

Greece Can Default & It Will be Fine, but the US & Britain are Really Screwed - jboydyhacker
http://www.blindreason.org/2010/02/greece-can-default-and-it-will-be-fine.html

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sdurkin
China, Spain, Portugal, France, Great Britain, the Ottoman Empire, and
Argentina all defaulted on their debt. Some of those nations were Great Powers
at the time of their default. If the United States defaults, it will lead to
breadlines, but not to Armageddon.

In conclusion, calm down. Stop reading every blog post on the national debt.
Stop pulling up every tired Mad Max reference you can muster. And certainly
stop telling your neighbors to hide gold under their floor boards.

Your company might not be here in a few years, but the United States and the
global economy probably will.

~~~
akadien
Very good advice. I started a social blog this weekend
(www.financialpreparedness.com) to spread the notion that, while it's not a
bad idea to prepare, the world is not going to end.

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bd_at_rivenhill
The quoted polemic, supposedly written by a Greek banker, doesn't make much
sense. It starts off by describing Greeks as some of the world's richest
people, then it claims that France and Germany are the problem (because their
investment industry was looking for higher returns) and not Greece (which only
took the money and misused it), and finally rejects the notion that Greeks
will accept austerity because the money was actually stolen by the oligarchy
that controls Greek businesses. If Greeks are so wealthy then they must
certainly be able to solve the problem by increasing taxes and seriously
pursuing evasion while cutting the bloated public sector. The actual fact is
that the Greek government and large international banks have basically
conspired to steal money from French and German taxpayers, and the average
Greek on the street has joined the conspiracy by refusing to accept that the
promises made to them by their government in terms of benefits and services
were simply a fabrication that had no basis in reality.

~~~
houseabsolute
Hmm, except the oligarchy aspect at the end, I thought the analysis was cogent
enough. I liked his points about the bailouts being a wealth transfer to baby
boomers in particular. It basically boils down to a few claims. For why Greece
is not the loser:

* A decrease in the amount our government is able to borrow will not hurt us very much. (This jives with your claim that Greece squandered the money lent to them.)

* Investors have short memories. They'll be knocking at our door again soon enough.

For why either baby boomers or the current generation do stand to lose:

* Bailouts represent a wealth transfer from the current generation, who will pay for them over time in taxes, to the baby boomers, whose investments are the ones being bailed out.

I'm not sure if his claims were about who was the problem so much as a
pragmatic analysis of who stands to lose. I've always thought that when
bankruptcy and default are options, the debtor is in fact the one that holds
the power in the lender-lendee relationship, and this situation seems to lend
credence to that view.

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miked
_The goings on in America, where nobody is thankful for having been "saved"
and where the economy is suffering the result of a misguided, short-term
decision may push the French and German government to say "the Greeks don't
deserve a bailout..."_

So, a decision local to the US will push the French and German govs to
withhold a bailout to Greece??? Also, the article never gives any numbers for
Greek government debt held by the US or UK. All this, plus some bad numbers
(see the post's comments) make me dismiss most of this.

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mark_l_watson
If you read the Blogspot profile of the author of this article, it looks like
he lives in the USA.

That said, he makes good points. I agree that the UK and USA are face the
worse economic problems, but it may take several years. Here in the USA, our
leaders will do _anything_ to push problems into the future rather than
working on them.

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rabidsnail
Lumping the US and UK together in the context of debt/gdp is misleading. The
UK does, as the article suggests, have a nearly 400% debt/gdp ratio, but the
US is "only" 95% debt/gdp.

~~~
ahi
I think, but don't know, that that 95% is federal only. Load in state and
local governments and the US might be competitive with the UK.

~~~
btilly
The biggest component to US debt is private.

Let me find some figures. Googling for _us "total debt" private_ leads me to
<http://mwhodges.home.att.net/nat-debt/debt-nat.htm> which claims a total US
debt of $57 trillion. The site is sensationalistic, but I have no reason to
doubt their numbers. Almost certainly they are going off of recognized
published numbers from somewhere. That figure includes "all recognized debt of
federal, state & local governments, international, private households,
business and domestic financial sectors, including federal debt to trust
funds". It does _NOT_ include unfunded obligations like pensions and social
security.

Wikipedia tells me that the US GDP is 14.2 trillion.

Dividing one number into the other gives me a 401.4% debt/GDP level for the
USA. And since we only have the first number to 2 significant digits, we
should round that to 400%.

Whether or not you agree with the conclusions in the email, the numbers quoted
look accurate.

