So, first a bit of math:
- 85% of the Greek sovereign debt is owned by the ECB, IMF, and other government-owned lenders. Only 15% is privately held. This is due to a 2012 bailout which moved the bulk of the sovereign debt from private banks to the ECB and other government and non-private lenders.
- The entire Greek economy is roughly the size of the city of Atlanta at around $270B. The total sum owed is E360B, or roughly $400B US.
- In short, a Greek default is not going to destroy the world economies. There just isn’t enough money involved for that. A Greek default would be less damaging to the world economy than the default of a major American city. There just isn’t enough money involved. The United States spends more money than that on fan belts for its jet fighters. (Just kidding, jet fighters don’t have fan belts, but you get the point 🙂 ).
In short, a) the debt is mostly government owned, and b) the ECB could write off the Greek debt in a heartbeat by simply adding 360,000,000,000 to the memory register that is their bank balance i.e. by printing money, then subtracting 360,000,000,000 from the memory register that is the Greek sovereign debt.
So why don’t they do that? The first notion is that it would do no good because the Greeks are lazy indolent spendthrifts, so they’d just come back hat in hand for more bailout money, right?
Well, here’s some more facts:
- Greek debt was stable from 1993 until 2007 at around 100% of the economy. In short, for almost 15 years they had the fastest growing economy in Europe while adding no effective debt to the already outstanding balances.
- Greeks worked an average of 2,120 hours in 2008 — or 690 hours more than the average German, 467 hours more than the average Brit, and 356 more than the OECD average.
- In 2008, Greeks were guaranteed 23 days of paid holidays in that same year, Brits 28, Germans 30.
- Again in 2008, the average Greek retired at the age of 61.7 years, which is above the average of the Germans, the Italians, the Brits and the EU average.
- A European Central Bank study shows that in 2007–2009 forty-four per cent of eurozone households had debt. In Greece only 37 per cent did.
- The same ECB study found that the median debt to income ratio was 62 per cent across the Eurozone, and households paid 14 per cent of their income to service their debt. Greek median household debt was only 47 per cent of income, much lower than the Eurozone figure, and these households spent 15 per cent of their income on debt servicing, roughly equal to the Eurozone figure.
Well, I guess they aren’t indolent spendthrifts after all, but hey, these are just facts, which are just things to be ignored if they contradict what we “know”, right?
So how did the Greeks get into this situation in the first place?
- The U.S. crashed the world banking system by flooding it with “good as U.S. Treasuries” mortgage backed securities that were, in fact, backed only by liar loans guaranteed to go bad, and which turned out to be utterly worthless.
- Amongst the banks crashed by the US banksters were the Greek banks.
- Greece then bailed out its banks with E150B of liquidity support via borrowing the money from other banks in the Eurozone.
- The banksters, grateful, then realized this meant that Greek debt had well exceeded its historical level, and responded by raising interest rates required for Greece to roll over its debt to 30% or more.
- This caused the debt to balloon even further, until finally Greece was entirely locked out of the private debt market in 2012
- The EU, ECB and IMF then bailed out Greece by buying the rollover debt and paying off the lenders (who they forced to take a haircut back to a reasonable interest rate).
- The troika then required Greece to crash its economy by imposing 40% pension cuts, cutoffs of support for schools and healthcare, and so forth. Otherwise they refused to roll over further debt that was coming due and instead demanded payment in full. Which could not be borrowed from anywhere else because Greece was cut off from the private debt market. Greece then complied, which caused its economy to collapse from $354B in 2012 to $237B in 2014, which then made it even more impossible to pay the debt.
- Current proposals by the troika call for even more pension cuts and cuts to schools and healthcare.
The last two of which are completely irrational. The first cuts crashed the Greek economy by almost 1/3rd, or worse than the Great Depression hit the United States in 1929-1931. How can destroying the Greek economy to US 1932 levels, i.e., 50% above the 2012 high, help Greece repay its debt? All they are doing is forcing Greece to default on the debt, at which point they get $0. How is that good for the troika?
And furthermore: All of these things are quite popular in Germany. Why?
Well, the “why” is simple. You know the facts. You have already read them above. But facts are powerless when it comes to bigotry. One thing missing from commentary on the Greece situation is why the people of countries like Germany go along with imposing austerity upon Greeks. But read the commentaries from Germans. They use much the same language as racists in the American South used to justify segregation. The Greeks are lazy and indolent and smelly and would sit on their front porches eating watermelon all day if not forced to work for low wages in the most demeaning and degrading of jobs. Well, except for the watermelon part, of course. So the Greeks must be punished until they become good Germans, much as the blacks in the South had to be forced by vagrancy laws and so forth into being gainfully employed, or the homeless of Los Angeles had to be forced into being housed by constant police harassment. (Oh wait, they’re still not housed? Thus exposing the problem with this notion of punishing people into living like you!).
What this is doing is exposing the lie of a unified Europe with European values, which it turns out was a smiley happy face mural slapped onto the wall of nationalism and cultural bigotry that has characterized the last 500 years of European history, except it turns out this mural was done in watercolors and now that it is rainy, the mural is washing off and showing the bigotry beneath. There is no logic or reason involved here, just pure racism. Racism based on cultural racism, not actual ethnicity as Americans view it, but racism still.
Greeks are untermenschen, mere unseemly mud people. They must be punished until they behave more like good Germans. That is the the sad truth of the situation right now — Greeks are being held hostage to the same virulent German racism that fueled the Nazi regime of Adolph Hitler. The Germans are, thankfully, not using guns and bombs this time. But the racism is the same. The Greeks are not being good Germans, they are being disorderly and rude and unseemly, and thus must be punished. Heil!
– Badtux the Racism-scryin’ Penguin
I agree. The facts do not match the rhetoric. Still, I can’t help to think that the crisis was manufactured for the purpose of looting the Greek economy.
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Which suggests that Yanis, quite possibly the top economic game theory expert in the world, has set-up the coming default as the best possible result for Greece…and quite possibly the worst possible for Germany. Simply by using the German leadership’s prejudices against them, he has practically backed the Germans into corner. They can either backdown or allow the destruction of the EU…I know which way I’m betting…the same way Yanis bets in his book.
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To be fair, the Greeks started the racism. The things they said about those xanthochroid barbarians 2,500 years ago would fit into this diatribe just fine.
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Thanks Tux. Sums it all up.
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That’s why I read you, Tux. Of all the perspectives I’ve scanned on the Greek situation, none have put it in the light of racism. I can see an element of that in the pressure being put on those dark hairy southerners, though, especially when I think of the Germans I’ve known. Who have been SO convinced of their own whiter-than-white superiority, even in the midst of whitoMericans and CauCanadians. They’d like to make those sloppy sudermenschen squirm.
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