Jun 30, 2011

greece

I think there is a lot of room for debate on Greece's situation and what these austerity measures mean and whether Greece should implement them. My view is they shouldn't. I think it would be dumb.

Let me make an analogy.

Greece = US families with no financial stability/power who bought homes through liar loans during the bubble.

Greece has always been financial weak. Their tax collection is a joke, pensions are egregious, it has huge welfare programs, corruption is ingrained, etc. No one in their right minds thinks of Greece being fiscally responsible.

And yet Belgium, Germany, Netherlands, etc all loaned money to them. Just like Countrywide, Bank of America gave mortgages to fiscally irresponsible families to buy homes.

Who is at fault here? Well both on some level. But a mortgage company's primary job is to underwrite mortgage by assessing the risk the mortgage won't be paid back. That's 90% of their job. And yet these banks from other European countries gave Greece money. The Greeks of course took it. In my mind these banks are quite frankly retarded. It is their job to assign loans and they quite frankly can't do it. They can't conduct what should be their core competency. They shouldn't exist and hopefully the Greek debt default will bankrupt them so someone who knows how to do it can actually compete in this market.  "Who gives someone a mortgage when you don't know their income?" is the same questions as "who gives Greece money?"  In a perfect world no one.

So the European banks want Greece to cut their spending and raise taxes so they can pay back their loans. Well they are never going to pay back these loans. Just like some US homeowners are never paying back their mortgages. They should implement a more reasonable financial setup in Greece but tell these other banks to fuck off.

So the argument at this point goes, "well no one will lend money to Greece then" to which I respond.

  1. No one should have been lending money to Greece in the first place.
  2. But in reality plenty of banks will lend money to them. See Iceland.
And so we'll end up doing all of this again in short order.

2 comments:

David Aronchick said...

I completely agree with this. But unlike Greece, Iceland had an adult, simple way to let the populous decide and move on. The biggest thing that's hurting the Greeks right now is the populous is not proposing anything sane (or it's not getting out_. So the only choices are:

1) Go back to the way things were. Not really possible (Greece would have to leave the Euro so they could inflate the hell of their currency).
2) Implement austerity measures - buys Greece 6-months, maybe a year until we're back here again.
3) Don't implement austerity and default. And? That's my problems ... It's only the first part of a choice - I want to know what the rest is.

C. Fuzzbang said...

I think there is another option. We agree the bailout/austerity helps non-Greek European banks. It also helps the Greek leaders/elite/rich because it allows them to keep skimming money through this financing while the common man takes the brunt. Tax evasion benefits the rich. The whole thing is similar to what we're doing here in the US. The banks get bailed out and teachers are fired. What? What the Greeks should do is kill the austerity measures, vote out/dissolve their government and demand a more just and fair set of austerity measures that includes taxing the rich. I suspect this avenue may be possible.