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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.