Financial gurus- explain Greece to me.

[psu00]

So I've been sort of following the Grexit issue from a distance but am obviously missing some big points. I keep hearing people say a Grexit will harm the Euro, Greece will have to leave the EU, and all of Europe is on the ropes. I get that Greece was horribly run and looks like it will leave the Euro since they won't reform to get ECB/ IMF funds. Why would they have to leave the EU (UK not in the Euro but still in EU)? Why would the rest of Europe tumble if Greece left? To be blunt- they are the weakest link. Shouldn't Europe and the Euro improve with Greece gone? I just don't get the doom and gloom predictions if Greece defaults for the rest of Europe (other than the ECB and mainly Germany don't get their loans repaid).

 

[sluggo72]

What I think is real interesting is how will the rest of Europe feel in they go to the Russians for a bail out!!! Get your pop corn ready.

 

[kgilbert78]

The joke I heard was "the Greeks want the Germans to work until 65 so they can retire at 50". There was some truth to that as a lot of the money was used for social programs of various kinds to keep the government in power--and then there was no money to pay it back.

 

[psu00]

What I think is real interesting is how will the rest of Europe feel in they go to the Russians for a bail out!!! Get your pop corn ready.

Yeah, I saw Russia put the idea out today that they could lend Greece money. I know traditionally Greece has not exactly been the US's strongest ally but the current Greek goverment clearly looks to Russia and China more than the west. It's going to be a few interesting weeks.

 

[kgilbert78]

Always remember the one major plank of Russian foreign policy. A warm water port.

 

[91Joe95]

So I've been sort of following the Grexit issue from a distance but am obviously missing some big points. I keep hearing people say a Grexit will harm the Euro, Greece will have to leave the EU, and all of Europe is on the ropes. I get that Greece was horribly run and looks like it will leave the Euro since they won't reform to get ECB/ IMF funds. Why would they have to leave the EU (UK not in the Euro but still in EU)? Why would the rest of Europe tumble if Greece left? To be blunt- they are the weakest link. Shouldn't Europe and the Euro improve with Greece gone? I just don't get the doom and gloom predictions if Greece defaults for the rest of Europe (other than the ECB and mainly Germany don't get their loans repaid).

Because its still a lot of loans that will be defaulted on, a lot of which Europe owned.

 

[nits74]

Always remember the one major plank of Russian foreign policy. A warm water port.

Very astute point.

 

[Pardlion]

So I've been sort of following the Grexit issue from a distance but am obviously missing some big points. I keep hearing people say a Grexit will harm the Euro, Greece will have to leave the EU, and all of Europe is on the ropes. I get that Greece was horribly run and looks like it will leave the Euro since they won't reform to get ECB/ IMF funds. Why would they have to leave the EU (UK not in the Euro but still in EU)? Why would the rest of Europe tumble if Greece left? To be blunt- they are the weakest link. Shouldn't Europe and the Euro improve with Greece gone? I just don't get the doom and gloom predictions if Greece defaults for the rest of Europe (other than the ECB and mainly Germany don't get their loans repaid).

It's simple. Just think about what kind of financial shape the US would be in if Obama were in office for another term. That's Greece.

 

[doctornick]

Yeah, I saw Russia put the idea out today that they could lend Greece money. I know traditionally Greece has not exactly been the US's strongest ally but the current Greek goverment clearly looks to Russia and China more than the west. It's going to be a few interesting weeks.

Culturally, Greece has significant connection with Russia due to sharing a (mostly) common religion.

Over the past decades, Greece has had problems with how the US has been a strong supporter of Turkey (a long time "enemy" of Greece) especially in regards to the Turkish invasion of Cyprus which has left that island divided. It's understandable for the US's position given that Turkey is the closest thing to a secular Muslim country and provides a gateway the Middle East. Also, more recently, there was some conflict over the US recognizing FYROM by the name of "Macedonia".

Not saying any of this is justified, but explaining some background as to why Greece isn't as friendly with the US despite a significant number of Greek immigrants in the US and being the only democratic country in the Balkans for decades (which you would think would lead to a strong bond).

 

[dawgduice]

I agree, this is ALL Obama's fault. I recently had to stop at a "RED LIGHT" (a communist plot) - damn you Obama !!!!!!!!!

 

[psu00]

It's simple. Just think about what kind of financial shape the US would be in if Obama were in office for another term. That's Greece.

Yeah.....I know the national debt has gone beyond wildly out of control the past 6 years (and no one seems to care) but I'm trying to focus on Greece and keep politics out of it so the thread doesn't degenerate to the nonsense we've seen on this board too much lately.

 

[kgilbert78]

Very astute point.

I forget where I first heard that. Might have been Clancy--but I think it's a Churchill comment. It explains the Ukraine situation, for example, to a large extent--and why the Russians took and kept Koenigsberg.

 

[chrisrn1965]

It's simple. Just think about what kind of financial shape the US would be in if Obama were in office for another term. That's Greece.

Remember GW Bush inherited a surplus from Bill Clinton. If you want to look at when the federal budget got off track how about huge tax breaks for millionaires and an unnecessary invasion of Iraq funded on credit.

Yeah the deficit is all Obama's fault

 

[psu00]

Culturally, Greece has significant connection with Russia due to sharing a (mostly) common religion.

Over the past decades, Greece has had problems with how the US has been a strong supporter of Turkey (a long time "enemy" of Greece) especially in regards to the Turkish invasion of Cyprus which has left that island divided. It's understandable for the US's position given that Turkey is the closest thing to a secular Muslim country and provides a gateway the Middle East. Also, more recently, there was some conflict over the US recognizing FYROM by the name of "Macedonia".

Not saying any of this is justified, but explaining some background as to why Greece isn't as friendly with the US despite a significant number of Greek immigrants in the US and being the only democratic country in the Balkans for decades (which you would think would lead to a strong bond).

Good points about Turkey, Cyprus, and Macedonia but a lot of that is juggling international politics- no one side is ever going to be very happy. . I'm sure the U.S. has the same type gripes about Greek stances on international issues too.

So, if Greece turns to Russia and offers warm water port(s) (outside of the one they have in Cyprus) or other concessions- does the discussion start about Greece leaving NATO?

 

[psu00]

Remember GW Bush inherited a surplus from Bill Clinton. If you want to look at when the federal budget got off track how about huge tax breaks for millionaires and an unnecessary invasion of Iraq funded on credit.

Yeah the deficit is all Obama's fault

PLEASE - let's stop the childish politics in this thread (everyone please).

 

[dawgduice]

Actually, I think Greece can be a massive entry point for China into Europe. The Chinese now own Volvo.
Thanks a lot, Marco Polo !!!!!

 

[chrisrn1965]

PLEASE - let's stop the childish politics in this thread (everyone please).

I only brought this up since Pardlion made an outrageously inaccurate assertion in his post. I did not feel it should go unchallenged. The US budget deficit actually does not parallel the situation in Greece and I would have not responded if he had not started down that path.

 

[psu00]

I only brought this up since Pardlion made an outrageously inaccurate assertion in his post. I did not feel it should go unchallenged. The US budget deficit actually does not parallel the situation in Greece and I would have not responded if he had not started down that path.

I think he was talking national debt not budget deficit but in any event I meant the plea for 'civility' to everyone (not just you). It's just that you were the last post at the time.

 

[Pardlion]

Remember GW Bush inherited a surplus from Bill Clinton. If you want to look at when the federal budget got off track how about huge tax breaks for millionaires and an unnecessary invasion of Iraq funded on credit.

Yeah the deficit is all Obama's fault

Debt under Obama has gone from 60% of GDP to current 100%. That's a 66% increase. If Obama could do that all over again, then debt would go from 100% to 166% GDP in his next term.

Greece's current debt: 160% of GDP.

Next time, come armed with some facts.

 

[chrisrn1965]

Debt under Obama has gone from 60% of GDP to current 100%. That's a 66% increase. If Obama could do that all over again, then debt would go from 100% to 166% GDP in his next term.

Greece's current debt: 160% of GDP.

Next time, come armed with some facts.

And what percentage of that debt is related to the Bush tax cuts and wars?

 

[psu00]

Debt under Obama has gone from 60% of GDP to current 100%. That's a 66% increase. If Obama could do that all over again, then debt would go from 100% to 166% GDP in his next term.

Greece's current debt: 160% of GDP.

Next time, come armed with some facts.

PLEASE everyone- can we get back to Greece? I still feel like an idiot when I hear discussions of a Grexit and the fallout and people making statements that seem counter intuitive to me.

 

[Pardlion]

And what percentage of that debt is related to the Bush tax cuts and wars?

Nothing compared to the havoc that Obama's new entitlement programs are going to wreck. In fact, Obama might as well be in office for another term, because we're going to continue to pay more and more for his entitlements.

 

[chrisrn1965]

Nothing compared to the havoc that Obama's new entitlement programs are going to wreck. In fact, Obama might as well be in office for another term, because we're going to continue to pay more and more for his entitlements.

Still didn't answer my question did you?

 

[dawgduice]

Is Obama Greek ??? I knew it !!!!!!!! Next we will all have to eat at "diners". Especially New Jersey

 

[ForesterGump]

It's sort of like loaning money to a family member, we'll call Elmo. He goes out and spends it on his kids that just sit around playing video games. Basically, they're not all that good of a credit risk. They make some payment on the loan, but they keep on falling short. They start to max out all their credit cards, and they mortgage their house to the hilt. Elmo also has lost his job, and taken another that doesn't bring in as many bucks. So, the family keeps him afloat, but barely.

Eventually, someone says he has to pay up, and in order to do that, he has to reduce his spending. He starts checking the cushions for change, and even raids the kid's piggy banks. But, there just isn't enough to pay the creditors. But, Elmo keeps on spending. The money that you lent him was going to help pay for your kids education or a new car. But, that money is no longer available until Elmo pays up.

So, either you keep on lending Elmo money or he goes into bankruptcy. In order to stay afloat, Elmo decides to pay everyone in IOUs. In Greece's case, that would be another currency, if they drop out of the Euro. If relationships get really strained, Elmo may eventually be set adrift and not be invited to family functions.

So goes the sad story of Elmo. You're poorer, because your hard earned cash is gone, along with it's earning potential. But, then you realize that you've also lent money to your other family members like Betty, Portia, Lulubelle, and Issac. The worst of it is that you borrowed that money to lend to them. And they're talking about not paying, since Elmo didn't pay up.

I don't think a Greece default would bring down the Euro. It may devalue it, and that would make things expensive in Europe, and end up hurting the US.. But, the financial systems of the US and Europe are intertwined. It's similar to the banks back in 2008. Iceland and Cyprus have already declared bankruptcy, but they weren't in the EU. They had some very Draconian measures that they took, like confiscating what was in Cyprus banks and limiting withdrawals. That would pretty much crush the Euro if it started a contagion that spread to the rest of the PIIGS. Whatever they do, it will be on a weekend when the banks are closed. Cyprus did it, so did Lehman Bros.

 

[psuguy04]

One thing to note in all of this: Be mindful of where you get your news on the subject.

 

[psu00]

It's sort of like loaning money to a family member, we'll call Elmo. He goes out and spends it on his kids that just sit around playing video games. Basically, they're not all that good of a credit risk. They make some payment on the loan, but they keep on falling short. They start to max out all their credit cards, and they mortgage their house to the hilt. Elmo also has lost his job, and taken another that doesn't bring in as many bucks. So, the family keeps him afloat, but barely.

Eventually, someone says he has to pay up, and in order to do that, he has to reduce his spending. He starts checking the cushions for change, and even raids the kid's piggy banks. But, there just isn't enough to pay the creditors. But, Elmo keeps on spending. The money that you lent him was going to help pay for your kids education or a new car. But, that money is no longer available until Elmo pays up.

So, either you keep on lending Elmo money or he goes into bankruptcy. In order to stay afloat, Elmo decides to pay everyone in IOUs. In Greece's case, that would be another currency, if they drop out of the Euro. If relationships get really strained, Elmo may eventually be set adrift and not be invited to family functions.

So goes the sad story of Elmo. You're poorer, because your hard earned cash is gone, along with it's earning potential. But, then you realize that you've also lent money to your other family members like Betty, Portia, Lulubelle, and Issac. The worst of it is that you borrowed that money to lend to them. And they're talking about not paying, since Elmo didn't pay up.

I don't think a Greece default would bring down the Euro. It may devalue it, and that would make things expensive in Europe, and end up hurting the US.. But, the financial systems of the US and Europe are intertwined. It's similar to the banks back in 2008. Iceland and Cyprus have already declared bankruptcy, but they weren't in the EU. They had some very Draconian measures that they took, like confiscating what was in Cyprus banks and limiting withdrawals. That would pretty much crush the Euro if it started a contagion that spread to the rest of the PIIGS. Whatever they do, it will be on a weekend when the banks are closed. Cyprus did it, so did Lehman Bros.

Thanks Gump. I get Greece's default and behavior (damn Aunt Lulubelle!!!! ). I understand there will be some pain in Europe as they don't get their €7 billion back (or whatever it is). I get lost when I see pundits talking about how the Euro is now in trouble/doubt, how Europe is going to be hit hard by Greece leaving, etc.

I get how the Greeks will be burned and with the run on bank withdrawals in Greece this week I wouldn't be surprised to see that frozen soon. I would think by now the rest of Europe (especially Germany) is tired of the never ending Greek shenanigans and watching Euro stock markets drop every time a Greek official burps.

 

[jj410]

So I've been sort of following the Grexit issue from a distance but am obviously missing some big points. I keep hearing people say a Grexit will harm the Euro, Greece will have to leave the EU, and all of Europe is on the ropes. I get that Greece was horribly run and looks like it will leave the Euro since they won't reform to get ECB/ IMF funds. Why would they have to leave the EU (UK not in the Euro but still in EU)? Why would the rest of Europe tumble if Greece left? To be blunt- they are the weakest link. Shouldn't Europe and the Euro improve with Greece gone? I just don't get the doom and gloom predictions if Greece defaults for the rest of Europe (other than the ECB and mainly Germany don't get their loans repaid).

The primary problem arises from the fact that Greece does not control its own currency, it uses the euro. If it had its own currency, they could simply devalue it and make it much easier to pay off the debt. Germany and other European countries will not allow this.
This is a completely different situation from the US, which controls the dollar, the ad hoc standard currency in the world - think of it as the modern gold standard. Fiscally, Greece is more like a US state than the US nation, which is why it is much more precarious for a state than the US to be unable to balance its budget. That is, the feds can effectively just print more money and lower interest rates to pay its bills and stimulate the economy, which is exactly what they been doing, while states do not have that option. In the long run, this risks high inflation, but that is the least of our economic problems today. Greece does not have these options and is in fact blocked by other European nations who stand to benefit, at least in the short term.
Although the alarmists have been predicting imminent inflation in the US for 30 years, that has not been a problem, probably in large part because unlike Greece, increases in productivity have outpaced the costs of production - mainly wages. (Our last period of inflation was in the 1970s, mainly due to escalating wages and an induced oil shortage, neither related to the national debt).
For all these reasons, any comparison of Greece with the US is utterly fatuous, either because of ignorance or political motivation.
To anyone with an iota of economic literacy, comparisons with family budgeting are even more inapt.

 

[jj410]

It's sort of like loaning money to a family member, we'll call Elmo. He goes out and spends it on his kids that just sit around playing video games. Basically, they're not all that good of a credit risk. They make some payment on the loan, but they keep on falling short. They start to max out all their credit cards, and they mortgage their house to the hilt. Elmo also has lost his job, and taken another that doesn't bring in as many bucks. So, the family keeps him afloat, but barely.

Eventually, someone says he has to pay up, and in order to do that, he has to reduce his spending. He starts checking the cushions for change, and even raids the kid's piggy banks. But, there just isn't enough to pay the creditors. But, Elmo keeps on spending. The money that you lent him was going to help pay for your kids education or a new car. But, that money is no longer available until Elmo pays up.

So, either you keep on lending Elmo money or he goes into bankruptcy. In order to stay afloat, Elmo decides to pay everyone in IOUs. In Greece's case, that would be another currency, if they drop out of the Euro. If relationships get really strained, Elmo may eventually be set adrift and not be invited to family functions.

So goes the sad story of Elmo. You're poorer, because your hard earned cash is gone, along with it's earning potential. But, then you realize that you've also lent money to your other family members like Betty, Portia, Lulubelle, and Issac. The worst of it is that you borrowed that money to lend to them. And they're talking about not paying, since Elmo didn't pay up.

I don't think a Greece default would bring down the Euro. It may devalue it, and that would make things expensive in Europe, and end up hurting the US.. But, the financial systems of the US and Europe are intertwined. It's similar to the banks back in 2008. Iceland and Cyprus have already declared bankruptcy, but they weren't in the EU. They had some very Draconian measures that they took, like confiscating what was in Cyprus banks and limiting withdrawals. That would pretty much crush the Euro if it started a contagion that spread to the rest of the PIIGS. Whatever they do, it will be on a weekend when the banks are closed. Cyprus did it, so did Lehman Bros.

Gump, your explanation is worthy of your name. You know as much about economics as your handle does,

 

[Pardlion]

The primary problem arises from the fact that Greece does not control its own currency, it uses the euro. If it had its own currency, they could simply devalue it and make it much easier to pay off the debt. Germany and other European countries will not allow this.
This is a completely different situation from the US, which controls the dollar, the ad hoc standard currency in the world - think of it as the modern gold standard. Fiscally, Greece is more like a US state than the US nation, which is why it is much more precarious for a state than the US to be unable to balance its budget. That is, the feds can effectively just print more money and lower interest rates to pay its bills and stimulate the economy, which is exactly what they been doing, while states do not have that option. In the long run, this risks high inflation, but that is the least of our economic problems today. Greece does not have these options and is in fact blocked by other European nations who stand to benefit, at least in the short term.
Although the alarmists have been predicting imminent inflation in the US for 30 years, that has not been a problem, probably in large part because unlike Greece, increases in productivity have outpaced the costs of production - mainly wages. (Our last period of inflation was in the 1970s, mainly due to escalating wages and an induced oil shortage, neither related to the national debt).
For all these reasons, any comparison of Greece with the US is utterly fatuous, either because of ignorance or political motivation.
To anyone with an iota of economic literacy, comparisons with family budgeting are even more inapt.

But what if you have a stupid, selfish uncle named Obama, who raids the kids college savings accounts to buy sweets for his fat friends?

 

[dawgduice]

Damn, I tell you !!!! Obama and ANOTHER damn RED traffic light !!!! Damn Him !!!!!!!! That Nazi-Commie !!!!!!

 

[Peetz Pool Boy]

Gump, your explanation is worthy of your name. You know as much about economics as your handle does,

His post is actually closer to the truth than your snarky response.

Perhaps you should should bless us all by declaring yourself John Maynard Keynes since we all know that your and his understanding of economics was....unimpressively incorrect.

I see people and governments, including my own, trying to spend their way to prosperity.

 

[NapaNit]

Nothing compared to the havoc that Obama's new entitlement programs are going to wreck. In fact, Obama might as well be in office for another term, because we're going to continue to pay more and more for his entitlements.

No problem, Pard-nur, your pal JEB will be here soon to save the day and avenge the damsel dollar.

 

[Bushwood CC]

It's sort of like loaning money to a family member, we'll call Elmo. He goes out and spends it on his kids that just sit around playing video games. Basically, they're not all that good of a credit risk. They make some payment on the loan, but they keep on falling short. They start to max out all their credit cards, and they mortgage their house to the hilt. Elmo also has lost his job, and taken another that doesn't bring in as many bucks. So, the family keeps him afloat, but barely.

Eventually, someone says he has to pay up, and in order to do that, he has to reduce his spending. He starts checking the cushions for change, and even raids the kid's piggy banks. But, there just isn't enough to pay the creditors. But, Elmo keeps on spending. The money that you lent him was going to help pay for your kids education or a new car. But, that money is no longer available until Elmo pays up.

So, either you keep on lending Elmo money or he goes into bankruptcy. In order to stay afloat, Elmo decides to pay everyone in IOUs. In Greece's case, that would be another currency, if they drop out of the Euro. If relationships get really strained, Elmo may eventually be set adrift and not be invited to family functions.

So goes the sad story of Elmo. You're poorer, because your hard earned cash is gone, along with it's earning potential. But, then you realize that you've also lent money to your other family members like Betty, Portia, Lulubelle, and Issac. The worst of it is that you borrowed that money to lend to them. And they're talking about not paying, since Elmo didn't pay up.

I don't think a Greece default would bring down the Euro. It may devalue it, and that would make things expensive in Europe, and end up hurting the US.. But, the financial systems of the US and Europe are intertwined. It's similar to the banks back in 2008. Iceland and Cyprus have already declared bankruptcy, but they weren't in the EU. They had some very Draconian measures that they took, like confiscating what was in Cyprus banks and limiting withdrawals. That would pretty much crush the Euro if it started a contagion that spread to the rest of the PIIGS. Whatever they do, it will be on a weekend when the banks are closed. Cyprus did it, so did Lehman Bros.

Sort of, but not really, because for all intents and purposes the Euro is Germany's currency because Germany is so large on an economic basis relative to the rest of the Currency Union - Germany is also the "net exporter" to the others, especially the debtor Southern European nations Greece, Portugal, Italy....who are straight-jacketed by the Euro and have no means to make themselves more competitive (the precise reason the UK, wisely I might add, refused to join the Currency Union). In any event, most of the money lent to Greece has been spent on imported German goods -- so Germany has massively benefited economically at Greece's expense from the Union albeit, all they have done is book inventories as profit to some degree in a situation similar to the technology "dot.com" bubble of the late 1990's / 2000 where technology hardware manufactures of capital intensive goods were booking inventories by using their cash surpluses to take small venture capital positions in tech startups that they would then turn around and sell hardware to often largely on credit.....

 

[AC-LION]

Keynesian Economics doesn't work. Endlessly printing money doesn't stimulate the economy. All it does is create bubbles like we've seen over and over again.

It's put our country in a position where if they stop printing so much money, the interest rate will rise, which will be financially devastating for millions of Americans. Conversely, if they continuously print money our dollars is continuously devalued, which is just a hidden tax and discourages savings. Our dollar is losing value and its already being talked about as being replaced as the world reserve currency, which will have bad ramifications as well. We'll have a ton of money that no one wants. We are truly caught between a rock and a hard place because of Keynesianism.

 

[Nittany Ziggy]

Remember GW Bush inherited a surplus from Bill Clinton. If you want to look at when the federal budget got off track how about huge tax breaks for millionaires and an unnecessary invasion of Iraq funded on credit.

Yeah the deficit is all Obama's fault

Remember that Clinton benefitted from the "peace dividend" as a result of Reagan's policies leading to the economic collapse of the Soviet Union. That is the only reason why a surplus was possible.

 

[Bushwood CC]

Keynesian Economics doesn't work. Endlessly printing money doesn't stimulate the economy. All it does is create bubbles like we've seen over and over again.

It's put our country in a position where if they stop printing so much money, the interest rate will rise, which will be financially devastating for millions of Americans. Conversely, if they continuously print money our dollars is continuously devalued, which is just a hidden tax and discourages savings. Our dollar is losing value and its already being talked about as being replaced as the world reserve currency, which will have bad ramifications as well. We'll have a ton of money that no one wants. We are truly caught between a rock and a hard place because of Keynesianism.

The USD (ticker for US $) has been "devaluing"? Are we talking the here-&-now? This is simply not true - not only is it a false claim, but the reality is that on a "trade-weighted basis" the USD has been strengthening against its worldwide trade partners (it is the direct cause of Import Prices falling by 10% on a YoY basis). This is largely what has kept nominal interest rates so low - e.g., the US is exporting "growth" and importing the rest of the world's "disinflation".

 

[TheGLOV]

Greece is a F'ed up country. Period.

 

[simons96]

hunh, has anyone mentioned Goldman Sachs?

 

[CATTY]

And what percentage of that debt is related to the Bush tax cuts and wars?

I believe the MAJORITY OF THE DEMOCRATS at the time voted for the invasion of Iraq. While the Clinton's were in the WH they were very vocal about Saddam! So was Kerry, Pelosi, Reid, etc. check it out for yourself.