Greek Gov Ready to 'Shave' Bank Accounts

[GURPS]

The ONLY solution to the Greek problem is to WIPE out their debt and lend them new money at higher rates. There IS business to be had with them. It just got out of balance and the people who were chasing profits by lending to them simply need to swallow the loss and get on with new business. They can pay SOMETHING. They just can't pay what is owed. So, that deal went bad. Time for a new deal.

It's that simple.

the Greeks needed to quit SPENDING so much money ... they cannot afford it

 

[GURPS]

Pensioners can't get their benefits, and pensioners make up 103.6% of the nation. And I can't stress the significance of this enough: Capital controls for a nation that relies heavily on imports for essential life resources. The import of that reality, for the plight of Greek people, is hard to overstate.

so we can expect the same or worse here, when the welfare state collapses in 25 - 50 yrs

 

[Tilted]

...

I just have a fondness of great moments and am pulling for someone to do something that is NOT a repeat of the the things they did to get in trouble in the first place. Greece in and of itself, seems to be a perfectly sustainable land. The US certainly was yet we chose to piss away our big chance.

Sorry, I'm a rude online discussion-er. Sometimes I just disappear.

Anyway, I didn't want to quote everything you've said since I left last night, but I did want to quote this part. What I'm suggesting should be done (which I'm starting to get a sickening feeling won't be done) would be this - it would be not repeating the mistakes that we've long been making. It would be trying something fundamentally different. It would be not kicking the can down the road and thinking we could operate in unsustainable ways, but rather letting reality in and dealing with it - making the adjustments it requires or will ultimately require.

Also, I would submit that you are wrong about Greece being, in itself, a perfectly sustainable land. Perhaps the geography itself is, but as a nation right now - with the attitudes and expectations that Greeks collectively have - it is not. That's the point, something has to change to change their attitudes and expectations. As things are, Greece can't sustain itself. Not enough people are wiling to work enough. Their collective productivity can't support their collective lifestyle. Something has to change, unless the rest of the world is willing to continue financing the disparity.

Anyway... back to the main issue I wanted to respond to: What happens if Greece doesn't get a new deal and why they are, as I've said, ####ed in that event. I do thing there are some things you are missing here. I'll find some articles and/or video reports that might do a better job of painting the picture. But I'd likely to quickly make a few points (perhaps again).

I think you are thinking of the Greek economy too statically. They produce this, they have this income, they have this money, etcetera. So much of how modern economies work is dependent on dynamics. How much wealth there is, how much money there is to be spent, these things depend on the constant motion of money - they depend on ongoing activity. When economic activity starts to slow down, money in effect disappears - not base money, but as I refer to it transactional money, which is what modern economies are mostly built on. If money stops changing hands, or if its changing of hands slows considerably, then some of it is meaningfully lost - the wealth it creates and the value it represents is lost. I'm sure you intuitively understand that notion.

Yes, Greeks still have money to spend. In theory. Some of them, their non-poor, have money in accounts. But the banks are closed. And those that have money can only withdraw small-ish amounts from ATMs. They can't do transactions. (I'm making general statements which aren't in all cases true of course, but the effect of them being true in many cases remains.) It doesn't much matter if I, in theory, have money in an account somewhere that I could use to pay someone for a gasoline delivery or carton of baby formula - if I can't do a money transaction with it, I effectively don't have it. And there are capital controls in place, it isn't easy to send money out of the country whether you have it in an account or not. The situation is somewhat like we would have faced here had those drastic steps not been taken to infuse liquidity into our financial system. We would have had money in accounts, in theory we - the general populace - were fine. But the banks wouldn't have had the money to give to us or to do transactions for us. You wouldn't have been able to pay your employees because... well, because there wouldn't have been any money to. When you said to your bank, I've got this much in my account give this much to that guy over there, the bank would have just shrugged its shoulders. Sorry, can't. I know what your bank statement says, but there's no money.

Anyway, no some of the ATMs are running out of physical currency. Even what you are allowed to withdraw, you can't withdraw. People can't use their credit cards because people don't know if they can trust the banks. Tourists can't use credit cards. Cash is king and it is disappearing - e.g., because it is being hoarded or moved out of the country. Commerce isn't getting done. Businesses in Athens are reporting they haven't had customers - or have had only a tiny portion of normal customer traffic - for a week. Essentials, yeah, people are still buying them to the extent they're able to. But other stuff - the stuff that drives economies, that business isn't getting done. The economy is grinding to a halt, there is in effect less money because there's less economic activity.

I heard a Greek guy last night report to Michelle Caruso-Cabrera that last year at this time they were seeing 120,000 reservations per day. Now they are seeing 75,000 reservations per day. The tourist industry is crashing.

They have supplies of course, and depending on what they are they'll last a week or a month or whatever. But they will get used up at some point, and the inflow system isn't functioning as it should. Again, yes, in theory some still have money. But without a functioning bank system, that doesn't matter all that much. The Greek bank system was only functioning because the ECB was giving it money to function with, e.g., to cover withdrawals. That's stopped. The ECB isn't allowed to give it any more money because there is no debt deal in place and because Greece defaulted (or, as they put it, is in arrears as of) last Tuesday.

This is how economies die, or at least how they seize up. Economic activity stops happening, money stops moving, which causes it to effectively dry up, which stresses the banking system and makes economic activity even harder. People hoard what cash there is or use what they have on essentials. The whole thing is a self-perpetuating cycle. And Greece was already in bad shape, even before its default this week and the banks closing and the capital controls and their rejection of the debt deals. They already had 25% unemployment (based on pretty low labor force participation to begin with) and there economy had already contracted 20 or 30 percent (I'd have to look it up to be more exact) over the last 5 years or however long it's been. They were already in a major depression. Instead of digging in and working to get themselves out of it, they've chosen to say #### it and deny that things were that bad - they want to act like they're in the middle of the housing bubble (warning: slight exaggeration).

Their only hope is to get a new debt deal. Otherwise, they are cut off and for them that means trouble. They are not, at this point in time, positioned to take care of themselves. They need help from the rest of the world. Can they remake themselves to be able to support themselves? Sure, that's possible. But that's much the point, they refuse to do that - they refuse to move meaningfully in that direction. They don't want to accept having to work past their 35th birthday or before their 30th.

This will be very ugly very soon if they don't get a new deal. There's no way to get the engine running otherwise, there's no way out of the cash problem they now have - no way for the banking system to start functioning again, no way to facilitate transactions on a sufficient scale. They can't print money to inject liquidity into their banks. They need the ECB for that. And they've just told the ECB, and other interested parties, to go #### themselves.

 

[Larry Gude]

S as I've said, ####ed in that event. I do thing there are some things you are missing here. I'll find some articles and/or video reports that might do a better job of painting the picture. But I'd likely to quickly make a few points (perhaps again). .

Then, truly, it is simply a matter of creditors holding on for a few days or weeks and they'll have Greece at their mercy and everyone will get back in line, shut up and do as the money tells them.

Or...maybe they figure it out, come together and break that bond.

 

[GURPS]

Greece has a WONDERFUL opportunity here and if they fix their waste, fraud and abuse as a consequence it will be of THEIR choosing and not some German telling them what to do.

and the Greeks refuse to .... that is why were are here today

 

[Tilted]

Larry - Here are some articles to help start to paint the picture. Keep in mind these are from before the no vote, which will make things worse (again, unless they can get a new deal from creditors). I would correct something said in one of these articles: It suggests the capital controls put restrictions on the cash that tourists can withdraw from ATMs. I don't think that's true, foreigners are allowed to withdraw as much as their banks' policies will allow them to. But, if there's no cash in the ATM, that doesn't much matter.

http://www.economist.com/blogs/freeexchange/2015/07/greeces-economy-under-capital-controls

http://rt.com/business/271534-greek-capital-control-hits/

http://www.ft.com/intl/cms/s/0/2034a0e6-20c7-11e5-aa5a-398b2169cf79.html#axzz3f7KYYrWl

EDIT: To add...

http://video.cnbc.com/gallery/?video=3000393206&play=1

That video is from last Wednesday, the iceberg to which he refers has been coming into better view since.

 

[Tilted]

Then, truly, it is simply a matter of creditors holding on for a few days or weeks and they'll have Greece at their mercy and everyone will get back in line, shut up and do as the money tells them.

Or...maybe they figure it out, come together and break that bond.

Yeah, but part of my point is that the interests of the remaining big creditors aren't necessarily the same as the interests of everyone else - i.e., of European economies or the global economy. Whereas most (outside of Greece) might be better off to just let Greece do this to itself, certain creditors might be better off bending over backwards in hopes of getting something out of Greece in the future - some return on the debt they hold.

 

[kwillia]

Then, truly, it is simply a matter of creditors holding on for a few days or weeks and they'll have Greece at their mercy and everyone will get back in line, shut up and do as the money tells them.

Or...maybe they figure it out, come together and break that bond.

Larry, your approach makes no logical sense. If we simply forgive their debt and not expect and enforce immediate financial frugality they are going to immediately begin racking up debt again... are you saying the rest of Europe should simply wash, rinse and repeat on the backs of their taxpayers every few years?

 

[Gilligan]

Or...maybe they figure it out, come together and break that bond.

The Greek people just resoundingly rejected the idea of any cuts in their amazingly generous social gravy train. Just yesterday, Larry.

 

[Larry Gude]

Larry, your approach makes no logical sense. If we simply forgive their debt and not expect and enforce immediate financial frugality they are going to immediately begin racking up debt again... are you saying the rest of Europe should simply wash, rinse and repeat on the backs of their taxpayers every few years?

No. I wrote what I wrote and I ain't gonna write it no more.

So, we'll just do it again; bail out the big banks, the tax payers will STILL get hosed for it and no repayment. In the meantime, the value of the taxpayers euro's are falling and their day to day costs will go up so, they lose/lose. As long as the banks win, we're all happy, yes?

:shrug:

 

[kwillia]

No. I wrote what I wrote and I ain't gonna write it no more.

So, we'll just do it again; bail out the big banks, the tax payers will STILL get hosed for it and no repayment. In the meantime, the value of the taxpayers euro's are falling and their day to day costs will go up so, they lose/lose. As long as the banks win, we're all happy, yes?

:shrug:

I read what you wrote and my post was what you stated at it's very simplistic nature. You expect banks to make loans to a country that continues to spend so far beyond their means that cannot make payment on their loans and by simply wiping the slate clean and allowing Greece to start it's debt all over again you are saying the other countries just need to accept that Greece is their "special son" who needs to be allowed to just sit on the couch and play video games all day while they keep him in his self-righteous comforts.

 

[Larry Gude]

I read what you wrote and my post was what you stated at it's very simplistic nature. You expect banks to make loans to a country that continues to spend so far beyond their means that cannot make payment on their loans and by simply wiping the slate clean and allowing Greece to start it's debt all over again you are saying the other countries just need to accept that Greece is their "special son" who needs to be allowed to just sit on the couch and play video games all day while they keep him in his self-righteous comforts.

Nope.

 

[Tilted]

No. I wrote what I wrote and I ain't gonna write it no more.

So, we'll just do it again; bail out the big banks, the tax payers will STILL get hosed for it and no repayment. In the meantime, the value of the taxpayers euro's are falling and their day to day costs will go up so, they lose/lose. As long as the banks win, we're all happy, yes?

:shrug:

I'm not sure where you're getting the idea that we're talking about bailing out the big banks. With what I'm suggesting, those that hold Greek debt get screwed. And even if they do get paid back, that isn't in any fair sense bailing them out. It's just them getting paid back what they loaned, which is the expectation when you loan money. (I'll resist for now the temptation to address that notion - of bailing out the big banks - with regard to what happened here 6 or 7 years ago.)

Anyway, I'm talking about doing something different, not doing the same thing again. Holding the line against Greece represents doing something fundamentally different. It represents the hope of a new day, a day in which people make decisions and take actions as though reality matters - as though they can't live their entire lives in a reality-defying, though delusion-protected, state, as though the laws of nature might eventually catch up with and subdue some of the premises on which society chooses to build itself on.

I would submit that, when it comes to Greece in particular, the fundamental problem is that collectively they don't want to do as much work as is needed to support the lifestyle that they collectively want to live (or expect to live or do live or whatever). If you accept that posit, then... what does wiping the debt slate clean and moving forward do to address that problem? Is it somehow going to lead to that problem being fixed? Or, if not, does the rest of the world just go on paying Greece's way in perpetuity? How do you see your solution playing out?

If you don't accept that posit, I suppose we'll have to take the conversation in a different direction.

 

[Larry Gude]

...just need to accept that Greece is their "special son" who needs to be allowed to just sit on the couch and play video games all day while they keep him in his self-righteous comforts.

Why do you think the EU/Greece deal, with all those nations, all those governments, all those long histories and relationships is remotely the same as some kid on moms sofa? Do you honestly feel that the EU is fair and only Greece is being lazy? Do you honestly think there's no manipulation, no shady deals, no tilting of the playing field, that all those nations can and should function as one? You sincerely see relations between these countries as parent and child?

Have at it. Make 'em pay. Force them. Kick them out. Whatever it takes to protect our Too Big To Fail world. Everyone else is with you; Greece is the problem. Simple. Black and white.
Let me know how it works out. :shrug:

 

[kwillia]

I'm not sure where you're getting the idea that we're talking about bailing out the big banks. With what I'm suggesting, those that hold Greek debt get screwed. And even if they do get paid back, that isn't in any fair sense bailing them out. It's just them getting paid back what they loaned, which is the expectation when you loan money. (I'll resist for now the temptation to address that notion - of bailing out the big banks - with regard to what happened here 6 or 7 years ago.)

Anyway, I'm talking about doing something different, not doing the same thing again. Holding the line against Greece represents doing something fundamentally different. It represents the hope of a new day, a day in which people make decisions and take actions as though reality matters - as though they can't live their entire lives in a reality-defying, though delusion-protected, state, as though the laws of nature might eventually catch up with and subdue some of the premises on which society chooses to build itself on.

I would submit that, when it comes to Greece in particular, the fundamental problem is that collectively they don't want to do as much work as is needed to support the lifestyle that they collectively want to live (or expect to live or do live or whatever). If you accept that posit, then... what does wiping the debt slate clean and moving forward do to address that problem? Is it somehow going to lead to that problem being fixed? Or, if not, does the rest of the world just go on paying Greece's way in perpetuity? How do you see your solution playing out?

If you don't accept that posit, I suppose we'll have to take the conversation in a different direction.

Well said. As was pointed out by Larry, Greece is a country of means and therefore should be governing to sustain itself within its means rather than expect other countries to continuously provide them funds to live so far above their means and then not be expected to pay them back time and time again.

 

[Larry Gude]

Anyway, I'm talking about doing something different, not doing the same thing again. Holding the line against Greece represents doing something fundamentally different. It represents the hope of a new day, a day in which people make decisions and take actions as though reality matters - as though they can't live their entire lives in a reality-defying, though delusion-protected, state, as though the laws of nature might eventually catch up with and subdue some of the premises on which society chooses to build itself on.

I would submit that, when it comes to Greece in particular, the fundamental problem is that collectively they don't want to do as much work as is needed to support the lifestyle that they collectively want to live (or expect to live or do live or whatever). If you accept that posit, then... what does wiping the debt slate clean and moving forward do to address that problem? Is it somehow going to lead to that problem being fixed? Or, if not, does the rest of the world just go on paying Greece's way in perpetuity? How do you see your solution playing out?

If you don't accept that posit, I suppose we'll have to take the conversation in a different direction.

Your position is that that will work, correct? Mine is that it won't. If you are right, it will be a matter of days before you're proven correct; Greece is screwed and MUST come begging back for a deal OR face dire problems that will only force them back when their threshold for pain is reached, correct?

I've never been a fan of the EU and I think it a fairly easy thing to do to find people who predicted this years ago. It is simply silly to put Germany and Greece on a level playing field and expect Greece to compete fairly well over time. Look at it as a golf match and Greece has been given strokes from day one to get the thing to sort of work. My sense is that you're seeking rational behavior from the weakest link in an enormous Rube Goldberg contraption where rational and reasonable would have meant it never happened. I always assumed national pride would be a fatal problem for the thing at some time and it's been a hoot watching the UK get their own special rules all this time to keep them on board.

It may be that the truly amazing thing here is that it's held together this long. However, in my view, that's only been because of all sorts of machinations and manipulations. Greece will fix what they have to if it is their idea and maybe someone can manipulate them into thinking it is and it will be addressed. Other than that, knowing some Greeks personally, their pride, their national instincts, their sense of unity, man, you wanna talk stubborn. Maybe you're right. Maybe they just need to have their feet held to the fire.

In the mean time, a lot of wealth is disappearing over a sound principle in an unsound contraption; the EU. :shrug:

 

[Larry Gude]

Well said. As was pointed out by Larry, Greece is a country of means and therefore should be governing to sustain itself within its means rather than expect other countries to continuously provide them funds to live so far above their means and then not be expected to pay them back time and time again.

Cut 'em off. Keep them cut off until they submit. Have at it. :shrug:

 

[Larry Gude]

Gotta go back out. Be back this evening. Should be an interesting day based on Tilted's observation of how ####ed they are.

Good conversation, people. Take notes. This is where we're headed.

 

[Tilted]

Your position is that that will work, correct? Mine is that it won't. If you are right, it will be a matter of days before you're proven correct; Greece is screwed and MUST come begging back for a deal OR face dire problems that will only force them back when their threshold for pain is reached, correct?

I've never been a fan of the EU and I think it a fairly easy thing to do to find people who predicted this years ago. It is simply silly to put Germany and Greece on a level playing field and expect Greece to compete fairly well over time. Look at it as a golf match and Greece has been given strokes from day one to get the thing to sort of work. My sense is that you're seeking rational behavior from the weakest link in an enormous Rube Goldberg contraption where rational and reasonable would have meant it never happened. I always assumed national pride would be a fatal problem for the thing at some time and it's been a hoot watching the UK get their own special rules all this time to keep them on board.

It may be that the truly amazing thing here is that it's held together this long. However, in my view, that's only been because of all sorts of machinations and manipulations. Greece will fix what they have to if it is their idea and maybe someone can manipulate them into thinking it is and it will be addressed. Other than that, knowing some Greeks personally, their pride, their national instincts, their sense of unity, man, you wanna talk stubborn. Maybe you're right. Maybe they just need to have their feet held to the fire.

In the mean time, a lot of wealth is disappearing over a sound principle in an unsound contraption; the EU. :shrug:

I've gotta run, but I'll pick this back up later.

But, to be clear again, I am not saying that will work as in it will force Greece back for a deal. (Note: They may want a deal and realize they should have taken the deal, but I think it may well be too late at that point - my point was never that what I suggest would lead to a deal to get Greece's creditors paid.) I'm saying it will be better for the global economy, and for most of Europe, to just move on - to let Greece fend for itself. What I'm talking about is letting Greece continue to default, but in light of their egregious attitude and defiance to stop supporting them financially. Creditors lose, they don't get their money back. Europe moves on, no longer supporting Greece. Greece hits bottom and either fades into history or makes dramatic changes. I can wake up in the morning and not have to listen to this bull#### that should have long ago been put behind us, I can focus on financial stuff that should matter for American markets. I can stop caring what happens in that ####### country (I love Greece, btw, and its history; but as a nation it's made itself into an ass of late). Global economies can stop being held hostage by it.

 

[GURPS]

Greece hits bottom and either fades into history or makes dramatic changes.

IMHO ... WAR is coming back to Europe ... next 25 yrs