
Once Greece goes... - andrewcooke
http://www.lrb.co.uk/2011/06/30/john-lanchester/once-greece-goes
======
fleitz
Markets are pricing greek debt as defaulted because it's the most rational
thing for the greeks to do, and the most rational outcome. Greece holds power
over the EU to the degree that its financial insolvency can bring the whole
system down. (Technically, it's a power transfer from the EU to US as the fed
has already bailed out the EU banks in anticipation of the Greek default)

When you owe the bank $1 million the bank owns you, when you owe the bank $469
billion, you own the bank. The average greek is smart enough to know this and
knows that the closer they get to default the better the deal they will get.
The banks have two options, get nothing, or get something.

Also, if the Greeks' can't pay at a AAA rating they certainly can't pay at AA
rating, nor A, not BB, so the end game for rational thinkers is default
because as the rating drops the inability to pay increases. Since Greeks hold
EU notes and EU denominated assets they can't even be screwed via an exchange
rate mechanism. If Greece defaults Europe basically has to eat it, and it puts
Europe in a much worse negotiating position with Spain and Portugal.

Furthermore, with regard to bond pricing there is no such thing as a bad bond,
only a bad price, hence they are quickly being priced to zero. It's similar to
the whole subprime thing, guys who bought subprime post Aug 2008 actually did
alright because the prices were so low that you'd be somewhat likely to get
your money back.

~~~
fleitz
As a side note a 2 year Greek T-bill pays 26%, at that rate Greece would be
better off phoning up Capital One for a VISA.

~~~
bd_at_rivenhill
Does anybody know how an individual investor could actually buy one of these?

~~~
sootzoo
well, us mere mortals will have to stick to international treasury ETFs like
BWX or fear plays like good old GLD/VIX.

even if you could directly invest in greek bonds, you probably would not want
to do this...

------
lyudmil
Every time I bring this up I get down-voted, but I cannot resist.

No one argues that the Greek economy was in good shape. It clearly had severe
problems with corruption and inefficiencies, which were brutally exposed when
the _global_ financial crisis hit. Everyone suffered, but because of the
problems in the fundamentals of the economy, Greece suffered
disproportionately more. However, the European Central Bank lent the "bailout"
money demanding cuts to public spending that, in the current economic
situation, would have very likely worsened the Greek economic situation.
Greeks realized this and protested, but were (understandably) dismissed as
spoiled brats, demanding an unsustainable, comfortable lifestyle.

Now that the _likely, predictable_ outcome is looking even more likely
(namely, default), journalists are still omitting that crucial part of the
analysis. Many economists warned that in a crisis of demand, which is what
we're experiencing now, cutting government spending is a bad idea. In a
situation of such great uncertainty in the market, the government is the only
source of demand big enough to make a dent. It must, of course, borrow the
money and therefore increase its deficit by doing so, but that's a worthwhile
thing to do when the alternative is default. After the economy has stabilized,
the deficit problem can be overcome by growth. Moreover, even if deficit
reduction is your priority, if the economy is shrinking you're always going to
be fighting a losing battle no matter how many spending cuts you make.

To summarize my point, the Greek economic turmoils are less of a cautionary
tale of the perils of uncontrolled spending (although they clearly are also
that), and more an illustration of the negative effect the austerity measures
recommended by the ECB are having on the economies they are imposed on. It
should give leading European nations pause when considering what to do with
the rest of the troubled economies in the eurozone.

~~~
yaakov34
I think the element you are missing is that the Greek government spending is
very inefficient; they're not investing in some kind of economy-growing
infrastructure revolution, they're spending money on totally unreasonable
union contracts and extraordinarily early retirement for large classes of
pensioners. The cuts they agreed to are something like 78 billion euros over
more than 10 years, which is quite moderate, for all the screaming. The
European central banks are lending money to Greece well below market rates,
and they're quite within their rights to demand a reasonable budget which
might actually result in this money being repaid.

If Greece wants to increase government spending on infrastructure and
investments, they can do that after getting their budget in order and
convincing their own population to part with some money for the sake of these
programs.

P.S. I don't think downvoting/upvoting should be a poll on whether someone
agrees with a message; it's a decision of interesting/unhelpful.

~~~
lyudmil
I think I openly admitted that the way the Greek government was spending money
was terrible. Yes, I agree with you. The Greek economy was a joke and it
definitely needs to change, but let's talk about the situation as of the
initial collapse.

The fact was (and remains now) that they need(ed) money just to keep afloat.
The CEB could have put any provision it wanted on the money lent. They chose
to force the Greeks to cut spending. My argument, informed by what I've read
on the topic, would be that it would have been better for them to force the
Greeks to spend the money as a stimulus, making the sort of investments that
you talk about. Instead, the CEB likely worsened an already pretty dire
situation.

I think you'll agree that the interesting part of this argument isn't Greece
at all, but the case study Greece is becoming. It's clear more austerity
measures are coming in more European countries and the US. I think it's a bad
idea and I'm curious to find out what this community thinks.

~~~
yaakov34
Suppose you have a friend who screws up and gets fired from menial jobs,
spends his money on booze and gambling, and ends up in heavy debt. Now you
want to help him out, so you can do one of two things:

1\. I'll lend you the money if you get a steady minimum wage job and cut off
the spending. 2\. Look, I believe in you. I'll lend you a whole bunch of money
so that you can go to college, retrain, get a much better job, and then repay
me with plenty left over for yourself.

Now I understand that (2.) sounds much better than (1.), but it's just not
realistic. He will waste the money again, because he knows he didn't earn it.
You have to be tough and force him to get his house in order. Then he can save
and borrow to retrain. If Greece is spending its own money on infrastructure
and investments, there is at least a chance it will be spent well. If it's
spending other people's money - no chance at all.

EDIT: I didn't mean this to sound like I am calling Greeks in general wastrels
and boozers. It's more about how other people's money tends to get spent. See
the message below.

~~~
waterlesscloud
What if you've been lending the money to him that he's spent on booze and
gambling? And what if you're very well paid to make good decisions about
lending money?

Shouldn't you then be forced to take a very serious, if not complete, loss on
the money you lent to him? It's your own fault you lent it to a wastrel. Why
should you be bailed out, exactly?

~~~
stayjin
Exactly. I will put a little more PF (political fiction) to make it a little
bit more interesting: How about if your "friend" is a drinker and gambler, but
happens to have a big fortune, say islands, nature, ancient temples. So you
find his girlfriend and start lending her drinking money out of your heart's
"goodness" without managing your loan when it is small, just let it grow... Of
course your friend gets drinking money and thanks his lucky stars and all his
friends for lending him just to have the pleasure of his charm.... Of course
you politely ask him to spend half of that money to buy submarines and fighter
aircrafts from your shop. Then one day you go and tell him, "you know your
debt is so big, me and everybody else were so surprised by the size of your
debt, and really you have been only drinking and womanizing, haven't you... So
we decided we will not lend you anymore. From now on you are not allowed to
drink, but neither to eat, unless of course you sell to us your
telecommunication industry at the amount of the next round of drinks, so what
do you say?" It works like a charm, your friend starts getting depressed, and
gives in... But then maybe he says, "Look I am grateful for all these drinks
and all but you can't in your good sense expect me to sell my property so
cheaply just because you were giving gifts to my girlfriend right. I will stop
drinking, please stop giving gifts to my girlfriend and wait for a while I
will give them back to you. Also I noticed you borrow money for 1% and you
lend it to me for 5.2%, that is too much for "friends" isn't it, please be a
sport and let me repay it to you with 1.5%." What then?

[EDIT] Disclaimer, I am Greek, I have no illusions about the management
abilities of my country (sometimes I think we are born without the part of
brain responsible for financial planning ;-), but I have strong opinions about
the economy of debt, the way it is manipulated by the "market" and it's
implications on the life of people. My opinion is biased, of course.

~~~
Uchikoma
No market "manipulated" Greek dept. The Greek government took more money than
they could pay back and mostly spend it on creating fake jobs in the
government. The submarine deal is only 1 billion euros, this is not the reason
for the hundred of billions of dept. To my knowledge this has not been payed
yet. The F-16 deal is 1,5 billion euros, also not the reason for the billions
of dept. Especially not"half the money."

It's plain simple, the Greek people voted for a government that took more
money than they could pay back and lived great with this. I know it's easier
to explain the Greek guilt away in this than face reality.

~~~
stayjin
Thanks for the reply. To be honest I am not sure about the exact amounts that
went to weapons(, nor "Siemens", nor the companies participating in the
"Olympic miracle") but I am sure, like you say that they only account for only
one part of the debt. I also do not have the slightest intend to justify or
excuse us one bit, we get what we deserve. At the very end, people are
responsible for what their governments do, if they are not, they do not
deserve to be called citizens and nobody will ever treat them as such. On the
other hand, I see debt used as a way to extort resources all around the world,
and they look strikingly similar. Look what happened in Brazil, in Argentine,
in Hungary, in Turkey, in Indonesia... For sure there are reckless
governments, but I believe there are institutions that capitalize on their
recklessness.

------
Aloisius
The Eurozone could go belly up because of a cascading failure. The US may
default because conservative politicians think it is "not that big of a deal."
China is scared of an economic slowdown and inflation. And everyone thinks
we're in a bubble and we're about to hit a point of irrational exuberance.

Interesting times.

~~~
j_baker
If you haven't already, I'd suggest reading _This Time is Different_. It turns
out that our current situation isn't unique, and is in fact a pretty vanilla
financial crisis. The elements are the same: large deficits that artificially
prop up the economy causing a bubble, sovereign debt defaults, loss of
investor confidence caused by political division (think it was a coincidence
things came to a head during the 2008 election?), and bank runs. Sad how we
always forget 800 years of financial history.

[http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobil...](http://www.amazon.com/gp/aw/d/0691142165/ref=redir_mdp_mobile/189-0608408-3382258)

~~~
katovatzschyn
To be simplistic, it seems that things are quite different this time. The
fundamentals of crises may be the same or similar, but the world has -never-
been linked in the way it currently is, and the world population, and total
consumption has -never- been as high as it currently is.

I hate to argue against an entire book with a sentence like that, but claiming
that this is a "pretty vanilla financial crisis" seems to take the overall
situation in a dismissive light that I don't agree with.

~~~
j_baker
I think you and the book agree. The title "This Time is Different" is a
reference to how economists tend to see the same signs that always indicate a
financial crisis and say "This time is different".

When I said that this is a vanilla financial crisis, I meant that the things
the grandparent post mentions aren't necessarily unique, albeit more
widespread than normal. In fact, it's surprising how frequently you see the
same patterns appearing.

------
sek
The reason for this big imbalance is the focus of the German industry on
exporting goods. Every time the Euro is lowered the German exports are heavily
increasing what makes the problem even worse.

Different countries with the same currency was a stupid idea to begin with.

~~~
fleitz
Please explain why it is rational for Athens and Berlin to not share the same
currency, but is rational for NYC and LA to share the same currency. NYC and
LA are MUCH further apart than Berlin and Athens. I fear your view of the
modern economy is rather mercantilist and zero-sum rather than the capitalist
view that the economy grows via increases in productivity. (Personally, I feel
we are moving away from the productivity view towards an attention based
economy)

Most of the arguments in regard to national economies make little sense in
smaller geographic contexts, there is little worry that NYC is 'stealing' jobs
from Wichita because of the various subsidies in NYC compared to the idea that
China is 'stealing' jobs from the US. No one worries about the trade imbalance
between Iowa and Alaska.

Why are we not worried about cheap Kentucky labour spilling into San
Francisco? Most of the arguments made with regard to trade policies and
imbalances are irrational, especially in light of the reserve currency status
of the US dollar.

~~~
dpapathanasiou
" _Please explain why it is rational for Athens and Berlin to not share the
same currency, but is rational for NYC and LA to share the same currency._ "

The problem is that you cannot have monetary union without political union.

EU rules notwithstanding, Germany and Greece are run by different governments,
with different laws, constituencies, and operational capabilities (or lack
thereof, in Greece's case).

~~~
daliusd
As far as I know different states in USA have different laws (e.g. in
Philadelphia you can't buy single bottle of beer in supermarket). Different
states have different taxes. Some laws are nation wide but that's the same in
Europe. If country does not put laws into its law base it should pay penalties
(and you don't even have to be member of euro-zone for that). The only real
difference between USA and EU is language however even that is not big problem
(e.g. my country lost about 18% of population because of emigration to richer
EU countries).

~~~
nhaehnle
You are missing the elephant in the room. The US federal government spending
accounts for around 20% of the GDP. A large portion of the automatic
stabilisers including social systems (as limited as they are in the US) is
shouldered by the federal government.

This is a huge stabilising momentum for the economy, because the government
does not have to (and indeed it should not) reduce its spending due to
financial pressures. There are no financial limitations to how much money the
US federal government can spend.

(There are other considerations - in _real_ terms, i.e. real capacity of the
economy - that put a limit on how much spending would be wise, but since
utilisation _drops_ in an economic crisis, the room for additional non-
inflationary government spending actually increases.)

None of this exists in the Eurozone. All spending within the Eurozone is done
by actors that are financially constrained, and therefore there is much less
momentum to carry on stability in case of a crisis.

~~~
daliusd
Your answer is really good. Therefore I have dig a little bit deeper.

"As of September 2004 the U.S. Congressional Budget Office reported that
federal government spending for 2004 was projected to be $2.293 trillion, or
slightly less than 20% of the GDP. Of that, $159 billion was for net interest,
$486 billion for defense, $492 billion for Social Security, $473 billion for
Medicare and Medicaid, $191 billion for various welfare programs, $136 billion
for "retirement and disability" benefits, and $64 billion was projected to be
spent elsewhere." (from <http://en.wikipedia.org/wiki/Government_spending>)

Therefore your numbers are correct. It is big work to find numbers for the
same year but for example military spending between EU and USA can be
compared:

"The combined defence budgets of the 27 EU member states in 2008 amounted to
€284.9 billion ($406,7 billion). This represents 1.63% of European Union
GDP[2], second only to the US military's €477.4 billion ($620.5 billion) 2008
defence budget, which represents 4.5% of United States GDP."
(<http://en.wikipedia.org/wiki/Military_of_the_European_Union>)

In this case we still have different agents but military spending has indirect
economic effect on different EU countries (e.g. military airports in countries
that do not even have its own war air planes).

Still your argument is really strong having in mind social security of federal
budget's spending. Europe Union has its own budget as well but it is way
smaller compared to US federal budget (about 1-2% of EU GDP vs 20% of USA).

Finally it is not very good to mix EU and Euro zone (because not all EU
members have Euro).

------
sprovoost
Some people have jokingly suggested that Greece should just sell a few
islands. I'm just curious how much they'd have to sell to make e.g. $100
billion. I think it would be kind of cool (and historically ironic) if they
sold some land to China and let them build a few descent city-states in the
area in the next year or so. A couple of million extra people should prop-up
the Greek and EU economy.

~~~
sprovoost
Maybe the folks a Quora know the answer to this: [http://www.quora.com/How-
much-is-a-typical-Greek-island-wort...](http://www.quora.com/How-much-is-a-
typical-Greek-island-worth)

------
abalashov
A recent Der Spiegel article
([http://www.spiegel.de/international/europe/0,1518,769329,00....](http://www.spiegel.de/international/europe/0,1518,769329,00.html))
made a titular remark that I found noteworthily pithy:

"The Euro Is a Fair-Weather Construct"

------
jamesgagan
"There is a good moment in one of the otherwise terrible Star Trek movies..."
- a knife to the heart in an otherwise interesting article. ;)

~~~
afterburner
Yeah, Star Trek VI was one of the good ones! :)

------
Tomek_
If you haven't already you should also read
[http://www.vanityfair.com/business/features/2010/10/greeks-b...](http://www.vanityfair.com/business/features/2010/10/greeks-
bearing-bonds-201010?currentPage=all) to get more of a perspective on what
went wrong in Greece.

------
patfla
I found this more compelling and succinct:

[http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/...](http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-
happens-when-greece-defaults/)

~~~
idonthack
more succinct, yes, but it imparts the reader with much less background
information, which makes it much less useful to anyone who is not already
informed about the situation.

------
cynusx
In my opinion the EU needs to trace the contagion effect and limit its
effects. It can do this by offering to take over all credit default swaps on
Greece's bonds, no sane economic actor is going to refuse that when a default
is imminent. What happens then is that the ECB absorbs all losses from a
Greece default, blowing a large hole in its balance sheet. However the ECB can
just print itself back into solvency.

The aftermath will be a period of high inflation.

------
tluyben2
What does Greece 'do'? I can tell you what France exports/makes, Germany,
Netherlands, Italy, even Portugal, but Greece; do they actually do anything?
Is anything created there? Do the Greek actually work? I've been on vacation
there a few times, and i've never seen people so lazy; we went into
restaurants and actually had to literally kick the waiters to serve us; they
were annoyed that customers came in.

~~~
amurmann
When I read the first half of your post I first had to laugh because I thought
it was ridiculously insulting and simplifying. However, reading the part about
the waiter, I quickly realized that I made the exact same experiences on my
Corfu vacation years ago. The best thing was this: Our hotel had free coffe
till 4pm. We ordered coffee at 3:59 or something like that. The waitress
starts making coffee, but stops all the sudden. Sais "it's 4pm, no more
coffee" and pures the coffee powder back into the container. We were just
speechless.

------
yaakov34
I feel like I should have stopped reading this missive after the first phrase,
which is "The economic crisis in Greece is the most consequential thing to
have happened in Europe since the Balkan wars."

The Balkan wars were in 1912-1913. I can think of a few other significant
things that happened in Europe since then. This crisis - it is really more of
a tantrum than a crisis, since the Greeks know perfectly well they are on the
hook for the money they spent on themselves - doesn't even register as a blip.
It's not going to collapse the economy of the 400 million people within the
EU/eurozone area, and even if it did, it still wouldn't reach the significance
of 70 years of revolutions and communism and dictatorships and the freaking
Holocaust and a couple of world wars, now would it?

This sort of wild-eyed panic mongering by people who take a bath on their real
estate or stock purchase, and think that they are living through the worst
crisis in the 7,000 years of recorded history, is beginning to wear thin. It's
annoying even as deliberate hyperbole.

On top of this, the economic points made are stale and unconvincing. He talks
about low interest rates being appropriate for Germany, but not for Greece.
Well, guess what? You don't have to lend at low rates to Greek institutions.
You can take a risk premium on top of the basic Euro central bank rates.
People weren't doing that because they thought that Greece would catch up
economically to the Euro average; it didn't, and the risk premiums went up.
Hardly worth killing the Euro zone over this.

EDITED to add: he probably meant the wars in former Yugoslavia, rather than
what's actually known as the Balkan wars. OK, but frankly, this is still crap,
since clearly the creation of the Euro block itself and the unprecedented
economic expansion in its new members is far more significant than a tantrum
in 3% of the Eurozone. And the economic points are absolute garbage: yes,
Argentina recovered, _because it is a mining/exporting country and commodity
prices skyrocketed._ Not very relevant to Greece.

~~~
mcantelon
>it is really more of a tantrum than a crisis, since the Greeks know perfectly
well they are on the hook for the money they spent on themselves

The Greeks didn't know the gov was in debt because Goldman Sachs colluded with
corrupt government officials to hide the debt[1]. They have ample reason for a
"tantrum" against their corrupt government.

[1]
[http://www.spiegel.de/international/europe/0,1518,676634,00....](http://www.spiegel.de/international/europe/0,1518,676634,00.html)

Goldman Sachs has made a good business out of contributing to, and
capitalizing on the, collapse of countries by corrupting their officials
(Greece, Russia, the US). In my opinion, they should be treated like a
dangerous cult (which is how they operate).

~~~
yaakov34
Come on, have you actually read the article that you quoted? It says that GS
helped Greece borrow an additional $1 billion in 2002 by having it assume
unrealistic exchange rates. Assuming for the sake of argument that this is
completely true, this sum barely passes the threshold of significance in the
mismanagement of Greece. The Greeks ran a corrupt, overspending government all
by themselves, and they have themselves to blame. Maybe GS evaded half the
Greek taxpayers' taxes for them, too?

~~~
danenania
The main problem with your reasoning is the assumption that the government of
Greece is a legitimate democratic representative of its people. If ordinary
Greeks had significant power in the political process that shapes the course
of their lives, perhaps they would share responsibility, but the fact is that
all the critical decisions were made and continue to be made by unelected,
unaccountable, extremely wealthy elites. Terming an economically oppressed
people's outrage a "tantrum" simply reveals your own bias, conscious or
otherwise, in favor of the corrupt establishment, along with a distasteful bit
of arrogance.

This isn't about Greeks taking responsibility for themselves, it's about
Greeks challenging the rampant criminality of international banks,
multinational corporations, and the governments they control. It's the same
challenge that faces people in every nation on this earth, and we won't see a
truly free and fair global society until every nation's people have overcome
it.

~~~
yaakov34
So the government is not a legitimate democratic representative of its people?
I didn't realize the colonels were still around. Give my regards to
Papadopoulos.

On a more serious note, Greece is a wealthy (by world standards), educated,
well-informed society. It is open to the world. It has open press, the
internet, freedom of assembly. It has elections, and has replaced several
governments when it wanted. It has a sophisticated intellectual class, which
is perfectly capable of articulating ideas about social structure to the
people. Can you tell me what more, exactly, does Greece need to become
responsible for whatever is done on its behalf?

What you wrote in another message - "why pay taxes to a government that you
feel doesn't represent you" - is the biggest thing that's wrong. You have to
pay taxes because it's the law, and the government is the government, until
you vote the next one in. If everyone evades taxes until the government does
exactly as he wants, nobody will ever pay taxes.

Oh, and the Greeks are not "oppressed", economically or otherwise. You'd think
they were being forced to toil in salt mines and fed gruel.

~~~
danenania
So you think America has a wonderful democracy too? We're wealthy, we have a
constitution, we have a sophisticated (well...) intellectual class, and yet my
taxes are still used to murder impoverished people around the world, support
autocrats, make Goldman Sachs executives rich. But I suppose that's what we
voted for after all, right?!

Greece may have a more democratic government than Saudi Arabia. That doesn't
mean its people's interests are represented. They may be one of the more open
and prosperous societies in the world, but even the _most_ open and prosperous
are run primarily for the benefit of special interests. I didn't think that
was controversial.

"What you wrote in another message - "why pay taxes to a government that you
feel doesn't represent you" - is the biggest thing that's wrong. You have to
pay taxes because it's the law, and the government is the government, until
you vote the next one in. If everyone evades taxes until the government does
exactly as he wants, nobody will ever pay taxes."

You seem to believe that a government is legitimate simply because it is in
power. To me this is both a spineless and a dangerous position. Every third
world dictator hosts sham elections and of course they use your exact argument
when their people complain. "But we have elections! We have parliament! If you
don't like the course we are on, you are free to change it at the polls." The
first world is more sophisticated in its deceptions, but the outcome is
similar: the government is run for the benefit of powerful interests at the
expense of the people, and election law is carefully manipulated to maintain
this state of affairs. Intelligent, ethical people will reject this ruse.
Legitimacy must be earned.

"You'd think they were being forced to toil in salt mines and fed gruel."

I suppose it's very easy for you to spout your trite little sarcasms from a
position of comfort and privilege. Let them eat cake!

~~~
yaakov34
Yeah, you've got a pretty good democracy in America. The reason that it seems
like it's always "more of the same, no matter who you vote for" is that the
government actually has external constraints on what it does. Bush did a lot
of the unpopular things that he did because he couldn't find a better way, not
because he has a heart of pure evil (hard as that can be to accept). So Obama
comes in and starts doing a lot of the same things, and people are surprised.

> You seem to believe that a government is legitimate simply because it is in
> power.

No, go ahead and overthrow dictatorships, but it you've got a government that
you voted for, with a constitution that you approved, kindly follow the law.
And elect another government if you want.

> I suppose it's very easy for you to spout your trite little sarcasms from a
> position of comfort and privilege. Let them eat cake!

You do realize there is no shortage of cake in Greece, let alone a shortage of
bread? But, whatever. The oppressed masses shall rise up and throw off the
chains of their class enemy, and then retire at 45! Or how about "workers of
the world, unite and claim your union patronage appointments!!" Hey, these are
catchy. "Burn down a bank, teach a lesson to the capitalist bloodsuckers who
financed your house!!"

------
jodrellblank
Is there any personal punishment for leaders ruining a country? There would be
if the Greek ministers were committing war crimes, or if they were driving
without due care and attention. Why not for "running a country without due
care"?

~~~
j_baker
You're going to need one hell of a prison to keep all the prisoners you'd end
up with. The US is possibly the only country to never have defaulted on its
debt (at one point in time, France would default by executing its debtors
every couple of years). Granted, most industrialized nations haven't defaulted
in a long, long time. But the point still stands that Greece is hardly the
only nation defaulting on its debt right now. Only the most significant.

~~~
josephcooney
Australia has never defaulted.

~~~
j_baker
You're right. There's about 10-15 countries that haven't. Still, the point
that default is the rule and not the exception stands.

------
joe_the_user
The Greek economic situation is unsustainable. The US housing market is
unsustainable. The _Chinese_ housing market is unsustainable. I could make a
longer list if anyone wanted.

My point is that this article seems to imply that Greece will be the _first_
to go. Maybe but maybe not. If doubt shifts to US, say, the euro might look at
great investment by contrast for a while.

------
JanezStupar
There are two sides to this article one is correct and the other is deceitful.
I assume that this article was written by a Greek __(I infer this from the
first person accounting of situation).

The true part of the article is the part about debtors options and possible
scenarios.

The deceitful part is the part about "ordinary Greek not understanding the
situation and having no part in it". In eastern Europe we have a saying that
someone is "indebted as a Greek", meaning that someone is perpetually taking
loans to repay old ones while having not a slightest intention of ever paying
them off. And this proverb is centuries old AFAIK. So all this protesting
going on, pleas of "ordinary Greek people" are an elaborate scheme of shedding
guilt. Modern Greeks as a nation are an entitled (an order of magnitude more
than attributed to gen-Y) and lazy bunch. Boasting their "heritage", while
they have nothing in common with the antic culture.

Any businessman worth his salt will be weary of doing business with Greeks -
thats how bad in general their ethics situation is. While I cannot offer any
meaningful opinion about how to get out of this mess. I can try to provide
some insight into how Germany and France got into this mess. The first would
be that greedy coke powered bankers got all optimistic that Greeks will repay
their debts this time and went on to issue insane amounts of subprime loans,
ok this is not what happened.

What did happen was that western world knew full on from the beginning what
would happen - but proceeded anyway, since Greece was too strategically placed
in the cold war and could not be lost to Soviet influence. The Greeks being
smart, knew that and took full advantage. What happened after the cold war,
was basically the subprime mortgage scenario of US played on a national scale
- it is fraud committed by German and French bankers over the people of EU.
I'm not believing anyone "in the know" telling me with a straight face that
they didn't know that Greeks were cooking their books.

So in a sense like US subprime fiasco is fraud committed by US elites over
people of US, European sovereign subprime debt crisis is also a fraud
committed by European elites over their peoples.

I recommend reading this analysis of Greek[1] and Irish[2] debt crisis. It has
to be some of the best journalism I have ever read.

[1]
[http://www.vanityfair.com/business/features/2010/10/greeks-b...](http://www.vanityfair.com/business/features/2010/10/greeks-
bearing-bonds-201010) [2]
[http://www.vanityfair.com/business/features/2011/03/michael-...](http://www.vanityfair.com/business/features/2011/03/michael-
lewis-ireland-201103)

Let the Greek diaspora and leftist lunatic downmodding begin!!

 __Edit: Indeed it was not written by a Greek. But the part about people of
Greece not knowing what is going on is pure bullshit - I am not accusing the
author of having an agenda. However I am accusing him of not having balls and
bringing it out.

~~~
route66
I sincerely hope that folktales and sayings about groups are not the common
source of judgement on HN. Nice also that you also have "leftist lunatic" as
an explanation for any possibly contrary opinion.

~~~
JanezStupar
Are you implying that folktales have absolutely no merit?

Also I am not implying that there are no honest Greeks. But from my anecdotal
experience their moral standards are quite... flexible.

Edit: Goes the same for people of southern Italy and whole of Balkans. Have
you ever been to Balkans? Are you intimately aware of moral and ethical
backgrounds of peoples living here? If not - then you might be guilty of
"everybody is a good person deep inside" type of thinking yourself.

Disclaimer: I am Slovenian, as you may have noticed discussions that we might
be next in line to join PIIGS. And I have to admit that our nation is guilty
quite of some of balkanisms ourselves (no matter how some might try to deny
it).

------
mkramlich
This article reminded me of the larger issue: why do so many modern, national
governments seem incapable or unwilling to ever operate with a balanced
budget? Why do deficits and debt seem to be the norm? Why all the excuses? Is
it a kind of stupidity brought about by having a large group of people each
pulling in different directions? Or is it by design and due to malevolent
intent? Just curious what everyone thinks.

~~~
brown9-2
In a down economy, a requirement that the budget be balanced simply leads to a
downward spiral - the state takes in less tax revenue and has to cut it's
spending, which removes a large portion of demand from the economy, which
results in less tax revenue, etc.

~~~
radu_floricica
Could you be more specific about this? I've seen this argument several times,
and it always seemed flawed to me.

Let's say you cut the budget by X. Part of this X (X') doesn't get invested in
money making enterprises any more, and less money goes back as taxes (X" less
money).

Now, unless the economy is super efficient, I'd say X > X' > X". And given the
realities of public government, usually X >> X".

How is then any better to borrow X just to get back X" (and still owe X), then
to simply lose X"?

~~~
meric
You cut the budget. Some companies go under, increasing unemployment.
Unemployed people not produce and do not pay tax, but they continue to consume
and receive government services (traffic lights, toilets, parks, police,
firemen, etc). To further balance the reduction in tax revenue from the
increase in unemployment, you cut the budget some more. Some more companies go
under, further increasing unemployment, decrease tax revenue, leading to
further budget cuts etc.

