. To make myself clear, it may not be very competitive, but it can be sustained provided the country goes back to its 40-hour week policy.
The issue resides in the fact that the PIIGS attempted to copy its welfare while totally lacking the French framework.

France has $36,500 GDP/Capita and works 1,453 hours per year. This equates to a GDP/Capita/Hour of $25.10. Americans, on the other hand, have $44,150 GDP/Capita but work 1,792 hours per year. Thus you chaps only achieve $24.60 of GDP/Capita/Hour.
An article discussing the worst and the best of the French system. It also acknowledges the necessity to abolish the 35-hour week, a reality most French have by now embraced. Excerpt:



Americans at home may still be eating freedom fries, but corporate America is buying into France.

"They come in France because they know that infrastructure is first-rate and that people are working very well in France, especially engineers," says Marchand. "We are probably one of the two or three countries in the world with the best engineers. And so in terms of technology, France is still a country that is taken very seriously by the American executives."

Some of those American executives savor the French approach to work. Katherine Melchior Ray left behind her job as a senior manager at Nike in the United States, and came to France to work in the French fashion industry. Her job is just as high-powered, but now that she's in France, she no longer works weekends, and vacation has taken on a whole new meaning.

"I don't check in, I don't check my e-mail. I don't call on the phone and no one expects me to," says Ray. "You really go on vacation."

France is still one of the world's five largest economies. When the French work, their productivity per hour is among the highest in the world, even better than in the United States. Problem is, French workers are on the job an average of 300 hours less per year than their American counterparts, so French economic growth lags far behind the United States.

"People understand very well that the French system will not survive long if it's not reformed," says Marchand. "People have to work more; for years people thought that they could work less and earn more, which is -- absurd."

Marchand says other countries in Europe are already moving in the other direction, increasing the work week without raising salaries. And France has made some minor reforms in its 35-hour work week, to allow some paid overtime. It's a question of economic survival.

Source: CBS (http://www.cbsnews.com/2100-3475_162-704571.html?tag=contentMain;contentBody)

[a completely inoffensive name]

So we should get rid of unemployment benefits and state retirement pensions, which both people are paying a fee from their salaries atleast here in Finland? So one would have to pay the same amount to an insurance companies for the same benefits? The difference being that the surpluss gathered would go to investors, rather then spent on the less fortuned ones of the society.Whats the point?
Unemployment benefits really should be very brief in good times and only long in bad times. So right now I would say unemployment benefits are good to keep around. Problem is that things never revert back to what they once were in politics.
As for pensions, why can't they save the fee they are paying to the government and put it into a personal retirement fund?

The point is that it seems West/Northern Europe is going to be paying for the South's mistakes and laziness and in return Italy, Greece, whoever, will promise to shape up and not be so terrible with money in the future. I really don't see how you can't take a hit and have to reverse some of the welfare state in order to fix out this mess.



The financial problem with Southern Europe compared to Northern Europe is that while Southern Europeans want similar or better benefits from their governments.They are not willing to pay similar taxes for those.Thus their public spending becomes unsustainable. It is not some inheritent problem with mixed economy "welfare states" like Nordic countries and Germany for example. The problem is that the benefits of the welfare state will not appear out from thin air, but from hard work.
I don't recall saying the problem was the welfare state system. I am just saying that because of the lazy southerner's your welfare state is threatened and now there is an almost certain possibility that some of it will have to be dismantled to solve this debt crisis and keep the Eurozone intact.

[rory_20_uk]

Leaving aside that in most Western countries, education is either free or heavily subsidised until people are 18 or later and hence people should be relatively skilled when they leave school - and those that aren't have to accept some responsibility for it (along with their parents) - too much money is spent on giving people money to do nothing. The UK is not some paradise where things do not need repairing / painting / elderly need no help and people get used to the routine of work. There is also little that is given towards self development (again, leaving aside the vast amount of resources that are easily accessible and free).

~:smoking:

[phonicsmonkey]

I read somewhere that the UK is the world's leading producer of reality TV formats.....so there's a bright future for the economy right there!

[Ja'chyra]

I'm kind of torn on this, as a civil servant I work more than my conditioned hours, every week, for less than the going rate in industry, don't bother quoting government or industry reports I know direct comparisons between my job and defence contractors. So, I do my work and signed on for 40 years and retiring at 60, the government now wants me to work 8 more years, 20%, and pay another 3% of my pay to my pension, a double whammy as they say, bearing in mind that that direct comparison shows that I am paid roughly half of what my oppo is.

I have also been unemployed, after being made redundant, for almost 12 months and struggled on the amount of money I got, but, I was always looking for a job. I know for a fact quite a lot of people either never work or never work legally, but how can we crack down on this when we are reducing the number of civil servants that would police this?

I say reducing amounts of benefits the longer you are out of work but more help in moving to areas where work is available, also longer sentences for offences where peoples are on drugs, you wouldn't believe what they get away with, no benefits for immigrants until they have worked for certain period (3-5 years?) and less foreign aid until we can solve our own problems.

[Furunculus]

de-link individual benefits from inflation; you get the going rate but you lose more buying power the longer it goes on.

[InsaneApache]

"Some years ago a small rural town in Spain twinned with a similar town in Greece.
The Mayor of the Greek town visited the Spanish town. When he saw the palatial mansion belonging to the Spanish mayor he wondered how he could afford such a house. The Spaniard said; "You see that bridge over there? The EU gave us a grant to build a four-lane bridge; but by building a single lane bridge with traffic lights at either end this
house could be built".

The following year the Spaniard visited the Greek town. He was simply amazed at the Greek Mayor's house, gold taps, marble floors - it was marvellous, beyond imagination. When he asked how this could be afforded the Greek said; "You see that bridge over there?"
The Spaniard replied, "No."

[Furunculus]

lol IA, good joke.

in other news, Clegg converts to the dark side of the force............ publicly:
http://www.telegraph.co.uk/news/8890843/Nick-Clegg-warns-European-in-fighting-will-play-into-hands-of-chauvinists.html

Mr Clegg said there was a middle ground between greater integration, favoured by France and Germany, and total withdrawal from Europe, favoured by dozens of backbench Conservative MPs:

“What we want is a European Union which is exclusively oriented towards growth prosperity and jobs,”

[rory_20_uk]

“What we want is a European Union which is exclusively oriented towards growth prosperity and jobs,”

That comment is fir for the Miss World contest - utterly vacuous.

~:smoking:

[InsaneApache]

What I find amazing is the silence from Our Masters in Westminster about the suspension of democracy in two EU countries.

[gaelic cowboy]

They better come up with that mechanism for countries to leave the Euro fairly quick cos if they want treaty change, there plan is toast.

There is not a hope in hell that it could pass not after they effectively removed two democratic leaders and replaced them with drones.

The thing I have to laugh at is the idea mr Papademos is the man to fix things in Greece surely he was the problem he must have know Greece lied for the Euro at the time.

[gaelic cowboy]

What I find amazing is the silence from Our Masters in Westminster about the suspension of democracy in two EU countries.

Thankfully it's impossible to do what they did in Greece/Italy in both Ireland or UK both the PM's must be picked from elected members.

No sticking in life senators here :2thumbsup:

[Furunculus]

That comment is fir for the Miss World contest - utterly vacuous.

~:smoking:

from a tory it would be, but for a leader of the lib-dem's to utter those words will be considered heresy by his party.

[Kralizec]

What I find amazing is the silence from Our Masters in Westminster about the suspension of democracy in two EU countries.

About Greece: Papandreou surprised everybody by announcing a referendum after he had agreed with the other European leaders that he'd implement reforms. Said European leaders put pressure on him, to make sure he kept his end of the bargain that (I can't stress this enough) he, as prime minister of Greece, had agreed to. Greece could still have decided to go on with the referendum, or to hold elections about it. The prospect of not getting financial aid from the rest of Europe made them decide otherwise. Granted, it's not a shining example of democracy in action, but if the hands of the Greek politicians are tied, it's because of the fiscal reality of their country, not by the leaders of other countries.

Italy? There's nothing unconstitutional about the way Monti has gotten into power (to my knowledge, anyway), and his government will be subject to the same parliamentary scrutiny as any other Italian government. Where's this supposed "suspension of democracy"? And, again, it's fiscal reality* which dictates that Italy should reform its economy. The Italians probably won't like it, but then again, Italian voters can't vote their national debt away in a national election or democraticly decide that Italy will only need to pay <5% interest on loans that Italy accepts from other parties.

The only way you could describe what's happened as "undemocratic" is if you consider representative democracy as such undemocratic. I've always been of the belief that elected governments should govern according to what they think is the right course of action, and not according to opinion polls. The only thing disaffected Italians and Greeks can do about it, short of revolution, is punishing this course of action at the next election. Which is how representative democracies have worked for centuries.

*or speculative attacks against Italy's finances, if you're inclined to believe that. Even then, the fact of the matter is that those investors can do with their money what they want, and if Italy wants to borrow money from them, it will have to do so on the lenders' conditions. Not that I necessarily agree with everything that happens in or around the financial market. I'm just arguing against the idea that the EU is somehow destroying democracies.

[InsaneApache]

Where's this supposed "suspension of democracy"?

Oh I dunno. Replacing two elected heads of state with EU apparatchiks sounds awfully like a coup d'etat. Or maybe it's just me. Whether you agree with the Greeks or the Italians is beside the point. It's up to the voters to boot out miscreant politicians. Not the EUSSR.

[Vladimir]

Having only a superficial knowledge of the Greek situation it seems like Papandreou sought referendum not in the interest of democracy but for personal gain. An opinion was that he wanted to use it as a negotiating tool to further reduce Greece's liabilities.

I'm far too skeptical of politicians, especially lately, Greek politicians, to believe that democracy was served here.

[Kralizec]

Without wanting to be pedantic, a prime minister isn't a head of state. Napolitino or Papoulias, the presidents of Italy and Greece, are heads of state. And the term "coup d'etat" is usually understood to mean seizing power by illegal means.

Prime ministers resign between elections for all sorts of reasons. Both Berlusconi's and Papandreaou's position in their respective parliaments were pretty shaky anyway, and the fact that foreign pressure played a part does not make it undemocratic, let alone a coup d'etat. In both cases, the former opposition (i.e elected members of parliament) has agreed to support a technocratic cabinet because neither country can afford to delay the decision making caused by an interim election. Unusual? Certainly. Undemocratic or unconstitutional? No.


Having only a superficial knowledge of the Greek situation it seems like Papandreou sought referendum not in the interest of democracy but for personal gain. An opinion was that he wanted to use it as a negotiating tool to further reduce Greece's liabilities.

I'm far too skeptical of politicians, especially lately, Greek politicians, to believe that democracy was served here.

He more or less said that the referendum was supposed to call bluff on the opposition. The opposition knew well enough that accepting the bailout and the conditions that came with it was the only viable choice, but opposed it publicly to garner support from the voters. If he really intended to use a "no" in the referendum to bargain a new deal, he would have gone through with it, unless he came to the conclusion that it was a bad idea afterall.

I already said that it's not a shining example of democracy in action, but neither is it the end of democracy.

[InsaneApache]

Oh as I've shown, I loath politicians, I maintain that they are the problem not the solution. However it must be up to the demos to decide who wields the kratos. Not foreign powers. If they try that on the Irish for example, I can foresee lots of semtex being dug up. It sets a dangerous precedent that we ignore at our peril.

[Watchman]

It has been pointed out that had the *bailout* been subjected to referendums in the countries footing the bill for Greek creative finance management, the place would've been left to burn long ago. (Since this would be economically insane, and the "great unwashed" tends not grasp that any better than the Greeks rioting against the austerity measures, nobody has. Seriously, you don't want "the people" to decide macroeconomics for the rather sound reason they really don't understand **** about the topic.)

Papandreou was pretty much engaging in sheer political brinksmanship with an awful lot of other peoples' money (and, in a sense, the immediate future of the whole continent's economies) at stake; confusing that with some kind of genuine "democracy in action" is plain silly. That veins started popping in Paris and Berlin was hardly unreasonable.

[Tellos Athenaios]

It has been pointed out that had the *bailout* been subjected to referendums in the countries footing the bill for Greek creative finance management, the place would've been left to burn long ago. (Since this would be economically insane, and the "great unwashed" tends not grasp that any better than the Greeks rioting against the austerity measures, nobody has. Seriously, you don't want "the people" to decide macroeconomics for the rather sound reason they really don't understand **** about the topic.)

Papandreou was pretty much engaging in sheer political brinksmanship with an awful lot of other peoples' money (and, in a sense, the immediate future of the whole continent's economies) at stake; confusing that with some kind of genuine "democracy in action" is plain silly. That veins started popping in Paris and Berlin was hardly unreasonable.

Bingo. It is hardly the EU imposing some sort of apparatchik, it is Papandreou & Berlusconi losing their respective games. Berlusconi's wanted to protect himself from persecution because of his own murky past, but he also needed to push through fiscal reform in Italy. That meant, he wanted to have his cake and eat it, too. :shrug:

[InsaneApache]

Seriously, you don't want "the people" to decide macroeconomics for the rather sound reason they really don't understand **** about the topic.

LOL

[gaelic cowboy]

Seriously, you don't want "the people" to decide macroeconomics for the rather sound reason they really don't understand **** about the topic.

Apparently the top boys in finance and economics dont have a clue either.

[Watchman]

Entirely possible, but I'd still rather trust them with it than the monkeys who can't even grasp that the fallout WILL, in fact, affect them too, even if their governement didn't lift a finger to try and control the damage.

Because seriously, watching the ball-punchingly stupid and terminally myopic public discourse on the topic here long since stripped away whatever little confidence in the judgement of the "common man" I may have had left. It may also have killed a part of my soul and made baby Jesus cry, but I'm too numb to tell for certain.

[Furunculus]

old phrase about paying people peanuts and getting monkeys, pretty sure their is a valid parallel to be drawn with representative democracy.

[edited for clarity]

[rory_20_uk]

Apparently the top boys in finance and economics dont have a clue either.

In finance it does not matter the long term prospects of a company, it matters what is going to happen in the next few days to months. In the dot-com bubble, one analyst showed that for one company to justify its share price its capitalisation in 5 years would have to equal the world's economy. He was of course let go.

As long as there is someone to sell things to, that's all that matters.

~:smoking:

[Beskar]

Hello all! I would like some advise from the more economically minded ones of you amongst us.

I was reading this article by the BBC which provides a very interesting picture of who owes what to who:
http://www.bbc.co.uk/news/business-15748696

If you click on the various countries, you can see who owes what to what.

One very interesting tibbit I noticed was this - countries owe money between themselves and their counterpart

So what I propose is this - Debt Cancellation

Let's take the United Kingdom for example. America owes us more money than we owe them. However, under what I propose is that we basically do this sum:
USA debt - UK debt = NewUSA Debt, Ukdebtless

So using United Kingdom again, we sort of get a picture like this.

United Kingdom
Debts - Germany, Spain, Ireland
Owed - America, Italy, Portugal
Cancelled - Japan, France

So now, the United Kingdom only owes debt to Spain, Germany and Ireland, whilst only America, Italy and Portugal owes to United Kingdom.

Effectively, we start pulling all these strings away reducing it all to simply numbers.

If politicians want to take that extra-step. They could attempt to use the Central European Bank as the debt-nexus. By doing this for example, lets say Germany owes America money (whilst UK owes Germany and America owes UK), they can eliminate the debt America owes UK in return to the debt the UK owes Germany.
Edit: Double checking it, it seems America owes more money to everyone in Europe than the otherway around..

Since all this debt gets eliminated, it means there is far less money being lost on "interest", which means all the economies can improve at home.

[Nowake]

It’s not impossible, but it would be painful to my knowledge. Could be wrong of course.

I am not able to give a lot of details off the top of my head, yet every loan has different payment timelines, is negotiated under different risk conditions, at different interest rates, between different departments which depend on different budgets with different scheduled cash flow intakes in different currencies with different, fluctuating exchange rates. Mutual debt cancellation would always incur significantly increased costs for one party on a case by case basis.

It would probably be a nightmare to sort it out equitably and it would not translate into significant benefits; the goal is to lower your debt while continuing to invest your money for maximum return, not decrease both.

[phonicsmonkey]

Since all this debt gets eliminated, it means there is far less money being lost on "interest", which means all the economies can improve at home.

This is the problem - no-one lends money except to earn interest and no lender is willing to cancel a loan early and forsake the interest which would come later and the potential profit which is to be made in the future if the rate at which you are lending is higher than the rate at which you borrow. There is an actual loss and an opportunity cost in a loan being repayed early. Where bonds are issued with such an option embedded in the structure (ie. when the lender can repay early) they are typically more expensive for the borrower to compensate the lender for the risk that they will receive the principal back early. It's called 'repayment risk'.

Also, it is not as neat as simply saying "Europe is owed money by America" because it is privately owned institutions like banks, funds management and insurance companies which are the actual lenders. The American government has not borrowed directly from European governments or vice versa.

[a completely inoffensive name]

Didn't debt cancellation as a policy occur at some point before or after one of the world wars? I think I remember reading some sort of debt scheme they came up regarding how to get the losers to pay up after their country had been destroyed.

I think that ultimately, if the four debt horsemen of the apocalypse comes around and starts having all hell break loose, countries may just decide to start forgiving debt as a last ditch measure to prevent the new Great Depression. When the world economy is at stake, I feel like everything is up for grabs.

[Beskar]

This is the problem - no-one lends money except to earn interest and no lender is willing to cancel a loan early and forsake the interest which would come later and the potential profit which is to be made in the future if the rate at which you are lending is higher than the rate at which you borrow. There is an actual loss and an opportunity cost in a loan being repayed early. Where bonds are issued with such an option embedded in the structure (ie. when the lender can repay early) they are typically more expensive for the borrower to compensate the lender for the risk that they will receive the principal back early. It's called 'repayment risk'.

Also, it is not as neat as simply saying "Europe is owed money by America" because it is privately owned institutions like banks, funds management and insurance companies which are the actual lenders. The American government has not borrowed directly from European governments or vice versa.

I am of the economical mind that you should pretty much never borrow money (other than longterm investment with easy repayment well within your budget), and only lend money if you can afford to lose it. Whilst I do have my fabulous student loan, I have absolutely no credit card bills or any other loans or negative amounts of money and I only buy what I can afford.

As such Government should be running a surplus of money from taxes and what not, which it can then use to provide loans for investment into the nation or even lend to another nation if needed, or simply for "rainy day" emergencies.

[Nowake]

As such Government should be running a surplus of money from taxes and what not, which it can then use to provide loans for investment into the nation or even lend to another nation if needed, or simply for "rainy day" emergencies.
A budget surplus doesn’t entail an absence of debt though. Under Clinton, you chaps had one. That is, if you kept on that course, you would’ve eventually paid your whole debt. Yet the then surplus was caused by Clinton’s further deregulation of the financial industry in ’94.

Now, the budget deficit is used as a tool of demand management; most economists would support the use of changing the level of borrowing as a way of fine-tuning or managing the level of aggregate demand. An increase in borrowing can be a stimulus to demand when other sectors of the economy are suffering from weak spending. A fiscal stimulus given is important in stabilizing demand and output at a time of global uncertainty. The argument is that the government can and should use fiscal policy to keep real national output closer to potential GDP so that a large negative output gap is avoided. Maintaining a high level of demand helps to sustain growth and keep unemployment low.

Plus, a government debt can lead to economic growth: a budget deficit can have positive macroeconomic effects in the long run if it is used to finance extra capital spending that leads to an increase in the stock of national assets. For example, higher spending on the transport infrastructure improves the supply-side capacity of the economy promoting long-run growth. And increased public-sector investment in health and education can bring positive effects on labour productivity and employment. The social benefits of increased capital spending can be estimated through use of cost-benefit analysis.

Overall, your overall GDP, in every situation, has more to gain from efficient debt management than from an aggressive approach to acquit it. I know where you’re coming from though and why it seems a lot safer, ideally, we’re all fiscally conservative and the current system has not been proved sustainable ad infinitum; it has not been disproved either yet thank F.

[Beskar]

A budget surplus doesn’t entail an absence of debt though. Under Clinton, you chaps had one. That is, if you kept on that course, you would’ve eventually paid your whole debt. Yet the then surplus was caused by Clinton’s further deregulation of the financial industry in ’94.

I am not American, but during a "Boom" period, the government should attempt to erase its debts and work up its surplus so lets say the Global Meltdown happened, the government has the resources for its "bail outs" and for heavy investment to keep the employment down, creating jobs and opportunities for businesses to continue under these conditions.
(There should be budget set aside for investment anyway, regardless of where about it is in the boom-bust cycle. This is for extra-intensive investment during the hardtimes)

However, if it is a situation where the debts are cleared and you got surplus money, you either use it for investment (if required for any major projects or serious work) or lower taxes.

[phonicsmonkey]

When the world economy is at stake, I feel like everything is up for grabs.

I think this is a reasonable view. It's not beyond the realms of possibility that debt could be forgiven but it would effectively involve nationalising privately owned banks and other institutions.

I think a more likely move is that the credit default swap contracts outstanding on sovereign debt (Italy's mainly) will be declared null and void as they present a systemic risk to the financial system.


I am of the economical mind that you should pretty much never borrow money (other than longterm investment with easy repayment well within your budget), and only lend money if you can afford to lose it. Whilst I do have my fabulous student loan, I have absolutely no credit card bills or any other loans or negative amounts of money and I only buy what I can afford.

This is very sensible and it's quite possible to live this way until you want to buy a house. Then you realise that in order to get hold of that kind of asset you either have to borrow or spend many many years saving up while prices rise and push it further out of reach.

[Beskar]

This is very sensible and it's quite possible to live this way until you want to buy a house. Then you realise that in order to get hold of that kind of asset you either have to borrow or spend many many years saving up while prices rise and push it further out of reach.
As I stated:

other than longterm investment with easy repayment well within your budget

IE: Mortgage :beam:

[Philippus Flavius Homovallumus]

I am of the economical mind that you should pretty much never borrow money (other than longterm investment with easy repayment well within your budget), and only lend money if you can afford to lose it. Whilst I do have my fabulous student loan, I have absolutely no credit card bills or any other loans or negative amounts of money and I only buy what I can afford.

As such Government should be running a surplus of money from taxes and what not, which it can then use to provide loans for investment into the nation or even lend to another nation if needed, or simply for "rainy day" emergencies.

I agree, but it's worth noting that most religions consider Usury (lending money at interest) a mortal sin, it's never outright stopped anyone but it did appear to curtail the practice somewhat.

They were obviously on to something.

As to your debt cancelation plan, I don't think we're quite there yet, but it's worth noting that many countries (including Italy) have a primary surplus, but currently need to borrow to pay off their debts.

So we may get there.

[rory_20_uk]

Voting populations are like children.

Who would they prefer? The parent who gives them small toys but promises them that tomorrow is going to be taken care of, or the one who gets them really big toys using loans... and also tells them that tomorrow is going to be taken care of.

In the UK there was a flood in the North. Some had house insurance that covered floods, others didn't. Those that didn't got give free money from the government. So, either you can pay insurance year after year, or not bother and complain if a flood happens and the Government will give you money.

In the UK, cuts are being fought tooth and nail as every special interest group fights for their money, with no mature overview that this is required due to the hideous amount of borrowing that went on before. Of course spending less money on things will be worse but frankly that's just tough.

Gordon Brown epitomised this "spend now, ask questions... never" mentality by calling every handout an "investment" - but never feeling the need to explain what the returns would be.

~:smoking:

[phonicsmonkey]

Voting populations are like children.

Who would they prefer? The parent who gives them small toys but promises them that tomorrow is going to be taken care of, or the one who gets them really big toys using loans... and also tells them that tomorrow is going to be taken care of.

In the UK there was a flood in the North. Some had house insurance that covered floods, others didn't. Those that didn't got give free money from the government. So, either you can pay insurance year after year, or not bother and complain if a flood happens and the Government will give you money.

In the UK, cuts are being fought tooth and nail as every special interest group fights for their money, with no mature overview that this is required due to the hideous amount of borrowing that went on before. Of course spending less money on things will be worse but frankly that's just tough.

Gordon Brown epitomised this "spend now, ask questions... never" mentality by calling every handout an "investment" - but never feeling the need to explain what the returns would be.

~:smoking:

Yes this is called moral hazard.

In the aftermath of the crisis the Fed and developed world governments in general, in their bailouts, failed to discriminate between those who had been reckless and deserved to go under and those who were simply caught up in the storm and should be saved. Then, in an apparent attempt to deal with the issue of moral hazard, they recklessly allowed Lehman Brothers to fail (alone among the broker-dealers who were in the same mess together) pour l'encouragement des autres and the resulting uncertainty made the whole problem many times worse.

Now the only clarity is that if you are big enough that your failing will threaten the whole financial system you will not be allowed to fail - a perverse incentive to grow bigger and more dangerous!

[Furunculus]

Hello all! I would like some advise from the more economically minded ones of you amongst us.

I was reading this article by the BBC which provides a very interesting picture of who owes what to who:
http://www.bbc.co.uk/news/business-15748696

If you click on the various countries, you can see who owes what to what.

One very interesting tibbit I noticed was this - countries owe money between themselves and their counterpart

So what I propose is this - Debt Cancellation

Let's take the United Kingdom for example. America owes us more money than we owe them. However, under what I propose is that we basically do this sum:
USA debt - UK debt = NewUSA Debt, Ukdebtless

So using United Kingdom again, we sort of get a picture like this.

United Kingdom
Debts - Germany, Spain, Ireland
Owed - America, Italy, Portugal
Cancelled - Japan, France

So now, the United Kingdom only owes debt to Spain, Germany and Ireland, whilst only America, Italy and Portugal owes to United Kingdom.

Effectively, we start pulling all these strings away reducing it all to simply numbers.

If politicians want to take that extra-step. They could attempt to use the Central European Bank as the debt-nexus. By doing this for example, lets say Germany owes America money (whilst UK owes Germany and America owes UK), they can eliminate the debt America owes UK in return to the debt the UK owes Germany.
Edit: Double checking it, it seems America owes more money to everyone in Europe than the otherway around..

Since all this debt gets eliminated, it means there is far less money being lost on "interest", which means all the economies can improve at home.

what is the quality of the debt?

example:

french bank owns £200m of solid british debt british bank owns £200m of dodgy french debt

why would the french government want to swap?

now multiply that detailed and searching calculation by thousands!

[phonicsmonkey]

I thought I might recommend some reading for those who are interested in these topics.

"Crisis Economics" by Nouriel Roubini is a succinct examination of what went wrong and why.

"This Time is Different" by Rogoff and Reinhard provides an interesting historical perspective showing that these sovereign debt issues were more or less unavoidable following a crisis in the financial system.

More entertaining if less directly relevant to the European sovereign crisis is "The Big Short" by Michael Lewis.

To the point of debt cancellation, another complicating factor is the size of the credit default swap market. These are effectively insurance contracts against default by the issuer of debt. A bondholder (the lender) can enter into a swap which means that if the creditor defaults, their losses are made good.

Unfortunately, unlike insurance, you do not have to own the asset in order to purchase insurance against it. This is like insuring someone else's house against fire - suddenly you have the same exposure to fire risk as the homeowner (who is most likely also insured) and in an odd way you have created another 'house' out of nothing which will burn down alongside the first, creating a double loss for the insurer.

In the case of European sovereign debt there are many times more face value of CDS outstanding than the actual debt, which means if there is a default by (eg) Italy the losses will exceed the value of Italy's debt many times over.

This is why, in the case of Greece for example, there has been such an intense focus on making the writedown by banks "voluntary" so that it does not trigger the settlement of the related CDS contracts and worsen the problem.

Unfortunately this also undermines the CDS market, because if you suddenly discover that the homeowner has voluntarily burned down his house and you aren't going to get paid out as a result, the value of your contract and like contracts on other houses is negatively impacted.

A debt cancellation deal would have to avoid both triggering the CDS settlement and also undermining the CDS market in order to avoid turmoil.

[rory_20_uk]

Use of CDS contracts are a good way of (on paper at least) reducing one's exposure to losses on bonds - German banks have massively reduced their exposure to greece in this way without the need to sell Greek bonds.
But who backs the CDS? Probably the very same banks that are utilising them to reduce their exposure... not something that is going to help stabilise the whole situation. And this is even leaving the whole facet that by careful reviews of the small print the clauses can be avoided.

~:smoking:

[Beskar]

what is the quality of the debt?

example:
french bank owns £200m of solid british debt british bank owns £200m of dodgy french debt
why would the french government want to swap?

now multiply that detailed and searching calculation by thousands!

You are right, because their own self-interest and greed overrides their moral principles and obligations in trying to fix the status quo and usher in a brand new functioning system. This is why I would be a bad leader and a good leader at the same time if I was ever in such a position. I would attempt to fix all the problems, even if it incurs losses for the greater good.

[phonicsmonkey]

who backs the CDS?

Other banks who do not hold the underlying debt, sometimes the same banks that hold the underlying debt (because they earn a trading commission from writing the contracts) but largely those who are 'short' CDS (ie. in the position of the insurers) are speculators in the shadow banking system: hedge funds and SPVs owned by banks and insurance companies (like AIG who wrote many of the CDS on the sub-prime mortgages).

The CDS market is only lightly regulated and while there are some entities which track CDS volume (like the DTCC (http://www.dtcc.com/products/derivserv/data_table_i.php?tbid=5)), not all speculators in CDS report their trades in this way so it's pretty opaque as to the exposure levels.

The DTCC tables I linked to show the gross notional USD value of outstanding CDS on (eg) Italian debt to be 312bn, with the net amount 21bn. This is compared to 2.2trn of outstanding Italian government debt (http://www.indexmundi.com/g/g.aspx?c=it&v=94). So my statement above was hyperbolic, I apologise - there will not be many multiples more losses as a result of CDS contracts, but in the event of default the losses will exceed the value of the outstanding debt and it is unclear by how much.

[InsaneApache]

Germany fails to flog it's bonds.

http://blogs.wsj.com/economics/2011/11/23/bond-vigilantes-make-their-votes-known-in-europe/

Blimey. :sweatdrop:

[Husar]

Germany fails to flog it's bonds.

http://blogs.wsj.com/economics/2011/11/23/bond-vigilantes-make-their-votes-known-in-europe/

Blimey. :sweatdrop:

Indeed, about time to get Eurobonds so we can help everybody spend more with our good reputation. :laugh4:

[phonicsmonkey]

The failed Bund auction is a big deal. It means the problems are coming home to roost at the core of the euro zone whereas before they could be dismissed as issues at the periphery. In my view it indicates the the Germans must soon drop their objection to the ECB taking action to underwrite the debt of the troubled eurozone countries.

In fact the ECB is, this Friday and for the first time since 2008, re-opening its long term repo facility to enable financial institutions to secure financing against dodgy collateral. This time it's for 13 months and is effectively unlimited in size, so expect to see them finance around 1trn of bank debt versus sovereign bond collateral.