What to do about Greece

[CaptainCrunch]

I think Greece fudged their books pretty hard to get into the EU. They weren't financially healthy, they just pulled a Madoff.

[nik-]

All I learned from that Graphic is that France needs to stop lending money.

[J pold]

Originally Posted by chemgear

I am not an expert, but how do you "sandbag" around this?

At the end of the day finance is a confidence game – when debt levels reach a certain about (according to Ken Rogoff ~90% of GDP) people start to get worried. You build sandbags by calming people down and stopping them from pulling their money out of the game. You do this by getting some powerful politician coming out and making a promises that they won’t let “insert troubled entity here” go down, and in some circumstances they have to take action to keep that promise. This is what basically happened in 2008 after Lehman went bust, Paulson had his hands tied and had to bailout the rest of the banks before everyone pull their money and the entire system went to hell.

Greece only represents about ~7% of the entire Euro economy so them going down really isn’t that big of a deal. The problems starts when some guy in Italy sees Greece default, Greek banks go down as a result, and Greek people unable to get their money out of the bank. So what does he do? He goes to his Italian bank pulls out his money, so does his neighbor, and his cousin, and the next thing you know the Italian bank doesn’t have enough reserves to cover their deposits (no bank does) and it fails. The same thing happens in Spain and Ireland and spreads like a disease to France and Germany because they are all connected through the Euro.

That is worse case scenario and what everyone is really worried about when it comes to Greece.

[NuclearPizzaMan]

Originally Posted by habernac

Let the Germans buy it.

Germany does not pay for nations and territory!

[calgaryrocks]

yea, 5 countries owe France a total of $910 billion. almost a trillion to 5 countries, who knows what they have leant to other countries. I'm not totally sure how this lending of money works between governments, but they must be getting some sweet interest to keep lending out so much money

[Barnet Flame]

Originally Posted by Lchoy

How did it get so bad in Greece, and by extension Portugal and Ireland? Wouldn't the Greek government and the EU finance Ministers pointed out a long time ago that the Greek were living beyond their means and this was unsustainable?
From the article, I can see how the Germans and Chinese feel the way they do

EDIT: The above diagram explains things for me

Greece cooked the books to join the Euro. Ireland would have been relatively ok had Brian Lenihan (Irish Finance Minister) not given a Government guarantee to all deposits and toxic assets held by Irish banks.

Italy always was a basket case and now that the Greeks are sure to default if the referendum goes ahead, they are likely to see their finance costs rocket creating a whole world of trouble for the EU.

[darklord700]

A once great nation that gave us Aristotle, Socrates and the likes. But they didn't give us a single economist which might explain the downfall they face today.

[SeeBass]

The more I learn about Greece the more I realize that all of these historical sites are not preserved they just haven't gotten around to cleaning them up.

[chemgear]

Originally Posted by Lchoy

How did it get so bad in Greece, and by extension Portugal and Ireland? Wouldn't the Greek government and the EU finance Ministers pointed out a long time ago that the Greek were living beyond their means and this was unsustainable?

EDIT: The above diagram explains things for me

Meh, it's not like all this a surprise at all. They've been kicking the can down the road and delaying all this for about two full years now. Economists/analysts have been writing and commenting about it the whole time. Things are just getting more interesting now.


Anyhow, speaking of "entitlements" in Greece, here's one on Italy:

http://business.financialpost.com/20...-italy-report/

This will be no small task in Italy, which has more than 530,000 pensioners who retired under the age of 50 — sometimes with just 14 and a half years of service — according to a report from independent Italian business agency Confartigianato last week.

The large majority of these pensions (78.6%) are paid by INPDAP, the country’s public sector pension administrator, the report said.

The average so-called “baby pensioner” remains retired for 40.7 years, spending 48% of their life retired, Confartigianato said.

[Ozy_Flame]

Greece loses approximately $11 billion in tax evasion, which equates to about 3-4% of their annual GDP. Couple that with a Soviet-esque economy of protectionism, corruption, unionism and unsustainable welfare state, and you've got a serious disaster on your hands.

I would say that not only does the economy have to change, but so does the country's culture and perspectives on labor and respecting the law. I remember going their about 10 years ago and wondering how any work ever gets done around there.

[troutman]

Double (or triple) the tax on cigarettes. Greeks smoke a lot. Problem solved.

[chemgear]

Originally Posted by troutman

Double (or triple) the tax on cigarettes. Greeks smoke a lot. Problem solved.

But then they'll live longer and require even more entitlements as they last longer.

[FlamesAddiction]

Who ever thought it was a good idea to sell Greeks Mercedes-Benzes while buying back olives and tomatoes? I means that figuratively, but the literal truth isn't that far off. They simply don't have the industry to support the level of western consumerism that they feel entitled to (and that our economic system enables). It's not just socialism at the heart of this.

Of course, there are a lot of problems. The tax evasion is a major one and is common throughout the Balkan region. People work "under the table" to avoid taxes. This type of corruption is entrenched from the street level all the way up to the government and the wealthiest people in the country. I feel that they also became to reliant on tourism which makes economies lazy.

[chemgear]

Originally Posted by FlamesAddiction

Of course, there are a lot of problems. The tax evasion is a major one and is common throughout the Balkan region. People work "under the table" to avoid taxes. This type of corruption is entrenched from the street level all the way up to the government and the wealthiest people in the country. I feel that they also became to reliant on tourism which makes economies lazy.

I do not recall if I linked this earlier - apologies if I double up but I couldn't believe they used post dated cheques so much. But I guess it makes sense given all the other economic shenanigans they also partake in:

http://worldfailure.com/business/9-t...es-a-time-bomb

ANYONE who has ever written a post-dated cheque knows it can be a convenient, interest-free means of deferring a payment. In Greece, however, there are now fears that 400bn euros' worth of post-dated cheques are simply "floating around", said Dionysios Chionis, an economics professor at Democritus University of Thrace.

A banking source at the conference explained that cheques in some cases are being written with advance dates of 12 months or more. The cheques are then passed from one person or business to the next, countersigned, and used as if they were cash. "By the time many of these cheques are cashed in, on the due date, they may have 10 or 20 countersignatures on the back," he said.

[CaramonLS]

People from Greece do their very best to avoid paying taxes, it is really sad, but it is pretty much part of their culture.

They could start by having a lot more enforcement and things like cash registers which could be audited at any time.

[Traditional_Ale]

Less big fat weddings?

Also, a nation thought it was a good idea to put fataing feta cheese on a salad deserves to be nuked from orbit.

[GirlySports]

Originally Posted by darklord700

A once great nation that gave us Aristotle, Socrates and the likes. But they didn't give us a single economist which might explain the downfall they face today.

The Greeks invented everything about 2000 years ago and figured that was good enough! They're on a pretty long losing streak.

[freedogger]

Originally Posted by J pold

I say at this point to just them default in a controlled manner, and build sandbags around the other peripheral Euro economies to keep them from going down. Of course this would be executed in a much smoother fashion if they weren’t on the Euro.

Is that not what really what the latest offer was? 50% haircut to creditors without CDS triggering is what I understand the deal was. Problem is, when you make the CDS worthless, there is no way to insure lending to these countries which makes the affordability of more debt for these countries go through the roof.

[mikey_the_redneck]

Originally Posted by CaptainCrunch

I think Greece fudged their books pretty hard to get into the EU. They weren't financially healthy, they just pulled a Madoff.

I was curious about the details of this, so I did a little reading and lo and behold....

...it was Goldman Sachs who helped Greece cook the books! ...and then got them hooked into the derivative scam....

http://www.bloomberg.com/apps/news?p...d=asBNXSLtlN9E

http://articles.businessinsider.com/...currency-trade

http://www.huffingtonpost.com/robert..._b_465134.html

Quote - "At the heart of the worldwide banking meltdown are those mysterious unregulated derivatives that Goldman and JPMorgan led the way in selling. But Greece's case did not involve the usual questionable mortgages packaged into derivatives with credit default swaps backing them up, but rather expected revenue on airport fees and other potential sources of the cashed-strapped government's future income."

"As The New York Times headlined it: "Wall St. Helped to Mask Debt Fueling Europe's Crisis." The story described the scam succinctly: "As in the American subprime crisis and the implosion of American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere. ... Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country's liabilities.""

I don't know who should be thrown in jail first, .....the politicians who hide these debts from the public, the ratings/regulatory agencies, or the bankers starting with Blankfein and the rest of 'em at Goldman.

[mikey_the_redneck]

Well hopefully Greece goes the way of Iceland....

If they don't and decide to accept full austerity, a whole swath of their resources, utilities, infrastructure, even national parks etc. will eventually be privatized (bought by banks, corporations) to glean more money from the Greeks to pay off the debt. This is the specialty of the IMF....total robbery