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cosmichobo
8th May 2010, 01:16 AM
G'day,

Couldn't spot another thread on this...

I know it's been a decade plus since I studied WWI or WWII... but the events of the past few days in Greece have somehow made me wonder if we aren't now heading towards a similar kind of situation in Europe as has been seen before...

I know the causes of WWI were many and varied... but hearing of an entire country's potential economic collapse... and the attitude of the neighbouring countries who are helping them out... I just felt like I was sitting in a history class in the year 2050, hearing about the events that lead to...

Here's hoping things do sort themselves out... much as I'd love 5% interest rates again, another global economic crisis... or worse... I could do without. If nothing else, it'll mean more of Koshie on the tv. ;)


cheers

cosmic

Lutze
8th May 2010, 01:26 AM
I don't think we have to worry just yet. It's not like Athens has significant pull these days to force someone to defend it (let's face it, it cant' defend itself!).

As a friend of mine on twitter said... it's bloody stupid throwing a firebomb into a bank when you need the money.

samuelowens
8th May 2010, 01:34 AM
Certainly economic history is repeating itself.

One of the reasons why the Great Depression was as bad as it was is that countries did not want to move off the recently-restored gold standard (the gold standard allowed bank notes to be exchanged for gold, and was practised until the outbreak of WWI). In doing so, they needed to keep interest rates higher than they needed to be and budget deficits smaller, to ensure there would not be a run against their gold reserves. The austerity pushed countries into a worse position because it was pro-cyclical.

So what does this long-winded discussion on pro-cyclical policies have to do with Greece? Simple, they are in the same position as a country on the gold standard in the depression (except that instead of the gold standard, they have their membership of the Euro at issue), because it is the European Central Bank sets interest rates for the whole of the Eurozone while the treaties establishing the Euro (theoretically) limit deficits to 3% of GDP.

I very much doubt we'll have another conflict though (well. beyond the soccer World Cup); Europe's too irrelevant these days.

Vojtin
8th May 2010, 01:49 AM
You can study this
Greece, The End of the Beginning - Oisin Zimmermann - April 30, 2010 (http://www.scribd.com/doc/30789246/Greece-The-End-of-the-Beginning-Oisin-Zimmermann-April-30-2010)

Lachie
8th May 2010, 08:42 AM
What do greece do for the world economy anyway? The only substantial thing i can think of is Olive oil and a small slice of history. They are rude to tourists, low exports, large debt, Failing Government. Gee, when you think bout it, they really don't have much going for them do they? No wonder they're in panic mode.

Then they want Germany to bail them out? I mean come on, everyone knows that foreign debt is more of a Hand-out than a loan. How about you increase exports rather than borrow money

stewiesno1
8th May 2010, 10:06 AM
Personally , I am not surprised some of these countries are up to their eyeballs in debt.
When we were in Greece a couple of years ago I was astounded at how many men and not just old retired guys either who were sitting in the sun sipping coffee, playing cards and knocking back the local grappa while the women were nowhere to be seen working their butts off.
After talking to some of the local women we gleaned that there was a real dilemma in Greece because a lot of the local women were now marrying foreigners and not the local guys because they has seen when they were kids how hard their mothers worked but how lazy a lot of the men including their fathers were.
We heard this a few times too.
There was also an article a few years back that praised most of these countries for their seemingly idyllic lifestyle but now we can see why - they have been living beyond their means.
I know the problems go a lot deeper than this as indicated by the posts above but this was just an observation of ours.
Talking to other friends , this was seen in Spain and Portugal a lot as well - two other countries deep in the financial mire.
Some of the German, Swiss and Scandinavian people we talked to on our trip were also quite astounded how disorganised and disinterested the locals were too.

Stewie

icant
8th May 2010, 10:09 AM
What do greece do for the world economy anyway?

This is Sparta!!!

Seriously. Souvlaki. Big Fat Weddings. George Michael.

iTy
8th May 2010, 10:15 AM
Gee, when you think bout it, they really don't have much going for them do they?

Or do they?

Don't forget they have...

Sakis! (http://www.youtube.com/watch?v=Bd5ThoUYx_s) *echoes* Sakis, Sakis, Sakis :p

<object width="500" height="405"><param name="movie" value="http://www.youtube.com/v/Bd5ThoUYx_s&hl=en_US&fs=1&border=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/Bd5ThoUYx_s&hl=en_US&fs=1&border=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="500" height="405"></embed></object>

Very heavy topic to stumble into on a Sat morn... :)

Mychael
8th May 2010, 10:42 AM
It seems to me that regardless of how they got themselves into the strife they are now that having huge protests are not going to help. They are effectively bankrupt or close to it. Fixing things I would have thought was the first priority.

310
8th May 2010, 10:55 AM
much as I'd love 5% interest rates again

bring it on, we're just about borrow another 200K so if it does happen; i'll be locking in the 5% for at least 5 years!

but yeah, scary times ahead.

cosmichobo
8th May 2010, 12:19 PM
Very heavy topic to stumble into on a Sat morn... :)

:)

Well, just wanted to get it out there. I figure part of the problems (at least with Germany in WWII) was people sticking their heads in the sand for far too long...

doofus
8th May 2010, 03:34 PM
Maybe Peter Costello could go over and lend a hand. He must be looking for a new gig after leaving parliament.

cosmichobo
8th May 2010, 04:44 PM
Maybe Peter Costello could go over and lend a hand. He must be looking for a new gig after leaving parliament.

Yes, they could set fire to him and throw him through the window of a shop...

avolve
8th May 2010, 06:14 PM
It seems to me that regardless of how they got themselves into the strife they are now that having huge protests are not going to help. They are effectively bankrupt or close to it. Fixing things I would have thought was the first priority.

The issue is who decides how things will be fixed, and who will be impacted the most. In the case of Greece, it is the workers and the poor who are facing the most cutbacks, not those who are very well off.

It might be worth reading up on what is actually happening to gain an appreciation of why people — so many people — are taking it to the streets.

For example — Occupied London (http://www.occupiedlondon.org/) (contributed to by people in Greece)

vecsty
8th May 2010, 06:18 PM
Personally , I am not surprised some of these countries are up to their eyeballs in debt.

Stewie

Do you know what level of debt is for Australia ?

iTy
8th May 2010, 06:37 PM
:)

Well, just wanted to get it out there. I figure part of the problems (at least with Germany in WWII) was people sticking their heads in the sand for far too long...


Topic is fair enough :)

It wasn't what I expected that is all. So I thought i'd add a little bit of humour to the thread....being a big Eurovision haggling fan that I am.

My interest on this topic lies purely on how the EU will handle the crisis. This is their first major financial crisis that they have to deal with. So I am curious if the powers within the union jostle around and see where the major influencers are going to come from.

EU currency is facing its first major challenge...I guess if they pull out of it cleanly and efficiently, the the Euro looks to be maturing.

This would give me a little vote of confidence that the Euro could threaten the greenback in a couple of decades as the benchmark currency. If so, their could be a shift in the distribution of global power etc., etc. So I'd revisit my long-term investment plans :cool:

Anyway, its Saturday night! Time to enjoy more iPad news :D

canonafficionado
8th May 2010, 06:44 PM
___

gikku
8th May 2010, 07:49 PM
Do you know what level of debt is for Australia ?

List of countries by public debt - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/List_of_countries_by_public_debt)

a list of countries by public debt as percentage of annual gross domestic product, based on The CIA World Factbook, gross debt, not net of assets.
Greece 108%
Australia 18%

cosmichobo
8th May 2010, 08:08 PM
On the ABC website there was an article including quotes from a Greek university lecturer. He was saying that whilst Greece has enjoyed some boom times, it's been a very tiny % of the population who have experienced the wealth, and the majority of the population are in poverty. Now that this crisis has happened, it's the poor workers who will have to foot most of the bill.

No idea if this particular lecturer actually knows what he's talking about (!), but was interesting. I don't know what the %'s are for Australia, and whilst yes, I know there's some filthy rich Aussies out there, I don't think the "majority" of us are living in poverty...

El Guardo
8th May 2010, 10:10 PM
I just felt like I was sitting in a history class in the year 2050, hearing about the events that lead to...

The only surprises are the history we do not know.
Harry Truman.




I don't think we have to worry just yet. It's not like Athens has significant pull these days to force someone to defend it (let's face it, it cant' defend itself!).

The German people are very much against bailing out Greece - and you know what happens when a collective of angry Germans get together...




How about you increase exports rather than borrow money

Because they can't thanks to the Euro. As Krugman notes: (http://krugman.blogs.nytimes.com/2010/05/01/why-devalue/)

Now, if Greece had its own currency, it could try to offset this contraction with an expansionary monetary policy — including a devaluation to gain export competitiveness. As long as it’s in the euro, however, Greece can do nothing to limit the macroeconomic costs of fiscal contraction.




They are effectively bankrupt or close to it.

They were effectively bankrupt before the IMF bailout - the technical date is 19 May when Greece has a debt payment due. And if they should still happen to default, shit hits the fan again. It is perhaps also worth noting that Portugal is now in a similar position to Greece (http://krugman.blogs.nytimes.com/2010/05/07/o-nao/) and Spain is teetering.




Fixing things I would have thought was the first priority.

The problem is how to go about fixing things. Again, Krugman sets the scene in in Default, Devaluation or What: (http://krugman.blogs.nytimes.com/2010/05/04/default-devaluation-or-what/)

The way things are going, it looks quite possible that Greece will spiral into domestic as well as debt crisis, and be forced to take emergency measures. And that makes me think of Argentina in 2001. At the time, Argentina had the convertibility law, supposedly permanently pegging the peso to the dollar — and that was supposed to be irreversible for the same reasons the euro is supposed to be irreversible now. Namely, to repeal the law would require extensive legislative discussion, and any such discussion would set off destructive bank runs, hence there was no way to undo the fixed exchange rate. But by late 2001 Argentina was a mess, with many emergency measures in place in an effort to contain the situation. These included the corralito, severe restrictions on bank withdrawals to contain bank runs — and one unintended consequence of all this was that the bank runs argument against suspending convertibility became moot.

Is it really impossible to see something similar happening in Greece? And if it does, might not other countries’ membership in the eurozone be called into question? This drama is far from over.



Following the IMF bailout and austerity measures being passed by the Greek Parliament - Greek End Game (http://krugman.blogs.nytimes.com/2010/05/05/greek-end-game/):

But the only route to economic expansion is higher exports — which can only be achieved if Greek costs and prices fall sharply relative to the rest of Europe.

The alternative is a devaluation — which means leaving the euro. Any announcement of plans to leave the euro would, as Eichengreen points out, trigger disastrous bank runs. By the same token, any suggestion by outside players, like the ECB, that the option exists would amount to invoking a speculative attack on Greek banks, and therefore can’t be made. The whole thing is effectively undiscussable.

Should I mention double dip recession?




He must be looking for a new gig after leaving parliament.

He's an advisor to the World Bank, is a Board Member of the Future Fund, and works for corporate advisor BKK Partners in Sydney.

avolve
10th May 2010, 08:48 AM
Having a look at the history of the IMF might provide some insight. They are renowned for imposing 'policy' on governments that provide massive windfalls for large corporate interests, often at the expense of a country's populace.

They achieve this by tying (essential) financial aid to these conditions.

As @hobo notes, there is much greater disparity between rich and poor in Greece than in Australia. And it is the poor who are being expected to pay for the excesses of the rich (which is a central feature or, at the least, bi-product of capitalism and neo-liberal economics).

samuelowens
10th May 2010, 10:19 AM
Having a look at the history of the IMF might provide some insight. They are renowned for imposing 'policy' on governments that provide massive windfalls for large corporate interests, often at the expense of a country's populace.

They achieve this by tying (essential) financial aid to these conditions.

As @hobo notes, there is much greater disparity between rich and poor in Greece than in Australia. And it is the poor who are being expected to pay for the excesses of the rich (which is a central feature or, at the least, bi-product of capitalism and neo-liberal economics).

The 'excesses of the rich' being massive tax rorting and a welfare state that allows people employed in 'hazardous' occupations such as hairdressing to retire at age 50.

Don't feel too sorry for Greece - the IMF is merely forcing them to join the real world...

canonafficionado
11th May 2010, 08:34 PM
Don't feel too sorry for Greece - the IMF is merely forcing them to join the real world...


The IMF says what the leadership in Greece hasn't had the courage to say for want of it's own self interest. For that leadership it's attractive to assign the 'blame' to an outside force.

avolve
13th May 2010, 11:28 AM
Don't feel too sorry for Greece - the IMF is merely forcing them to join the real world...

If you look at that statement in the context of what the IMF has imposed on countless countries over the years, you would see there are much more insidious implications.

That aside, it is not the welfare state that is the issue, it is the nature of capitalism that has enabled the big end of town to run rampant at the expense of pretty much everyone else.

It goes much deeper than the superficial and negative mainstream (western) media portrayals of Greece as a state that enables people to be lazy (i.e. enjoy life) amongst other things.

Why not have a look at analyses from people inside Greece about what has actually happened, rather than neo-cons, apologists for global capital and the like. It might provide you with an interesting perspective...

As for the 'real world' does that mean $5/hour jobs with no employment security, health care or other benefits (which many of us 'take for granted')? As is far too common in the USA - the pin up for neo-con economics.

samuelowens
13th May 2010, 12:01 PM
Greece lived beyond its means...

I will have to disagree on the welfare state issue: Greece's particular example with government debt and unfunded liabilities totalling 875% of GDP was far too generous to be sustainable long term. Payback Time - Patchwork Retirement Plan Adds to Greece?s Debt Woes - Series - NYTimes.com (http://www.nytimes.com/2010/03/12/business/global/12pension.html) has more.

Angsty
13th May 2010, 01:42 PM
While meeting current financial liabilities is Greece's current problem, the deeper, underlying problem does not seem to be addressed much in the news articles I have read so far: Greece is not an organised society in terms of bureaucracy, efficiency and the tax system. Rorting and corruption are rife, from top to bottom. Everyone is part of this game and you are considered an idiot if you don't "rip off" the system. Avoiding paying tax is the game, and the bigger the deductions, the bigger the rort is, then you are considered to be smarter and better than the rest. No one, and I mean no-one in Greece pays their "fair share" of taxes! The side effect of this is that the Govt has less money to fund its responsibilities and borrows beyond its means.

The bureaucracy is a law unto themselves, where every public servant has their own mini-fiefdom of corruption. These "facilitation" payments and influence keep them in power and supplement their lowly wages. Money gets allocated to departments and slowly, but surely gets pilfered every step of the way, until the hospital system barely has the funding to operate. Ever wonder why Greece has near 3rd-world standards of hospitals and medical care? And don't get me started on the Greek mental health system - Romanian state orphanages look idyllic in comparison!

Of course, their political system also has to deal with the strong communist and anarchist factions that stymie attempts by the more well-intentioned politicians to do any real good. Almost makes me want to hug an Australian politician in gratitude... almost.

Greece - nice place to visit, but I wouldn't want to live there.
(And wow Greece, talk about stabbing yourself in the back - murder and mayhem in the streets of Athens just as the summer tourist season is about to start in Europe. Wonder how many tourists are making travel plans to visit Greece in the next few weeks, eh???)

Ang

cosmichobo
13th May 2010, 06:55 PM
And wow Greece, talk about stabbing yourself in the back ...

Ang

Thought for a minute you were going for a Caesar reference... but that'd be the wrong country :}