The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest.
Please, be civilized and don't let yourselves be infected by nationalistic passions.
Your moralizing nanny...
(No seriously, I am starting to get concerned.)
I called my local elected representative about it, SPD (social democrat), and "voiced my concern", but only got met with talk about chain reactions and responsibility. Perhaps I shouldn't have shouted.
I think the problem is, that nobody really knows what had happened if we've let the banks die.
The fear that the results might be a lot worse than the current situation is perhaps the driving force of politics of the last years.
That sounds a bit like only risk-taking share holders would have been harmed and that wouldn't be much harm for the society at all.
I really don't think that the harm would be that focused, because banks aren't only about risk-taking share holders and because of the interconnection of banks at the end someone might be harmed you've never thought about.
I really don't envy any politician having to make a decision in such a case.
I'm not even an economist, so obviously I have no idea what would have happened (even as is in "they don't really know" but I know even less).
My reasoning is this:
if I remember correctly Greek government bonds were already trading at ~70% of their nominal values two or even three years ago (cannot check, currently on a train along the Rhine with very limited internet access). To me this means, that the banks had already written off ~30 of the value of that bonds, and I bet if we look at their balance sheets we'll see that fact reflected.
e.g. from the article:
> But despite this, the younger generation of Greeks carries no more responsibility for the mistakes of its elders than the younger generation of Germans did in the 1950s and 1960s.
I am pretty sure we can segment society in any means necessary to excuse one group or another from responsibility. I can just as well blame the same younger generation for bringing in a firebrand Marxist and voting to support saying NO when its going to wreck their economy even further; likely closing the banks for electronic transfers for business may have done too much damage.
As for the article, I could care less what Germany did or didn't do back then. Times were different then, we were all recovering from a incredible war and no one wanted to see conditions repeated that may lead to a third. Reparations and the restrictions on Germany after the first world war led to someone like Hitler gaining power so why repeat the situation?
Greece doesn't have a modern history of military aggression. Germany did. What the Allies put in place was in their own interests.
The Allies didn't want to make that mistake twice (one could argue 3rd time). Hence they made sure that Germany [a] had a political system that was extremely balanced and stable (ironically much more than their own).
And [b] (most importantly of all), they made sure that they Germans had hope. Hope to be able to dig themselves out of what must have appeared to be almost a impossible mess at the beginning. Hope is like a virus. It starts small and becomes a self fulfilling cycle upwards (the reverse is also true).
That is what the Greece requires now. It needs to restructure its debt in order to take advantage of the quantitative easing policy of the ECB and low interest rates.
It also needs time to put its house in this order and it needs stability (politically and economically) to build itself back up.
The EU powers that be hates referendums. The people always vote that opposite to what they want. Welcome to democracy.
"he Allies also confiscated large amounts of German intellectual property (patents and copyrights, but also trademarks). Beginning immediately after the German surrender and continuing for the next two years the US pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany"
If you do the research, the U.S. Leveraged a similar deal over the UK to obtain all patents royalty free as an incentive to enter WWII.
There may be some leverage that can be applied. These corporate and IP raids netted the U.S. hundreds of trillions of dollars.
I was first devastated when I first found this out. It reminded me that the line between the "goodies" and "baddies" was not so clear.
Germans are somewhat aware that the Soviet Union practically strip mined the industry in East Germany after the war but what the other Allies (and the US in particular) did is less widely known. Especially the fact that the original (pre-Marshall) plan was to convert Germany to a pre-industrial level (which would have been a death sentence for a large part of the population which would have been unable to sustain itself on agriculture alone) to avoid a repeat of the mobilization that enabled the Blitz.
Also, there was quite a bit of reparations going on after WW2. I'd wager that every German adult has heard stories from their grandparents about stealing supplies off those trains -- something that became so frequent the archbishop of Cologne (Cardinal Frings) absolved the practice and people began calling it "fringsen".
War means everybody loses -- even the "winners". There are no good guys, just various degrees of badness.
At this point it is pretty clear that Greece can never pay off the debt which is just another way of saying that they should never have been lent the money in the first place. Write off the debt and vow to never lend the Greek state any money ever again. Both sides are at fault here.
Just that it will be doing better than if don't forgive its debt.
No. No one is saying that. People are saying that Germans should help Greece because it's a rational thing to do. No one, except complete idiots, is saying that they have moral obligation to do it. Here's the quote from OP:
> Nonsense! This had nothing to do with moral clarity; it was a rational political and economic decision
I would be very surprised if a person who's so invested in a situation would act intelligently and rationally about it.
I'm interested in those ideas. Can you give a link to any information about them?
I really enjoyed these books, but I am not super well-read in this area, so there may be better ones out there. You could try searching for "systems theory" and see what other resources are out there.
Systems theory is a very broad topic, so you'll find it attached to many specific disciplines, but the general idea is that you can take a bunch of simple things, hook them together, and produce a "being" that has totally weird behavior in aggregate.
Bringing a little more egoless theory in the picture is a nice idea.
1. Meet Portugal (my country). Some may know us derisively as the P in PIGS because of our financial problems (much similar to the Greek one in nature and extent).
In 2010 and 2011 as one of the 14 member states of the EU that were part of the Greek loan facility Portugal contributed with 1102 million euros into the 52.9 billion loan that greece received .
Yes, that's correct, not all of the debt that people are so eager to expect that German forgives is from their coffers, it was actually pooled from the following countries: Belgium, Cyprus, Germany, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia and Spain.
2. As you may know, about the same time we had our own problems and also had to be bailed out. As part of the measures put in place to reduce our deficit a massive tax hike was implemented in the end of 2012 
I'll draw attention to single one of those measures: the 3.5% extraordinary tax on the income paid by every single person with income above minimum wage (485€/month) including pensioners.
Now, for the money quote : "Minister of Finance Vitor Gaspar said the tax would bring in 1025 million euros".
Less than what Portugal contributed to the Greek bailout fund. 3.5% of the income of every citizen in this country.
In conclusion, that's one of the reasons for the nationalistic outrage against Greece defaulting the loan. It is not only the money of the richest bankers of Europe that won't be repaid, it is the taxpayer money of each of those countries that contributed to their rescue.
To put in perspective, 1102 million euros means that default would cost every inhabitant in this country 110 euros (about 330€ per household) and not only hypothetically but in practice too as demonstrated above.
EDIT: Changed second link as it was paywalled for the same news, but on CNN
So I would suggest you redirect your complaints towards the real responsible parties: European bankers and the elites who keep enabling them. Portugal would benefit from getting together with other countries and ask for their money back from the (mostly German and French) financial sector, or at least a big haircut. This is also true of Italy, Spain, Ireland and so on.
Can I borrow 100€ from you to pay back this other guy from whom I borrowed 100€ which I then spent on alcohol? Yes please? Okay, thanks, now unfortunately you didn’t actually give me any money and it’s not my fault if I can’t pay you back because actually your money went to this other guy. It had nothing to do with me or those empty bottles you see back there, it really went directly to this evil person OVER THERE AND YOU SHOULD ONLY TAKE IT UP WITH HIM!
In other words, the money of course did go to Greece, it’s just that Greece was so far in debt by this point that they couldn’t decide for themselves on how to spend it because they first had to pay back other people. On the other hand, there is still plenty of private property in Greece so the country itself is far from bankrupt. It’s just the people deciding they would rather default on their loans and continue living than to tax the rich and wealthy.
I'm not sure why you fervently believe the banks deserve this. No-one held a gun to their head and forced them to make a loan to Greece, and it's not as if the, ah, looseness of Greek gdp calculations was exactly a secret.
Perhaps consider being pissed at the bankers that swindled all the aforementioned taxpayers into buying out their bad loans. A cynic might think this is how European government disguised the rather unpopular act of writing their banks a huge-ass check.
German, Dutch, et al banks -- specifically banks that had unacknowledged bad loans to Greece -- have several hundred billion more than before. Public sector balance sheets have that much less.
Where did the money from all these bonds go? To Greece.
In this unjust world, as it happens, "I" was bailed out by the taxpayer community that stepped in and made me whole; however, it's clear that you still can't repay them like you couldn't repay me. What are they supposed to do? One option is enslaving your family for a long time (austerity); another is to just let go and forget about the money, you just won't do business with them anymore (which is what is happening, with the previous Greek elite being slowly kicked out); another still is knocking on my friend's door. Note how this last option is always absent from public discourse. In any case, now I'm free to pontificate on how bad you are and how I shouldn't have given you money in the first place because you're a lazy scumbag, although of course I knew this from day 1. Is that fair?
I've seen accusations that the high military spending goes to northern European arms dealing countries. I have no idea if that's true but the pattern is very familiar, the UK have a long history of giving "foreign" "aid" which is basically giving taxpayer money to arms dealers.
And again in 2012, it was widely speculated that the bailout was granted on condition that Greece kept up buying stuff from Germany: http://www.theguardian.com/world/2012/apr/19/greece-military...
And these are the first two google hits, really.
Adding a bit of context: Greece basically had a full-out war with Turkey over Cyprus about 40 years ago, and tension has been high ever since. The Cyprus issue is one of the many sticking points that resulted in Turkey being refused EU membership. If you look carefully at maps, you'll see that many Greek islands are extremely close to the Turkish mainland (tourist guides joke that you can get "instant Greece" when visiting Turkey with a quick boat trip). Part of the reconstruction process of Turkish national identity after the end of the Ottomans involved ethnic cleansing against long-time Greek enclaves. This is complicated further by the Cold War and the strategic location of both countries, which means they both "have to be" NATO members by hook or by crook (i.e. the US will never let them go). In this framework, high defence spending is not unnatural; however, reliance on specific northern-European dealers is a bit suspect.
One of the things people have been laughing at the Greeks for is that they don't even have a Cadastre listing who owns what land. Apparently this is proof the Greeks are all lazy, tax-avoiding thieves. In Scotland they're trying to achieve the same thing as they only know who owns about a quarter of the country.
Unfortunately the very rich aristocrats who own this land have been trying to prevent it since apparently knowing who owns land is some dark secret they're worried about getting out. They've been writing articles, such as the one by the UK prime minister's father-in-law Lord Astor, comparing this compiling of a list of ownership to the behaviour of Mugabe in Zimbabwe.
So, are we living in democracies with government responsible to citizens? I'd say to a great degree we don't, and like many soldiers who fought in European wars last century I think it becomes clear that you have more in common with the ordinary people of other European nations than you do with the ones guiding you into wars, or continuations of the same via diplomacy or economic shock doctrines.
Please don't sell me that socialist BS. I live in ex-socialist country and there is always trash talk about elites, aristocrats and capitalism on our long coffee breaks but guess what? You know what those people cry for? Socialist dictators and God-All-Mighty state.
Grow up. It is your fault mostly.
Elites exist, it is not a mystery cloaked in enigma. Most of people on Earth could say I'm part of elite just for being European. But you are talking about powerful elites who work in mysterious ways to control all Greek people votes.
If they haven’t, that’s an issue internal to Greece to be sorted out by Greek people. You can’t continuously elect corrupt oligarchic governments for 40 years and then turn around and shout “Not my fault!!” if these governments don’t act in your best interest.
Oh, like Americans complaining that they didn't want to invade Iraq? Those same Americans who have elected Bushes and Clintons for about 30 years now? Yup, quite unacceptable, really. They don't even have the excuse of having been ruled by a dictatorship for 10 years because of the Cold War, or having been born on one of the most strategic bits of land in the world from a military perspective, or having to fight ethnic wars with their immediate neighbours.
Someone once said something about beams in your own eye...
Now for the economical elites this is a much better situation, they get to present the whole situation as lazy Greeks causing problems, present the rest of Europe as the good guys, and pretend that the money we lent them should have saved them somehow.
It's important not to forget all the sides that caused the problems on 2008, just because we already solved the problems of one of the sides it doesn't absolve them from the responsibility.
The buying and refinancing of bonds is a very direct support of the Greek economy as the bonds are used by the Greek banks as collateral when they go to the central bank to get cash euros to give to their customers.
Greeks have taken out billions of fresh euro bank notes from their ATMs in the past few months. Without the Troikas support this would not have been possible.
* Portugal contributed about 0.48% of its GDP in loans, compared to Germany's contribution of around 0.41%.
* Portugal's GDP / capita is a bit less than than half of that of Germany
How people avoid asking for bills when going to the doctor to avoid the extra 20 euros being added to the bill.
How people get things done, because someone has a friend that knows a guy... Of course without anything written and payed in cash.
How many small businesses closed down because they couldn't afford the new computer systems required by IRS.
How Portuguese are fleeing the country to countries like Angola, Mozambique and south American ones in the hope of finding a job that helps pay the bills to those that stay back.
Lots of many other cases that don't make us far from the Greek situation.
Yet, the Portuguese media has the outrage to call us a success case?!
The purpose of that answer is not to identify the party at fault or to explain what went wrong. It is to explain one reason for the increase of nationalistic rhetoric when there are talks of defaulting that loan.
Many people weren't aware that the money didn't come of an abstract "European fund" but from individual countries and helpfully it shed some light on why nationals of those countries consider it "their money".
Also, by showing the amount of money that countries (specially the weakest ones like Portugal) have contributed compared to the sacrifice the population (specially the weakest ones like the minimal wage pensioners) had to make to collect about the same amount (3.5% of all income) hopefully it helps in the understanding that the sacrifices are not being made by abstract concepts and organizations but by the people living in those countries.
As for the rest of your comment it doesn't help advancing or refuting the points explained above so they are a little bit out of place.
Yet, on our daily lives we and our politicians do exactly the same things they get accused for.
So sorry if I went a bit too much off topic.
And this is why there is little support in the rest of the EU for further transfer of wealth to Greece at this point.
If anybody is interested, just look into this[0,] and if you can bear it, consider the pattern of all the similar cases, the utter depravity of it all, how it was allowed to operate for so long, and with those facts considered, god knows how much of it is going on as we speak.
And because these problems and others like them throughout Europe, can be seen as the result of and directly traced to specific policies put in place by European governments, they are in desperate need of discussion. Especially by people who want to make the world a better place.
And now upon further consideration, an increasingly disruptive(not the good kind,) rapidly growing in size immigrant population in Europe does seem rather on topic in any broad discussion about the future of the Eurozone economy, already dealing with employment issues.
So as I think I pretty civilly and clearly laid out my reasoning for why I think it is an important topic to discuss, and so many of you feel strongly enough about it to downvote, maybe one or two of you wouldn't mind to put your thoughts into words?
edit: Also, I should maybe note, in my original, now dead, post I did position myself pretty far to one side of an interpretive spectrum, as I find that is often a good way to elicit a response I had not considered and whittle down my view to a more thoroughly thought through viewpoint.
I think dang already laid out reason enough already. But hell, I'll add more fuel to the fire...
> [...] I did position myself pretty far to one side of an interpretive spectrum, as I find that is often a good way to elicit a response
You elicited a response alright. But not a good one, and not one conductive to constructive discussion. The well has been poisoned, so to speak. Why? Well, there's playing devil's advocate, and then there's playing the devil - your initial posts look more like a xenophobic version of the latter, to me, than the former. No offense...? I assume this is why your first post ended up flagged.
Even if we assumed this was on topic such discussion is unlikely to be productive at the moment as a result.
Rather than let sleeping dogs lie, you made a second post, defending the subject as on topic. Dang pointed out that it wasn't. Your reply, which we now discuss, admits you knew that it was "a bit of a stretch" (a bit of an understatement) - and still, yet again, attempts to force the topic, in explicit response to being asked not to. And you're wondering why it's attracting downvotes?
At this point, it wouldn't surprise me if the entire topic tree is eating down-votes - nobody wants to see any of this negative wasted opportunity for discussion. That includes this reply - if HN supported PMs, this is where I'd cut and paste this reply into one, to spare the other posters. As stands, I'll just have to take my licks as they come, if they come (I've found HN rather lenient in handing them out.)
(edit: fixed some awkward sentence flow.)
You don't need game theory of this, you just need history. Game theory is the hammer that thinks every problem is a nail.
At the end of the day, every historic fact ruthlessly stretched into some assumed future is a risk for the people relying on unjustified assumptions.
It is unhealthy when it centers on negatives about other countries. Being proud that you're so much better than those lazy freeloaders across the border is not so great, for example.
One should view critically the past and present of its own nation, focus on all aspects, and learn from mistakes. But nationalism/patriotism and objective critical thinking tend to go against each other in real world out there. So no, I prefer to not like patriotism, of any kind. Anyway, I feel more of a citizen of this world, rather than some area that belonged somewhere else 100 years ago, elsewhere 1000 yeats ago, and will for sure in another 1000 years in future. Once a person moves a bit around the world, perspective on this topic is changed for good (classic House quote - "Patriotism is nothing but loyalty to real estate")
There's a very big difference between war caused debt and economic caused debt (note that I'm basically making these two "debts" up, and things are more nuanced obviously, but I'm going to ignore the nuances for now, these are very broad strokes.) When you come out of war, you're either the loser or the victor (one way or another, there are very few true "ties" in war.) And while capital may be destroyed in both cases, an economic crises doesn't necessarily leave your physical infrastructure and entire social system completely unrecognizable.
Further, Piketty seemingly completely ignores the Marshall Plan and all that it included in rebuilding Europe. And yes the Marshall plan was a form of debt forgiveness, but as a huge portion of the European continent was a smoking crater, things were different in 1945 than Greece in 2015.
Further, some historians/economists will argue that the "German miracle" (and "Japanese miracle" as well) were in part because of the destruction cased by the wars. With all the manufacturing capabilities destroyed, they were able to rebuild with the latest and greatest technology of the time. (and if you take this further, as the US was able to rest on it's un-destroyed capital equipment and make huge profits during the rest of the 1940's, 50's and early 60's, and never re-invested as Germany and Japan were forced too, this eventually lead to the downfall of the US Industrial might, in part.)
Personally, I think this has more to do with his French nationalism than anything else, at least as it appears to me in the interview.
Which allows us to provide a further distinction: the country who had everything destroyed was directly responsible for that destruction. Yet, the debt that they racked up because they tried to take over eurasia while killing and torturing millions in the process, was forgiven not many years after the killings and torturings took place.
I think there should be a distinction between a country that kills and tortures millions and one that does not. So, why again should we forgive the debts of those responsible for killing and torturing millions, but not those of a country who has done nothing comparable?
Because the Treaty of Versailles was tried the first time, to penalize Germany with onerous debts for starting WW1, and WW2 was the direct result. After WW2, the Allied occupiers weren't thinking, "How can we penalize Germany?", they were thinking, "How can we prevent another damned war!?".
Unfortunately, this time people are still thinking, "How can we penalize Greece?", as if that will help the EU at all in the future.
Why would you try it on Greece then?
And that's all they're thinking.
Piketty is right - it's atrategic idiocy of the first order.
As for tax avoidance - some countries, including the UK, have based significant sectors of their economy on tax avoidance.
In the same way that it's immensely hypocritical of Germany to lecture Greece on debt, it's equally hypocritical of the Eurozone to lecture Greece on tax avoidance, when the bankers and corporates know damn well that if they weren't avoiding taxation at least as aggressively, austerity would be completely unnecessary.
But of course they mean tax avoidance by working class people, which is a very bad thing, and not tax avoidance by corporations, banks, and oligarchs, which is a very good thing.
It's this kind of twisted self-serving nonsense that has created the situation in Greece. Sovereign debt is a symptom of much deeper problems, not a final cause.
Especially with the head tax avoidance manager at his head, Jean-Claude Juncker.
That said, my understanding is that there are real issues with the Greek state - not only cronyism and corruption, but lack of fundamental mechanisms like a proper welfare system or a cadastre. These issues need to be addressed, but seems at odds with the creditors' obsession with slashing public spending at all costs.
I also agree with Piketty about the way the crisis served to highlight systemic issues in the EU. Unfortunately, EU leaders appear completely unwilling to address them, apparently pretending nothing is wrong is much easier.
For example, during the early 90s, Australia had a recession. Due to this recession, more stringent banking laws were introduced. Fast forward to the GFC, and the entire globe is running for cover. The Australia dollar tanked because everyone thought that the economy would die and the banks would collapse. On the contrary, due to the tightened banking laws, the 'big four' Australian banks all kept their credit rating. All of them. At a time when most banks were slipping.
Times of national pain like this are the times to slip in significant reform. Greece has an endemic corruption problem, and independent of anything else, this is a good excuse to 'stop the rot'. Or we could just point fingers everywhere, make it no-one's problem and no-one's responsibility, and not progress at all.
And if you've been watching the news lately, the big economies are all looking at ways to counter tax avoidance by corporations, as it's a significant problem. It's a complete misrepresentation to say that there's no concern or effort being made there.
World War I: Germany loses, is forced to pay not just debt, but reparations. Huge economic and political instability as a result leads to a new leadership which leads directly to World War II.
World War II: Germany loses, is split up, due to the Marshall plan (in part do to a fear of Communism, so not solely due to compassion), West Germany given millions of dollars to rebuild, a rather thriving democracy and economy is created as a result.
Which of these is the better option?
Also, there is another gigantic difference here, Germany lost a bloody war and we told them how it was going to be, we restructured their economy, wholesale, and they were in no position to disagree. About half the debt was forgiven because they did what we made them do. If Greece wants to put their sovereignty on the table and let their creditors structure their economy for them, that's a very different negotiation than what they've had. Further, the west wanted a strong Germany between them and the communists, what's Greece got to bring to that table?
All this hypocrisy talk misses the point. Greece should go elsewhere to finance their debts if they don't like dealing with Germany. With their history, lifestyle, economy and government, I think that will be a challenge. Nothing prevents BRICs from investing there, they just don't seem that interested. Nations aren't individuals but try to go negotiate with a pawn shop or payday lending place, it sucks to need money and not have options. Sure, Germany has defaulted in the past, Greece can crap on then when the tables are reversed...
Given that even the IMF have admitted that pretty much all their projections were flat out wrong for Greece, of course the Greek government would be total idiots if they did this.
> All this hypocrisy talk misses the point. Greece should go elsewhere to finance their debts if they don't like dealing with Germany.
This is missing the point: Sure, Greece can't demand whatever they like. But at the same time, it is irrational for Europe to treat Greece this way, because all it achieves is weakening the Greek economy further, which nobody benefits from.
If the EZ governments wants to lose all the debt, that's a good approach. If they want some of it repaid and would like Greece to remain a viable part of the common market, it's not.
Continued loyalty to NATO and the EU? http://www.reuters.com/article/2015/07/03/eurozone-greece-ru...
Germany did repay the WWI reparation debt.
[Note: Germany paid less than half of its WWI reparations, until recently. I'm not sure what WWI debt you are referring to though.]
WW2 was caused in no small part by the Wall St Crash, which was a direct cause of hyperinflation in Germany, and by delusional industrialists who thought that financing Hitler would be a good way to avoid a revolution.
At least one of them - Thyssen - ended up in a concentration camp. So that didn't work out so well for him.
The others have never been held accountable.
Weimar could easily have been rescued if the Nazi party hadn't received literally millions in external funding and other forms of corporate support. In a counterfactual reality, Europe would probably have united more quickly and peacefully. Technology wouldn't have developed as quickly, but there would have been an arms race and perhaps a war with the Soviet Union sooner or later.
Could you please clarify how the Crash of '29 caused hyperinflation in Germany in the early 1920's?
Or do you mean the August 1919 to December 1920 slide? That doesn't suffer from violations of the law of causality, but nor is there any evidence that it caused the Weimar government to print ever increasing amounts of money in higher and higher denominations, which started in June 1921, six months after Wall Street had started to recover.
I also think reparations are fundamentally different than loans. Comparing war reparations to loans is blurring the lines to make a political point.
Germany had loans forgiven less than one decade after they were systematically killing tens of thousands of people per day in gas chambers, human ovens, or worse and barely twelve years after they had firebombed London and other cities, resulting in 40,000 dead civilians.
Oh, wait. They did. https://en.wikipedia.org/wiki/Yalta_Conference
I think that's a good point in principle, but remember that the Greece's poor suffer the most. Drive through a poor neighorhood in town and consider how much influence the residents have over national economic policy.
Which reminds me...
158,000 killed due to those bloody stupid Communists :(
"As the war’s outcome became apparent, British Prime Minister Winston Churchill was determined to return Greece to the prewar rule of the monarchy and the old regime. He was motivated by fear of Communist influence within the resistance movement.
Churchill tried to get the Anglo-American army that was getting ready to invade Italy to attack Greece instead. Indeed, he tried so hard to change the war plan that he almost broke up the Allied military alliance; when he failed, he threw all the soldiers he still controlled into Greece and precipitated a civil war that tore the country apart."
There isn't a major economy in the world that this does not describe. Perhaps not India. The "Race for Africa" was a low point for the UK and France, for example.
If Greece was a buffer state against some monstrously powerful ideological opponent, you can bet that we'd be seeing considerably different politicking going on.
Your post actually prove's the other author's point: Your clear opinion of responsibility is shown and thus it would be clear to me, how you as a winner's negotiator in that time after WWII would have "accounted" that debt.
>Your post actually prove's the other author's point: Your clear opinion of responsibility is shown and thus it would be clear to me, how you as a winner's negotiator in that time after WWII would have "accounted" that debt.
My clear "opinion of responsibility"? You mean, my assertion that Germany was responsible for the destruction mentioned by sgnelson and the killing and torturing of millions that I brought up? Do you reject that assertion?
Modern debt is an inherently ridiculous proposition. It can only ever expand or collapse. The longer the world tries to solve its problems using it, the more comical it becomes.
When the European and world economy went down, it dragged Greece with them. The debt became unsustainable. Instead of the creditors losing out (much as an investor or normal creditor would when they invest in something that loses), the Europeans decided to bail out the initial creditors, and convinced the then-current Greek government to take a bad deal, all the while basically 'socializing' the risk. Their shitty economics led to a 25% contraction in the Greek economy.
If you follow the chain of events, this crisis is as much Germany's fault as Greece's.
Another thing to keep in mind, is that it doesn't matter whose fault it is. If Greece stops paying its creditors and stops taking loans, Germans will lose out. It's actually in Germany's best interest to forgive some of the debt, and have Greece pay the rest. Greece's economist/finance minister knows this, that's why they can play this game.
Absolutely. It's bizarre that in a country with bankruptcy laws (which Germany must have), they argue that it's 'immoral' for Greece to have some debt relief.
> When the European and world economy went down, it dragged Greece with them.
Remember who started the Great Recession (the U.S.). The Greeks probably had less to do with it than most nations.
Greece may have been run by a ridiculously irresponsible government (and electorate), but it was the troika (Germany, mostly) put the fallout on the German (and EU) public's tab. That was and is a debt guaranteed to go bad.
The reason Germany have a particular interest/power here (apart from being a large eurozone member) is that it is/was their banks that are owed money by the Greek government.
This is vagueness kind of part of the problem, these oblique and vague institutions representing oblique and vague interests. What is the ECB exactly? How is it funded? What does it want?
In any case, it doesn't really matter if this is germany or if Angela and the electorate are just playing the role. The Troika made a (unrealistic) loan to Greece so that Greece could pay back "creditors" (who I'm assuming are largely German banks, but am possibly mistaken).
Angela Merkel is not part of the Troika. Angela Merkel plays a prominent role in the debate because she is the unofficial leader of the northern states, while François Hollande unofficially represents the southern states. Both can only influence one vote of the EU commission and have very limited influence on the ECB or the IMF.
Also, there is more to it than polemics. I think Germany's political traditions and biases largely driving these policies and also their interests (as direct lenders and as the country housing the interested banks). Angela Merkel is not officially part of the Troika, but her role in it is still real. Germany underwrote loans.
You are right that it's not strictly true. But using the terms Troika or listing the institutions isn't more true, it's obfuscating. It's not clear what those acronyms mean.
I'm also not right wing (or left). I'm critical of the EU, but I care because I want it to succeed. I disagree with a lot of technical aspects but I am wholeheartedly in favor of the true goals of the EU: solidarity and peace. I believe the EU will give us our first 100 years of peace and our second.
In reality though there are Eastern European with lower standards of living than Greece that had a hard time getting these measures through parliament but ultimately took part in the rounds, too.
Germany is because of its size the biggest actor in most European things, that does not make them German.
I do not think the concept of a Troika of a central bank, the European government and the International Monetary Fund is that hard to understand, either.
We don't have a European taxation system, an empowered European parliament, figurehead or any such thing.
The way things work in this case is that "The Troika" is a mechanism. As I said it's all foggy. But insisting that this Troika is ultimately the decision make, is independent and so forth is disingenuous, I think. Behind this troika is EU member state government that funded the laons, decided on the rules and will be on the hook if loans are defaulted on. Chief among them is Germany. It is their public interest at stake (sharing with other members, etc.). Also it is their banks (not only their) that these loans will go to repay, so it is also their economic interest. It is also their political traditions, biases and ideologies that are being largely represented by the "Troika"
The media depiction of Germans and Greeks is not just a made up populist Greek media invention. It's in the German media as well. Angela Merkel herself (with finance ministers of other member states taking a sort of deputy role) is speaking and acting a way that assumes this role.
To me, saying "germany" in this case is no different tan saying "The US" in the Afganistan War. You could be legalistic and say "International Security Assistance Force" or "Coalition." You could say NATO, of which the US are the biggest member. You might even say the "Afghan Transitional Administration and their allies" if you are willing to push it. But, we say the "US invasion/mission/force" as shorthand and that is more honest than all the rest. All those terms are mechanisms or sometimes euphemisms given form.
In any case, in my original comment it was a shorthand given that I don't know the ins and outs of this (purposely?) obtuse collection of acronyms and it wasn't particularly important to the comment.
I said "it was the troika (Germany, mostly) put the fallout on the German (and EU) public's tab."
What exactly are you claiming anyway? That germany isn't the key decision maker? They aren't they key lender in these troika bailout loans? That it isn't mostly the German public that will be liable for these loans when they are defaulted on?
I agree that this "Germany vs Greece" media dynamic is unhelpful. The media has been playing to nationalism in both countries. That stil doesn't mean pretending that these acronyms are real independent bodies is more honest.
Greece's GDP nearly tripled from 2000 to 2008. Their debt to GDP was comparable to other European nations until 2008 (105% of GDP).
Yes. The main difference being that Greece didn't invade anyone, didn't cause millions of deaths and didn't exterminate 6 million Jews.
Just over-borrowed. And it has paid for it with 5 years destruction of its economy (40-50% effective less buying power per person among other things and unemployment rates similar to the Weimar republic). Hey, Greece didn't even ask for its loans NOT to be repaid -- they just asked for a better deal, without heavy taxation and anti-business austerity measures that prevent development and make it even more impossible to reboot.
The idea that the first case is somehow more justified to relieve is ludicrous -- not to mention insulting to the victims of the Holocaust and WW.
[EDIT] Besides, the main historical reason Germany was "forgiven" wasn't that it had suffered losses too (war agressors have no right to complain about that), but because it suddenly was in the right place to serve as a nice Cold War ally, half to the West/NATO and half to the USSR, so both sides wanted it to be in good standing.
Actually Greece Invaded Turkey in WW-I.
Greece, the nation, emerged after liberating its land from centuries of Turkish (then Ottoman) occupation (with several failed smaller scale attempts at independence in between).
After the Ottoman Empire was collapsing, the succeeding regime, the "new turks" who created Turkey, started an ethnic cleansing attempt, killing millions of Greek Pontians, Armenians, Assyrians etc.
After a decade of this happening, Greece (and with the assistance and encouragement of Western powers) invaded Asia Minor, where 1.5 million of Greek ethnicity were still living among the other local populations. Then the Greek army had the not so brilliant idea to march forward to the inner Turkey, and they got slashed. A massacre followed, with the Turkish army slaghtering the Greek population of Asia Minor (including in a great fire), and creating huge swarths of immigrants.
So, I'd say Greece paid quite hard for that "invasion", but also that: a) 1.5 million of your people living in a place, b) some centuries of occupation, c) a decade of genocide, more or less justifies some kind of military campaign.
That land was invaded by Turkish Tribes during 12th century. So historical occupation that far cannot be justified with 20th century invasion. Greek people living in the invaded areas were around %18 of the population.
Besides, Atrocities goes both ways.
Edited for wording and some corrections.
PS: And yes, it was the ottoman empire, etc, but that's semantics.
Ss far as I could understand, that's not the point he's making, at all. He's saying that financially punishing countries is shortsighted and counterproductive and that we have recent examples of doing just that (1918), and doing the opposite (1945/1953), and clearly different outcomes.
The rest of your points are irrelevant - he's not discussing post WW2 recovery in Germany in a void or for fun, like we are, he's trying to steer a super important debate about a Greek exit, which has so far been very simplistic and populist (the greek are lazy and must learn their lesson, even if it means they'll be in debt for 40 years). So he's also pointing out that it just so happens that the same countries are involved, then and now, and calling for a bit of a look at _recent_ history.
Also, points for dropping 100% unsubstantiated nationalism accusations right at the end, great!
Also, the 2008 crisis isn't the direct cause of the crisis in Greece right now. That crisis has been building ever since Greece joined the monetary union in 2002. As Piketty notes: "The Greeks have, without a doubt, made big mistakes. Until 2009, the government in Athens forged its books". Papandreou finally revealed this (indeed, around 2008), and the current Greek crisis and European monetary instability followed suit.
Keep in mind that Nazi Germany did a lot of damage in Greece, and still hasn't repaid that debt either. Insisting that Greece pays back all their debts when Germany is so good at avoiding to pay their own, is outright hypocritical.
Sending an economy into destruction like this is a terrible idea, and goes against everything the EU should stand for. It's disgusting to see Germany at the helm of such a ride to hell.
So it's a rock and a hard place choice - austerity for 15-20 years or bankruptcy followed by maybe a new deal, betting that Europe won't let one of its own starve to death.
If they lose their funding they need to do both of:
1. negotiate a new deal with their creditors
2. Get emergency humanitarian funding to feed people and keep hospitals running
3. start paying people in IOUs (which could eventually turn into the new drachma if #1 doesn't work out).
Exiting the Euro completely would be disastrous for both Europe and Greece - there's a year or more of IT work required to introduce a new currency and one can't run an advanced economy on cash only. And Europe would have a €250 billion hole across the major powers that would need to be covered by its taxpayers if it can't get it from Greece. Legally by EU law they could sue Greece for its actions which then opens up questions about membership in the EU itself.
(this was linked from the Interfluidity thing everyone was talking about before) and continues through here:
(which I read when someone claimed Greece had a 2014 primary surplus, which IMF disputes), and is colored by Tyler Cowen:
... who I do not agree with on most things, to the extent that matters, but whose commentary on Syriza and Greek financing I now understand a little better.
I thought the article about Peronis Democracy was interesting but I need some help seeing the connection to the current crisis.
Judging from your comments it seems like you believe the Greek government is spending more than it's taking in(primary budget deficit). Which is not true at least for 2014 according to the Wall Street Journal. The Greek government needs to borrow more money not to fund additional purchases but to pay off debt that is coming due. For example they have $5 billion(not sure on exact number) worth of debt that matures in 2015 but they will run a primary budget surplus of $2.25 billion so they need to borrow an additional $2.75 billion to pay off the additional debt.
The next few years will be very terrible for Greece, but so have the last few years. The fundamental problem with Greece comes down the idea of a fiscal multiplier, which is how much gdp changes when government spending is cut. Right now the IMF estimates that the fiscal multiplier is 1.7. This means that every dollar the government cuts(increasing the primary budget deficit) reduces the size of the economy by $1.7(which also reduces the governments tax revenue). So the current austerity measures of a surplus of $2.24 billion reduce the size of the Greece economy by at least $3.8 billion. The current Great Depression level unemployment in Greece is the result of cuts in government spending that generated a surplus of just 1%. Imagine what Greece would be like if they achieve their target of 3.5%(was 4.5%).
P.S. excuse any spelling or grammatical errors, its too late for me to be on hacker news.
http://www.wsj.com/articles/greece-misses-target-on-budget-s... - behind paywall unfortunately, so there will be a need to google.
(at least because of the feed back loop of +surplus-> -gdp -> -taxes -> -surplus so to achieve a surplus of 2.24 billion more than 2.24 billion in cuts would need to be mead)
The IMF analyzed the 2014 primary surplus and found it illusory:
* They counted revenue sources that aren't conventionally accounted for in primary budgets
* They undercounted liabilities, notably from tax refund and pension payables
* Some of the unorthodox revenue they counted were privatization proceeds, which turned out less lucrative than projected
The IMF's trued-up numbers suggest there was no 2014 primary surplus.
It's probably a bit unfortunate that this Piketty interview is getting prominence, because the whole question of analogies or disanalogies to Germany's war-related sovereign debt problems is mostly beside the point. The most urgent disanalogy in Greece's case is to what happens to just about every other country from A to Z that goes broke and needs to enter an IMF program. The SOP is for their pre-existing sovereign debt to be haircut as far as is necessary (if it is necessary) to make their debt burden clearly sustainable from then on, as a central part of the program designed and supervised by the IMF. This is what the IMF was designed to do from Day 1 and no-one, including Germany or any Eurozone core countries, is running around shouting that the IMF system is morally depraved, or a source of unacceptable moral hazard or a surrender to blackmail etc. etc. because it frequently results in program countries defaulting on a large chunk of their sovereign debts. And compared to the rogue's gallery of mostly developing countries that enter IMF programs Greece is probably not exceptionally profligate, corrupt, structurally rigid, unreformable and so on.
Instead Greece was moved onto the special, ad hoc Troika scheme, in which a country with a greatly unsustainable debt burden was given more loans but originally no debt relief at all, and great efforts were made to make the country run primary surpluses so that the creditors would not only get all their money back but make a profit. Greatly inadequate debt relief was only added later on when the original plan had collapsed. I'll let the former head of the Bundesbank explain why:
Politically this was a wonder solution for the EU core leadership: bail out their banks by stealth, avoiding the anger of their taxpayers by camouflaging it as a rescue mission for the wayward Greeks. Even better, the whole cost of the EU-wide bank bailout could be sweated out of the Greek taxpayer! Well, not really of course: probably no-one ever expected the official creditors to actually get their money back, but hopefully the defaults would be acceptably far in the future for the politicians, who live hand-to-mouth and election to election. Now that the whole thing has exploded, perhaps sooner and harder than they expected, those EU core politicians are trapped by their earlier lies.
There is one further wrinkle: not only was the Troika fix-up job vastly harsher on Greece as a creditor than a normal IMF program, it was specifically forbidden by the treaty of Lisbon (the solemn document I was asked to vote on twice, as an Irish citizen) articles 123 http://euwiki.org/TFEU#Article_123 and 125 http://euwiki.org/TFEU#Article_125 while at the same time the treaty had been crafted to allow Euro member countries continued access to normal IMF programs while remaining inside the Euro. Or at least, everyone thought that it was specifically forbidden, until this prohibition was no longer convenient, and the wizards at the ECJ (the same visionaries who recently discovered the "right to be forgotten") helpfully made it go away.
But if we do want to talk about the German example, we don't have to go back to the Marshall Plan either. The US Fed's cross-border largesse in 2008 would be a good place to start.
Reading the HN comments, it occurs to me what a total mess this is. People on all sides are not happy. Furthermore it's one of those he-said, she-said stories where each party has a long and detailed argument for why outsiders should consider things one way or another.
Along those lines, I am very unhappy that Piketty chose to give this interview on this topic. I want to see his ideas about wealth being put under harsh light and deep scrutiny -- after all, he's supposed to have something important to say in this matter. But now he's just turning into another Krugman -- economist-cum-pundit. That's probably great for his career, but it makes honest and objective evaluation of his ideas much more difficult because from now on everybody's going to conflate his political views on various matters with his academic ones. Bah.
I disagree; that's a smoking crater. I'd bet the U.S. economy hasn't experienced that since 1900, or maybe only in the Great Depression.
> There's a very big difference between war caused debt and economic caused debt
not if you started the very war that put you in debt.
"This is not a peace. It is an armistice for twenty years"
Why don't we talk about the moral hazard of writing off a country's debt after they kill 60 million people?
I won't say the victims of predatory lending have a moral obligation to default, since this could get them killed. But in the absence of good government, this is the only way to drive predatory lenders out of existence.
And yes, good governance includes making life unprofitable for loan sharks.
Germany, especially after complete restructuring following the war was manifestly a decent credit risk. Greece is another story. The moral arguments in this scenario are just noise.
The US needs it for its bankrupt local governments. The EU needs it for member states.
The rationale behind bankruptcy is this: if a borrower cannot repay their debts in full, the lender cannot receive them in full. This isn't negotiable. It's an artefact of reality. Given that the lender will not receive their payment in full, it makes sense we may as well have a process that acknowledges this fact and moves things forward. There is no point to debtors prisons. Debt means risk and if bankruptcy happens, that risk plays out.
The current Greek situation is exactly that. The troika cannot receive its repayments in full. Greece simply cannot repay them. It's not marginal. It's not possible if only Greece would... It's not going to happen. They owe too much and their economy is in collapse. It is game over for these loans.
Somebody will always lend money to states, even poorly managed states. At the end of the day, three people with the most to lose are the richer countries of the world, because they are also in debt, and a sovereign default will screw up all of the debt models.
In the U.S., there is municipal bankruptcy. U.S. States cannot go bankrupt, which will be interesting when states run as poorly as Greece (ie Illinois) get hit by a tidal wave of retirement obligations.
The whole point of interest in a loan is to cover 2 points: 1) The lost purchasing power of that money i.e.: the cost of inflation over the period of the debt, and 2) The priced-in risk that the loan will not be repaid in a small portion of cases. This is why unsecured debt attracts a higher interest rate than secured debt and is why all debt incurs a higher interest rate than inflation.
I don't understand why popular opinion towards debt seems to invert at some point. I'm sure if you asked these same people whether bankruptcy processes should be outlawed many would say no, but yet at some point between 'person' and 'nation state' their opinion changes without changing any of the inbuilt mechanisms for supporting that process (interest on a loan to price in risk).
It's a fascinating example of once you make something sufficiently faceless, peoples' views towards it changes. See also: politics towards social classes, etc.
If bankruptcy norms existed, they could create a market discipline. As government approached the intervention threshold, their bonds would decrease a little in value. Also in my governments-can-declare-bankrupcy world, this can happen a lot sooner and the defaults can be much smaller.
Likewise, central banks have been working very hard to keep interest rates near zero. Any interest is perceived to be a bad thing (the big piles of money held by the large private interests become relatively smaller under inflation), and has thus been held in check. Normally, when things go somewhat badly for a country, they can issue a bunch of bonds and inflate their currency a bit to take up the flack. But with the Euro, there's no opportunity for member countries to inflate their own currencies to smooth out the bumps, and strong pressure from the overall Eurozone to keep interest rates low. The normal control mechanisms are suppressed, leading to bigger explosions when things go really wrong...
I agree with a lot of what you say about how Greece needs it's own currency to inflate, but sometimes I don't know if someone has a non-mainstream opinion or just needs a little help with consensus economics. So if you are like me a student of economics this post will hopefully help clear some things up. If not then I guess we disagree and the next person to read this post will have a better understanding of the different views of monetary policy present in economics :).
The consensus view in economics about issuing bonds is that it moves the needle away from inflation and towards deflation. Think of money in a very simple supply and demand model. More (supply)money means it is worth less. When the government issues bonds it auctions them off and takes money from people(out of circulation) in return, reducing the supply of money. This leads to less money, which is worth more(deflation, or disinflation).
The consensus view about lowering interest rates is that it leads to inflation. Imagine a country with a long term interest rate of 10%, then the FED turns the dial down to 0%. Vick the VC, previously had to average 10%+ on all of his start up investments because investors would move their money to banks(and make 10%) if he made less. So Vick previously only invested in the best start ups, all ex-googlers and previous entrepreneurs. But now he only needs to break 0%, so he invests in all the maybes. This leads to more start ups and more dev positions. Now if we go back to supply and demand, more openings(demand) means greater price. This same things happens across the entire economy. Many projects/start ups/buildings get funded that weren't before because of the drop in interest rate. And these projects create openings, leading to higher wages. Since labor composes most of the goods and services we consume, when we pay more labor, we pay more for good and services call it inflation.
Where did you get that idea? Governments usually borrow money so they can spend it. That money isn't deleted or burned, it heads right back out of the government into the economy.
recently the euriborturned negative- the reason for that was to increase the money available to the economy as saving on bank accounts lost attraction and turned to stock exchanges...
His point is that this isn't a "moral" decision between two peoples. It's an economic decision between nations.
And there are enormous differences in the uses of the new debt capacity. Germany used the capacity to rebuild its economic capacity. Greece would use its new capacity to fund further welfare transfers and tax dodgers. Germany did not use the new capacity to repeat the same mistakes that created the old debt (and the vastly more important war). Greece would continue the exact same policies, and arrive at the same point of demanding debt concessions.
Yes, but most of the people who enabled that regime to do its work, were still around. It's not as though the entire population of Germany was swapped out for a different one, after the war. The average German was not a murdering genocidal maniac, but he did fall under the sway of idiotic fascism, and while it would have served no one's interest to force him to pay the price, there is nothing wrong with pointing out that he did not, in fact, pay the price.
> Greece would use its new capacity to fund further welfare transfers and tax dodgers.
Let's talk about those tax dodgers, then. You make it sound as though the Greek government has some sort of policy in place where they encourage people not to pay their taxes. Rather, the Eurozone is set up in such a way that it is very easy for the rich to avoid paying taxes by putting all their asset in tax havens e.g. Luxembourg and with very little oversight. And the wealthier nations in the EU tend to support this status quo, not the poorer ones.
Greece is the latter. Having been in Greece several times, it is very unsettling to being issued fake bills all the time for everything.
A famous example is the swimming pool tax avoidance:
Some more information:
Those other countries seem able to collect tax to fund their governments.
After WW1 France tried first through international (England) enforcement bodies, and then ultimately by occupation of the Ruhr valley (Germany's most productive region then).
Both approaches failed. Eventually the Weimar inflated their currency until the French debt was worth nothing, workers in the Ruhr valley striked, and extremist political parties promising a return of German dignity flourished.
Once the Greeks decide to refuse to pay, there isn't a good way to force them, short of enslavement.
And that might not work either. My understanding is that some slaves eat more than they produce.
After WW2, the only Germany which acknowledged war and pre-war debts was the FDR. This was a state in ruins under foreign military occupation, with about half the territory and population of the former German state that had incurred those debts.
If post-war Germany is your standard for debt relief, then Greece is still very, very far away from qualifying.
OK. So, the Greek government officials who ran up Greece's debt are responsible for that debt. The current government isn't, and in fact the current Greece is in economic ruin courtesy of years of "austerity" imposed forcefully by foreign powers.
It's also ironic that Greece was one of the creditors that forgave a large amount of German debt.
Germany and everyone else who foolishly loaned Greece money in 2010--and before--wants to get paid. There is nothing wrong with that. Dredging up the irrelevant past? Not so much.
Or: if I owe someone money, it doesn't matter if they are a nice person or not. I still owe them money, and must suffer the legal consequences if I fail to pay. This is what the rule of law is all about. It protects everyone, even people who are not nice. Even people who are hyopcrites. Even people who are Germans.
This moralization is childish. By all means dismiss the German government's moralization as silly and irrelevant. But don't engage in far more silly and far less relevant moral hectoring of your own.
Actually I remember an article posted a while ago right here on HN about the last payments for WW1. It is possible that Mr. Piketty may not have updated information, but it is also possible that he deliberately ignores some facts in order to stir a bigger debate.
"By the time country was reunified, in 1990, the world had changed dramatically since the days of Versailles, and policymakers decided to write off most of the original sum."
So he's still correct.
It was a similar article.
"So he's still correct."
The Germany's case was very, very different than that of Greece. After the both wars the winning forces just dictated the sum and the loosing forces had very little saying in the mater. It was most likely an exaggerated figure to start with, probably out of PR reasons - "we made them pay, dear people!" Later, when the emotions faded for the most part, a more realistic figure could be put in discussion and sold to the wide public as an act of generosity. Now let's talk about Greece and how many parallels can be drawn here. Greece was not being dictated figures of debt, Greece took the money willingly. Well, one could argue that only a small political elite made the decisions, but the money were actually reaching the average persons too, as budgetary salaries and pensions (and I bet they all enjoyed it). Write off some of the debt? There's no real reason to do that (but if that would be what it takes to bring them to saner fiscal practices, I would be OK with it anyway). So, Mr. Piketty may be "correct" in some twisted view in which paid-in-full war compensations are not actually recognized as such¹ and more importantly - he wants to be correct in an even more twisted context that puts on the same footing a subject of dictated-upon debt and the one of self-inflicted debt.
¹ Because the war winners have chosen later to adjust low the asked war compensation, and by doing that they manage to morally deny the "repaid" status. They could however have managed to achieve just the same by adjusting high (i.e. continuously calling for higher and higher sum so that it could never be paid in full).
Piketty seems like he is in favor of repaying this debt by "inflation, a special tax on private wealth, and debt relief."
But, he is against Greece leaving the Eurozone. So, how can they inflate their currency?
Instead of inflation, which is impossible if Greece shares the Euro currency, is he suggesting that some percentage of Greece's debts just get knocked off? That would achieve the same result, I think.
26 “But the man fell down before his master and begged him, ‘Please, be patient with me, and I will pay it all.’ 27 Then his master was filled with pity for him, and he released him and forgave his debt.
28 “But when the man left the king, he went to a fellow servant who owed him a few thousand dollars.[d] He grabbed him by the throat and demanded instant payment.
“His fellow servant fell down before him and begged for a little more time. ‘Be patient with me, and I will pay it,’ he pleaded. But his creditor wouldn’t wait. He had the man arrested and put in prison until the debt could be paid in full.
I think the 'Germany never paid'-argument is flawed. The Marshall plan would not have worked if Germany had been indebted. Instead this happened: https://en.wikipedia.org/wiki/German_reparations_for_World_W...
If Greek defaults without paying their debt Germany (=tax payers) is about to lose 90 billions. I'm not sure how this is profiting...
If Greece was not on the Euro, it would simply print money and inflate its currency until it could easily pay off it's debts. That gives you the same result as what Germany did, which was to basically only pay off some of their debt and just forget about the rest. The debtors lose, but hey, that's the risk for loaning money, right?
Anyways if Greek was not in the Euro it could devalue its currency. Which would benefit their exports, if they had any. However their debt would still be payable in Euro and the new currency would have a terrible exchange course. So no win. There are scientist who say the real estate market might boom in such a case. Since most Greeks are home owners that may provide some cash in the short run: International investors and rich Greeks who transfered their assets out of the country before the crash will buy in.
It's still unclear if a state can actually default. I guess if you're not dependent on import you could risk not paying back your international partners(/enemies). There are examples of countries regaining some power in isolation.
I agree about the risk of lending money, that's probably the reason why so much of this money was used to decouple Greece finance market and ensure existing (private) contracts were honored.
Ahh, I didn't realize this, but yeah, you're right. The debt would stay in Euros...
Or would it? Maybe you switch to a new currency at 1:1 (at the start, of course it drops immediately) and your debt uses the new currency too? Who knows
Its happened numerous times in the past, so its eminently clear that it can actually happen.
Well, I suppose you can just make up statements like that if you want. I could say that basic economics disagrees with you, but what would be the point?
The current euro situation certainly helps keeps prices down and allows more people to buy German products and that's a big part of why the German economy is doing so much better than anyone else. It wouldn't be much worse with a German currency either though.
The repayment of Germans debt is only delayed till Germany has a peace treaty. The 2+4 contract is not a peace treaty, but deliberate "instead a peace treaty" just allows the Russian occupied part to join the US, UK and French occupied parts.
The Euro-Zone is facing a dilemma. A debt cut, followed by inflation and taxing of private assets, would require that Greece still has monetary sovereignty. But all Euro states, even Germany and France, gave up their monetary sovereignty. None of them is a complete sovereign state anymore. An obscure bureaucracy in Brüssel is creating laws, that national governments just have to sign. And entering EU is like a roman Catholic marriage. A nation can join, but not leave EU.
It will be a very dangerous signal to send that you can borrow money, and not pay it back without any retribution. This is particularly important since more countries are going in the same direction as Greece (I think Spain and Puerto Rico are close, but I might be wrong).
Besides that, it also hurts the confidence towards the Eurozone if the countries in it can behave this way.
Also, am I the only one that finds it weird that they wait until after the deadline, to vote on whether or not to pay the debt back?
In a well regulated system, the people who make bad bets are not entitled to retribution. They are "entitled" (read: expected) to go out of business. At the very least, they suffer embarrassing losses that they must explain to their shareholders.
"Moral hazard", properly understood, is a term used to describe conditions that encourage reckless lenders. The threat of default is a good thing. That's what keeps otherwise rapacious lenders fearful enough to excercise good judgment and prudent restraint. Indeed, in advanced economies, the power of bankruptcy judges to wipe out debt is seens as an essential component of healthy capital markets. Bad lenders get wiped out, and take the money of their imprudent investors with them.
That's what should have happened to the private lenders who originated the Greek debt. Instead, they got bailed out by EZ members who are following up one bad choice with another in promising their electorates that they can collect from a nation manifestly unable to pay.
That's going a bit far. The borrower would still pay interest for the use of the money. Just not very much.
Time value of money?
Sometimes the creditor must share some of the pain, in order to save (even himself) more pain down the line.