NFT: Greece is broke

In comment 12347119 buford said:

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400 pts down. Oh well, I'm not retiring anytime soon anyway.

The market has basically doubled since 2008. You're sweating 2%?

Greeks are a lost cause. If the EU wants to survive, they need to dump them. It's going to happen sooner or later anyway.

In comment 12347222 schabadoo said:

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In comment 12347119 buford said: Quote: 400 pts down. Oh well, I'm not retiring anytime soon anyway. The market has basically doubled since 2008. You're sweating 2%?

I could do the same thing and point out the market is up a mere 11% over the last 15 years couldn't I? If you don't believe it I can show you an S&P 500 mutual fund I bought and held on to since 1999.

is it not a good time to visi t Greece now?

that was always epitomized best by Greece.

Weak, corrupt craphole economies need to be able to devalue and reform at the same time, in order to become competitive.

Locked into the Euro, Greece couldn't devalue, and locked into ridiculous promises and corruption, it couldn't become competitive even if it did devalue.

I could never figure out how this was going to actually work. Greece has practically nothing to sell that anyone anywhere else in the world wants, other than tourism. And meanwhile, cutting spending without devaluing just leads to one recession after another. Germany continuing to throw money down a bottomless pit makes no sense.

The bottom line is that leaving the Euro, defaulting and devaluing seems like the only possible combination that could stop the economic erosion.

No winners here. The best hope is that the EU can shut the door after Greece leaves without anyone else needing to follow them.

In comment 12347208 bradshaw44 said:

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Sell her estate in Greece for the last few years. She's from Greece and has the stubbornness of the society, so isn't willing. I fear that property is going to be taken by the government in a matter of days.

If it hasn't already been squatted in.

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Most of the bonds and long-term obligations were discounted several years ago. So the net impact on the EU, Germany in particular, is expected to be manageable.

Obviously is cheaper to kick them out than let them stay on their terms.

Hope it doesn't happen, but it looks like the EU will be cultivating its own "developing economies"/countries, like we have with Latin America.

but to is Puerto Rico.
PR broke - ( New Window )

In comment 12347317 giants#1 said:

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but to is Puerto Rico. PR broke - ( New Window )

I was just about to post that. $73B in debt they can't pay. How much fear is there that Greece will spread to at least some of the other PIIGS?

I think this is the best thing for Greece in the long term. This is the major flaw in the Euro monetary system. When individual countries go through recessions, the typical remedy is to devalue your currency to incentivize foreign investment. That is difficult for the smaller EU countries, because the Euro is held afloat by the larger economies of Germany and France.

What Greece has going for it is tourism. With a cheap drachma, foreign tourists will hopefully take advantage of cheap Greek currency to vacation there. The challenge for Greece is to provide adequate security.

In comment 12347246 GentleGiant said:

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In comment 12347222 schabadoo said: Quote: In comment 12347119 buford said: Quote: 400 pts down. Oh well, I'm not retiring anytime soon anyway. The market has basically doubled since 2008. You're sweating 2%? I could do the same thing and point out the market is up a mere 11% over the last 15 years couldn't I? If you don't believe it I can show you an S&P 500 mutual fund I bought and held on to since 1999.

They have charts for these sort of things, trust is not really necessary.

It is some interesting timing, as the Dow had tripled from '93 to '99. Bad luck I guess.

In comment 12347308 WideRight said:

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Most of the bonds and long-term obligations were discounted several years ago. So the net impact on the EU, Germany in particular, is expected to be manageable. Obviously is cheaper to kick them out than let them stay on their terms.

Exactly. These are intelligent people, both in government and in business. The last few years have been about planning for and managing the inevitable. That's why there isn't much of any push to find an accommodation. Now that isn't to say they can anticipate the second and third order effects of this or the impact on the confidence of investors in other struggling economies (PIIS I guess at this point, though I understood - perhaps dated though - that Ireland was relatively stable), only that the direct consequences of this for their banks, their firms and those of their respective countries have likely been anticipated and mitigated.

a Eurozone exit is. There's no mechanism for a member to be kicked out, or even exit voluntarily. You may have to amend the EU treaty, which would require a unanimous vote - including Greece's. Institution fail.

is dragging down the global economy. Greece. How the fuck did we get to this point?

down global equity markets, not the global economy as of yet.

weaken against the shekel... I got a pretty sizeable bill due (in Euros) for French oak barrels...

I went all over Europe the summer before Euro notes were distributed. Even as a 22 year old, the common currency didnt make any sense to me. After visiting Italy, I thought you couldnt pay me enough money to throw in my lot with that country. The Greeks just beat Italy (and maybe Spain) to the punch. Notice how Italian bond yields spiked today.

Imagine if this was Italy instead of a piddling Greek economy.

At least damn near it?

Why not hedge out that risk, take that piece of uncertainty out of your business? Or are you able to adjust your prices to recover higher barrel prices?

Without EU funding they can't pay their people's pensions, and they can no longer create Govt jobs (which I believe is like 80% of the jobs there). Also they will have to come back with the Drachma, which means re-positioning it a lot lower versus the Euro. The estimates I have seen say that peoples bank accounts will be devalued by ~40%. Germany and the others can get by without the loans being re-payed, Greece will be left with nothing.

can someone explain as if I'm 5 years old how it got to this point? How was there rampant tax evasion and no enforcement?

In comment 12347485 Ten Ton Hammer said:

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can someone explain as if I'm 5 years old how it got to this point? How was there rampant tax evasion and no enforcement?

Tax evasion is an art form in Greece going back to the days when they were under Ottoman occupation. Back then it was considered a form of civil resistance. The problem is, the idea of tax evasion never left (helped vs. the Ottomans but screwed themselves royally here)

To join the Euro, you essentially had to have a modern, functioning economy and had to meet certain metrics like inflation, debt/GDP, budget deficit, etc. Greece in no way resembled the economies of Germany, France, Holland, etc. but they wanted to join the Euro because under the Euro, they're borrowing costs would be much lower. So they cooked their books (Enron, WorldCom had nothing on them) to make it look like they met the necessary criteria.

They reported numbers that suggested a normal modern economy, which made it possible for them to borrow money in the capital markets. In reality, they were an economic basket case. Tax evasion was systemic, they didn't report several major costs and liabilities (i.e. they kept them off the books), there really wasn't a viable private sector, etc. Several years - and billions of Euros borrowed - later, the facade came off. Now they can't borrow money like they used to repay the old loans and their creditors (EU, ECB, IMF) made them adopt draconian austerity measures that torpedoed their economy and contributed to social hardship and unrest.

The Greeks then elected the relatively new Syriza party to power. Syriza is a fringe leftist/populist party that promised to end austerity in negotiations with creditors. The creditors are saying NFW and here we are.

and then cried poor (or were actually too poor) to even begin paying back?

If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country.

but Greece has been at the forefront of 'bad shit coming' for years.

no real surprise, nor is it a surprise that markets will use the opportunity to freak. This am I told the wife that stock will drop, oil will rise (despite Greece not producing oil). Stock is a no brainer. the market freaks when a mouse farts. oil is more or less the same.

In comment 12347522 Ten Ton Hammer said:

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and then cried poor (or were actually too poor) to even begin paying back? If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country.

The other detail being that the folks running the Eurozone had every reason to suspect that the Greek economic outlook wasn't as rosy as was portrayed in their application, but didn't look very hard. They wanted to let them in to gain market for their exports (that wouldn't be affected by adjustments in currency markets) more than they wanted to screen out high risks.

1. Are there any figures on how rampant (%) tax evasion is there?

2. Are there civil movements there urging for an end of the tax evasion?

places.

The strong European economies want access to cheap markets and raw materials (including labor), but don't want to let the immigration of these elements into their sphere of influence.

It's always been the Eastern and Southern Europe question; how much do you expand membership along these margins, knowing that they are likely very high risks.

in 26% lower tax receipts.

And no large scale civil movements against this; this type of "corruption" is largely seen as a cost of doing business in Greece.

In comment 12347538 Enoch said:

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In comment 12347522 Ten Ton Hammer said: Quote: and then cried poor (or were actually too poor) to even begin paying back? If that's the case, seems like they should be guilty of defrauding their lenders, but I guess what can you do with an entire country. The other detail being that the folks running the Eurozone had every reason to suspect that the Greek economic outlook wasn't as rosy as was portrayed in their application, but didn't look very hard. They wanted to let them in to gain market for their exports (that wouldn't be affected by adjustments in currency markets) more than they wanted to screen out high risks.

Frankly they were complicit in cooking the books. The blame has fallen to Goldman and of course GS usually gets what it deserves but plenty of people in Northern Europe made a buttload of money exporting to Southern Europe. They're not stupid, they knew the bill would eventually come due, presumably they thought that either they'd get out before the shit hit the fan or that the government (European or national) would backstop them.

In comment 12347577 kicker said:

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in 26% lower tax receipts. And no large scale civil movements against this; this type of "corruption" is largely seen as a cost of doing business in Greece.

Are you sure it's not a higher percentage? A while back (last year) I read a 40% number with respect to tax receipts. Perhaps they stepped up enforcement at least to a degree since then.

In comment 12347236 Eric from BBI said:

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Greeks are a lost cause. If the EU wants to survive, they need to dump them. It's going to happen sooner or later anyway.

Totally agree. Been saying this for a while. Syriza are one problem. It is Podemos who tower over this situation because if they get in in Spain then shit will get real fast. That is not a 5% correction to an already high market.

There is a school of thought that the EU has to show the Spanish and others the consequences of the Greek's actions. The risk with that is an Iceland style rapid revival makes the Greece option look appealing.

In comment 12347758 njm said:

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In comment 12347577 kicker said: Quote: in 26% lower tax receipts. And no large scale civil movements against this; this type of "corruption" is largely seen as a cost of doing business in Greece. Are you sure it's not a higher percentage? A while back (last year) I read a 40% number with respect to tax receipts. Perhaps they stepped up enforcement at least to a degree since then.

That was solely income tax, and not other taxes as well.

everyone says that Greece s problem are because citizens did not not paying income tax -

rather than the Global financial meltdown of 2008 which causes all economy in the world to contract and then the imposed austerity by the Trioka which has cause Greece GDP to contract 25% in 5 years

the problem isn't Greece not paying their debt
the problem is freaking 28% unemployment
the probem is 60% youth unemployment

In comment 12348301 giantfan2000 said:

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everyone says that Greece s problem are because citizens did not not paying income tax - rather than the Global financial meltdown of 2008 which causes all economy in the world to contract and then the imposed austerity by the Trioka which has cause Greece GDP to contract 25% in 5 years the problem isn't Greece not paying their debt the problem is freaking 28% unemployment the probem is 60% youth unemployment

at 1:20 am Manh George said: "...Greece has practically nothing to sell that anyone anywhere else in the world wants, other than tourism."

The lack of industry equates to unemployment - so your point, while valid, has already been covered here at least in part.

You are correct to highlight it however as it has been glossed over quite a bit on this thread.

Part of the solution is to improve tax collection, and another, more important part of the solution is to increase employment levels, particularly among the youth.

Job creation requires a lot more than protesting for more jobs however, a fact that many people in the U.S. and abroad seem blind to. We often assign the blame for high levels of youth unemployment on policy, when the reality is that most youth today (in the U.S. and abroad) are not skilled enough to be employable. I don't know enough about Greece to label their youth as unskilled, but I can say that there is global demand for laborers with specific skill sets.

You're correct. The root problem is that Greece has a third world economy yet wanted a first world lifestyle - and that dog don't hunt.

This will all shake out painfully for Greece - economically, politically, socially and psychologically. The whole country is being exposed as a fraud and laughing stock in a very public and humiliating way.

the more I'm convinced that the only way out is a default/restructuring (everyone agrees that Greece pays back less than they actually owe) and an exit from the Euro. I have no idea how that sausage gets made but it has to happen, IMO.

whose root causes lie in a lack of competitive advantage and excessive debt.

Anyone that blames Greece's problems on austerity is a simpleton with an eye toward politics, not economics.

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Anyone that blames Greece's problems on austerity is a simpleton with an eye toward politics, not economics.

Yes you are the expert Rob!
you still got that gold under your bed ??

their economy was debt-fueled at its height, the bill was going to come due sooner or later. In the last 20 years, they cracked the Maastricht 3% just once (by cooking the books) so as to gain entrance into the EU. Unemployment, particularly youth unemployment, is a symptom of much wider structural features, not their cause. If your point is that there are other villains, sure. But if your point is that this was a healthy economy groaning under the back to back hits of recession and then austerity, that's simply not hte case.

In comment 12348454 giantfan2000 said:

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Quote: Anyone that blames Greece's problems on austerity is a simpleton with an eye toward politics, not economics. Yes you are the expert Rob! you still got that gold under your bed ??

Homerjonesredux was the gold bug, ace. I can honestly say I have never commented on precious metals, or any other directly investable asset, as I feel this isn't the forum for it. Try again?

Bear in mind, no matter how you deflect, you are still dead fucking wrong on this topic.

Robbed it off a lever to pull in these circumstances - devaluation. Forty years ago, this would have been a minor event for currency traders, painful for Greece in the short-term (Argentina's GDP contracted some 10 percent in the wake of its devaluation), but the concept of contagion would be completely foreign.

Greek drachmas to invest in Zimbabwe dollars.

One of these days I'm going to cash that in.

They went into austerity because their problems were so bad. Years and years of government over spending gone amok. The social system, lack of private jobs, ridiculous govt pensions, and the complete lack of fiscal responsibility is what brought them here.

Macro and Micro econ dont work the same way. Yes, in some sense the dynamics are similar: If you spend what you dont have, youll wind up broke.

But the entire Macro system is built on trust and credit, not actual money in the bank. What austerity does is essentially confuse these two realms, forcing a national treasury (a public institution responsible for the welfare of citizens, not profit making), operating on the Macro level, to adhere to micro rules. Under austerity, a treasury that is responsible for welfare and public services is restricted from providing these services. Innocent people suffer as a result.

This does not excuse Greece's ineffectual (invisible?) tax collecting machinery and irresponsible fiscal policy. However, one might argue that these policies need to be reformed along side debt relief.

A Keynesian would say that when the economy stumbles, public spending and services need to increase in order to account for the drop in activity/ demand left by struggling private sector. The time for austerity and belt tightening is during boom times, when economies can cut back on their own terms.

A classical econ student, who sees the macro and micro realms operating in closer relation would advocate riding the boom wave all the way to the top, and then tightening belts when the going gets tough, similar to how a private household would behave.

it's that he is often misapplied, and that in these applications people often ignore Keynes's own cautions. They were already running substantial deficits during boom times, it isn't clear that additional money would have really improved things. And Greece's issue is not a lack of government spending.

can someone explain to me in elementary terms whats wrong with Greece? I know they are broke but how did it get to this point?

i mean thinking like a 10 year old, they are a tourist hot spot and should bring in outside money. Is this not the case?

dont kill me but i just want to understand this good.

In comment 12348818 GMAN4LIFE said:

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can someone explain to me in elementary terms whats wrong with Greece? I know they are broke but how did it get to this point? i mean thinking like a 10 year old, they are a tourist hot spot and should bring in outside money. Is this not the case? dont kill me but i just want to understand this good.

Tourism is quite substantial, but the Euro made (makes) tourism more expensive and undermines the advantage Greece had as a relatively inexpensive destination depending on the ebbs and flows of exchange rates. And Greece makes very little other than olive oil. They have an outsized role in merchant shipping, but that's about it. And they have a huge public sector, huge legacy costs from past public sector workers, and their tax collection is a joke.