Possibility of a Greek default in next week
- Thread starter Tehanu
- Start date
I agree with a lot of what Tehanu is saying.
The fundamental problems with Greece are an overly generous state and mass tax evasion. These need to be resolved, and there was a letter in the FT a couple of weeks ago where someone was calling for the right (i.e. uncorrupted) officials to take over the running of the country.
A lot of the calls for Greece to exit the Euro and default are coming from the right wing press in the UK, which is incredibly hostile to the single currency. All the problems that the PIIGS are suffering from are pinned to their membership.
My suspicion is that a lot of people are clinging to these articles of faith because they allow for a simple description of the world, rather than engaging with something that's big, complicated and difficult to resolve.
Also bear in mind that the Germans were profligate in the not too distant past, meaning that their reputation for fiscal prudence is recent. A decade ago the country was the sick man of Europe, and I think that what Angela Merkel is aiming to do is export the solution. The medicine isn't popular though, and it's not going to be the quick and easy fix that the markets are after.
The fundamental problems with Greece are an overly generous state and mass tax evasion. These need to be resolved, and there was a letter in the FT a couple of weeks ago where someone was calling for the right (i.e. uncorrupted) officials to take over the running of the country.
A lot of the calls for Greece to exit the Euro and default are coming from the right wing press in the UK, which is incredibly hostile to the single currency. All the problems that the PIIGS are suffering from are pinned to their membership.
My suspicion is that a lot of people are clinging to these articles of faith because they allow for a simple description of the world, rather than engaging with something that's big, complicated and difficult to resolve.
Also bear in mind that the Germans were profligate in the not too distant past, meaning that their reputation for fiscal prudence is recent. A decade ago the country was the sick man of Europe, and I think that what Angela Merkel is aiming to do is export the solution. The medicine isn't popular though, and it's not going to be the quick and easy fix that the markets are after.
What the hell ?!
On the topic of tax evasion, there would be a few expensive cars for sale in Italy ATM. The cops are stopping Ferraris and such to find out who owns them and then checking tax records to see if they have declared enough income to afford them
Our ATO cross checks all manner of such things. They even keep an eye on who is game fishing and yachting.
Our ATO cross checks all manner of such things. They even keep an eye on who is game fishing and yachting.
Actually I don't think tax evasion is the only problem. Greeks don't pay tax because the government is corrupt and incompetent. Politicians use public service jobs to reward followers and build up feifdoms. From the articles I am reading, even now, the austerity measures are mainly falling on the middle and working classes and not on the rich as they are easier to get to.
This is my point about the intractability of the Greek problem. It is a deep systematic issue that goes back nearly two centuries. Trying to collect more tax is not going to solve things unless the corruption issue is solved too.
However in the end the solution has to be Greek - it has to come internally - no amount of browbeating from the right-wing on austerity or "Oh you poor babies" from the left will solve the problem. Outsiders can help if the Greeks decide to act, but no-one can or should force the Greeks to act. The only thing outsiders can do is to protect themselves but at the same time deal with the Greeks fairly (i.e. no looting national assets). However no one can "save" Greece but the Greeks. Which is one of the reasons a default is better - right now we are just prolonging the pain for both sides. However I don't think default (without reforms) will solve Greece's problems either since that's been tried numerous times in the past.
I agree that Tehanu has completely nailed the fundamental problem ... and that is the ingrained customs, beliefs and mindset of the Greek people (generally, but not all).
As a good Australia taxpayer, who does everything legally because of fear of the ATO, I was stunned to read, over the weekend, that the tax collectors in Greece have gone on strike because the government has cracked down on their kickbacks/bribes ... therefore no tax is being collected, so the government income is severely reduced.
What I found surprising was that the tax collectors didn't seem to realise that this problem of bribes and evasion was a large part of the reason the country is in the trouble it is. They have always done it "this" way and therefore they should be allowed to continue to do it "this" way.
Although, I can understand the reluctance of people to pay taxes that go into the bottomless coffers of a wasteful, corrupt government - or out of the country to pay debt caused by a wasteful, corrupt government. It's bad enough paying tax in Australia when seeing some of the government waste - but ours is nothing compared to that of Greece.
It is an ingrained mentality that keeps getting them in financial trouble, as a people, and has been a way of life for at least the last 190 years. Not going to be solved by an outsider, or overnight.
As a good Australia taxpayer, who does everything legally because of fear of the ATO, I was stunned to read, over the weekend, that the tax collectors in Greece have gone on strike because the government has cracked down on their kickbacks/bribes ... therefore no tax is being collected, so the government income is severely reduced.
What I found surprising was that the tax collectors didn't seem to realise that this problem of bribes and evasion was a large part of the reason the country is in the trouble it is. They have always done it "this" way and therefore they should be allowed to continue to do it "this" way.
Although, I can understand the reluctance of people to pay taxes that go into the bottomless coffers of a wasteful, corrupt government - or out of the country to pay debt caused by a wasteful, corrupt government. It's bad enough paying tax in Australia when seeing some of the government waste - but ours is nothing compared to that of Greece.
It is an ingrained mentality that keeps getting them in financial trouble, as a people, and has been a way of life for at least the last 190 years. Not going to be solved by an outsider, or overnight.
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Aaron Sice said:
seems that chain reaction is already beginning.
https://rt.com/news/spain-protests-labor-reforms-693/
lets think about the values of assets in the UK for a bit, and the value of their bank shares, and their "we're insulated from the Euro" mentality....
oops.
Reminds me of:
"At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."
http://www.federalreserve.gov/newsevents/testimony/bernanke20070328a.htm
Banks and private investors hold nearly 2/3 of Greek bonds, granted they've had some time and warning to prepare for a default, but IMO it's impossible to know the full risks of a Greek default...
Just look at it like a big card game,The German/Swiss/ hold all Aces,and have a few cards under the table that no one knows about,all the rest just get in line and hope it all works out,and all the while the US is just sitting laughing..
i will be looking at the EU/US$ exchange rate as well as the individual sovereign debt yields to gauge, the markets perceiption of change in 'risk'.
"the market".....is what, exactly?
who owns the market versus who runs the market are two different things.
sepculators run the market, those left holding worthless promises (bonds) are the owners.
if i was trading that index, i'd be licking my chops about now.
"risk" is somethign gauged by owners, not speculators.
who owns the market versus who runs the market are two different things.
sepculators run the market, those left holding worthless promises (bonds) are the owners.
if i was trading that index, i'd be licking my chops about now.
"risk" is somethign gauged by owners, not speculators.
Aaron you stated in another thread 'why is so hard for you to say "yes, i agree" without posing ANOTHER set of questions that form part of a drawn out, borderline contrived, response?'
Well its because there are so many moving parts, so the 'opinionated answer' has so many subject to qualifications.
Its not a simple a+b=c in this environment.
Overall my internal antenna is switched onto the 'risk' in the system. But after this one needs to give consideration to what extend is that risk being priced in already by the markets, then one needs to give consideration to what extent is the market positioned for this risk, then one needs to give consideration to ones own investments, how are they priced based on their own merits, how will their intrinsic value change from a change in market risk, how will their market pricing change from a change in market risk.
Most of the more sophisticated members of this forum just gravitate towards gold. My exposure is equities.
So obviously my opinions reflect a different analysis prism.
Well its because there are so many moving parts, so the 'opinionated answer' has so many subject to qualifications.
Its not a simple a+b=c in this environment.
Overall my internal antenna is switched onto the 'risk' in the system. But after this one needs to give consideration to what extend is that risk being priced in already by the markets, then one needs to give consideration to what extent is the market positioned for this risk, then one needs to give consideration to ones own investments, how are they priced based on their own merits, how will their intrinsic value change from a change in market risk, how will their market pricing change from a change in market risk.
Most of the more sophisticated members of this forum just gravitate towards gold. My exposure is equities.
So obviously my opinions reflect a different analysis prism.
"the market".....is what, exactly?
who owns the market versus who runs the market are two different things.
sepculators run the market, those left holding worthless promises (bonds) are the owners.
if i was trading that index, i'd be licking my chops about now.
"risk" is somethign gauged by owners, not speculators.
yes but it aggregates the immediate 'pole of opinions' into a quantifiable measure. So it gives the short term net-net view.
But then the next stage obviously is to extract that short term view onto a longer term view and reflect on whether the short term sightedness of the market is correct or not.
Lol i can tell you this sought of back and forth debate is not just on this forum. The whole investment community is doing it, there is no secular bull market out there (apart from gold), so there is no clear avenue of agreement.
so short term, the world goes to ****, but long term could easily be rosy?
you'd want a long dated call for that one - well into MM territory.
yes the locals agree with that too..
"They've drunk our blood, we don't have anything to eat. They've sold us to the Germans. My child owes money, they're about to take her house. I hope they all get cancer."
-- Greek woman protesting outside parliament, reported by the Guardian, 12 February 2012.
In other words, this woman and many people, real live human beings, view this seriously, take this seriously and worry about the future seriously.
A bit of respect from some armchair experts quick to throw insulting terms and and names and blame about from the comfort of their armchairs with no real understanding is a bit too much to ask from the rest of us when discussing this.. When people do that watching a footy game, we normally sarcastically call them armchair experts
I'm sure that lady doesn't view the situation as "hilarious"
Yea well attitudes like that aren't going to save her.
yeah perhaps she was just venting frustration ?
I've heard worse from people here at sporting matches, so you know......
Anyone who thinks there's an easy answer should check this out:
http://crookedtimber.org/2012/02/16/so-what-would-your-plan-for-greece-be/
http://crookedtimber.org/2012/02/16/so-what-would-your-plan-for-greece-be/
OK, so we throw more money at Greece and say "Don't worry about it". How has that worked so far? Also go down this route and you will guarantee the break-up of the euro. What's going to happen is that the Greeks will be happy for a while, and only the Greeks, but the euro-skeptic movements in France and Germany will gain power, then either France or Germany will leave the euro, guaranteeing its disorderly break-up and Greece will be in an even worse position, along with most of Europe. "Let us leave the euro" Marie Le Pen has nearly enough support to possibly kick Sarkozy out of the first round of the French Presidential elections in a couple of months. No chance of her getting elected but that is showing the increasing power of the Euro-skeptic movements in the core countries. The euro can survive Greece leaving - it cannot survive a core country leaving.
Other consequences of a no condition bail-out is that it will lead other PIIGS to rightly enough, demand the same.
The simple fact is, leaders have far more responsibilities than Greece. Even large powerful countries like Germany and the US cannot save everyone. Even in the eurozone there are other countries in trouble and with people suffering just as much as Greece. They also have a responsibility to try to preserve the euro. Then of course their chief responsibility is to their own people.
There is no much fairy dust in which everyone can be saved. There are no bottomless pits of money. Hard choices have to made, every choice has a consequence and Greece is only a small part of this.
The Greeks need to stand up and save themselves. They need to work out their options, the consequences of those options and a long-term plan for their country. They need to settle their domestic differences and present a united front with the backing of the people and a plan. Outsiders can help them then. Even the Libyan rebels managed to get to this stage by themselves so it's not rocket science.
Actually even just some longer-term thinking would be helpful. There generally seems to be a lack of comprehension that if Germany doesn't give the money, which they don't have any obligation to do, they will default. I'm sure they realize it but by not explicitly considering the option, they are not explicitly considering the consequences of default such as how are they going to import food and oil. It seems to me that the Greeks don't want to default but they don't want austerity either. They just want Germany to give them money forever and go away so they can pretend nothing has changed. Not is that not realistic, but it isn't in any way fair and just even if Germany is wealthier. Now sure, I think defaulting is a good option. The problem is without explicitly considering it, Greece is stumbling towards a default by default or via emotion rather than choosing the option, which greatly increases the chances of a disorderly default which would increases the chances of catastrophe - mainly to the Greeks themselves.
Also, the Greeks also need to help themselves by not acting like they are entitled to other people's money. This more than anything else is what is reducing international support for them. Really the Greeks seem to be doing everything in their power to **** off the largest number of people.
While the Greeks can make the excuses that it is OK because Germany is wealthy consider that countries even poorer than Greece such as Slovakia also have to stump up money for any bail-out. In fact other PIIGS have to stump up money too. Also while they may be able to blackmail Germany to pay out, it reduces public support for help for other PIIGS. They win but at the expense of those just as badly off or even worst off then them.
I'm sure many Greeks and those on the left will accuse me of being a heartless *******, but if that happens it just reminds me of why even though I have strong leftist tendencies I don't like the left. It's all about emotional blackmail and perfect worlds rather than strategic thinking about the real world. For say a priest or councillor or movie star that's cool. For anyone who has to lead anything important however...The sad thing is the right is just as deluded, but about other things.
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