That's to say nothing of the Irish who have taken some very, very bitter medicine of their own and are starting to turn the corner - why should they do it tough and the Greeks get a soft option?
Ultimately the Greek government took billions in loans to support an unsustainable system - there is short term gain for Syriza in sticking two fingers up at the EU and the bankers but in the real world the consequences of doing that are ruinous.
Greece needs cash just to keep running - would you borrow them money if they had told their previous lenders to go fuck themselves?
I think there's an election coming up soon in Ireland, and Sinn Fein are rising in popularity (have led in some polls). If Greece have their debts forgiven and no change to Ireland, that would definitely help Sinn Fein. I believe it's a similar story in Spain.
Who were Greece's previous lenders (before the bailout)? I had thought German pension funds had been left hugely exposed to the Greek financial sector and Greek government debt. I understand what people are saying about Greece not collecting tax and having a large public sector, but surely the lenders should also be responsible for reckless lending? Should they be bailed out of their poor financial decisions by ordinary Greek citizens?
"It's no secret that their numbers to be admitted into the Eurozone were completely fudged and that deception on a scale that'd make Arthur Andersen blush. "
It didn't make Goldman Sachs blush though. They did the numbers. Didn't you know that?
Criminal organisation.
I'm sure there's a point you're trying to make here, I'm just not sure it's a good one.
The World's economic system is completely and utterly bonkers. The world's richest 1% are worth $110trillion. That is 65 (sixty-five) times as much as the poorest half of the World. "Despite the austerity affecting ordinary people around the globe in the wake of the recession, the richest 85 billionaires saw their fortunes increase by a total of around £150 billion over the past year - the equivalent of £415 million a day or almost a third of a million pounds a minute"* The UN estimates that on a world wide basis 21,000 (twenty one thousand) people die of hunger or hunger related causes every day.
Such disparity cannot be explained by the 1% working harder, or being cleverer, or somehow gaining such a massive share through merit. It can only be explained by the the fact that the system we live under is utterly fucking obscene. Before we get to carried away with arguments about the Greeks being lazy premature-retirees, it is worth remembering that in the UK we are lucky to have good natural resources and a major financial hub. Without those things, we may well find ourselves in a similar position to the Greeks. Good luck to them for voting anti-austerity. The simple fact of the matter is that the whole system needs a shake up. I hope others follow their lead.
*Daily Mail 30/10/2014
Yeah, sure, the system's broken but that's down to a lack of meaningful population control more than anything else.
Take India for example, from 300 BC up to 1600 the population was fairly stable at 100 million. As recently as 1990 it was still "only" 850 million; it's now 1,250 million. For even a rich country that level of increase in population is unsustainable.
The thing about the World's richest 1% is that it's still around 70 million people.
The BBC's head of statistics, (yes they really have one of those!) Anthony Reuben, said: "In order to be part of the wealthiest 1% of the world's population, an individual would need to be worth just over half a million pounds. So it is not necessarily talking about people who own yachts and ski chalets. Owning an average house in London would just about put an individual in the 1%."
So, do we really want better distribution of wealth or would we like to keep our houses?
Absolutely spot on. The wealth figures are just political currency. You could give up your house and give the deeds to a starving African. You've immediately made the figures better and made no difference at all to the ability of an African to feed his family. It's efficient use of an asset that matters, and how you re-distribute the proceeds. If you transferred a billionaires clothes boutique from Oxford Street to Katmandu it would reduce the assets of the billionaire but do nothing to improve the wealth of the poor in Katmandu. All you do is destroy the wealth creating value of an asset.
If the statistics focussed on the income actually received by the billionaires instead of the value of the assets that create the income, it would make more sense, because income is the only thing that can be effectively re-distributed.
So the published figures on wealth are simply telling us how much wealth can theoretically be turned into cash, not what are the billionaires worth in net income terms. Theoretically converted into cash because the market value collapses if there are no wealthy billionaires to buy the assets, and the poor have no cash.
Nor do they convey how much economic activity would be destroyed if the wealth creating assets were taken away from the control of the wealthy. Only if the poor nations could use the assets to generate local economic activity and it was not used to buy goods from the wealthy would it make any sense.
So the idea that taking away assets from the comparative wealthy solves anything of itself, is wrong. We don't have the means of transferring economic activity to where it is needed and that is not the fault of those who happen to own the assets that are currently employed efficiently in the developed World. If you looked just at the income being produced, which is what we should be looking at, it would show that the problem is bigger than it is made to look. And the problem is overpopulation and insufficient resources to support it. It doesn't matter who owns the resources, there aren't enough of them.
Some people have covered key points such as the debt at 174% of GDP never getting cleared, especially if GDP is shrinking, poor Greek tax receipts and five years of poverty and austerity creating this result. What I don't see mentioned is that this is the natural conclusion of German export of their economic policy. Many think it's the fault of a debtor if they run into trouble but someone lent them the money in the first place. The Greeks have audis and BMWs as well as German trains running in their country. So what will Germany do now?
Greece is important to Greek people but it's economy is tiny compared to the Eurozone. What happens next including a possible Grexit is important to the Eurozone because of the knock on effect to Italy and others...and their voters.
The irony is that a softer programme and perhaps some technical assistance with tax collection would have avoided what is a fairly big risk to the EU economic system. But the Germans were so worried about inflation going above 2% that they have insisted on policies which shrink the economies of the European nations.
But before we condemn or pity the Greeks, let us thank them for restoring the meaning of democracy in all of this. I hope, rather than believe, that the Eurozone can find an orderly way through with a mix of grants (not more loans) to help Greece grow their way out of trouble.
Cutting spending, benefits and services to expand ones way out of a debt crisis is stupid and can never work since your economy shrinks. Perhaps the voters in this country might take notice!
Edit: the irony of the German message is that they benefitted from debt forgiveness and the Marshall plan after WW2. We are fortunate that the Greeks have chosen a leftist group and not fascists to solve the problem.
60% per cent youth unemployment in Greece , which i'm guessing is 18 - 24 years old, over here its 16% youth unemployment, and we thought we had problems, what the heck do they do all day?
60% per cent youth unemployment in Greece , which i'm guessing is 18 - 24 years old, over here its 16% youth unemployment, and we thought we had problems, what the heck do they do all day?
Well, according to The Economist, in 2013, 24% of all economic activity in Greece went undeclared to evade tax and regulation.
Don't forget that Greece still has a large rural community with small (subsistence/semi-subsistence) farms. 12% of Greeks work in agriculture, forestry or fishing compared with 2% of Germans and 1% here in the UK.
So, to answer your question I suspect that a fair number of them are manning trawlers, building villas, working in their dad's restaurant/bar during the season, farming, and in the autumn picking grapes and olives.
I guess maybe the ones in trouble might tend to be those looking for jobs in the professional classes, public servants and the like.
I have a colleague who worked in Greece for 7-8 years and his neighbour worked for the Government but only attended that job 2 days a week because he was moonlighting in his brothers restaurant but was still receiving his full civil service pay....you couldn't make it up. I agree the best step would be to help them establish a proper tax collection system that is enforced that at least would help their balance of payments. Will they ever get straight? I doubt it and the only likely outcome I can see is an eventual exit from the EU and then they will really see what a fix they are in.
The World's economic system is completely and utterly bonkers. The world's richest 1% are worth $110trillion. That is 65 (sixty-five) times as much as the poorest half of the World. "Despite the austerity affecting ordinary people around the globe in the wake of the recession, the richest 85 billionaires saw their fortunes increase by a total of around £150 billion over the past year - the equivalent of £415 million a day or almost a third of a million pounds a minute"* The UN estimates that on a world wide basis 21,000 (twenty one thousand) people die of hunger or hunger related causes every day.
Such disparity cannot be explained by the 1% working harder, or being cleverer, or somehow gaining such a massive share through merit. It can only be explained by the the fact that the system we live under is utterly fucking obscene. Before we get to carried away with arguments about the Greeks being lazy premature-retirees, it is worth remembering that in the UK we are lucky to have good natural resources and a major financial hub. Without those things, we may well find ourselves in a similar position to the Greeks. Good luck to them for voting anti-austerity. The simple fact of the matter is that the whole system needs a shake up. I hope others follow their lead.
*Daily Mail 30/10/2014
Yeah, sure, the system's broken but that's down to a lack of meaningful population control more than anything else.
Take India for example, from 300 BC up to 1600 the population was fairly stable at 100 million. As recently as 1990 it was still "only" 850 million; it's now 1,250 million. For even a rich country that level of increase in population is unsustainable.
The thing about the World's richest 1% is that it's still around 70 million people.
The BBC's head of statistics, (yes they really have one of those!) Anthony Reuben, said: "In order to be part of the wealthiest 1% of the world's population, an individual would need to be worth just over half a million pounds. So it is not necessarily talking about people who own yachts and ski chalets. Owning an average house in London would just about put an individual in the 1%."
So, do we really want better distribution of wealth or would we like to keep our houses?
As usual you've made an elegant argument. However did you not hear the consistent message coming out of Davos last week? Global equality has improved, due mainly to the success of China and India in lifting millions out of poverty. however there are problems of greater inequality in individual states. It isn't hard to think of which states are referred to. The USA - shocking levels of poverty in a country of so many billionaires. Russia. And last but by no means least, Britain. I would like to ask both you and especially @Dippenhall whether you watched Jacques Peretti's "The Super-Rich and Us", and if so, what, if anything do you consider he got wrong?
At a time when we are seeing more and more public services being cut, including operations that were considered mandatory as recently as five years ago, I am not inclined to support the British Government using our public finds to bail out another country - not again. I would be against this in any circumstances, certainly I would be against a bottomless pit like Greece, where they have had lifestyles that we can only dream about for decades.
I don't want to sound heartless, and the story of the lady that died because her electricity was cut off is terrible, yet great for the PR machine that wants to demand more credit for those that have no money, or any way of paying it back. However, it brings us back to the 'Economic Question' the one that all studies of Economics starts with and that's how to allocate the finite resources in the face of infinite demands.
If we, for example, 'give' Greece billions of Euros (or write off debt) what further cuts would be needed here? How many of the things we want our taxes to fund will we have to go without in order to have the money sent to a country with a population less than twice that of London?
The suggestion that Greece imported Audis and BMWs is, I believe, irrelevant. People have to take responsibility for the money they spend, they can't blame those that lent it to them.
The sad truth is that those that benefited while money they didn't have was being spent are probably not going to be called upon to pay it back. That is, however, true of the UK too. There are thousands of 'pensioners' that have final salary pensions that are well in excess of the national salary that retired long before they were sixty. They will be able to keep their pensions and will, probably, be more wealthy in retirement than much of the UK population that will be 'repaying' the debt for their entire working lives, and will retire with insignificant pension provision ten years older than their ancestors.
This is the world that we, now, live in. I have little sympathy for the Greeks or the Spanish or the Italians for that matter. We have enough problems of our own in the UK and despite it not being perfect, I believe that those that have fallen on hard times at home are more deserving of our money that those abroad that have had an easier life than we have for decades.
I normally have an opinion on everything but I genuinely have no idea what the Greeks should do.
Austerity seems to be crippling their country and they will never, ever pay off the debts they've incurred so what's the point of the austerity in the first place ?
So I guess they should they default on their loans, almost certainly get kicked out of the Eurozone (and probably the EU too) and find it nigh on impossible to borrow money for at least a decade. However if they were sensible they could use that decade to put in place the apparatus of a state which was capable of raising taxes efficiently which would allow public spending at a sustainable level which would improve lives and mean that in a decades time they would be in a better place than they are today, just. If they stay in the Euro, continue with austerity all to pay back a miniscule amount of an impossible debt then I would guess that things will be no better, possibly much worse in 2025.
I have a colleague who worked in Greece for 7-8 years and his neighbour worked for the Government but only attended that job 2 days a week because he was moonlighting in his brothers restaurant but was still receiving his full civil service pay....you couldn't make it up. I agree the best step would be to help them establish a proper tax collection system that is enforced that at least would help their balance of payments. Will they ever get straight? I doubt it and the only likely outcome I can see is an eventual exit from the EU and then they will really see what a fix they are in.
Agreed It has been long documented that the euro was a political project establishing one currency but without the required fiscal and political union. In the US I understand there are fiscal transfers between states which are important to balance the fact that talent and wealth gravitates to certain parts. And I'm sure some federal authority kicks in if a state fails to balance its books AND is unable to issue paper debt. Not looked it up but didn't both California and Detroit both fall over recently? And New York went bust in the 70s.
Eventual exit means a lot of things including complex negotiation between the new Greek government and the troika looking at an almost impossible outcome of no one losing face, no default and most importantly no contagion. Maybe they kick the can down the road? Or maybe EU (German) policy changes to accommodate the fact that youth unemployment across the Mediterranean states is going to build up a lot of grief in years to come?
I don't know when Italy, Spain and France go to the polls but the opportunity is there for the centre left to articulate a policy for the masses and not the few. I have said for sometime that it's not just Milliband who has failed to create a compelling vision where ordinary voters can vote for a path that grows the country and enables more people to participate in opportunity.
People like Farage, Salmand and Le Pen love to blame the EU, the Euro or Westminster for all the ills but the 20th century social contract isn't that complicated! It just need updating for this century to allow for technologies and people living longer. And that much less of today's enterprise is state owned plus tax for a multi-national is quite easy to avoid or at least reduce well below the rate its customers pay!
Centre-left are in power in France, with record low approval ratings pre-Charlie Hebdo. Isn't Renzi in Italy left-wing too?
I don't know much about the rising left party in Spain, but the Economist does not rate them (right-wing paper, I know, but it's barely polite about them). I believe the traditional centre-left party in Spain, like PASOK in Greece, is in danger of withering away.
@kings hill addick If someone owes a bank money how can the bank get the money back? Encourage ways for that person to grow their income - I borrowed to do a post grad course many moons ago and it paid off. Or lend money to invest in assets that create wealth? I am fortunate to own property and over the years, every sale has been for more than the purchase price. The bank received interest and their capital.
Now if banks don't want their money back in full and if they want to take a hit this week rather than ten years time then they should foreclose immediately and stop funds! Hank Paulson pulled that trick with Lehmann brothers - that went well!
Once again Greece is full of real people but their economy isn't that big. It's the risk of contagion to the Eurozone which will freak the markets and return us to 2007-09 quicker than one can say sub-prime derivatives!
I would suggest that the question about "moral hazard" and bailing out banks and/or governments isn't easy because many people and many countries work hard to create the lives and nations they have. And why would Italy or Spain (and now France) play by the rules if Greece can pull a fast one?
I'm not an economist but Keynes had a very simple maxim: when aggregate demand is down, then governments can intervene to move it up and create jobs and services. Not my original thoughts but something I'm reading right now suggests very strongly that Germany needs to loosen policy write now - not just for Greece but for the whole Eurozone to grow its way out of trouble.
Greece is a lot more complex because their spending isn't that high but their tax receipts are poor for all the reasons mentioned. A lot of this is down to middle class professionals and of course the super rich. Now I don't think so many of them voted for Tsipras... so maybe the Troika and Syria have a common interest in addition to Greece not falling over?
Let's see how it pans out but this is one high stakes poker game!
"The suggestion that Greece imported Audis and BMWs is, I believe, irrelevant. People have to take responsibility for the money they spend, they can't blame those that lent it to them"
I think you may have misunderstood the point @seriously_red was making. if i understood him correctly it was that in lending the Greeks all that money the Germans got a lot back because the Greeks spent their money on many excellent German products. And I think he might go on to argue that therefore the Germans might not be so bloody tough on the Greeks because they've actually done quite nicely from the Greek bailout. Unfortunately we cannot benefit in the same way because we don't make such good products any more. To which the Germans may say, that's your own bloody fault.
Really like this article by Paul Mason of Channel 4. He argues that this time a young educated class who have had enough of corruption and "elites" (i hate the misuse of that word) voted for Syriza; and that Tsipras did indeed make a fight against corruption and tax avoidance a priority. Paul Mason is no mug, and I hope he is right.
I get that PA. I do understand, but It was, as you say, of great benefit to the German car manufacturers, but I don't believe there was any condition of where they spent the money.
I still believe that the Germans have no obligation to write off debts just because none of the rest of Europe could make better cars (or other consumer goods).
Had they bought Italian sports cars would we be expecting the Italians to bail them out?
The World's economic system is completely and utterly bonkers. The world's richest 1% are worth $110trillion. That is 65 (sixty-five) times as much as the poorest half of the World. "Despite the austerity affecting ordinary people around the globe in the wake of the recession, the richest 85 billionaires saw their fortunes increase by a total of around £150 billion over the past year - the equivalent of £415 million a day or almost a third of a million pounds a minute"* The UN estimates that on a world wide basis 21,000 (twenty one thousand) people die of hunger or hunger related causes every day.
Such disparity cannot be explained by the 1% working harder, or being cleverer, or somehow gaining such a massive share through merit. It can only be explained by the the fact that the system we live under is utterly fucking obscene. Before we get to carried away with arguments about the Greeks being lazy premature-retirees, it is worth remembering that in the UK we are lucky to have good natural resources and a major financial hub. Without those things, we may well find ourselves in a similar position to the Greeks. Good luck to them for voting anti-austerity. The simple fact of the matter is that the whole system needs a shake up. I hope others follow their lead.
*Daily Mail 30/10/2014
Yeah, sure, the system's broken but that's down to a lack of meaningful population control more than anything else.
Take India for example, from 300 BC up to 1600 the population was fairly stable at 100 million. As recently as 1990 it was still "only" 850 million; it's now 1,250 million. For even a rich country that level of increase in population is unsustainable.
The thing about the World's richest 1% is that it's still around 70 million people.
The BBC's head of statistics, (yes they really have one of those!) Anthony Reuben, said: "In order to be part of the wealthiest 1% of the world's population, an individual would need to be worth just over half a million pounds. So it is not necessarily talking about people who own yachts and ski chalets. Owning an average house in London would just about put an individual in the 1%."
So, do we really want better distribution of wealth or would we like to keep our houses?
As usual you've made an elegant argument. However did you not hear the consistent message coming out of Davos last week? Global equality has improved, due mainly to the success of China and India in lifting millions out of poverty. however there are problems of greater inequality in individual states. It isn't hard to think of which states are referred to. The USA - shocking levels of poverty in a country of so many billionaires. Russia. And last but by no means least, Britain. I would like to ask both you and especially @Dippenhall whether you watched Jacques Peretti's "The Super-Rich and Us", and if so, what, if anything do you consider he got wrong?
He got quite a lot wrong, vey poor journalism. 1. Failed to provide any evidence of a conspiracy by the rich to make the poor poorer. 2. Failed to explain why a London Fashion show only took place because there were poor people 3. Confused me by making an association of common evil between a butcher who sold overpriced meat to Mayfair resents, a man who sells expensive cigars, an entrepreneur and a barrow boy market trader. 4. Ridiculously implied the Black Scholes theory was a conspiracy to create poverty. Neither Mr Black nor Mr Scholes said "greed is good" that was Michael Douglas. They formulated a mathematical algorithm that allowed risk to be priced into a transaction. Banks used it to work out how much they needed to load the price to make a profit on a transaction. It is used in all sorts of positive ways to manage investment risk. Like saying hypodermic needles were invented for the benefit of drug dealers. 5. Could go on and on....
Had the programme explained that the financial institutions were parasites which existed to extract as much money from both the rich and the poor using different products and services it might have made sense. Had it tried to point to an alternative strategy that sought to show how the assets of the wealthy can be shared with the poor for a common good it might have amounted to something more than a piece of entertainment showing how the super rich spend their leisure time.
You raise some very interesting points cafcfan. I certainly can't take on your overpopulation argument, and have no wish to. I've felt for a long time that the world is overcrowded, and I have no doubt that those countries where there has historically been a culture of having children as a pension will feel the brunt of the problems.
It's also difficult to argue that people in London with an average property should be penalised. However I do think the figures as you've presented them need some context. Any mortgage value or other debt would be deducted and it should be remembered that the average number of people per household is 2.3 not 1. Nevertheless, I concede that 1% is too low a threshold to get excited about.
That does not mean that we can write off wealth inequality though. The Credit Suisse report that Reuben was quoting states that there are, worldwide, 128,000 individuals with net assets of $50m+. That is at least $6,400,000,000,000 (Six trillion, four hundred billion) sitting in the hands of an extremely wealthy elite. In actual fact, it's likely to be a whole lot more than that. That to me is obscene and I stand by my argument that any system that allows this whilst people are starving is fundamentally flawed.
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
Good morning Mr Molloy.
This is a bit above my pay grade. Could you expand on the implications of the point you are making? For example what would you say to the Syriza leaders if they asked your advice before meeting with the troika?
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
Exactly. Some above saying that anyone else with 170% debt to income ratio would be bankrupt - that's the position of vast numbers of UK mortgage holders and has been for decades!
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
Exactly. Some above saying that anyone else with 170% debt to income ratio would be bankrupt - that's the position of vast numbers of UK mortgage holders and has been for decades!
Not strictly speaking true with mortgage holders as you put your house up as collateral in the event you default on your mortgage.
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
Exactly. Some above saying that anyone else with 170% debt to income ratio would be bankrupt - that's the position of vast numbers of UK mortgage holders and has been for decades!
Not strictly speaking true with mortgage holders as you put your house up as collateral in the event you default on your mortgage.
Accepted, although nations can sell assets to pay down debt and do. But I still think there is a lot of popular confusion between debt and deficit, as well as misunderstanding of the historic context. UK debt to GDP was 250% in 1950, I beleve, and Japan's is that now.
So there's a Spanish election coming up too. Will Podemos (the equivalent of Syriza) achieve a similar result? Someone asked their leader about left vs right struggles and he responded "it's not left vs right, it's democracy vs austerity! "
Quite catchy really and perhaps what the Eurozone needed?
As per @PragueAddick interpretation of my BMW reference, increasing demand across the board for goods and services is far more likely to solve things than reducing demand through austerity.
The book I'm reading is so bloody complex I have to read every chapter twice to get my head around it! The basic premise is (I think!) that the Germans have helped create the Euro and now have to work with centre left and centre right to think about the whole of Europe and not just their own economy. To improve conditions for sellers of goods and services to prosper you need active buyers.
Our manufacturers are suffering from a depressed Eurozone and there is talk of a repeat of the Japanese "wasted decade" across Europe as they teeter on the edge of deflation.
That's bad enough when you're well off but if you're poor that might lead to revolution so once again I thank the Greeks for reminding us about democracy in a slightly different way to that of Farage and Salmand.
I know about as much about Farage's real agenda as I do M.Duchatelet! But I do know he is blaming others, just as Le Pen does in France and somebody else does in Italy. And I also recall that the crash of the 1930s led to recession and then depression because moral hazard was applied - banks folded and credit seized up. We saw the outcome in Italy and Germany and I (and now my son) learnt about it in school.
I think austerity is neither a solution nor popular so why can't the well paid politicians and highly educated think tanks come up with something different ? I won't pick up on the super rich references and wealth inequality save to pick up one soundbite: if the trickle down theory is nonsense then what do the super rich bring to the table? Their wealth and their 100% increase over the last five years does wonders for GDP and makes politicians look good.
Strip out the top 1% and then take a look at how ordinary people are doing. Not so well but they do have a lot more votes than the 1%! Let's see how they use them next Monday i
I've gone around the houses but the point is that how Greece pans out in the coming weeks and months is important. Anymake collecting taxes from those who can afford it.
I'm not underplaying the difficulties faced by Greece but it is debt-servicing (i.e. scheduled repayment of capital & interest) NOT the total (170% of GDP) amount of debt that is immediately relevant. The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
Yes. Th eproblem for Greece is that although they are just about running a primary surplus they have done so through massive austerity and by sellign assets. If the new Government wnat to embark on a spending splurge (as they will be expected to) then they will have to borrow the money from somewhere or raise/collect taxes.
I don't blame the Greeks for desperately searching for a way out of this but I'd be amazed if the new Government is still in power at the end of 2015. The coalition is pretty fragile and diverse and the expectations are so huge that they can only be disappointed.
Comments
Who were Greece's previous lenders (before the bailout)? I had thought German pension funds had been left hugely exposed to the Greek financial sector and Greek government debt. I understand what people are saying about Greece not collecting tax and having a large public sector, but surely the lenders should also be responsible for reckless lending? Should they be bailed out of their poor financial decisions by ordinary Greek citizens?
If the statistics focussed on the income actually received by the billionaires instead of the value of the assets that create the income, it would make more sense, because income is the only thing that can be effectively re-distributed.
So the published figures on wealth are simply telling us how much wealth can theoretically be turned into cash, not what are the billionaires worth in net income terms. Theoretically converted into cash because the market value collapses if there are no wealthy billionaires to buy the assets, and the poor have no cash.
Nor do they convey how much economic activity would be destroyed if the wealth creating assets were taken away from the control of the wealthy. Only if the poor nations could use the assets to generate local economic activity and it was not used to buy goods from the wealthy would it make any sense.
So the idea that taking away assets from the comparative wealthy solves anything of itself, is wrong. We don't have the means of transferring economic activity to where it is needed and that is not the fault of those who happen to own the assets that are currently employed efficiently in the developed World. If you looked just at the income being produced, which is what we should be looking at, it would show that the problem is bigger than it is made to look. And the problem is overpopulation and insufficient resources to support it. It doesn't matter who owns the resources, there aren't enough of them.
BlackburnBradford West, which is an English constituency.What I don't see mentioned is that this is the natural conclusion of German export of their economic policy. Many think it's the fault of a debtor if they run into trouble but someone lent them the money in the first place. The Greeks have audis and BMWs as well as German trains running in their country.
So what will Germany do now?
Greece is important to Greek people but it's economy is tiny compared to the Eurozone. What happens next including a possible Grexit is important to the Eurozone because of the knock on effect to Italy and others...and their voters.
The irony is that a softer programme and perhaps some technical assistance with tax collection would have avoided what is a fairly big risk to the EU economic system. But the Germans were so worried about inflation going above 2% that they have insisted on policies which shrink the economies of the European nations.
But before we condemn or pity the Greeks, let us thank them for restoring the meaning of democracy in all of this. I hope, rather than believe, that the Eurozone can find an orderly way through with a mix of grants (not more loans) to help Greece grow their way out of trouble.
Cutting spending, benefits and services to expand ones way out of a debt crisis is stupid and can never work since your economy shrinks. Perhaps the voters in this country might take notice!
Edit: the irony of the German message is that they benefitted from debt forgiveness and the Marshall plan after WW2. We are fortunate that the Greeks have chosen a leftist group and not fascists to solve the problem.
Don't forget that Greece still has a large rural community with small (subsistence/semi-subsistence) farms. 12% of Greeks work in agriculture, forestry or fishing compared with 2% of Germans and 1% here in the UK.
So, to answer your question I suspect that a fair number of them are manning trawlers, building villas, working in their dad's restaurant/bar during the season, farming, and in the autumn picking grapes and olives.
I guess maybe the ones in trouble might tend to be those looking for jobs in the professional classes, public servants and the like.
I don't want to sound heartless, and the story of the lady that died because her electricity was cut off is terrible, yet great for the PR machine that wants to demand more credit for those that have no money, or any way of paying it back. However, it brings us back to the 'Economic Question' the one that all studies of Economics starts with and that's how to allocate the finite resources in the face of infinite demands.
If we, for example, 'give' Greece billions of Euros (or write off debt) what further cuts would be needed here? How many of the things we want our taxes to fund will we have to go without in order to have the money sent to a country with a population less than twice that of London?
The suggestion that Greece imported Audis and BMWs is, I believe, irrelevant. People have to take responsibility for the money they spend, they can't blame those that lent it to them.
The sad truth is that those that benefited while money they didn't have was being spent are probably not going to be called upon to pay it back. That is, however, true of the UK too. There are thousands of 'pensioners' that have final salary pensions that are well in excess of the national salary that retired long before they were sixty. They will be able to keep their pensions and will, probably, be more wealthy in retirement than much of the UK population that will be 'repaying' the debt for their entire working lives, and will retire with insignificant pension provision ten years older than their ancestors.
This is the world that we, now, live in. I have little sympathy for the Greeks or the Spanish or the Italians for that matter. We have enough problems of our own in the UK and despite it not being perfect, I believe that those that have fallen on hard times at home are more deserving of our money that those abroad that have had an easier life than we have for decades.
Austerity seems to be crippling their country and they will never, ever pay off the debts they've incurred so what's the point of the austerity in the first place ?
So I guess they should they default on their loans, almost certainly get kicked out of the Eurozone (and probably the EU too) and find it nigh on impossible to borrow money for at least a decade. However if they were sensible they could use that decade to put in place the apparatus of a state which was capable of raising taxes efficiently which would allow public spending at a sustainable level which would improve lives and mean that in a decades time they would be in a better place than they are today, just. If they stay in the Euro, continue with austerity all to pay back a miniscule amount of an impossible debt then I would guess that things will be no better, possibly much worse in 2025.
It has been long documented that the euro was a political project establishing one currency but without the required fiscal and political union. In the US I understand there are fiscal transfers between states which are important to balance the fact that talent and wealth gravitates to certain parts. And I'm sure some federal authority kicks in if a state fails to balance its books AND is unable to issue paper debt. Not looked it up but didn't both California and Detroit both fall over recently? And New York went bust in the 70s.
Eventual exit means a lot of things including complex negotiation between the new Greek government and the troika looking at an almost impossible outcome of no one losing face, no default and most importantly no contagion. Maybe they kick the can down the road? Or maybe EU (German) policy changes to accommodate the fact that youth unemployment across the Mediterranean states is going to build up a lot of grief in years to come?
I don't know when Italy, Spain and France go to the polls but the opportunity is there for the centre left to articulate a policy for the masses and not the few. I have said for sometime that it's not just Milliband who has failed to create a compelling vision where ordinary voters can vote for a path that grows the country and enables more people to participate in opportunity.
People like Farage, Salmand and Le Pen love to blame the EU, the Euro or Westminster for all the ills but the 20th century social contract isn't that complicated! It just need updating for this century to allow for technologies and people living longer. And that much less of today's enterprise is state owned plus tax for a multi-national is quite easy to avoid or at least reduce well below the rate its customers pay!
I don't know much about the rising left party in Spain, but the Economist does not rate them (right-wing paper, I know, but it's barely polite about them). I believe the traditional centre-left party in Spain, like PASOK in Greece, is in danger of withering away.
If someone owes a bank money how can the bank get the money back? Encourage ways for that person to grow their income - I borrowed to do a post grad course many moons ago and it paid off.
Or lend money to invest in assets that create wealth? I am fortunate to own property and over the years, every sale has been for more than the purchase price. The bank received interest and their capital.
Now if banks don't want their money back in full and if they want to take a hit this week rather than ten years time then they should foreclose immediately and stop funds! Hank Paulson pulled that trick with Lehmann brothers - that went well!
Once again Greece is full of real people but their economy isn't that big. It's the risk of contagion to the Eurozone which will freak the markets and return us to 2007-09 quicker than one can say sub-prime derivatives!
I would suggest that the question about "moral hazard" and bailing out banks and/or governments isn't easy because many people and many countries work hard to create the lives and nations they have. And why would Italy or Spain (and now France) play by the rules if Greece can pull a fast one?
I'm not an economist but Keynes had a very simple maxim: when aggregate demand is down, then governments can intervene to move it up and create jobs and services. Not my original thoughts but something I'm reading right now suggests very strongly that Germany needs to loosen policy write now - not just for Greece but for the whole Eurozone to grow its way out of trouble.
Greece is a lot more complex because their spending isn't that high but their tax receipts are poor for all the reasons mentioned. A lot of this is down to middle class professionals and of course the super rich. Now I don't think so many of them voted for Tsipras... so maybe the Troika and Syria have a common interest in addition to Greece not falling over?
Let's see how it pans out but this is one high stakes poker game!
"The suggestion that Greece imported Audis and BMWs is, I believe, irrelevant. People have to take responsibility for the money they spend, they can't blame those that lent it to them"
I think you may have misunderstood the point @seriously_red was making. if i understood him correctly it was that in lending the Greeks all that money the Germans got a lot back because the Greeks spent their money on many excellent German products. And I think he might go on to argue that therefore the Germans might not be so bloody tough on the Greeks because they've actually done quite nicely from the Greek bailout. Unfortunately we cannot benefit in the same way because we don't make such good products any more. To which the Germans may say, that's your own bloody fault.
I still believe that the Germans have no obligation to write off debts just because none of the rest of Europe could make better cars (or other consumer goods).
Had they bought Italian sports cars would we be expecting the Italians to bail them out?
1. Failed to provide any evidence of a conspiracy by the rich to make the poor poorer.
2. Failed to explain why a London Fashion show only took place because there were poor people
3. Confused me by making an association of common evil between a butcher who sold overpriced meat to Mayfair resents, a man who sells expensive cigars, an entrepreneur and a barrow boy market trader.
4. Ridiculously implied the Black Scholes theory was a conspiracy to create poverty. Neither Mr Black nor Mr Scholes said "greed is good" that was Michael Douglas. They formulated a mathematical algorithm that allowed risk to be priced into a transaction. Banks used it to work out how much they needed to load the price to make a profit on a transaction. It is used in all sorts of positive ways to manage investment risk. Like saying hypodermic needles were invented for the benefit of drug dealers.
5. Could go on and on....
Had the programme explained that the financial institutions were parasites which existed to extract as much money from both the rich and the poor using different products and services it might have made sense. Had it tried to point to an alternative strategy that sought to show how the assets of the wealthy can be shared with the poor for a common good it might have amounted to something more than a piece of entertainment showing how the super rich spend their leisure time.
It's also difficult to argue that people in London with an average property should be penalised. However I do think the figures as you've presented them need some context. Any mortgage value or other debt would be deducted and it should be remembered that the average number of people per household is 2.3 not 1. Nevertheless, I concede that 1% is too low a threshold to get excited about.
That does not mean that we can write off wealth inequality though. The Credit Suisse report that Reuben was quoting states that there are, worldwide, 128,000 individuals with net assets of $50m+.
That is at least $6,400,000,000,000 (Six trillion, four hundred billion) sitting in the hands of an extremely wealthy elite. In actual fact, it's likely to be a whole lot more than that. That to me is obscene and I stand by my argument that any system that allows this whilst people are starving is fundamentally flawed.
The average maturity of Greek debt is relatively long; such that, as a % of GDP and at current interest rates, it's debt-servicing burden is approx 2.6% of GDP - lower than some other EU countries, e.g. Italy.
This is a bit above my pay grade. Could you expand on the implications of the point you are making? For example what would you say to the Syriza leaders if they asked your advice before meeting with the troika?
Quite catchy really and perhaps what the Eurozone needed?
As per @PragueAddick interpretation of my BMW reference, increasing demand across the board for goods and services is far more likely to solve things than reducing demand through austerity.
The book I'm reading is so bloody complex I have to read every chapter twice to get my head around it! The basic premise is (I think!) that the Germans have helped create the Euro and now have to work with centre left and centre right to think about the whole of Europe and not just their own economy. To improve conditions for sellers of goods and services to prosper you need active buyers.
Our manufacturers are suffering from a depressed Eurozone and there is talk of a repeat of the Japanese "wasted decade" across Europe as they teeter on the edge of deflation.
That's bad enough when you're well off but if you're poor that might lead to revolution so once again I thank the Greeks for reminding us about democracy in a slightly different way to that of Farage and Salmand.
I know about as much about Farage's real agenda as I do M.Duchatelet! But I do know he is blaming others, just as Le Pen does in France and somebody else does in Italy. And I also recall that the crash of the 1930s led to recession and then depression because moral hazard was applied - banks folded and credit seized up. We saw the outcome in Italy and Germany and I (and now my son) learnt about it in school.
I think austerity is neither a solution nor popular so why can't the well paid politicians and highly educated think tanks come up with something different ? I won't pick up on the super rich references and wealth inequality save to pick up one soundbite: if the trickle down theory is nonsense then what do the super rich bring to the table? Their wealth and their 100% increase over the last five years does wonders for GDP and makes politicians look good.
Strip out the top 1% and then take a look at how ordinary people are doing. Not so well but they do have a lot more votes than the 1%! Let's see how they use them next Monday i
I've gone around the houses but the point is that how Greece pans out in the coming weeks and months is important. Anymake collecting taxes from those who can afford it.
I don't blame the Greeks for desperately searching for a way out of this but I'd be amazed if the new Government is still in power at the end of 2015. The coalition is pretty fragile and diverse and the expectations are so huge that they can only be disappointed.