Live on TV: The Fall of Greece

[Thailandnotes]

http://www.gq.com/news-politics/news...printable=true

[gnk]

Re: Live on TV: The Fall of Greece

I live in Greece. It's really not as bad as the media portrays it. Just like in the US, parts of Greece are really bad, and this is new for them. Greece pre crisis, and even decades before that, had one of the lowest crime rates and suicide rates in the OECD. Greece had very little foreign immigration, and was a rather homogenized strongly family-centered country. Now they are experiencing a rise in rates of crime, immigration to "blame" for their woes, but yet in many ways is not much different than the US.

It's the change that is shocking to many people here. I remember Greece in the 1980s, it was well behind most OECD countries, very poor. Yet crime was low, no one was starving, etc... Greece's middle class exploded in wealth during the bubble, and now that wealth is vanishing. That's the most shocking part to them. It's all relative.

I've been to Athens several times, even during protests. Yeah, those protests seem out of control, but I can say this: Greece handles those protests better than the US could. I'm from the Philly area in the US. Last New Year's eve weekend in Philadelphia - there were 6 homicides. Across the Delaware river from Philadelphia is Camden City - often cited as the US murder capital. I am not joking when I say that you are safer in the middle of an Athens riot even with molotov cocktails and tear gas being thrown, than in many parts of US cities on "calm nights."

That's my fear for the US. Greek society is actually still functionin even with the turmoil. Will US society be able to handle the same economic pressure when it's the US's turn?

I worry more about my friends and family in the US than my friends and family in Greece. In Greece, many extended families are living together as they used to. Many are leaving Athens for their roots - the villages their parents and grandparents were raised. Family and tradition - and when I say tradition, I don't mean black friday shopping. I mean, tradition in a deeply rooted cultural family centered sense. That's what gets a society through a crisis.

These articles in the media don't show that.

One more thing: Greece has been "falling apart" on and off for over 2,000 years now. It's nothing they can't handle.

[aaron]

Re: Live on TV: The Fall of Greece

That's my fear for the US. Greek society is actually still functionin even with the turmoil. Will US society be able to handle the same economic pressure when it's the US's turn?

We did not have our turn yet?
Wages have been stagnant for a decade. Inflation adjusted, they are down substantially.
Millions lost their homes.
Trillions in savings have been lost.

Might things go the way of Greece? Perhaps. However, we have "better" police to keep the protests from turning violent. And they have had excellent experience and training over the past few years. Occupy what?

I think, in the U.S. you get civil war or nothing. I believe "nothing" will continue to be what happens. We are extreme; We will either bury you or tolerate you. Americans are quite passive at this point. The only thing that will change that is when your kids are hungry. As long as they keep the food programs going, that will not happen.

When they start talking about cutting food stamps (for real), that is when I think we should make plans to exit the country. Because 50 million hungry people can and will cause havoc.

[gnk]

Re: Live on TV: The Fall of Greece

We did not have our turn yet?

Far from it. Trillions in guarantees, bond and other debt purchases, Fannie Mae and Freddie Mac support (effective nationalization of the real estate market), as well as multi year trillion dollar deficits... nothing like Greece.

The US will experience what Greece is going through when all those things run out of gas so to speak - either they can't be done anymore, or they lose their efficacy - in a quickly deteriorating manner. Does anyone really think the federal reserves's balance sheet can grow forever at that rate? Does anyone think that the US can cut down spending without damaging its economy? And what of the future role of the US Dollar and mitigation (I doubt loss) of the US Dollar exorbitant privilege?

The biggest difference between Greece and the US is size. Size affects a country a lot. It's one thing if 30-40 percent of your population lives in the capital city and everyone else within a few hours can reach that city, and another when most citizens live many hundreds, if not a couple thousand miles away from the capital. If it was easy for the average American (wherever he/she may live) to stop by and visit Washington DC, as it is in Greece, things would be very different. That's an advantage big countries have. The population is really spread out.

Right now there are many areas of Greece where life is still better than many areas of the US. Location plays a role. It's complicated, I guess, to really make a comparison when you look at the local level. I'd rather live in an average neighborhood in Athens than the rough parts of Detroit.

But the US, and many other Western countries, still have not avoided their "Greece" moment yet, IMO. They have just delayed it. For example, the Netherlands just started experiencing a housing bubble bust. Their mortgage debt to gdp was almost triple that of Greece's. What does that mean? The Netherlands has an additional step in delaying the unavoidable. When their private sector trash debts make their way to public sector balance sheets - then they become Greece too. Greece didn't have that "convenience" - most of Greek debt was in the public sector.

Without Austerity, I can't think of many Western nations that can slow down or even stop their total debt to gdp growth. But Austerity is an ugly thing. And not all countries react the same to it.

As for moving out of the US - it won't be worth it for most. When the US eventually feels the real economic repercussions of the 2008 crash, most of the rest of the world is likely going down with it.

One more thing, I think that suburban sprawl is America'a biggest Achilles' heel. What a waste of space, energy, and resources. An unsustainable and hugely expensive mistake to rectify. Suburbia was not created organically by centuries of living. It was designed by auto and tire manufacturers just a few decades ago. In Europe, a mansion is something made of stone and or concrete that lasts centuries and has been in the same family for the same time period - truly wealthy people. In the US, there are McMansions made of particle board, wrapped in paper covered in vinyl siding financed by Option Arms and the owners need to drive very far to "afford" them.

But I don't see a civil war in the US's future. It's not possible. It's a big country, and I just can't imagine the logistics of it. I don't see states seceding. They'd be broke without the Federal Gov't. Leave the US - no more Federal grants, no more Defense spending in your district, large companies leave your state due to an immediate embargo, no medicine due to that embargo, etc... A state that left the US would collapse into anarchy in months. And no way would the US let a state with oil reserves ever leave either.

Sorry for the rambling "thought experiment."

[aaron]

Re: Live on TV: The Fall of Greece

I look at Japan and think: If they can do it, why not the U.S. (bigger, more nat resources, reserve currency, large military that WILL defend the dollar)?

When Japan fails, we will know the limits of a balance sheet without military backing.

Why can't the FED increase their balance sheet more? Inflation --> I don't see it, yet. I think all the inflation we have had is from the money created in the last decade. What has the fed done in the past few years except fill empty holes of bank balance sheets? They have prevented deflation.

[c1ue]

Re: Live on TV: The Fall of Greece

I look at Japan and think: If they can do it, why not the U.S. (bigger, more nat resources, reserve currency, large military that WILL defend the dollar)?

The reason the everyday foreign citizen uses the dollar is because it has represented greater stability than their own or other currencies, and has the best redemption flexibility.

So long as the US government continues to destroy this stability, so too will these everyday foreign citizens lose more and more of their willingness to place their savings into US dollars.

All the military in the world isn't going to fix this problem.

As for Japan, over and over we've noted that the only reason Japan has been able to continue with its mild deflationary policies as well as ringing up massive debt is because it has a net foreign trade surplus and the Japanese people are extraordinarily sheep-like in placing their savings into the Japan Postal Bank - to which the Japanese government has been able to freely sell ZIRP bonds to.

That surplus is gone and so is almost all of the Japan Postal Bank liquidity.

[aaron]

Re: Live on TV: The Fall of Greece

The reason the everyday foreign citizen uses the dollar is because it has represented greater stability than their own or other currencies, and has the best redemption flexibility.

So long as the US government continues to destroy this stability, so too will these everyday foreign citizens lose more and more of their willingness to place their savings into US dollars.

All the military in the world isn't going to fix this problem.

As for Japan, over and over we've noted that the only reason Japan has been able to continue with its mild deflationary policies as well as ringing up massive debt is because it has a net foreign trade surplus and the Japanese people are extraordinarily sheep-like in placing their savings into the Japan Postal Bank - to which the Japanese government has been able to freely sell ZIRP bonds to.

That surplus is gone and so is almost all of the Japan Postal Bank liquidity.

Hey, I am not saying we are some shining example of stability. I am just saying, we have an excellent example of how far you can go into debt before the fat lady sings. She ain't singing yet. 200% debt to gdp and growing. We have hope.
When Japan does crack, we will know the limits of deficit spending. Based on the factors I listed, I think we can push it further than the Japanese. Or, less.... either way, I think we have a ways to go, ESPECIALLY if Japan cracks.

[gnk]

Re: Live on TV: The Fall of Greece

I agree with c1ue's points.

I would further add: Triffin's Dilemma. As the issuer of the world's reserve currency, unlike Japan, we can't run a positive trade deficit. A positive trade deficit would reverse the flow of dollars back into the US, negatively impacting the world's economy. Continued QE, on the other hand is effectively exporting inflation - target:China.

The Brics and many other countries know the dollar's international role is over - the US is caught in a catch 22. The US economy can't export its way out, and it can't print its way out either. The bilateral (non dollar denominated) trade agreements that many Brics are entering into are indicative of a breakdown of the US dollar centric monetary system. We're actually in breakdown mode right now. Eventually it reaches a critical mass, so to speak, and then things begin to change very quickly.

Japan is an export powerhouse and had ridden a global credit bubble for much of its decades long QE. And don't forget the yen dollar carry trade kept rates low for the US further fueling that credit bubble. One can argue that Japan had been exporting inflation to the US. But the US, trading with low cost China, and increasing its farm productivity, while experiencing a tech boom - was able to keep inflation that affects many goods and service low. So where did that inflation go? It went to real estate, the stock market, gold, etc... The Greenspan Fed was all too willing to keep that bubble growing as well.

It's a complicated world - everything affects everything. There are always multiple consequences to any policy - with intended and more so, unintended consequences.

The US will feel the pain when the exorbitant privilege of hosting the world reserve currency is severely restricted. That's when the US military plays a role. That's when it becomes all about energy procurement and control.

And then, it's not about going back to the "good times." It's about just maintaining what we have grown to know as a "modern economy/society."