If the 1% want the Greek "bailout", how can it *possibly* be good?

[MannyGoldstein]

I was listening to the radio on the way home from work, discussion was about the Greek "bailout". It struck me: since 1981, when have the 1% ever said that something was necessary that didn't simply further enrich them and fuck the 99%?

More shock doctrine, no way it's good. The Greeks should give the "bailout" the bird.

[piratefish08]

1. 'Fuck the Bailout' based on THAT reason alone works for me.

[Nye Bevan]

2. The Greeks have four options

1. Raise taxes. The population seems to be against that, with the property tax being particularly unpopular. The man on the Athens omnibus might well be in favour of raising taxes on the rich, or on companies, but it does not seem as if this strategy will be pursued with sufficient vigour, or will raise enough money.

2. Cut public spending. Public sector workers are against that option.

3. Borrow money from their EU neighbours. The neighbours are willing to hand over the money but only on condition of further austerity. This the Greeks also dislike.

4. Default outright. The result will probably be even more painful austerity. Cut off from the financial markets, the Greeks will have to balance the budget overnight. They may also need to rescue their banks, a capital-intensive process. Leaving the euro might also involve a rescue of the corporate sector, which would find its revenues in (devalued) drachma and its debts in euros.

Although there is a risk that voters will reject option 3, it may be that politicians will use fear of option 4 to pull opinion around. If the Greeks designed their own menu, one would guess that it would be for the EU to lend them money, without imposing the austerity conditions. But the Germans have to satisfy their own voters; democracy cuts both ways.

http://www.economist.com/blogs/buttonwood/2011/11/greek-referendum


"Giving the bailout the bird" is option number 4, that would result in even more painful austerity for the Greek middle and lower classes than they have seen so far.

[MannyGoldstein]

5. Actually, Argentina and other countries that defaulted ended up doing quite well

Life for the 99% improved mightily within a few years.

Maybe default's not a bad thing - for the 99%, that is.

[fascisthunter]

8. Exactly...

[Lionessa]

10. I think Iceland is in a nice recovery right now too. They defaulted.

And the interesting thing about countries is that when they default, they don't have to cede any land, or home, or car, they just get a bad credit rating, and yet they make the taxpayers think it's somehow huge. Truth be told, there are probably only two or three countries whose credit and money printing behavior would get them a simple loan by most banks these days, and yet individuals with better stats are being refused regularly while being forced through taxes to uphold those banks.

It's just mind boggling the clusterfuck the banks are forcing our countries to apply to the masses. I think I need to become a corporate country.

[Nye Bevan]

11. Iceland did not default on its sovereign debt (nt)

[Lionessa]

13. Iceland Shows Default Doesn’t Lead to a Deep Freeze: 06-28-2011

http://finance.yahoo.com/news/Iceland-Shows-Default-Doesn-dg-2638407258.html?x=0&sec=topStories&pos=5&asset=&ccode=

[Nye Bevan]

14. That's referring to the default of Icelandic *banks*. Iceland itself never defaulted,

poorly written articles on the Internet notwithstanding.

[JVS]

16. Iceland didn't default, they let the private banks go under.

If Iceland had bailed out their banks, then they'd be in the position Greece is in.

[Nye Bevan]

12. It's different for Greece as they will end up outside of the Euro if they default (nt)

[tama]

26. How so?

According to EU-treaties only way to leave Eurozone is to leave EU. AFAIK no treaty says default is illegal.

Guess you are meaning some illegal action by certain people...

[Spider Jerusalem]

31. Different scenario

if Greece defaults and exits the euro then their currency (the drachma) will fall in value making the repayment schedule of loans denominated in euros next to unmanageable; Argentina had its own currency, the Argentine peso; Iceland has the Icelandic kronor. Both were in a better position to inflate away their debt (in the case of Argentina by ending their peg to the US dollar ); this isn't really an option for Greece because of their particular situation.

[muriel_volestrangler]

32. But 90% of Greek debt was issued under Greek law, so they can denominate it in new drachmas

(90% figure from here, and quoted elsewhere too: http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2959&context=faculty_scholarship&sei-redir=1&referer=http%3A%2F%2Fwww.google.co.uk%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3Dgreek%252Bdebt%252B90%252Blaw%26source%3Dweb%26cd%3D4%26ved%3D0CF0QFjAD%26url%3Dhttp%253A%252F%252Fscholarship.law.duke.edu%252Fcgi%252Fviewcontent.cgi%253Farticle%253D2959%2526context%253Dfaculty_scholarship%26ei%3Dy4q0TreFHs_C8QP14dj9BA%26usg%3DAFQjCNGyxI1m9yaRZcQjC57SfgdusQlyOw#search=%22greek%2Bdebt%2B90%2Blaw%22 )

They have the option of just passing laws to denominate that debt in the new currency, if they want to (perhaps they can force partial default that way too, if they want). If they can work out the mechanism of leaving the euro, it will have attractions.

[JVS]

17. What that doesn't mention is what the historical method of dealing with such a situation in PIIGS...

has been: inflation.

These economies are not capable of tolerating a currency that is kept as hard as the old D-Mark. They didn't before and they can't now. And until the European central bank stops repeating the policy of Bundesbank, and largely with the same people, these economies are going to suffer. It's like the cross of gold that William Jennings Bryant decried, but this time it's a cross of hard fiat currency.

[Fool Count]

21. Outright default will save the Greeks at least $400 billion

in principal and interest payments. That's over $40,000 for every man, woman and child in the country. How in the world can it possibly
result in "more painful" austerity? There won't even have to be an austerity at all. Greek budget is already close to surplus if interest
payments are excluded, and the economy will only get better without the additional austerity measures. The only real fear that would
make Greeks decide otherwise is that of losing the Euro and going back to drachma. Bat that is purely psychological. In practice,
having independent control of their own monetary policy will be a major advantage for returning to economic growth.

[JVS]

24. There would still be some austerity in a default.

The problem with defaulting is that when you default, nobody will lend you money for a while. This means that by defaulting Greece would not be in a position to borrow and that their government would be completely unable to run a deficit. Since Greece currently does run a deficit (even before accounting for debt payment, as far as I know) that would mean an immediate need to slash the budget.

[Fool Count]

27. With their own currency they can run all the deficits they want

without resorting to external borrowing - they could just print money to cover the deficit.
Sure that will result in higher inflation and faster depreciation of the drachma, but that
is not the worst thing in the world. Besides, it is not true that default will cut off all
borrowing. As examples of previous defaults clearly show, the opposite is actually true -
people are more willing to lend you money if you are not spending half your income on
paying interest on your prior debts. Discharging of unsustainable debt makes one more
creditworthy not less. It also helps that greedy investors have a very short memory.

[JVS]

28. Lenders do get scared off in the immediate aftermath of a default, and nobody is going...

to lend debt denominated in drachmas. Inflation could also be very bad for greece if they depend on imports.

Recovery from a default has a lot to do with what condition the economy is in when the default happens.

Russia recovered fairly quickly from its 1998 default, due largely to a spike in oil (which Russia exports). Even then there were a lot of pensioners who were starved and frozen due to this. North Korea defaulted on their debt in the 1980 and that was pretty much the beginning of the end for their economy, especially after the USSR was no longer around to give them subsidized oil.

If Greece has a trade surplus, then they could be ok. There will still be some pain.

[MjolnirTime]

3. If the 1% want "breathable air", how can it *possibly* be good?

:sarcasm:

[Nye Bevan]

4. Yeah. I want a global economic catastrophe, because the 1% want to avoid one (nt)

[MannyGoldstein]

6. This is more like invading Iraq than it is about breathable air.

I can prove pretty quickly that not breathing air is a problem. Iraq was a "trust us experts, we need to do this" kind of deal.

[MjolnirTime]

22. Just pointing out the fallacy of your logic, Manny

[fascisthunter]

7. this isn't about a element needed for survival

it's about fanatical ideologues...

[Vincardog]

9. The 1% want to poison my air land and water to add a penny to their bottom line.

[provis99]

18. given that the factories of the 1% are poisoning the air,

I'm not sure they want breathable air.

[Maven]

23. Breathable air for *whom* is the question.

The rest of us get the toxic fumes.

[Imajika]

15. Not entirely sure the Greeks would have voted no...

Most hate the bailout deal, but most also want to remain a Eurozone country.

I think Greece should reject the deal, default and dump the Euro, but I am really not so the majority of Greeks feel that way.

The problem for Greece is their deficit is so bad that even if they didn't have to pay interest on their debt, they'd still be running a deficit and that means if they default they would be forced to endure even deeper austerity than they even are right now. Of course in the long term there would be light at the end of the tunnel, which is I why I think they should reject the deal and just get the pain over with. The choices are pretty bad all around.

[unkachuck]

19. K&R....n/t

[Historic NY]

20. Screw the Greeks they already went through one from the EU

[pampango]

25. The far-right in Europe hates the Greek bailout. How can it possibly be bad?

The idea of a referendum, while creating a lot of instability in the interim, would have been a good idea. Either Greeks would choose to accept the bailout and stay in the Eurozone/EU or reject it and go their own way. Either way the Greek people would have spoken.

[JVS]

29. The 1% are very good hostage takers. If someone has your kid and wants ransom money...

you are both going to see eye to eye pretty quickly.

You want your kid back more than you want the ransom money and the kidnapper wants the ransom money more than he wants to kill your kid.

[BOG PERSON]

30. another question worth asking is

how on earth would greece accepting another loan help them solve their debt problem.