Greece.What happens next ?

[Leekbrookgull]

Plenty 'news talk' about what could happen,yet few hard facts apart from to many there pay little or no tax. Already in reciept of 95 (?) billion Euro and the are asking for more,why saddle them with more debt ? A debt that is almost certain never to be repaid. Let them return to the Drachma and 'cheap' Greek holidays.

 

[vulture]

the euro is going to collaspe

 

[peterward]

the euro is going to collaspe

this.......

 

[Giraffe]

It's all about the money...

 

[Giraffe]

Will Danny find love again?

 

[larus]

the euro is going to collaspe

The debt figures for Greece are frightening. Their debt is 160% of GDP, but the yield on their 10year bonds is about 17% (it's been over 10% for quite a long time I believe). OK, this only relates to new borrowing, but even at say 5%, this equates to 8% of GDP going to finance the existing debt, irrespective of the ongoing requirement to bridge the current shortfall.

Add to this the state of Ireland and Portugal, plus the fact that Spain has 20% unemployment and the public finances are being fiddled (search for references to Spanish Regional Debt), plus the potential downgrading of Italy, then I really strugggle to see how the Euro can survive in it's current state.

One of the reasons why I've sold and I'm only going to rent is that I can see a bloodbath sometime over the next couple of years in the financial markets.

Look at the developed world; the imbalances are incredible. America is printing money like crazy, yet it still can't stop unemployment rising and house prices falling. The Euro is discredited and all the politicians are doing is 'kicking the can down the road'.

The UK finances are bad (and if we add the off-sheet PFI crap that Labour did, they would look even worse).

So yep, IMO, it's only a matter of time before the whole thing collapses. I fear for where this leaves the Greek people.

 

[Leekbrookgull]

Larus,interesting veiw,but what is driving this land/loan/debt/collapse ? Someone/force must be driving this ?

 

[larus]

Larus,interesting veiw,but what is driving this land/loan/debt/collapse ? Someone/force must be driving this ?

The reality is we have never left the credit event from 2008. All that's happened is that the a lot of the debt which the banks had was bailed out the sovereign debt. The QE carried out by the Fed and BOE has been a form of devaluation, which leads to inflation as imports cost more. If you print more money, then the worth of each unit of currency becomes smaller.

The ECB has 49 bln Euros of Greek debt, which is currently marked to at face value so it's showing a profit on their investment. In reality, they are sitting on a potentail loss of say 20bln Eur if the Greeks take a haircut.

If you want a good read, I can recommend this web-site http://www.mindfulmoney.co.uk/wp/author/shaun-richards/. I read his blog every day. His views have been very accurate over the last 12-18 months, and he explains things in a way which is reasonably clear.

 

[HovaGirl]

Larus,interesting veiw,but what is driving this land/loan/debt/collapse ? Someone/force must be driving this ?

The whole world relies on loans - bank loans, credit card loans, mortgages - at personal, national and international levels. Very little money actually travels from one company or bank to another. It's just figures on statements and databases. Loans are even being used by people and countries to pay off other loans. These loans are used to buy goods and services, which provide jobs for people, who earn money to buy the same goods and services. During the decade before 2007, the same money was put to multiple uses at the same time. It's a bit like the little man buying a stereo on his credit card, at the same time as paying his electricity bill using a cheque which he knows would bounce if his salary wasn't coming in, while using a bit of cash to pay for the kids' school lunch. It's all blown up, because internationally, there are more loans than there is cash to back the loans. The doo-dah has hit the fan. If all the major countries are in debt, who has all the money? The answer is: no one. There is less money running around the world than is supposed. If all of us were to pay off all our various loans by selling our houses, then who is left to buy the houses? Only those who would buy them cheaply because of the glut. In other words, money itself has become worthless. There will have to emerge a new form of bartering, of buying and selling. Perhaps we will begin again to swap the potatoes we have grown, for the services of a window-cleaner. In the future, we may need skills, rather than cash, with which to acquire the necessities of life. It's going to be a very testing time for everybody, everywhere. It's been rumbling for four years, but it will really start to take off within a year or so, maybe a little longer.

 

[Triggaaar]

I fear for where this leaves the Greek people.

They could try working.

Obviously that's harsh on the individuals, because it's no one persons fault, but it seem the Greeks think it's ok to work for the public sector for a few years and then retire at 50 odd. They don't grasp the concept that someone has to pay for those under working age, and also for those over working age, and that someone is them.

 

[drew]

The whole world relies on loans - bank loans, credit card loans, mortgages - at personal, national and international levels. Very little money actually travels from one company or bank to another. It's just figures on statements and databases. Loans are even being used by people and countries to pay off other loans. These loans are used to buy goods and services, which provide jobs for people, who earn money to buy the same goods and services. During the decade before 2007, the same money was put to multiple uses at the same time. It's a bit like the little man buying a stereo on his credit card, at the same time as paying his electricity bill using a cheque which he knows would bounce if his salary wasn't coming in, while using a bit of cash to pay for the kids' school lunch. It's all blown up, because internationally, there are more loans than there is cash to back the loans. The doo-dah has hit the fan. If all the major countries are in debt, who has all the money? The answer is: no one. There is less money running around the world than is supposed. If all of us were to pay off all our various loans by selling our houses, then who is left to buy the houses? Only those who would buy them cheaply because of the glut. In other words, money itself has become worthless. There will have to emerge a new form of bartering, of buying and selling. Perhaps we will begin again to swap the potatoes we have grown, for the services of a window-cleaner. In the future, we may need skills, rather than cash, with which to acquire the necessities of life. It's going to be a very testing time for everybody, everywhere. It's been rumbling for four years, but it will really start to take off within a year or so, maybe a little longer.

But isn't that the basic concept of banking, ie they take in money as savings and can then lend out a multiple of that to borrowers. If that is the case in it's very basis form then that has been going on for 400 years, nto just the last 4!

 

[drew]

They could try working.

Obviously that's harsh on the individuals, because it's no one persons fault, but it seem the Greeks think it's ok to work for the public sector for a few years and then retire at 50 odd. They don't grasp the concept that someone has to pay for those under working age, and also for those over working age, and that someone is them.

Isn't part of the problem the fact that the tax collection system is inadequate and too much tax goes unpaid?

 

[Leekbrookgull]

With interest rates still low for mortages,yet APR on cards is still high,why apart from they own your house ?

 

[larus]

They could try working.

Obviously that's harsh on the individuals, because it's no one persons fault, but it seem the Greeks think it's ok to work for the public sector for a few years and then retire at 50 odd. They don't grasp the concept that someone has to pay for those under working age, and also for those over working age, and that someone is them.

Totally agree. The problem is endemic. I think this is the problem with a lot of people in the West. Because we've been used to having our life-style supported by cheap labour (imports) from the developing world, we think that we are entitled to a certain way of life. I'm not an advocate of either a left/right wing views. I believe that too many people want 'something for nothing'. This applies to people in the city as well as dole scroungers.

For exmaple, how many people want house prices to drop to affordable levels. Most people think that house prices rising in excess of inflation is a good thing, so that they make money. But (following on from Hovagirls point), money is only a token to represent value. Therefore, what's creating this increase in 'wealth'; what have people done to accumulate this wealth? Nothing. So who's paying for it? The future generations are getting into debt to pay the older generation a big lump sum.

It can't go on.

 

[Grendel]

For exmaple, how many people want house prices to drop to affordable levels. Most people think that house prices rising in excess of inflation is a good thing, so that they make money. But (following on from Hovagirls point), money is only a token to represent value. Therefore, what's creating this increase in 'wealth'; what have people done to accumulate this wealth? Nothing. So who's paying for it? The future generations are getting into debt to pay the older generation a big lump sum.

It can't go on.

Property must be the only thing that people buy and expect to increase in value. If you buy a new car you don't expect it to be worth more in 5 years time, you accept the fact that it's going to be worth less. If you buy a brand new freezer you don't anticpate selling it for more than you paid for it down the line. Why are houses any different? I'm no economist but I'm sure that part of the problem is the whole concept of a property "ladder" - people in this country buy houses to try and make money, rather than buying houses as places to live in.

 

[HovaGirl]

But isn't that the basic concept of banking, ie they take in money as savings and can then lend out a multiple of that to borrowers. If that is the case in it's very basis form then that has been going on for 400 years, nto just the last 4!

Yes, it has been going on for centuries, but it was really taken to extremes during the 20th century. The only reason the USA did well, was as a result of the mass-production started during WWI and probably the film industry. In the meantime, the UK ended up owing the US a fortune in war debts, which we've only just paid off. I was no fan of Mrs Thatcher, but she inherited a debt-ridden country, but she did manage to reduce the debt. She also destroyed the manufacturing industry, leaving us with almost nothing to sell, but money itself. In the meantime, the debt-ridden UK borrowed even more money in order to finance its benefits system, and now we have a country where more is being paid out in benefits than is actually earned through taxation and that is over and above the salaries paid to the top-heavy State employed. Greece is just at the top end of a third-world country. It's like the UK was in the 70s, with strikes every time someone sneezes and the unions ruling the roost. But, like the UK, it produces almost nothing, except tourism. Since it joined the Euro in 2001, prices have doubled. Ridiculous amounts are asked for properties either for sale or for rent. No one can really afford housing in Greece. A previous Communist Government allocated plots of land to people who went on an orgy of concrete expansion. Families built whole blocks of apartments to house all the members of the family, so few actually have mortgages. The Euro money of the last decade financed a boom in everything, from roads, to plush cafes and restaurants, designer shops. This all provided jobs, but only for as long as there were those who would frequent these establishments. Many of the spenders were ex-pats from all over Europe, in well-paid jobs, building and supervising the trams, the Olympic facilities, or developing Aegean Airways, Coca Cola, Lidl, Dixons, Marks and Spencer, Atlas Copco, Praktiker and a host of other international businesses. Many of those have returned to their own countries, taking their spending power with them, leaving Athens, in particular, as a wasteland of empty shops and business. Unemployment in Greece is now 16%, but among the young (the ex waiters, shopgirls and the like) it is now about 60%. My favourite restaurant has seen custom drop by 70% and has been for sale for a year. There are no customers and no buyers, but it still has to pay bills. However, the Greeks are masters at avoiding paying their bills, including their taxes, and that is a major part part of the problem. The cash doesn't flow, principally because there isn't any.

 

[deletebeepbeepbeep]

How long has the downturn been going on for. I remember going to a conference in Brighton and getting home and reading all the report thinking shits hit the fan, better stockpile tinned beans but that seems YEARS and YEARS and YEARS ago now and still struggling on. The only reason I'm still in the job is due to colleagues leaving for jobs elsewhere. Clearly it'll never return to normal but will it get worse? Or is that just scaremongering. I don't really get all this technical lark.

 

[HovaGirl]

They could try working.

Obviously that's harsh on the individuals, because it's no one persons fault, but it seem the Greeks think it's ok to work for the public sector for a few years and then retire at 50 odd. They don't grasp the concept that someone has to pay for those under working age, and also for those over working age, and that someone is them.

One of the things which has recently been hit on the head in Greece, is the idea that an unmarried daughter can collect her father's pension after he has died, for the rest of her life. Up till now, the Greek state pension has been a final salary pension. Suddenly, 5 years before he retires, the Greek is given an enormous pay rise, which, of course, boosts his pension. That, too, has been hit on the head, and is one of the principal reasons that Greeks have taken to the streets. The other reason is that the State-sector retirement age has risen from about 55 to 60 (or 65?). Greeks love sitting around in cafes dissing the Government. They won't be able to do that if they have to carry on working for another 5 or 10 years. Also, more often than not, State-sector jobs are undertaken by two or three people for every one job. Most of them spend their time avoiding doing any work. Jobs for life, so they'll never be sacked, but that is changing, too. Some are being laid off, to cut state spending. They don't like it. They've been having a ball, but the party's over. Few of them realise it, though.

 

[HovaGirl]

Property must be the only thing that people buy and expect to increase in value. If you buy a new car you don't expect it to be worth more in 5 years time, you accept the fact that it's going to be worth less. If you buy a brand new freezer you don't anticpate selling it for more than you paid for it down the line. Why are houses any different? I'm no economist but I'm sure that part of the problem is the whole concept of a property "ladder" - people in this country buy houses to try and make money, rather than buying houses as places to live in.

Yes, it's the concept that property prices must rise, which makes them rise. This idea really started just before WWII, when the ordinary working man began to buy his little house, his little castle in his little bit of England. Particularly in England, the whole British economy has been fed and nurtured by the whole house-buying phenomenon and its knock-on effect. The modern British economy has been built on DIY shops, garden centres, insurance companies, surveoyors, architects, solicitors, and the like. It has covered up the true nature of the British economy, but now the bubble has burst.

 

[HovaGirl]

With interest rates still low for mortages,yet APR on cards is still high,why apart from they own your house ?

Because the interest on credit cards is what is keeping the banks afloat.