Figuring out Greece


#1

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#2

Greece has 2 Million greeks living there. They are how many BILLIONS in Euros in debt? That is a fact that seems to slip by everyone talking about the Greek default to the EU.


#3

Well I think the “Who do we hold liable for bad loans, the creditor or the debtor?” question is more complicated than with say the mortgage question in the US. In this case we’re dealing with sovereign nations,rather than Joe sixpack who never really understood what a negatively ammortizing loan was.


#4

Debt is not a guarantee of future payments in full. Rather, it is a risk that creditors take, in hopes of maybe being paid tomorrow. The key word there is “risk.”

If you’re willing to take the risk, you’ll get a premium — in the form of interest.


#5

Gambling/Risk can sometimes have a negative outcome.


#6

But… but… profits good! wealth needs interest, not risk! power needs impunity, not risk! the people need discipline, if they won’t pay off the bankers and the politicians who made the loans…


#7

Exactly. People are missing the fact that one billion is a thousand million. That doesn’t spread well over the population, and while countries are often fiscally more than the some of their parts, you cannot create wealth from nothing, and no matter how you slice it the Greeks will feel the pain. I think people are genuinely fooled into thinking that the Greek public is unaware of this. The Greeks understand that there will be consequences, but they’re not prepared to let Germany dictate what amount to very punitive terms. This has become emotional, and Germany is trying to punish Greece. There have been economists who have pointed out that if this is just about money, Germany would have been more flexible by now. The Greeks are certainly acting out of emotion, too, but they don’t hold as many of the cards as some pretend they do. They’re pretty much damned no matter what they do.


#8

Next to deliberate (or near-terminally stupid) obfuscation of marginal vs. effective tax rates, this is my biggest financial-news-industry pet peeve.

Greece promises to double your money in the time it takes you to write them a check. Meanwhile, the United States will think about letting you store your money in its vaults, but only as a favor, and they sure as hell are not going to pay you interest greater than the rate of inflation.

If you don’t understand why that is, you weren’t competent to make the loan in the first place. But anyone holding Greek paper knew exactly what they were doing when they bought it. Saying anything other than “damn, that calculated risk didn’t go my way” and pretending you don’t know why you were getting a premium rate is pure moral masturbation.


#9

Greece has a population of 11 million. It has debts of 323 billion.
That’s around 29.3 thousand for every Greek.
The US has a population of 319 million. It has debts of 13 trillion.
That’s around 40.7 thousand for every American.
So who’s really deeper in the shit?
That is a fact that seems to slip by everyone talking about other people’s debts.


#10

True, but the US is also sitting on a ton more valuable rocks and plants and dirt and such. Those kinds of things matter to these calculations.

Greece is deeper in the shit because if it came to a fire-sale, the stuff the US has is more valuable per capita than the stuff Greece has. (Here “stuff” includes the capacity to make or grow more stuff, and the likelihood of that stuff finding buyers.)

Absolutely the US could, and maybe eventually will, get itself into serious (or even Greek-like) credit trouble. But on top of all the rest, we also benefit from the Too Big To Fail problem. Our default would be an even bigger deal for China (among many others) than Greece’s will be for Germany. And, adding insult to injury, the damage that the Grexit (or a near-miss of the Grexit) will do to the Euro will make US debt all the more attractive.


#11

I have Greek friends in Athens, they say bring back the Drachma [they should have done it 5 years ago], and bring it back fast. In the end they will be the better for it. Will it be painful? YES, very! But the Greeks will have autonomy from the EU.


#12

That’s true enough.

China’s bubble is going to burst soon, and when it does they’ll be calling in their debts. It ain’t gonna be pretty. I think that puts the US more squarely in the shit.

Not damaging enough until Spain, Italy and the UK pull out too. Hopefully then the failed experiment of a ‘United States of Europe’ will be consigned to history.


#13

These are the days that give the guys over at Zero Hedge boners.


#14

It just did.

How would they do that?


#15

Yeah, but America has debts of 13 trillion US dollars, while Greece has debts of 250 billion Euros. The big difference here is that America if it were so inclined could say fuck it and print money until the real world value of its debt goes down. Greece can’t do that… it doesn’t have any control over how the currency its debt is written in is managed.


#16

Ooh, that’s interesting. I’ll keep an eye on that.

By email I suspect.
Nah, probably as they’re doing in Africa, by taking land and mines in exchange.


#17

The more money you print, the less its value. It’s called quantitative easing, and it’s a big fat con.


#18

Yeah, it’s a con, but in this case, it’s a con that would work… if you have $13 trillion US dollars in debt, it’s $13 trillion US dollars worth of of debt even if it’s costs $1000 US dollars to buy a can of coke. Your investors are SOL if you do that, and, while doing it will fuck you and your descendants over for a generation along with your creditors, the credible threat that you could do that gives you a whole lot of leverage over your creditors, leverage that Greece doesn’t have.


#19

If you print up all your debt money, your creditors are going to tell you it’s now worthless paper, they’ll want something a lot more valuable than that.


#20

Nope, they agreed to be paid in a specific currency. And, for the US at least, the government has the guns so the creditor gets to thank it for altering the deal no further.