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#1 I believe Greece has been defaulting for several months now. Or has it been years?
Posted by Anguper Hupomosing9418 2012-03-04 06:53||
#2 Why do I get this feeling that its all playing out like those bizarre news stories where grandma died years ago with her remains mummified in the back bedroom while the family doesn't say anything so that the government check keeps showing up every month?
Posted by Procopius2k 2012-03-04 08:58||
#3 This whole farce needs to be done with.
Posted by DarthVader 2012-03-04 10:15||
#4 The Greek government is unwilling to take the political heat of doing what is needed so they need to force the external action so they can point the finger at someone external and say "it isn't our fault, they did this".
Ultimately, though, it is the Greek people who refuse to make the required changes. They demand they keep all their freebies even though the country is out of money. This could be settled in a day if the people came to their senses but they are faced with the notion that their social democratic experiment has failed and many simply can not face that fact.
Socialism doesn't work. At least not when there is someplace else to which economic activity can flee.
Posted by crosspatch 2012-03-04 12:04||
#5 The Greek people failed to take responsibility for their financial actions.
the EU allowed the Greeks to pile on unsustainable debt. The EU ignored the debt to GDP rules and let this situation fester.
I say culpability is 50-50. Nobody, whether the EU or the Greeks are working to solve the problem.
Come to think about it, neither are we in our own financial mess.........
Posted by Alaska Paul 2012-03-04 12:10||
#6 This is a result of the loonacy of the EU. You can't have a government responsible for it's budget and borrowing but have no authority or responbsibility for its money supply. If the Drachma was still around it would have been devalued/inflated to fix the problems (if you notice that's what's happening in the US). Certainly not fun for the populace but at least under their control.
The EU, however, controls the money supply and demands that the Greek politicians toe the line. Guess what the Greek people think? Oh that's right they don't matter any more since the EU is not a democracy.
Posted by AlanC 2012-03-04 15:26||
#7 The Greek people claim to be the cradle of democracy but we all know better. Yes, there was a time when the polis was 'free' -- if you weren't a slave or servant, but even back then most Greek cities had a royalty.
Then came a lot of wars. A number of Greek states, particularly in Asia Minor, sold out to the Persians. Then came the Macedonians. Poof independence. Then more wars. Then the Romans. They morphed to become the Byzantine Empire. Real democracy there, huh?
Then the Turks for 400 more years. Then 'independence', thank you Lord Byron, as a non-democratic state. Then a quasi-fascist state. Then the Nazis. Then the Communists. Then more generals. Now the Socialists.
So if you were a Greek schmoe trying to get ahead, would YOU trust the state? Pay your taxes? Declare your income?
The country has two thousand years experience in tax avoidance. You want to really piss off a Greek shop-keeper? Buy something in his store and ask for a receipt.
Greece is boned because in the end the citizens aren't willing to pay the taxes to support a Greek nation. They want la dolci vita on the cheap and they don't trust the whole idea of 'nation' and 'government' with their bread. They don't see the citizenry as a nation; they see the government as rulers, not administrators.
Greece is boned. Cut them loose from the EU and let them go their own way.
Posted by Steve White 2012-03-04 15:37||
#8 Well said, Dr. Steve!
Posted by Barbara 2012-03-04 15:49||
#9 I suspect if all Greek businesses paid their taxes the economy there would contract greatly; I think they're so far past the laffer optimum point that cheating is the only thing keeping it afloat.
Posted by Thing From Snowy Mountain 2012-03-04 15:49||
#10 I suspect if all Greek businesses paid their taxes the economy there would contract greatly
The Greek economy already has contracted greatly. According to the Wall Street Journal, the economy has fallen 16% from a 2007 baseline as of mid-February of this year. The real numbers are likely considerably larger, but s nobody keeps records, there's no real way of knowing.
Posted by trailing wife 2012-03-04 16:23||
#11 The real numbers are likely considerably larger, but s nobody keeps records, there's no real way of knowing.
Sorta like here with our state apparatchiks putting out numbers like inflation and unemployment. While the pols play games with this, they fail to grasp how destructive the very act is with any integrity to the system they insist they operate. Too late in the process they discover the numbers, which they themselves begin to believe, result in an utterly surprising collapse (see the fall of the Soviets).
Posted by Procopius2k 2012-03-04 16:49||
#12 Credit rating agencies have warned they will declare Athens to be in default if the CACs are triggered
Perhaps so, but not nearly as important as the International Swaps and Derivative Association declaring that the 70% haircut is NOT a credit event. All those CDS's sitting there and not coming into account!
Hang on, people. We're going to be flying through some rough air.
Posted by Canuckistan sniper 2012-03-04 17:18||
#13 Cut them loose from the EU and let them go their own way.
The European Union (27 members) is not coextensive with the eurozone (17 members). Yet, Chancellor Merkel has confounded the two also. Apparently she thinks cutting Greece loose would destroy "the idea of Europe" (the EU). But they are governed by different agreements (Maastricht/Lisbon vs. EMU).
So I don't quite understand why she's so adamant about keeping Greece tied down to the euro, since merely cutting Greece loose from EMU would hardly be the end of "Europe." But it tells me she is an incurable, dyed-in-the-wool Eurocrat - which, considering she was a conservative physicist from the DDR and knows all too well the yoke of foreign empire - comes as a disappointing surprise.
Posted by RandomJD 2012-03-04 17:56||
#14 I suspect that the greek economy is a lot better than its state stats seem (as it goes further into the black economy), and it's economy was, in reality, a lot worse in the past when it relied on pretend economic activity via increased debt.
Posted by Bright Pebbles 2012-03-04 17:57||
#15 At the time of the fall of the Soviet Union, the underground economy was contributing 50% of the GDP.
With Greece, their underground economy will keep them alive, but government infrastructure will suffer, but hey, let them figure it out.
Posted by Alaska Paul 2012-03-04 18:09||
#16 For those interested in the Gold standard for money, Greece is essentially on one. The Euro is a monetary item whose supply is outside the control of the Greek government. Further, they have no capital controls to prevent the money from walking out of the country.
The only way they can plan for the future under this system is to balance their government budget. That means firing people and cutting programs, just like we see in the U.S. when the States balance their budgets.
There is a question of whether to pay the principle or interest on their existing debts today, tomorrow or never, but that could all be finessed if they had a balanced budget.
What the taxes are and stuff isn't really important. We know how much money the tax man stumped up last year (35% of GDP) and we can be sure that he will stump up at least most of that this year. So, balancing the budget in the euro system is just a matter of cutting public expenses from about 45% of GDP to about 30% of GDP. That is a one third cut.
So, every third government employee needs to go, every third building needs to be decommissioned, and every third program needs to be eliminated. And yes there will be some second order effects that will shrink the economy, but they are second order effects that will abate once the crisis is averted.
Until they do something like this, they will continue to try to borrow more euros to patch hole in their government budget, and as soon as they cannot come up with the cash, things will be much worse than they otherwise would have been.
Posted by rammer 2012-03-04 19:02||
#17 "things will be much worse than they otherwise would have been"
And they'll STILL blame the U.S. and the Jooooz somebody else, rammer. :-(
Posted by Barbara 2012-03-04 19:17||
#18 > What the taxes are and stuff isn't really important.
Oh I disagree. Taxes on work will harm the economy regardless of their level. Low taxes on government created monopolies will allow privately collected taxation to harm the economy.
There's only one way to get the lowest real taxation level on the economy LVT.
Posted by Bright Pebbles 2012-03-04 19:24||
#19 Bright, yes, there are second order effects to having inefficient taxation schemes. But I argue that arguing about efficiency of the boiler is not important when the ship is going fast enough towards the iceberg. The argument needs to be about the course the ship is on.
Posted by rammer 2012-03-04 19:36||
#20 Rammer, Propicious, excellent comments! Thank you for your insight.
Posted by Scooter McGruder 2012-03-04 20:50||
#21 I'm still waiting to see if US citizens are willing to pay the taxes necessary to support the USA (and forgo gov't expenditures/bennies they aren't willing to be taxed for). For many years now the USA and many of its citizens have been living 'la dolce vita' on money borrowed from somebody else.
Posted by Anguper Hupomosing9418 2012-03-04 23:02||
#22 AH9418: Taxes? Pish posh. QE3! The US will live la dolce vita so long as the rest of the world thinks all those legally-counterfeited dollars are still worth something.
Posted by RandomJD 2012-03-04 23:21||