Greece shocks markets with referendum on austerity

[Martinus]

it was the Greek people who basked in the shower of loaned money their leaders German bankers bathed them in.

Fixed

The Tamas/Martinus response helps explain why the EU is in danger of ending up a failed project.  Even at the level of the relatively well-informed elite (yeah, yeah, hold the jokes), there is a lack of understanding of the fundamental interconnections in the financial system.  There are no innocent parties here.  If some states got hooked on financial crack, their behavior was enabled by the states that chose to profit from being the drug dealers.  But what we see is that when a crisis arises, the pan-European balls of light rally around their tribes to chant and point fingers.  It is Lincoln's house divided against itself, and no amount of fancy contemporary European architecture can keep such a structure standing for the long run.

Well, I know that, and I have always voiced my view that the Greek mess is the doing of German bankers as much as it is of the Greek government. However, the current situation is unsustainable and if Greece wants to stay in the EU/Eurozone, it must take painful reforms.

When Poland was adopting painful reforms in 1989, noone cared that the sorry state of our economy was caused by years of communist rule and "generosity" of international bankers.

[Martinus]

...tired racist morality tropes about hardworking Protestants and lazy Mediterraneans.

How is it racist when they're the same race?

You shut your mouth. Mediteranean types are not white, ergo a different race.

I don't think Protestant is a race though.

It's a race to the bottom. 

[Gups]

Not if it's agreed

I don't think many were agreeing out of the charity of in their hearts.

Whatever the motive, if they agree it's not a default.

[alfred russel]

Not if it's agreed

I don't think many were agreeing out of the charity of in their hearts.

Whatever the motive, if they agree it's not a default.

It is a de facto default. Whether it meets some legal or contractual threshold isn't my expertise.

[Ideologue]

...tired racist morality tropes about hardworking Protestants and lazy Mediterraneans.

How is it racist when they're the same race?

You shut your mouth. Mediteranean types are not white, ergo a different race.

I've been insulted by a damn ukranian. One living in alberta, just to make it worse

No shit.  It's one thing to get that from a German or something, but a Mongol-Slav?  Yeah, right.

[DGuller]

The Tamas/Martinus response helps explain why the EU is in danger of ending up a failed project.  Even at the level of the relatively well-informed elite (yeah, yeah, hold the jokes),

[Admiral Yi]

Whatever the motive, if they agree it's not a default.

I think you have this wrong Gups.  All modern day defaults have the lenders (or some minimum percentage of the lenders) sign off on the amount of the haircut.

[DGuller]

That seems like a pointless semantic debate.  You don't get haircuts unless it is obvious that full repayment is impossible.  Therefore, whether lenders agree to a haircut, or have one imposed on them in some way, is really fundamentally the same (even if legally there are different ramifications).

[The Minsky Moment]

When Poland was adopting painful reforms in 1989, noone cared that the sorry state of our economy was caused by years of communist rule and "generosity" of international bankers.

IIRC the US and Germany provided a few billion in aid.

As for the Polish debt, payments were suspended for several years. Ultimately, the Paris Club of sovereign holders cut the principal amount by 50% and then the bank creditors took a 40% reduction as part of a Brady bond plan.

[Tamas]

it was the Greek people who basked in the shower of loaned money their leaders German bankers bathed them in.

Fixed

The Tamas/Martinus response helps explain why the EU is in danger of ending up a failed project.  Even at the level of the relatively well-informed elite (yeah, yeah, hold the jokes), there is a lack of understanding of the fundamental interconnections in the financial system.  There are no innocent parties here.  If some states got hooked on financial crack, their behavior was enabled by the states that chose to profit from being the drug dealers.  But what we see is that when a crisis arises, the pan-European balls of light rally around their tribes to chant and point fingers.  It is Lincoln's house divided against itself, and no amount of fancy contemporary European architecture can keep such a structure standing for the long run.

yes, the bankers played the "too big to fail" angle which was given to them. They thought they were making a risk-free high-yield investment. Irresponsible? Certainly. But the ball was on the Greek side.

[crazy canuck]

When Poland was adopting painful reforms in 1989, noone cared that the sorry state of our economy was caused by years of communist rule and "generosity" of international bankers.

IIRC the US and Germany provided a few billion in aid.

As for the Polish debt, payments were suspended for several years. Ultimately, the Paris Club of sovereign holders cut the principal amount by 50% and then the bank creditors took a 40% reduction as part of a Brady bond plan.

You can add Canada and the UK to that list as well (although the US and Germany contributed the lion's share).

If Marti wants to learn a bit about the aid that as was given from 1989 on by Canada and a sholarly assessment of the impact of that aid here is a link http://www.utoronto.ca/ceres/CIDA/reports/papers/PolandPapeSmalyuk.pdf

I for one doubt the positive impact on Poland's educational system.

[Gups]

Whatever the motive, if they agree it's not a default.

I think you have this wrong Gups.  All modern day defaults have the lenders (or some minimum percentage of the lenders) sign off on the amount of the haircut.

Assuming you are talking about sovreign countries, could you give me an example? I always thought that Argentina simply didn't pay and I can't think of any more recent ones.

If you are talking about companies, I think there are loads of different situations but I would not call a creditors voluntary agreement a default (and nor would the dictionary or, I think, the terms of any loan).

[Admiral Yi]

Assuming you are talking about sovreign countries, could you give me an example? I always thought that Argentina simply didn't pay and I can't think of any more recent ones.

If you are talking about companies, I think there are loads of different situations but I would not call a creditors voluntary agreement a default (and nor would the dictionary or, I think, the terms of any loan).

I was talking about sovereigns.  Argentina settled a year back or so, a good long time after it's most recent default.

I have a suspicion, but no proof, that investors in Russian ruble debt lost everything.  The difference is where the bonds are issued and what law governs them.  The majority of Latin American dollar denominated debt (which I'm most familiar with) is governed by New York law.  This is important because under NY law any unpaid creditors can seize any new loan disbursements as partial repayment.  So the sovereign is shut out of the market until they settle.

[Tamas]

Funny-ass day: Greek politics are in absolute chaos, the government has lost it's majority, which causes world markets to... rocket up high, in hopes that this will somehow cancel the referendum and makes accepting the deal easier.

[alfred russel]

Whatever the motive, if they agree it's not a default.

I think you have this wrong Gups.  All modern day defaults have the lenders (or some minimum percentage of the lenders) sign off on the amount of the haircut.

Assuming you are talking about sovreign countries, could you give me an example? I always thought that Argentina simply didn't pay and I can't think of any more recent ones.

If you are talking about companies, I think there are loads of different situations but I would not call a creditors voluntary agreement a default (and nor would the dictionary or, I think, the terms of any loan).

Greece is insolvent. Various entities and have tried to float Greece with below market interest rates, but this is almost certainly insufficient. They need more help. For reasons I don't totally agree with, the various EU governments don't want a partial repudiation of debt by the Greece. Governments don't want to reduce the principal that Greece owes them because that will lead to a public outcry (it would be an obvious transfer of wealth from their people to the "irresponsible" Greeks). So the solution seems to be to tell banks (backed and regulated by governments, and also unpopular atm) that they are going to take the losses.

And really, it seems fair enough, if we can suspend all disbelief and assume this will work. Government along with banks have most of the debt, so the government and quasi governmental agencies can transfer money to Greece through a variety of means (such as below market interest rates) and the banks can "volunatarily" take the losses on capital. Ordinary investors can be fully repaid and voters can be told that all the money they lent to Greece was paid back. A high speed disaster is converted to a tedious headache, and there is a fig leaf to deny that anyone really bailed out Greece. This is corporatist government at its finest.

But it doesn't change that Greece has lent out money that it can't, and for that reason won't, pay back. Whether that meets the criteria for a default is semantic, imo.