Can someone explain to me what's going on in Greece?

[Lago PARANOIA]

What I want to know is, how the hell did the confidence fairy meme take hold of in Europe? I can see why it would take hold in America, since it's a useful deception for raiding the lower classes, but assuming that there's a rational (if selfish) reason behind pushing it, what do the European upper class and technocrats have to do with it?

[Ancient History]

Germany, basically. Germany's economy did very well with a beggar-they-neighbor trade imbalance, and they became the model for financial prosperity on the continent. Unfortunately, duplicating Germany's feat is basically impossible on a large scale, because somebody has to buy all the goods.

[Username17]

What I want to know is, how the hell did the confidence fairy meme take hold of in Europe? I can see why it would take hold in America, since it's a useful deception for raiding the lower classes, but assuming that there's a rational (if selfish) reason behind pushing it, what do the European upper class and technocrats have to do with it?

Well, European Technocrats love the meme that the confidence fairy will take over. It lets them do absolutely anything and dismiss any objections from anyone. When a Technocrat announces that the well of debt financing for governments has run dry and the only way forward is austerity and technocratic governance, they certainly aren't basing any of that on serious analysis. They're pretty much just masturbating. This is what they've been dreaming of saying their whole fucking life.

European technocrats are appointing themselves the nobility of Europe. They are dismissing input from democratic institutions, the media, public advocacy groups and even the political class! They are announcing that the only way forward is to give the bankers all the money and all the power. What is not to like?

And sure, it hasn't "worked":


But that's a good thing, if you happen to be a technocrat who wants all the money and all the power. If the economy started growing again, you might get fired or unions or something might be strong enough to force you to do things you didn't want to do.

Now, the whole religious thing where leaders are so fucking stupid that they think that everyone exporting more is a way to end the crisis or that government cutbacks make the economic situation rosier is bizarre. But that's just myopia. People who don't know any better think that the government budget is like a family budget or a small business because that's intuitive. That people that ignorant could become the leaders of nations is chilling, but shouldn't be surprising. But the part where technocrats insist that the response to any and all crises should be to cut all support for everyone but technocrats and give all political and economic power to technocrats is just simple naked greed.

-Username17

[Lago PARANOIA]

Pinochet's crimes against humanity

From the very start of his rule, General Pinochet moved to suppress all opposition. He banned all other political parties, suspended labor unions, and cracked down on all dissidents to his regime. During his 16 years in power, his repressive apparatus executed at least 1,500 activists, exiled 15,000 others, and imprisoned, tortured, assassinated, or caused the "disappearance" of countless thousands more. (29) According to one human rights group, the Pinochet regime was responsible for 11,536 human rights violations between 1984 and 1988 alone. (30)

As time went on, however, Pinochet did a most unusual thing for a dictator: he dissolved his own regime. Not only did he give total control of the economy over to the Chicago boys, but he eventually returned a growing share of political freedom to the people as well. Once his totalitarian power was secure in the late 70s, he legalized labor unions and political parties once more, albeit under oppressive limitations and controls. And he agreed to a new constitution that would eventually require a plebiscite on his rule, and even democratic elections.

Does the fact that an oppressive military regime enabled the Chicago boys' to carry out their experiments somehow invalidate their results? Not according to Milton Friedman:

"I have nothing good to say about the political regime that Pinochet imposed. It was a terrible political regime. The real miracle of Chile is not how well it has done economically; the real miracle of Chile is that a military junta was willing to go against its principles and support a free-market regime designed by principled believers in a free market. The results were spectacular. Inflation came down sharply. After a transitory period of recession and low output that is unavoidable in the course of reversing a strong inflation, output started to expand, and ever since, the Chilean economy has performed better than any other South American economy.

"In Chile, the drive for political freedom, that was generated by economic freedom and the resulting economic success, ultimately resulted in a referendum that introduced political democracy. Now, at long last, Chile has all three things: political freedom, human freedom and economic freedom. Chile will continue to be an interesting experiment to watch to see whether it can keep all three or whether, now that it has political freedom, that political freedom will tend to be used to destroy or reduce economic freedom." (31)

However, Friedman is pessimistic that Chile's economic freedom can last under democracy. He notes elsewhere that "while economic freedom facilitates political freedom, political freedom, once established, has a tendency to destroy economic freedom." By Friedman's lights, democracy should kill Chile's free-market reforms. One gets the impression Friedman would consider the experiment an unqualified success had the regime never existed.

It is interesting to note, however, that the anti-labor reforms enacted by the Chicago boys would have never been tolerated in a democracy (and in fact weren't, when the time came). The suppression of opposition to the Chicago program thus allows us to see how it would work in an uncompromised form.

So. When the PIIGS and other such nations get fed up with these unelected technocrats, do you imagine that they will throw those fucking bums out on their ass? Or rather, do you think that the technocrats will allow them to or will the stupid and myopic political class crack down on dissidents OWS-style?

[Lago PARANOIA]

So. What's with the U.K. being all austerity-hungry? They're not answering to a woefully undemocratic ECB right now and don't have any unproductive money sinks the way the U.S. is burning its cash on the military. They also don't have insane religious retards propping up the upper class the way the U.S. does. So what gives?

[Username17]

So. What's with the U.K. being all austerity-hungry? They're not answering to a woefully undemocratic ECB right now and don't have any unproductive money sinks the way the U.S. is burning its cash on the military. They also don't have insane religious retards propping up the upper class the way the U.S. does. So what gives?

Simple: Labor was in power when the crisis hit. The economy was still in a pretty shitty state when new elections happened, and the Conservatives won the election. The UK Conservatives ran on doing something different, and like conservatives everywhere, their idea of "something different" is to scale back the social safety net and stop investing in the future.



The current depression is the black one. Gordon Brown was head of the country until nearly the 30 month mark. You'll note that was working, but it hadn't actually solved the problem yet. The rest of it is Cameron, which you'll notice is not working.

But basically now Cameron ran his entire campaign on the premise that classic Tory policies of turning Britain into a Dickensian nightmare as fast as possible were the way out of the depression. If he admits that this didn't work, he's essentially admitting that his entire party's world view is a house of cards built on sand. He is not going to do that. Instead, he is going to cling on and double down on his bullshit austerity plan again and again until he is voted out of office. Hoping against hope that some irrelevant side issue will restore the UK to full unemployment in spite of his actions. Hey, the olympics are this Summer, so he might be able to shift blame or claim undue credit or something.

-Username17

[RobbyPants]

The UK Conservatives ran on doing something different, and like conservatives everywhere, their idea of "something different" is to scale back the social safety net and stop investing in the future.

Sort of like an appeal to novelty, except it's actually a really old idea that's been on the shelf long enough to seem new? I always hate when voters refuse to look beyond the scope of an election cycle when making decisions.

[tzor]

John Paulson Says Greece May Soon Default And The Shock Might Be Worse Than The Lehman Bankruptcy via @clusterstock

Hedge fund titan John Paulson is predicting that Greece may default by the end of next month causing the euro to break up, according to Bloomberg News.

The billionaire hedge fund manager, who famously bet against the subprime mortgage market, thinks things will get really ugly if it does.

From Bloomberg News:

"We believe a Greek payment default could be a greater shock to the system than Lehman's failure, immediately causing global economies to contract and markets to decline,” the hedge fund said in the letter, a copy of which was obtained by Bloomberg News. The euro is "structurally flawed and will likely eventually unravel," it said.

[K]

Considering the Greeks lost a fourth of their businesses since 2009, I wonder if their troubles are just the first signs of Euro-zone depression.

[Username17]

Considering the Greeks lost a fourth of their businesses since 2009, I wonder if their troubles are just the first signs of Euro-zone depression.

Well, the UK is having such a shitty economy that there are literally riots in the streets and Scotland is threatening to leave the Union.

Portugal borrows at the same rate as Pakistan and has negative growth and inflation. Hungary is exploding, as is Ireland and both are borrowing at worse rates than Russia or Mexico.

While France grew at a whopping 1.7% (sarcasm detected!), the entire Eurozone outright Shrank in Q4 of last year. Europe is already in a depression of course, since they haven't managed to solve the last one through the power of prayer and investor confidence in contractionary policies. And last quarter is almost certainly going to be the start of a new recession. Technically, a recession is two or more quarters with negative growth in a row, so we won't be able to say for sure that Europe went into a depression last October until this coming May.

But since there is basically no prospects for positive growth anywhere in the Eurozone except possibly in France and Holland, history will probably say Europe was in a recession now.

-Username17

[Lago PARANOIA]

But how's Germany doing and how much would backing off of austerity help or hurt them in the short term?

I say help or hurt because you always have to add in a fudge factor when ideology is causing bad decisions. Someone might double-down on ideology if it's causing their GDP to shrink by .5%, but not with 3.0%. Probably. Maybe. Hopefully.

[tzor]

Well, the UK is having such a shitty economy that there are literally riots in the streets and Scotland is threatening to leave the Union.

Scotland has always been threatening to leave the Union. It's the general nature of the Scot. And riots in the streets (of England) have been happening for a while. They generally are more based on immigrant populations (and the general reaction to immigrants which is to treat them skitty) than overall economic problems, but the two combine in a multiplictative effect. UK unemployment is at its hightest rate since 1994 but it's only at 8.4%, hardly enough to be the sole driving factor.

[Vnonymous]

http://www.zerohedge.com/news/ecb-has-o ... 80%99s-box

This is actually pretty big news, and I can't even begin to think of what's going to happen as a result of this. I've been expecting the house of cards to fall over for a year or two now, but the people in power keep postponing(and worsening) the eventual collapse just to save their own skin.

[Gnosticism Is A Hoot]

Well, the UK is having such a shitty economy that there are literally riots in the streets and Scotland is threatening to leave the Union.

Scotland has always been threatening to leave the Union. It's the general nature of the Scot. And riots in the streets (of England) have been happening for a while. They generally are more based on immigrant populations (and the general reaction to immigrants which is to treat them skitty) than overall economic problems, but the two combine in a multiplictative effect. UK unemployment is at its hightest rate since 1994 but it's only at 8.4%, hardly enough to be the sole driving factor.

Well, fuck. A Tzor post I don't entirely disagree with. I will point out that -

a) Most Scots don't want to leave the Union, because they know it is a bad idea. The SNP is only in power because the other Scottish parties fucked up. For a long time, the Scottish independence movement has been a useful political fiction. David Cameron's attempt to beat it once and for all has, ironically, given it much more force than it would ever otherwise have possessed.

b) It's not about immigrants - at least, not recent ones. The areas which went up first are generally populated by the descendents of the first Afro-Carribean influx - people who have, for generations, been treated like shit by the police and society at large. As they spread, the riots were joined by the urban white underclass that's been building up since oh, Thatcher or so.

Also notable is the community response to the riots - I lived in Harrow at the time, and a number of my friends were among the volunteer impromptu clean-up crews that did most of the rebuilding. The community response was one of solidarity, co-operation and a determination to move forward. The Coalition, in contrast, decided to throw identified rioters out of their council houses. After all, if someone becomes violent because they are poor, marginalised and cut off from society at large, the best thing to do about it is make them homeless. Fucking Conservatives (big C).

[DSMatticus]

http://www.zerohedge.com/news/ecb-has-o ... 80%99s-box

This is actually pretty big news, and I can't even begin to think of what's going to happen as a result of this. I've been expecting the house of cards to fall over for a year or two now, but the people in power keep postponing(and worsening) the eventual collapse just to save their own skin.

That was a lot of hyperbole. It would have been totally fair to say, "the ECB's ability to change the terms of a bond contract represent an increase in risk, and as such the bonds are less valuable." But to assert that their value just went to zero makes him a hilarious doomsayer. The risk that the ECB will fuck you over is measurable (or it will be in the future, once they set a usage pattern), the costs of the ECB fucking you over are worst case measurable, and therefore the decrease in the value of bonds is statistically calculable. It doesn't represent infinite more risk, it represents more risk, some of which is currently unquantifiable.

Depending on how investors respond to it, it can run the gamut from who cares to bad to terrible, but it does not principally make it impossible to have a statistically expected profit on those bonds, so people will still deal in them when the scales tip the right way.

[Lago PARANOIA]

Like DSMatticus said, the amount of trouble it'd cause would depend on how much investors would see the ECB unilaterally and arbitrarily changing bond contracts.

Hell, I'd go as far as to say that it'd increase investor confidence in certain circumstances, depending on how the ECB did it and what the EU governments were saying. Of course it's not like the ECB has been exactly going against what the EU wants.

[Username17]

The ECB didn't unilaterally change anyone else's contracts, they negotiated a change in their own contract. They agreed with Greece that Greece was going to pay them before they paid other creditors, but that didn't actually change the sums owed to other creditors, it just made it slightly more likely that they would get stiffed.

But since the question is not if Greek's various creditors are going to get stiffed, but when and for how much, that isn't much of a change. The issue with the ECB is that they are willing to print money to lend it cheaply to their bankster friends so that those friends can buy Italian debt at exorbitant interest rates, but they are not willing to simply announce publicly that they will buy Italian bonds at a manageable rate in order to cut short a bank run. That is all you need to know about the ECB. They will print money so that their friends can embezzle it, but they won't stop an actual economy destroying bank run.

Greece has to go the Full Argentina. Disorderly default without an EU bailout and off the Euro. That is their only way forward. Any other story anybody is telling is an elaborate fairy tale. Greece's current debts may be honored in Drachmas or not at all, but the idea that they can pay euro denominated debts in Euros with the ECB they have is fantasy. Every attempt to "tough it out" and maintain the status quo is shuffling deck chairs on the Titanic. The ECB demanding and receiving a comfier deck chair than anyone else is kind of a dick move, but ultimately not particularly meaningful.

-Username17

[Koumei]

So I asked before what's stopping Greece from just defaulting and leaving the Euro, and you basically said then that the worst that could happen could be a bubble forming that would break later on, which is less bad/immediate than the current crisis it's facing.

And now you're basically saying again that their only real option is to leave the Euro.

So I'm wondering... if a bunch of assholes on the Internet can figure it out, what's stopping the Greek government from figuring it out? Is it a case of the President/PM/whatever basically bending over for Merkel and the ECB in return for personal benefits so they're happy to screw their own country and simply intend on not being there when the populace go "THIS IS SPARTA!" or are they somehow unable to figure this out despite spending more hours worrying about it than we do (or at least, more than I do)?

I'm assuming it's the former, that, being politicians, the people theoretically running Greece are as morally bankrupt as their country is financially bankrupt, and that they are being provided with incentives for themselves that have nothing to do with helping the country. So basically, acting as pimps for their entire populace.

[theye1]

Greece has to go the Full Argentina. Disorderly default without an EU bailout and off the Euro.

That is bad advice. Firstly, you're discounting the massive differences in the Greek and Argie economy (and the Russian economy while we're at it). The Argies had an agricultural economy too fall back on, and the Russians had natural gas as well. Whereas, the Greek economy is entirely dependant on shipping and Tourism. Which are usually the most hypersensitive too any economic troubles.

So I asked before what's stopping Greece from just defaulting and leaving the Euro,

It's actually a lot of political reasons, rather then economic ones.

[Username17]

Greece has to go the Full Argentina. Disorderly default without an EU bailout and off the Euro.

That is bad advice. Firstly, you're discounting the massive differences in the Greek and Argie economy (and the Russian economy while we're at it). The Argies had an agricultural economy too fall back on, and the Russians had natural gas as well. Whereas, the Greek economy is entirely dependant on shipping and Tourism. Which are usually the most hypersensitive too any economic troubles.

Don't get me wrong, the Full Argentina would be a disaster in Greece. They have a standard of living roughly twice that of the Argentines of the day and they have a trade deficit and they have few natural resources. Defaulting and rebuilding their economy without external financing is going to be a beast.

The problem is that they cannot repay their Euro-denominated debt. It's not possible. Staying on the Euro requires that someone bail them out. And I mean grants, not loans. It has been more than four years now, and everyone in the world has agreed that that ain't happening. Paying back the Euro bonds requires a growing economy and an interest holiday, and they can't get the interest holidays without taking it up the ass from the Troika, and taking it up the ass from the Troika involves shrinking the economy. There is no way forward there.

Yeah, it would be better to do some sort of structured debt forgiveness thing, in which countries that have the money just outright pay off Greece's debts and then Greece expands their economy and agrees to pay those countries back after they have an economy again and can actually afford to do so. That would be logical, and in the long run much cheaper than what is actually happening. But Germany won't do that, and their conditions for releasing even enough money to continue the current can kicking farce have been so draconian and pointless as to make Greece's position worse even relative to its own debt and European competitiveness over the last four years.

The best run-down on the situation is Here. The Full Argentina is the only realistic outcome.

-Username17

[hyzmarca]

What about the good old colonialist exploitation route? Invade a third-world shit-hole that no one is willing to defend, steal everything that isn't nailed down (and it isn't nailed down if you can pry it up) enslave the locals, and use the loot to prop up the economy. It's a historically successful scheme.

[theye1]

Don't get me wrong, the Full Argentina would be a disaster in Greece. They have a standard of living roughly twice that of the Argentines of the day and they have a trade deficit and they have few natural resources. Defaulting and rebuilding their economy without external financing is going to be a beast.

Defaulting would massively decrease the living standards for the Greeks, which is political suicide.

[DSMatticus]

Don't get me wrong, the Full Argentina would be a disaster in Greece. They have a standard of living roughly twice that of the Argentines of the day and they have a trade deficit and they have few natural resources. Defaulting and rebuilding their economy without external financing is going to be a beast.

Defaulting would massively decrease the living standards for the Greeks, which is political suicide.

That's what's happening right now. Playing this game with the ECB has zero prospects for success or recovery. Defaulting is just biting the bullet and getting this shit over with so they can pick themself up afterwards.

It's bad for the politicians, of course, but it's probably good for the country long-term. But being bad for politicians means it doesn't happen, of course, so...

[Username17]

Greece's real GDP has shrunk by double digits over the last four years and there is no sign of it stopping. On the other hand, the Argentina example is this:



The default is the end of 2001.

Greece will probably see a bigger dip right after default for a number of reasons, but it will also probably get them on the road to positive growth within a few months. It's going to be super hard, but it's difficult to imagine something as ghastly and unworkable as what they are trying to do now.

-Username17

[theye1]

It's bad for the politicians, of course, but it's probably good for the country long-term. But being bad for politicians means it doesn't happen, of course, so...

You do realize that 40% of the Greek Workforce is employed by the Greek government? What do you think will happen when the Greek government announces it can't pay the Wages of their workers, or that it can't pay the Pensions of it's citizens?

Greece's real GDP has shrunk by double digits over the last four years and there is no sign of it stopping. On the other hand, the Argentina example is this:

Argentina's economy is different too use it as an accurate example of a Greek default.

Greece will probably see a bigger dip right after default for a number of reasons, but it will also probably get them on the road to positive growth within a few months.

That's all conjecture. You have no real evidence too suggest that would be the case.