Sovereign debt bubble thread

[Admiral Yi]

Jesus fucking Christ. What's with the moral outrage, the fixation with debt and "living beyond your means"? Cypriots were not borrowing shit. They went down because their banks were tightly coupled with Greece, and faced crippling losses after the haircut last year.

The financial sector was a major contributor to Cypriot GDP.  It turns out the value added by that sector was not sustainable. Cypriots who earned their living in the financial sector, or by providing goods and services to people in the financial sector, were in fact living beyond their means.

[Admiral Yi]

If you construct a "it's their own fault" narrative you feel less guilty about enjoying other peoples' suffering while also feeling less likely that it will happen to you.

Quite the opposite. 

[Iormlund]

It was designed to punish exit? That one is new to me.

How else do you explain the lack of exit mechanism?

[Admiral Yi]

My understanding was that the problem pointed out with the euro is there is no mechanism for kicking out a member, not that there are any legal requirements that prevent a member from leaving of their own volition.

[The Minsky Moment]

High living standards?  Must put a stop that nonsense at once!

No need to lift a finger.  High living standards built on borrowing tend to self-correct.

That would explain the collapse in the GDP/capita of Luxembourg.
Oh wait, that never happened . . .

[Admiral Yi]

That would explain the collapse in the GDP/capita of Luxembourg.
Oh wait, that never happened . . .

Don't really know what you're talking about.

[Zanza]

It was designed to punish exit? That one is new to me.

How else do you explain the lack of exit mechanism?

They didn't see the necessity? When it was created the EU also didn't have an exit mechanism and they must have assumed that the Euro was for perpetuity. Otherwise you don't join a currency union in the first place.

[citizen k]

That would explain the collapse in the GDP/capita of Luxembourg.
Oh wait, that never happened . . .

Don't really know what you're talking about.

It's called 'grasping at straws'.

[Jacob]

If you construct a "it's their own fault" narrative you feel less guilty about enjoying other peoples' suffering while also feeling less likely that it will happen to you.

Quite the opposite.

You see events in Cyprus as an object lesson for America? You fear you'll go down that road?

... or something else?

[Admiral Yi]

You see events in Cyprus as an object lesson for America? You fear you'll go down that road?

... or something else?

Not Cyprus per se, since, as Iorm so graciously pointed out, their's is a banking crisis rather than a sovereign debt crisis, but if you haven't noticed I won't shut up about the US debt.

[Jacob]

Not Cyprus per se, since, as Iorm so graciously pointed out, their's is a banking crisis rather than a sovereign debt crisis, but if you haven't noticed I won't shut up about the US debt.

Yes yes, I did notice that.

[Neil]

Jesus fucking Christ. What's with the moral outrage, the fixation with debt and "living beyond your means"? Cypriots were not borrowing shit. They went down because their banks were tightly coupled with Greece, and faced crippling losses after the haircut last year.

The financial sector was a major contributor to Cypriot GDP.  It turns out the value added by that sector was not sustainable. Cypriots who earned their living in the financial sector, or by providing goods and services to people in the financial sector, were in fact living beyond their means.

Well put.

[The Minsky Moment]

That would explain the collapse in the GDP/capita of Luxembourg.
Oh wait, that never happened . . .

Don't really know what you're talking about.

I'm talking about countries where the financial sector is supposedly too big to be sustainable.
Since Luxembourg's financial sector is about 5-10 times larger than Cyprus relative to economy and population, it must be doomed.

Or maybe the analysis of "living beyond means" is not sound.

[Admiral Yi]

I'm talking about countries where the financial sector is supposedly too big to be sustainable.
Since Luxembourg's financial sector is about 5-10 times larger than Cyprus relative to economy and population, it must be doomed.

Or maybe the analysis of "living beyond means" is not sound.

Or maybe Luxembourgeois banks are not sinking their funds into worthless Greek paper.

[Neil]

High living standards?  Must put a stop that nonsense at once!

Indeed.  There are only so many resources on the Earth, and the fewer that are consumed by third-world barbarians, the better.