Post #354,316
2/16/12 7:50:15 AM
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There's a crisis in the Greek economy: Needs moar austerity.
It's gonna be Ok though - the bond holders will be guaranteed some money, so it's all good. Everyone's in agreement - they just have to finish the jots and tittles....
http://www.guardian....ral?newsfeed=true
That brings us to Greece, whose government is trying to negotiate the umpteenth and final package to solve the problem. Output is down, as I noted above, and still falling. The Greek government faces a Â14.5bn bond payment on 20 March that it looks extremely unlikely to be able to make. Ten-year bond yields have reached 29.8% in Greece  and they are now 11.6% in Portugal, which is also going to have to be rescued. Germany has taken away any hope Greece had of recovery.
On 9 February, the Hellenic statistical authority, which is Greece's central statistical office, published data on the labor market and industrial production (pdf), which suggests the Greek economy is headed over the cliff. This is a Great Depression for Greece and its 11 million inhabitants.
In the latest month for which we have data, the number of unemployed for November 2011 increased by a massive 126,000, compared with October 2011, to stand at over 1 million. The unemployment rate in November 2011 is now 20.9%, compared to 18.2% in October 2011. The youth unemployment rate is 48%, and the unemployment rate for females (24.5%) is higher than for males (18.3%). Evidence from other measures of labour market slack are equally horrendous: the number of employed decreased by 406,000, compared with November 2010 (a 9.4% rate of decrease), and by 165,00 persons compared with October 2011 (a 4.0% rate of decrease).
Industrial production in Greece is falling through the floor. The Production Index in Industry (IPI) in December 2011 (pdf), compared with December 2010, was down 11.3%, while manufacturing production decreased by 15.5%. As might be expected, consumer confidence in Greece has also collapsed, as can be seen from the chart that plots the EU Commission's survey of consumer confidence.
So, don't expect the consumer to start spending any time ever. Portugal and Italy don't look far behind.
The major problems in Greece that are constraining growth have still not been addressed. According to the World Bank, Greece ranks 100th in the world in terms of the ease of doing business, just beaten out by Yemen, in 99th place, and Vietnam, in 98th place. It ranks 135th in terms of the ease of starting a business and 83rd in terms of paying taxes, below Azerbaijan in 81st place. Without reforms to its product and labor markets, alongside the introduction of a fully-functioning tax system with enforced compliance, Greece has no future and is headed to inevitable default.
The only issue is, how disorderly will it be? It's not so much that the Greeks won't pay, it's that they can't. Greece remains uncompetitive.
I hear that more austerity will fix the problem. It always has in the past, right?
:-/
(via Krugman's blog)
Cheers,
Scott.
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Post #354,318
2/16/12 9:12:49 AM
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Actually, I think it WILL be OK, at least for the majority
of the greeks.
The vast majority of greeks have family land. It may not be near the cities, but it's out there. Most of them DO have a village to go back to, and they have 300 days of sunshine a year.
I would LOVE to end up on a little plot of land in Greece and farm for my livelyhood.
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Post #354,322
2/16/12 10:18:54 AM
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And here's a quote that seems to exemplify it
http://www.guardian....ral?newsfeed=true
It is poor down here on the Med - most are poor - education is in the 50s - very traditional - concepts like recycling, vegetarianism, animal rights, for God's sake women's rights - have not yet touched the surface of life here - north Europe is another world - we have fruit, vege, our hens and pig - we have our own olives, vines - we will get by - what have you got? We are poor country - rich people - you are rich country - poor people - You only see the holiday resort - the quick fix sun lounger and cheap drink, cheap flight - Angela I hope you do ok but leave us alone - we will be better off without you
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Post #354,339
2/16/12 7:24:10 PM
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I understand it's a typical economists dilemma.
The place needs something to make the economy grow. Which is the opposite of what the EU is doing to try to make sure they get their money back. :-/
It's possible that Greece either should never have been admitted into the Euro, or the EU should have enforced their economic conditions and helped them move into the 20th century. Problem is, the EU trying to enforce the rules now (i.e. after the fact) and the Greeks want to tell them to Go Away. And are finding the EU won't let them have it both ways.
It is a very broken country.
Wade.
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Post #354,347
2/17/12 9:49:08 AM
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I have to say
that I have a lot of sympathy for the Greek people's position that they should not be made to pay for games played among oligarchs. I'm having a hard time figuring out how a retired taxi driver in Athens is expected to live out his remaining days in penury so wealthy bondholders don't have to take too much of a haircut. How much money did the individuals running the banks that helped the Greek government hide their mendacity take out, and why aren't they being tasked with taking care of the mess they helped to create and hide, and profited from?
Everybody knows the game is fixed, the poor stay poor and the rich get rich, that's how it goes....
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Post #354,463
2/19/12 10:21:23 AM
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You think so?
I know certain investor counselers who are still pushing Greek investments hard.
They know Greece isn't going to be able to pay. A large piece of the market knows it too, which is why those investments are going down.
But the investment head honchos don't want to lose their money. They'll push for haircuts, create new product, sprinkle Greek with other investments and push hard to sell them into 401k and Pension Funds.
A lot of foolish investors are going to buy items and watch it lose money.
The taxi driver isn't going to be affected.
The wealthy bondholders will lose a little, but that's all.
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Post #354,520
2/21/12 12:40:15 AM
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The retired taxi driver's
pension checks have stopped showing up.
I'd say it's affecting him.
What would happen in the US if the SS checks stopped going out?
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Post #354,521
2/21/12 1:44:59 AM
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Actually, the huge blowup this week
was mostly tied to loss of Government jobs and pension cuts....
But it looks like they got an agreement on the pension cuts. (They're still there, just not as large)
I still say, check your 401Ks...make sure you don't have any international exposure to the Greek markets. This isn't over yet.
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Post #354,466
2/19/12 11:02:46 AM
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Too many in power are treating it as a moral issue.
Economics isn't ethics and morality. It's an attempt to describe the workings of an economy and what should be done under conditions of economic distress.
There are ways to fix the Greek economy and get it growing again, but too many in power in the EU are treating the problem as if it's one of "confidence" and "not rewarding bad behavior".
The numbers don't lie - Greek can't pay back most of these bonds even if the bond holders take substantial losses. Every day of austerity makes the situation worse. Since European banks hold many of the bonds in question, they want their money and will do what they can to get it. Even if it results in a revolution and collapse in Greece.
There are a lot of things the EU/ECB/IMF/etc. could do to substantially lessen the stress on the Greek financial system, but they won't because they view it as a problem of Greek morals. The politicians in the EU that control the purse-strings (Merkel especially) have shown no leadership in explaining the reality to their voters.
Greece (and Portugal and Italy and maybe even Spain) likely need something like a Marshall Plan - dump a lot of money into the economies to stablize them and get them growing again. It'll increase demand, helping the donor countries/economies, and it'll reduce political pressures in the PIIGS for more radical solutions.
The longer this goes on without recognizing reality, the worse the solution will be.
http://krugman.blogs...6/the-greek-vise/
Cheers,
Scott.
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Post #354,544
2/21/12 12:22:24 PM
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latest Krugman
Greece would have been in deep trouble no matter what policy decisions were taken, and the same is true, to a lesser extent, of other nations around EuropeÂs periphery. But matters were made far worse than necessary by the way EuropeÂs leaders, and more broadly its policy elite, substituted moralizing for analysis, fantasies for the lessons of history.
Specifically, in early 2010 austerity economics  the insistence that governments should slash spending even in the face of high unemployment  became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in Âconfidence, that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, youÂre right: It does and he did.
Now the results are in  and theyÂre exactly what three generations worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.
Furthermore, bond markets keep refusing to cooperate. Even austerityÂs star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.
http://www.nytimes.c...mc=rss#h[FtdBmw,2]
"Chicago to my mind was the only place to be. ... I above all liked the city because it was filled with people all a-bustle, and the clatter of hooves and carriages, and with delivery wagons and drays and peddlers and the boom and clank of freight trains. And when those black clouds came sailing in from the west, pouring thunderstorms upon us so that you couldn't hear the cries or curses of humankind, I liked that best of all. Chicago could stand up to the worst God had to offer. I understood why it was built--a place for trade, of course, with railroads and ships and so on, but mostly to give all of us a magnitude of defiance that is not provided by one house on the plains. And the plains is where those storms come from."
-- E.L. Doctorow
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