I thought that was David Byrne. 
Bank holiday. Referendum in a few days. Hm. I predict that Greece will give up the Euro within a month. It’s about time. Even money confidence: I wouldn’t give odds.
Could someone provide some references for this statement?
I have been reading the opposite: 1. the government was running a surplus when the latest government took over but there has been a substantial decline since then. 2. While the government is current on payments to government employees and pensioners the government is extremely slow to pay for other stuff–drugs for example.
Imagine a household that earns $100 a year, spends $98.5 a year, and has $175 in credit card debt. These numbers are real–they correspond, in percent of GDP, to Greece.
The household says that they are “already doing the right thing” and they expect to pay down the debt in a mere 116 years. The household’s creditors, however, point out that the debt is due today, and don’t want to loan more money unless the household reduces its spending or brings in more money.
Greece’s creditors dictate the specific reforms that Greece must take because Greece cooked the books before the financial crisis and isn’t trustworthy. In other words, if the creditors tell Greece to meet a specific surplus, Greece might just lie and claim they did, or lie by saying that they will reform things but actually do nothing. Moreover, the creditors are under no obligation to loan more money to Greece. They can attach whatever conditions they want to their money. All is fair in love, war… and international finance.
PastTense makes another point, which is that the primary surplus is essentially temporary and borderline fraudulent.
[QUOTE=RTFirefly]
Greece is, by all accounts, running a decent primary surplus - IOW, if you take debt payments out of the picture, they’re taking in more than they’re paying out.
[/QUOTE]
Unfortunately, it is difficult to trust what the Greek government says about its finances, and it isn’t necessarily “by all accounts” that they are running a surplus.
Regards,
Shodan
Tru dat, but an opinion piece by someone I’ve never heard of isn’t the sort of thing I tend to find convincing.
What sources did you rely on for your understanding that they were running a surplus? Maybe I can dig out something of roughly the same level of credibility.
Regards,
Shodan
Many Dopers in the thread seem pro-austerity. Here’s a respected opinion that Greeks should vote “No” on increased austerity.
Perhaps not necessary, but logical. Inflation or devaluation are natural responses to such a crisis, but are unavailable if they stay with the Euro. Moreover, with Greek cut off from credit, the Greeks may need to print scrip; then Gresham’s Law would operate, effectively moving Greeks off the Euro anyway. And, if bank account balances in Euros were changed overnight to Greuros, the government could prop up the banks.
While the so-called troika demands austerity in part for the benefit of big banks of Germany, etc., I think some of the pro-austerity Dopers see this as a morality play: austerity will punish sinners! Unfortunately, as usual, the austerity will publish Greece’s already-devastated lower class, while benefiting the vested interests which most benefited from the early profligacy.
Krugman is highly competent but also highly biased and is not a respected source to anyone right of center, especially when he writes for the general public. You might as well link to Zerohedge.
Again, much of what is deemed ‘austerity’ is common-sense reforms that basically amount to stopping the government from wasting money. Even if Greece’s debt was wiped away overnight, they still are barely running a balanced budget and face substantial future problems (like an aging population) that will ensure crises will reooccur without economic reform.
Greece is no longer running a primary surplus. Greek tax intake has also collapsed since Syriza came to power as companies and individuals deferred paying tax in case emergency levies were enacted.
Incidentally, Krugman has consistently failed to understand this crisis, whether intentionally or not. This crisis is political, not economic. Krugman sitting in his ivory tower lecturing everybody on the best course to take from an economics point of view is helping nobody. The fact of the matter is that there are several countries in Europe significantly poorer than Greece that are being asked to contribute to Greece’s bailout. Why should the Slovakians and Bulgarians bailout the Greeks when their own populations get by with substantially poorer public services and pensions? Further, the structure of the Eurozone means that any bailout must be overseen by various national parliaments, some of which (e.g. Finland) now have a significant Euroskeptic contingent. Lastly, Syriza coming to power and demanding reparations from Germany for Nazi War Crimes hasn’t exactly done them any favours.
It’s not just an economic point of view, it’s a magical economic point of view that ignores most of economics.
A bailout (quantitative easing, etc.) works by allowing the economy to not continue going under, after a crash, while the problem that caused the crash is tracked down and amended so that market confidence returns and businesses can adapt to the new systems. That is to say, there’s a certain real world logic to it. It’s not just a magical lever that makes everything better.
It’s like giving someone a winning lottery ticket. Used wisely, that money could do the winner a lot of good in their life. Used unwisely, and it’s going to do nothing or (potentially) do something harmful. Money isn’t a magical panacea. It’s just gasoline, to be used productively or to be burned up in a big fancy fireball (that might accidentally burn down your house).
Krugman treats it like a magical panacea.
“Going into the Eurozone with Greece is like going into business with your drunken brother in law.” - Charlie Munger.
Sorry to hear that people who are right of center reject the opinions of a highly competent economist with a pretty good track record, just because he has left-of-center opinions. Because they might have some, you know, facts behind them.
Feel free, though, to give an example where his biases resulted in his being wrong on something.
You lost me there. It’s not like you can separate the two.
Particularly, if you say that the diverging lines in the graph at this post (between the IMF 2010 projections and reality) are simply due to politics, not economics, let’s hear your story. (Gonna be tough to blame that on Syriza.)
The primary surplus that has gone away was never enough in the first place. The possibility of going off the Euro set off a slow motion run on the banks. As Greek banks were being drained of funds the European Central bank stepped in to keep the banks solvent. As soon as the Greek government defaults the ECB will stop the support for banks and the Greek government does not have enough money to keep the banks solvent. So they have instituted capital controls to try to keep the banks solvent. Unfortunately capital controls are almost as bad as bank runs. The Greek economy will be starved for capital and contract. Syriza has called a referendum as a way to avoid the blame for the contraction. If the vote is no then Greece will leave the Euro and the contraction really starts. If the vote is Yes then we will continue on in this limbo where everyone pretends there is a possibility of Greece paying the money back, while the Greek economy slowly crumbles.
What Greece’s creditors don’t understand is that it is not a normal European country. In a normal country if a government wants more money they raise taxes and everybody grumbles but pays up. In Greece if they raise taxes, everybody grumbles and decides not to pay.
The best case scenario is Greece decides to reform its economy, does what the troika wants and their economy starts growing again. There is almost no way this will happen. The troika is making the perfect the enemy of the good. The worst case scenario is everyone agrees to keep pretending the money will be paid back, the ECB continues to do a horrible job and Greece continues to slowly crumble. What will most likely happen is that people will finally have to accept reality. The Euro was a bad idea, Greece is never going to have the money to pay its creditors, does not have enough good government to reform its economy, and is not an advanced economy. They will have to leave the Euro, accept a contraction in the economy, revive the Drachma, and start growing again in a year or two.
I’m center of center and Dr. Oz is a real doctor and award-winning surgeon.
The Greek (working age) population should move to Germany-they can get jobs there. The rest of the country should become a tourist theme park.
Except that everything Krugman predicted has come to pass and nothing the austerians claimed has. By imposing severe austerity, Greece has sent its economy, which has made their receipts go down the tubes. Krugman predicted that this is what would happen and the austerians predicted that it would lead to economic revival, which hasn’t and won’t happen.
Just as another example, Krugman predicted that the US economy would slowly recover on the basis of mild government interventions. The “deficit scolds” (his term) predicted that unless the US instituted severe austerity, inflation would run rampant and interest rates would go sky high. Like they have.
Yes, nobody on the right credits Krugman, but nobody on the right is the least bit interested in evidence.