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[monster]

Originally Posted by Vallen Chaos Valiant

By that argument then no one would buy US government bonds. As I just said, currently you LOSE money buying it, but people buy it anyway because risk is zero.

You invest for a profit as an intention, but the amount of profit is proportional to the risk. The more chance of you losing your money, the higher the interest payment.

When chance to lose your money is ZERO, the interest rate is ZERO or even negatives. Because there is a healthy market of people wanting their cash stored in Bonds to avoid taxes. The fact is "not losing money" is actually valuable enough that people are willing to pay for the privilege. So no, you don't need to pay any interest rate if you can guarantee zero risk.

Conversely, and this is the core of my argument, if you invest in risky ventures for high interest rates, don't act surprised if you lose that money. You can either guarantee to get your money back, or get high interest rate payments. Not both.

Well, what if all types of loans are risk-free? Wouldn't the debtor then want to be able to provide some other incentive so that the creditor would choose to invest with them rather than with another debtor?

I mean, I think I see your point, but I do think that interest might still be of some use, even if only at a reduced necessity.

[Vallen Chaos Valiant]

Originally Posted by monster

Well, what if all types of loans are risk-free? Wouldn't the debtor then want to be able to provide some other incentive so that the creditor would choose to invest with them rather than with another debtor?

I mean, I think I see your point, but I do think that interest might still be of some use, even if only at a reduced necessity.

My point isn't that all interests payments should be erased, I am arguing about the opposite; that it is ridiculous to say that "all loans need to be repaid". Because the entire BASIS of loans and risk based interest rate, is that loan are NOT always repaid. To force every loan to be paid in full, no matter what, would actually break the financial system.

Zero interest rate is the result of what happens if all loans are repaid.

Debt forgiveness is the foundation of the financial system, it is what allows interest rates to exist.

[Anh_Minh]

Originally Posted by Vallen Chaos Valiant

Actually, your sentence is contradictory. By your logic if all debt needed to be paid, then there is NO RISK, and without Risk, why does creditors charge interest payments?

The only reason you pay interest is the risk! So if all debts need to be paid, logically all loans should be interest-free.

This is actually why people buy US government bonds, when they technically lose money from inflation. The risk is zero, so money managers are willing to take the loss to park their money there.

Greece should have already paid the original principle by now. So by your argument they no longer owe the creditors anything. After all, no risk means no interest rate. And no compound interest mean most loans are already paid up.

Another reason for interest rates is that money now is better than money later.

And yes, Greece can default. But brazenly claiming they have no interest in repaying their debts, and planning to borrow some more is still somewhat contradictory. Insulting their creditors is just icing on the cake.

[Vallen Chaos Valiant]

Originally Posted by Anh_Minh

Another reason for interest rates is that money now is better than money later.

And yes, Greece can default. But brazenly claiming they have no interest in repaying their debts, and planning to borrow some more is still somewhat contradictory. Insulting their creditors is just icing on the cake.

Greece is in debt MORE now than when the Austerity began. At current trajectory without changes, every single currently living Greek citizen would die of old age before the debt is paid. Where is the money that they allegedly got given? Not a cent went to the citizens, only to the foreign creditors. Foreign creditors who should have written off the debt as they should do, for risky loans.

And you still don't understand interest rates; Money Now is worse than Money Later, because money not invested would lose value via inflation. While Money Later would be treated as Capital Gains and be minimally taxed. The incentive is to give money away, assuming you can guarantee that it can come back.

Hence, to default on loans is the only thing that allows interest rates to exist. And why your regular bank account barely give you any interest.

EDIT:
Greece is not a stranger to bankruptcy, and at this point I don't see why not. Their current austerity is killing the country, and the only reason the election went the way it did, was because the citizens genuinely believe that declaring bankruptcy is BETTER than Austerity. After all, if the Austerity is going to last your remaining natural life, it might as well be eternal pain. So from that POV of an unpayable debt, you just don't pay it.

Greeks did this because it is their best chance. You don't have to like it, but Greece needs to take care of Greeks.

[Anh_Minh]

Originally Posted by Vallen Chaos Valiant

Greece is in debt MORE now than when the Austerity began. At current trajectory without changes, every single currently living Greek citizen would die of old age before the debt is paid. Where is the money that they allegedly got given? Not a cent went to the citizens, only to the foreign creditors. Foreign creditors who should have written off the debt as they should do, for risky loans.

Then Greece should officially default. Until then, it makes no sense for creditors to unilaterally forgive anything.

And you still don't understand interest rates; Money Now is worse than Money Later, because money not invested would lose value via inflation. While Money Later would be treated as Capital Gains and be minimally taxed. The incentive is to give money away, assuming you can guarantee that it can come back.

Money now can be invested now. If you chose to blow it on hookers and booze instead that is your affair.

Hence, to default on loans is the only thing that allows interest rates to exist. And why your regular bank account barely give you any interest.

No, the possibility of growing capital is what allows interest rates to exist. (OK, it's really both things. )

[Vallen Chaos Valiant]

Originally Posted by Anh_Minh

No, the possibility of growing capital is what allows interest rates to exist. (OK, it's really both things. )

Technically it is both, one side favours the borrower and the other side favours the lender. However, the reason interest rate is so low NOW, is because it is a borrower's market. And this is why Greece doesn't just default immediately; because they know Germany is not willing to take the fallout if they do it.

Greece doesn't mind defaulting because it isn't going to make things any worse for them. So Germany will have to pay them to NOT default. Yes, it is technically blackmail, but it is entirely legal. If you are willing to lend, you have to accept the risks.

[Mentar]

Originally Posted by Vallen Chaos Valiant

My point isn't that all interests payments should be erased, I am arguing about the opposite; that it is ridiculous to say that "all loans need to be repaid". Because the entire BASIS of loans and risk based interest rate, is that loan are NOT always repaid. To force every loan to be paid in full, no matter what, would actually break the financial system.

The vast majority of loans are to be repaid and _are_ repaid. You display a very... uh... relaxed attitude towards contractual obligations here, which is exactly the root cause of the Greek problems. If you take on loans without the intention to pay them back, you're untrustworthy and acting in bad faith, and you will soon run out of potential creditors.

Originally Posted by Vallen Chaos Valiant

Greece is in debt MORE now than when the Austerity began.

And your argument is...? That this is the austerity's fault? This is a very popular straw man in Greece, but it's nonsense.

What Greece did since joining the Euro was blowing through hundreds of billions of Euros which it borrowed - like a juvenile getting old enough to sign for his own credit cards, and then passing the cash on to himself and his friend. Once he is running out of banks to give him credit, he will not be able to finance his former lifestyle anymore, and cut down on them, even if it hurts. THAT is "austerity" here. It sure isn't the fault of the banks. The "painful cuts" were boons that Greece never earned for themselves in the first place. And I don't see many people in Greece who have the maturity and honesty to openly admit that.

And naturally, this will lead to a decline in GDP. There is no way around that.

At current trajectory without changes, every single currently living Greek citizen would die of old age before the debt is paid. Where is the money that they allegedly got given? Not a cent went to the citizens, only to the foreign creditors.

Ahahaha

Who do you think is paying for the hordes of civil servants that are pushing pencils in their offices? Who is paying for the rents of the deceased that are STILL collected?

Greece is continuously receiving money from the EU and the WMF. Without it, they couldn't. And I'm really sick of the BS (not by you, but by many others) that the billions of cash borrowed and blown "did not reach the citizens". It's exactly those corrupt parties funneling cash to their clientele that got elected. Cash not earned by taxes, but by borrowing.

Foreign creditors who should have written off the debt as they should do, for risky loans.

Then Greece should have had the honesty to default on them, and live with the consequences. But this is the beauty (or perfidity, depends on how you look at it) of the Greek approach: They want BOTH. They want to de-facto renege on the deal, default on their debts, but still stay in the Eurozone and receive more money from EU/WMF.

Greece is not a stranger to bankruptcy, and at this point I don't see why not. Their current austerity is killing the country, and the only reason the election went the way it did, was because the citizens genuinely believe that declaring bankruptcy is BETTER than Austerity. After all, if the Austerity is going to last your remaining natural life, it might as well be eternal pain. So from that POV of an unpayable debt, you just don't pay it.

You don't see why not? Very simple: Should Greece simply default, they will immediately be cut off from their lifeline, the ECB. They would be forced to switch to the Drachma, which will immediately undergo hyperinflation (current estimates are at ~0.52 Euro per Drachma). Then, this will happen:

1) Many Greek banks also hold Greek public debt. If they have to write it all off, many will go bankrupt. Especially since they also tend to hold debt in Euro, which will immediately double. In other words, the Greek financial system will collapse, and I doubt that they will be able to rebuild it quickly.

2) Greece needs to massively import fuel, steel and lots of other goods required. They would immediately double in price, and most of these goods can NOT be replaced by domestic wares.

3) The Greek "export" is extremely limited in scope, mainly shipbuilding. Unfortunately, since shipwrights pay ZERO tax (you can't make this up), the potential of growth will not directly register in the budget.

So, at least in the short and medium run, a Grexit would lead to a poverty and economic disaster which will make the austerity measures look like a picnic. It will get much, MUCH worse before it might get better again. Tsipras knows that, of course. The Greek public knows that too, of course. It just doesn't have the honesty to admit it.

Greeks did this because it is their best chance. You don't have to like it, but Greece needs to take care of Greeks.

You haven't read Syriza's manifest, then. They made it adamantly clear that no way they want to leave the Eurozone. The pathos in the "Greece people took the country back to themselves" proclamations is COMPLETELY hollow.

No, they don't want to take care of themselves. They want Europe to continue to pay for their lives, but without heeding the promises they themselves made to receive the necessary support.

Bah.

Originally Posted by Vallen Chaos Valiant

Technically it is both, one side favours the borrower and the other side favours the lender. However, the reason interest rate is so low NOW, is because it is a borrower's market. And this is why Greece doesn't just default immediately; because they know Germany is not willing to take the fallout if they do it.

You're wrong, sorry. Now that the mechanisms are in place so that a potential Grexit would not kill the rest of southern Europe via contagion, the extortion threat is gone. There are big majorities in the German public to rather let Greece drop and lose the 50-60 billions we guaranteed for. Hell, I'd be all for adding 10 billion on top if that would remove Greece from the Eurozone, and I'm rather one of the more conciliatory people here.

Greece has worn out its welcome long ago. And that's not only Germany's view, but the predominant view throughout Brussels in entirety.

Greece doesn't mind defaulting because it isn't going to make things any worse for them. So Germany will have to pay them to NOT default. Yes, it is technically blackmail, but it is entirely legal. If you are willing to lend, you have to accept the risks.

If they indeed go for this brinkmanship, Tsipras will be known for the man that defaulted Greece back into the third world.

No, what is going to happen is something else: Tsipras will blather and blah, and in the end, what he will get is that the (already ridiculously long) loan repayment agreements get prolonged a bit more. And that the EU/WMF will continue to finance Greece a little bit longer to the same conditions. Before more promised reforms in Greece are not fully implemented, there will not be another significant haircut.

This of course will leave the Greek public disillusioned in 6-12 months, because Tsipras will not be able to deliver his moon promises. Who woulda thunk?

[Bri]

Originally Posted by Mentar

The vast majority of loans are to be repaid and _are_ repaid. You display a very... uh... relaxed attitude towards contractual obligations here, which is exactly the root cause of the Greek problems. If you take on loans without the intention to pay them back, you're untrustworthy and acting in bad faith, and you will soon run out of potential creditors.

States are not people, sovereign debt is not meant to be repaid. A country will aim to outgrow it (or inflate it away) and when short term debt matures it will be refinanced. What is socially accepted or not for individuals has no implications on government finance.

Greece was caught during a period when a relatively large amount of short term debt was about to expire and markets cranked up the interest rate. Mainly by hedge funds who saw a massive opportunity to make a buck if they could push Greece in to default.

Due to private bank exposure the EU could not let this happen nor was a Greek exit an option as it would open up Spain and Italy to speculative pressure which could lead to a break up of the Euro zone.

Currently creditors are less worried as much of the debt is now refinanced for longer time periods and the QE by the ECB will mean there is more liquidity about in the Eurozone which will make borrowing easier. Which gives Greece a stronger bargaining position against the Troika.

Originally Posted by Mentar

What Greece did since joining the Euro was blowing through hundreds of billions of Euros which it borrowed - like a juvenile getting old enough to sign for his own credit cards, and then passing the cash on to himself and his friend. Once he is running out of banks to give him credit, he will not be able to finance his former lifestyle anymore, and cut down on them, even if it hurts. THAT is "austerity" here. It sure isn't the fault of the banks. The "painful cuts" were boons that Greece never earned for themselves in the first place. And I don't see many people in Greece who have the maturity and honesty to openly admit that.

And naturally, this will lead to a decline in GDP. There is no way around that.

That's Bild talk, Greece's total debt before the crisis was on the high side (100% GDP) but only marginally higher than those of say Italy, UK and France.

Austerity is needlessly inefficient when all your neighbors are doing the same. Demand collapses and you might look at a debt deflation spiral if things really go really wrong. Government cutbacks were necessary but not to the extent of driving a sizable part of the population in to unemployment. During recessions most governments will run deficits, enforcing budget balance is asking a lot.

Syriza's policy plans are hardly radical, most of it is a Keynesian stimulus package which is not unreasonable given the conditions.

[Mentar]

Originally Posted by Bri

States are not people, sovereign debt is not meant to be repaid. A country will aim to outgrow it (or inflate it away) and when short term debt matures it will be refinanced. What is socially accepted or not for individuals has no implications on government finance.

That's a matter of wording now. As long as a matured debt would be refinanced, debts are being "paid". But this is not what Syriza wants. They want the debts to be _struck_.

Greece was caught during a period when a relatively large amount of short term debt was about to expire and markets cranked up the interest rate. Mainly by hedge funds who saw a massive opportunity to make a buck if they could push Greece in to default.

Please excuse me, but this is complete nonsense. Greece never had stable finances and was caught "at the wrong time". Greece was a few weeks away from default, with no means to get the necessary money from anyone to refinance matured loans. And they only came clear with the truth about their Goldman-Sachs-cooked books when their absurd currency speculation gamble went *poof*.

The truth when it became visible was was that Greece was running an extreme budget deficit and was fully tapped out. If the EU and WMF wouldn't bail them out with fresh money, they would have to default. The international finance crisis only uncovered this festering cesspool a bit faster. It didn't CAUSE the structural deficit.

Due to private bank exposure the EU could not let this happen nor was a Greek exit an option as it would open up Spain and Italy to speculative pressure which could lead to a break up of the Euro zone.

Yep. Which is why several new regulations and the banking union were done, after the first debt haircut for the Greek was agreed. To make sure that the threat of contagion couldn't be used again to extort help.

Currently creditors are less worried as much of the debt is now refinanced for longer time periods and the QE by the ECB will mean there is more liquidity about in the Eurozone which will make borrowing easier. Which gives Greece a stronger bargaining position against the Troika.

You're confusing cause and effect here. Greece has near-zero bargaining power on their extortion scheme. Yes, the rest of the EU would prefer that the Greek don't default, but they will not allow this threat (which pretty much equals Greece holding a gun to their own temple and threaten to shoot) to cajole them into one more "forfeit a few hundred billion Euros to keep Greece from defaulting" round. The QE which the ECB did is exactly a _countermeasure_ to defend the Eurozone against a possible default. Because even if Greece gets cut off, there is way enough liquidity to go round for other struggling southern European banks. The QE is effectively neutering most of Greece's bargaining position.

Sorry, the Greek position is simply absurd. "Forfeit half of our debt, or we'll default on it. It's been your own fault to borrow us money anyway, you greedy suckers. And while you're at it, send us more money". You cannot threaten to renege on your promise to pay back earlier loans and demand new loans at the same time. This is a completely irrational demand. Either-or.

That's Bild talk, Greece's total debt before the crisis was on the high side (100% GDP) but only marginally higher than those of say Italy, UK and France.

Yeah, "100%", Goldman-Sachs vouches for it, honest

Like I wrote above, Greece ran a murderous structural deficit and was all tapped out. THIS is why the bond interest rates skyrocketed, the capital market realized that Greece was going down. Cause and effect.

Austerity is needlessly inefficient when all your neighbors are doing the same. Demand collapses and you might look at a debt deflation spiral if things really go really wrong. Government cutbacks were necessary but not to the extent of driving a sizable part of the population in to unemployment.

Says who? You?

Interest payments for public debt are a natural part of each western industrial country's budget. Greece still never comes remotely close to living within their means if these interest payments are being considered. And even the "primary surplus" in the budget without the interest payments seems to dissipate now - last november a huge 2.3 billion Euro gap suddenly "appeared". The way I see it, even the current painful austerity measures are still _not enough_. Greece _still_ requires outside help.

What Greece needs is to GROW UP for chrissakes. To stop corruption, to stop aberrations like tolerating people receiving rent for dead or blind people. To start paying taxes, and yes, to start making the exempt elite like shipbuilders pay taxes. To start a proper land registry office. And and and. All those reforms that were always promised AND THEN STONEWALLED. And all of this are necessary steps that are 100% in the Greek court.

You seem to think that Greece is a normal country just undergoing stress due to austerity, while things would be hunky-dory otherwise. I can only hope that Greece will _really_ default, then you'll see very quickly how the situation really is.

[Edit: After rereading things, I apologize for the aggressive tone to you, Bri. You've always been a very rational discussion partner and don't deserve my ire. But this issue really really pushes my buttons, it makes me mad as hell. Sorry for that]

[SaintessHeart]

Greece defaulting sounds like a pretty great idea. It isn't the only country in the Eurozone with a negative balance sheet - if it does, every single other country with a negative balance sheet will become insolvent, all FDI becomes crap, and the entire eurozone will disappear overnight.

Yes, it is an excellent idea alright. And the term Grexit sounds just as nice. [/caustic]

[Bri]

Originally Posted by Mentar

Says who? You?

Interest payments for public debt are a natural part of each western industrial country's budget. Greece still never comes remotely close to living within their means if these interest payments are being considered. And even the "primary surplus" in the budget without the interest payments seems to dissipate now - last november a huge 2.3 billion Euro gap suddenly "appeared". The way I see it, even the current painful austerity measures are still _not enough_. Greece _still_ requires outside help.

What Greece needs is to GROW UP for chrissakes. To stop corruption, to stop aberrations like tolerating people receiving rent for dead or blind people. To start paying taxes, and yes, to start making the exempt elite like shipbuilders pay taxes. To start a proper land registry office. And and and. All those reforms that were always promised AND THEN STONEWALLED. And all of this are necessary steps that are 100% in the Greek court.

You seem to think that Greece is a normal country just undergoing stress due to austerity, while things would be hunky-dory otherwise. I can only hope that Greece will _really_ default, then you'll see very quickly how the situation really is.

[Edit: After rereading things, I apologize for the aggressive tone to you, Bri. You've always been a very rational discussion partner and don't deserve my ire. But this issue really really pushes my buttons, it makes me mad as hell. Sorry for that]

Unfortunately I just lost a response I had typed and I'm short on time to do it over. In short, current mainstream macro economic thinking does not support the idea of rigorous austerity during a regional recession. The loss of economic activity and the lack of export demand makes the increased competitiveness through lower labor costs useless. A balanced budget will become an unattainable goal as government revenue collapses.

http://www.theguardian.com/world/201...rt-of-comments

This article gives a fair case in my opinion. I understand that there is a lot of emotion involved with this topic, and not to ignore Greece's errors, but I think there is more to it than just a rogue nation wanting an easy life on other people's expense.

[Ithekro]

There clearly isn't just one way to do economics. Otherwise everyone would more or less have the same setup and similar solutions to problems.

[Mentar]

Originally Posted by Bri

Unfortunately I just lost a response I had typed and I'm short on time to do it over. In short, current mainstream macro economic thinking does not support the idea of rigorous austerity during a regional recession. The loss of economic activity and the lack of export demand makes the increased competitiveness through lower labor costs useless. A balanced budget will become an unattainable goal as government revenue collapses.

http://www.theguardian.com/world/201...rt-of-comments

This article gives a fair case in my opinion. I understand that there is a lot of emotion involved with this topic, and not to ignore Greece's errors, but I think there is more to it than just a rogue nation wanting an easy life on other people's expense.

But not much, Bri. Sorry to be so blunt, but this is it. 90% of the responsibility lies straight in Greece's lap, and instead of growing up and dealing with their sh*t, they start pointing fingers to those who keep them afloat. If a bucket is full of holes, you can keep a water hose permanently filling water into it, it will be empty again in no time. As long as this simple self-evident truth remains ignored, and all necessary (and promised) reforms stonewalled, _nothing_ will help. But instead of concentrating on that, Tsirpas got a coalition partner who will _block_ these reforms, and who rather goes public with insulting the creditors.

The big emotional push to give Greece a 1953: Why is it forgotten that they already GOT that? That was the first haircut which Greece got in return for (broken) reform promises. Half of their debt was written off (exactly what Germany got, as well). How many more of those will be sufficient, Bri? Look in my eyes and tell me that you honestly believe that if Greece would get ANOTHER 50% haircut, they would get their sh*t together. Can you?

You should talk to some actual Greeks about this. I have, and the results have been disturbing.

[Ghiest Cid]

Their credit rating would plummet if not already. Few will invest there.

[Solace]

Originally Posted by Ithekro

There clearly isn't just one way to do economics. Otherwise everyone would more or less have the same setup and similar solutions to problems.

As long as economics is based on pseudo science and faith, you are correct.

[SaintessHeart]

Originally Posted by Solace

As long as economics is based on pseudo science and faith, you are correct.

I wouldn't say it is pseudo science. People put too much faith in statistics.

There is no tiger.

[Solace]

Originally Posted by SaintessHeart

I wouldn't say it is pseudo science. People put too much faith in statistics.

There is no tiger.

It's pseudo science. Economics is defined by human politics, there's nothing economical or efficient about it. Sure, there's lots of neat bits of numbers and theories, but none of it actually matters in the broadest sense. Just look at the debate over Greece, even among the posts above. There's no discussion on the science of the reasoning behind what Greece is doing. It's all based on emotion. Numbers be damned, it's all about whose fault is whose and who will be inconvenienced by this choice or that choice.

You can apply some science to it, but in itself the current system of economics has very little to do with being an actual science. It's basically Intelligent Design, except replace religion with money and god with the invisible hand. The followers are people who make decisions less on what they know, and more on what they believe.

[SaintessHeart]

Originally Posted by Solace

It's pseudo science. Economics is defined by human politics, there's nothing economical or efficient about it. Sure, there's lots of neat bits of numbers and theories, but none of it actually matters in the broadest sense. Just look at the debate over Greece, even among the posts above. There's no discussion on the science of the reasoning behind what Greece is doing. It's all based on emotion. Numbers be damned, it's all about whose fault is whose and who will be inconvenienced by this choice or that choice.

You can apply some science to it, but in itself the current system of economics has very little to do with being an actual science. It's basically Intelligent Design, except replace religion with money and god with the invisible hand. The followers are people who make decisions less on what they know, and more on what they believe.

I would say it is a crude mishmash of human and political science. I hold a biz diploma, and with a Physics background in high school I would say that the hypotheses are largely made based on rational human behaviour.

The problem in reality is twofold : human behaviour is irrational and Murphy's Law accounts for human error. Statistics prove a major percentage of occurrences will go in a stipulated way, but it is often reported in journals, mags, etc that statistics prove a given definite. And the masses take their word for it because "it is an established news outlet".

The dumb and stupid are not they are from birth. They are misled by academics. Screw the Nobel Prize for Economics.

[Solace]

I can agree with that. Too many people think in absolutes these days.

[AnimeFan188]

This Russian News Agency Doubled As a Spy Machine:

Moscow’s alleged spy ring in New York City sometimes took orders from a Kremlin-run news
outfit. Talk about media bias.

A pair of accused Russian spies tried to gather intelligence about U.S. financial markets,
and potentially how to disrupt them, by feeding questions to journalists at the Russian
state-owned news agency Tass, The Daily Beast has learned. The agency has a long
history of giving cover to Russian spies, current and former intelligence officials say.

A criminal complaint released by the Justice Department on Monday lays out how the spies
ran an alleged economic intelligence-gathering operation by developing the questions at
the request of the news organization, which isn’t identified in the document, so that
journalists could pose them to New York Stock Exchange employees in the course of
newsgathering. The operation crossed the line between traditional reporting and espionage,
in a blurry terrain where Russian spooks have long been comfortable operating."

A person familiar with the investigation of the alleged spying ring confirmed the organization
in question is Tass."

See:

http://www.thedailybeast.com/article...itar-tass.html