2015 - Greece drops Euro?

[gnk]

Re: Drachma valuation

But surely, the value of the drachma would depend on the quantity of currency issued, interest rates, etc.

What is the "etc." you refer to above? I live in Greece, read my posts in this thread to get a better idea of what is going on here in Greece.

Or better yet, read this.

Does your "etc." above take that into consideration?

The troika dragged Greece - which includes the people and the political power structure, kicking and screaming into making the much needed economic reforms during this period of austerity.

A nation's currency is also a reflection of its political power structure. Understand that political power structure first, and then apply economic theories.

I want to add, I was opposed to the Austerity initially. I believed Greece would be better off with the Drachma, especially so due to the nature of its economy. I based this on my understanding of economics alone, and did not take into consideration the political realities of Greece.

But living here was an eye opener. I don't think the current political establishment could manage a successful currency on their own. Far from it.

[jk]

Re: Drachma valuation

the greek power structure would manage the drachma in the same way they ALWAYS managed the drachma in modern times - it would be a steadily depreciating currency.

[GRG55]

Re: Drachma valuation

What is the "etc." you refer to above? I live in Greece, read my posts in this thread to get a better idea of what is going on here in Greece.

Or better yet, read this.

Does your "etc." above take that into consideration?

The troika dragged Greece - which includes the people and the political power structure, kicking and screaming into making the much needed economic reforms during this period of austerity.

A nation's currency is also a reflection of its political power structure. Understand that political power structure first, and then apply economic theories...

From your linked article:

"...Government ministers who have spent their lives in public service emerge from office able to afford multi-million-dollar mansions and two or three country homes..."

Perhaps some of those whose experience is exclusively in the USA have difficulty recognizing this is how, to one degree or another, most of the rest of the world, including SE Asia, Africa, Middle East, Former Soviet Union, Latin America, works. In the USA, however, this is inverted;political influence & power is derived from achieving economic power first.

I want to add, I was opposed to the Austerity initially. I believed Greece would be better off with the Drachma, especially so due to the nature of its economy. I based this on my understanding of economics alone, and did not take into consideration the political realities of Greece.

But living here was an eye opener. I don't think the current political establishment could manage a successful currency on their own. Far from it.

I have never believed that Greece would be better off out of EMU, or even able to re-float the Drachma. This discussion dates back years on this forum. Here's a link to one sample in a string of posts from jk's long running Crisis in Europe thread.

http://www.itulip.com/forums/showthr...595#post140595

That the fiscal insanity needed to be dealt with was never in question. My objection to the form of Austerity that has been imposed is twofold:

1. The EU members of the Troika should not be able to absolve themselves of any responsibility for the mess; they are equally soiled. Another excerpt from your linked article:

“Our people went in and couldn’t believe what they found,” a senior I.M.F. official told me, not long after he’d returned from the I.M.F.’s first Greek mission. “The way they were keeping track of their finances—they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn’t even what you would call an emerging economy. It was a Third World country.”

This was a surprise to them? Come now, really?? The corruption, officially tolerated tax evasion and fiscal profligacy didn't start after Greece entered the EU and EMU; it just accelerated. Greece, like all other Euro nations, was required to meet certain conditions before being admitted to the EU. It would appear that in their falling-all-over-themselves haste to expand their pet project, EU officials and institutions did less due diligence than you or I when we purchased our last laptop. Now "punishing Greece" for the inevitable outcome is being pursued with equal, and equally damaging zeal it would appear.

2. Just as there is no lift without drag, there is no benefit without cost from Austerity. What I fear is that the real costs of the current form of Austerity are somewhat deferred, thus contributing to a false sense of accomplishment in the present. To me the breathtakingly high structural unemployment figures in Europe, particularly youth unemployment statistics, are a harbinger of future troubles. All of those officially unemployed are doing something to put breakfast on the table, which implies the underground cash economy in Greece and elsewhere is undoubtedly enlarging, and potentially becoming more, not less, institutionalized. Youth migration from the South to the North, and out of the EU entirely has increased. Economic migrants are generally those with higher propensity to embrace risk (lets face it, nobody who aspires to work for or supported by the government leaves), and over time that loss of unique talent to the future economy can't easily be recovered. Of those left behind there is nothing more explosive than a bunch of unemployed young single men with time on their hands; just ask officials in Saudi Arabia or much of North Africa.

[touchring]

Re: Drachma valuation

2. Just as there is no lift without drag, there is no benefit without cost from Austerity.

My thoughts as well, austerity is only a short term measure. If it lasts longer than 5 years, it will turn into disaster.

[astonas]

Re: Drachma valuation

I have never believed that Greece would be better off out of EMU, or even able to re-float the Drachma. This discussion dates back years on this forum. Here's a link to one sample in a string of posts from jk's long running Crisis in Europe thread.

http://www.itulip.com/forums/showthr...595#post140595

Congratulations on finding your post in that thread. One reason I don't use it as much anymore is that it has grown so long I simply can't find anything there, when I want to refer back. I was hoping to provide my own similar references, but found myself stymied.

For my part, I never thought Greece belonged in the EMU in the first place. The gap between it and every other nation in Europe was too large to expect that it was ready to integrate.

But that's not the issue we're faced with. We have to deal with where we unfortunately are.

That the fiscal insanity needed to be dealt with was never in question. My objection to the form of Austerity that has been imposed is twofold:

1. The EU members of the Troika should not be able to absolve themselves of any responsibility for the mess; they are equally soiled. Another excerpt from your linked article:

“Our people went in and couldn’t believe what they found,” a senior I.M.F. official told me, not long after he’d returned from the I.M.F.’s first Greek mission. “The way they were keeping track of their finances—they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn’t even what you would call an emerging economy. It was a Third World country.”

This was a surprise to them? Come now, really?? The corruption, officially tolerated tax evasion and fiscal profligacy didn't start after Greece entered the EU and EMU; it just accelerated. Greece, like all other Euro nations, was required to meet certain conditions before being admitted to the EU. It would appear that in their falling-all-over-themselves haste to expand their pet project, EU officials and institutions did less due diligence than you or I when we purchased our last laptop. Now "punishing Greece" for the inevitable outcome is being pursued with equal, and equally damaging zeal it would appear.

There is a vast difference between accepting a small delay on a target deficit (Greece begging for entry and giving promise on promise that the difference was a temporary blip in reforms already underway) versus being equally responsible for a massive fraud.

By your logic, if a person shows up at my front door with a too-good-to-be-true offer to steam-clean one of my rooms' carpets as a free demonstration, and I let them in, then I am "equally soiled" and hence equally guilty when they later come back and clean out the house that they were casing.

I may have been incautious. But that doesn't mean I burgled my own house.

Europe and Greece were at each others' throats in EMU entry negotiations when Greece was joining because of a disagreement about whether the deficit was really 3% as stated - or if the numbers had been fudged to really be closer to 4%. The actual disagreement ranged from a 0.7% to 1% difference, and that nearly scuppered the whole process. Much later, Greece goes back to find out - to it's own great surprise, that it was at least 15%, with the difference entirely off any books at all. And what's more, it hired Goldman Sachs - probably the best financial white-wash firm in the world - to hide the lies it did know about in a vast array of technically legal but misleading shell games.

For not seeing through all the (I'm sure abundant) paperwork from Goldman's best liars (sorry, I meant lawyers) working on behalf of Greece, who itself didn't know that even the numbers it was providing Goldman were off by vast amounts, the EU is equally responsible?

What was Eurostat supposed to do, bypass the audited numbers provided by the most trusted (ridiculous in hindsight, I know, but true at the time) bank in the U.S., and instead read the minds of each Greek politician who was providing false numbers, add the corrections up, and come to its own conclusions?

Goldman being equally responsible as Greece, I can see. They actually got to craft the lies. If you wanted to extend it out to the other advisors in the city of London and other auditing firms hired to authenticate the numbers, sure. But the con's victims are equal in responsibility to the perpetrators? For believing numbers given to them by the most trusted names in US and UK banking and auditing, when the evidence that these were wrong wasn't yet compiled in any country?

The entry of Greece into the EMU was entirely based on Greece, aided by Goldman Sachs, perpetrating an active fraud on Eurostat. Even Greece thought the con was <1%. And you're saying it should have been obvious to the victim (Eurostat) that the fraud was in fact twelve times as large as the perpetrator itself believed.

Seriously?

If you really believe that, I'm sure that if your home is ever burgled, you'll be sure to tell the police that you're happy to step up and take your full and equal share of responsibility. After all, you do have a front door on it, don't you?

2. Just as there is no lift without drag, there is no benefit without cost from Austerity. What I fear is that the real costs of the current form of Austerity are somewhat deferred, thus contributing to a false sense of accomplishment in the present. To me the breathtakingly high structural unemployment figures in Europe, particularly youth unemployment statistics, are a harbinger of future troubles. All of those officially unemployed are doing something to put breakfast on the table, which implies the underground cash economy in Greece and elsewhere is undoubtedly enlarging, and potentially becoming more, not less, institutionalized. Youth migration from the South to the North, and out of the EU entirely has increased. Economic migrants are generally those with higher propensity to embrace risk (lets face it, nobody who aspires to work for or supported by the government leaves), and over time that loss of unique talent to the future economy can't easily be recovered. Of those left behind there is nothing more explosive than a bunch of unemployed young single men with time on their hands; just ask officials in Saudi Arabia or much of North Africa.

Precisely. I have said repeatedly that the danger in any austerity plan is not that the immediate pain be too much, but that it be too little (as you say, the balance can only be deferred, not avoided). The possibility of deferring pain is what creates the illusion that reform is not needed. That illusion is what makes an austerity program take so long that it becomes politically impossible to finish.

[EJ]

Re: 2015 - Greece drops Euro?

I think so. Actually, Europe has no choice.

Culturally, however, I think things are moving much faster than most realize.

I teach English as a second language here in Greece. My students are between 13 and 17 years old. I have learned a lot about this generation. They all have smartphones and tablets. Most, if not practically all Greek students that have higher education as a goal, speak a second if not a third language - very well. Many are gamers and interact with kids all over the world. They watch foreign television shows, actually, all Europeans are used to watching foreign movies and TV series (unlike in the US, where it is considered highbrow to watch a foreign film - read subtitles? god forbid!) Go to a bar or restaurant and you will hear music from the US and all over Europe, and nobody complains.

This generation is nothing like us.

Just about every Greek has a family member (distant or close relative) that lives abroad. In the past it was mostly the US or Australia. Now it is becoming mostly within the EU.

I have friends that work for or with larger companies and just as a businessperson in the US may travel from NYC to Houston, here in Europe, they travel from Athens to Paris, Munich, London, etc... It's very common. Working for a large company in Europe, whether it's in sales, or engineering, means traveling to several countries.

I remember going to college in the early 90s. International Business was a hot subject. Guess what? Europeans have been doing it for centuries. "International" to a European may only mean driving 100 kilometers, or a one hour flight.

I have been visiting Greece since I was a child in the 1970s. Back then, in this little corner of Greece, an island called Kefalonia, one would see a very homogenous local greek population that was very old fashioned and spoke their own colloquial/localized Greek. This was common for most of Greece outside Athens. Today, on this island, there are migrant workers from Pakistan, Albania, (although many Albanians have now assimilated), there is a Chinese community that owns shops that sell the motherland's wares, and there is also a large British expat/retiree community. I know many married couples that are of mixed nationalities. - Greek-Russian, or British, or Albanian, or Bulgarian... it's very common.

Going to the Supermarket, off season (no tourists), you can hear people speaking Albanian, Greek, English, Russian, and sometimes Bulgarian too. This island merely has a population of 37,000 off season, and yet it is almost as diverse as any major metropolitan area.

30 years ago, I would have never believed that could happen. It did.

Granted, I am only giving you my experiences from one European country. But this country has come a long way in my lifetime. And most of that period was before the internet revolution.

I think this gets to the heart of it. The world is changing faster than I think most of us geezers over 50 can keep up with.

Europe became first economically federalized and the culture followed, a concept that an economic visionary like Triffin might appreciate were he alive today, although the agency of this change -- the Internet -- would surprise him.

All across Europe, even the museum states of France and Italy will experience change that the previous generation could not imagine.

The young French will "tear down this wall" of cultural, lingual, and ideological conservatism.

The genie is out of the bottle. Everyone wants the freedom to pursue happiness, a brilliantly broad ideological palate on which to paint individual human aspirations.

In the bargain another genie has been unleashed: virtually unfettered inventiveness.

More surprises to come. For example, North Korea will within two years time join the modern world. The young leader is working out a way to do it.

[vinoveri]

Re: 2015 - Greece drops Euro?

I think this gets to the heart of it. The world is changing faster than I think most of us geezers over 50 can keep up with.

Europe became first economically federalized and the culture followed, a concept that an economic visionary like Triffin might appreciate were he alive today, although the agency of this change -- the Internet -- would surprise him.

All across Europe, even the museum states of France and Italy will experience change that the previous generation could not imagine.

The young French will "tear down this wall" of cultural, lingual, and ideological conservatism.

The genie is out of the bottle. Everyone wants the freedom to pursue happiness, a brilliantly broad ideological palate on which to paint individual human aspirations.

In the bargain another genie has been unleashed: virtually unfettered inventiveness.

More surprises to come. For example, North Korea will within two years time join the modern world. The young leader is working out a way to do it.

Yes, the rate of change is absolutely astounding - remember CDs? Started a serious classical music collection 15 years ago and now it is obsolete, ITunes, Amazon Music, heck even mp3 players.

Unfettered and as someone else called it, the "democratization of innovation"; sophisticated programming software w/o the need to really be a programmer, arduino type processing open platforms, 3-d printing, contract manufacturers, crowd funding, etc. . If one has ideas to bring to market, there is nothing stopping anyone save drive. It is an absolutely awesome time to be alive (even for a 50ish geezer like me)

[LazyBoy]

Re: 2015 - Greece drops Euro?

More surprises to come. For example, North Korea will within two years time join the modern world. The young leader is working out a way to do it.

[astonas]

Re: Drachma valuation

What is the "etc." you refer to above? I live in Greece, read my posts in this thread to get a better idea of what is going on here in Greece.

Or better yet, read this.

Thanks, gnk, for both your posts, and more recently, this link. Both Lewis and you paint a very vivid picture of a place hard to imagine without a physically present reporter. It really is an excellent article.

[touchring]

Re: 2015 - Greece drops Euro?

Is it possible to change a cult mindset so easily?

I'm not even sure if Singapore can stop worshiping their own great leader this generation.

[jpatter666]

Re: 2015 - Greece drops Euro?

Yeah, me too.

Probably better phrased as "The young leader is working out a way to do it" [and stay alive and in power]

[touchring]

Re: 2015 - Greece drops Euro?

Yeah, me too.

Probably better phrased as "The young leader is working out a way to do it" [and stay alive and in power]

It's all a show. If you're really in charge, you don't send your own aunt's husband and all his 3 generations to the firing squad - http://rt.com/news/korean-leader-family-slayed-213/

This is not how relationship and seniority based Asian politics works. If you look at Chinese politicians, they don't persecute their non-related allies, not to mention blood relatives. Persecuting your elders is out of the question. Chosun Dynasty era Korean queen dowagers were more powerful than the kings themselves.

[ProdigyofZen]

Re: 2015 - Greece drops Euro?

The cultural landscape is changing in a way that will be a very negative detriment to human relations, IMO.

[Polish_Silver]

Re: 2015 - Greece drops Euro?

The cultural landscape is changing in a way that will be a very negative detriment to human relations, IMO.

I agree with that and we are not alone. "Bowling Alone" describes the erosion of social capital due to Television (it's controversial, but I think leisure time is much more family/individual than it used to be).

There's a whole branch of socio-biology called "mismatch theory" dealing with how our genetic nature is out of tune with modern society. We evolved in intimate groups of 30-150 hunter gatherers, and now we live in a mass society/nuclear family social structure.

EJ's statistics not withstanding, I think people are more transient now, due to increased globalization and specialization.

It's not all negative though. Sexual freedom is increasing, and will offset some of the negative effects of transience.

[gnk]

Re: 2015 - Greece drops Euro?

The cultural landscape is changing in a way that will be a very negative detriment to human relations, IMO.

My father was born in a Greek island village in 1931. In his youth, he witnessed German and Italian soldiers conquer and occupy the island. When Mussolini was hung by the heels, the Germans on that island turned against the Italians and slaughtered them by the thousands. My father witnessed many of these atrocities firsthand. His is not an uncommon story for elder Europeans. Actually, Europe's is a bloody history.

With economic integration, and the subsequent cultural integration that is following, such tragic episodes are difficult to take root again within Europe (EU).

That was one of the major initial goals of establishing the EEC, which is now the EU. So far, since the Treaty of Rome in 1957, it has been working. There have been no major European wars. If anything, there has been historically unprecedented cooperation to be found between nations, companies, universities, and NGOs, much of it now facilitated by the internet. There's even a European Space Agency.

I used to have my reservations. But now I believe the EU is humanity's grandest experiment.