Greek Referendum Poll

[Admiral Yi]

The rest of the EU is going to end up paying anyways, so what's the difference?

Check your tenses Timmy.  We're talking about the hypothetical of no austerity. 

And for God's sake please put a hard return after a post you quote.  It's a pain in the ass to crop when you don't.

[Richard Hakluyt]

Bankrupt Greece is still richer than China the economic powerhouse of the globe.   

Hate to break it but lots of countries are richer than "the economic powerhouse of the globe." Using the 2014 IMF numbers that would include Colombia, Serbia, Libya, the Dominican Republic, Algeria.

China is still a poor country.  There are pockets of prosperity.  And still huge swaths of grinding poverty.

I was browsing through my Economist "Pocket World in Figures" the other day and comparing the UK with China. China's total production is vast of course, but so is its population; I found that (in 2012) UK industrial production per capita was 3.5 times greater than China's, while services output was over 13 times greater per capita.........and Britain is only middle of the pack for Western nations.

[Monoriu]

I saw many wall posters in China asking people to take up jobs in restaurants and retail shops, and I was very surprised how little the front line workers made.  A waiter in a decent restaurant would make like US$6-8k per year.  (Unlike the US, there is no expectation for all customers to tip.)  That is a big contrast with the image of mainlanders being big spenders and buying up all the luxury goods available everywhere in the world. 

[frunk]

I saw many wall posters in China asking people to take up jobs in restaurants and retail shops, and I was very surprised how little the front line workers made.  A waiter in a decent restaurant would make like US$6-8k per year.  (Unlike the US, there is no expectation for all customers to tip.)  That is a big contrast with the image of mainlanders being big spenders and buying up all the luxury goods available everywhere in the world.

The population of mainlanders who leave the country in order to buy things are going to be the wealthier ones, not the service workers.

[viper37]

Late to the party, but do we have actual examples or highly endebted countries who got themselves out of a recession and to successfull growth by taking even more debt?

[Grey Fox]

All of them?

[Valmy]

All of them?

South America has managed to turn two centuries of peace and stability into disaster using that plan. Not sure it is all that fool proof.

[Martinus]

Late to the party, but do we have actual examples or highly endebted countries who got themselves out of a recession and to successfull growth by taking even more debt?

Sorry but is anyone proposing that? It seems to me you are creating a strawman.

[The Minsky Moment]

I don't know what you're talking about here.  It doesn't match the post you responded to.

Your post contains an assumption that Greece running less austerity would mean someone would have to pay money that otherwise was not paid.

The assumption is false.  Greece did austerity.  Its debt load went up.  And the rest of the EU picked up the tab.    The tab would not have been any different in the absence of austerity.

The only difference in the absence of harsh austerity would be that Greece's GDP and growth prospects would be better now.

Assuming for the sake of argument that ECB rules would permit such a write off, or that they could be changed to do so, how does one justify giving Greece free money in the amount of 6-8% of GDP but not the other indebted countries?  Surely an equivalent gift to Portugal or Ireland would have a similarly negligible effect on the money supply and inflation and the exchange rate and asset values?

You've stated it elsewhere.  Conditionality.

[Martinus]

The pro-austerity crowd does not seem to get the fact that debt reduction or not, it is highly unlikely the creditors will see most of their money again. The Eurozone governments are engaging in the elaborate illusion of "extend and pretend" for political reasons, but Greece will never be in a position to repay all that debt. The only viable solutions are either a Greek default and Grexit, or debt haircut and allowing Greece to grow before it starts to pay off the rest of the debt. The latter would be clearly preferably from economic standpoint, but may be politically unviable for Eurozone governments.

[crazy canuck]

The pro-austerity crowd does not seem to get the fact that debt reduction or not, it is highly unlikely the creditors will see most of their money again. The Eurozone governments are engaging in the elaborate illusion of "extend and pretend" for political reasons, but Greece will never be in a position to repay all that debt. The only viable solutions are either a Greek default and Grexit, or debt haircut and allowing Greece to grow before it starts to pay off the rest of the debt. The latter would be clearly preferably from economic standpoint, but may be politically unviable for Eurozone governments.

Yeah, the Germans are forcing the Greeks into more misery for a very dubious end result.

[The Minsky Moment]

The fundamental difference is between different views on how heavily to weight moral hazard concerns.  Yi (and those similarly inclined) weigh it very heavily, to the point where there is a willingness to let an entire small country collapse pour encourager les autres.  I don't think it merits that level of concern.

[crazy canuck]

The fundamental difference is between different views on how heavily to weight moral hazard concerns.  Yi (and those similarly inclined) weigh it very heavily, to the point where there is a willingness to let an entire small country collapse pour encourager les autres.  I don't think it merits that level of concern.

Agreed, its like the disciplinarian parent who goes over the top to demonstrate their disapproval to the rest of their children.

[Monoriu]

The pro-austerity crowd does not seem to get the fact that debt reduction or not, it is highly unlikely the creditors will see most of their money again. The Eurozone governments are engaging in the elaborate illusion of "extend and pretend" for political reasons, but Greece will never be in a position to repay all that debt. The only viable solutions are either a Greek default and Grexit, or debt haircut and allowing Greece to grow before it starts to pay off the rest of the debt. The latter would be clearly preferably from economic standpoint, but may be politically unviable for Eurozone governments.

It isn't about Greece any more.  Greece is a goner.  It is about Spain, Portugal and lots of others.  There is a need to demonstrate what the result of voting in a pro-welfare, anti-austerity party, spending until the country is bankrupt, and blackmailing more prudent countries into giving them more money to spend, is. 

[Martinus]

The pro-austerity crowd does not seem to get the fact that debt reduction or not, it is highly unlikely the creditors will see most of their money again. The Eurozone governments are engaging in the elaborate illusion of "extend and pretend" for political reasons, but Greece will never be in a position to repay all that debt. The only viable solutions are either a Greek default and Grexit, or debt haircut and allowing Greece to grow before it starts to pay off the rest of the debt. The latter would be clearly preferably from economic standpoint, but may be politically unviable for Eurozone governments.

It isn't about Greece any more.  Greece is a goner.  It is about Spain, Portugal and lots of others.  There is a need to demonstrate what the result of voting in a pro-welfare, anti-austerity party, spending until the country is bankrupt, and blackmailing more prudent countries into giving them more money to spend, is.

So precisely what Minsky just said.