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Source: (consider it) Thread: What happens if Greece leaves the Euro?
Robert Armin

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# 182

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I am genuinely puzzled here, and am looking for wiser Shipmates to enlighten me. Greece is clearly in a big financial mess, and there are loads of opinions about what (if anything) can be done to sort them out. One possibility is that they might have to pull out of the Euro zone, and this is normally accompanied by warnings that all of Europe, and even Britain, might then collapse in financial ruin.

What I can't see is why Greece leaving should cause problems for any other countries. How serious would it be if we saw a Hellenic withdrawal?

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Keeping fit was an obsession with Fr Moity .... He did chin ups in the vestry, calisthenics in the pulpit, and had developed a series of Tai-Chi exercises to correspond with ritual movements of the Mass. The Antipope Robert Rankin

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Beeswax Altar
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Does anybody know what would happen if Greece leaves the Euro? The EU can't maintain the status quo. Other nations will soon have to decide if staying in the euro is in their best interest. Greece might end up being a test case.

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SeraphimSarov
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If Greece goes , I don't see Spain or Portugal staying. It will probably become a grouping of smaller nations (Germany, France, Etc) But who knows what will happen in the event of a free fall ?
I'm very glad the UK and Scandinavia were smart enough to stay out

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Evensong
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Mmmnnnn.... Good question Robert Armin. I've been equally bamboozled at the financial systems involved in these things.

And if other countries withdraw cos they can't keep up ( I believe Spain is next on the hopeless causes list?) what then?

How does it hurt the Euro if weaker economies withdraw?

I would have thought it would help.

[Confused]

[ 22. May 2012, 13:27: Message edited by: Evensong ]

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a theological scrapbook

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Honest Ron Bacardi
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If weaker economies withdraw, what happens next is unpredictable. Theoretically, the exchange rate of the euro should rise as it is not being pulled down by the weaker economies. That would make it more difficult for the weakest economies remaining in the euro, and give less headroom to the stronger economies to bear the load of supporting them.

But in fact the banks in the stronger economies are already highly exposed to debt in the weaker economies, and the latter are going to have to default if they withdraw.

So what is likely to happen is a flight of capital. It has started already in Greece. Nobody knows whether that will lead to general bank failures, but some will assuredly fail.

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Yerevan
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As I understand it, the Greek banks would almost certainly not survive a Greek withdrawal from the Euro. Apparently many Greeks are already withdrawing their money, on the basis that keeping it in cash (and in euros) is a better option than trusting to a Greek successor currency. The question then is how much exposure the wider European banking system has to a Greek bank collapse.
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the long ranger
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I think there has also been a lot of money put into the bail-out of Greece by other Eurozone countries. As far as I can understand it (which admittedly isn't far), a withdrawal from the Euro would be to default on their loans.

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Evensong
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So defaults on loans hurt the banks which in turn hurt capital in general?

But wouldn't that only occur if the banks were only smallish banks not backed by the EU or the IMF?

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Yerevan
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There's also a pyschological aspect. The euro was very much sold as the next big step in the European project, a sort of post-war European manifest destiny.
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Read, mark, learn and inwardly digest

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Albertus
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Which is the reason why dodgy economies like Greece (OK, Greece being the worst example) were allowed in. If the Euro had started off with, say, the Benelux, Germans, Austrians, maybe the French, then let others in as an when they could show they could hack it, would it be in the trouble it is in today? Nope.

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Honest Ron Bacardi
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quote:
Originally posted by Evensong:
So defaults on loans hurt the banks which in turn hurt capital in general?

But wouldn't that only occur if the banks were only smallish banks not backed by the EU or the IMF?

The majority of the capital that banks loan is not their own but is borrowed in the marketplace. They do of course have to deal with loans going bad all the time, but if it gets out of hand, lenders will stop lending to banks if they think the banks will not be able to repay them in turn. Its a game of confidence really.

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Anglo-Cthulhic

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Matt Black

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Agreed. The EU is a bit like a shark: it has to keep moving forward in order to survive. That's why EU leaders are never content with the status quo but always looking ahead to the next treaty, the next round of accessions etc. Any country exiting the Euro would be a retrograde step and thus spell the beginning of the end for the EU.

[Reply to Yerevan]

[ 22. May 2012, 13:59: Message edited by: Matt Black ]

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Yerevan
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Though its debatable whether even a much smaller eurozone would have worked without much higher
levels of economic integration (which would have meant surrending more sovereignty than any electorate would have been willing to accept). Thus Ireland came unstuck partly because eurozone membership took certain key means of cooling down an overheating economy out of Irish hands i.e. eurozone interest rates for much of the 2000s were the polar opposite of what the Irish economy needed, because the Irish economy was out of step with much of the continent. IMO the euro cannot be made to work without a massive surrender of sovereignty on the part of its members, but no one is going to make that surrender.

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Crśsos
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quote:
Originally posted by Yerevan:
As I understand it, the Greek banks would almost certainly not survive a Greek withdrawal from the Euro. Apparently many Greeks are already withdrawing their money, on the basis that keeping it in cash (and in euros) is a better option than trusting to a Greek successor currency. The question then is how much exposure the wider European banking system has to a Greek bank collapse.

That's always been the big barrier to any nation abandonning the Euro: that doing so would kick off bank runs and a financial crisis. What makes a Greek exit from the Euro thinkable is that they're going to have a finanicial crisis anyway and having the level of control available to countries with their own currency (and thus greater control over their internal rate of inflation) is a rather critical tool in getting out of this particular type of financial crisis.

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Humani nil a me alienum puto

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Crśsos
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quote:
Originally posted by Yerevan:
The question then is how much exposure the wider European banking system has to a Greek bank collapse.

I haven't checked the numbers on this, but I suspect that the exposure of other European banks to Greek banks is trivial compared to their exposure to Greek government debt. Remember, the various "rescue" packages Greece has received so far haven't been intended to help Greece, but rather to bail out the holders of Greek government bonds, most of whom are German and French banks. If the Greek government defaults on its bonds, or starts paying off those bonds using a much-devalued New Drachma, the consequences for the counterparties is expected to be dire.

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Humani nil a me alienum puto

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ken
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quote:
Originally posted by Robert Armin:
How serious would it be if we saw a Hellenic withdrawal?

Very serious for Italian Mediterranean tourist operators as the cost of Greek hotels and cruises was suddenly halved. And Plenty of high-quality cheap olive oil to compete with Spanish production.

British and German universities will recruit loads of Greek academics only too willing to triple their wages by moving a few hundred miles. Oh, we already did that. They're here already.

Non-Greek Bank collapses? Only if they are utterly incompetant idiots. Which they might be, of course. Most large private foreign investment will have been taken out of Greek banks in 2008 & 2009. That's one of the reasons they have been having such trouble.

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Ken

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Crśsos
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quote:
Originally posted by ken:
Most large private foreign investment will have been taken out of Greek banks in 2008 & 2009. That's one of the reasons they have been having such trouble.

This ties in with my earlier post on consequences of leaving the Euro. Doing so will make it next to impossible for the Greek government to sell bonds. However, given that it's already next to impossible for the Greek government to sell bonds, this no longer seems to be a huge barrier.

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lowlands_boy
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quote:
Originally posted by Crśsos:
quote:
Originally posted by Yerevan:
The question then is how much exposure the wider European banking system has to a Greek bank collapse.

I haven't checked the numbers on this, but I suspect that the exposure of other European banks to Greek banks is trivial compared to their exposure to Greek government debt. Remember, the various "rescue" packages Greece has received so far haven't been intended to help Greece, but rather to bail out the holders of Greek government bonds, most of whom are German and French banks. If the Greek government defaults on its bonds, or starts paying off those bonds using a much-devalued New Drachma, the consequences for the counterparties is expected to be dire.
Yes - this. It seems to me that all this bail out money that is being "invented" by the ECB and the IMF is being "given" to Greece, so that they can "give" it straight to their creditors. If the Greeks pull out of the Euro, it's clear that they won't get any more bail out money, and their creditors will be knackered. In which case, the ECB/IMF/whoever, can just cut out the middle man and give the bail out money directly to the same creditors who are ultimately receiving it now. No?

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lowlands_boy
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By the way - for those in the UK who might not have seen it and have access to BBC iPlayer, they had a good show last week presented by Robert Peston, investigating the founding of the Euro and it's current problems.

The Great Euro Crash

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Honest Ron Bacardi
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If you want to see who owes what to whom, there is a useful graphic here, on the BBC website, which splits government debt from non-government debt.

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Anglo-Cthulhic

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ken
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# 2460

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Frankly I think if Greece or any other country simultaneously leaves the Euro and sees its new currency inflate sharply, the Euro governments will wave a magic legislative wand and write off most of the government debt, "printing" (i.e. making an entry in a database that represents) much of the extra money needed. That will make everybody a bit poorer and give a one-off inflationary blip but it won't change the relative position of the nations still in the Euro to each other, nor would it cripple productive companies. In fact by cutting the value of Euro against other currencies it might boost exports a little.

Private debt is a different matter. If you or I or Barclay's Bank decide to lend money to Greek individuals and companies and the Greek government suddenly ordains that Euro-denominated debt has to be paid back in Dodgy Drachmas, that's our look-out. We could have done the deal in Sterling had we wanted. Or pulled out of the contract, or sold some or all of the debt on to spread the risk, or taken insurance.


quote:
Originally posted by Honest Ron Bacardi:
If you want to see who owes what to whom, there is a useful graphic here, on the BBC website, which splits government debt from non-government debt.

If that site is true then the non-Government debt from Greece to UK is worth about 100 Euros per UK taxpayer. So if Greece utterly vanished from trade markets and no Greek ever paid back a penny to their British creditors the direct impact on our economy would be somewhere in the same ballpark as the 1993 Bishopsgate bomb or the government's over-reaction to the 2000 fuel protest. Less than the policing costs of the Jubilee and the Olympics.

Ireland though owes us about 3,000 euros per taxpayer. And its nearly all private business debt. Whoops.

[ 22. May 2012, 17:32: Message edited by: ken ]

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Ken

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the long ranger
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I was just talking to someone else about this.. presumably if Greece restarts their own currency, there would be massive devaluation vs the Euro. In that scenario, things that are scarce at the moment in Greece are unlikely to become less scarce (because they are going to be short of hard currency to buy expensive stuff and nobody will lend them anything).

So the chances of hyperinflation and the grinding to a halt of public services seems fairly high.

Which makes me think that anyone who is able to will try to leave Greece - and as they are full members of the EU can legitimately settle in any other nation state.

Gadzooks, it'd mean the breakup of the EU. Who is going to want to accept millions of hungry refugees from Greece?

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"..into the outer darkness where there will be weeping and gnashing of teeth,” “But Rabbi, how can this happen for those who have no teeth?”
"..If some have no teeth, then teeth will be provided.”

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ken
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quote:
Originally posted by the long ranger:

Who is going to want to accept millions of hungry refugees from Greece?

Pretty much anyone. They are mostly white and comparitively well-educated, and (despite the propaganda of the last few years) they actually on average work longer hgours and more productively than most Europeans.

Also about a quarter of all Greeks live abroad already. London might well be the city in the world with the third or fourth largest Greek population (the competition would include New York and Melbourne).

Even if half the population left - which won't happen - and even if they all stayed in the EU - also unlikely - that would be only about one percent of the population of the other countries.

And if even a fractiom of that many lest, there would be an awful lot of cheap houses and land in Greece for us Brits and Germans to buy. Greece is too hot for me, especially in summer, but you can buy a small house in a holiday resort with a small garden and a swimming pool for less than the likely price of my slumlike London flat. If real prices halved? Even though I wouldn't go, I bet a lot of the kind of people who used to buy houses in Spain twenty years ago, and now seem to be going to Turkey or to Northern Cyprus, would be very tempted.

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Ken

L’amor che move il sole e l’altre stelle.

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Sober Preacher's Kid

Presbymethegationalist
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quote:
Originally posted by Yerevan:
Though its debatable whether even a much smaller eurozone would have worked without much higher
levels of economic integration (which would have meant surrending more sovereignty than any electorate would have been willing to accept). Thus Ireland came unstuck partly because eurozone membership took certain key means of cooling down an overheating economy out of Irish hands i.e. eurozone interest rates for much of the 2000s were the polar opposite of what the Irish economy needed, because the Irish economy was out of step with much of the continent. IMO the euro cannot be made to work without a massive surrender of sovereignty on the part of its members, but no one is going to make that surrender.

American, Australian and Canadian economists were critical of the Euro for just this reason. The EU was not nearly integrated enough as a market, particularly for labour. Statutory labour mobility doesn't mean much when Spanish workers won't move to Germany because of language and cultural issues.

Further all those three above-named federations have extensive systems of fiscal transfers which experience has shown are needed to make a single currency area work. The Euro didn't have that and was thus a bomb waiting to go off.

Apparently the ECB is no longer dealing with some Greek banks, which means those banks are bankrupt and have failed in practical terms. Once the central bank stops dealing with you, you're toast.

In terms of immigrants from Euro victim states, I'm holding out for Irish immigration. Just because parts of my family wound up on these shores from Ireland 150 years ago due to economic issues.

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Honest Ron Bacardi
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SPK wrote
quote:
Further all those three above-named federations have extensive systems of fiscal transfers which experience has shown are needed to make a single currency area work. The Euro didn't have that and was thus a bomb waiting to go off.
This is true enough, though the EU does have a structural funding mechanism which is intended to push things in that direction. But this is only going to work if the funds are used for economic purposes to make the economies more convergent. And broadly speaking I think France and Spain did that. Probably Ireland too though I don't know enough to confirm that.

The problem is that Greece didn't. It's difficult to know where to begin really - the government hid debts off-balance sheet so it could apparently meet the joining criteria. It has a near-optional tax regime if you are an employer or self-employed (which of course most professions choose to be). The government deficit is running out of control, and the national debt heads ever-skywards. And so on (see threads passim).

Even if a rabbit can be pulled out of the hat and Greece gets to stay in the euro, they will become increasingly in hock to their northern neighbours and surely increasingly resentful. That in itself could spell disaster, and it is true whether or not a fiscal union can be formed. The point is they are non-convergent, and I think they cannot now realistically become convergent.

ken wrote:

quote:
Frankly I think if Greece or any other country simultaneously leaves the Euro and sees its new currency inflate sharply, the Euro governments will wave a magic legislative wand and write off most of the government debt, "printing" (i.e. making an entry in a database that represents) much of the extra money needed. That will make everybody a bit poorer and give a one-off inflationary blip but it won't change the relative position of the nations still in the Euro to each other, nor would it cripple productive companies. In fact by cutting the value of Euro against other currencies it might boost exports a little.
Something like that I guess, even if not that exactly. I think the only authority able to do this under current laws is the ECB, and right now they are banned from doing it. But I guess if Germany could be persuaded, they could change the rules overnight. Frankly I doubt the German public would support it, so it may get done some other way.

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Anglo-Cthulhic

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Sober Preacher's Kid

Presbymethegationalist
# 12699

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I know the EU has transfers, but the "policing" behind them just isn't of the same order that it is in Canada, the US and Australia. Australia has an extensive system of "tied grants" for states with lots of compliance, the US Unemployment Insurance system is run by states with Federal supervision, as is Medicaid. In Canada we either have unconditional grants (equalization) or tied transfers that have fulfilled their purpose, health transfers are related to the level of parallel private billing in a province and eradicated the practice 30 years ago.

The EU just isn't on the same level. The aforementioned Anglosphere economists told the EU that the middle ground the EU was aiming for didn't exist.

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NDP Federal Convention Ottawa 2018: A random assortment of Prots and Trots.

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Crśsos
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quote:
Originally posted by the long ranger:
I was just talking to someone else about this.. presumably if Greece restarts their own currency, there would be massive devaluation vs the Euro. In that scenario, things that are scarce at the moment in Greece are unlikely to become less scarce (because they are going to be short of hard currency to buy expensive stuff and nobody will lend them anything).

So the chances of hyperinflation and the grinding to a halt of public services seems fairly high.

The question is how massive is "massive"? (And why does any inflation rate above about 2% seem to be considered "hyperinflation" these days?)

In line with my other posts, since the austerity measures being demanded of Greece are already resulting in "the grinding to a halt of public services", that's not a particularly effective warning. At any rate, a moderate amount of inflation (especially inflation relative to the rest of the EU) would probably help the Greek economy by boosting its exports to the rest of the EU.

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Humani nil a me alienum puto

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fletcher christian

Mutinous Seadog
# 13919

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Posted by Seraphim:
quote:

I'm very glad the UK and Scandinavia were smart enough to stay out

I'm hoping that this won't come as a shock. Are you sitting down? The UK is part of it - you are actually in the EU, you do benefit from it and just as the rest of Europe would be effected by an economic downturn in the UK, so the UK would quite naturally and understandably be effected by an economic downturn in any other part of Europe. The UK isn't miles away from the rest of Europe. I know some might wish it was, but it is actually part of it. I know that leaders on TV talk about Europe like it's as far off and far away as China and I know that must be very confusing and make it really hard to understand where exactly the UK is located. I know you have swallowed all the silly spin about the Euro and how everything is all about the Euro. Now ask yourself; would it really get us out of this crisis where banks gave loans like it was Christmas come early and people bought houses they knew they couldn't afford and where businesses built more property than there are people to live in them, if we all had our own money called by our own special name with our own pretty pictures on them? Maybe you haven't noticed this either, but not being in the Euro doesn't seem to be helping the UK in the least at the moment. I'm somewhat surprised you still swallow that spin about it 'being all about being in the euro', but at least you're living up to what your leaders expect of you (which isn't a good thing by the way).

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'God is love insaturable, love impossible to describe'
Staretz Silouan

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fletcher christian

Mutinous Seadog
# 13919

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Hmmm, I promise I only hit the button once, but a Trinitarian response has been garnered.

[To quote Hannibal Lecter; "Not any more" Edited at FC's request; B62]

[ 22. May 2012, 21:49: Message edited by: Barnabas62 ]

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'God is love insaturable, love impossible to describe'
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the long ranger
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# 17109

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quote:
Originally posted by ken:
Pretty much anyone. They are mostly white and comparitively well-educated, and (despite the propaganda of the last few years) they actually on average work longer hgours and more productively than most Europeans.

Well, obviously we inhabit different worlds, ken. In mine, productivity throughout Europe is down and concerns about a lack of employment and immigration at an all-time high. There are few jobs, mass migrations of Greeks would put strains onto social security budgets in countries which are already close to breaking point, in my opinion.

quote:
Also about a quarter of all Greeks live abroad already. London might well be the city in the world with the third or fourth largest Greek population (the competition would include New York and Melbourne).
I'm sure this is true, but hardly relevant. If every person in the disapora had a family member to live with them, this would cause massive strain. And as far as I can see, there is very little chance of Greeks being able to migrate to North America. Possibly to Australia - I hear that many Irish are moving over there.

quote:
Even if half the population left - which won't happen - and even if they all stayed in the EU - also unlikely - that would be only about one percent of the population of the other countries.
Again, this is true but irrelevant. It isn't the numbers of migrants so much as the concentration of them in a short period of time which would cause a problem.

quote:
And if even a fractiom of that many lest, there would be an awful lot of cheap houses and land in Greece for us Brits and Germans to buy. Greece is too hot for me, especially in summer, but you can buy a small house in a holiday resort with a small garden and a swimming pool for less than the likely price of my slumlike London flat. If real prices halved? Even though I wouldn't go, I bet a lot of the kind of people who used to buy houses in Spain twenty years ago, and now seem to be going to Turkey or to Northern Cyprus, would be very tempted.
Well, again, this is a very optimistic vision of the Greek future. An alternative involves mass instability within the country. shortages of food and rioting. In that scenario, the tourism market could drop off - as Egypt shows, tourists do not like danger. As to the cheap housing, there are already an influx of people leaving Cyprus to return to northern Europe as they begin to realise that hospital bills are unaffordable. In an unsettled Greece, I cannot see that it necessarily follows that people from the North will be so keen to move there even if they have the money to do so. There are many cheap places to live in Croatia and elsewhere, the fact that the price is low has not encouraged mass purchasing of their housing.

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"..If some have no teeth, then teeth will be provided.”

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aumbry
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quote:
Originally posted by Albertus:
Which is the reason why dodgy economies like Greece (OK, Greece being the worst example) were allowed in. If the Euro had started off with, say, the Benelux, Germans, Austrians, maybe the French, then let others in as an when they could show they could hack it, would it be in the trouble it is in today? Nope.

You are buying the idea that the failure of the Euro Project is to do with the weaker economies which joined it dragging the show down. The fault in fact lies not with Greece or Spain or Italy but the very design of the Euro. If the Euro had contained say just Germany, Benelux and the Austrians it would have been a very hard currency which would mean that the least competitive economies in that group say Belgium and Austria would have found themselves in the position that Spain and Greece are now in.

Greece has had abysmal governance and not all of the economic disaster they are facing can be blamed on the Euro but their only hope is Euro-exit which would make them competitive again in their main export market of tourism, foreign currency would start to return, as Ken says people would buy cheap villas and olive oil and gradually there would be a revival. With the Euro all they can hope for is a decade of grinding austerity.

The backers of the Euro will spin a tale of Euro-exit being an economic disaster because they know that if Greece had a revival outside the Euro other nations would want to follow and the whole project would quickly collapse. It amazes me that the European public still take any notice of the economic predictions of the Euro-Elite as it is their policies which have led to this disaster.

[ 23. May 2012, 10:29: Message edited by: aumbry ]

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Vaticanchic
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Cheap hols?

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ken
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quote:
Originally posted by the long ranger:

If every person in the disapora had a family member to live with them, this would cause massive strain.

Bollocks. The UK alone had more Poles than that move here in the 1990s and 2000s. Economically beneficial to pretty much everybody. There really aren't that many Greeks.

Now if Spain crashed in the same way, that would put lots of people in the shit. And don't even think about Italy. Ireland defaulting would hurt the UK financially (but not anyone else much). But Greece alone isn't big enough to cause serious trouble for everyone else.

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Ken

L’amor che move il sole e l’altre stelle.

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the long ranger
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quote:
Originally posted by ken:
Bollocks. The UK alone had more Poles than that move here in the 1990s and 2000s. Economically beneficial to pretty much everybody. There really aren't that many Greeks.

The majority of Poles came to work when there were jobs. Now there are fewer jobs, they are leaving. So bollocks to you.

quote:
Now if Spain crashed in the same way, that would put lots of people in the shit. And don't even think about Italy. Ireland defaulting would hurt the UK financially (but not anyone else much). But Greece alone isn't big enough to cause serious trouble for everyone else.
It isn't about Greece being the problem on its own, but the domino effect of any possible default. If it was just about the effect of Greece, nobody outside of Greece is going to be worrying about it.

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"..into the outer darkness where there will be weeping and gnashing of teeth,” “But Rabbi, how can this happen for those who have no teeth?”
"..If some have no teeth, then teeth will be provided.”

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aumbry
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quote:
Originally posted by ken:
quote:
Originally posted by the long ranger:

If every person in the disapora had a family member to live with them, this would cause massive strain.

Bollocks. The UK alone had more Poles than that move here in the 1990s and 2000s. Economically beneficial to pretty much everybody. There really aren't that many Greeks.


Difficult to believe they could have been economically beneficial to the workers at the bottom of the ladder whom they undercut but if by everybody you mean the middle classes then you are probably right.
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ken
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More workers means more jobs. There is no fixed supply of "jobs" granted to us from on high by a mysterious and ineffable "economy". Workers make jobs.

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Ken

L’amor che move il sole e l’altre stelle.

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aumbry
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quote:
Originally posted by ken:
More workers means more jobs. There is no fixed supply of "jobs" granted to us from on high by a mysterious and ineffable "economy". Workers make jobs.

In my naivete I thought that workers were subject to the laws of supply and demand and that if you flood the market with cheap labour the price falls. Certainly a chum of mine who is a humble self employed painter and decorator considers that Eastern European workers have had a depressing effect on what he can earn.
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aumbry
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This article seems to not to follow Kenonomics:-

Effect of migration on wages

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Ricardus
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quote:
Originally posted by aumbry:
quote:
Originally posted by ken:
More workers means more jobs. There is no fixed supply of "jobs" granted to us from on high by a mysterious and ineffable "economy". Workers make jobs.

In my naivete I thought that workers were subject to the laws of supply and demand and that if you flood the market with cheap labour the price falls.
Not necessarily, because you also create more consumers, which increases demand for goods and services, and therefore for labour.

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Then the dog ran before, and coming as if he had brought the news, shewed his joy by his fawning and wagging his tail. -- Tobit 11:9 (Douai-Rheims)

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Sioni Sais
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With the increasing numbers of pensioners and young people not starting work until they are older than was the case we had better get workers from somewhere.

What's needed* in Greece and everywhere else is confidence. It was a lack of confidence that NINJA loans would be repaid that led to the current economic downturn (call it a recession or depression according to whether you have a job or not). The tricks that governments are trying and the hoops they are going through are designed to give the market makers confidence, but I reckon we might as well wait until the current generation of corporate CEOs, hedge-fund managers and city traders are dead before we get a recovery.

*If that is you're a capitalist and actually want the global free market to return.

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Cod
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quote:
Originally posted by Sioni Sais:
With the increasing numbers of pensioners and young people not starting work until they are older than was the case we had better get workers from somewhere.

Even if the British economy continues to contract and there is no work for them?
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Sioni Sais
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quote:
Originally posted by Cod:
quote:
Originally posted by Sioni Sais:
With the increasing numbers of pensioners and young people not starting work until they are older than was the case we had better get workers from somewhere.

Even if the British economy continues to contract and there is no work for them?
Economies don't behave entirely of their own volition. Gorgeous George looks increasingly rudderless so if the market doesn't provide the solution the government will be under even more pressure to stimulate growth; the IMF suggested lowering the base rate further and more Quantitative Easing only yesterday.

If you're not careful I'll bang the drum for repairing empty homes firstly to employ people and then to house people. There, broken my own promise.

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PaulTH*
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quote:
Originally posred by Albertus:
Which is the reason why dodgy economies like Greece (OK, Greece being the worst example) were allowed in. If the Euro had started off with, say, the Benelux, Germans, Austrians, maybe the French, then let others in as an when they could show they could hack it, would it be in the trouble it is in today? Nope.

This is entirely the point. A political decision was made to allow Greece to join the Euro when its economy clearly wasn't fit for puropse. That's why I think it will stay in. The Eurocrats won't want to admit they got it wrong. And IMF leader Christine Legarde's opinion:

quote:
she said that the costs of Greece leaving could be so high that other members of the eurozone may be prepared to pay more to keep Greece in the euro.
Greece will not pay its debts, because its people won't tolerate the austerity measures imposed on it. But Greece is about 2% of the EU economy. In EU terms it would cost peanuts to keep it afloat in perpetuity. In the way a poor city or county in the UK, or a poor state in the USA could be kept supported by the rest of the economy. It would matter little if Greece stays or goes, except the possibility of contagion affecting much larger economies such as Spain and, especially Italy, sends shudders throughout Europe. The EU and Greece need to decide. either accept it's a basket case economy and treat it like a poor brother you love. Or eject it from the Eurozone. Don't expect it to pay its debts. It can't and it won't.

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Yours in Christ
Paul

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Cod
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quote:
Originally posted by Sioni Sais:
quote:
Originally posted by Cod:
quote:
Originally posted by Sioni Sais:
With the increasing numbers of pensioners and young people not starting work until they are older than was the case we had better get workers from somewhere.

Even if the British economy continues to contract and there is no work for them?
Economies don't behave entirely of their own volition. Gorgeous George looks increasingly rudderless so if the market doesn't provide the solution the government will be under even more pressure to stimulate growth; the IMF suggested lowering the base rate further and more Quantitative Easing only yesterday.

If you're not careful I'll bang the drum for repairing empty homes firstly to employ people and then to house people. There, broken my own promise.

Perhaps this is a subject for a separate thread, but ISTM that the British government isn't in a position to stimulate growth (leastways by spending more money). Its options are a mixture of the following a) raise taxes and by doing so risk further economic contraction b) print more money and c) borrow more money. Both b) and c) risk increasing bond yields and thus the cost of borrowing, although Britain has got away with it so far. b) also risks inflation. I wonder if Keynesianism can work for state that has to, at every turn, try not to spook its creditors.

In any event, ISTM that Labour, while criticising Coalition spending cuts, wouldn't have done very many things differently had they been reelected to power.

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Cod
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quote:
Originally posted by PaulTH*:
... or a poor state in the USA ...

Perhaps American shippies could comment. I understand that there is considerable variation of wealth per capita between US states: according to Wikipedia, Delaware's is $US70K; Mississipi's is $US33K (a bit above Greece which is at $US27K).

Do the indigents of Mississipi struggle on by themselves or do the denizens of wealthier states assist them?

Has an American state faced bankruptcy, and if so, what happened?

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Marvin the Martian

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quote:
Originally posted by Cod:
In any event, ISTM that Labour, while criticising Coalition spending cuts, wouldn't have done very many things differently had they been reelected to power.

Of course they wouldn't. Every current Labour MP is dancing a little jig of joy that they got to fuck up the economy then leave the Tories to take the flack for doing what's necessary to fix it.

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Hail Gallaxhar

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South Coast Kevin
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quote:
Originally posted by Cod:
I wonder if Keynesianism can work for state that has to, at every turn, try not to spook its creditors.

As I understand it, Keynesianism has a rather important corrolary to the bit about spending in a recession; and that's the requirement to run a budget surplus in the good times. The previous UK government spectacularly failed in that regard.

quote:
Originally posted by Cod:
In any event, ISTM that Labour, while criticising Coalition spending cuts, wouldn't have done very many things differently had they been reelected to power.

Well indeed; the last Labour Chancellor (Alistair Darling) warned that 'cuts worse than anything since the Depression' would be necessary, if I recall correctly. Or was it 'cuts worse than under Thatcher'? Anyway, severe cuts to public expenditure.

You don't hear Labour saying this now, though - it's all 'The Tories are destroying growth' and 'too far, too fast'...

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My blog - wondering about Christianity in the 21st century, chess, music, politics and other bits and bobs.

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Sioni Sais
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quote:
Originally posted by Cod:
quote:
Originally posted by PaulTH*:
... or a poor state in the USA ...

Perhaps American shippies could comment. I understand that there is considerable variation of wealth per capita between US states: according to Wikipedia, Delaware's is $US70K; Mississipi's is $US33K (a bit above Greece which is at $US27K).

Do the indigents of Mississipi struggle on by themselves or do the denizens of wealthier states assist them?

Has an American state faced bankruptcy, and if so, what happened?

AFAIK Delaware is the Brass Plate capital of the USA (ie, companies tend to have registered offices there in preference to elsewhere. It is for US companies what Liberia and Panama are for ships. That could bump the figures up.

Cod,

I accept that the government is concerned about 'spooking the lenders', but if that's the case aren't we now in thrall to the big bankers to a greater extent than we were to the unions back in the 'seventies?

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Sober Preacher's Kid

Presbymethegationalist
# 12699

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quote:
Originally posted by Cod:
quote:
Originally posted by PaulTH*:
... or a poor state in the USA ...

Perhaps American shippies could comment. I understand that there is considerable variation of wealth per capita between US states: according to Wikipedia, Delaware's is $US70K; Mississipi's is $US33K (a bit above Greece which is at $US27K).

Do the indigents of Mississipi struggle on by themselves or do the denizens of wealthier states assist them?

Has an American state faced bankruptcy, and if so, what happened?

They are assisted greatly through federal programs. The poor are helped with Medicaid, Unemployment Insurance (I understand that states borrow from the federal government if their own UI funds run out. There are also grants to extend eligibility). Over-65's receive Social Security and Medicare, whose bill is entirely paid for in Washington. Even if a state totally mismanages its finances, cheques still come in from Washington.

In Europe, all of these expenses are dealt with at a national, not EU level. That is a problem.

States can't declare bankruptcy, not the way that is individuals or companies can. States are sovereign under the US Constitution, they can default on bond payments but they can't go into court and declare bankruptcy. No court has the authority to enforce bankruptcy procedure against a state.

Arkansas defaulted on state bonds in 1932, that was the last outright default. California has come close in recent years and resorted to paying state employees in IOU's but bond payments were still made.

In Canada provinces cannot default and the Federal government has authority to stop a default by activating the residual powers granted to Ottawa in the Constitution. In 1993 Saskatchewan threatened to default. The Federal Department of Finance prepared to take over the province's finances, the Bank of Canada was ready to extend emergency credit and the provincial government, had it actually defaulted, would have been deprived of a good deal of authority for a while.

Though the Mulroney government advanced several scheduled transfer payments and disaster was avoided.

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