Greece

[weezer 316]

Wonder what the neigh-sayers to the govt cutbacks will say if Greece defaults on its debt. Maybe then they will realise how much money has been wasted and that we must pay more tax to meet our responsibilities. The alternative is bankrupcy and probably every bank in the country becoming insolvent and the Uk being unable to borrow for quite a long time.

See this for the likely sequence of events - http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/

[theone]

It is quite frightening what can happen when these countries are allowed to live outwith their means.

The sad thing is that this would hardly even make the news if Greece wasn't in the Euro. The fact that is is brings major consequences to that currency and those who deal with it.

I actually think that while the government are at least trying to do the right thing by getting us into the black, we need to go further. A law should be passed where no government can set a budget outwith what it can afford except perhaps in extreme circumstances such as war or natural disaster.

Until that happens the parties in power will continue to spend money they don't have to try and win a vote.

[weezer 316]

110% agreed. Wonder if there is actaully an opposing view of this, seeing as there seems to be so much hatred towards the govt for its cuts? I can only assume they are unaware of the true consequences of living on the never never like we have done for years.

[secrets in symmetry]

Weezy, I see you're still rewriting history (albeit only by implication this time) to fit in with your political hue.

For an espouser of science, you're not very good with numbers. See my post from the weekend. (http://forum.caithness.org/showthread.php?147523-Well-done-to-David-Cameron-2&p=861156#post861156)

Greece, on the other hand, is indeed a chronic basket case, and the UK borrowing requirement is not going to get better with spending cuts and little or no growth. For once Andrew Lilico doesn't need to exaggerate to get his views over.

[weezer 316]

Symmetry,

Apologies. I had read your post but I didnt have time to reply at the time and it since slipped my mind.

As for your points, I can only assume you are fully happy to carry the enormous debts we do as to say that we wouldnt have a serious problem today without the credit crunch is naive at best and negligent at worst. We have been running a deficit the entire century and as you say only had 3 years of a surplus, most of which ironically can be traced back to the previous tory govt due to the lag effect in the economic cycle.

This misses the point though. Chickens come home to roost eventually and that has been what happened in Greece. As a result they have had to impose such austerity measures. That's exactly what will happen here if the attitutude "we are ok today, stuff what could happen tommorow" prevails in govt.

Indeed one of the links you mentioned makes the point we pay the equivalent in the defence budget in interest each year! At a time when people moan about service cuts and wish us to continue running in deficit, there by needing to borrow more money and spend more on interest and then cut more services..........you can see where this is going.

Over the course of this parliament I sincerely hope we can wipe the deficit out. Only then can we tackle the debt.

[oldmarine]

I have read the above posts with interest. What do you think about the USA which has amassed the highest debt in its history? They are so deep in debt that they never will get out of debt. GB used to hold this debt and now it's China. I read some where (written I believe more than 200 years ago) that a democracy will fail when people discover they can get something for nothing and without working for it. I believe the USA has reached that point.

[theone]

What do you think about the USA which has amassed the highest debt in its history? They are so deep in debt that they never will get out of debt. GB used to hold this debt and now it's China. I read some where (written I believe more than 200 years ago) that a democracy will fail when people discover they can get something for nothing and without working for it. I believe the USA has reached that point.

I think the USA's situation is very worrying. Especially as so much world trade is based around the dollar.

Once the dollar crashes, the effect felt around the world will make the current credit crunch look like a walk in the park.

There's a reason gold prices are at an historical high. Those "in the know" are choosing to invest and trade in it instead of dollars.

[oldmarine]

I think the USA's situation is very worrying. Especially as so much world trade is based around the dollar.

Once the dollar crashes, the effect felt around the world will make the current credit crunch look like a walk in the park.

There's a reason gold prices are at an historical high. Those "in the know" are choosing to invest and trade in it instead of dollars.
theone has made a good point about gold. The USA prior to 1932 was on the Gold Standard. President Roosevelt took the USA off the gold standard. One of the largest mistakes he could have made.

[weezer 316]

Im not sure keeping the gold standard would have made any difference to the current US economic plight. I often wonder about US fiscal issues, namely the seemingly absurd insistence on republicans vetoing everything they can when not in power on the account its costing the govt money, and their incredible ability to run up govt debts whilst in the white house with Reagan/Bush and dubya being the prime cuplrits.

Anyway, for my tuppence worth im gonna gamble if the US was to default the winner would be the Euro as you would see people dumping the dollar and heading there. Unfortunately I dont see a way out for the US as it has committed itself to incredible social security payments via medicaid and medicare and the like which are quite literally crippling them. And this is in a country without a public healthcare system.

In conclusion, an extreme form of capitalism, combined with a govt having to pay prices rising far beyond inflation for medicines, and a extremely partisan legislature has caused the current debt crises. And none of them can be solved overnight or in isolation.

[John Little]

Everyone's in debt- correct?

Now who are they in debt to?

[weezer 316]

I read somewhere (cant mind where) the Uk holds about $250bn of US debt. Thats not to bad. Drop in the ocean when you consider they owe about 9 trillion though admitedly.

[John Little]

If that is the case then surely the idea of a financial crisis is a notional absurdity.

[theone]

Everyone's in debt- correct?

Now who are they in debt to?


If that is the case then surely the idea of a financial crisis is a notional absurdity.

It is strange, isn't it?

One of the big problems with the way our financial markets work is that its all speculation, many things have no value, only a price.

We could just do what Mugabbi does and print more money to pay of the debt! ;-)

I know a couple who have been trying to sell their house for several years. Nobody has given them an offer anywhere near their asking price, and so it continues unsold. They seem totally confused by the fact that their house is only "worth" what someone is willing to pay for it.

[John Little]

Oh I find it completely odd. We peg limits to our expenditure yet Weezer seems to be saying we are owed far more than we owe. The whole system seems too absurd for words - yet the price is paid in misery, unemployment and want.

Perhaps we should abolish money by international agreement and adopt some sort of work credit system

[weezer 316]

Here we go - http://www.economicshelp.org/2008/09/us-national-debt.html

$252bn to be precise. Although IM not sure how accurate the site is.

[secrets in symmetry]

Symmetry,

Apologies. I had read your post but I didnt have time to reply at the time and it since slipped my mind.

As for your points, I can only assume you are fully happy to carry the enormous debts we do as to say that we wouldnt have a serious problem today without the credit crunch is naive at best and negligent at worst. We have been running a deficit the entire century and as you say only had 3 years of a surplus, most of which ironically can be traced back to the previous tory govt due to the lag effect in the economic cycle.

This misses the point though. Chickens come home to roost eventually and that has been what happened in Greece. As a result they have had to impose such austerity measures. That's exactly what will happen here if the attitutude "we are ok today, stuff what could happen tommorow" prevails in govt.

Indeed one of the links you mentioned makes the point we pay the equivalent in the defence budget in interest each year! At a time when people moan about service cuts and wish us to continue running in deficit, there by needing to borrow more money and spend more on interest and then cut more services..........you can see where this is going.

Over the course of this parliament I sincerely hope we can wipe the deficit out. Only then can we tackle the debt.Oh come on weezy. Why bother building a straw man to misrepresent my post about the Blair/Brown era, and then shoot it down to cover your previous glossing over of the facts?

Greece is indeed a chronic basket case, but, as I explained before, the UK's current account deficit was not (quite) excessive until the banks imploded and the economy shrunk by more than 6% in just over a year. That resulted in a near as damn-it a 10% cut in government income in one year. Very few people saw that coming - except in retrospect. As I wrote previously, Brown rode the back of a wild tiger for several years, pushing the edge of the envelope with staggering success...pouring money into health and education, and more or less balancing the books by the skin of his teeth. He was lucky for a few years, and I'm sure he knew it...but he kept going, somewhat recklessly perhaps. Blair worried that Brown was going too far as far back as 2005, and I think Darling knew it in 2007, but still they kept spending...until Lehman Brothers sank and all hell broke loose as liquid cash dried up. Only then did tax receipts fall dramatically and the current account went into the red dramatically.

An ideal solution would be to re-expand the economy rather than to increase taxes and cut spending, the problem is how to actually do it. The Tory party is ideologically devoted to cutting spending, and they are delighted to have this opportunity to do it whilst pulling the wool over their opponents' eyes, but as Ed Balls likes to point out, they are playing a dangerous game. The deficit could grow faster than ever if the economy is flat (or worse) for the next year and total disillusionment sets in amongst business and the populace. Of course, Balls' game would be just as dangerous, perhaps more so, but the corner shop economics claim that spending cuts are the only answer is too naive.

Having said all that, I agree that the deficit should be beaten up as soon as possible, and before the national debt gets too big for economic expansion to dent and/or to inflate away. Also, objective arguments are one thing, but avoiding spooking the markets and credit raters is a different kettle of bankers' bonuses. That's why mere economic theory ain't the whole story.

One promising sign is that this is the first government since about 1987 to at least pay lip service to rebalancing the economy away from the City. Only time will tell if they are serious about this.

Gotta go, sorry.

[Kenn]

I have been following events in Greece not only through my eyes but those of a native greek.
When I have asked about what the country has to export, tourism , a small amount of produce including alcohol and it's people seem to be about the only things as manufacturing has never been on a scale that most western and some eastern countries take for granted.
I have asked where the fortunes of the shipping magnates have been invested and am reliably assured that they are in hedge funds overseas or Swiss banks and with many greeks,especially those resident in The USA holding dual nationality such arrangements are easily facilitated.
Whilst I appreciate that the average salary is aproximately half of what it is here, the per capita spending on social welfare is almost double.One thing that surprised me is that women retire on a full pension at age fifty and there were many other benefits paid to pensioners until recently such as ,two weeks extra pension in the summer to enable a holiday to be taken and an extra week's over the Christmas period.
In a country which like most of Europe has an aging population, the burden on the state pocket was bound to be unsustainable especially when most greeks part with their money in taxes slower that a hen grows teeth, preferring to hide it under the bed or in gold.
The number of cars being taken off the road as a direct result of rising fuel prices and VAT in the country has resulted in a large loss of revenue and not the increase that was projected.
I just hope that Papandreou can get the necessary financial reforms in place but am not holding out much hope and if he fails and the country defaults on the bail out then the country will have little alternative but to go bankrupt, this could result in the collapse of the euro as confidence will be severely undermined in the currency especially as there are others within The EU who are in a similar situation.
To add insult to injury ,Germany owes the country millions in restitution but all approaches by the greek government have been ignored.

[weezer 316]

Symmetry,

Very easy to say re-expand the economy, very hard to do in practice. Unfortunately most of the new jobs in the past decade have been via public spending! So, assuming we get abck to pre 2008 size (we will early next year unless greece blows up) we still have the issue of running at a deficit, year on year, all the while mounting up debt.

Its lunacy. Take the hit for the next few years and get it over with and maybe then we can start paying down the debt, maybe. And for that we need to cut spending and raise taxes. And we have noone to blame but ourselves.

Lizz,

I must say i find it staggering beyond belief that woman retire at 50 in Greece! Thast utterly incredible.

[theone]

I don't understand how any party, Tory or Labour, should have been allowed to get us into the position when we're paying £120 MILLION a DAY in interest on our national debt.

Lunacy.

[oldmarine]

Both major parties in the USA (Republicans & Democrats) plus many of the Independents are guilty of running up the National Debt. The USA is financially broke and does not seem to want to admit it. It's the worse it has ever been and getting deeper and deeper in to debt without paying off any of the debts. It's just a matter of time until the USA finances will collapse and probably bring down many other nations with it. It used to be Great Britain who held the majority of the debt. Now it's China and they are telling the USA it has gone too far with its borrowing. When will the politicians wise up and get past this problem?

[theone]

When will the politicians wise up and get past this problem?

They'll never wise up for as long as the current system of democracy is in force. To get in power you have to be popular. What needs to be done to deal with debt is not popular, therefore anyone willing to slash spending will not win the votes and get in power.

Ask a 5 year old who they want to pick dinner. Mum wants roast chicken and veg, Dad wants chips and ketchup. Dad wins every time. The popular vote beats the one that is good and 'right' for the voters.

Wars will be fought to gain control of nautral resources for financial gain as the economies go downhill. Some say they already are.........

[sandyr1]

I have been following events in Greece not only through my eyes but those of a native greek.
When I have asked about what the country has to export, tourism , a small amount of produce including alcohol and it's people seem to be about the only things as manufacturing has never been on a scale that most western and some eastern countries take for granted.
I have asked where the fortunes of the shipping magnates have been invested and am reliably assured that they are in hedge funds overseas or Swiss banks and with many greeks,especially those resident in The USA holding dual nationality such arrangements are easily facilitated.
Whilst I appreciate that the average salary is aproximately half of what it is here, the per capita spending on social welfare is almost double.One thing that surprised me is that women retire on a full pension at age fifty and there were many other benefits paid to pensioners until recently such as ,two weeks extra pension in the summer to enable a holiday to be taken and an extra week's over the Christmas period.
In a country which like most of Europe has an aging population, the burden on the state pocket was bound to be unsustainable especially when most greeks part with their money in taxes slower that a hen grows teeth, preferring to hide it under the bed or in gold.
The number of cars being taken off the road as a direct result of rising fuel prices and VAT in the country has resulted in a large loss of revenue and not the increase that was projected.
I just hope that Papandreou can get the necessary financial reforms in place but am not holding out much hope and if he fails and the country defaults on the bail out then the country will have little alternative but to go bankrupt, this could result in the collapse of the euro as confidence will be severely undermined in the currency especially as there are others within The EU who are in a similar situation.
To add insult to injury ,Germany owes the country millions in restitution but all approaches by the greek government have been ignored.

Can you explain that comment pls..tks...s

[John Little]

http://hubpages.com/hub/The-American-National-Debt-Who-Do-American-Owe

[secrets in symmetry]

Symmetry,

Very easy to say re-expand the economy, very hard to do in practice. Unfortunately most of the new jobs in the past decade have been via public spending! So, assuming we get abck to pre 2008 size (we will early next year unless greece blows up) we still have the issue of running at a deficit, year on year, all the while mounting up debt.

Its lunacy. Take the hit for the next few years and get it over with and maybe then we can start paying down the debt, maybe. And for that we need to cut spending and raise taxes. And we have noone to blame but ourselves.

Lizz,

I must say i find it staggering beyond belief that woman retire at 50 in Greece! Thast utterly incredible.
Lol! Of course I know it's hard to re-expand the economy without spending money. I wrote that mainly to see how you would react, like the Devil I am.

There's nothing wrong with new public sector jobs if those jobs pay for themselves. The problem is that most of them don't, and it is true that the public sector is bloated with administrators and other assorted fluff after years on Easy Street. Even worse, some of that fluff is running things now, and they have the power to fire the useful people!

Luckily, you don't need to pay off government debt - ever. You expand the economy and you inflate it away so that the interest payments become less important.

[Kenn]

My reference was to the WW2 restitution Sandyr and to the fact that The Germans raided the bank of Greece for it's gold reserves, in neither case have The Greeks succeeded in gaining the monies back although several other countries have.

[sandyr1]

http://hubpages.com/hub/The-American-National-Debt-Who-Do-American-Owe

I asked a Q and this was sent....was it for me?

[sandyr1]

My reference was to the WW2 restitution Sandyr and to the fact that The Germans raided the bank of Greece for it's gold reserves, in neither case have The Greeks succeeded in gaining the monies back although several other countries have.

Thanks Lizz..... I forgot about that......s