Not Just Another Greek Tragedy

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Permalink Reply by Kofi Koduah-Sarpong on May 12, 2010 at 12:35pm

A good read!!!

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Permalink Reply by Loren J. Fairchild on May 17, 2010 at 10:47am

Oh what a terrible web we weave when we practice to deceive!

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Permalink Reply by David on May 17, 2010 at 2:41pm

It will take a lot to become a Greek tragedy. The reason is that The Greek has the highest rate of "black economy", that's income hidden away from tax authorities to avoid income being taxed. Employees get a bonus if they show up at work on time. Employees receive 14 months of salary per year. If you want to get things done, you need to pay under the table. Even the local doctor will require a payment under the table to tell you what's wrong with you. Furthermore, the Greek has the highest debt of all European countries. The Greek has a debt rate of 114% of GNP !!! In other words, the state debt of Greek is higher than its total wealth creation, sum of all production, during a year.

No wonder the Greek economy went somewhere else than heaven!

David

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Permalink Reply by GEORGES PEQUITO on May 17, 2010 at 5:42pm

We just postponed the collapse.
And that's the real tragedy.

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Permalink Reply by Bill M Wright on June 2, 2010 at 12:05am

I believe Greece has about 50% of its work force in a government related high pay and benefits jobs that produce nothing. I hear the normal retirement age to collect full benefits is 60. I hear a hairdresser can retire with full retirement benefits @ age 55. Socialism is affordable when you have a small population and produce a product the world must buy like Norway and its North Sea Oil. But in a global economy a country that makes little the world wants to buy & spends more on government employee wages & benefits than it can afford is doomed financially. How many weeks vacation does a newly hired government employee expect in Greece? In China employees just hope to someday get 5 day 8 hour work weeks. They pack them into dorms and only hire those under age 35 so they can work them non-stop with little benefits, no health care worries and only have to pay them $400 a month. And they can draw from more youth than the whole population of America & western Europe.

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Permalink Reply by Thabani on June 9, 2010 at 7:34am

How can Greece get out of this debt trap. African countries are in a debt trap but it appears better than that of the European countries.

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Permalink Reply by Russ Huntley on May 21, 2010 at 2:43pm

The problem centers on the simple fact that you cannot have a monetary union without a political union. Generally, when a country has a deteriorating economy, the central bank and government will act by lowering rates and/or adding stimulus. Greece cannot do that because it no longer has its own currency. It is like Illinois and California. What is happening to Greece can never happen to the USA. Why? The US cannot go insolvent unless the government wants to. The US Government can always print money to make payments. The USA also does not need any one to buy its debt. It does not have to issue Treasuries if it does not want to - the FED can simply increase it reserves. US spending is thus not constrained. And as far as taxes are concerned, the Government does not to tax in order to spend (states do but not sovereigns with their own non convertible currency don't). The only reason why taxes exist is simply to give value to the currency. It is the only thing that you can pay your taxes with. Taxes should be simply be used to control the temerature of the economy. The Government does not need to tax in order to spend. Welcome to Modern Monetray Theory. - search google. This is going to drive everyone with a finance background mad, because we are all trained to balance our books. The Government does not - it can spend as much as it wants, but the downside will be that when it spends too much the currency will lose value and inflation will result. But those few who understand monetary policy know what to do. But when you have such a large output gap and deflation, the Government needs to spend. It should also stop spending when the economy recovers. The only problem is that politicians never know when to stop. Enough said.

Attachments:

• Stephanie Kelton - Are there Restraints on Spending by Government Sovereigns in their own currency.pdf, 21.2 MB
• Mitchell - Fiscal sustainanability.pdf, 473 KB
• Mosler - What is the problem with Social Security.pdf, 77 KB

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Permalink Reply by Werner Reisacher on May 21, 2010 at 8:14pm

Interesting attachments, but politically way too motivated articles for my taste. Since when is the problem of a broken Social Security System the increasing ratio of workers to retire? And why is the problem of the Social Security’s financial crisis the aggregate demand of those that are paying contributions for their retirements and those who receive payments in return for their contributions made?
I am also struggling with the statement that the US Government cannot run out of money, and if there is “a large output gap and deflation”, the Government needs to spend until the economy recovers.
I do understand finance, economic, and monetary systems and therefore believe that budget crisis can only be corrected if governments are prepared to shrink spending because increasing taxes is not an option. Otherwise, there won’t be an economy.
Werner Reisacher

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