Hard News by Russell Brown

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Hard News: European Horror Stories

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  • Bart Janssen, in reply to Danyl Mclauchlan,

    the average Greek worked 2,116 hours in 2008, while the average German worked 1,426 hours.”

    That’s about labour productivity. German workers are much more productive than Greek workers, so they earn more, so they work less.

    Silly stat. Cause and effect are not proven. You could argue equally from the data that working less causes you to earn more and be more productive.

    Auckland • Since Nov 2006 • 3347 posts Report Reply

  • BenWilson, in reply to Danyl Mclauchlan,

    Even if Greece defaults on all its debt, it still can't afford to run its government and its loss of credit would mean instant bankruptcy and force it to implement staggering austerity measures.

    That might happen. Or it might go a different way, that loss of credit would mean a loss of credit repayments, reducing the necessity to export, allowing them to use their own currency control to reduce austerity and get their economy working again. This has happened many times in human history, I can't think why it couldn't happen again. The evils of a debt driven society are a frequent theme in writings from the ancient world, and the massive debt write offs have often gone very well for the societies concerned.

    Auckland • Since Nov 2006 • 8499 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    Silly stat. Cause and effect are not proven. You could argue equally from the data that working less causes you to earn more and be more productive.

    It is a silly stat, although that conclusion isn't impossible (it just doesn't follow from the premises). It could well be that there's entirely too much work going on. I think this is very much the case with the current GFC. That the very idea of work is broken.

    Auckland • Since Nov 2006 • 8499 posts Report Reply

  • James Bremner, in reply to Rich of Observationz,

    Rich, states in the US could go bankrupt as Illinois and California are in the process of proving.

    NOLA • Since Nov 2006 • 341 posts Report Reply

  • Hans Versluys,

    Greece (and Ireland) could learn a lesson from Iceland: refuse to bail out banks; make banks' international division go bust but keep the deposit taking as the core business of domestic banks; have capital controls to prevent bank runs; go back to basics of fishing (and tourism in Greece's case).
    Result: Iceland has now got a credit rating back, paid off its IMF loan money, is growing strongly economically (even tourism is booming due to a cheap Krona), but still has capital controls.
    Greece would need to leave the euro for this to make its internal prices and costs competitive on the international market by a devalued drachma. German tourists could then support their economy, even if they must get first choice of the sunloungers at the poolside.

    Interesting comparison of economic woes and responses by Iceland, Ireland and Latvia

    Auckland • Since Jul 2011 • 29 posts Report Reply

  • Bart Janssen,

    What I find sad about the situation in Greece is that there seems to be a lot of effort going into placing blame and insulting the Greek people and not nearly as much effort into getting a long term solution in place.

    Understanding the causes of the crises is a good thing, running around shouting "it's your fault" doesn't help much at all.

    Auckland • Since Nov 2006 • 3347 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    although that conclusion isn’t impossible

    I know. And there is a lot of research that suggests working less is a very good thing for the economy.

    Auckland • Since Nov 2006 • 3347 posts Report Reply

  • BenWilson, in reply to Angus Robertson,

    A method that succeeded to such an extent that a combined Germany is now being hailed as the potential saviour of Europe.

    I'm sure some people are hailing it, but it was not without considerable social consequences. Former East Germans are still second class citizens, even now, 20 years later.

    Or

    False binary, right there. There are a lot of other ways to do things. The Greeks could default and no-one pays off their debts. The banks just have to suck up that they gave out bad loans, like they're actually meant to in a functioning banking system. Or the solution could be not on the Germans at all, but in changes to the functioning of the ECB. Or the Greeks could ditch Europe altogether. Or a whole lot of other possibilities. They could actually invest in Greece, in a major round of public works, to get the economy churning again, after which the Greek economy might just pay its way out of all that debt. Or they could relocate major industries to Greece because the labour is dirt cheap. Or .. well the list goes on and on. There's no binary to this. It's a very complicated question.

    Auckland • Since Nov 2006 • 8499 posts Report Reply

  • Crunchy Weta,

    The source of the bailout money is... printing presses. It doesn't actually exist. The beneficiaries of the bailout are the banks who should never have lent what they didn't have. The victims/slaves of this financial chicanery are the Greek people.

    Mamaku • Since Nov 2006 • 35 posts Report Reply

  • Steve Barnes,

    The Greek shall inherit the world.
    #spelcheckfail

    The wireless north ;-) • Since Dec 2006 • 4802 posts Report Reply

  • Angus Robertson,

    False binary, right there. There are a lot of other ways to do things.

    That binary is based on the assumption is the Greeks want to borrow the money, which is the assumption Giovanni uses in his article. I'm pointing out that the Germans as the lender would have to be batshit crazy not to enforce conditions. The Germans understand that they are not like the banks or Greeks, no one is going to bail the Germans out.

    The Greeks could default and no-one pays off their debts.

    Personally I think the Greeks should default and stiff the bankers. It would work out better for everyone, except bankers (which to my way of thinking is a bonus). Any pain would be transient and new bankers would be found within days, if not hours, of it occuring.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Angus Robertson,

    I might have to ask you to take it up – in a non-belligerent fashion – with the papers I cite in my article (which were two of many, but seemed the most lucidly argued).

    Nah, I'll do so in a belligerant fashion and I'll do so here.

    It they're Americans and economists they've only ever got one* gauranteed plan of action:

    - make sure the banks are profitable.

    The plan has lots of themes included buying bad debt, encouraging more loans, borrowing ever more, bailing banks out and so on. Just so long as the banks are happy everything will be okay. It's the American way, which is fine if you like that sort of thing. I don't like that sort of thing, it seems immoral somehow.



    * the exceptions on the American political spectrum are socialist/OWS types and libertarian/Tea Party types who are both very minor groups.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Phil fryer,

    A referendum on the Euro in Germany, would see just how much most would
    rather go back to the dueshMark!

    Laingholm • Since Mar 2011 • 34 posts Report Reply

  • Russell Brown, in reply to Crunchy Weta,

    The beneficiaries of the bailout are the banks who should never have lent what they didn’t have.

    Sorta. Some of those banks have been obliged to write off 50-75% of the Greek debt they own, courtesy of the bailout deals.

    Auckland • Since Nov 2006 • 18837 posts Report Reply

  • Joe Wylie,

    A few weeks old now, but still (for me) an interesting take on events:
    What They Are Reading in Greece

    flat earth • Since Jan 2007 • 3460 posts Report Reply

  • Conrad Heine,

    While Greeks (and Spaniards, Italians, Portuguese) have been let down by their political and business elites for decades, it must not be forgotten that the entry of these countries to the eurozone was desired by the leading economies, to ensure potential low-cost competitors were in the euro tent. Poland is in a similar position right now. And let's not forget that the early years of the eurozone saw constant breaches of the deficit levels of the Stability Pact by... France and Germany. Backward-looking I know, but let's forgive those Greeks on the street--taxpayers, on the whole, for like most of us, taxed at point of earning--their anger at "austerity" (such a bracing, wholesome-sounding, virtuous concept).

    London/New Zealand • Since Mar 2008 • 11 posts Report Reply

  • tussock, in reply to Russell Brown,

    some of those banks have been obliged to write off 50-75% of the Greek debt they own,

    Sorta. Those banks have been running 100% or higher interest rates for over a year, so when they write off 50% what it is now, the Greeks still owe more than what they did before the Germans put their economy in the toilet, only the interest rates are still too high, the ECB still isn't allowed to be a lender of last resort, and their economy is spiralling into oblivion because neo-liberalism über alles.

    Interestingly, the Greek government is a profitable enterprise. If they just dumped the Euro, and defaulted on the interest, they'd be immediately able to run a healthy stimulus budget without borrowing anything more, and they'd have rocking growth in no time.

    All they'd have to do is figure out what to do with their money. Digging holes works to pay off debt, but if you can make something productive it works even better. Shame is, massive and growing overproduction, no one wants anything, unless someone can figure out how to get the idle rich in Germany and Japan to loan all their money to some other poor country to buy it all with. 8]

    Since Nov 2006 • 430 posts Report Reply

  • Ian Dalziel,

    Drachma Queens, they lost their marbles...
    I'm thinking the Greeks should invoice someone for part profits from the British Museum's display of the 'Elgin Marbles'.
    And perhaps a further small tax on all words and concepts of Greek origin still in use (Intellectual properties act of some kind) - everytime some American (or other Western person) goes on about 'Democracy' 10c goes in a jar, nek minnit!
    Of course the takings on 'Hubris' would be now climbing, I'm sure...

    Christchurch • Since Dec 2006 • 4860 posts Report Reply

  • giovanni tiso, in reply to Conrad Heine,

    it must not be forgotten that the entry of these countries to the eurozone was desired by the leading economies, to ensure potential low-cost competitors were in the euro tent.

    That's a very good point. German manufacturers would be particularly worried about Italy exiting the Euro.

    Wellington • Since Jun 2007 • 7358 posts Report Reply

  • Danyl Mclauchlan,

    Silly stat. Cause and effect are not proven. You could argue equally from the data that working less causes you to earn more and be more productive.

    Or you could look at the actual data and see that, yes, like I originally said, German workers are far more productive than Greek workers.

    Wellington • Since Nov 2006 • 901 posts Report Reply

  • Andrew C,

    Adding to the background: Even if you don't buy the line about Greeks being lazy tax dodgers, they spent a good deal of effort bullshitting their finances in order to get accepted into the Euro in the first place.

    Auckland • Since May 2008 • 144 posts Report Reply

  • Rich of Observationz,

    The ECB is (effectively) doing qualitative easing (QE). Why are people saying that it can't?

    Also, I don't think that if Greece exited the Euro, it would be able to do QE. The Greek government bonds are Euro denominated, so unilaterally converting them to "new Drachma" would be a default. They wouldn't be able to buy back their Euro bonds using Drachma (at least, not at a reasonable rate). And they'd have to pay back Euro debts from tax revenues in a devaluing currency.

    Back in Wellington • Since Nov 2006 • 4444 posts Report Reply

  • Sacha, in reply to Conrad Heine,

    "austerity" (such a bracing, wholesome-sounding, virtuous concept)

    Ae, like a mid-winter swim

    Ak • Since May 2008 • 16614 posts Report Reply

  • Andrew C, in reply to Angus Robertson,

    Personally I think the Greeks should default and stiff the bankers

    What this should read is: Personally I think the Greeks should default and stiff the holders of Greek debt

    This isn't always limited to the banks themselves, shareholders in the banks get done, funds (eg pension funds) that own shares in these banks get stiffed, as too do any institutions/funds that bought the Greek debt if it was repackaged and onsold.

    A default can trickle down and smack the little guys too, think of the mom and pops here in NZ who took a kicking when the developers said 'screw the finance firm bastards, the bottom has fallen out of the market so we're off'

    Like you Angus my personal view is that Greece (and Ireland etc) should default, this is how a functioning banking and risk system is supposed to work. I just wanted to make sure that its clear that a default isn't just sticking it to the "rich pricks".

    Auckland • Since May 2008 • 144 posts Report Reply

  • kiwifarang,

    The BBC did a great piece on how this all got started - How Goldman Sachs Helped Mask Greece's Debt.

    The Greek economy was already behind the eight ball in 2000-2001 and they needed to show an improving economy in order to be welcomed by the EU. Golden Sachs offered them a (off balance sheet) deal they couldn't refuse - using a currency swap mechanism that "guaranteed" to reduce debt to GDP ratios.

    Surprise, surprise... it didn't work.

    And the ex-GS cronies running Europe are now busy changing laws to suit their masters.

    With all the quants at their disposal the banks have created a financial system that is truly flawsome.

    Auckland • Since Aug 2007 • 8 posts Report Reply

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