Excellent posts well reasoned, BrightNShiny. Much obliged.
That’s what frankly disgusts me about this thread and much of the discussion IRL. You used the word “sanctimonious,” and I think it’s entirely appropriate. The moralistic, condescending, paternalistic language people insist on using to describe the Greeks is astounding. It displays a deep lack of perspective and a deeper sense of entitlement and self-righteousness.
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It’s not about “punishing” Greece. It’s about having any hope that new loans will in fact get paid back.
If I have borrowed money from you, and can’t pay it back, and need to borrow more money from you, and you find out that: I spend more than I make, and while I’m willing to cut that spending some, I have no intention of cutting it to some sustainable level even close to my means, and also that I have no intention to charge my brother who lives with me any rent because that’d upset him - are you an asshole for insisting I make these changes before you lend me any more?
There is no question that the creditors will get fucked over by Greece. Greece will not honor the terms of the loans (at this point, it can’t). So the creditors will either have their agreed upon return diminished by slower payments, have to accept some principal forgiveness, or, in Grexit, deal with getting pennies on the dollar. Yet somehow them setting terms which will avoid a repeat on any new loans they make is a bad act?
No doubt life in Greece will suck badly, sadly probably for some time. No doubt most of those who will suffer, and for sure those who will suffer the most, had no hand in creating this situation. (Although a number benefitted from the spending which created the situation). But does that mean the creditors should donate the money to kick the can doen the road (with a repeat in 5 years)? Life sucks worse in South Sudan. Should the creditors have to pay for that? How about you? You have money, should you have to help bail out Greece? (There’s a fund me campaign out there if you say yes, btw)
Have the corruption, tax evasion, market red-tape, unsustainable pension promises, and general over-dependence on government spending been fixed? No? Then Greece is fucked whether they take a bailout and stay in the EU or get on with the Grexit and go it alone.
All the liberals who want to delude themselves that a return to a devalued drachma will magically erase the fundamental problems that plague the Greek economy are the ones on their “moral high horse.”
Their refrain is monotonous and wrong: “Yeah Greece has to fix all these major problems or they will never be able to recover, but let’s talk about little old ladies…”
Um… they are running a primary surplus. How much more cutting do you want them to do? Let me guess. Like every other topic we discuss on these boards, you’re completely ignorant on this one too.
Right. That’s why your entire post shows a complete ignorance of the situation, does nothing to actually try to recover the payment and engages in a sunk cost fallacy. That’s why your entire post ignores all the structural problems outside of Greece that are making it impossible for the Greek’s to pay back the loans.
Just stop with these idiotic analogies. You and I are individuals. Neither the Greek government nor the IMF are individuals. And we aren’t really talking about borrowing new money at this point, since the Greek’s are running a primary surplus. We’re talking about restructuring existing debt.
The Greek government did make significant changes, since they are running a primary surplus. Which means that outside of the debt payments, they aren’t spending more than they make. So, no, I wouldn’t be an asshole. That would be you for making dumb analogies and making false claims about the situation.
Big deal. Creditors often have to restructure debt. If you want to make these dumb comparisons with individuals, then any individual who was running a “primary surplus” could go into bankruptcy court and have the court rewrite the terms of their debt. Corporations routinely restructure their debt (either through negotiation or in bankruptcy court).
A debt restructuring is not a “donation.” But, thanks for giving us a post that’s both a morality play and a sunk-cost fallacy.
Greek debt as a percentage of GDP was around 110% at the height of the crisis. Now, after years of doing what the IMF, the ECB and the German government have been making them do, their debt-to-GDP ratio is more than 175%. Even though the Greeks are running a primary surplus. This is because each time the Greek economy contracts, it becomes more and more difficult to pay off the debt and the debt ratio gets worse.
And everyone’s solution for this is to go to the Greeks and tell them to do even more of the stuff that they’ve already been made to do. Even though this is making it more and more difficult for the Greeks to pay down the debt.
[quote=“zoid, post:68, topic:724353”]
[/QUOTE]I say… it isn’t our problem. Let Greece deal with their own issues.
After all the money the Greeks have burned through, they should have:
Instead, they took the money and had a huge party - raises for the corrupt government employees, more of them, lowered the retirement age and generally screwed around until it was time to go back and say “yeah, yeah, where do I sign?” and get another 50 billion or so.
Now it’s a big deal if they promise (what is their word worth by now?) to cut 1/10 of the spending they used incurred wasting the previous loans.
So, ironically, austerity worked and now they want to leave the EU?
They can then rest on inefficient markets, a broken tax system, and unsustainable pension liabilities. Whoop-dee-doo.
I can see their creditors offering a debt restructuring/write-down as a reasonable compromise along with fixing the structural problems that remain. Greece seems to struggle with their end of the bargain.
If indeed Greece’s finances are in such good order as you claim, bailout liabilities notwithstanding, then they should leave the Eurozone. However, the minute they need to borrow, they face the consequences of ruined credibility. And we all know, history as our guide, that they will need to start borrowing pretty quickly…
Having high unemployment and an increasing debt-to-gdp ratio is not working. It’s the opposite of working.:rolleyes:
I doubt you actually know what reforms they’ve already undertaken at the behest of the IMF. You just want to keep repeating this.
Following the Troika’s recipe only keeps making things worse and worse. “Structural reform” is a red-herring.
Well, I think they should leave the Eurozone. It’s clear that nobody in the EU wants to fix the Eurozone, which means that this type of crisis will just keep popping up over and over again.
But, countries default or restructure debt all the time, and they survive and in many cases end up better for it. Some of us are actually using history as our guide here. You aren’t one of them.
Yes, the Greeks had a huge party that ended seven years ago. What did the Spanish do to deserve their mess? Or the Portuguese? They both had decent debt-to-gdp ratios on the eve of the crisis. Is that considered a party too?
Latvia has an excellent debt-to-gdp ratio. And at one point their unemployment rate had shot up to 20%. Were they partying?
See, you’re exactly one of the people I’m talking about. You aren’t actually interested in trying to figure out why the Greeks are doing so badly now. You aren’t interested in trying to figure out how to fix the problem. And you certainly aren’t interested in trying to get maximum payout back to the creditors. What you want is to conduct a morality lecture.
If we’re going to conduct morality lectures, let’s just go full out on them:
[QUOTE=The Bible]
And if you lend to those from whom you expect to receive, what credit is that to you? Even sinners lend to sinners, to get back the same amount. 35 But love your enemies, and do good, and lend, expecting nothing in return, and your reward will be great, and you will be sons of the Most High, for he is kind to the ungrateful and the evil. 36 Be merciful, even as your Father is merciful. ESV Luke 6:34-35
[/QUOTE]
I can do morality lectures too.,
Brightnshiny, I understand that individuals are not the same as sovereign governments. I tried to provide an analogy you might understand, and obviously I failed.
You are the one casting this in moral terms. My point is the the lenders refuse to make a new loan unless there are changes they believe will make repayment likely, or else they choose to not lend. I believe they should be able to do that. You are the one talking about the guilt of various parties leading up to this.
A “debt restructuring” which involves the creditors getting less than they’re entitled to per the original terms is a donation. It is a transfer of wealth from the creditor to Greece, for which they receive nothing in return.
Primary surplus is a neat concept - “we’d be doing ok if only we didn’t have to pay some of our obligations” . Pretty useless. If it is a true primary surplus, which I seriously doubt given past shenanigans in Greek bookkeeping, all it means is that if Greece defaults, they can avoid going to the capital markets for a while.
And how is asking for a new loan not asking for a new loan?
Again, if you feel the people of a Greece are getting a raw deal, I concur. Where you feel that the existing creditors should pay to make this go away, I disagree. I think you should pay for it. The only thing I was incorrect about is that the place where you can contribute is on IndieGoGo, not Gofundme. They’re at nearly 2MM, and could use your contribution.
The Irish didn’t deserve this mess, either. Our ridiculous debt levels are due to politicians who bailed out bankers, who were overleveraged due to unregulated real estate investment (much like Spain), whose lending largesse was made possible by German and French banks shifting capital to the periphery to get the best return, knowing that they would in turn be bailed out by their own nations’ politicians acting at their bankers’ behest.
Spare the morality bullshit, Stringbean, Isosleepy, et al. This fiasco has very little to do with Greek misgovernance.
Watching the vote on a friend’s BBC, I was struck by the fact that always the MSM speaks as if we were tiny kids, and never goes into specifics about what exact measures are done/proposed or the effects of so doing. Plus the fact that those who voted No would include most of the poor, and that there would have been a lot more poor thanks to the previous austerity measures.
So I looked it up on Wikipedia, suitable for a non-economist, and the Greeks have had 7 Austerity Packages. Including the rape of privatization, and pension cuts, and lower government pay. I dunno how much more can be cut. — Most of the profits from their sacrifices go to the banks.
Greek government-debt crisis countermeasures
[ Each Austerity Package has it’s own page unfortunately. ]
Main:
And now China is entering a financial meltdown. Maybe the moralists can explode over the greedy Chinese factory workers/peasants/unemployed as a change.
Your analogy is stupid, and anyone drawing facile analogies to individuals doesn’t understand what they are talking about.
The Greeks have already made changes, which is a concept you can’t seem to understand. They keep making change after change demanded by the IMF, and all that happens is that their ability to pay off the loans gets worse and worse. The lenders are the ones causing the problem now.
Uh, no. You can restructure debt so it has the same NPV as the current terms. You can even restructure it so it has a better NPV and still give temporary debt relief to the borrower. Restructuring debt is not a donation. I think it’s pretty clear you don’t understand what NPV is, so you aren’t in any position to lecture anyone on this topic.
Secondly, if we’re talking about the ECB’s or IMF’s portion of the debt, then there isn’t a wealth transfer anyway, since they can essentially print money to float the restructure until the loans are paid off. They aren’t going to “lose” any money if they have to wait a hundred years to get paid.
The point about bringing up primary surplus is that it is clear evidence that the Greeks have already signficantly restructured their economy. It’s to rebut assholes like you who want to pretend the Greeks haven’t been doing anything.
Stop repeating the same stupidity. Restructuring existing debt is not asking for a new loan, no matter how many times you want to pretend it is.
I’ve done my share of paying during the US mortgage crisis. I paid in service cuts and increased taxes. I paid for AIG’s bonuses. I paid off the bank’s private creditors.
Plus I do donate to a group that does charitable relief in Greece. But again, this shows what a moron you are. We are talking about about a country-wide economic problem and an EU-wide economic problem. An individual making a donation isn’t going to make a dent in what’s going on.
And, yes, you are the one trying to turn this into a morality lecture by bringing up the idea of donating to Greece as some form of solution. We know exactly what you are doing. Give it a rest.
Thank you for this. The Greeks keep restructuring and cutting and restructuring and cutting, and their ability to pay of the debt gets worse and worse each time. It’s clear the people pushing these austerity packages are incompetent (or maybe they have another agenda than getting paid back). And there are a bunch of people in this thread acting as if the Greeks haven’t done anything at all.
Part of the Greek debt is a result of this as well.
The bank’s private creditors knew full well that if the bank failed, they would get pennies on the dollar. Instead of doing that, though, the elites decided to “restructure” the debt and pass it on to the public. So, when private debt is restructured and passed on to the public, that’s perfectly okay. When “wealth is transferred” from the public to private creditors, that’s perfectly okay.
But, God forbid you should restructure debt held between public institutions, because that would be wrong and a “wealth transfer” (even though when we’re dealing with something like the IMF or the ECB, it’s not actually a wealth transfer).
If you wanna talk about nations bailing out other nations, don’t begin with sob stories about little old Athenian ladies. THAT is the stuff of a morality lecture.
This whole thread has been one long morality lecture. I didn’t start it, but I can play that game too.
But the reason I brought up the little old lady was to point out that the people who make moral hazard arguments are going after the people who had nothing to do with creating the hazard in the first place, instead of actually dealing with the bad actors. The pain of the moral hazard problem is being put in the wrong place.
Anyway, why don’t you just admit your a dipshit who has no idea what austerity or structural reform measures the Greeks have taken to date? Why don’t you just admit your an idiot who (as usual) is talking out of his ass? That will save us all a lot of time.
Brightnshiny, clearly reading for comprehension is not your strong suit, and your understanding of the situation is at best suspect (the idea that any restructuring of Greek debt would arrive at the same NPV is laughable and made me briefly think you were jesting). Ignorance combined with passion makes for poor discussion, so I see no point in further debating this with you, as you will only read what you want to read, and then respond by calling names. I’m sorry you had a bad experience in California a few years ago, hope things are better for you now.
Fuji, I have no morality angle here, other than this: My point is simply that lenders should have the ability to state terms for new loans, even if they are unpalatable to the borrower. The borrower has the option of not taking the loan, even if that has catastrophic consequences. The lender should not be forced to make the loan if they believe it will not be repaid, the borrower should not be forced to take the loan, even if that means defaulting on other, older loans, and even if most of the lenders are countries rather than banks
I believe the logical action for Greece is default to some, possibly very large, extent. This is screwing over the lenders of that debt. However, that is exactly what interest rates are for - they are a reward for the time value of money and the (typically very small) risk of default. The lenders severely misjudged the default risk(*), and will bleed for it. Greece will suffer - default will mean very limited access to capital markets for some time. This suffering is not something the Greek people somehow deserve, it is a consequence of actions taken in the last 14 years, by Greeks and non-Greeks. I don’t wish this on the Greeks, and I don’t think it’s somehow right that they suffer. I do believe that past Greek governments had a large part in creating these issues, and that there is nothing wrong with pointing this out. I take issue with the notion that all this is somehow the result of the current reluctance to lend Greece on anything other than very restrictive terms - this mess was made over many years.
*severe oversimplification: the original lenders misjudged the default risk on the original loans and took a hit with the first restructuring in 2010, a number of nation-states then either misjudged or chose to ignore the risk and took over most of the restructured loans in an attempt to bail out private institutions from the remaining exposure, and the ESFS (now ESM - but still ultimately just European governments) shoveled some more money in in 2012.