Misery Economic Theater 2011

[garo]

Originally Posted by R.D. Silverman

False. The citizens of Greece collectively borrowed the money through
their government. The citizens of Greece are collectively responsible for
paying it back.

And you call yourself a mathematician? Anyone with an elementary knowledge of compounding knows that the Greeks cannot pay back the loans. What you suggest is a mathematical impossibility.

Perhaps you should take your own advice and stick to what you do best and not opine on matters about which you know little to nothing.

And in the pot calling kettle black department:
FDR - Gold standard
Nixon - Bretton Woods II

[ewmayer]

Originally Posted by literka

False. Elderly of Greece neither borrowed money not nor benefited from borrowing.

Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run. Now everyone is shocked and dismayed that borrowed money actually comes with strings attached, and all the entitlement addicts are looking for convenient scapegoats, be it "the corrupt/incompetent politicians", "the corrupt/incompetent politicians in the opposition party", the greedy bankers, the evil Germans, what have you.

--------------------------

And in today's lecture on recursive Ponzi finance:

EFSF Bail-Out Fund Buys Its Own Debt Because Not Enough Others Will

The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.

However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.

Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.

The failure of the EFSF will increase pressure on the European Central Bank to effectively become the lender of last resort for the eurozone, a move it has strongly resisted.

[R.D. Silverman]

Originally Posted by garo

And you call yourself a mathematician? Anyone with an elementary knowledge of compounding knows that the Greeks cannot pay back the loans. What you suggest is a mathematical impossibility.

The ability to pay back the loan has nothing to do with the responsibility.

Making the leap from a discusion of responsibility
to one of ability defies all logic. It is a total nonsequitur.

Perhaps you should take your own advice and stick to what you do best and not opine on matters about which you know little to nothing.

And of course, you find it necessary to resort to insults in the process.

I'd say more but there is a clear double standard posed by the mods.

[R.D. Silverman]

Originally Posted by ewmayer

Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run. Now everyone is shocked and dismayed that borrowed money actually comes with strings attached, and all the entitlement addicts are looking for convenient scapegoats, be it "the corrupt/incompetent politicians", "the corrupt/incompetent politicians in the opposition party", the greedy bankers, the evil Germans, what have you.

Yup! I have a modest proposal. Let those who gave Greece loans do
what banks do when people reneg on mortgages: they take back the
property.

Greece spent a lot of money that it could not afford on repairing/improving
infrastructure and building new infrastructure (e.g. modern highways).

Let the banks reposess! Call the repo man. Then they can charge fees/tolls
for the use of their property, or they can sell it to private concerns.......

And I love your term "entitlement adicts".

Literka complained about "hurting the elderly". Those elderly benefitted from
social programs that the government could not afford, including retirement
and pensions at an age that would be totally ludicrous in the U.S.
And I understand that country is under such poor control that an absurdly
large part of the economy is underground and does not pay taxes.

Greece voted itself 'bread and circuses'. Now it is time to pay the piper.

[literka]

Originally Posted by ewmayer

Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run.

It should be written: as the result of massive lending for Greece, this country maintained its overly-generous social-welfare system, bloated public sector and uncompetitive labor markets.
In other words, all these listed bad things were consequences of massive loans Greece was able to get. This means that there was only one bad thing (lending money) causing all these listed bad things. Banks were responsible for lending, hence also for all listed bad things that took place.
Loans were dirty money, causing disruption of economy. People stopped working, trying to be glued to a stream of money. This was easy money, the worst kind of money ever invented. If someone couldn't be glued to a stream of money, still he could try to glued to the people glued to a stream of money and still he could have some benefits from loans. Vast majority were artificially maintained because old jobs stopped to exist.
Behavior of all governments having access to new loans were always the same. If money was needed than always there was "no problem".
Banks had a full control, where the stream of money was flowing. And they had not any reason to care about jobs, agriculture etc. That is why I consider loans rather as a plot than help.

[R.D. Silverman]

Originally Posted by literka

It should be written: as the result of massive lending for Greece, this country maintained its overly-generous social-welfare system, bloated public sector and uncompetitive labor markets.
In other words, all these listed bad things were consequences of massive loans Greece was able to get. This means that there was only one bad thing (lending money) causing all these listed bad things.

No! The country borrowed money in order to vote themselves
'bread and circuses'.

Or are you claiming that they were like children in a candy shop:
unable to restrain themselves?

They spent money on things they could not afford. The money was
available, but availability of money did not cause the problem. Their
spendthrift attitude did.

Banks were responsible for lending, hence also for all listed bad things that took place.

Fantasy. The 'bad things' that took place happened because Greece
did things IT COULD NOT AFFORD. It was caused by the people who
made bad decisions and spent the money recklessly, and not by those who made it available.

Or do you want to suggest that the banks should have known that
they were lending money to people who would spend without restraint
i.e. that Greeks are children who can't control themselves?

Loans were dirty money, causing disruption of economy.

Huh? 'dirty money'??? Total gibberish. The first part of the gibberish
is the unsubstantiated 'dirty' part. The second part is the idea that
'dirty' money presented as a loan would somehow cause economic
disruption. Would 'clean' money have made any difference?

This nonsense is the worst sort of attitude that I can imagine. It is
total fantasy/denial and a horrible sense of entitlement.

Does anyone else believe this fantasy??

[literka]

Originally Posted by R.D. Silverman

Or are you claiming that they were like children in a candy shop:
unable to restrain themselves?
They spent money on things they could not afford. The money was
available, but availability of money did not cause the problem. Their
spendthrift attitude did.

Here "they" refers to the special people, who could get loans. Of course, not theirs loans, but other people loans. Usually people in such occasion think if they personally can have some profits. Especially in the case they can do this in a legal way. What if they have an offer to get loans with a condition to buy new Volkswagens for received money? And later to get loans to build new roads so that they can more possibilities to drive new Volkswagens?
Sure there are people who would never agree for such a deal. But they are eliminated quickly. Look, Papandreu didn't agree for European conditions and he was eliminated in one week. By the people who needed new Volkswagens and needed new roads to drive new Volkswagens.


So, don't tell me that it is not dirty money. All easy money is a dirty money.

[R.D. Silverman]

Originally Posted by literka

Here "they" refers to the special people, who could get loans. Of course, not theirs loans, but other people loans. Usually people in such occasion think if they personally can have some profits. Especially in the case they can do this in a legal way. What if they have an offer to get loans with a condition to buy new Volkswagens for received money? And later to get loans to build new roads so that they can more possibilities to drive new Volkswagens?
Sure there are people who would never agree for such a deal. But they are eliminated quickly. Look, Papandreu didn't agree for European conditions and he was eliminated in one week. By the people who needed new Volkswagens and needed new roads to drive new Volkswagens.


So, don't tell me that it is not dirty money. All easy money is a dirty money.

You talk and espouse ideas like a 1960's love child hippy on quaaludes.
Totally separated from reality.

Do you really expect that because my recent car loan was the result
of 'dirty money' simply because the loan was easy to get???? Or that
I am not obliged to pay it back?

The 'special people' who got the loans were the Greek government
acting at the behest of the Greek people who WANTED all the social
programs and infrastructure programs.

[literka]

Originally Posted by R.D. Silverman

Do you really expect that because my recent car loan was the result
of 'dirty money' simply because the loan was easy to get???? Or that
I am not obliged to pay it back?

If you want to compare two things, you should choose things that can be compared. You took a loan on your name hence it is your responsibility to give money back. People in Greece, they take loans on the name of few millions. Out of these millions there are only few, who know they are taking a loan. This makes a lot of difference and makes these two things uncomparable.

Originally Posted by R.D. Silverman

of the Greek people who WANTED all the social programs and infrastructure programs.

Did they want also a total collapse of economy, street demonstrations etc.?
If you knew they wanted social programs then you should know the answer for this question too.
By the way, what kind of infrastructure programs? New roads maybe? New roads are needed for Volkswagens owners. They built huge infrastructure for Olimpiade to have a week of national pride. I do not believe they built anything useful, for example to create new jobs. Not with dirty money.

[Fusion_power]

Seems to me that Europe at this point has already forgiven 50% of a major portion of Greek debt. That is not why there is still a financial crisis. The crisis is that even with that much relief, Greece is still spending more than it receives in taxes. Do some due diligence, see just how much tax they collect vs their socialized obligations. Then look at the methods used to borrow the exorbitant amounts that led to this problem.

The only effective solution is to cut Greece adrift. The alternative is that all of Europe and maybe most of the rest of the world will suffer if they keep waffling around with the problem.

This is apt to be a very touchy subject so I would invite posters to take a deep breath and remember that we are not enemies.

DarJones

[ewmayer]

A friend forwarded John Mauldin's latest newsletter, which features an excellent analysis of the crisis facing the Eurozone - full piece needs a signup (othewise free), this one is worth it IMO:

Where is the ECB Printing Press?

Where Can I Find €3 Trillion?

First, for the record, the European issue is not a crisis of confidence, as Merkel and Sarkozy, et al., keep telling us. It is structural. And until the structural issues are dealt with, the problems will not be solved.

The first problem facing Europe is the glaring sore thumb: there is simply too much sovereign debt in Greece, Ireland, Spain, Italy, Portugal, and Belgium. That is not news. What has yet to be absorbed by the markets...

Couple brief comments:

- Forget writing off > 90% of Greek debt ... ultimately the EU (or whatever pieces are left of it) will have to write off (or print) a similar proportion of the full 3T-plus in sov debt Mauldin mentions. The only way to fix the structural issues is via deep, long-term austerity, which of course makes things even worse in the short run because it hammers GDP thus impairing ability to service debt. But that's the nature of the debt trap all the insufficiently productive economies of the world have created for themselves - and that includes the US, which will be at or near debt of 120% of GDP in around 2 short years.

- Notice it only took 2 *days* for Italian yileds to again rise above 7%, even with the ECB buying much - but apparenty not all - of it. So much for "the full Monti" saving things. Reshuffling the deck chairs by swapping out a lying pol with a lying economist appears to have had a very short bond-market half-life.