Economy
Related: About this forumI have an incredibly naive question ...
I was listening to NPR coverage of the Greece anti-austerity thing while driving home this evening and a question popped into my decidedly non-economically sophisticated mind ... What if Greece told the bankers, "screw you, we ain't paying?"
I mean, if I told my creditors that, they would seize what little assets that I have, post haste ... after a semi-judicial procedure. But, as I understand it, Greece, as all/most nations use fiat currency - it is valued at whatever the smartest guys in the room say it is; but it's not backed by hard assets.
So if Greece pulled the "I call Bullshit" card, what would the bankers' recourse be ... "we're not going to lend more to you?" Okay! I'll re-order my economy. We'll suffer; but we're suffering now. Now what?
"We're going to come in and take what you owe?" Okay ... with what army?
I'm thinking this global shake down thing is based completely on idle threats and gentlemans agreements.
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Jackpine Radical
(45,274 posts)for a model of how things might go in Greece.
1StrongBlackMan
(31,849 posts)That's exactly what I was thinking when I posed the question.
Scuba
(53,475 posts)
MrMickeysMom
(20,453 posts)Of course, each oven of these nations have their particular demographic and size, but I truly believe the only way to get away from the horrid financial terrorism of the monetary funders, is to, as you suggest, and JR is right to call attention to, follow Iceland, who had to stones to call "bullshit" on this first.
And, based on what France has decided to do, I can see the EU making the case for a big ole "FU, IMF".
So, then, shall it eventually be our turn?
PoliticAverse
(26,366 posts)
girl gone mad
(20,634 posts)because they refused to guarantee bad bank debts. Instead they nationalized the banks, devalued their currency, and paid off depositors while forcing bondholders to take writedowns. Now they can borrow at rates under 5%.
Turns out that a little bit of financial sector discipline goes a long way.
MrMickeysMom
(20,453 posts)I'll listen.
PoliticAverse
(26,366 posts)the Icelandic krona while Greece uses the euro as their currency.
The short description of what happened in Iceland is in Iceland private banks borrowed
money and then couldn't pay it back. Iceland effectively let their banks go bankrupt and
nationalized them and then inflated away the debt issues (devaluing their currency).
The Greek problem is twofold. The Greek government has borrowed a lot of money from
foreign lenders which they can't pay back and as part of their agreement in joining the euro
currency they need to keep their budget deficit below a certain target figure (neither
of these things applied to Iceland). The Greek issue is if they want to stay as part of the
euro they have to negotiate with the other countries in the euro (especially Germany who
is the major lender).
What Greece can do is default on their sovereign debt and leave the euro reverting back
to their own currency.
MrMickeysMom
(20,453 posts)Thanks.
Would the UK, then, with the Pound, and the US with the Dollar, be better off in nationalizing banks, as Greece reverts to the Greek monetary unit?
Seems to me that the idea is to rid the sovereign debt to the international lenders, which in my view, is the IMF.
FogerRox
(13,211 posts)MrMickeysMom
(20,453 posts)I guess I don't use IIRC, so couldn't tell what you were saying.
FogerRox
(13,211 posts)
OnlinePoker
(5,719 posts)Things aren't as rosy as people make it out to be.
Go to Post 21 for the pertinent info.
http://www.democraticunderground.com/1002546016
TreasonousBastard
(43,049 posts)it really can't survive without borrowing for the foreseeable future, so if it gives the finger to whoever it borrowed from in the past, it will starve. Greece doesn't really make enough stuff or have enough economic activity to survive without borrowing or charity. It cooked the books and lied on past "loan applications" and so past borrowing was effectively fraud. Squeezing blood out of a stone is probably not the best way to deal with Greece, but no one has come up with a better way so far.
Eventually every country has to pay its bills because the credit card will max out, but as Ireland, Poland, Portugal and a few others have found, you still have to live while you're working it out. It has to build industry, tax the shipping maggots, and learn to live with one, honest, set of books.
provis99
(13,062 posts)As a nation, Greece has no obligation to pay back its debts. Frankly, countries like Argentina have defaulted on their debt several times in the past, had no negative repercussions, and continue to borrow money whenever they please.
Most of the people that get screwed when countries default are individual rich investors and private banks. Nothing bad would happen to Greece; quite the opposite. they should go the Iceland route and simply tell their creditors to fuck off.
girl gone mad
(20,634 posts)Only a problem when a country's bills are due in a currency it doesn't issue.
TreasonousBastard
(43,049 posts)is one thought, and it sometimes works, but can cause as much pain as it reduces.
PoliticAverse
(26,366 posts)This has to do with staying with the Euro and in the European Union.
girl gone mad
(20,634 posts)Greece has already effectively defaulted on its public debt.
I've advocated hard default and return to the drachma, but there is no question this would be a difficult road.
ret5hd
(20,489 posts)girl gone mad
(20,634 posts)Last edited Wed May 9, 2012, 05:14 PM - Edit history (1)
Sorry to be unclear.
ETA: Just to further clarify the point I'm making, Greece might as well be tied to a gold standard since their debts are denominated in a fixed rate "foreign" currency which they do not control.
1StrongBlackMan
(31,849 posts)All the commentators seem to base all their projections and commentary on Greece knuckling under, rather than following the Iceland/Argentina model.
Isn't that alot like drawing up YOUR gameplan assuming that the other team will only run the plays that you drew up for them?
Taitertots
(7,745 posts)They are going into debt to pay the usurious interest rates on their debt.
Any austerity that would result from refusal to lend would have to be less than the austerity required to repay.
mother earth
(6,002 posts)If austerity is bad and it certainly appears to be so, and Greece appears to be on the verge of rejecting not only austerity, but perhaps the Euro as a result of default...and the next step would be nationalize their banks like Argentina/Iceland, which seems to have worked for them - how far off would the US be in doing likewise.
With the "blunder" of JP Morgan, isn't it really a matter of time before the whole game needs a reset button push to a better system?
Maybe nationalizing a bank is the best route? Certainly privatizing results in privatizing the crimes that go unpunished.
It just seems like Naomi Klein's Shock Doctrine all over the place...the whole system is gamed, now that we get that, what next?
Obviously there's no accountability for banksters...how long before the house of cards reaches game over point? Or does it?
I come here for my economy 101 fix and education. TIA
dixiegrrrrl
(60,010 posts)WE have Bernake and Turbo Timmy to run the printing presses.
The Euro is not under Greece control
which is why there is all this talk about Greece leaving the Euro, so that it has its own currency.
And....looks like, at this date, that is what it will do.
Euro Officials Begin to Weigh Greek Exit From Common Currency
By Patrick Donahue - May 13, 2012 5:01 PM CT
http://www.bloomberg.com/news/2012-05-13/euro-officials-begin-to-weigh-greek-exit-from-common-currency.html
Greece’s possible exit from the euro area moved to the center of Europe’s debt-crisis debate, with officials beginning to weigh the fallout of a withdrawal even as authorities in Athens struggled to form a government.
Meetings brokered by Greek President Karolos Papoulias are set to continue today after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. The country where the 2 1/2-year-old crisis began moved closer to a new vote, and to the possibility of a euro-area exit that was once a taboo among policy makers.
Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said in Tallinn on May 12. An exit was “technically” possible yet would damage the euro, he said. German Finance Minister Wolfgang Schaeuble reiterated in an interview in Sueddeutsche Zeitung that member states seeking to hold the line on austerity for Greece could not force the country to stay.
mother earth
(6,002 posts)insider group, but I've long thought the house of cards is set to fall, and we need to pay special attention to these countries and how they are all going. Our problems are far from solved.
I know Greece's currency is the Euro and that's about to get ditched. I guess that move would not necessitate nationalizing Greek banks, but that is what Arg. & Iceland did, correct? If they are to ditch the Euro and use their own currency, wouldn't nationalizing the banks follow? It seems nationalizing ensures accountability and audits under responsible adult supervision, translating into an honest system that works for all. I see it as good and more desirable than austerity measures that if adopted will mean deeper global depression.
Finally, this is really currency wars isn't it? With austerity only the elite win and the masses suffer horribly, and the winners are who holds the most popular currency...?
dixiegrrrrl
(60,010 posts)It would be lovely if Greece and Italy could get rid of their bank installed technocrat "leaders"..
I do get the feeling the Greeks have really had enough of the crap.
"
"and the winners are who holds the most popular currency...? "
IMF is indeed pushing for a new currency.
mother earth
(6,002 posts)IMF = same controlling group as our own
Without the nationalization part, this will be business as usual, most likely after a few painful mos., which does not necessarily translate to financial freedom for Greece. Am I missing something? Shouldn't we all be hoping for nationalization of the banking system globally?
Seems like the best have opted to nationalize some of the most important things like banking, health care and education, most likely due to oversight and accountability in these systems once nationalized? I guess I am assuming the IMF is like our FR in that they are not subject to audit or transparency, except perhaps only to themselves.
Once again, thank you.
mother earth
(6,002 posts)Some of us have been talking it over, and here’s what we think the end game looks like:
1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.
3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.
4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:
4b. End of the euro.
And we’re talking about months, not years, for this to play out.