patrick.net

the best outcome in any economic situation is default from a long term perspective. Bailouts do not work. They fail to punish bad actors and encourage recklessness. Wall St. is a prime example. Everyone told us the market would crash to all hell and we'd have 15% unemployment had we let the banks fail. That's absolutely true. Instead, we have 10% unemployment, bigger banks, and we'll get our 15% unemployment once we actually feel the full effects of all that easy money that went their way.

Bailing out Greece failed to rectify the problem and will only allow Greece to continue their ways. Meanwhile, every time they need a bailout, they just phone up Joseph Stiglitz, pay him a few million, and get him to sell it to the media.

When is the last time you saw something "Made in Greece"?

xenogear3 says

When is the last time you saw something “Made in Greece”?

I buy olive oil & wild dried oregano from Greece. That's about it.

xenogear3 says

When is the last time you saw something “Made in Greece”?

Though I don't have any proof, in today's global financial world, US will be affected indirectly when Greece fails. Here is the link I think would be.

When Greece fails, its bond holders will suffers big time. Spain, Portugal, Italy, German, France and Britain will have to take a hit(loss). May be even some US funds are dragged down. When the P(I)I(G)S take loss, some of them may not survive for long. If the fire spread to Spain and Italy, it is multiple time bigger than Greece. As the fire keeps burning, the confidence of sovereign debt will diminish. US may not be affected initially, but as every one flee from bond market, US will have no more sucker to sell its treasury bond to, except FED. FED can only print and print and print and print. Here you got inflation out of control. May be US will look to helicopter China to rescue before FED prints.

If Greece collapses, it will probably actually be good for the US since it will stave off pressure on treasuries even longer. Nobody is going to want their money in Euros if Greece falls.

Looks like German have agreed to bailout Greece. Now is all up to Greece to take it or leave it. From the public demonstrations, Greece people are against bailout and all austerity measures. They rather default. But the politicians may prefer the bailout.

thunderlips11 says

theoakman says

Meanwhile, every time they need a bailout, they just phone up Joseph Stiglitz, pay him a few million, and get him to sell it to the media.

Everytime a US investment bank loses a ton of money, they do the same thing with Bernake and Timmeh.

They don't pay Ben and Timmy. They simply call them up and get money. Ben and Timmy are bureaucrats who act in the interest of the rich and politically connected because they are in the good ol boys network. Stiglitz is an academic for hire and he'll sell anything to the public that you want him to for a nice fee. He does it behind the guise of being a good hearted liberal.

Fannie Mae bought him off. So did Australia. So did Greece.

theoakman says

I buy olive oil & wild dried oregano from Greece. That’s about it.

Are you sure that is Greece and not Spain?

theoakman says

thunderlips11 says

theoakman says

Meanwhile, every time they need a bailout, they just phone up Joseph Stiglitz, pay him a few million, and get him to sell it to the media.

Everytime a US investment bank loses a ton of money, they do the same thing with Bernake and Timmeh.

They don’t pay Ben and Timmy. They simply call them up and get money. Ben and Timmy are bureaucrats who act in the interest of the rich and politically connected because they are in the good ol boys network. Stiglitz is an academic for hire and he’ll sell anything to the public that you want him to for a nice fee. He does it behind the guise of being a good hearted liberal.

They all do it under pretenses of being "good hearted liberals". Greenspan, Bush, Obama, Bernanke... all same shit different label.

Greenspan is more tactful.
If he is here, it will not be that bad.

Bernanke really screwed up. He put 1.7 Trillion dollars into the economy and nothing happened.

What if a Greeter defaults?

French and German banks will lose some money.

xenogear3 says

When is the last time you saw something “Made in Greece”?

The stuff you bought that's "Made in China", well there's a good chance a Greek Ship brought it to you. Greece is still number 1 in shipping even now.

ChrisLA says

theoakman says

I buy olive oil & wild dried oregano from Greece. That’s about it.

Are you sure that is Greece and not Spain?

Yeah, Greece. Although, Spain has some good olive oil as well.

The government is in heavy debt, and has no money to create jobs.
It should reduce the military expenses, and fix the rich people's tax loophole.

We are only one step away from "Great Depression 2".

For clarification. The USA cannot afford to repeat the makework projects of the 30s because back then there was no:
1. food stamps
2. medicare
3. medicare drug benefit
4. medicaid
5. life expectancy was low=low social security payments
6. no 2 year unemployment benefits
7. no medicaid
8. no HUD
9. no various other new government departments sucking the blood out of the taxpayers.

There is simply no way the USA can afford to have a "war on poverty" in addition to the above expenses, INTEREST on $14 trillion, three wars, and mortgages for poor people.
It's all over, don't blame the responsible people who are taking away the credit card from Congress.

Pardon, I meant to say the USA cannot afford a "war on UNEMPLOYMENT" since we are still fighting the "war on poverty" since Johnson.

thunderlips11 says

shrekgrinch says

the idiot who DID NOT save America from the Great Depression

He sure did. In 1936, the GDP had surpassed 1929 levels. Three years’ of Hoover’s budget balancing and cutbacks had no impact on the Depression.

The US did not start the big rearmament program until the 1940 budget cycle; and French and British military budgets increased starting only in 1939, when it conflict with Hitler was no longer deemed avoidable. The recovery had already happened by then.
Here’s unemployment:

That argument never flies. If GDP in 1936 had exceeded GDP in 1929 (The height of a stock market bubble), there is no real explanation as to why unemployment was still 10%. And Hoover spent more than his predecessors.

Why ECB is so desperate to keep Greece alive in Euro Zone? If Greece is a dead meat, just let it go. Anyhow, Greece GDP is just a small fraction compared to other members in Euro Zone.

During the Go Go year, I bet there must be tons of CDS and other similar financial instruments are being created out of Greece's debt and sold to the whole world. CDS is notorious of its ability to leverage the debt. If Greece debt being magnified 10 times, then $300b becomes $3T. $3T will really inflict some real punches to German, Italy, Spain and other healthier EU countries. What if couple of these bigger players, take Italy and Spain, go down, their CDS will be much larger than Greece's. I think this is why the EU and US is afraid of.

Someone is out there borrowed billions of US dollars at 1% interest rate and bought Greece government bond which is supposed to be "safe".

I did not say the national debt cannot go higher. I said it cannot go so high as to finance the debt required to start a "war on unemployment".
The USA gets money from 1. taxation 2. selling treasury bills and notes=increasing the debt.
There are no other sources of money for Uncle Sam.
The situation when FDR was around was different, he sold war bonds, etc. but the total debt service was not yet so high as ours is today.
For the last several years, the deficit was $1.5 trillion of so, so the fact is that Uncle Sam cannot afford to do anything else creative to do "make work" projects. There is too much debt spending already, soon interest payments will be so huge as to eat up all GDP growth.

If the Fed could create money, then why is Congress involved in raising the debt ceiling?
Congress spends the money, and the Treasury raises the money, either with taxation or selling debt.
The Fed may buy some of the Treasury debt, but it pays it back with interest of course. The Fed made $79 billion in 2010 which it also must pay to the Treasury.
The suffering is not going to end. The unemployment rate for high school graduates is very high, and since we have millions of illegal alien high school graduates competing for these jobs, the situation will not improve soon. This is a result of government not enforcing the laws.
They should have given small businesses a $1 trillion tax cut, instead of spending the $1 trillion in a wasteful stimulus which actually was just payment to state workers. They paid for some nice bathrooms along the 101 above Paso Robles and other absurd wastes of money.
Having "shot their load" and accomplished nothing with that $1 Trillion, they will not get their chance to see whether or not spending another Trillion dollars will help or not. It will not happen.
Who is right, is it worthwhile to keep spending and extra Trillion dollars to see if Krugman is right, or not? The consensus of opinion is it is not.

The War on poverty is a hell of a lot cheaper than a Civil War in more ways than one. TARP HAMP and the various other ways the Government has sucked TRILLIONS out of the Tax payer, to fight the War on shrinking Wealth. Makes the other social services look like postage in comparison.

Lets cut EVERY and ALL corporate subsidy in this country, then we can blame the indigent.

Krugman may or may not be right. The consensus is he is not. More to the point, the consensus of the the House of Representatives is Obama won't have a chance to try another $1,000 billion useless stimulus program soon.
I must repeat, the reason that we can't blow the kind of money as FDR did is that there were not so many expensive entitlements when he was president, and there was not such a gigantic pre-existing national debt.
So, blame the last people to take a stand against enormous debt for the problems, but spending borrowed money does not solve the fundamental problems, it just postpones the pain for a while.

Isn't it more a matter of when than if Greece defaults?

Where is APOCALYPSEFUCK when you need him to comment?

zzyzzx says

Isn’t it more a matter of when than if Greece defaults?
Where is APOCALYPSEFUCK when you need him to comment?

It looks like we are getting very close to finding out. It seems like every six months, Greece needs a rescue. The EU should just let the chips fall.

Underdark says

It looks like we are getting very close to finding out. It seems like every six months, Greece needs a rescue. The EU should just let the chips fall.

Though, IMO, defaulting on the debt is the right choice for Greece so they can start out with clean slate just like US personal bankruptcy law. However, cronies in Greece government will fight till their last breath to make sure the riches/banksters will not have to pay for the loss. They want the citizen to pay for the debt via tax increase or cut in social service. What's more, they will sell public properties to the creditors(other banksters) as means of collateral.

Everyone knows Greece can't really pay off their debt. This is the last act to make sure creditors will have their share of Greece carcass when Greece can no longer be milked.

Feel sorry for Greece citizens. And, what is playing out in Greece is the similar story will happen to US.

I would get some gratification if Grees did default and the result was the nobody would lend governments money any more.

Haven't wars started because of defaults in the past?

American in Japan says

Haven’t wars started because of defaults in the past?

I really don't see France, UK, and Germany invading Greece and occupying it until the debts were paid.

Personally, I'd prefer to see France, UK, and German banks refuse to lend other governments money in the future.