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

[K]

I don't understand the Internet sometimes. Economists and foreign policy guys on Slate and Foreign Policy posted articles today that the Cyprus bank scheme is a wonderful idea and it seems like they are avoiding bank runs and market problems.

Except that's not fucking true. The Cyprus banks are loading ATMs on the holiday so that the people of Cyprus can get their fucking money out and collapse the banks. They don't give a fuck about the billions belonging to Russian billionaire-oligarchs who can't do e-transfers on the holidays.

The global markets tanked like a bitch today too on just the idea that the EU would quite obviously be either so stupid that they'd not realize that they'd be tanking banks or are too corrupt to care.

These combined factors have the EU scrambling into an emergency meeting today to formulate a pretense that they were never going to steal a bunch of money out of all the regular people's bank accounts to prop up the fortunes of rich fucks and that there is some other plan that the Cypriot PM is getting rammed up his ass that isn't going to force Cyprus into a bloody and dramatic exit from the EU.

[Stahlseele]

Update on the Cyprius thing:
Savings under 100.000 is probably going to be ignored in the 10% thing.

[K]

Update on the Cyprius thing:
Savings under 100.000 is probably going to be ignored in the 10% thing.

Maybe. The whole reason that the EU wanted everyone's bank accounts was because stealing money from only the rich wasn't going to get them to the amount of money they wanted.

They also never expected the Cypriots to do a bank run, or for those banks to help them by filling the ATMs with money on the bank holiday manufactured to trap the Cypriot's money in the banks so it could be taken. This means that their Monday night emergency meeting is about trying to keep the situation from spiraling down the toilet and taking the global economy with it.

But that leaves the question: what are they going to do about not getting to that magic number? This leaves me wondering if stealing the money of the Russian oligarchs was the whole plan from the beginning, but I can't give them that much credit.

It may be out of their hands entirely at this point. The Confidence Fairy does exist and it happens to live exclusively in the heads of people who don't like a banking environment where Germans can reach into bank accounts and grab money to preserve their bond investments.

[Juton]

This leaves me wondering if stealing the money of the Russian oligarchs was the whole plan from the beginning, but I can't give them that much credit.

When presented like this, it seems like a brave or foolish thing to do. I wouldn't want to be seen 'stealing' from Russian oligarchs.

[Koumei]

What's the worst that could happen?

[DSMatticus]

The primary goal was pretty obviously "steal a bunch of money from Russian mobsters" from the very start. Not because I'm giving them benefit of the doubt on their ethics, but because if it weren't for all that Russian mobster money this idea never would have been discussed in the first place. There are probably a lot of reasons they extended it all the way to the bottom, like stupid greed and an effort to at least appear like they aren't blatantly trying to steal foreign funds to partially finance bailouts, but they're really after the huge chunk of non-eurozone deposits in the Cyprus banks.

And that should really tell you how incredibly out of touch with economics the people deciding the world's economic policies are. The aggregate harm caused by merely discussing this plan as a serious option is likely already more extensive than they could ever recoup by actually enacting it, and when all of this is said and done everyone is likely to be worse off than if they had done absolutely nothing at all.

I don't actually know who this was supposed to help or how. I can't see how anyone at any level benefits from this relative to sitting on their hands and doing nothing with their mouth shuts. Who did this help, really?

[Username17]

And that should really tell you how incredibly out of touch with economics the people deciding the world's economic policies are. The aggregate harm caused by merely discussing this plan as a serious option is likely already more extensive than they could ever recoup by actually enacting it, and when all of this is said and done everyone is likely to be worse off than if they had done absolutely nothing at all.

Pretty much. They kept their deliberations secret and announced the plan on the weekend of Ash Monday and tried to ram it through parliament during the bank holiday. When that didn't work, they extended the bank holiday indefinitely while they try to push it or something like it through an increasingly angry parliament. What is really terrifying is that apparently the European Commission thought this would work. They had all the plan infrastructure in place to ram it through (except having enough MPs in the Cypriot Parliament to enact such an obvious catastrophe).

I don't actually know who this was supposed to help or how. I can't see how anyone at any level benefits from this relative to sitting on their hands and doing nothing with their mouth shuts. Who did this help, really?

Well if you were going to be a realist and follow the money, I would say "anyone who shorted the Euro". They just made over 1% on their money over the weekend, which is tough to beat. If you shorted a billion dollars worth of Euros on Friday, the European Commission just physically handed you ten million dollars.

But the disconnect between economic reality and the Germans in Brussels has gotten pretty intense for a while. Considering that these guys seem to actually believe that keeping inflation low by itself is enough to grow the economy, is it really so hard to believe that they don't know why the OECD doesn't have bank runs any more? That they actually don't understand why creating a situation where people keeping their Euros in sock drawers is demonstrably better and safer than allowing it to be reinvested as a bank deposit is a really bad idea?

I'm afraid this rabbit hole probably doesn't go very deep, and they are literally hitting the bank accounts of school children for 6.5% while giving bond holders and people with cash under their mattresses 100 cents on the Euro because they are too fucking stupid to see how that might not be a good idea.

-Username17

[Mistborn]

This is what I want to know how is it that all the worlds economists with actual political power have climbed aboard the crazytrain to looneytown.

Is it because all the people who were involved in fixing western capitalism last time it catastrosploded are now dead and the current generation no longer remembers how not to be so retarded.

[Lago PARANOIA]

Is it because all the people who were involved in fixing western capitalism last time it catastrosploded are now dead and the current generation no longer remembers how not to be so retarded.

Ha ha, no. They do remember. Every now and then you'll get a conservative basically admitting the basic tenets of Keynesianism. Romney said that cutting spending in a depressed economy is a bad idea and Boehner just said a couple of days ago that we don't have a debt problem.

The thing is, conservatives and centrists are lying assholes. I'm sure some of them are genuinely confused and stupid, but on the whole they flat-out know that their policies enrich the overclass -- or cause the overclass to suffer less than everyone else, which works out the same. They pretend to mysteriously forget all of the lessons simply because the state of pluralistic ignorance benefits their masters.

And who is going to call the centrist shills out? The corporate whore media? Bitch, please; what is the income bracket of the people who write paychecks for their lapdog pundits? How much money do they stand to lose if their bought-and-paid-for whores started telling, oh, the truth?

As said by the illustrious Bartcop: "If someone makes a mistake that ends up putting money in their pocket, expect them to continue making that mistake."

[Ancient History]

Well, not all of them. Ben Bernake has a good head on his shoulders and is in charge of the Fed.

The problem (in America) is that conservative fiscal policy has latched onto austerity in general and not raising taxes in particular, and the conservative Republican party has been heavily promoting those policies, resisting or refusing to compromise, playing brinkmanship to threaten financial crisis if they don't get their way, disrupting and delaying any meaningful poltical action by their opponents, and then blaming the entire crisis on their opponents. Added to this, the American media is trying to maintain an "objective" centrist stance and blame both parties equally, when in fact the majority of the problem is the recalcitrance, bad economics, and general dickery of the Republicans. At the same time, the Republicans are being encouraged and funded by several billionaires who have been funding think-tanks and lobbying groups to produce academic-sounding stuff to support and promote the policies they want.

The problem (in Europe) is that European integration is behind the real-world consequences of their actions: it is insane to have a single unified currency without a central bank willing and able to devalue its currency and bail out member nation-states. Compounding this is that EU politicians don't understand that the individual national economies are interdependent - Germany benefited from the euro because it could outsource cheap labor to places on the European periphery like Spain; this caused an imbalance of trade, which is not what you want in a system where everybody has the same currency. Ze Germanz, for their part, have the EU by the balls (they are the majority investors) and have framed the debate as the afflicted countries being irresponsible (unlike ze Germanz), which is not entirely accurate (Greece's tax collection system is a joke and Italy is terrible corrupt, we accept this, but it isn't the sole source of the problem). Ze Germanz want the interest rate to remain low because they're still haunted by the spectre of hyperinflation and massive national debts after WWI amd WWII. So ze Germanz appear to have it in their heads that nothing is free and any country that wants a bailout must suffer terribly for it.

The problem (in Britain) is that the UK decided to go along with the austerity thing because everybody else was doing it, and after noting it really wasn't working and in fact was making things worse the prime minister decided to continue to do so because otherwise he'd have to admit he fucked up.

In all cases, the austerity-driven nonsense is largely identified with Austrian economics, a school of thought which has profound technical issues that have been repeatedly demonstrated in academia, and now in a real-world setting.

[hyzmarca]

Maybe the whole austerity thing is really a Nazi conspiracy. I mean, austerity measures in Greece have resulted in their neo-Nazi party gaining seats. Maybe the idea is to fuck up the economy so bad that a Fourth Reich sounds like a good idea.

[Stahlseele]

It worked in germany.
Can't be all bad right?

[Ancient History]

It did not work in Germany, that is the entire point.

[hyzmarca]

Well, it seems that exactly one MP voted for the bank levy and 36 against, with 19 abstaining.

http://www.cbc.ca/news/business/story/2 ... osits.html

It seems that the Cyprus was, in fact, listening to internet trash talk and those protesters outside their door.

[name_here]

It's good to see someone displaying basic common sense. They're apparently planning to do the levy on amounts over the insured value, which might not be entirely desirable but does not shatter the basis of confidence in the banks, that you never take a loss on insured savings.

[K]

I'm not sure that it's clear that they won't be taking from under 100K accounts. All they are talking about is a "more progressive approach" which sounds like they can't meet their numbers without taking money from everyone.

The interesting thing in that article is the guy from the bank saying that they expect that on Friday that at least 10% of deposits will leave the bank, basically saying that the banks are going tits up on Friday.

[Koumei]

This seems remarkably relevant. And will probably remain that way for a long time to come.

But that does raise the point: why can't the money that has "disappeared" (given it is not real) just be whipped back up into existence by typing it in? I'm not convinced that just crediting banks with a fluptillion dollars to cancel out what disappeared in the crisis can actually cause more harm than it would fix.

[Ancient History]

In this case, Cyprus cannot do that because they are using the euro, and Cyprus is not allowed to print euros. Otherwise they could totally do that.

[hyzmarca]

The biggest problem there is that the European banking system sucks currently. There is no Eurozone-wide banking system, though there should be. Instead, all of the different Eurozone countries still have their own banking systems.

In any sane world, the entire Eurozone would have a single banking regulatory agency, a single deposit ensurer, a single central bank. And in that sane world the Central Bank would make temporary (single-day, usually) loans using non-existent money as necessary to keep things working smoothly.

Alas, we do not live in a sane world.

And thus I'm stuck with my unreasonable imperialistic dreams.

[Username17]

The interesting thing in that article is the guy from the bank saying that they expect that on Friday that at least 10% of deposits will leave the bank, basically saying that the banks are going tits up on Friday.

This is the best part. The Levy was supposed to be 6.5% on accounts under €100K, and 9.9% on accounts over €100K. That was supposed to raise €5.8 Billion. If 10% of the deposits are withdrawn, then the banks are therefore losing more than €6 Billion in capitalization. Just discussing this idea hurt the banks more than the levy was supposed to have raised. If it had gone through, it would have been even worse.

-Username17

[Surgo]

I know hindsight is 20/20 and all, but this whole thing couldn't have been more perfectly engineered to cause bank runs. So question 1: what the fuck? Question 2: what the fuck?

[Morat]

This seems remarkably relevant. And will probably remain that way for a long time to come.

But that does raise the point: why can't the money that has "disappeared" (given it is not real) just be whipped back up into existence by typing it in? I'm not convinced that just crediting banks with a fluptillion dollars to cancel out what disappeared in the crisis can actually cause more harm than it would fix.

Isn't that basically Keynesianism, with the caveat that putting the money back into the hands of rich people is pointless because they're all too scared to spend it, and because nobody is spending nobody has income ("your spending is my income and my spending is your income"), therefore they're right to sit on the money and nothing will happen. This is what we're doing now. Corporations are sitting on big piles of cash (AKA they aren't finding anything to invest in) and the stock market is doing great. But this isn't helping.

What Keynes wanted was to replace the vanished money with newly created money in the hands of the poor (because they'll spend it), preferably by employing them to do something useful, but by any means if doing something useful is off the table because politicians are stupid. The bit about putting money in jars, burying it in abandoned mines, filling the mines with trash, and leasing the mines to private companies to dig up the money again was mostly a sarcastic parody of the gold standard that the world was on in 1936. The idea being that gold mining was just as silly as money mining, except it employs fewer people.

Once people start spending money again, companies invest to cope with the increased demand, hiring more workers, causing more spending, and the economy gets going again.

[Josh_Kablack]

[Stahlseele]

Something i really don't understand about global economics:
if everybody has debts to somebody else, then who has all the money?
if you have a debt because somebody loaned you money, then you have the money he loaned you. if you spend it somewhere else, like loaning it to somebody else, then they have that money, it does not just disappear right?
so if everybody is indebted to everybody else, then where is the money everybody loaned to everybody else?

[name_here]

Basically, people loan money repeatedly. Savings accounts are more-or-less loans to banks, which the banks then issue loans with. If a loan is relayed twice, the total debt involved is three times the value of the money in the loan. There is literally not enough money in the world to cover every loan being called in simultaneously, but savings accounts are the only thing I can think of where the lender has the power to demand immediate repayment in full as long as the terms are kept to.

Mostly, the money people loaned is actually in the hands of people who have taken loans and for legal or practical reasons have opted not to spend the money paying off the loans.