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The price of defending the Euro.
September 24, 2011 5:59 PM   Subscribe

Greek Crisis Exacts the Cruelest Toll. 'Two years into Greece's debt crisis, its citizens are reeling from austerity measures imposed to prevent a government debt default that could cause havoc throughout Europe.' 'The most dramatic sign of Greece's pain, however, is a surge in suicides.' 'Recorded suicides have roughly doubled since before the crisis to about six per 100,000 residents annually, according to the Greek health ministry and a charitable organization called Klimaka. About 40% more Greeks killed themselves in the first five months of this year than in the same period last year, the health ministry says.'

'Suicide has also risen in much of the rest of Europe since the financial crisis began, according to a recent study published in the British medical journal The Lancet, which said Greece is among the hardest hit.

While some countries have higher rates of recorded suicides, including the U.S.'s over 10 per 100,000, mental-health professionals here say Greece's data greatly understate the incidence of suicide because it carries a strong stigma among Greeks. The Greek Orthodox Church forbids funeral services for suicides unless the deceased was mentally ill. Families often mask suicide deaths as accidents.

A suicide help line at Klimaka, the charitable group, used to get four to 10 calls a day, but "now there are days when we have up to 100," says a psychologist there, Aris Violatzis.'

'Mr. Petrakis collected his hunting rifle from home and wrote farewell notes over four pages of an old calendar. The banks had destroyed him, he wrote, and he had lost his honor over the check affair. He warned that others on Crete would suffer his fate.

"Please forgive me," he wrote. "I love you very much."

At 5 a.m., Mrs. Petrakis heard her husband's dog whimpering in an olive grove by the field where he kept his animals and used to go for peace of mind.

In the dark, she tripped over him beneath an olive tree. He was still alive but, with a gunshot wound in his head, could no longer speak. He died in her arms.'
posted by VikingSword (101 comments total) 20 users marked this as a favorite

 
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posted by crayz at 6:08 PM on September 24, 2011 [5 favorites]


Thanks for posting. This is fine journalism. I didn't understand how the debt crisis affected private citizens. Now I'm starting to get it. Mind-boggling, and completely heartbreaking.
posted by bicyclefish at 6:15 PM on September 24, 2011


There is an extremely serious problem with poor bankruptcy protections throughout much of Europe, although the only country I've read much about is Spain. There are literally cases of people losing their home to the bank and being unable to discharge the remaining debt.

There is a reason that Europeans never created Google, Microsoft, Amgen, etc. etc. etc., specifically their investor class simply don't provide access to capital while simultaneously accepting the responsibility for evaluating the quality of said investments themselves. A European bank not accepting any risk when issuing a home or small business mortgage is simply the same hyper-protective thinking.

Add some damn bankruptsy protections, your economies will benefit.
posted by jeffburdges at 6:26 PM on September 24, 2011 [5 favorites]


And trillions more to the bankers I guess, or it's all going to get so much worse.

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posted by furiousxgeorge at 6:26 PM on September 24, 2011 [2 favorites]


I have talked to first responders here in the US and they tell me they find more and more suicides of foreclosed upon homeowners.

It doesn't have to be this way, but I know that before things change, many more people like Mr. Petrakis will take their own lives.

I mourn for Mr. Petrakis and his family, and I curse those who claim that austerity and forcible debt repayment is "the price we pay" for the economy to return to "equilibrium."
posted by wuwei at 6:35 PM on September 24, 2011 [13 favorites]


Saw a story much like this on a PBS show; protesters in Spain who say "our taxes bailed out the banks, they shouldn't be able to take our homes." Which I thought a remarkably elegant argument, even though it's simplistic. To see banks thriving while your family becomes destitute has an immediacy that a million talking-head discussions of Who is Responsible and What's Best for the Economy does not.
posted by emjaybee at 6:41 PM on September 24, 2011 [12 favorites]


So I'm ideologically aligned with the Keynesians, though I don't know much serious economics aside from what I pick up from Krugman and DeLong's meatier posts (plus hazy memories of undergrad macro classes). That disclaimer aside, it seems to me that this leads as a handy reductio ad absurdum of austerity economics: countries that are losing more of their own citizens to suicide will, all else being equal, tend to do worse than countries that don't provoke quite so much self-murder.

(but wait, the conservatives say, all else isn't equal, and certainly a productive citizen or two offing themselves is just a part of the "belt-tightening" that will result in benefits down the road, right? Never mind that these benefits never quite seem to arrive...)
posted by You Can't Tip a Buick at 6:42 PM on September 24, 2011 [3 favorites]


Seven posts before a swipe at conservatives. I'm impressed at the restraint.
posted by Etrigan at 6:47 PM on September 24, 2011 [2 favorites]


I do think it's fair to take a swipe at a failed ideology, yes.
posted by You Can't Tip a Buick at 6:48 PM on September 24, 2011 [36 favorites]


I'm all for taking a verbal swipe at whomever is responsible for this disaster.
posted by wuwei at 6:48 PM on September 24, 2011 [6 favorites]


I've got nothing but contempt for Europe's policymakers.

The sight of Germany and France lecturing other countries about fiscal discipline (who was it who played fast and loose with the EU's stability and growth pact when it suited them?) is hard to stomach.

The European Central Bank, proudly boasting of keeping inflation in Germany around 1.5 percent for the last 15 years as the euro zone turns to dust, is an obscene institution.

European commissioners and ECB board members, who view countries as simple profit-and-loss accounts, shield themselves from the fact they are fucking over the poorest citizens and most vulnerable with bland jargon like "target implementation" and "commitment to restoring fiscal confidence". Fuck them.

The post-war European consensus -- an absolutely admirable ideal -- has turned into a shoddy bureaucracy run dogmatic, unelected morons. It's hard to see a way back and I feel genuinely depressed about it.
posted by TheAlarminglySwollenFinger at 6:52 PM on September 24, 2011 [14 favorites]


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?
posted by bonobothegreat at 7:08 PM on September 24, 2011 [1 favorite]


We should emphasize anyone offing themselves over indebtedness isn't some homeless guy to whom some dumb bank sold a mortgage, they're people who actually tried doing something, perhaps a small business.

There is no real excuse for this behavior in the U.S. of course, just declare bankruptcy. You entered into a seemingly mutually beneficial deal with a bank, which then failed. Said bank will lose some money taking the assets, you'll be limited in your future stupid business deals, meaning you'll work for a living instead of playing games, but you'll both walk away. It's that simple folks. You don't feel like working into your old age? Fine, you've decades to plan your 'graceful exist' in a skydiving or scuba diving accident, or as a cop, or whatever.

I donno how Europeans from countries with poor bankruptcy laws might escape this, maybe you could protect your family through divorce, maybe moving to another country.
posted by jeffburdges at 7:10 PM on September 24, 2011


I have talked to first responders here in the US and they tell me they find more and more suicides of foreclosed upon homeowners.

There are 19 million empty homes in the US. Maybe for an encore we can raze our own farmland rather keep handing out food stamps

Capitalism - it's the rational way
posted by crayz at 7:11 PM on September 24, 2011 [6 favorites]


bonobothegreat, I think the main difference is that Greek debt is denominated in Euros, which the Greeks can't print. In the case of the UK (and the US, for that matter), the debt is denominated in local currency, so that, at the expense of savers, the state can print money to inflate its way out of debt, lowering the exchange rate so that its exports become more competetive, and pay off its debt sooner.

Greece doesn't have this option because it doesn't have control over its own currency. This is Krugman's criticism of the Euro.
posted by claudius at 7:15 PM on September 24, 2011 [9 favorites]


And I should note, the austerity measures slow the economy, making an already difficult task, paying off the external debt with tax revenues, impossible.

Greece should really just default, but that would cause a systemic banking crisis in France, Italy, etc, which would hurt the Germans a lot more that some transfers.
posted by claudius at 7:17 PM on September 24, 2011


So why is everybody picking in Greece?

Claudius is right. Also, lot of it has to do with the debt maturity profiles of different countries.

Greece has a huge amount of its debt maturing in the short-term (as in the next 12 months) -- and it doesn't have the cash to pay it off.

You mention Britain, for example. It too is heavily indebted, but its debt maturity is spread fairly evenly over the next few decades, which makes repaying it less onerous (especially if, as Claudius mentions, you can devalue your currency effectively inflate your way out of debt over time).
posted by TheAlarminglySwollenFinger at 7:22 PM on September 24, 2011 [3 favorites]


There is an awful lot of systemic corruption in Greece, bonobothegreat. You've heard about the upper classes not paying their income tax, right? I'd doubt their ability to raise tax revenues too.

Ideally, the 'austerity measures' imposed on Greece should've simply been tax collectors from Germany and Scandinavia, but that might inconvenience someone important.

On previous, there are many countries with worse debt than Greece that's also denominated in Eros, claudius, but their corruption doesn't resemble that of third world countries quite so closely. Austria for-example could simply raise taxes whenever inflation doesn't keep pace with their interest payments. All that creates a vicious cycle with higher interest rates, shorter term debt, etc.

I donno if Greece should default on their debt or not, but Greek voters should definitely replace their political class with someone more trustworthy. A new political class without the known corruption could revitalize confidence like nothing else.

posted by jeffburdges at 7:36 PM on September 24, 2011 [3 favorites]


Paul Krugman: Eurovillains
Specifically ... - The ECB, which bought totally into the doctrine of expansionary austerity, despite overwhelming evidence that it was false, and proceeded to raise rates in the face of a deeply depressed economy — possibly the straw that breaks the euro’s back.
posted by delmoi at 7:45 PM on September 24, 2011 [3 favorites]


Ideally, the 'austerity measures' imposed on Greece should've simply been tax collectors from Germany and Scandinavia, but that might inconvenience someone important.
Or gotten someone shot.
posted by delmoi at 7:45 PM on September 24, 2011 [1 favorite]


there are many countries with worse debt than Greece that's also denominated in Eros

Hmmm, debt denominated in Eros? Has it come to that point?
posted by Philosopher Dirtbike at 7:45 PM on September 24, 2011 [5 favorites]


Yes, suicides, depression, mental illness - all are shooting through the roof here. In Greece what we have is brutal austerity (~20-30% wage and pension cuts in both public and private sector) coupled with mad and indiscriminate, regressive taxation *and* cutback of labor protections and assorted social rights, unemployment which is near 20% and a tremendous increase in temporary and part-time work. Unemployment benefits are ~400 Euros/month in most cases and they are only for a year. This on top an already decrepit (by EU standards anyway) welfare system, and high corruption. And did I mention inflation near 5% the past couple of years? Society is literally falling apart. Pensioners are searching the garbage bins for food, homelessness has increased, soup kitchens feed 100 times the number of people they did before the crisis.

At the same time, the psychiatric clinics have been abandoned by the state, and rehab clinics are shutting down... This is also something that is contributing to the explosion in the suicide rate.

Bankruptcy laws in Greece are nowhere near as bad as in Spain, but are seriously lacking. It is not just debt to banks that drives people to suicide. It is debt to other businesses, inability to pay bills, stuff like that as well as a feeling of personal cancellation, of failure beyond repair and with no prospects (the economists speak of a "lost decade" at least)... Plus, in many cases the gap left by banks which stopped lending been taken over by loan sharks. People commit suicide to take the loan-sharks off their family's backs...
posted by talos at 7:46 PM on September 24, 2011 [18 favorites]


jeffburdges: One problem is that harsh austerity measures destroy the justification for paying taxes, so you get into another vicious cycle.

Why pay taxes when most of what you pay is going to support foreign bondholders, and the rest will go to a government that is no longer providing services?
posted by Grimgrin at 7:47 PM on September 24, 2011 [2 favorites]


So I'm ideologically aligned with the Keynesians...,

So am I... if there were any in charge. Keynes' original idea was to run governmental surpluses during economic booms and then when bad times arrived (as they always do), they could use deficits to prime the economic pump. Total government debt would not rise signficantly.

What the Western countries have done is to turn on the spending taps during both good times and bad as if there would be no consequence. Now the "Keynesians" advocate more government spending on top of unprecedented debt levels. This won't help because at some point lenders will balk at trying to swallow an ocean of promissory notes. It's Greece today, andl likely Italy, Spain and the US in the not too distant future.

Yeah, Keynesians, I wish we had them.
posted by storybored at 7:52 PM on September 24, 2011 [6 favorites]


Seven posts before a swipe at conservatives. I'm impressed at the restraint.

Let them eat cake.
posted by Blazecock Pileon at 7:52 PM on September 24, 2011 [1 favorite]


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?
Yup, and not only that Brittan's interest rates are super-low, which means that they can maintain huge Debt/GDP ratios forever, without spiraling into an out of control situation where interest payments are higher then revenues.

Think about something like a CPU without a thermal regulator. At a certain temperature, things are fine but if the temperature gets to high, the resistance in the CPU goes up, that means that the amount of heat the CPU generates goes up, which in turns causes the CPU to heat up even more. It's called Thermal Runaway

A big part of it is the fact that the UK can print it's own money. It will always be able to repay it's debt. And on top of that, if you're a Keynesian who thinks that we're in a liquidity trap, you know that the UK pound won't lose value simply by print more because people are hording pounds simply as a store of value.

Greece can't print it's own money, so it's fucked.

The other thing that's crazy in Greece is that not only are people being taxed to the hilt, they know those taxes are all going to bankers in Germany and other countries, they're not even going to better the country or something like that.
posted by delmoi at 7:53 PM on September 24, 2011 [2 favorites]


And about the tax collection: By now billions (hundreds of billions) have left the country and good luck finding and taxing it in Aruba. There are things that could be done but they take time. A plan to restructure an reform tax collection could be made productive in 4-5 years time pehaps, given the political will. When you try to do it in a few months the whole apparatus collapses. Greece BTW is now on the verge of a serious tax-strike, the state is losing its authority for much of the population.
German tax collectors would be shot. A 4th Reich metaphor/hyperbole started as a joke initially, but in a country that suffered (in living memory) starvation under the Nazi occupation, it isn't funny anymore
posted by talos at 7:54 PM on September 24, 2011


I remember interviewing a (very old) British aristocrat about the 1930s depression, and he told me that many tenant farmers of his killed themselves - "walked into the wood and shot themselves with their own guns" were his exact words. Plus ça change, etc.
posted by unSane at 7:56 PM on September 24, 2011


What the Western countries have done is to turn on the spending taps during both good times and bad as if there would be no consequence. Now the "Keynesians" advocate more government spending on top of unprecedented debt levels. This won't help because at some point lenders will balk at trying to swallow an ocean of promissory notes.
In the U.S the fed can buy as many treasuries as it likes. You're essentially arguing about what Krugman calls the 'bond vigilantes' lenders who cut their purchase of government debt because they don't like government policy. The problem though is that in real life those people don't really exist. People don't really think about the government's ability to repay debt, they worry about inflation -- and right now there's no sign of inflation at all, because we're in a liquidity trap.

Anyway -- before you argue that we have to cut spending to satiate hypothetical rich people who lend to the government, you actually have to prove that these people exist. If it was the case that people wanted to stop buying US treasuries then that would be the time to worry about it. Not pre-emptively start worrying about them without any evidence they even exist.

(European debt is more complicated since I don't think the EU issues it's own debt)
posted by delmoi at 7:58 PM on September 24, 2011


You Can't Tip a Buick : certainly a productive citizen or two offing themselves is just a part of the "belt-tightening" that will result in benefits down the road, right? Never mind that these benefits never quite seem to arrive...

Absolutely. But the "benefit" here just means "you have better chance, though no certainty, of not ending up destitute". The "belt tightening", this time, counts as permanent, so get used to it.

The bigger issue here involves those who naively think we can tax-and-spend our way out of the mess we got into by... Well, by taxing-and-spending. I kinda feel bad for those dependent on various forms of welfare to keep them alive, because you can expect to see that all vanish within the next decade, as people worry more about feeding their own families, than yours. This recession doesn't come from evil bankers, it comes from the reality that we've spent more than we paid in for over a century, and this particular margin call has happened world-wide, all at once.

Or put another way - Welcome to Shit's Creek, hope you came from the womb with a paddle.
posted by pla at 8:07 PM on September 24, 2011


I didn't understand how the debt crisis affected private citizens.

Who don't pay taxes.

I'm all for taking a verbal swipe at whomever is responsible for this disaster.

Residents of Greece? I don't understand: if we're all in mindthink agreement that Capitalism is a disaster and Socialism is the Only Answer, why are we shedding comradely tears for those who decided they don't need to share their money with their Ideological Brothers?
posted by yerfatma at 8:12 PM on September 24, 2011


The bigger issue here involves those who naively think we can tax-and-spend our way out of the mess we got into by... Well, by taxing-and-spending.

We didn't get into the 'mess' by taxing and spending, but rather due to financial deregulation, and a bubble in home prices which was fueled in part by massive mortgage fraud.
posted by delmoi at 8:12 PM on September 24, 2011 [21 favorites]


I kinda feel bad for those dependent on various forms of welfare to keep them alive, because you can expect to see that all vanish within the next decade, as people worry more about feeding their own families, than yours.

Your veiled glee at this all is sickening.
posted by Hypnotic Chick at 8:13 PM on September 24, 2011 [12 favorites]


I kinda feel bad for those dependent on various forms of welfare to keep them alive, because you can expect to see that all vanish within the next decade, as people worry more about feeding their own families, than yours.

I kind of feel bad for the people who aren't on welfare too, because once people are starving the line between yours and theirs might very well become violently blurred.
posted by furiousxgeorge at 8:16 PM on September 24, 2011 [11 favorites]


You're essentially arguing about what Krugman calls the 'bond vigilantes' lenders who cut their purchase of government debt because they don't like government policy. The problem though is that in real life those people don't really exist.

One fact that supports your argument is that Japan has a massive national debt and it still seems to be safe from creditor angst. The argument is that this is because the Japanese are the main holders of their debt. Somehow I don't find this argument very convincing. Are there no limits to government spending? None at all? Hmmm.

In the case of the US, there are external debt holders. China has made noises in the past about America's lack of fiscal restraint. They only hold ~15% of American debt but you would think at some point that debt buyers would get nervous if the US's national debt began to significantly exceed its GNP.

But let's say for the sake of argument, that the US can keep on priming the pump regardless. Once a country's debt levels do exceed GNP, there's evidence that it puts a permanent crimp on economic growth. Japan can serve as the prime exhibit but it's certainly not a special case.

If it was the case that people wanted to stop buying US treasuries then that would be the time to worry about it.

I think the way the financial markets work, by the time that people stop wanting to buy US treasuries, it would be too late. With Greece, everything was quiet for the last decade as the problem was quietly building. Then the spam hit the fan last year and is now running out of control. As the saying goes, if you jump out of a skyscraper everything is fine all the the way down...until you hit the ground.
posted by storybored at 8:19 PM on September 24, 2011


Residents of Greece in general have not been tax evading that much. As I've said before: This report might have some shortcomings but the picture it describes is basically sound: tax under-reporting is largest at both ends of the income spectrum, but the mass of tax-evasion comes from the upper decile and the (large numbers of) self-employed. This is sort of a simplistic picture but I think qualitatively correct...
posted by talos at 8:21 PM on September 24, 2011 [1 favorite]


The bigger issue here involves those who naively think we can tax-and-spend our way out of the mess we got into by... Well, by taxing-and-spending.The bigger issue here involves those who naively think we can tax-and-spend our way out of the mess we got into by... Well, by taxing-and-spending.

Oh, are we going to get back to the taxing part sometime soon? I thought we'd just been spending for the past 11 years, while cutting taxes and saying we didn't really need any more money coming in.
posted by dilettante at 8:22 PM on September 24, 2011 [7 favorites]


Storeybored, what about the idea that we fix the situation with massive stimulus spending right now but actually do the proper Keynesian thing this time after the recovery? No, I don't think we would actually do that either, but we how can we base all of our economic policy on the idea that we will be idiots in the future?
posted by furiousxgeorge at 8:24 PM on September 24, 2011 [1 favorite]


One fact that supports your argument is that Japan has a massive national debt and it still seems to be safe from creditor angst. The argument is that this is because the Japanese are the main holders of their debt. Somehow I don't find this argument very convincing. Are there no limits to government spending? None at all? Hmmm.

Well, the limit depends on the country, right? In Japan you have a lot of upper middle class people (far less income inequality) who typically invest in government bonds. In the U.S you have a smaller number of hyper-wealthy people who can afford to hire investment people to manage their money, but you still have a lot of people buying treasuries. No one thinks that the U.S will default. And if you look at the UK, it's been how many hundreds of years since they've been borrowing money without any upheaval? All those countries have their own currencies.

Looking at the list, Japan has the highest Debt/GDP ratio of any country in the world with 2.25 times as much debt as their GDP. The US has a 92% ratio, and the UK has 76.7%

So we we know at least that 225% is possible without any repercussions so far

So in practical terms the U.S could borrow 1.33 times it's GDP in addition to what it's already borrowed in order to get to Japan's level. That's $18,779,600,000,000 -- $18.7 trillion dollars.
posted by delmoi at 8:29 PM on September 24, 2011 [4 favorites]


Michael Lewis's Beware of Greeks Bearing Bonds (Vanity Fair, Oct 2010) is very much worth reading.
posted by neuron at 8:36 PM on September 24, 2011 [6 favorites]


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?
Hmm, now that I've actually looked at the tables, this is wrong. You linked to 'external' debt which is both public and private debt to people outside of the countries. One of the highest on that chart is Hong Kong, which is actually the lowest non-zero value on the table of government debt.

Hong Kong's external debt is 334% of it's GDP but it's government debt is only 0.7%
posted by delmoi at 8:37 PM on September 24, 2011


One of the most affecting true stories I read about the end of Weimar Germany was the account of a man who used all his remaining funds to buy a tram ticket to travel the length of Berlin. He then went home and shot himself. I remember feeling intensely sad and identifying with his desire to see his city once more before the end.

I never thought I'd read stories about it happening in much the same way today.
posted by winna at 8:39 PM on September 24, 2011 [4 favorites]


Thanks for posting. This is fine journalism.

Yes. Fine journalism indeed from the same cheerleaders of austerity who brought us Austerity Needn’t Bite Stocks:
All over the developed world, governments are desperately trying to hack out fiscal austerity programs before midnight strikes on long evenings of profligacy and their credit ratings turn into pumpkins.

This is obviously bad news for the current generation of politicians. Poor things, they finally arrive atop the greasy pole only to find nothing there but debt and the unappealing prospect of saying ‘no’ to everyone for years. It’s not good for electorates, either, many of whom are accustomed to a good helping of pork from their leaders. They’ll have to learn to do without.

However, the sound of coffers snapping shut in the Treasuries of the West ought to be Beethoven’s Fifth to the ears of equity investors. For the evidence suggests that stocks do rather well in times like these.

Often very well indeed.
Fuck 'em all.
posted by zachlipton at 8:40 PM on September 24, 2011 [8 favorites]


how can we base all of our economic policy on the idea that we will be idiots in the future?

Mainly because we have been idiots in the past? No wait, let's rephrase that, we've been dedicated idiots.

If we look at this from a high enough perspective, it's so tragically insane. In Western societies, we've largely solved the big problems - communicable diseases, starvation, religious strife etc and have made huge strides in addressing other challenges like sexual and racial discrimination. All of these are crazy, tough problems yet we can be proud of the progress we've made.

But when it comes down to financial wisdom, we're total fuck-tards. We've the exact same mindset of the idiots who drove the world into the Great Depression, seventy years ago. We were treated to the dot-com bubble, but did we learn from that? No, we didn't. Instead less than ten years after pets.com, the Americans inflated the biggest speculative bubble in history.

And the Americans might even be the smart ones, because two years after all hell broke loose in their real estate market, punters in China, Canada and Australia are still pushing prices up in their own local bubbles.

It's not even that the psychological and social mechanisms of speculative bubbles are a mystery. They've been known since the 17th century. Fer Chrissakes, we figured out that smallpox was caused by tiny invisible microorganisms and then discovered the amazing technique of vaccination. But if Tulipmania were to start again today, we'd be lined up around the block for the bulbs.
posted by storybored at 8:41 PM on September 24, 2011 [13 favorites]


Debt is the price the present pays to the past in return for inheriting such a fair and just system. Once people realize the system is fucking them sideways, maybe everyone decides 2012 should be debt jubilee year and the debt holders can just thank us for not getting the guillotines

The Tea Party is so 2009 populism. How about we start the Jubilee Party?
posted by crayz at 8:45 PM on September 24, 2011 [2 favorites]


Seven posts before a swipe at conservatives. I'm impressed at the restraint.

I'm impressed at your missing the entire point of the post and instead using it as an opportunity to whine about how vicitimized conservatives are.
posted by blucevalo at 8:51 PM on September 24, 2011 [7 favorites]


This recession doesn't come from evil bankers, it comes from the reality that we've spent more than we paid in for over a century ... Welcome to Shit's Creek, hope you came from the womb with a paddle.

I really don't understand what this means. You're saying we owe debts to people from a century ago. Dead people. How is this possible? Money is a shared fiction. The only debt we owe today is the debt we agree to owe today, or that can be forcibly extracted from us today

You're saying the entire earth is in debt to itself, so now we just have to close down shop and starve because the rich are owed more yachts. Well sorry, no, that's stupid
posted by crayz at 9:00 PM on September 24, 2011 [20 favorites]


Michael Lewis's Beware of Greeks Bearing Bonds (Vanity Fair, Oct 2010) is very much worth reading.

He's made into a book, Boomerang: Travels in the New Third World, published next week. About all of Europe. Can't wait to read it, given current events.
posted by stbalbach at 9:02 PM on September 24, 2011 [1 favorite]


Ahh, nice link, talos. Please read "German tax collectors" as "people willing to tax the wealthy", not the historical Nazi connotations. And I used a past passive tense intentionally.

I should mention that Americans pay income tax on their entire worldwide income, less $80k if they live abroad, and deducting any taxes paid abroad. I donno if rich people actually pay this, perhaps not, well I guess really rich people pay almost nothing here, but that's the theory anyways.

I'm curious about that Aruba problem though. How does one implement progressive taxation when income hides so easily? I donno, maybe market manipulation? Why tax only your own rich people though? Why not simply tax all rich people in the world through clever market manipulation?

We could have an enormous financial cold war between America, Europe, China, and the other major players, with everyone trying to rob/tax everyone else's citizens. Imagine all the war time jobs doing economic espionage and financial modeling! "Chinese investors hold 5% more of Lockheed than Americans, raise interest rates, and switch that contract to Bowing." Yes, some investment houses like Renaissance and De Shaw could out think the NSA+CIA, GCHQ, etc., but probably not many. Talk about entertainment!
posted by jeffburdges at 9:05 PM on September 24, 2011 [4 favorites]


There are going to be periods of time where the average man has it tough, but I think the Euro is still a valid currency for the foreseeable future and that a unified Europe is a great force for stability and peace. I think what the Greeks are going through are like birth pains and they should stick things out.
posted by Renoroc at 9:05 PM on September 24, 2011


I really don't understand what this means. You're saying we owe debts to people from a century ago. Dead people. How is this possible? Money is a shared fiction. The only debt we owe today is the debt we agree to owe today, or that can be forcibly extracted from us today
The thing a lot of debt-haters don't understand is that anything that's not literal cash is a debt. When you deposit money in a bank you are lending the bank the money your bank balance is the amount of money your bank owes you. So, of course the total amount of 'debt' is going to be really high. Almost all value in the world is debt.

The other thing is that debt-haters often don't distinguish between public (government) and private debt. If we're just talking about public debt, it's not really that big of a deal.

If your salary increases every year, you'll always be able to pay back your debts so long as the interest payments each year are less then amount of the raise.
posted by delmoi at 9:06 PM on September 24, 2011 [3 favorites]


There are going to be periods of time where the average man has it tough, but I think the Euro is still a valid currency for the foreseeable future and that a unified Europe is a great force for stability and peace. I think what the Greeks are going through are like birth pains and they should stick things out.

If the euro benefits everyone in Europe, shouldn't the "pain" be shared among all of Europe, not just the Greeks?
posted by delmoi at 9:08 PM on September 24, 2011 [1 favorite]


If we're just talking about public debt, it's not really that big of a deal.

Except for how concerns over public debt are being used to justify austerity measures that lead to human misery and death. Right
posted by crayz at 9:11 PM on September 24, 2011 [1 favorite]


Greece has a unique set of problems and has been criminally mismanaged by the Greeks themselves. The Austerity is supposed to get them back to a reasonable fiscal policy. If people are killing themselves perhaps it's because they were told lies and now they are facing reality which can be painful. I feel bad for them, but the alternative is Germans get stuck with the bill, which might cause a few German suicides instead.
posted by stbalbach at 9:21 PM on September 24, 2011


The Austerity is supposed to get them back to a reasonable fiscal policy.

"This wind is getting us nowhere. Lower the sails!"
posted by crayz at 9:28 PM on September 24, 2011 [2 favorites]


If the euro benefits everyone in Europe, shouldn't the "pain" be shared among all of Europe, not just the Greeks?

It's one of those mathematical rules of economics. "Benefits" is a distributive quantity, whereas "pain" is an associative quantity.
posted by storybored at 9:37 PM on September 24, 2011 [4 favorites]


Mainly because we have been idiots in the past? No wait, let's rephrase that, we've been dedicated idiots.

If we look at this from a high enough perspective, it's so tragically insane. In Western societies, we've largely solved the big problems - communicable diseases, starvation, religious strife etc and have made huge strides in addressing other challenges like sexual and racial discrimination. All of these are crazy, tough problems yet we can be proud of the progress we've made.

Ok, but we were big idiots for a long time on all of that too. Is there a better path forward for right now than stimulus out of the recession while at the same time supporting as loudly as possible the idea that we have to radically change how we do things before this happens again?

I don't see an alternative that isn't fatalistic.
posted by furiousxgeorge at 9:40 PM on September 24, 2011


Germans get stuck with the bill, which might cause a few German suicides instead.
I fucking doubt it.

And also importantly "The greeks" is not an individual or even an institution. The people who are getting shafted aren't necessarily the ones who made the decisions. The people who lent them money should have done due diligence. They're no different then a mortgage lender who ignored the fact that a borrower didn't have a job when lending them a million dollars to buy a house. Really, why shouldn't the Germans eat it?
It's one of those mathematical rules of economics. "Benefits" is a distributive quantity, whereas "pain" is an associative quantity.
Is this some kind of metaphor? because mathematically it makes no sense at all. For one thing the distributive property and the associative property are properties of operators not 'quantities' And operators, such as multiplication can be both associative and distributive.
posted by delmoi at 9:44 PM on September 24, 2011 [6 favorites]


Japan has the highest Debt/GDP ratio of any country in the world with 2.25 times as much debt as their GDP. The US has a 92% ratio, and the UK has 76.7%

So we we know at least that 225% is possible without any repercussions so far


I wish that were true. Japanese suicide rates have been rising also.
posted by storybored at 9:47 PM on September 24, 2011 [3 favorites]


I kinda feel bad for those dependent on various forms of welfare to keep them alive, because you can expect to see that all vanish within the next decade, as people worry more about feeding their own families, than yours.

Rich and middle-class people are also dependent on welfare to keep them alive -- because when welfare vanishes and poor people begin to starve, they get guns and sticks and forcibly take food from those who have it.

Social safety nets are designed to protect the poor -- but also cleverly designed to protect the rich. It's been this way since at least Bismark and I have no idea why modern conservatives don't see this. It's almost as if they've forgotten all history after 1776 or something.
posted by Avenger at 10:33 PM on September 24, 2011 [11 favorites]


Without the threat of communism, the rich aren't as scared as they should be.
posted by furiousxgeorge at 11:23 PM on September 24, 2011 [6 favorites]


Rich and middle-class people are also dependent on welfare to keep them alive -- because when welfare vanishes and poor people begin to starve, they get guns and sticks and forcibly take food from those who have it.

s/they/we/g.

but that aside, the flaw in your reasoning is that it's more common for us to go out, get guns, and then shoot ourselves with them, as in the article.
posted by You Can't Tip a Buick at 11:24 PM on September 24, 2011 [3 favorites]


My uncle, who lived through it, told me that the Hungarian nobility were were land-rich and cash poor. They didn't sell their land, because land was status - being a landowner practically was nobility. The noblemen's debts just mounted up and up, generation after generation, until they were unsustainable. In the meantime traders and manufacturers were creating wealth - not just collecting rents - and making Budapest and Vienna into glittering fairytale cities, full of art and culture.

As it happened (and not coincidentally) the extreme hyperinflation after WW1 made the noblemen's debts disappear. But by the time WW2 came around they were all deep in debt again, and I suppose that if the Hungarian Communist Revolution hadn't abolished the nobility and broken up their estates you'd have seen a third cycle.

My point is that serious debt is a structural problem, and by the time there's an evident crisis it's probably to late to avoid it. The thing to worry about is what happens after the crisis. If you don't change the underlying causes the same pattern will happen again.
posted by Joe in Australia at 11:39 PM on September 24, 2011 [3 favorites]


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?

Because Britain has some viable industries left, whereas Greece produces mostly olive oil and feta cheese. But there is only so much olive oil and feta cheese that you can sell to the world. Yes, tourism is a large industry as well (possibly the largest in Greece?), but probably that will drop as well as soon as the Greeks start (metaphorically or literally) spitting on their tourists and calling them Nazis.
posted by sour cream at 1:20 AM on September 25, 2011


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?

That chart is a measure of all debt, including individual, corporate and government debt, which is a somewhat different measure/problem.

For the specific issue regarding government stability, you want to look at the government, i.e. public debt chart here; the UK is at 76% of GDP, while greece is at 143%, which is significantly higher than the rest of europe.

You also have to look at current deficits, i.e. the difference between tax receipts etc and expenditure in the current year, and again greece is running a much, much higher deficit than the UK and much of the rest of the euro.

So the problem is twofold - a large outstanding debt, much of which is due to renewed shortly, and a very large gap between receipts and outgoings, which makes it hard for the greeks to do anything except massively grow that debt.

Which is why the cost to the greeks of borrowing more on the open market is so huge right now, which is why the main euro economies are having to bail them out - but are demanding massive austerity measures in order to do so, so they can survive politically back home. After all, the french and german people have had their own austerity measures, and shovelling money into the greek debt blackhole without taking a hardline is basically political suicide for them; especially Angela Merkel who is under significant threat domestically as the germans don't see why they should be on the hook for greek corruption/government failure.

Of course, without the euro, the greeks would just devalue the drachma like mad, make imports expensive, exports very competitive (both giving a big shot in the arm to greek industry) and would make taking holidays in greece insanely popular, giving their huge tourism sector a massive boost, and basically inflate their way out of a lot of the debt. Given they're chained to the ECB interest rates, which are basically run for the benefit of the northern european countries though to the detriment of the south, they're basically utterly screwed.

There are only two realistic end games out of this.

1) eurobonds. The stronger northern euro countries basically guarantee greek debt. Greece borrows even more money to get past the current crisis, with the intent that some day they will manage to balance the books. France and Germany are point blank refusing because they see a future of even worse problems, but where they're directly on the hook for all the bad debt, instead of only indirectly through the loans their banks have made to greece.

2) greece defaults. They say to the foreign banks and pension funds 'sorry guys, you're only getting 50% of the money we owe you back'. They may or may not have to leave the euro in order to do this. It may or may not be orderly, i.e. the announcement and arrangements are done internationally, with massive amounts of foreign government money pumped into the foreign banks that are going to take the hit* to avoid a cascade collapse.
If it's disorderly, then god help us all, as the shock to the euro, the euro banks, the ECB, and all the international banks exposed to greek and other euro debt will make lehman brothers look like a lemonade stand going bust.


The whole business of cheap loans from the rest of europe in exchange for massive austerity cuts to try and balance the greek budget has failed, in basically every way. Tax receipts have been falling faster than the cuts, and the human costs - such as the tragic suicide rates - are huge. The problem is worse than when they started financially, and the greek public are suffering immensely - they see austerity measures where all the benefits go to pay off foreign banks. Yes, there are problems with tax collection, corruption and other related issues, but the basic problem is that greece has been spending far beyond its income for a looong time. Crash austerity measures now are just making their recession even worse.

A greek default seems basically inevitable at this point, and quite possibly an exit from the euro at the same time. It's the only way for the greeks to survive. Frankly, if I were Angela Merkel, I'd help them default and exit the euro; it would do more to save the euro long term, even at the cost of more massive bailouts for their banks in the short term, whereas right now, it looks like the entire euro project is under threat through trying to hang onto greece in the euro.
posted by ArkhanJG at 1:44 AM on September 25, 2011 [19 favorites]


Greece produces mostly olive oil and feta cheese.

It's a good thing that Feta now has European Protected Designation of Origin status.

The olive oil is good stuff, too. Too bad European olive-subsidy fraud is rampant.

I should be able to extract a moral about neoliberalism vs. protectionism in a failed and/or rigged market here, but I don't have the training to be able to work it out. Instead: yum-yum.
posted by GeorgeBickham at 1:48 AM on September 25, 2011


* Note, this has already started taking place: the central banks are pumping cheap money into the system in the hope that it will provide a cushion when the greeks default.
posted by ArkhanJG at 1:48 AM on September 25, 2011


What's interesting/terrifying though is we're seeing the start of the sovereign debt bubble bursting.

To avoid the tech bubble crash in 2000, massive amounts of cheap money were funneled into the system to avoid a collapse. That led to a housing/debt bubble, that burst in 2008. Massive amounts of public money went into the banks, to avoid a systemic crash, creating a sovereign debt bubble. Now the governments that were weakest are collapsing under that load, such as greece, portugal and ireland; even italy and spain are at risk, and the strain is clearly showing on the largest economies such as the US, UK and france/germany.

as the sovereign debt bubble bursts, we're bailing it out by the largest economies basically pumping in ever more cheap money via the ECB, fed and bank of england. Are we steadying the markets and keeping the system running, or just setting ourselves up for even bigger collapse in a few years when the US or chinese economies collapse, with no-one left to bail them out. I don't know any more.
posted by ArkhanJG at 2:06 AM on September 25, 2011 [3 favorites]


I don't know how accurate this table of external debt is but it seems that Greece's per capita debt and it % of GDP I'd NOWHERE NEAR Britain's (and not much different than a lot of other countries). So why is everybody picking in Greece?

The UK has a very large figure, almost as big as the USA. This is being used in press scare stories but mostly represents the gross external liabilities of the financial institutions based in the City of London. This has to be taken together with their corresponding assets because these institutions trade money back and forth on a grand scale and what really matters are the differences which determine the net profit/loss.

A better figure to look at is the Public Debt which you can get direct from the CIA World Factbook
posted by Lanark at 3:06 AM on September 25, 2011


jeffburdges: There are ways to tax the rich. Plenty. And it is astonishing that neither the Greek government or our overlords especially the ECB have not taken active measures to identify Greek citizens deposits in other EU countries and especially Switzerland, where the exact amount hidden is the subject of much speculation. And it isn't just cash, in London a mass exit of money from Greece went directly to the real-estate market... ~30 billion Euros is owed in ascertained back taxes by just 1400 people and entities, though many of the companies that owe money no longer exist. Still, any transactions and transfers mediated by Greek banks should be in principle detectable and audited. But that would upset much of the oligarch/political/media complex. So it's politically unpalatable. And uncomfortable for the many banks which have served as havens for such money.

I note also that Greece besides tourism, feta and olive oil has the largest merchant marine in the world, yet the Greek shipping tycoons pay near zero tax (even the office clerks in their offices are tax exempt) by threatening to move someplace else if anyone tries to tax them in the least (and I mean in the least (p.6)). It also has mining and oil refinement. It used to have much more but the turn to a "service economy" was hailed as some sort of national goal in the early 90s and serious deindustrialisation followed.

stbalbach: Austerity, especially during a recession is massive economic sabotage. With long-range effects that extend decades into the future. Hooverism never benefited anyone. Ever. Destroying a country in order to save it does not make sense. The alternative is not for Germans to pay (although the Euro system has been set up so as to create massive trade imbalances: the producing north and the consuming south - it isn't just Greece), its for the banks to take a hit. To pay for making a really bad business decision. It is the first time that I know of in debt crises that the lenders were protected from *any* losses. This is about to change.
posted by talos at 4:02 AM on September 25, 2011 [8 favorites]


delmoi : We didn't get into the 'mess' by taxing and spending, but rather due to financial deregulation, and a bubble in home prices which was fueled in part by massive mortgage fraud.

What you describe shouldn't have affected the average Joe in the least. Sure, 401ks would drop a bit, and home prices would go wonky for a few years, but only those actually playing the REIT game should have suffered heavy losses.

Instead, we have the entire planet in a financial meltdown? All because some people found a way to shine a turd? Sorry, no. It doesn't work that way. That would have shocked the system, no doubt, and we all should have moved on with our lives; Except, the system, after years of mismanagement, lacks the underlying stability to absorb this particular shock.

Not bigger or nastier than past problems, just one... more... straw tossed on that poor camel.


Hypnotic Chick : Your veiled glee at this all is sickening

When you stand on the street corner yelling about the end of the world year after year after year, only to have people mock or ignore you, hard not to feel a bit of schadenfreude when the comet finally appears. And I never claimed "humility" as one of my attributes.


talos : The alternative is not for Germans to pay [...] its for the banks to take a hit.

What does that actually mean?

Yes, as corporations, you can tax their profits. And yes, some investment banks have some pretty damned impressive profits.

But when the banks write down their assets, it also means they have written down your assets (which in the US just triggers a bailout by the FDIC, but that counts as a separate issue). You can't make "them" pay for our spending habits, because, although they certainly get their cut, they work for us.
posted by pla at 6:53 AM on September 25, 2011


Pla: Instead of subsidising the banks via capital guarantees or cheap loans, why not offer to inject equity capital? It removes the element of moral risk: deposits are still guaranteed, but bank shareholders know that they will lose a big chunk of their investment if the guarantees are ever called on.
posted by Joe in Australia at 7:13 AM on September 25, 2011


If your salary increases every year, you'll always be able to pay back your debts so long as the interest payments each year are less then amount of the raise.

That's a pretty big if these days.
posted by IndigoJones at 7:26 AM on September 25, 2011 [1 favorite]


as the sovereign debt bubble bursts, we're bailing it out by the largest economies basically pumping in ever more cheap money via the ECB, fed and bank of england. Are we steadying the markets and keeping the system running, or just setting ourselves up for even bigger collapse in a few years when the US or chinese economies collapse, with no-one left to bail them out. I don't know any more.
Compare the situation in Iceland, where no bailouts happened to other countries that did bail out their banks. It wouldn't have even been remotely possible for Iceland to bail out it's banks, so it just didn't. Other countries were upset, but it just wasn't possible.

On the other hand, Ireland did and it's done a lot of damage to the economy. Banks were guaranteed with public debt, and then austerity measures were put in place to pay back the bankers debts. As you can imagine, this wasn't particularly popular. It also seriously messed up the economy.

Anyway, the US and UK (as well as China) have their own currencies, so rather then a default you would have inflation.
posted by delmoi at 7:38 AM on September 25, 2011 [1 favorite]


pla
It means that the whole structure of the European banking system is blown up and a new recession sets in. Banks and their owners are burned and the whole system is nationalized. There are plans to overcome the crisis, eminently sensible but politically unviable since day one (see this for example). An alternative that doesn't lead to a Mad Max sort of post-fiscal-apocalypsis 21st century Europe doesn't seem to exist at this point.

The only asset I'm vitally interested in is my house and that not as a potential asset but as a roof above my head. For the vast, vast majorities of people their main asset is their work, perhaps a home, only secondarily other assets, which they'll have to get by without, or with greatly reduced value. Given, say, the state of the Greek banking system and the minimum deposit guarantees, I think that this wholesale nationalization would not harm people in my income group and lower - and that's a big majority - more than austerity is doing right now. It will harm the pension funds I'll be getting a pension from, true, and wreak some sort of havoc in the short term but nothing a good and rational expansionary policy won't fix in the medium term. I can't imagine why subsidizing failed private investments by taxpayers' money or by sucking the blood out of a country is even sustainable, never mind proper. And if they really work for us, they should be owned and overseen by us.

I'm not sure whose spending habits you are referring to. What I've seen is that most people in the West have seen their real incomes stagnate or decline and public services being withdrawn for the past 10-30 years, depending on the country, while private debt increased and the top 1% growing to be unimaginably rich, creating unprecedented inequality. The way the financial system has grown in the past decades has contributed greatly to this outcome.
posted by talos at 7:39 AM on September 25, 2011 [5 favorites]


maybe everyone decides 2012 should be debt jubilee year and the debt holders can just thank us for not getting the guillotines
This might not even be a grossly immoral idea for government debt - didn't we agree at one point that loans only impose obligations on their recipients? So why are we trying to squeeze the recipients' kids and neighbors?

But I've still got a few questions:

By "debt holders", do you really mean "debt holders"? Retirement accounts tend to be pretty bond-heavy, and my parents' are going to need to go grocery shopping again eventually...

After this jubilee, how much money do you expect to continue borrowing, and at what interest rates, when we've demonstrated that such borrowing is likely to never be returned? If you think the Greeks' current "Not counting interest payments, we only get to spend 5% of GDP more than we collect" budget is "austerity", wait until you see what "We only get to spend what we collect" looks like.
posted by roystgnr at 7:45 AM on September 25, 2011 [1 favorite]


There are two long term moral hazards causing this, pla.

First, our politicians violate the principles of Keynesians economics by spending like crazy during the boom years, primarily through excess military spending. Eisenhower foresaw this. Various presidents like Johnson pushed this forward. Reagan must however take the blame for pioneering the Republican's current "spend it all quirky so the Democrat can't spend it" attitude, ending the GOPs fiscal conservative tradition.

Second, financial institutions are fundamentally creatures of regulation. Investors use simply risk assessment strategies like ranking banks, brokers, and hedge funds from less to more risky, or believing the ratings agencies. There is consequentially an enormous amount of money to be made whenever you find a legal loophole to lie about your risk factors. Deregulations creates an enormous systemic risk under such conditions.

As a rule, financial institutions should not be protected from their own mistakes. Investors who are far removed from their investments should however be protected, ala FDIC. In addition, you must make sure the day-to-day lending that keeps various large debt ridden companies afloat persists.

You might for-example imagine the U.S. simply letting their highly leveraged financial institutions collapse after the housing bubble, i.e. no TARP. Instead, you'd capitalize smaller financial institutions who'd avoided the errors made by their bigger brethren, while requiring that new capital be invested in the commercial paper market.
posted by jeffburdges at 7:53 AM on September 25, 2011 [3 favorites]


roystgnr: It will look like something that has some sort of future outside the Third World. As things are we're in a death spiral with nowhere to go but Zambia, or something. Because what can be collected is diminishing rapidly this way. The plan to fix things would be at a European level, since the policy of bankrupting a large part of your customers doesn't seem to be viable for Germany either, especially during a recession...

jeffburdges: Funny you should mention it, defense spending in Greece was until recently a little higher than that of the US, as a percentage of GDP. I cannot overstate how much this has contributed to the bloated debt...
posted by talos at 8:01 AM on September 25, 2011 [1 favorite]


Iceland also took steps towards resolving the political situation that created the financial situation. I suppose the only politician actually indicted was PM Geir Haarde, but various bankers were indicted too.

You'll never create confidence without creating the impression that you've change the leadership who created the crisis. Indictments are a nice orderly method for doing this. Failing that, I suppose the Greeks could create some economic confidence by lynching a fair number of their current political party heads or driving the central banker out or whatever.
posted by jeffburdges at 8:10 AM on September 25, 2011 [2 favorites]


jeffburdges : As a rule, financial institutions should not be protected from their own mistakes.

I absolutely agree with that. Let 'em fold.

I had the sense you meant something more than that, however, almost a sort of punitive "rob the banks as a stand-in for the rich, and give to the poor". The whole idea a few have thrown about of a "jubilee" pretty much makes that idea explicit.

I apologize if you didn't mean that, and I erroneously conflated the two.
posted by pla at 8:41 AM on September 25, 2011


I watched Enron: the smartest guys in the room earlier tonight. Yikes if you haven't seen it, watch it. I just cannot believe what they got away with and then what they did to the state of California.

So how bad could austerity be? Imagine that every single public utility you rely on; power, gas, garbage, roads, sewage and water get privatised so they can be operated by companies just like Enron, in environments where if regulations still exist they are policed by government departments which have been over the years gutted and defunded to the extent that policing is no longer possible. Imagine that these privatley owned utility monopolies are also owners of major broadcast television networks and are able to purchase without limit as much political power as they need to maintain their competitive advantage.
posted by vicx at 9:41 AM on September 25, 2011 [1 favorite]


In Revolutionary Change, Chalmers Johnson looks for statistically valid quantitative indications that a society is experiencing systematic stress (what he calls "desynchronization") that could lead to revolutionary change. Two that he came up with were incarceration rates (showing the state is increasingly relying on a monopoly on force to maintain control) and suicide rates (showing people believe there is no hope within the existing system.) He decided on those two statistics because they are hardest to conceal or distort.

I'm not saying we're seeing prerevolutionary conditions, I'm saying we're seeing indicators of politico-economic systems that are in crisis. The possibility of "conservative change" (what we call progressive reform) is still out there. Conservative in this case means conserving the existing system without revolutionary change.

The increasing shift towards authoritarian and exclusivist politics is very similar to the "crisis in democracy" during the 1930s.

Very likely this will all end badly.
posted by warbaby at 10:53 AM on September 25, 2011


G20 plans for greek default. Also.

The eurozone deal, being brokered by the G20 group of nations, would seek to "ring fence" the crisis around Greece, Portugal and Ireland - preventing it from spreading to major EU economies such as Italy and Spain.

It would involve the bailing out those European banks - mostly French - most at risk from their massive lendings to tottering economies.

Greece, crucially, would be able to default on at least some of its more than £300billion debts but remain inside the eurozone. The Greek government's private creditors would bear most of the increased costs.
posted by ArkhanJG at 11:31 AM on September 25, 2011 [1 favorite]


I just wanted to say that there are some pretty good comments here.
posted by ovvl at 2:34 PM on September 25, 2011


ArkhanJG , I find this plan sort of laughable, it's herding cats, how are they going to get everyone to agree to such massive amounts in 6 weeks, all the while with the public sniping going on and the markets tanking from lack of confidence, I think the market could very well get ahead of their ability to do stop it.
posted by stbalbach at 6:06 PM on September 25, 2011


Yeah, this is like the beginning of Raiders of the Lost Ark with the large boulder crashing down on Indy. Except in this case he's blindfolded and on crutches.

Also wouldn't you know it, they're trying to pull it off during the month of October, historically the most god-forsaken of all months for stock markets.

... a good chance we'll see Oct 2008 redux except more painful.
posted by storybored at 7:57 PM on September 25, 2011 [1 favorite]


For those interested in following Europe, Mish is a must.
posted by stbalbach at 8:11 PM on September 25, 2011 [1 favorite]


Krugman:
A reasonable estimate would be that Spain and other peripherals need to reduce their price levels relative to Germany by around 20 percent. If Germany had 4 percent inflation, they could do that over 5 years with stable prices in the periphery — which would imply an overall eurozone inflation rate of something like 3 percent.

But if Germany is going to have only 1 percent inflation, we’re talking about massive deflation in the periphery, which is both hard (probably impossible) as a macroeconomic proposition, and would greatly magnify the debt burden. This is a recipe for failure, and collapse.

Another way to say this is that the euro is going to have a chance of working only if the ECB delivers much more expansionary and, yes, inflationary policies than the market now expects. If you don’t think that’s a possibility, say goodbye to the euro project.
posted by delmoi at 8:51 PM on September 25, 2011 [2 favorites]


i have a question for the proponents of letting the banks fold. when a bank goes bankrupt what happens to the millions of bank accounts and other people's money they manage? i think bank accounts have insurance for a pathetic amount. fuck all the people who opened bank accounts in a bank which goes out of business because they should have done their due diligence?

i really never understood the sentiment of fuck the banks, let them go under....
posted by canned polar bear at 3:27 AM on September 26, 2011


canned polar bear : when a bank goes bankrupt what happens to the millions of bank accounts and other people's money they manage?

Chaos ensues for a few months, then the FDIC begins paying out up to $250k per person per insured bank (which sounds like a weird way to write it, but basically no one with an account under $250k loses a penny).

People with more than $250k stored in ordinary cash deposit accounts held by a single bank risk losing money. Only the very rich and very stupid keep over $250k in liquid assets at a single bank.


i think bank accounts have insurance for a pathetic amount. fuck all the people who opened bank accounts in a bank which goes out of business because they should have done their due diligence?

You think wrong. Whether or not the amount they pay for that insurance accurately reflects their risk of insolvency, they have 100% coverage up to that magic number of $250,000 per person per bank.


i really never understood the sentiment of fuck the banks, let them go under...

Anything follows from a false premise.
posted by pla at 3:41 AM on September 26, 2011 [1 favorite]


pla, we're talking about europe here. i doubt the FDIC will be so generous with us over here.
posted by canned polar bear at 3:46 AM on September 26, 2011


Broadly speaking, most EU countries also provide deposit insurance. No need to rely on the FDIC!
posted by Coventry at 5:13 AM on September 26, 2011


indeed but not to the tune of 250k, however that still leaves people fucked and paying for the mistakes of institutions. i still think it's the wrong way to handle things.
posted by canned polar bear at 5:29 AM on September 26, 2011


Will the greek government have the funds to cover deposit insurance? Although I would imagine that lots of greeks will have moved their accounts out of Greece by now.

Anyway, this doesn't necessarily seem like a 'bank thing' but rather a 'Greek government' thing
posted by delmoi at 8:16 AM on September 26, 2011


It's not just banks, if countries default sovereign bonds don't get paid and your SOL. Those bonds are tied up in investment portfolios, normal every people get screwed out of their retirement. Also, where do you think the money comes from for the FDIC or other insurance? Adding more burden to tax payers is another form of financial repression setting up the next round of debt crisis. Shifting the debt around is all your saying. At some point this debt has to be paid down, or simply default and impose a reduced standard of living on everyone.
posted by stbalbach at 6:04 PM on September 26, 2011


i have a question for the proponents of letting the banks fold. when a bank goes bankrupt what happens to the millions of bank accounts and other people's money they manage? i think bank accounts have insurance for a pathetic amount. fuck all the people who opened bank accounts in a bank which goes out of business because they should have done their due diligence?

i really never understood the sentiment of fuck the banks, let them go under....


Nationalization, also spelled nationalisation, is the process of taking an industry or assets into government ownership by a national government or state.
posted by furiousxgeorge at 6:07 PM on September 26, 2011


Ah man things are getting hot in Germany. This just in from Prince Hermann Otto zu Solms-Hohensolms-Lich, top judge in Germany:
"A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable." .. accusation that German leaders are conspiring with EU officials to emasculate the Bundestag.. "The sovereignty of the German state is inviolate.." calls for a new Constitution (!)
He is angry. As Mish says, "the German court has had enough of Chancellor Angela Merkel, her cronies, and all the politicians who want to rob German taxpayers". Damn right. Of course, this means we are edging closer to the abyss if Germany doesn't put a barrier around the defaulting countries with a trillion or two.
posted by stbalbach at 6:17 PM on September 26, 2011


Yes, any "let the banks fold" sentiments can be paraphrased as "nationalize the stupid banks", with the underlying point being that whoever made the stupid decisions should lose their 'capitalist autonomy'.

If a country doesn't insure deposits, well maybe it simply means "let them learn to insure deposits". You know, even Iceland insured deposits for Icelandic citizens living in Iceland.
posted by jeffburdges at 6:48 PM on September 26, 2011 [1 favorite]


I'm curious what you mean by a 'barrier', stbalbach. Is the theory that Spain has invested so much in Greece that Greece defaulting will trigger a Spanish default? Are the PIGS really so heavily invested in one another? Or am I missing something?
posted by jeffburdges at 6:50 PM on September 26, 2011


Contagion. Same thing happened in 2008, once trust breaks down between banks, inter-bank lending stops and financial system stops working and banks begin to fail. So they want to build a firewall around the weak countries to prevent contagion.
European Union governments will spend the next six weeks building a financial firewall to protect their fragile banking systems against what is now seen as an inevitable Greek default.
The world's most expensive firewall, 2 trillion, largely paid for by German taxpayers, who won't have any say in it, since it's being decided by American and EU officials. It would be sort of like Canadian and British officials deciding spend a few trillion dollars of American taxpayer money to bail out Mexican banks (for our own good of course).
posted by stbalbach at 7:38 PM on September 26, 2011


I should explain my first comment slightly better :

Investors are generally heard animals, happily taking whatever risk they deem social acceptable. Real entrepreneurs are usually taking considerably graver risks.

You need good bankruptcy protections because they encourage entrepreneurship by capping the downside. Investors will never notice the difference because (a) ain't much money in squeezing money from stones, (b) what money you get all goes to the lawyers anyways, and (c) investors will simply tolerate the risks anyways.
posted by jeffburdges at 8:59 PM on September 27, 2011 [1 favorite]


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