Greek Situation

@jeeprs,

I completely agree - Marxism has gone to hell. I said, I hate communism. But Marx predicted the ultimate demise of capitalist economies. In 2008 a number of columnists - not left-wing columnists either - lamented the irony of the fact that it looked like he was going to be proved right but there were no communists left to say 'I told you so' (except for nutcases like Kim Jong Il who is more psychopath than communist.)

Fast forward two years. Everything looks like it is OK again. Economies are growing, housing market returning, etc. But what has happened is that massive amounts of debt have been transferred from private to Government balance sheets. Just as the banks exposed to toxic assets were the first to start falling over in 2008, now those sovereign governments that are over-leveraged are starting to look very shaky. But these aren't banks or insurance companies - they are national economies. So it is all very well to say, stupid greeks, spanish, whatever, they don't pay tax, and so on, but if they start to default on their soveriegn debt, you have an Argentenian-style economic collapse right in the middle of the Eurozone. Then GB's total indebtedness is, as I said, 85% of its GDP. (Australia's is miniscule by comparison.) Things could get very ugly, very quickly.

So I am not the only one worried about this. A World Bank economist said on Tues this week, it is like the Ebola virus. If you get it, you have to amputate the limb to save the rest of the body.

Now I am hoping that it will be contained, we'll scrape by again, things will be OK. BUt don't underestimate how serious this could become.

@jeeprs,

I hear a lot of complaining about Obama's policies and solutions, ( we'll have to wait and see about the solutions) but where are all the big ideas at, it's partisanship that would let the ship sink while they all stand around arguing. We've already hit the ice berg, we better try and patch the hole somehow, I've got a lot more respect for someone who at least tries to do something, rather than stand around complaining about having to sacrifice in order to plug the hole. There is a lot of that going around right now. When I was in grade school, I thought I learned that after the election is over, you got behind your president, I think they called it patriotism, after all he is an American and loves his children too.

@wayne,

wayne;158172 wrote:

I hear a lot of complaining about Obama's policies and solutions, ( we'll have to wait and see about the solutions) but where are all the big ideas at, it's partisanship that would let the ship sink while they all stand around arguing. We've already hit the ice berg, we better try and patch the hole somehow, I've got a lot more respect for someone who at least tries to do something, rather than stand around complaining about having to sacrifice in order to plug the hole. There is a lot of that going around right now. When I was in grade school, I thought I learned that after the election is over, you got behind your president, I think they called it patriotism, after all he is an American and loves his children too.

Getting behind your president is one thing, but you don't mean that he should not be criticized, do you? If you do, you should have mentioned that while President Bush was in office. Patriotism is love of country, not love of president. And I agree that Obama is an American and loves his children. But what has that to do with his performance as president?

@jeeprs,

Criticism is one thing, posters calling him a communist is another. 'Patriotism' as understood in some sections of American society is not a virtue, it is a pathology.

@kennethamy,

kennethamy;158180 wrote:

Getting behind your president is one thing, but you don't mean that he should not be criticized, do you? If you do, you should have mentioned that while President Bush was in office. Patriotism is love of country, not love of president. And I agree that Obama is an American and loves his children. But what has that to do with his performance as president?

I do not mean he shouldn't be criticized. But todays media is carrying that far beyond what I feel is healthy. I realize it's the public feeding that too. It's all a very bad situation all around, and I certainly don't have the answer. I am willing to believe that Mr Obama,as an American, has my best interests at heart. If I come up with a better idea I will criticize him, a lot of folks are busy criticizing him without any better idea of how to solve any of the problems, that, in my mind, is just wrong.

@jeeprs,

jeeprs;158183 wrote:

Criticism is one thing, posters calling him a communist is another. 'Patriotism' as understood in some sections of American society is not a virtue, it is a pathology.

Yes. It certainly was when its object was President George Bush just a few years ago. I hope you agree. He was called a fascist, a moron, and so on.

Which sections are you talking about? Clearly, a person can go overboard about almost anything. It is called, I believe, "too much of a good thing". But I am very patriotic. I think that as President Clinton's secretary of state, Madeline Albright said, "America is the one indispensable nation". I am a believer in what is called, "American exceptionalism".

@jeeprs,

jeeprs;157843 wrote:

Hopefully the problems with Greece will be contained. Hopefully the EU will get its act together, the Greeks tighten their belts and work out how to change the way they run their economy. Hopefully.

Well basically you can only borrow so much money before people begin to worry about your ability to pay it back.

For countries that is somewhere around 100% of your GDP. You can not indefinitely borrow against future generations and provide unlimited entitlements for an ever growing, ever longer living, population of older individuals against a smaller number of younger workers.

You can get some idea of the markets opinion of various countries debt ratios by looking at the interest rates on government bonds for various countries (say Greece, Brazil, Mexico, etc). Markets are probably more accurate indicators of economic health than what governments have to say. What if you hold a bond sale and there are no buyers?

@jeeprs,

well the immediate problem is that the Greeks owe 20 billion euros in bond repayments on 19th May. If they can't make those payments, they have defaulted. As I understand it, the Greeks have indeed been profligate, which is why the Germans are so angry about having to bail them out. But the problem is in today's world, everything is connected as never before. The yanks were worried about the domino effect at the start of the Vietnam war. It was never going to happen then, but domino effects are a real possibility in economic terms now.

I am not and have never been anti-American. But the extreme American Right scares me. These teaparty crackpots who really believe that the UN is the antichrist and Obama a communist. They think that the right to carry a deadly weapon is more important than the right to access to the medical system. Anyway hopefully they really are just the lunatic fringe, but I have my doubts (and to be fair, they exist on the left, too). I am generally a supporter of the US, in fact I think it is probably the second-best country in the whole world. :bigsmile: And I never thought George Bush a moron; I always thought he was a man of average intelligence.

But as Salima points out, where she is, water is a problem. The fact is, we are in the middle of the first-ever massive human population boom. In our lifetimes, food security, water shortages, energy security and economic instability are huge potential problems. I don't think laissez-faire capitalism is equipped to deal with them. Copenhagen was an abject failure and that is only in one of the critical areas. The problems the world is facing need co-ordinated responses and sacrifices from all sides. This is not fatalism, it is facing up to some very, very tough situations.

@jeeprs,

jeeprs;158211 wrote:

well the immediate problem is that the Greeks owe 20 billion euros in bond repayments on 19th May. If they can't make those payments, they have defaulted. As I understand it, the Greeks have indeed been profligate, which is why the Germans are so angry about having to bail them out. But the problem is in today's world, everything is connected as never before. The yanks were worried about the domino effect at the start of the Vietnam war. It was never going to happen then, but domino effects are a real possibility in economic terms now..

Well there is something new now in the form of a global interrelated economy. The US still the largest economy of the world and about 25% of global GDP is of course a major influence and player.

Money can now flow around the world, in a matter of days if not minutes and seconds. Money tends to go in such a world where it is well treated (higher safer yields) and well protected (lower taxes, stable economies).

When almost all economic activity took place within a country governments could regulate their economy (interest rates, control of the money supply, deficit spending, etc) but now there is no world government to regulate the world economy. It makes it very difficult in a global economy for individual governments to use monetary policy effectively. It requres coordinated action on a world wide scale and often the politics and intersts of individual countries are in conflict.

Yes, we have a problem but one that is probably more efficiently and effectively managed using market forces and strategies than using political decision making. The free flow of capital and resources and transparency of markets will in the long run generate more wealth and higher living standards than political and governmental control and regulation. One may be nervous about the US economy but where would you find a safer investment, russian rubles, ethiopian bonds?

@jeeprs,

But doesn't 'using market forces' really equate to 'letting Lloyd Blankfein et al make a squillion dollars out of it while we look the other way?' 'Market forces' are nowadays often manipulated by the boards of the uber-corporations. At least elected governments are answerable to the electorate. If this 'small government' dogma wins the day, the entire planet will be held hostage to Wall Street I am sorry.

@jeeprs,

jeeprs;158211 wrote:

well the immediate problem is that the Greeks owe 20 billion euros in bond repayments on 19th May. If they can't make those payments, they have defaulted. As I understand it, the Greeks have indeed been profligate, which is why the Germans are so angry about having to bail them out. But the problem is in today's world, everything is connected as never before. The yanks were worried about the domino effect at the start of the Vietnam war. It was never going to happen then, but domino effects are a real possibility in economic terms now.

I am not and have never been anti-American. But the extreme American Right scares me. These teaparty crackpots who really believe that the UN is the antichrist and Obama a communist. They think that the right to carry a deadly weapon is more important than the right to access to the medical system. Anyway hopefully they really are just the lunatic fringe, but I have my doubts (and to be fair, they exist on the left, too). I am generally a supporter of the US, in fact I think it is probably the second-best country in the whole world. :bigsmile: And I never thought George Bush a moron; I always thought he was a man of average intelligence.

But as Salima points out, where she is, water is a problem. The fact is, we are in the middle of the first-ever massive human population boom. In our lifetimes, food security, water shortages, energy security and economic instability are huge potential problems. I don't think laissez-faire capitalism is equipped to deal with them. Copenhagen was an abject failure and that is only in one of the critical areas. The problems the world is facing need co-ordinated responses and sacrifices from all sides. This is not fatalism, it is facing up to some very, very tough situations.

These teaparty crackpots who really believe that the UN is the antichrist and Obama a communist. They think that the right to carry a deadly weapon is more important than the right to access to the medical system. Anyway hopefully they really are just the lunatic fringe,

Wherever did you get this disinformation? I know some Tea Party people. They are nothing like what you say here they are. They are essentially libertarians who are fed up with the way Obama has been moving, and especially with his very sleazy tactics in forcing the recent health care bill (and this includes, of course, his allies in the Congress). He had absolutely no regard for the democratic process. He used every trick in the book. It was a disgrace. I am not a Tea Party member. I don't join. But I have a good deal of sympathy for their aims and for their resentment at the way their kind of people have been treated during these last couple of years. They are not lunatics or crackpots, or whatever the sources of information you have tell you about them. I would advise you to distrust those sources from now on. They have an agenda, and they are not reporting the truth.

@jeeprs,

Why do you reckon that guaranteed accees to medical care is 'sleazy'? Actually, I don't want to get into that debate - there is another thread on that. I was going to comment on Prothero's endorsement of the free market system. Goldmann Sachs made a billion out of advising the Greek government on how to conceal the extent of its deficits.

Quote:

What sets Goldman Sachs apart from the most aggressive of hedge funds and other opportunistic investors is that it plays the role of both market maker and principal investor while having access to cheap official funding with little regulation over its businesses. When you throw the smartest people in the industry into such a franchise the result is a financial powerhouse that will transcend competitors and test the boundaries of law and ethics in the pursuit of profit. Indeed, Goldman Sachs is the epitome of the free market capitalist ideology the same politicians have prided the US for attaining over the past century.

Goldman Sachs had its place in structuring cross-currency swaps to mask the extent of the Greek deficit and circumvent European Union deficit rules. Then it was at the forefront of trading in the credit default swaps (CDS) market for Greek sovereign default.

Source

@jeeprs,

jeeprs;158225 wrote:

But doesn't 'using market forces' really equate to 'letting Lloyd Blankfein et al make a squillion dollars out of it while we look the other way?' 'Market forces' are nowadays often manipulated by the boards of the uber-corporations. At least elected governments are answerable to the electorate. If this 'small government' dogma wins the day, the entire planet will be held hostage to Wall Street I am sorry.

Well I am not sure government and politicians running the economy is the answer either.

No economy is completely market driven there are always some governmental ground rules, regulation and oversight. The argument comes in what type and manner of regulation is needed.

Personally I think it is a mistake to let corporations become larger than countries. About half of the largest economic entities in the world are corporations not countries. I think antitrust laws are good and should be enforced. No corporation should become "too big to fail" or represent a systemic risk.

When two or three corporations control an entire sector of the economy you no longer have a "market" you have a de facto monopoly. When corporations get to take all the risk and the profit and taxpayers get the bill you do not have a market you have "moral hazard".

So I am talking about transparency, true competition and accurate representation and accounting. On the other hand politicians would never let an industry fail, there would not be the ruthless efficiency and effective allocation of resources that generates wealth "the creative destruction of markets". What are markets anyway other than the combined results of the individual decisions of buyers and sellers, a form of economic democracy.

In the US for instance government (local, federal and state) already represent close to half GDP. How large do you want government to be? Do you think government allocates resources (human and capital) more effectively than markets? Do you think government generates wealth more efficiently than markets? Do you think politicians can run companies better than CEO's?

There is a reasonable argument to be made that government intrusion into markets (especially housing and mortgage markets) are at least partially responsible for the crisis to start with. Also prolonged low interest rates and large increases in the money supply (all government decisions).

It is only markets that will force governments to be fiscally responsible. At some point investors will not buy your bonds, or hold your currency, or invest in your stocks or buy your houses. It is only the market that is forcing Greece to finally face economic reality. The Greek politicians would not reduce deficits or cut services except for the market.

@kennethamy,

kennethamy;158226 wrote:

They are not lunatics or crackpots, or whatever the sources of information you have tell you about them.

Here is an articlefrom that communist rag, NewsWeek, on which my comments were based.

@jeeprs,

jeeprs;158229 wrote:

Why do you reckon that guaranteed accees to medical care is 'sleazy'? Actually, I don't want to get into that debate - there is another thread on that. I was going to comment on Prothero's endorsement of the free market system. Goldmann Sachs made a billion out of advising the Greek government on how to conceal the extent of its deficits.Source

Well I suppose that is one interpretation of it but:
You can not blame a publicly held (stock) corporation for trying to maximize profit (it fact it is their fiduciary responsibility and social function).

You also can't blame them for risk management (taking out a CDS (credit default swap) on sovereign debt that they hold. CDS is after all a form of insurance against default and thus a form of leverage or risk management.

I do not think anything GS did was illegal and I doubt there will be any sucessful legal action against them. If the government would loan me 200 million or so interest free, I could invest it in bonds, make money and pay them back later too, wouldn't you?

You can not blame people for playing the game, exploiting the rules and making money. It is just another example of the government failing to properly understand and thus properly regulate the market. You take really smart people and pay them based on short term profits, stock options and cash flows instead of long term results and what do you expect? The behavior is based on the incentives provided by government regulation, government intervention or the lack of it.

@jeeprs,

And this is exactly what Obama is doing - preparing to re-regulate the market. The financial deregulation beloved of Thatcher and Reagen ultimately resulted in the world coming within a whisker of financial apocalypse - and it might happen yet. And as I said before, the only reasons the Right are going along is because even their constituency is fed up with it. So despite their bluff and bluster, sanity might actually prevail.

@jeeprs,

I know Greece is having a debt crisis but who is Greece in debt to? Who does Greece owe money to. I'm having difficulty finding this information.

Ok, I found something that says Greece owes money to German, French and Swiss banks...but which banks...I want names.

@Deckard,

Deckard;158266 wrote:

I know Greece is having a debt crisis but who is Greece in debt to? I'm having difficulty finding this information.

Everyone who is holding their sovereign bonds. It is a long list. The bond market is very efficient and higher yields generally means higher risk. Greek bonds have had high yields for some time now, making them both attractive and risky. The downgrading of their status means many institutional and governmental investors will now have to sell their Greek bonds since by law or regulation they can not hold junk bonds in their portfolios.

@prothero,

prothero;158269 wrote:

Everyone who is holding their sovereign bonds. It is a long list. The bond market is very efficient and higher yields generally means higher risk. Greek bonds have had high yields for some time now, making them both attractive and risky. The downgrading of their status means many institutional and governmental investors will now have to sell their Greek bonds since by law or regulation they can not hold junk bonds in their portfolios.

So is the Greek bond bubble somehow related to the US real estate derivative bubble that popped and started the US/global recession? Or is the Greek crisis independent of that one?

@kennethamy,

kennethamy;158226 wrote:

These teaparty crackpots who really believe that the UN is the antichrist and Obama a communist. They think that the right to carry a deadly weapon is more important than the right to access to the medical system. Anyway hopefully they really are just the lunatic fringe,

Wherever did you get this disinformation? I know some Tea Party people. They are nothing like what you say here they are. They are essentially libertarians who are fed up with the way Obama has been moving, and especially with his very sleazy tactics in forcing the recent health care bill (and this includes, of course, his allies in the Congress). He had absolutely no regard for the democratic process. He used every trick in the book. It was a disgrace. I am not a Tea Party member. I don't join. But I have a good deal of sympathy for their aims and for their resentment at the way their kind of people have been treated during these last couple of years. They are not lunatics or crackpots, or whatever the sources of information you have tell you about them. I would advise you to distrust those sources from now on. They have an agenda, and they are not reporting the truth.

You've said quite a lot here. I am in agreement, at least as far as the principles are concerned. I don't want to advocate the end as a justification for the means.

However, that being said, there seems a bit of a connundrum here with the way our bi-partisan system works, or rather, is grinding to a halt.
Do you feel there is any value to Obama's policy of ramming the thing through and then refining it later?
Is it likely to ever get the job done without a tactic like that?

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