In the news media (e.g. NPR, BBC, CNN, etc.) there is a dominate consensus that Greece must eventually give in to demands to reduce pensions and make further cuts in government spending in exchange for a new loan to help pay off defaulted loans, even if acknowledging that the Greek people have high unemployment and a failing economy.
However, for those not yet exposed to an alternate perspective which is not generally aired in the news media, you might read this bit of a rant by Prof. William K. Black. William Kurt Black is an American lawyer, academic, author, and a former bank regulator. Black's expertise is in white-collar crime, public finance, regulation, and other topics in law and economics. He developed the concept of "control fraud", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud. In this piece, William Black make ssome some interesting points about the Greek crisis, of which I cut and paste a few excerpted points:
1. That economists overwhelmingly believe on the basis of theory and experience that austerity in response to a Great Recession constitutes economic malpractice akin to bleeding a patient until it restores him to health.
2. That austerity has caused, as predicted, a human catastrophe in Greece
3. That austerity and the oxymoronic "labor reforms," by reducing wages and the safety net throughout the eurozone, the bailout of German banks, and the sale of Greek infrastructure and islands to wealthy Germans at fire sale prices are very much in the interests of the elite German corporate and banking CEOs that dominate domestic German politics, the Germany economy, and the troika
4. That when a debtor has unsustainable debts, the normal and desirable response is to negotiate a troubled debt restructuring (TDR) to reduce the debt to a level that can be repaid. Even the IMF, the mother of monstrous austerity, admits that the Greek debt is unsustainable.
5. That a TDR was done for German[y], which was essential to its economic recovery. (after WWII)
6. That the Greek "bailout" was a bailout of foreign EU banks, primarily French and German – not the Greek government or people. That bailout of the eurozone's largest banks is funded by eurozone taxpayers. The muted reaction of the commercial markets to the Greek "No" vote is largely attributable to the fact that the bailout of French and German banks by eurozone taxpayers has been completed. The remaining loss exposure of the large eurozone banks on the loans they made seven or more years ago to Greek banks is tiny. The reason EU elected officials are so apoplectic to the Greek "No" vote is that the eurozone taxpayers are on the hook because they bailed out the (primarily) French and German banks. If the eurozone taxpayers suffer losses in the range of one hundred billion euros those taxpayers might turn on those EU elected officials who represent the interests of elite bankers at the expense of the peoples of the eurozone. The NYT article ignores all this and, without any analysis, treats the bailout as if it were a bailout of the Greek people.
To me it this final point which resonates after witnessing the the U.S. bailout of to-big-to fail banks after making a number of risky (sometimes fraudulent) loans to homeowners.
(Score: 4, Insightful) by bradley13 on Friday July 10 2015, @08:25AM
There's no doubt at all that the bailouts were primarily intended to aid the European banking system, rather than Greece. Really, I don't know of anyone claiming otherwise.
However, this is completely separate from his austerity point. Yes, austerity has hurt a lot of individuals. However, as a country Greece was following in the footsteps of almost all other Western countries, spending far more money than it was taking in. These overall debt levels have not yet come home to roost, but who really doubts that they will?
Greece has the further, specific problem that it cannot just print more money to inflate its way out of debts. Essentially the rest of the Eurozone is doing this, but Greece needs a lot more inflation to balance its debt. The US is the poster child here, with a long-term inflation rate approaching 10% [shadowstats.com] (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect). The fact that inflation is essentially a huge, indirect tax on savings and pensions - essentially stealing from your population? Nah, we won't mention that...
Sooner or later, the debt monster is going to come home to roost. That is going to be a damned painful reckoning, worldwide.
Everyone is somebody else's weirdo.
(Score: 2, Interesting) by anubi on Friday July 10 2015, @09:09AM
The whole concept of fractional reserved banking seems to have an illusion of "helping" others afford things they otherwise could not, but in practice tends only to enslave the borrower... as now the repayment of a loan plus usury now requires additional "dollars" that are brought into play only by issuing yet more loans.
The banker ends up owning everything, yet had to produce nothing but forms and handshakes to "earn" it.
I believe the US is fixing to see our debt come back to bite us pretty soon. I see lots of retail stores ( mostly fashion junk ) closing around me, but I am waiting for the other shoe to drop as the Christmas season approaches with people maxxed out on debt. A ceasing of the lower classes to spend at the mall will send ripples all the way up the supply chains. Every dollar taxed from the lower income people is a dollar that did not go into a local business till. As our Government looks for more ways to tax the little guy to have money to motivate the rich guy, I see a cascade of business failures in our future.
Incidentally, there is a lot of buzz on the net concerning September 23. A lot of it concerns a meteor impact with Earth, which I consider extremely improbable, however a lot of it also concerns a collapse of the economy brought on by too many people in debt, with riots and ensuing military action being prepared for. There is also a significant amount of buzz about Wal-Marts being repurposed as military supply depots, as Wal Mart has the worlds most advanced logistics systems in place.
I am also noticing the powers that be are really pummeling late-night TV with seminars on house flipping. I noted the exact thing happened just about a year preceding the 2008 crash, and these things happen about every seven years. My speculation is that we are nearing the "power stroke" of the economic engine transferring wealth to the rich, and they are trying to get as many proles as possible to plunk down any money they have into real estate - whose value is extremely dependent on loaned money - whose availability is also controlled by the elite. Deliberately crashing the economy allows them to foreclose and the little guy lose what little he had in the first place.
All by pandering to greed, bait, and switch.
I remember watching Bernake hike the FED rate, subsequently bringing the whole world economy down via debts that could not be repaid. I am seeing the new Fed chairman making noises about doing the same thing... but this time the fed funds rate is zero. If the economy is crashed again, this time, how will they "add liquidity to the market by reducing the interest rate" if the interest rate is already zero? I feel our economy is already like a jet airliner soaring ten feet above the ground, and the pilot is considering moves that may stall the plane?
Consider these charts [google.com] of how we have traded "growth" for debt since World War II ( when we were the only industrial nation on this planet not bombed out ). It looks like we are completely out of cards to play to coax more dollars into circulation by dropping the interest rate. Now, debts are coming due, and the little people flat do not have the money to pay all the hands that are now outstretched... not with a pen and a shake, but for their payment: not only principal but usury as well. People are already going further and further into debt just to pay usury!
I believe we are one signature away from a global financial meltdown, as on paper, a very few banking elite "own" everything, but when they try to take possession of it, riots will ensue. All it will take now is just one head to be placed in front of the FED microphone and it hocks up a rate hike.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 2, Interesting) by caffeine on Friday July 10 2015, @09:46AM
It is my understanding that most economies operate on endogenous money supply rather than a fractional reserve system.
To me the big question is, if money can be created at zero cost as needed by the economy, why does it come with interest attached?
Why don't we just create what we need to do what is needed and ensure low unemployment, the money is destroyed whey the debts are repaid. No need for interest and no need for the banker class.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @10:23AM
I know that interest is a red flag for the left, but it is an important regulator in a market economy. You can't just "create what we need", because usually you don't know how much that is, and even if you did, you wouldn't know who would need it and who would just want it. That is also why people get uneasy when central banks lend at close to or even under 0% interest. Economies which nevertheless do "create what we need" sooner or later end up with hyper inflation (see Venezuela for a current example).
(Score: 1) by caffeine on Friday July 10 2015, @12:59PM
Most currencies are floated and the market defines the exchange rate. This makes it fairly easy to drive any country into hyperinflation by devaluing their currency and making their debts impossible to repay. Surely the Germans understand this after WWI reparations drove the Weimar Republic into hyperinflation.
In my opinion, employment rates are a good indication of how much money is needed to grow the economy.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:13PM
Yes. Modern Monetary Theory often say the aim should be 100% employment
(Score: 2) by Runaway1956 on Friday July 10 2015, @02:46PM
You err. The government can indeed "create what we need" - the Fed does it all the time. I think that GP's question was, "Why are we paying interest on it?" THAT is the 64 trillion dollar question. We owe the banking cartel nothing - we can start printing our own money any time we take a mind to.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @02:51PM
No you can't. Well, at least not for long. Because then you'll get trouble with the authorities.
(Score: 1, Informative) by Anonymous Coward on Friday July 10 2015, @07:16PM
You didn't make it clear in your comment that, despite its deceptive name, The Fed (The Federal Reserve) in -not- part of the gov't.
It's a cartel of 12 private banks--with a really sweet deal:
When USA.gov collects taxes, it just hands that over to those private bankers--no payment required; no interest charged.
The Federal Reserve Act of 1913 was a giant windfall for the largest private bankers.
Ellen Brown has noted that an allegory of those times, disguised as a children's tale, is The Wizard of Oz. [google.com]
-- gewg_
(Score: 4, Informative) by Runaway1956 on Friday July 10 2015, @02:43PM
"why does it come with interest attached?"
Because, our congress abdicated it's right and responsibility to print money, and ceded that right to a private banking institution, which is profit driven. When "Greenbacks" were still in circulation, government still had a controlling influence over the economy. As those government-issued notes were phased out, congress lost all ability to control the economy. Today, if congress wants to exercise some influence on the economy, they must first ask permission from our "Central Bank", or Federal Reserve.
The banking cartel owned our asses before any of us were ever born.
(Score: 1) by khallow on Friday July 10 2015, @04:17PM
To me the big question is, if money can be created at zero cost as needed by the economy, why does it come with interest attached?
Because it can't be created with zero cost. Inflation is the huge problem with arbitrary money creation.
Why don't we just create what we need to do what is needed and ensure low unemployment, the money is destroyed whey the debts are repaid. No need for interest and no need for the banker class.
The thing is, we don't need more money. We need things. Merely having more money doesn't feed you or mentally stimulate you. And really aside from the rent seeking, there's nothing wrong with the current currencies.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:11PM
Yes, but this is the point isn't it. It has nothing to do with debt denominated in one's own fiat currency. It has to do with inflation and deflation. Right now inflation is not the problem. We have low inflation. Fiat creation of money would not be a problem at first, but as inflation creeps up you lower the spigot, or raise taxes to maintain control of the rate of inflation.
but it doesn't have much to do with debt. Debt just means we have made a contract to create money out of nothing to pay for the interest. If those interest payments get too high as to inflate the currency, then we have a problem...But thus is just a sliver of the number called debt.
(Score: 1) by khallow on Saturday July 11 2015, @12:10AM
Right now inflation is not the problem. We have low inflation.
But if you create a bunch of money, you make it a problem.
Debt just means we have made a contract to create money out of nothing to pay for the interest.
No. Debt is the borrowing of current wealth from another party and paid for from future income.
(Score: 1, Insightful) by Anonymous Coward on Friday July 10 2015, @10:15AM
The U.S. would not have as much debt if corporations paid taxes. Instead we let them hide money in foreign countries so they can sneak out of paying. It is high time that the bank owners and corporations started seeing hard jail time for their financial schemes. I am still waiting for the Goldman Sachs guys that sold everyone on mortgage backed securities being a sure thing get their long jail terms.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @11:14AM
You will have to include ratings agencies that gave AAA ratings to those Mortgage-backed securities.
And being the devil's advocate:
The role of a bank is to satisfy its customers requests, not think of their long-term financial future and security. If someone wants to buy MBS's, sell it to him.
(Score: 3, Interesting) by Runaway1956 on Friday July 10 2015, @02:50PM
Let the buyer beware, ehh? Never mind predatory business practices.
In MOST sane and rational societies, sales of those toxic securities would be called "extortion", "graft", "fraud", and several other things.
But, you're cool with fraud, so long as the Good Old Boys on Wall Street are committing it.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @07:56PM
EU banks make risky loans to Greece for high profits. Greece can't pay. EU bails out bankers, American style. Greece only gets more loans at the expense of every day Greek retirements.
(Score: 4, Interesting) by M. Baranczak on Friday July 10 2015, @12:28PM
The US is the poster child here, with a long-term inflation rate approaching 10% (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect).
That is one way to look at it. Here's another:
7 years ago, various crackpots were predicting that runaway inflation would hit the US any moment now. In reality, inflation stayed low, but the crackpots never admitted they were wrong, they just started fudging the numbers.
(Score: 4, Disagree) by threedigits on Friday July 10 2015, @01:23PM
The fact that inflation is essentially a huge, indirect tax on savings and pensions - essentially stealing from your
populationrich? Nah, we won't mention that...FTFY.
The truth is, inflation is only a problem for those wanting to live of interests and rents. For people living from their own work, without big long-term savings (or those with mortages or other debt) usually benefit from it.
(Score: 2) by deimtee on Saturday July 11 2015, @02:01AM
Inflation steals from the middle-class by erosion of their savings and defined benefits, and from the poor because wage increases always lag price increases.
They get a slight benefit back by the decrease in value of any debt they hold. Note that this benefit is always less than the interest they are paying on that debt.
The rich don't hold much cash, and they benefit far more from the above two effects than any piddling losses in the cash they do hold.
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @04:55PM
The US is the poster child here, with a long-term inflation rate approaching 10% (officially it's a lot lower, since the index was been carefully redefined in the 1990s to produce this effect).
This assumes that this 1990s system is correct. The description in the website doesn't really go into it, so I could see it either way. It could be the 1990 number overstates inflation or the changes are all politically motivated to mask the real inflation numbers. For example (all the following are hypothetical):
1) The previous system said "lard is a staple food and so counts." That's more difficult to find now and thus expensive, so this would overstate inflation. Likewise if it said "computers are not a staple consumer good so doesn't count" would likewise overstate inflation as computer prices have gone down.
2) The previous system included things like education and healthcare, but then these were subsequently removed to make inflation numbers appear lower.
Clearly there is a lot of politics (and economics) behind the inflation numbers. To what extent these influence the current official inflation rate, and whether they overstate or understate inflation, is more difficult to say.
Ignoring all the official facts and figures, do you honestly feel like everything costs 10% more each year (assuming you live in the US)? Or just take this year compared to last year. Speaking for myself, I sure don't. Things are creeping up in price, but certainly not 10% each year.
(Score: 2) by monster on Friday July 10 2015, @05:18PM
Well, there is a lot of people saying that the greeks must pay their debts, even in Soylent News, as you can see in the story about the greek referendum from some days ago.
Given that most of the people weren't responsible of the debt and that the bailouts were an aid to the creditors, why should they now bear the weight of paying them off?
There's a lot of misinformation and prejudices going on in this whole affair.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @06:03PM
I hear this all the time. If the whole world is in debt then the world blows up? Who are the owners of these debts? Debt is a number. Money is paper. It is a tool, and when that tool no longerworks, it is discarded.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @09:59PM
Sure, in the end it's all just a few numbers, which may not mean much after all is said and done. But in the meantime, those numbers right now still do have meaning, because we humans give them meaning. Try telling the bank that you won't be paying your mortgage because "it's just a number". I bet they will not be amused.
When a large number of people have so much debt that they become extremely cautious about spending money, then society slowly grinds to a halt, as businesses receive less revenue from sales, manufacturers and builders receive less orders. Businesses faced with lower revenue cut costs or close up shop, leading to more unemployment, which brings even more people into financial trouble. The whole thing creates a positive feedback loop that is devastating to society.
Sure in the end, maybe there will be some giant economic restructuring by governments to remove debt, maybe change currency, but in the meantime, there is chaos.
(Score: 2) by Gravis on Friday July 10 2015, @08:26AM
2. That austerity has caused, as predicted, a human centipede in Greece
i'm glad they haven't completely lost their minds.
(Score: -1, Troll) by Anonymous Coward on Friday July 10 2015, @08:58AM
The human centipede was German, not Greek. Had it been Greek, it would have been all boys, joined penis-to-mouth.
(Score: 3, Insightful) by Anonymous Coward on Friday July 10 2015, @08:55AM
You know that, right? Syriza is literally "the radical left". Tsipras joined the communist party at the age of 16.
With that out of the way, the humanitarian crisis was caused by Greek administrations failing to actually reform the country, even though Europe bought them 5 years time to do it. Greece was and is in a crisis because it spent much more than it earned and, caused by the US mortgage crash and the ensuing global banking crisis, private investors shied away from the rapidly growing sovereign debt that Greece was taking on to pay for its spending spree. Austerity does not mean starving the poor. Austerity means that that the government needs to control its revenue and spending to be in line with each other. Choosing who gets taxed more and whose budgets get cut leaves much room to avoid humanitarian catastrophes.
The Greek debt was very sustainable until Syriza's rise to power caused capital flight and crashed the economy starting at the end of 2014. Syriza failed to control the capital flight right until the European Central Bank froze the ELA limits, which forced the installation of capital controls, a necessary measure which should have been done months earlier, but nevertheless prompted the Greek finance minister to call the other Eurozone countries "terrorists" for forcing Greece to close the banks. Already in 2012, European creditors (then including private investors like European banks) gave a haircut, which reduced the absolute amount of debt, and they additionally lowered the interest rates and pushed the due dates for both interest and repayment far into the future. The debt that remains to be paid before 2020 is due to the very organizations that are the loudest about debt relief for Greece. But the IMF and the American vulture funds won't forgive the debt THEY hold, will they?
Europe had to choose between bailing out Greece, Italy, Spain, Portugal and Ireland, and in extension the banks and private investors who held their sovereign debt, or let these countries default right then and there, let the EU fall apart and crash the European banking system, possibly leading to a global financial system meltdown. The US, where most of the critics of European policy come from, let a single small bank crash and look what that caused. If you keep bringing up the bullshit argument that Europe didn't help Greece but only did what it did to funnel tax payer money to private investors, I just can't take you seriously. Remember that Greece did not just get cheap credit to pay off expensive credit (which saved them untold billions in interest payments, but more likely instant default), it also got two actual haircuts on already humongous debt which Greece had amassed before the ECB and the Eurozone countries even got involved.
It is ironic that we give kids allowances so that they can learn to manage their money, and if they still haven't learned not spend more than they can afford by the time they're teenagers and get into debt with excessive spending on mobile phones, we shake our heads reprehensively. But if a country is told to stop spending more than it can afford, we're told "austerity" does not work, and we're bleeding the patient dry without curing him.
(Score: 2) by dusty monkey on Friday July 10 2015, @09:42AM
The Greece import/export deficit is 2:1. Sustaining this requires the system as a whole to offset the extra 1 every year, by the sum of both public and private debts as well as foreign investments. The governments credit line stinks, so the only way to really get this kind of offset is to make it attractive for foreign capital to come and play. Unfortunately for them the place isnt attractive to investments.
- when you vote for the lesser of two evils, you are still voting for evil - stop supporting evil -
(Score: 3, Informative) by jcross on Friday July 10 2015, @12:47PM
This is an interesting take on the import/export issue and why that might be the case:
http://thehill.com/blogs/pundits-blog/international/246834-what-the-euros-current-difficulties-really-mean [thehill.com]
The summary is that Germany and Greece sharing the Euro makes the Euro less valuable as German currency and more valuable as Greek currency, such that German exports are helped while Greek exports are hindered, naturally creating a fiscal imbalance between the two countries. The situation is compared to the more and less urbanized parts of the US, where the imbalance is resolved by transferring money in the form of disproportionate federal spending, but the Eurozone has no equivalent process available.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @01:10PM
The European Union also transfers money through more spending in regions that need it and collecting more in regions that can afford it. Greece has been a major beneficiary of that system. The one thing that Europe doesn't have is that a broke member country isn't put under federal insolvency administration, whereas the US would not just let a broke country keep spending as they please. I don't even want to think about how that would go down with the "proud Greek people".
(Score: 3, Insightful) by Anonymous Coward on Friday July 10 2015, @10:01AM
There have been challenges here to show a single time that "austerity" [alternet.org] has ever worked to improve things for a country's economy.
No one yet has accepted the challenge.
Big hint: Eating the seed corn is a guaranteed loser.
The way you get an economy revved up is with the Multiplier Effect--ordinary people making ordinary purchases.
.
In contrast to the places that have tried "austerity", Iceland took a look at IMF's plan and told their crooked bankers to pound sand.
After a short spell of belt-tightening, Iceland is doing fine (compared to Cyprus). [googleusercontent.com] (orig) [dissidentvoice.org]
Too bad Greece wasn't quicker putting in a REAL Left gov't. [googleusercontent.com] (orig) [commondreams.org]
...and most of what has been coming out of the EU about the Greek situation has been lies. [globalresearch.ca]
-- gewg_
(Score: 2, Insightful) by Anonymous Coward on Friday July 10 2015, @10:15AM
So what you're saying is that the north European countries like, oh I don't know, Germany, would not be such economic losers if they abandoned their "living within their means" dogma? Schäuble should just go hogwild with investments, "black zero" be damned, and Germany would turn into an economic power house?
There is a distinct difference between "eating seed corn" and "making sure you don't have to eat seed corn". Greece was spending borrowed money, not investing it. In a way that is eating seed corn.
(Score: 1, Insightful) by Anonymous Coward on Friday July 10 2015, @10:42AM
I already said that Greece needed a true Left gov't earlier.
I already said that taking advice from IMF is dumb.
Insanity: Doing the same thing over and over and expecting different results.
Isn't it interesting how Germany had their own debts written down after WWI *and* after WWII?
Why won't they do that for Greece?
Why won't Germany pay the debts they still owe Greece from WWII?
Answer: They're still Nazi bloodsuckers.
The Eurozone doesn't work for small, poor countries.
Though it was sold as a protective league, the Big 2 are exploiting the small fries and will continue until they are bled dry.
The smart thing will be for those exploited countries to exit.
Iceland and Argentina offer much better models than Ireland and Cyprus.
...and you need to turn off Faux Noose.
It's filling your head with nonsense.
Try learning some actual History for a change.
-- gewg_
(Score: 0) by Anonymous Coward on Friday July 10 2015, @10:51AM
It's sad how quickly the left resort to name calling.
(Score: 2) by wantkitteh on Friday July 10 2015, @06:47PM
Indeed, referring to the Germans as "Nazi bloodsuckers" is distasteful at best, but there is a point in there worth looking at. Germany has accepted write-downs on it's debts several times in the past during times of world-wide post-war economic hardship. It seems what Greece needs to get it's debts cleared without the economy being ravaged by the marketplace is start a war and lose it.
(Score: 1) by choose another one on Friday July 10 2015, @01:34PM
and the ransom money we paid for king richard - pure and simple criminal kidnapping and extortion, practically bankrupted England at the time.
Exactly - exit and their imports will be more expensive, their exports cheaper and more competitive until balance is achieved again. The market isn't a perfect regulator but it's better than nothing, and in the Euro you have nothing to achieve that balance. Buying imported goods is what is bleeding them dry.
BUT, guess what, the Greeks don't actually _want_ to exit, they want to keep their cheap imports low inflation and stable currency, just like Germany, but without the German's financial discipline. Eventually they will _have_ to exit, but none of their leaders are prepared to say that yet.
Iceland and Ireland perhaps (one in Euro and austerity, one outside and devaluation). I can't see how anyone could possibly see Argentina as a better model than Ireland - 13yrs after default, growth is still minimal and (official) inflation 15% (unofficially twice that). Ireland has exited its bailouts (ahead of schedule I think), has the low inflation and stable currency of the euro, and is now fastest growing economy in the EU ( http://www.theguardian.com/world/2015/feb/05/ireland-fastest-growing-eu-economy [theguardian.com] ).
(Score: 3, Interesting) by sudo rm -rf on Friday July 10 2015, @01:49PM
and the ransom money we paid for king richard - pure and simple criminal kidnapping and extortion, practically bankrupted England at the time.
Sorry, but this is an argument I hear all too often, and it is wrong.
For an interesting read about the *justified* demand of war reaparation (backed by international law), I suggest reading this article [greece.org] (which is in fact a petition, but nevertheless -or because of that- has a few interesting facts).
Excerpt:
Italy repaid to Greece its share of the occupation loan, and both Italy and Bulgaria paid war reparations to Greece. Germany paid war reparations to Poland in 1956, and under pressure from the USA and the UK (to placate Tito and keep him from joining the Soviet block) paid war reparations to Yugoslavia in 1971. Greece demanded from Germany payment of the occupation loan in 1945, 1946, 1947, 1964, 1965, 1966, 1974, 1987, and in 1995 (after the unification of Germany). Before the unification of Germany, using the London Agreement of February 27, 1953, West Germany avoided to pay its obligations arising from the occupation loan and war reparations to Greece on the argument that no “final peace treaty” had been signed. In 1964, German chancellor Erhard pledged repayment of the loan after the reunification of Germany, which occurred in 1990. As the German magazine “Der Spiegel” wrote on July 23, 1990, with the Two (West and East Germany) Plus Four (USA, former Soviet Union, United Kingdom, and France) Agreement that paved the way for the German unification, the nightmare of demands for war reparations by all those damaged by Germany, which could be raised by signing a “peace treaty”, disappears.
Greece never signed that Two Plus Four Agreement.
Indicative of the current value of the German obligations to Greece are the following: using as interest rate the average interest rate of U.S. Treasury Bonds since 1944, which is about 6%, it is estimated that the current value of the occupation loan is $163.8 billion and that of the war reparations is $332 billion. The French economist and consultant to the French government Jacques Delpla stated on July 2, 2011, that Germany owes to Greece 575 billion euros from Second World War obligations(Les Echos, Saturday, July 2, 2011).
(Score: 0) by Anonymous Coward on Friday July 10 2015, @02:30PM
Forget it. That's all there is to say about that. You're chasing the wind.
(Score: 1, Interesting) by Anonymous Coward on Friday July 10 2015, @03:49PM
This guy doesn't seem to think that Germany ever paid its debts (I suppose war reparations aren't paying debts?):
http://thewire.in/2015/07/08/thomas-piketty-germany-has-never-repaid-its-debts-it-has-no-right-to-lecture-greece/ [thewire.in]
(Score: 2) by cyrano on Friday July 10 2015, @03:08PM
Most of this growth is as a tax haven for Apple, IBM and a few other very big corporations who bring little employment but shift boatloads of money from the rest of the EU to countries where they keep their stash...
The quieter you become, the more you are able to hear. - Kali [kali.org]
(Score: 0) by Anonymous Coward on Friday July 10 2015, @03:54PM
Germany is a mercantile industrial state which benefits from the economic stagnation of the poorer states of Europe. I'd love to see the resource-poor and land-poor Germany maintain their position if they could no longer exploit all the European banana economies.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @08:22PM
Ok I will bite.
https://www.reddit.com/r/FinancialIndependence [reddit.com]
I personally went from 180k in debt to about 3x that in cash/stocks. Know how I did it? Financial discipline.
It is amazing walking into a steak house and saying I want the 30 dollar steak because it tastes good. Not getting the 10 dollar burger because it costs less or not going at all because I dont have any money or just adding to the big pile of debt. I rarely do this. Because guess what? It is bad financial discipline.
If you have your money in order everything else is easy. You can borrow money for when it is lean and build capital. You can build things that you could not before.
If you are borrowing money to pay back loans (what they are doing). You end up with, tadaaaaah, more debt. Bankers will jump all over you to make it happen too. They do not care you are a bad risk. They are going to sell the debt to someone else and make money doing it. They are not using that money to build capital and eventually jobs. They are using it to pay peter by borrowing from paul. They are screwed.
Now apply financial independence to the country level. You can do things like 'fix all the roads'. Because you have the money to do it! You can actually have good goals and make things happen. If you listen to bankers they will take all of your money and squander it on their bonuses and tell you need to tighten your belt (sucks to be you!). The bankers even managed to find out a way to put the debt on someone else (specifically the other countries in the EU). Sound familiar? It should. As that is exactly what they did here with 'too big to fail'. I knew many people who borrowed money for homes and within months 'some other company bought my mortgage'. They make the suckers bet someone elses problem.
Austerity should be about balance your goals with what you are spending. You can NOT borrow you way into prosperity (it did not work for pre WWI germany or post WWI germany, both defaulted). Borrowing only works if you build capital goods. If you are just chasing paper money with it and paying off other loans you will *never* get anything other than more debt. If you do not get your house in order the bankers will rape you for more money and make it seem like they are giving you a good deal while they are at it. Yes your growth on the other end will not be as dramatic as others. But you will be built upon a solid foundation where you command what is going on. Not the bank. Your highs will not be as dramatic. But then neither are your lows.
They basically have 3 choices. Suck for short term (austerity, get your shit in order), suck for longer term (keep borrowing, no one is willing to make that bet after awhile), default (suck for a longer term, no one will work with you for years).
(Score: 5, Informative) by ikanreed on Friday July 10 2015, @12:42PM
I'd say, by and large, the worst results of super-politicized capitalism very naturally drive people into the arms of communists, if they're the only alternatives who are given any voice in the debate.
If the only people saying "Hey, maybe we shouldn't destroy our middle class for the interests of extremely rich foreigners" are communists, of fucking course communists are going to be popular. That's just a truism of popularity. Strong austerity in recession is a historically terrible idea, with all of about one or two success stories, and frankly, only goddamn idiots support it. Unless you're an institutional investor. Then you can be paranoid about risk.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @01:16PM
Greece didn't have a recession, it had and still has a debt crisis. Like when people get a new credit card to pay off the old credit card debt. That kind of crisis. You don't solve that problem by approving yet another credit card. Folks, I know that Keynes has some alluring ideas, but this is not a situation where they're applicable. What you're suggesting is akin to using petrol in a fire engine. Greece's problems are not due to a lack of funding.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @01:23PM
Greece's problem is a lack of liquidity. None of the solutions being offered at this point address the.
Sometimes you have to cut your losses short... I think in tech, we call it fail often but fail fast. Why can't the same be true in this case?
(Score: 0) by Anonymous Coward on Friday July 10 2015, @01:38PM
Greece's problem is a lack of liquidity.
No, it's not. Up until two weeks ago, they had all the liquidity they wanted - ECB floodgates wide open. The current lack of liquidity is a symptom, one that in turn causes other problems no doubt, but the cause of the crisis was that Greece consumed more than they could afford and that resulted in too much debt (by which I mean unsustainable debt, even at low interest rates).
There is absolutely no point in giving Greece more money or reducing their debt burden until the Greek government as well as the Greek people understand funding isn't the problem, but overspending and what they do with the money is. If they want to get private investors to buy their bonds again, which is the only realistic way that Greece can stay in the Eurozone, then they need to make their economy and their debt sustainable. That the US, which has geopolitical interests but won't invest a dime of their own in Greece, keeps telling them that everything will be alright if Europe would only keep giving them money is not helping at all.
(Score: 2) by cyrano on Friday July 10 2015, @03:34PM
Wow. Just wow! You get the prize for having the most oversimplified and dumbed down propaganda post of the week.
I hope you are well paid. A talent like yours to spin is rare.
Turning an international bank scam into a national problem is inventive. After all, we wouldn't want to blame Goldman Sachs or Deutsche Bank, would we?
And I must admit, it sounds good. Even out CFO would like it...
The quieter you become, the more you are able to hear. - Kali [kali.org]
(Score: 0) by Anonymous Coward on Friday July 10 2015, @04:40PM
Maybe the Trojan horse was the cause of it all. You can always look further back. Assuming that Greece had a chance inside the Eurozone, and I see no reason to deny that, the cause of their problems was their overspending, not anything that happened earlier. I don't think there is any debate about that. The statistics are very clear. Even if you subscribe to the "spend money to earn money" ideology, you can't ignore that there are limits to how much of your budget you can spend on interest payments before the debt blows up in your face.
It doesn't matter what you think about the fraud surrounding Greece's admission into the Eurozone: The Greeks could still have reformed their country. Cutting the budget deficit from 10% down to less than 3% would not have killed the Greek economy. If you don't believe that they could have done it then, they can't be expected to do it now, and must leave. Anyway, even after it became clear that Greece had cooked the books (had had their books cooked, whatever), they did not change their ways. Then the US mortgages caused the banking crisis and lit the fuse on Greece's debt, but even then, Greece did not reform. Years later, after haircuts and debt restructuring in return for promises of reforms, still nothing. At what point is it no longer someone else's fault?
(Score: 3, Informative) by ikanreed on Friday July 10 2015, @01:36PM
Yes, Greece did stupid shit to get into its current situation.
That doesn't mean doing stupid shit is the way to get out.
(Score: 2, Informative) by Anonymous Coward on Friday July 10 2015, @01:20PM
You know that, right? Syriza is literally "the radical left". Tsipras joined the communist party at the age of 16.
Yes, I am aware of that. I also fail to see your point. So what he's communist? We've long been out of the Cold War with the commies being the bad guy, you know...
Capitalism ain't that great either, fella...
(Score: 3, Insightful) by threedigits on Friday July 10 2015, @01:45PM
The Greek debt was very sustainable until Syriza's rise to power caused capital flight and crashed the economy starting at the end of 2014.
Curiously enough, it wasn't until January 2015 that Syriza came to power.
Also, the Greek debt was never sustainable. It was growing, without sign of turn around, until the European Central Bank started buying sovereign debt (as they should have been doing from the beginning). Before that, the only way Greece could finance their payments was in the private markets, with astronomical interest rates. Here you have the two main reasons for the enormous debt: the European Central Bank applying the austerity mantra, and the private bankers making very lucrative "risk" investments (something that's easy when you have a safety made of of taxpayers money).
(Score: 1, Interesting) by Anonymous Coward on Friday July 10 2015, @02:06PM
The political changes were already visible at the end of 2014, and a lot of people stopped paying their taxes because Syriza had promised lower taxes.
The Greek debt caused the crisis, so obviously at that point it wasn't sustainable. You didn't miss that I mentioned the 2012 haircut and restructuring of the debt, did you? Obviously I meant that the measures which have been taken by the IMF, the ECB and the Eurozone countries had resulted in debt sustainability from then on, until Syriza "turned the country around" by promising the end of austerity.
(Score: 3, Insightful) by threedigits on Friday July 10 2015, @02:04PM
Austerity does not mean starving the poor.
Yes it does. Currently one of the biggest expenses (if not the biggest one) of the Greek government is paying the pensions. This is the only income for millions of people. Without this money they cannot eat.
BTW, Austerity means:
1. raising taxes. The IMF has called concretely for *direct* taxes to increase, meaning those applied to consumer goods (and food).
2. reducing spending. As said above, the main spending is in paying pensions.
3. no new spending. That means no help for Greek industry, no incentives to re-start the economy, and thus no future growth in tax income. This later part is what is killing the country. Think about it. If the money spent bailing out the private banks had been put to work in the real economy, would Greece be in this mess now? Remember that Greece "enjoys" a 25 percent unemployment rate.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @02:44PM
So what do you propose? Let Greece rack up more debt, even though they are already saddled with twice as much debt per capita as Germany (while having a gross domestic product that's 40% lower per capita)? What good is that going to do? Or do you suggest that Europe should just keep giving money to Greece so that they can keep spending 110% of everything they earn? I can tell you how long that's gonna last: Last month.
(Score: 2) by SubiculumHammer on Friday July 10 2015, @05:51PM
Debt forgiveness, obviously.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @06:08PM
Good, you first. The largest entity behind the IMF is the USA. So far, the IMF flat out refuses to forgive debt, even though they keep demanding it from everybody else. The vulture funds trading in the US are also welcome to forgive the debt they hold. Forgive me if I'm not holding my breath until that happens. On the other hand, what Greece owes to Europe has already been pushed to 2020 and later (interest and principal), so we can put off talking about that until Greece has successfully completed the program.
(Score: 2) by Runaway1956 on Friday July 10 2015, @02:57PM
Were the shipyard owners also communists?
Historically, Greece has had a very huge interest in ship building, ship repair, and maintenance.
Why is it that the EU mandated that Greece give up it's dominant position in the industry, and help to finance it's upstart competitors - France and Germany?
That arrangement was nothing more than maneuvering to put a knife in Greece's back.
(Score: 2) by cyrano on Friday July 10 2015, @03:01PM
Some years ago, the Greek government spent a lot of money to get advice from American and German banks.
The banks probably knew how they would proceed the next few years. Yet, they advised the Greek government one way and promptly started acting opposite.
How do you think a small country's debt evolves if a consortium of large US and german banks are speculating against it?
Is it moral, or even legal, to advise your client to do one thing and then making damned sure this one thing fails?
The quieter you become, the more you are able to hear. - Kali [kali.org]
(Score: 0) by Anonymous Coward on Friday July 10 2015, @05:42PM
Is it moral, or even legal, to advise your client to do one thing and then making damned sure this one thing fails?
What is this morality you speak of, there are dollars on the line here.
And as far as legal, that doesn't matter too much to us, we've got laywer, lobbyists and deep pockets of cash. The law does not apply here.
(Score: 2, Informative) by Anonymous Coward on Friday July 10 2015, @09:12AM
From the article:
Actually "Realpolitik" is a German word.
(Score: 3, Informative) by moondrake on Friday July 10 2015, @10:31AM
that was some sort of joke (see the entrepeneur statement a line later).
(Score: 2, Insightful) by geb on Friday July 10 2015, @09:27AM
I consider myself quite strongly left wing. I'd normally argue in favour of protecting the vulnerable, of spending on welfare, protection pensions, and so on, but if you're going to do all of those things there has to be a functional economy to pay for it. If there isn't money coming in, you can't spend it.
When people say "austerity doesn't work, it only makes things worse" I rewrite that in my head to say "having a government that can't pay its bills is bad for the economy".
You can't say "two plus two equals four doesn't work" just because you'd prefer the answer to be six.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @09:47AM
And when the Ministry of Truth says two plus two equals six, the answer is six. According to the Ministry of Plenty, poverty is prosperity, didn't you know?
(Score: 1) by Demena on Friday July 10 2015, @10:07AM
What you are missing here is that they tried austerity and it failed them. Maybe it failed them partly because of the lack of ability to collect taxes but primarily it was that austerity caused the economy to collapse even further. When that happened there was even less taxes to collect. Unemployment increases, welfare spending (necessarily) goes up. It is a vicious circle. But all of this is really beside the point.
In any group of economies there will be winners and losers. But money cannot continue to go one way indefinitely or some will be flush while others bleed dry.
In the US the Fed transfers money from the more profitable states to the less profitable states and it works reasonably well. With nation states with no common currency the rates of exchange fluctuate so that if a state becomes too successful its currency becomes expensive and less successful states can provide a better deal. This also works reasonably well. But when different economies share the same currency there is no means to correct the trade imbalance the weaker economies bleed to death. Spain, Portugal, Greece.
Unless some balance mechanism is put in place there is just going to be a cycle of bailout and bleed, bailout and bleed. It is a fundamental need that is missing from the EU.
(Score: 3, Interesting) by choose another one on Friday July 10 2015, @10:36AM
There is a balance mechanism in place in the eurozone, it is called the stability and growth pact. The problem is it has no enforcement with teeth so everyone ignores it. At worst they can fine a country that spends / borrows too much - like that is going to help.
There needs/needed to be a stronger mechanism such as all borrowing to be through the ECB or if you breach the pact then we remove your ability to borrow from the market and you can only spend what the pact allows (and your local politicians can decide what to spend it on). But that would have meant ceding too much power to Brussels, so the politicians voted to have Germany's low interest rates and stable currency without Germany's financial discipline, and to load the costs onto the next government / generation - quelle surprise.
It isn't Greece's fault that they joined a currency union without meaningful fiscal controls, but it _is_ Greece's fault they repeatedly breached the rules of the currency union that would have prevented them getting into this mess in the first place. Time for them to leave the euro, actually it was time to leave long ago.
(Score: 2) by choose another one on Friday July 10 2015, @10:40AM
Thing is, it worked for Ireland. Also arguably for the UK (except we didn't really do austerity, didn't even reduce public spending) - but that's a bad example because we have own currency. Ireland is in the Euro, was at one point worse than Greece for debt, made really harsh austerity cuts, and is now booming.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @12:05PM
And not bad for an economy whose main industry is eurozone tax haven for multinationals.
(Score: 2) by geb on Friday July 10 2015, @10:55AM
The Greek governments before 2008 borrowed massive quantities of money and poured it into the economy, unsustainably raising GDP in the process. Some of it was spent on infrastructure, but not a lot of it. Most of it just ended up being spent on imported goods or services. It went on for so long that everybody got used to the situation and started believing it was normal.
When the global financial collapse hit, and everybody realised that Greek debt had reached very scary levels. The debt-sustained artificially high economy was going to contract one way or another, simply because nobody was willing to lend any more money. There were only two realistic options available - keep borrowing in the short term to smooth out the transition, until income and outgoing matched (i.e. bailout and austerity) or keep spending and then go bankrupt.
There was never any realistic hope of sustaining the good times of free money, because it had all been built on debt and nothing else. A contraction would have happened one way or another. The only choice was to have it go relatively smoothly, trying to preserve the most essential infrastructure of everyday life, or to have it all crash and burn uncontrollably.
Austerity was painful for the Greek people, yes that is true, but to say that it failed is to live in a fantasy land where there was some other alternative. To say it failed is to pin all your economic hopes on 2+2=6.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @10:12AM
Your personal finances and the finances of a country/continent are quite different.
The way you get an economy back on its feet is to put everyone to work.
You really need to do some study on The New Deal.
It's the way USA dealt with the failed economics of the Republican administrations from the 1920s till 1933 (which caused The Great Depression).
-- gewg_
(Score: 2) by scruffybeard on Friday July 10 2015, @06:29PM
I agree that putting people to work is what made the New Deal successful, however things are different now. In the 30's you could hire 25 men to support a road construction project. Today you can probably do the same work with 4 men and a backhoe. On top of it, those men in the past required little to no knowledge of how to do the job. Today those workers have had a few years of vocational training, and probably have some kind of additional license or certification to work on the job site. Additionally, lets not forget that while the New Deal programs certainly helped, it was WWII that broke us out of the Great Depression.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @07:37PM
War! What is it good for? Breaking us out of bad economic times.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @08:24PM
Some points you overlooked:
- Current unemployment[1] in the USA (over 23 percent) is approaching the worst levels of The Great Depression.
A corresponding percentage of the production infrastructure is idle.
[1] The real numbers--NOT the dummied-up junk USA.gov reports. [googleusercontent.com] (orig) [counterpunch.org]
Note also that the 2.4 million people in prisons aren't counted.
- There were and are a huge number of highly skilled people without jobs.
In the 1930s, those skills were put to use. [google.com]
What happened then is NOT the case today; we continue in a downward spiral.
We needed a John Maynard Keynes and an FDR; what we got was Larry Summers and Caspar Milquetoast.
(At least the training-for-non-existent-jobs fraud is finally being exposed for the scam it is.)
it was WWII that broke us out of the Great Depression
Myth. By 1937, the economy had improved enough that FDR eased off on his policies--and the economy headed straight into the crapper again.
He quickly went back to listening to John Maynard Keynes and again went back to ignoring the "wisdom" of the "geniuses" on Wall Street.
You consume WAY too much Lamestream Media.
-- gewg_
(Score: 2) by choose another one on Friday July 10 2015, @10:17AM
"Austerity" has be redefined to mean "spending a bit less than before but still borrowing in order to pay our debts".
The UK has been doing "austerity" by reducing the deficit by half over five years - er, provided you measure it in terms of gdp that is.
Austerity used to mean living visibly well below your means
Having a small surplus to put away for a rainy day / next downturn in the economy used to be prudent
Spending all you have each month used to be risky
Borrowing more to pay your debt interest used to be stupid
Lying about you income to borrow even more to pay back money you lied to borrow in the first place used to be fraud
These days, in reverse order, those things are "normal", "austerity", "what a novel idea", "are you mad" and wtf.
The Greeks are still at the last one - lying in order to borrow more (whilst saying all their problems are due to their debts) anyone who believes they are actually running a primary surplus and just crippled by debt repayments should look again, they are no longer actually making any debt payments, but they are still running out of money even though they've had E90bn emergency assistance for ECB.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @12:00PM
Fancy that, rewriting a phrase changes the meaning.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @01:28PM
There sometimes is a minimum amount of spend that you have to incur. If you can only spend 2 bucks per day because your creditors tell you to, but you need to spend 4 in order to stay alive that it makes sense to spend only 2. If you do that, you'll starve to death.
This is what I don't get in the current political (and corporate) rhetoric: it's always about cut, cut, cut... at some point, you've reached the bottom and there is nothing left to cut.
(Score: 3, Informative) by cyrano on Friday July 10 2015, @03:20PM
Even the IMF has admitted in 2012 that austerity doesn't work:
http://www.herald.ie/news/we-got-it-wrong-on-austerity-and-made-things-worse-imf-28849664.html [herald.ie]
Not even for Ireland...
The quieter you become, the more you are able to hear. - Kali [kali.org]
(Score: 1) by purple_cobra on Friday July 10 2015, @05:08PM
Whether you disagree with the former Finance Minister's (Yanis Varufakis [wikipedia.org]) various press statements or not, one of those statements should be taken on board by all involved in the issue: "You can't get more milk out of a sick cow by whipping it".
(Score: 2, Funny) by Anonymous Coward on Friday July 10 2015, @05:44PM
Clearly you are self-employed and have never worked for a manager.
(Score: 5, Insightful) by RedBear on Friday July 10 2015, @11:03AM
I expect the typical negative response to this article, but I must say that I have seen no observational evidence that a national economy functions anything like a household budget. Economies are very complex systems in which wealth is frequently spontaneously created and/or destroyed via a plethora of differing mechanisms. If one takes the viewpoint that economies are engines, they seem mainly powered by self-sustaining loops of discretionary income being continually transferred back and forth amongst and betwixt businesses and the middle economic classes. You don't take an engine that's going "putt-putt-gasp" and start drastically cutting the fuel supply and then act all surprised when it starts going "gasp-putt-gasp-putt-gasp" or just up and dies altogether.
Austerity measures seems to be akin to debtor's prison. A bad idea that never really accomplished anything positive, and whenever implemented has a strong tendency to make recovery quite literally impossible. The only people who didn't die in debtor's prisons were those who had their debts paid off by someone else. You will of course note that all the people who were left to die in debtor's prison still FAILED TO PAY OFF THEIR DEBTS, thus accomplishing absolutely nothing but an increase in human suffering.
If one is capable of understanding and accepting that it may be morally and ethically correct (and ultimately a logical and effective use of funds) to buy a family member or friend out of debtor's prison (or keep them from being sent there in the first place) by using some of the proceeds of one's own good fortune, then it is only a small step further to realize that it should be equally morally and ethically correct to invoke debt forgiveness and effective debt recovery measures for Greece rather than leave an entire nation of human beings to the wolves. It is after all a nation full of people who are effectively friends and family to us all. Hippy-dippy or not, we are all in this life together, that fact cannot be denied. Doing what is necessary to allow Greece to become strong again will eventually allow them to be one of the nations that will end up helping others, just as Germany quickly became a strong, stable economic powerhouse through debt forgiveness and the extraordinary wisdom of the Allied nations forgoing traditional demands for costly war reparations after WWII.
Other commenters ask, who doubts that there will ultimately be a powerful reckoning where the world economy will collapse due to excessive debt. Well, I doubt it. I doubt it very much. As I said, I've seen no evidence that national economies function in any way like a small household budget, and even a family deep in debt will always wind up contributing more to society if they are helped out of that debt rather than being allowed to plunge into the nearly inescapable trap of abject poverty. The only thing I've seen that does an incredibly good job of making a weak economy collapse and have no chance of recovering is austerity measures.
Most of the world has finally gotten over the idea that debtor's prisons were ever a good idea. It's time we start getting over the idea that austerity, forcing an entire nation of individuals through an extended (possibly endless) period of crushing poverty, is somehow the proper way to help that nation recover from debt.
¯\_ʕ◔.◔ʔ_/¯ LOL. I dunno. I'm just a bear.
... Peace out. Got bear stuff to do. 彡ʕ⌐■.■ʔ
(Score: 0) by Anonymous Coward on Friday July 10 2015, @11:29AM
A lot of Greeks own houses, flats and company stock*. No, I'm not talking about the assets in Greece but about the ones in Berlin, for example. If Greeks had more, not less, faith in their own country than they expect from the Eurozone, reformed their government to use money wisely instead of funneling it to their cronies, paid their taxes or reformed the tax collection system to not leave the decision to the tax debtors, then and only then could taking on debt be considered a prudent investment. Greece currently has twice as much per capita debt as Germany. Adding more debt to keep that "engine" going now just makes things worse. We have kept the engine going for too long already, but Greece never bothered to get it repaired, to stay with the metaphor.
*) I am well aware that there are poor Greeks as well. I wrote "a lot of", not all.
(Score: 5, Interesting) by moondrake on Friday July 10 2015, @12:38PM
I have read the article, and found it interesting. Yet also greatly disturbing. I agree with his economic viewpoint (austerity being bad for economy) but I feel this guy has some trouble understanding European culture. Or at least, he and I differ quite a lot in our views about that.
Frankly, he seems to be on a crusade against Germans. Some googling shows this is not his only campaign against them. This is fine (I am not German anyway), but it makes me nervous about how valid his viewpoints are. He basically has a prejudice against Germans that they all have prejudices against south Europeans countries. And he cites tabloids to prove his point. Let me break this to you: all Europeans regularly make fun of eachother. We like it that we, and we all have our problems. We do not get hung up about this, its far more reasonable to make fun of a neighboring country compared to making fun of an ethnic minority. And you know, most of our prejudices may actually be somewhat true. In an over-sensitized US society this may seem to be politically incorrect, but it seems to be common and accepted in Europe. It only becomes a problem when you let your decisions being affected by such prejudices, and for all his ranting, I did not see evidence for that so far.
The fact is that Greece has a debt problem. This has nothing to do with prejudices that they are corrupt or do not work hard. Its a simple fact. They spend more than they earned. For many years. Even after they got bailed out in 2012. This needs to be fixed. And I agree (and so does the EU) that there needs to be a restructuring of the debt. But only if they can also balance their budget again. I know too little of the details (and most things are not public), so I cannot really judge on whether the "troika" favors austerity too much over increasing productivity. But I do want to mention here that Greece, as do most EU countries, spends a HUGE amount of money on social welfare. If the lenders want to cut some of this in order to make money, you could call this austerity, you could also say that government spending becomes more close to the US system. Austerity in the US and in the EU mean simply very different things.
That said, I do think there is some cause for worrying about whether some interest-groups are not purposefully trying to bankrupt Greece. If this is true, I have problems understanding why some of the smaller countries, that do not stand to gain much from this, are going along with this though.
All in all, Mr Black needs to provide some better evidence and not a highly hyperbolic discrediting of a particular nation. Its always easy to blame the Germans.
(Score: 3, Insightful) by wolfinator on Friday July 10 2015, @09:26PM
But the Greeks HAVE balanced their budget! I don't know if you're unaware of this, or being obtuse.
http://www.reuters.com/article/2014/10/04/us-greece-budget-idUSKCN0HT0OJ20141004 [reuters.com]
That's what's galling to people like me - a non-European observer of this train wreck.
Greece has balanced their budget, at enormous human and economic cost. Their economy shrunk by TWENTY-FIVE PERCENT. They STILL managed to cough up enough tax revenues to turn a BUDGET SURPLUS. (Minus the wealth extraction payments to the German banks.)
http://qz.com/248821/greeces-collapse-is-officially-worse-than-the-us-great-depression/ [qz.com]
Greece HAD a debt problem. Now it has a debtor problem. The correct thing to do when you have the kind of problem they do is to go bankrupt. Whether you are an individual, a business, or a country, there is an inflection point at which continuing to service your debt merely puts you further and further behind.
In fact, restructuring Greece's debt is in the interest of the Germans. Getting 50% of your money back is better than getting 0% back.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @10:23PM
They had a surplus, and then Syriza promised the end of austerity, people stopped paying taxes and made "the radical left" their government. That caused massive capital flight, crashed the economy some more and turned the surplus into a deficit. Why people keep falling for communists is beyond me, but they still do, and it still fucks them up.
(Score: 2) by moondrake on Monday July 13 2015, @07:01AM
As the sibling AC said, all that was before the change in power in Greece. I do not mind they are communist, perhaps it was even a good thing to revert some of the policies of the original government. But they also had to continue fixing problems, and they did not.
>In fact, restructuring Greece's debt is in the interest of the Germans. Getting 50% of your money back is better than getting 0% back.
In fact I agree with this. Which is why I am curious about the plans agreed on last night. If they do not remove part of the debt, I tend to agree more with the alternative perspective of Mr. Black.
(Score: 2) by Common Joe on Saturday July 11 2015, @06:13AM
You said a lot of highly insightful things, but I'm going to disagree with you on some of it. World economies do function differently than households, but they do share one thing in common: they cannot spend more than they generate indefinitely. The only way a country can "escape" this clause (in the short term) is to print more money. But money is defined by faith in a currency. The world has examples of countries with of super high inflation. It's not pretty. So, what really makes a country valuable? The ability to produce goods, grow agriculture, or service others. Goods, agriculture, and service can be imported or exported.
The U.S. has been racking up debt for decades (since about 1940 if I recall correctly) and we are so used to racking up debt that politicians regularly talk of reducing the deficit instead of reducing the debt. And we love them for it. Thought experiment: If the U.S. suddenly found itself having to pay back loans and actually reduce the debt, how much faith would you have in their ability to do that? The only faith I have is that a politician will spend it immediately. I can't speak directly for the Greece situation, but I don't trust politicians in general. They renag on promises. They lie. They line their pockets at the expense of everyone else. (And that is what makes me nervous about Greece. As for Germany? Yeah, they have their fair share of problems too in this matter. No doubt.)
When a person like me says, "run it like a household", what we're really saying is spend less than you make. Don't print more money to get yourself out of trouble. (i.e., make the amount of money representative of what the country produces.) There are healthy economic tricks that can work under the right circumstances that a household cannot do, but for the most part, I believe the very basics are the same. If the basics are out of balance, the economic tricks will fail.
Only when a person (or country) is sincere about paying back debts will everything you said apply. Well... debtor's prison is very bad and shouldn't be done. Fully agree with you for the reasons you state. But what do you do with a person who wants a loan and has no intention of paying it back? It is not moral to give that person money. With the Greece situation (and I would argue in the U.S. situation too), it is not moral to allow a person or a country to get into such a lousy, heavily-debted situation either.
Not fully cohearent argument, but hopefully understood.
(Score: 0) by Anonymous Coward on Friday July 10 2015, @11:54AM
TFS is an indictment of the structure and the running of eurozone. It implies Greece should get out of eurozone, regain economic sovereignty and get its act together.
HOWEVER, the Greeks don't want to. Many of them don't trust their own government's/politicians' competence.
Can't have it both ways.
(Score: 2) by Magic Oddball on Saturday July 11 2015, @06:59AM
One of the best articles I've read on the situation was released by the NYT recently:
Germans Forget Postwar History Lesson on Debt Relief in Greece Crisis [nytimes.com]
I can't type a summary — injured my (fucking defective) neck so putting my arms down to type hurts like a mofo. So, a few choice quotes:
As negotiations between Greece and its creditors stumbled toward breakdown... a vintage photo resurfaced on the Internet. It shows Hermann Josef Abs, head of the Federal Republic of Germany’s delegation in London on Feb. 27, 1953, signing the agreement that effectively cut the country’s debts to its foreign creditors in half [and underpinned Germany's postwar economic miracle].
...To critics of Germany’s insistence that Athens must agree to more painful austerity before any sort of debt relief can be put on the table, it serves as a blunt retort: The main creditor demanding that Greeks be made to pay for past profligacy benefited not so long ago from more lenient terms than it is now prepared to offer.
...
Creditors, of course, do not generally like debtors to write down their debt. ... If Greece were offered an easy way to get out of debt, what would prevent it from living the high life on other people’s money again? What kind of lesson would this send to, say, Portugal?
But the Greek economy has shrunk by a quarter. Its pensioners have been impoverished. Its banks are closed. That counts as suffering consequences. No sane government would emulate the Greek path.
Germany, in fact, understands moral hazard backward. The standard definition refers to lenders; covering their losses will encourage them to make bad loans again. And that is, let us not forget, exactly what Europe’s creditors have done. Their financial assistance to Greece was deployed to pay back German, French and other foreign banks and investors that held Greek debt. It did Greece little if any good.
Greece has done little to address its endemic economic mismanagement. But it has few incentives to do so if the fruits of economic improvements will flow to its creditors.
(Score: 1) by Kawumpa on Saturday July 11 2015, @02:14PM
In fact, restructuring Greece's debt is in the interest of the Germans. Getting 50% of your money back is better than getting 0% back.
I doubt anyone in Germany or the EU bureaucracy really thinks that Greek debt will ever be repaid in any meaningful way. The problem is neither a financial nor an economic one, it is purely political: How do you keep member states in line if you allow one member to continuously breach contracts and make extremely bad economic decisions? I am not saying that austerity is necessarily a good economic decision, but if governments aren't willing to reform their tax and subsidy systems in a crisis, they never will. We do not learn or make difficult decisions when everything is working well, where would be the point?
The whole Euro system as it was implemented was a misconception but we are stuck with it and now is the time to start necessary reforms everywhere. It is just really bad for the people of Greece who for decades got themselves governments that fucked them over. It is a huge failure of the EU to let the humanitarian crisis happen as it is. Here was a chance to demonstrate what solidarity means, if only as a marketing tool.