Greece is a tiny part of the Eurozone. The ECB could have taken over their debts without inflation

[phantom power]

I get annoyed when people talk about the legal constraints that central banks face because "do whatever the fuck they want just call it an emergency" seems to govern their actual behavior when necessary. Greece is a tiny part of the Eurozone. The ECB could have taken over their debts without causing inflation. They could've mailed giant checks to every citizen of Greece without causing inflation. They could have made the lives of actual people infinitely better at essentially no cost.

But Teh Moral Hazard!!! The only moral hazard issue we see these days is that big banks lend without fear of default, knowing well that they - not the people - will be bailed out. Both could be bailed out, of course, but apparently that's not an option. Because serving the people is not what these institutions are for.

http://www.eschatonblog.com/2015/07/success-stories.html

[geek tragedy]

1. $350 Billion is not "no cost"

Inflation wasn't the concern--not getting paid back is the concern. Throwing good money after bad was the concern.

Plus, if Greece can demand it, why can't Spain, and Italy, and every other debt-ridden or poor country.

It is true that Greece is a tiny part of the Eurozone.

Which is why the Grexit remains the only viable solution to this mess. Greece needs to control its own monetary policy.

[truebluegreen]

4. Not getting paid back was not the concern; if it were, the Troika would have made it possible.

"The IMF released a report just a few days ago admitting what so many economists have already said, that Greece's debt is unsustainable and odious. The IMF had this report for months.
Just two days ago Wikileaks released a document from 2011 where German Chancellor Angela Merkel who told her personal assistant that Greece's debts would still be unsustainable under the terms of the new arrangement.

So basically the troika knows beyond a shadow of a doubt that the crushing austerity they are forcing upon Greece is doomed to fail. Greece will never be able to pay these debts.
Yet neither the IMF, nor the ECB, nor the political leaders of Europe are willing to change course. Why?

The debt, in other words, isn't about money. It's about political control."

(my bold)

http://www.opednews.com/articles/26-Centuries-later-Athens-by-Daily-Kos-Debt_Debtor-Nation_Democracy_Greece-150705-780.html

[Igel]

6. Odd.

Entailed is that the way to get paid back is to annul the debt.

I've had unsustainable debt before. That meant, I guess, I was doomed to fail.

But I really had three choices: I could sit back and say, "meh, unsustainable now and that can't be changed, it is the master of my destiny," then declare bankruptcy; I could refinance and consolidate debts and hope to lower the payments, even though it meant I'd pay more over a longer period and have to scrimp (personal-level "austerity&quot ; I could find a way of increasing my ability to pay so the unsustainable debt was not only sustainable but diminishing.

Four years later the $10k on one credit card, $5k on the other were paid off, and we missed defaulting on our mortgage by a month. We made structural changes to our domestic economy to reduce inefficiency and increase income, while restructuring short-term debt to allow the domestic changes to take effect.

[truebluegreen]

8. Countries' economys are just like kitchen table budgets?

Who knew? But let's look at your analogy.

You didn't actually say what you did: did you refinance, consolidate and lower payments? Incidentally, restructuring is exactly what the troika refused to do, and it is exactly what the current government of Greece was elected on.

And while you were addressing your debt, did someone require you to quit one of your jobs, thereby producing less income, or did you find a way to produce more? When austerity measures are pushed on a country already in trouble, what happens? Exactly what happened here, said economy contracted, in this case by 25%. They have suffered sustained 25% unemployment...for 7 years. What was that definition of insanity again?

Meanwhile the debt keeps piling up. At this point even the IMF is willing to admit the debt is "unsustainable" so maybe you should too.

[Taitertots]

26. This is the epitome of pseudo-economic willful ignorance

Does your income decrease by more than a dollar every time you cut a dollar in spending? It's does in Greece.

[geek tragedy]

7. Greece is saying two things

1) we have too much debt, we can't pay everyone back
2) please lend us more money

Um, okay.

[truebluegreen]

9. "Stunningly superficial."

[geek tragedy]

10. which of those two things is Greece not saying?

Under what conditions would you be willing to lend Greece money?

[truebluegreen]

15. For your further enlightenment:

http://www.democraticunderground.com/10248943

[geek tragedy]

16. that's not an answer, nt

[truebluegreen]

18. http://crooksandliars.com/2015/07/greece-and-economic-hit-men

[geek tragedy]

19. still not an answer.

no one's arguing that austerity is a good thing--it's a stupid policy

the question is: is it not true that Greece is asking for debt relief while also seeking to take on more debt?

the phrase that covers such situations is "throwing good money after bad."

[truebluegreen]

20. Did you really mean that? If so, the depth of your humanity is inspiring.

Austerity is stupid (7 years after) but well, what can you do? Good money after bad. Tsk.

How much money? "Enough", and wipe out the debt. The banksters who engineered the depth of this crisis should suffer, and the EU should take a long hard look at itself, and decide if it wants to be a democracy or an empire. Whatever went before (and bear in mind it was not this Greek government that engendered this fiasco) Greece cannot recover under current conditions.

[geek tragedy]

21. The banksters have already taken their losses and moved on.

The people on the hook would be the taxpayers of European countries. they're the ones who are owed the debt, and they're the ones from whom any more bailout funds would come.

You are awfully generous with other people's money (cutting a blank check to Greece to be paid by working people in Europe), and awfully judgmental about people who lack that generosity with other people's money.

[truebluegreen]

22. I'm generous about other people's money? We were talking about what "I" would lend.

As for the banks having taken their losses--um, no. Where do you think the money went from the loans in 2010 and 2012? To the tooth fairy?

http://digbysblog.blogspot.mx/2015/07/greece-and-european-project-whats-next.html

[geek tragedy]

23. private creditor losses

http://www.dw.com/en/greek-creditors-receive-official-haircut-notification/a-15767530

Private investors such as banks, insurance companies and investment funds as well as ordinary savers holding Greek bonds were issued a public offer Friday, enabling the Greek government to conclude the debt swap on a first set of bonds by March 12, Athens announced on Friday.

"Greece has made a titanic effort to finalize the decision on PSI [Private Sector Involvement] and conditions for granting the aid," Prime Minister Lucas Papademos told the cabinet meeting that approved the final text.

The debt swap deal is a precondition for Greece to receive a second rescue package worth 130 billion euros ($174 billion) from eurozone countries and the International Monetary Fund (IMF).

As part of the deal - also known as a haircut - private creditors are asked to trade in their Greek bonds for new ones offering lower interest rates and longer maturities. Bondholders are expected to take a nominal loss of 53.5 percent on their holdings, which equates to a real loss of 73 to 74 percent.

http://www.bbc.com/news/world-europe-15478358

After marathon talks in Brussels, European leaders agreed:



◾Banks holding Greek debt would accept a 50% loss
◾A mechanism to boost the eurozone's main bailout fund to about 1tn euros (£880bn; $1.4tn)
◾Banks must also raise more capital to protect them against losses resulting from any future government defaults

The agreement is aimed at preventing the crisis spreading to larger eurozone economies like Italy, but the leaders said work still needed to be done.

http://dealbook.nytimes.com/2011/10/04/banks-in-europe-face-huge-losses-from-greece/?_r=0

Europe’s biggest banks may finally be forced to own up to their losses.

While bank executives and government leaders have been reluctant to acknowledge that the hundreds of billions of euros of Greek debt held by financial institutions is worth far less than its face value, they are slowly accepting the grim reality, as investors, clients and lenders grow increasingly wary.

On Tuesday, Deutsche Bank said it would not meet its profit goals for the year, citing investor uncertainty and losses on Greek bond holdings. Government officials are debating dismantling Dexia, the large French-Belgian bank, and warehousing its troubled assets in a bad bank.

The latest woes prompted a broad market sell-off in Europe, hitting banks in France and Germany particularly hard. Wall Street, dragged down early by the problems on the Continent, lifted at the close, after reports that European financial officials were considering ways to shore up the industry.

Banks are not charities. And if they were there are lots of countries that need the help more than Greece.

[Taitertots]

24. "Under what conditions..."? If I was their central bank I would

No country can stand when their central bank is dedicated to destroying them.

[geek tragedy]

25. The ECB is not Greece's central bank.

The ECB doesn't exist to benefit Greece. It's not funded by Greece.

Greece does have a central bank, but it is insolvent.

[Taitertots]

27. The ECB (European central bank) is the central bank of Greece

[geek tragedy]

28. no, the Bank of Greece is the central bank of Greece

https://en.wikipedia.org/wiki/Bank_of_Greece

The ECB is the central bank of the Eurozone and the Euro currency. it's co-owned by the central banks of all 28 EU members.

[Taitertots]

29. Greece is in the Eurozone. ECB is their central bank.

Bank of Greece abdicated their Monetary policy authority to the ECB.

[geek tragedy]

31. No, Eurozone states still retained their own central banks

who retained the primary task of providing liquidity to their countries' banking system.\

Germany's central bank is the Bundesbank.

The ECB's purpose is to stabilize the value of the Euro. It is explicitly barred from acting as a lender of last resort to insolvent institutions.

[jwirr]

12. Disaster capital?

[truebluegreen]

14. Bingo.

Elites protecting elites, while plucking the citizens' pockets (the loans Greece received after the crash were intended to pay the banks), plundering the country for its assets, privatizing etc.

[snooper2]

2. LOL, the simplicity of some of these arguments is hilarious

to be expected, but hilarious non-the-less

[Romulox]

3. Detroit is a tiny part of the US. We could've bailed it out without inflation... nt

[Taitertots]

30. We probably should have bailed them out.

I guess it doesn't matter if dont care at all about the 700,000 people that live in Detroit.

[whatthehey]

5. So you'd be fine paying higher taxes and working longer just so...

..say, Arizonans could retire earlier and with better pensions than yours? Without wondering why they wouldn't at least meet your own requirements if they needed a tenth or twentieth bailout from you?

[Taitertots]

32. LOL, you mean like how we bailed out Texas in the 1980's

http://mobile.nytimes.com/blogs/krugman/2012/06/17/what-a-real-external-bank-bailout-looks-like/?referrer=

The federal government sends trillions of dollars from productive states to unproductive states. It's literally the largest intentional wealth redistribution in human history.

[LittleBlue]

11. Here is the problem

If any of that debt is forgiven, neighboring countries will be outraged that they have to pay their debts while Greece doesn't. It would be the end of the euro zone rather than the exit of just one member

[Betty Karlson]

13. The Baltic states are poorer than Greece.

They didn't need any assistance from the ECB. But then: they never allowed Goldman Sachs to swindle the entire European Union into believing that the Baltic states qualified for membership of the Euro-zone.

[brooklynite]

17. No - the moral hazard is that giving in to Greece would mean Italy, Spain, Portugal...

...and some Eastern European nations would probably be asking for a bailout as well.