

Joseph Stiglitz: how I would vote in the Greek referendum - paublyrne
http://www.theguardian.com/business/2015/jun/29/joseph-stiglitz-how-i-would-vote-in-the-greek-referendum

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yequalsx
Both the lender and the borrower have responsibilities when it comes to loans.
I rarely hear people complain about irresponsible lending and the need for
lenders to suffer too. In the case of Greece the suffering has all been one-
sided. The so called bailout have been nothing more than a way to prop up
French and German banks. The Greeks alone are suffering.

~~~
woodman
Isn't one big difference between a lender and an investor the default risk? If
we were talking about investors taking a bath, then I'd agree - but screwing
with the relative safety of loans... that could have much further reaching
consequences. Also, the suffering of the Greeks - are we to just trot out the
whole "will of the governed" when it is convenient for the position that we
support? That is really the only good thing I see coming out of this, that a
people who feels abused will retire the popular idea of where a democracy
derives its power.

~~~
yequalsx
I'm not sure what you are referring to with the will of the governed part. As
I understand the situation Greece was flooded with cheap money in the form of
low interest loans from French and German banks. Not surprisingly lots of
money was borrowed. So much money that Greece will never be able to pay it off
as long as it remains part of the euro. Shouldn't the banks also take a hit
alongside Greece? I think so.

~~~
woodman
> I'm not sure what you are referring to with the will of the governed part.

The idea that the government derives its power from the consent of the
governed [0], or put another way, that the people are responsible for the
actions of the state.

> As I understand the situation...

So "predatory lending", one of the sillier ideas that I've ever heard. It
basically implies that people can't be trusted to enter into voluntary
transactions. Except that we are talking about the state here, the nanny that
is to protect the people from themselves. So what happens when people start
complaining about red lining [1]?

> Shouldn't the banks also take a hit alongside Greece?

Contracts, they're pretty important. When you don't enforce contracts,
businesses will start to wonder what advantage they have in trading with you
over doing business in Zimbabwe.

[0]
[https://en.wikipedia.org/wiki/Consent_of_the_governed](https://en.wikipedia.org/wiki/Consent_of_the_governed)

[1]
[https://en.wikipedia.org/wiki/Redlining](https://en.wikipedia.org/wiki/Redlining)

~~~
yequalsx
The banks voluntarily lent money way beyond the means of the ability of Greece
to pay. That was foolish. They shouldn't take a loss on their foolishness?
Only one party of the transaction should suffer for the foolish loans?

Predatory lending is not what happened in the case of Greece. the validity of
that concept is not relevant in this case.

I know what consent of the governed means. I don't know what it has to do with
any of my comments. All I've said is that there are two parties in borrowing
money. Both have responsibilities and both should suffer consequences for bad
decisions.

~~~
woodman
Again, if this was an investment - where payoff is proportional to risk then
this would be a different matter. But we are talking about more than that, as
legally binding obligations and contingency plans where established long
before any money traded hands. So what, everything leading up to that point
should be ignored? There is a reason why bankruptcy is viewed as the option of
last resort, it is because the consequences to the bankrupt party are long
lasting - nobody trusts them anymore. What do you think would happen if you
defaulted on a loan from your bank? Collateral would be collected, wages would
be garnished, you wouldn't be able to secure credit, etc. Why is this any
different?

Consent of the governed is relevant because you were waving about the
suffering of the Greeks, who according to the popular political idea, are
actually responsible for their own suffering. Also, if you think the EU isn't
suffering over this - I'd like to direct your attention to the EUR/USD
exchange rate.

~~~
yequalsx
A loan is an investment. Like almost all formal investments there are rules,
laws, and contracts involved. When an investment goes bad both parties tend to
suffer.

When I defaulted on my mortgage the bank got the house and I bought another
one for a much cheaper price. The bank lost money. It happens with
investments. That's part of the risk. I still secure credit and have a 750
credit rating even with a default on my record. My credit card company still
trusts me. I've suffered no long term consequences other than that I can't get
another mortgage for 5 years.

The point of me writing the above is try to show that defaulting on loans is
not a black/white issue. It's not either or. There are shades of gray
sometimes. And most certainly, when a bad loan is made both parties should
suffer consequences.

~~~
woodman
It is strange that you recognize the bank's right to remedial action in taking
your house, but don't appear to apply the same logic to the Greek situation.
You even recognize the fact that the bank suffered due to their mistake of
giving you money, but you don't see the rest of the EU eating the shit
sandwich that is the Greek financial crisis? Your personal story, while
interesting, is certainly outside the norm. We don't have debtors' prison, but
this sort of thing can have multigenerational consequences.

~~~
yequalsx
Nowhere have I indicated that Greece shouldn't suffer for their profligate
borrowing. I mentioned that the banks should suffer as well. Nothing more,
nothing less. Implicit in my posts is the belief that the banks haven't
suffered proportionate to their recklessness.

------
pm24601
Its not hard to choose either. Hope v. No Hope.

Greece tried austerity for 5 years - its not working out.

Greece will hopefully try something new.

