
Greece - biehl
http://www.interfluidity.com/v2/5965.html
======
msabalau
The entire thing is worth reading, but the key take away:

"Regulatory mistakes and agency issues within banks encouraged poor credit
decisions. Spanish banks lent into overpriced real estate, and German banks
lent to a state they knew to be weak. Current account imbalances within the
Eurozone — persistent and unlikely to reverse without policy attention —
implied as a matter of arithmetic that there would be loan flows on a scale
that might encourage a certain indifference to credit quality. These were
European problems, not national problems.

But they were European problems that festered while the continent’s leaders
gloated and took credit for a phantom prosperity. When the levee broke,
instead of acknowledging errors and working to address them as a community,
Europe’s elites — its politicians and civil servants, its bankers and
financiers — deflected the blame in the worst possible way. They turned a
systemic problem of financial architecture into a dispute between European
nations. They brought back the very ghosts their predecessors spent half a
century trying to dispell. Shame. Shame. Shame. Shame."

~~~
telepheron
So we just ignore the fact that the Greek government misrepresented their
economic state, failed to implement the necessary changes and then puts up a
completely bogus referendum?

~~~
DangerousPie
Yes, pretty much. The author's argument is that everybody knew that their
economic state was misrepresented, so the banks should have never lend them
money in the first place.

The mismanagement leading up to the financial crises was of course the fault
of the Greek government. However, the reforms that the EU has
proposed/enforced since then seem to have been more about punishing the Greeks
than about actually building a properly functioning economy. That might feel
justified (and because of that it has the support of many voters) but long-
term it is not a viable solution to the problem.

~~~
mike_hearn
The reforms are the _only_ long term solution. They're reforms like, maybe
Greeks should retire at the same age that other people in Europe do. Maybe
hairdressing should not be considered a 'dangerous profession', thus unlocking
various benefits. Maybe Greek train drivers should not be paid $130,000 a year
to drive near-empty trains. Maybe Greece should be able to grow its own food
instead of importing more than half of it.

Greece is hosed because, as the article points out, it is an incredibly
screwed up and corrupt country. The EU is desperately trying to make it a few
percent less screwed up, and mostly getting nowhere. Greece absolutely isn't
hosed because of those awful European creditors who deserve to be punished for
their naive belief that maybe Greece would improve.

I mean, just go take a look at the garbage that has been pouring out of Greece
and ordinary Greek people about German in recent times. Allusions to Hitler
seem to fall from their mouths every single day. The idea that maybe Germans
should not be paying for Greeks is _not_ fascism, yet they routinely act as if
it is.

Greece has no real alternative but to adopt severe reforms and that means
severe "austerity", whereby "austerity" of course what people mean is
shrinking the Greek state to a size more appropriate to the size of its
economy.

~~~
josephlord
No reforms in the world will allow Greece to meet the current liabilities,
even the IMF says so. The bigger the surplus the Government runs (to pay back
the creditors) the more the economy will shrink and the further more they will
miss their target by.

Germany isn't paying for Greece, it (well the troika but Germany is
significantly calling the shots) is effectively governing Greece by a series
of manufactured crises every 6 months in which they can impose conditions
(detailed policy requirements on internal issues including pensions and taxes)
for the next payment (which is 90% transferred to creditors rather than going
to Greece itself).

Whether fascism is the right word or not there is something profoundly
undemocratic about the situation and there are several valid comparisons with
fascism. Singling out a groups as scapegoats for all blame and the aspect of
collective punishment. Sensible people trying to maximise the return on their
loans would restructure them to take some loss but to enable Greece to recover
to be able to pay the bulk of them. Instead the focus seems to be punishment
for irresponsible lending.

~~~
mafribe

        Singling out a groups as scapegoats for all blame and the aspect of collective punishment
    

In line with many on the right, you are singling out Germany as a group as a
scapegoat! Indeed Syriza's approach to the negotiations was to run a divide-
and-conquer on the EU, trying to pit the rest of the EU against Germany. This
backfired badly.

    
    
       Germany isn't paying for Greece
    

In what sense? Greece owes Germany €88.7 Billion.

    
    
        Sensible people trying to maximise the return on their loans would restructure them to take some loss but to enable Greece to recover to be able to pay the bulk of them.
    

Which is of course exactly what the troika is trying to do (however
imperfectly), and much debt has already been written off or rolled over, but
the Syriza government is blocking this as much as possible.

    
    
       there is something profoundly undemocratic 
    

Greece is perfectly free democratically to decide to ignore the troika, and
default on all debt. Greece is also free to other other countries to pay for
its debt, e.g. Japan, the US, Venezuela. But Greece has no unconditional right
to other people's money. Why should Latvia and Lithuania, who are much poorer
than Greece, finance a ridiculously bloated Greek military? There are much
poorer countries still, Cambodia, Malawi, Niger, Angola. Why is it so vital
that the rest of the world blows billions on fairly wealthy Greece, rather
than these much more needy countries?

------
hughw
I just read this Duke law paper[1] saying that in 2012 Greek creditors took a
64% haircut. I had not realized they had received such debt relief already.
From the report:

"Within the class of high- and middle-income countries, only three
restructuring cases were harsher on private creditors: Iraq in 2006 (91%),
Argentina in 2005 (76%) and Serbia and Montenegro in 2004 (71%). There are a
number of cases of highly indebted poor countries, such as Yemen, Bolivia, and
Guyana, that imposed higher losses on their private creditors. However, the
Greek haircut exceeds those imposed in the Brady deals of the 1990s (the
highest was Peru 1997, with 64 per cent), and it is also higher than Russia’s
coercive 2000 exchange (51%)....the 2012 Greek exchange was exceptional in
size, exceeding the next largest sovereign credit event in modern history,
which to our knowledge wasRussia’s default on 1.7 billion British pounds in
1918, equivalent to just under 100 billion in 2011 Euros. The Greek exchange
also easily surpasses the German default of 1932-33, the largest depression-
era default on foreign bonds, comprising 2.2bn US$ at the time, or
approximately 26 billion in 2011 Euros."

[1]
[http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=...](http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=5343&context=faculty_scholarship)

~~~
zaroth
TFA is arguing the private creditors got off far too easily. Having made the
loans of their own accord, pocketing the interest payments up to that point,
you can be sure the private creditors were quite happy to have the debt off
their hands in 2012. This is the largest transfer from private credit to
public credit in history, right? These are the same loans Greece is now
actually completely unable to service.

The paper talks about creditors taking haircuts, but then in the next
paragraph that this resulted in very little actual debt relief for Greece? If
private credits really had to absorb 50% haircuts on $100 billion of debt,
point me to the massive string of bankruptcies? If I understand correctly, the
"haircuts" are projections based on net present value using some arbitrary
high discount rates (the paper mentions 9% !!!) so you have to appreciate that
with a different discount rate you could claim the private debt holders were
actually being paid even > 100 cents on the dollar.

    
    
      Using this 5 per cent discount rate to compare  old
      and  proposed  new  debt  flows,  the  debt  relief
      implied  by  the  July  2011 financing offer would
      have been approximately zero – indeed, slightly
      negative. Using the  “risk  free”  discount  rate  of
      about  3.5  per  cent  (not  shown  in  the  table),
      would indicate an *increase* of Greece’s debt burden by
      about 11-15 per cent [over] the July 2011.
    

That's from your quoted article! Doesn't sound like such a great haircut to
me... Any time private banks are being bailed out, I'm going to assume that
they are being well enriched in the process. Just the way of the world. People
will just play with the numbers to suit a given narrative, so it's hard to
even find a "truth" in all this. A 9% discount rate for sovereign debt is
insane though. Almost any NPV analysis is going to look like shit against a 9%
discount.

EDIT: I read further down into the paper, and the actual discount rates used
to arrive at the "59 - 64%" haircut range for the 2012 restructuring were
15.3% - 18.7%. Just WOW. So, yes, creditors were NOT paid the full NPV on over
a hundred billion of dollars of debt being carried through maturity at rates
higher than my credit cards. This should surprise exactly no one.

~~~
derriz
I don't think you understand NVP and debt. You seem to be suggesting Greek
debt be discounted at something close to the risk free rate?

These discount rates are correct. The value of a promise of future cash
payments from the Greek government is worth far less than one from the US or
German governments for example.

If you actually believe that Greek debt should be discounted much less, I'll
happily swap any amount of (say 10 year) Greek bonds with you if you give me
the equivalent face value of 10 year US treasuries or German bunds. Since you
think the NVP should be similar, you should be happy to take the deal.

~~~
tomp
If you can expect to be bailed outif the debtor defaults, then yes, you should
use the risk free rate for discounting.

~~~
derriz
Nope - haircuts are calculated relative to current asset values.

For example, when discussing the haircut on a 100m greek bond that's currently
trading for 60m, giving the holder 60m for it does not constitute a 40%
haircut.

------
namuol
This was my main take-away:

"There is one morality tale that says the debtor must repay, or she has sinned
and must be punished.

There is another morality tale that says the creditor must invest wisely, or
she has stewarded resources poorly and must be punished.

We get to choose which morality tale we most use to make sense of the world.
We do, and surely should, use both to some degree.

But if we emphasize the first story, we end up in a world full of bad loans,
wasted resources, and people trapped in debtors’ prison, metaphorical or
literal.

If we emphasize the second story, we end up in a world where dumb expenditures
are never financed in the first place."

~~~
snitko
Unfortunately, it's neither. The debtors in this case are the people of
Greece, yet the ones who got them indebted are politicians, who misled the
population into believing that the expenses the government had were
sustainable. Even more important is that the politicians were not voted in by
100% of people, which simply means that many people who lost their money
didn't agree with the policy that led to them losing their money.

I don't think anyone with a straight face can now say that democracy is the
best solution to running our society, when it, in fact, leads to the situation
in which half the population (the ones who vote for the policy) unknowingly
oblige the other half (and themselves) to lose their money. This situation is
not an exception. This is what's going to happen sooner or later to every
other country which has a substantial debt. You can't spend more than you earn
without consequences.

~~~
PhantomGremlin
_half the population ... oblige the other half_

I'd love to see an experiment where democracy was modified. People should get
multiple votes, proportional not to their income or their wealth, but to the
amount of _taxes they paid_ the previous year.

There would need to be some sort of limit. E.g. nobody gets less than 1 vote
nor more than 10.

But something like that would create what some call "skin in the game". Those
people who pay the most money will have the most influence on government.

It's been proposed before, but never implemented AFAIK. Still, "the usual
stuff isn't working". Why not some experimenting?

~~~
snitko
Now, let's extend your idea. Everyone can vote with their dollars for what
they want to have in their lives! That way, no one is forced to use products
or services someone else imposes on them. Now wouldn't that be the fairest
system of all?

~~~
zo1
I've tried a few times to suggest the idea that people should have more say in
which sections/parts of the government their tax money goes to. Similar to the
HumbleBundle, with of course the "total tax amount" not being an amount people
can change at will. I.e. they still pay taxes, just that they determine where
to put more/less.

I.e. let's assume all of government is composed of:

Welfare

Education

War/Military

Police/Protection

By default, individuals start off giving in 25% into each bucket. You know,
you could even put limits... e.g. "no more than 70% into any single bucket"
and "no less than 10% for any single bucket".

These are just examples, obviously it's not perfect and/or ideal. But the fact
that in our modern/digital age we haven't even considered and tried such a
thing smacks of absolute hypocrisy. We don't "govern" ourselves in any sort of
remote way, and to tell us so by virtue of "noble democracy" is an outright
smack in the face if you ask me.

------
dredmorbius
Far better one that turned up in my G+ feed a few days back:

[http://faculty.chicagobooth.edu/anil.kashyap/research/papers...](http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-
on-the-Greek-Crisis_june29.pdf)

"A Primer on the Greek Crisis: the things you need to know from the start
until now", Anil Kashyap, University of Chicago, Booth School of Business,
June 29th, 2015

 _1) How did Greece get into such trouble?..._

To accompany that:

"Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt"

[http://www.spiegel.de/international/europe/greek-debt-
crisis...](http://www.spiegel.de/international/europe/greek-debt-crisis-how-
goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html)

 _Goldman Sachs helped the Greek government to mask the true extent of its
deficit with the help of a derivatives deal that legally circumvented the EU
Maastricht deficit rules. At some point the so-called cross currency swaps
will mature, and swell the country 's already bloated deficit._

~~~
hartator
G+ feed? Are you a google employee?

~~~
dredmorbius
No.

------
Hello71
The title was edited from "The best analysis of the situation in Greece" to
"Greece". The former title, while baity, is a much better description of the
article than just the name of the country. Might as well call it "Blog".

It would have been much better to, for example, delete "the best" and leave
"analysis of the situation in" so that readers understand what _about_ Greece
is being discussed.

~~~
nbouscal
“Greece” is the title of the post, so this follows the standard HN norm. Also,
anyone paying any attention at all to world news knows what aspect of Greece
is likely to be being discussed.

~~~
mikeash
I saw it post-edit and knew it was surely some sort of analysis about the
current situation in Greece.

------
kqr2
This is a much better primer on the situation:

[http://faculty.chicagobooth.edu/anil.kashyap/research/papers...](http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-
on-the-Greek-Crisis_june29.pdf)

~~~
DangerousPie
It's a good primer to describe the facts, but it does not say much in terms of
what should have been/should be done.

------
revanx_
I've meet a handful of young greeks(Age: 17-29) since 2010 and when asked
about their situation, especially the unemployment rate they all said the same
thing, young greeks don't want to work unless it's a high paying gov. secure
job with 6 hours a day 5 days a week schedule. Ironically all of them were
gamers but considering that the unemployment rate is about 50% with young
greeks, it's hard to argue with that.

Also one important thing was said many times, most of greeks try to avoid
taxes or they don't pay them at all. They've told me this is especially
rampant in tourism. It's hard to argue with that, depending on where you
traveled you can experience this first hand.

It's so easy to blame everyone else for your own problems, lets not forget how
much money has actually been pushed to Greece since 2010 via financial
injections and what have they done with it? What good is it to keep pushing
more and more money into Greece when the people and it's gov don't want to
change and without change how can you expect any progress?

~~~
spystath
Being greek in the same age group I dare to say that what you support is a
blatant and dangerously ignorant lie. There are tons of people that have law
or engineering degrees and would be grateful for a supermarket cashier job or
flipping burgers. There is a serious problem with greek young people, they are
basically a burnt generation, doomed to either chronic unemployment,
ridiculously low-paying jobs (<500 euro/mo), or emigration, so I find your
assertion deeply insulting.

I'm getting tired of the "lazy, tax-evading, early retiring greeks" mantra
being repeated everywhere. I expect generalisations from reddit, but I
expected something better from HN.

~~~
revanx_
The problem of young people with academic degrees that can't find a job is not
a problem isolated to Greece, this is happening everywhere.

As far as your comments, all I can say is that I shaped my opinion based on
statistics and what other greeks told me.

You can't deny the fact that in the last decade, greeks have become accustomed
to a certain life style that can no longer be maintained.

~~~
kylebrown
> You can't deny the fact that in the last decade, greeks have become
> accustomed to a certain life style that can no longer be maintained.

The point of the article is that the 'moral hazard' of lending and borrowing
cuts both ways. What about the lifestyle of European bankers & elites? The
lifestyle of elites was funded by their reckless lending, buying up "idiot
paper" left and right (not just Greece). They believe themselves entitled to
collect high-interest rents regardless of the risk which is priced into the
interest rate!

To stretch an analogy, it'd be like Venture Capitalists blaming the startups
for failing to earn returns on their investments.Rather than take
responsibility for making risky investments, they demonize startup founders
and employees, and threaten to break their legs until they pay back the firm.

Its "loan-shark theatre" between governments and central banks, with
politicians stoking nationalist sentiment and stereotypes (as politicians do)
in the service of elites (i.e. the creditors). Maybe you should read the
article, instead of asserting "undeniable facts" (p.s. the greek economy has
been in a worsening great depression for the last decade; and your handful of
gamer acquaintances are a non-representative sample).

------
nbouscal
Tyler Cowen responds:

“Interfluidity has an interesting but quite wrong post on how to think about
Greece. International relations simply could not be run on the principles he
advocates, most of all in conjunction with democratic nation states. His
weakest point becomes evident when he writes:

““Among creditors, a big catchphrase now is “moral hazard”. We cannot be too
kind to Greece, we cannot forgive their debt with few string attached, because
what kind of precedent would that set? If bad borrowers, other sovereigns, got
the idea that they can overborrow without consequence, if Spanish and
Portuguese populists perceive perhaps a better deal is on offer, they might
demand that. They might continue to borrow and expect forgiveness, and where
would it end except for the bankruptcy of the good Europeans who actually
produce and save?

“The nerve. The fucking nerve. Lenders, having been made nearly whole on their
ill-conceived, profit-motivated punts, now fear that if anybody is nice to
somebody who doesn’t deserve it, where will it end? I’d resort to that cliché
about chutspa, the kid who murders his parents then seeks leniency ‘cuz he’s
an orphan. But it’s really too cute for the occasion.”

“That’s a non-answer, with anger filling in for the required substance as to
why Germany and others should allow this. “Your government is making things
much worse. If you want to borrow so much more from us, you have to play by
the rules and also stop spitting in our face and calling us Nazis and
terrorists while negotiating” is more relevant — and yes relevant is the right
word here — than any point he makes.

“A political program has to be something that voters could at least
potentially believe, and international negotiations therefore cannot stray too
far from common-sense morality, including when it comes to creditor-debtor
relations. That is the point which today’s progressive economists are running
away from as fast as is humanly possible. And for all the Buchanan-esque and
public choice points about “rules of the game” this one about common sense
morality unfortunately has ended up as the most important.

“Look at this way: if you lost a public relations battle to Germany, you are
probably doing something very badly wrong.”

[http://marginalrevolution.com/marginalrevolution/2015/07/gre...](http://marginalrevolution.com/marginalrevolution/2015/07/greece-
and-syriza-lost-the-public-relations-battle.html)

~~~
crdoconnor
"Among creditors, a big catchphrase now is “moral hazard”. We cannot be too
kind to Greece, we cannot forgive their debt with few string attached, because
what kind of precedent would that set?"

They already set that precedent by refusing to punish the individuals involved
in the fraudulent misrepresentation that led to Greece entering the Eurozone.

Still not too late for the creditors to make amends for that mistake.

------
seliopou
Interfulidity is one of the best economics blogs out there. Last year he did a
five-part series on welfare economics[0] that, while quite lengthy, was very
well-done. Anybody that's interested in political economy, but has a more
traditional Econ 101 background, it's a good place to start.

[0]:
[http://www.interfluidity.com/v2/5149.html](http://www.interfluidity.com/v2/5149.html)

~~~
tjradcliffe
I'm not encouraged by statements like this: "There is nothing inherently more
scientific about using an ordinal rather than a cardinal quantity to describe
an economic construct. Chemists' free energy, or the force required to
maintain the pressure differential of a vacuum, are cardinal measures of
constructs as invisible as utility and with a much stronger claim to validity
as 'science'."

Utility is ordinal not out of some deep desire on the part of economists to
"appear scientific" but because it reflects a simple empirical fact about
humans. "Utility" is a measure of value to someone, and human values are
ordinal: I value my children more than my cats, and _no number_ of cats will
ever equal the value of my children. It would be incoherent and wrong to say I
value my children ten times more than my cats, and no cardinal relationship
between them could possibly represent reality.

This is not mysterious or esoteric. The ordinality of human values is what
makes rational choice under uncertainty such a difficult problem, because we
can't compute expected values from ordinals (unless there happens to be a
market in the things we value, in which case we can get cardinality through
prices... but there is no market in children or many other things we value.)

By making it sound like economist's interest in publicly testing ideas by
systematic observation, controlled experiment and Bayesian inference--which is
what the discipline of science actually is--is some kind of inexplicable
fetish instead of a perfectly reasonable goal for anyone who wants to say
anything meaningful or interesting about the world, the author does everyone a
great disservice.

~~~
crdoconnor
>Utility is ordinal not out of some deep desire on the part of economists to
"appear scientific" but because it reflects a simple empirical fact about
humans. "Utility" is a measure of value to someone, and human values are
ordinal: I value my children more than my cats, and no number of cats will
ever equal the value of my children.

Utility is a bullshit non-measurement that is defined self-referentially. It's
not better than phlogiston.

------
DangerousPie
I largely agree with this article. It is still very dubious to me how anyone
thinks that things like increasing VAT at the moment are going to help anyone.

However I don't really understand the author's reasoning here:

> I’ll end this ramble with a discussion of a fashionable view that in fact,
> the Greece crisis is not about the money at all, it is merely about
> creditors wresting political control from the concededly fucked up Greek
> state in order to make reforms in the long term interest of the Greek
> public. Anyone familiar with corporate finance ought to be immediately
> skeptical of this claim. A state cannot be liquidated. In bankruptcy terms,
> it must be reorganized. Corporate bankruptcy laws wisely limit the control
> rights of unconverted creditors during reorganizations, because creditors
> have no interest in maximizing the value of firm assets. Their claim to any
> upside is capped, their downside is large, they seek the fastest possible
> exit that makes them mostly whole. The incentives of impaired creditors are
> simply not well aligned with maximizing the long-term value of an
> enterprise.

The argument he disagrees with here is that the creditors are actually not so
much interested in getting back their money but in keeping leverage over the
government to enact reforms [0]. He believes that this cannot be the case,
because as creditors their incentive is not the long-term good of the nation,
but only their short-term recovery of the debt. I don't think this is
necessarily true.

In the end, the goal of the EU should be (I hope) to allow Greece to become a
prosperous nation with a sustainable economy, to form a stronger union
overall. Whether or not the actual debt ever gets fully repaid should be
secondary to that. So aren't the incentives in this case, unlike for corporate
debt, actually quite well-aligned?

To me the idea that the creditors do not want to give up all their leverage
(the debt) makes perfect sense to me. The Greek government has shown time and
time again that it is unable to enact the reforms it needs to. Properly
reforming the political structures and getting rid of clientelism and waste is
going to require some external factor forcing them to act.

[0] [http://www.vox.com/2015/7/2/8883307/merkel-nsa-wikileaks-
gre...](http://www.vox.com/2015/7/2/8883307/merkel-nsa-wikileaks-greek-crisis)

------
lhl
This is an interesting take on things w/ a lot of merit, but I think Vox
actually summed it up better here w/ a short video and a longer article:
[http://www.vox.com/2015/6/30/8867939/greece-economic-
crisis](http://www.vox.com/2015/6/30/8867939/greece-economic-crisis)

Until/unless the rich European countries are willing to subsidize the poorer
countries, as a financial union, the Euro is just a complete non-starter since
the fiscal policies these states need are so far apart.

~~~
mike_hearn
The notion that a country like Greece _needs_ a different currency or fiscal
policy to Germany isn't really true. Ultimately whether they print New Drachma
and hyperinflate themselves into poverty or whether they accept massive pay
cuts/import drops doesn't make much difference - they are two roads that lead
to the same outcome.

Greece could become competitive without leaving the Euro. However, it means
actually telling people they're going to receive large and frequent pay cuts.
As nobody likes doing that, easier to ignore the problem until the whole thing
comes crashing down. Then when salaries are redenominated in ND and suddenly
ND becomes worthless, it's not the bosses fault see - the boss didn't cut
anyone's pay. It's just the darn currencies fault.

Psychological tricks aren't what Greece needs right now though.

~~~
cgio
On a zero-based forecast the two are equivalent. It is different though to
keep your stocks high while taking your flows down as if you keep a euro
balance sheet and a de-valued euro p&l. They are two roads in the same
direction but with totally different outcomes.

~~~
mike_hearn
Could you explain a little further? I didn't understand your point, I'm
afraid.

Sounds like you're saying it affects the accounting.

------
pvg
This can probably use a neutral title. 'An analysis of the situation in
Greece' or somesuch.

------
gizi
When the Greek government originally borrowed their debts, they did so mostly
from commercial banks in other EU countries. Therefore, the first Greek crisis
was systemically dangerous. It had the potential of dragging the entire EU
banking system into the mud. In the meanwhile, these commercial EU banks have
been able to offload their Greek debt paper onto their own governments and
onto supranational EU organizations. Today, a Greek default would no longer
put the EU banking system in jeopardy. It is the European Financial Stability
Facility (EFSF) and similar organizations at national and international level
that would see a hole appearing in their financial paperwork, if Greece
defaulted.

Therefore, the point of view of Alexis Tsipras, the Greek prime minister,
makes a lot of sense. Let Greece simply default and let the current debt
holders dump the Greek paper on the open market, where it will trade at cents
to the Euro. Inasmuch as Greece finds more money in the future, the Greek
government can try to buy back debt paper in order to destroy it. The current
holders of Greek paper would indeed lose money but in fact they have lost that
money already. If they simply had the courage to let the open market value
their holdings, they would see today already that most of the value has
already gone. Nobody has any hope of seeing the money back represented by the
Greek debt paper. Why not just admit it?

Historical lesson: Borrowing large amounts from EU banks is a one-way bet.
Their governments will not let these banks go bankrupt and therefore, if need
be, they will take over the debt. Since these governments cannot collect the
debt either, they will eventually have to forgive the debt.

------
dnautics
> "The world is full of unworthy and unscrupulous entities willing to take
> your money and call the transaction a “loan”. It always will be. That is why
> responsibility for, and the consequences of, extending credit badly must
> fall upon creditors, not debtors. There is one morality tale that says the
> debtor must repay, or she has sinned and must be punished. There is another
> morality tale that says the creditor must invest wisely, or she has
> stewarded resources poorly and must be punished. We get to choose which
> morality tale we most use to make sense of the world. We do, and surely
> should, use both to some degree. But if we emphasize the first story, we end
> up in a world full of bad loans, wasted resources, and people trapped in
> debtors’ prison, metaphorical or literal. If we emphasize the second story,
> we end up in a world where dumb expenditures are never financed in the first
> place."

This is great. What, then, about a middle road? Absolve greece of its debts.
Write off its liability as a sunk cost, let bygones be bygones. Then cut it
off from the ECB. Let the government figure out how to run a sustainable
economy, and when they're ready, bring them back in.

~~~
reagency
That quote is silly, it completely justifies fraud. There has to be a balance.

~~~
crdoconnor
The balance can involve slamming the individuals in jail who enabled Greece to
misrepresent its finances before it joined.

Unfortunately, actually prosecuting fraud seems to be a minority view, whereas
punishing entire countries (primarily those on a low income, too) for the sins
of a few is the norm in Europe.

~~~
Xylakant
Some of these individuals were greek and are under greek jurisdiction. None
were prosecuted. It would give the moral position of the greek government a
huge boost if they started doing that, just like Iceland did in its default.

~~~
kylebrown
Quoting from a comment on the linked article:

> I’d only add that the corrupt elites were not only overspending, but they
> were involved in vendor finance scams. Hundreds of millions in bribes on
> some single deals. The credit came through to sign the contracts, and the
> bribes were rolled into the contracts. On one deal alone, Siemens, you had
> the Greek defense minister take hundreds of millions to approve a tens of
> billions deal. He is in jail, so are members of his family, but then there
> are 64 others being prosecuted as well for this one deal. Think about it,
> hundreds of millions spread to 64 people (who probably doled out more
> themselves).

------
telepheron
This article is far from objective, let alone 'best analysis'. It is a perfect
example of cherry picking data.

~~~
bildung
_> This article is far from objective, let alone 'best analysis'. It is a
perfect example of cherry picking data._

Then you surly are able to expose those flaws and give us better numbers?

------
misterbarnaby
"They had knowingly and purposefully brought weak states into the Eurozone,
because they genuinely, even nobly, wished to build a large, strong, United
Europe."

For folks who know Europe/Europeans well, is this true?

~~~
saool
Absolutely. The pro-European movement that's been going on for many many
decades has as an ultimate goal to unite the peoples of Europe so we can live
in peace. United in diversity, as the EU motto claims. A great % of Europeans
you met before 2008 would agree with this.

There's now —sadly— little left going around of the "Alle Menschen werden
Brüder" that our shared anthem sings (all men become brothers under the gentle
wing of joy).

A bunch of unscrupulous cronies sold both northern and southern Europeans up
the river just to make a profit for themselves and their friends. No damn
statesmanship to be seen anywhere. Long gone are the times Schroeder and other
much-more-respectable leaders, we now have to put up with the likes of Lagarde
and Juncker. And, of course, Tsipras and Varoufakis, amateur hour, who have
been absurdly reckless in their handling of the negotiations and PR.

~~~
krzyk
Schroeder? You mean the one that is the one of the best friends with Putin and
was put by him chairman of the shareholders' committee of Nord Stream. Which
was basically created by those two. Corruption at it best, I would strongly
object to such "respectable leaders".

Look at
[https://en.wikipedia.org/wiki/Nord_Stream](https://en.wikipedia.org/wiki/Nord_Stream)
Controversy section

~~~
saool
Note I said more-respectable, it was just comparative and not absolute.
Politicians are politicians: it's never white, it's just shades of gray.
Schroeder at least had some decency when it came to the bigger picture, which
these gutless lawyers we chose as of late lack completely.

------
jboydyhacker
How do you call this an analysis? This is pretty blatant political polemic. It
isn't an "analysis" but a rant. The Greeks lied about their financial
condition in an effort to support a pension system that lets people retire far
earlier than the rest of Europe. Bring the pension system and other spending
in line in exchange for some haircuts on the debt- that's the fair answer. Not
this crud about how the other European countries "betrayed" Greece. Man that'
some offensive nonsense.

~~~
the_why_of_y
> The Greeks lied about their financial condition in an effort to support a
> pension system that lets people retire far earlier than the rest of Europe.

This is incorrect: the average age of retirement in Greece is not lower than
every other country in the EU; in fact for men it is exactly the same as in
Germany.

[http://www.keepeek.com/Digital-Asset-
Management/oecd/finance...](http://www.keepeek.com/Digital-Asset-
Management/oecd/finance-and-investment/pensions-at-a-glance-2013/effective-
age-of-labour-market-exit_pension_glance-2013-10-en#page4)

If you want to make the case that an EU country needs to raise its retirement
age, make it for Belgium or France.

~~~
peterfirefly
The retirement age a country can afford depends to a large extent on the
productivity of the workers in that country.

(And of course it is too low in Belgium and France. Everybody knows that.
Doesn't change the fact that it is /way/ too low in Greece.)

------
fiatjaf
For those not wanting to read, just look at this image (from the post):
[http://i.imgur.com/c7IYmaY.png](http://i.imgur.com/c7IYmaY.png)

------
AndrewKemendo
The TROIKA GDP Forecast graph is great! I think from now on I am going to send
it to any investor who thinks asking pre-revenue companies for projections is
a reasonable thing.

~~~
drxzcl
I had a good chuckle at that. It instantly reminded me of the Itanium sales
forecasts[1]. It's like people are afraid to say "I don't know" (especially
when money is involved) and just end up telling people what they want to hear.

1:
[https://commons.m.wikimedia.org/wiki/File:Itanium_Sales_Fore...](https://commons.m.wikimedia.org/wiki/File:Itanium_Sales_Forecasts_edit.png)

------
yeureka
You could say that the current Greek problems are a consequence of bad
governance, but that alone is not enough.

See Finland for instance:

[http://www.nytimes.com/2015/07/03/opinion/paul-krugman-
europ...](http://www.nytimes.com/2015/07/03/opinion/paul-krugman-europes-many-
disasters.html?rref=collection%2Fcolumn%2Fpaul-krugman)

------
naveen99
Nick Szabo's take on it: [http://unenumerated.blogspot.com/2015/07/the-greek-
financial...](http://unenumerated.blogspot.com/2015/07/the-greek-financial-
mess-and-some-ways.html)

------
atmosx
I would like to thank the author for putting together the words I would like
to had put, but being out of skill and full of anger, I wasnt able to.

------
mistermann
I really don't know that much of the details of this particular situation,
I've grown tired of hearing about this sort of thing. I RTFA and it was
interesting, but then it's always interesting, isn't it.

I was surprised that a CTRL+F "Icelend" in this thread turned up nothing.
While I'm sure there were many differences in their situation, I bet there
were a lot more similarities. My crude analysis of this situation is, it is
yet another example of "men behaving badly while playing with other people's
money". And when I say men, I'm not using it in the gender agnostic sense.

When this sort of thing happened to Iceland, they had the choice of "doing the
right thing" (aka do what they were told by the international banking
industry), or go it on their own. After some "public discussions", it was
decided they would go it on their own. And a key learning that came out of
that public discussion was to ensure females were involved in the process:

[http://www.theguardian.com/world/2009/feb/22/iceland-
women](http://www.theguardian.com/world/2009/feb/22/iceland-women)

And by most accounts, Iceland is now doing generally "ok".

By the way, I have no idea if that article is at all authoritative on the
topic of Iceland or females role in its recovery, I did a 5 second google
search. My point is, as the author of the article (that is the topic of this
post) clearly pointed out, the original deal with Greece was built on a fair
amount of lies, that everyone _knew_ were lies. I particularly liked the
reference to this term:
[http://www.urbandictionary.com/define.php?term=IBGYBG](http://www.urbandictionary.com/define.php?term=IBGYBG)

And my experience (as a man), dealing with other men for many decades now is:
a certain subset of men have absolutely no moral qualms about lying in the
pursuit of power; other men of the same personality type, even if _seemingly_
enemies, are happy to go along, and the collusion between these opposing
actors who share the same mindset often results in them all rising into
positions of extreme power, and they eventually blow the whole place up. It's
probably always been this way in a sense - in the good old days, it resulted
in war - nowadays, it results in financial markets blowing up.

I know there are all sorts of holes in my "theory of the world", and I don't
even care, because this same shit will continue to happen indefinitely, and it
will always be men running the show, but there's no way to prove causation
because it will _always_ be men running the show.

~~~
tdsamardzhiev
Iceland is quite a different story: 1\. It isn't a part of the eurozone 2\.
Its economy actually works 3\. The debt was not in the slightest a people's
fault

------
twobits
The basic idea:

BMW wants to sell more cars to greeks. Greeks don't have enough money so they
can't buy. Deutsche Bank (DB) gives "free money" in loans. (And of course DB
knows that greece isn't exactly "strong" economically.) We are talking about a
greek population that never ever had a loan before, while the prime minister
talks about the "powerful (economically) greece". They also thought that the
world "stock markedt" was some kind of chinese recipe. Greeks, with "free
money", buy BMWs. BMW is happy. Profits. Eventually, of course, TSHTF.

And then, would you expect that?

THE PRIVATE DEBTS BECOME PUBLIC.

That means the bad loans of DB become the burden of all the taxpayers of
europe. Germans pay, greeks pay (decimated basically, with ~-20+% GDP, +5x
taxation, etc), italians pay, french pay, etc. The TAXPAYERS.

To put it simply:

BWM: Happy. DB: Happy. Europe's taxpayers: F*cked.

The billions that greece "got" as "help", it never saw. They went ~98% back to
foreign creditors.

Basically:

The politicians (cue, under the table payments for Mrs. Merkel, Mr. Schauble,
Mr. who-was-PM-of-greece-then), took money from all european taxpayers, and
gave profits to BMW and DB. (With their cut.) Now, they sell a nationalistic
"those southern states are lazy".

PS: It was german and french private banks, and german and french industries.
It's just that DB was the biggest, and BMW is big and symbolic.

~~~
ams6110
Germany also never repaid the money that the Greek Central Bank was forced to
lend to the occupying Nazi regime in WWII.

~~~
hueving
Germany is not the same thing as Nazi Germany.

~~~
foobar2020
Germany is the direct descendant of Nazi Germany, just like Russia is the
direct descendant of USSR.

~~~
pvaldes
Only in films. They are totally different people.

Is the same oversimplification as to say that Greek people is the same thing
as Goldman Sachs plus a few corrupts in Greece.

~~~
hebdo
> Only in films.

Are you trying to say that the current Germany is _not_ the direct descendant
of the Nazi Germany? Then how did it come into existence? Is it a brand new
nation conjured out of thin air after the Yalta and Potsdam conferences?

Pay attention please that I did not say that it is _the same_ nation, but that
it is _the direct descendant_. Surely the majority of living Germans had
nothing to do with NSDAP, because they were born after 1945.

~~~
pvaldes
Yes, I'm saying exactly that.

> Then how did it come into existence?

I thing that inmigration played a role. Unless you count the 2 millions of
german-turkish people and 200.000 german jews as nazis in disguise of course
(This will explain the big suspicious moustaches, otherwise). And italian,
spanish, greeks... lots of croats also.

See 'gastarbeiter'.

~~~
pvaldes
s/thing/think/

------
Catalyst4NaN
this would be much nicer if word spacing was like 5px!

------
return0
"Greece is a remarkable country full of wonderful people, but along dimensions
of development and governance, the place is plainly pretty fucked up"

Rehash of what we already know + strong words != Great analysis

~~~
dylanjermiah
One sentence != Entire article

