Yet some economists claim that's the US trump card: enough new births, young people, and immigrant workers (read tax payers) to take care of the aging population. Japan also has a problem with skewed workers-to-retirees, too heavy on the elderly side.Originally Posted by agamemnus
Sigh,What do they think striking will accomplish? Reminds me of California Dreamin'
Would it be considered Doom 'n Gloom to suggest this looks like a canary in a coal mine? Come on all ye optimist club members, put the positive spin on this....
*http://www.realclearmarkets.com/arti...ins_98354.html
The euro isn't going to break up, the Greeks will not return to the drachma. Their trade unions are old school communists who think 'the rich should pay for the crisis', but they appear to have limited appeal to the general public at the moment. The Greeks themselves say they don't really need money, but the consensus is that money probably will be made available if the shit really hits the fan.
Congratulations America
http://www.thetrumpet.com/index.php?q=7005.5529.0.0Greece’s Mirror Image in America
February 23, 2010 | From theTrumpet.com
Will California become the next Greece? What about Kentucky, or Florida, or Illinois, or Ohio, or Michigan, or North Carolina?
BY ROBERT MORLEY
On January 15, European Central Bank President Jean-Claude Trichet was asked if Greece posed a threat to the monetary union. He replied that the crisis in Greece was greatly overstated. But he also said something else very alarming. He told reporters that if they wanted to worry about something, they should worry about California. While the world is focusing on a small country of 10 million in Europe, could an even more dangerous situation be developing in America?
Right now, Greece is synonymous with an economic red alert. Without a bailout, the entire country could face debt default. A very deep recession is on its way, and standards of living are plummeting. Unions are already staging mass strikes, and money is fleeing the country as those who have cash park it in foreign locales. Some analysts think the crisis in Greece could lead to the disintegration or the revamping of the eurozone.
You think Greece, you think of an economy burning down. But is it possible that California could actually be in a more dangerous situation?
Some people say yes. So much so that California is becoming a popular analogy to the failing Mediterranean nation.
On February 16, Luxembourg Prime Minister Jean-Claude Juncker was fielding questions about the crisis in Greece. When asked if the International Monetary Fund would bail out the country, he quipped back that to talk of a loan from the imf was “absurd” for a country using the euro.
He then indignantly said: “If California has a refinancing problem the U.S. wouldn’t go to the imf. Why should we go as a euro area to the imf if we have resources by our own to solve the problem?”
Like Greece, California is becoming a symbol for budget problems. And the fact that California—the seventh-largest economy in the world—is frequently mentioned in the same breath as Greece is a testament to how far the Golden State has fallen (as is the fact that California was already forced to temporarily send out iou’s to pay its bills last year).
How could California set off a Greek-style economic crisis in America?
In some ways, Greece and California are very similar. Both have high unemployment and falling tax receipts. Both also have bloated public sectors with lavish retirement and pension plans that are underfunded and unsustainable. Both have gridlocked governments comprised of politicians incapable of working together to make hard choices.
Greece and California are also members of a larger union that shares a common currency. Each state also has specific trade relationships as well as financial interrelations with others inside the union. And both states have the worst credit ratings within their unions. Like Greece, it costs more to insure California debt against default than it does to insure Kazakhstan.
Greece and California have other similarities. Both states are dominated by special interest groups and handicapped by unions. Chronic overspending has become endemic and uncontrollable in both locales.
“Lastly,” as Agora Financial’s Bill Jenkins notes, “each is ‘bankrupt,’ and that has a certain dilatory effect on those around it.”
Critics of the economic doomsaying point out that there are big differences between Greece and California. There are differences, but not all of them are good.
In some ways, California could actually be a greater threat to its union.
California’s debt is supposedly far less than that of Greece. California’s debt reportedly equals approximately 7 percent of its economy. In Greece, the ratio is around 100 percent. On the surface, Greece looks much worse off.
In reality, comparing total California debt to total Greece debt is like comparing rotten apples to rotten oranges. To make it a fair comparison, you also need to factor in California’s share of the national debt (which is projected to be $14 trillion by year end). When this amount is factored in, the $68 billion that the state owes (as of the end of 2009) balloons to $1.65 trillion—which means that California’s actual debt-to-gdp ratio is almost 90 percent.
Yet, as horrendous as a debt-to-economy ratio of 90 percent is, California’s ratio is even greater. When including unfunded Social Security, Medicare and Medicaid liabilities into the equation, California’s state debt-to-gdp ratio soars to a stratospheric 400 percent.
That means California debt equals more than $200,000 per man, woman and child. Where is the money going to come from?
A California debt default would be far more damaging to the U.S. than anything that a Greek failure could produce. Besides being far smaller, Greece’s economy only makes up 3 percent of the total eurozone. California, however, composes about 12 percent of the U.S. economy.
Plus, a California default could hurt many U.S. states disproportionately hard. According to Trichet, cumulative U.S. state budget deficits amount to 12 percent of America’s gross domestic product. In Europe, the figure is only 7 percent.
Portugal may be a problem. But so is Ohio. Think things are tough in Ireland? Look at Kentucky. Is Spain having unemployment issues? So are Florida, Illinois and Michigan. While analysts focus on Greece, they are missing the rhinoceros in the flower garden.
David Walker is the former U.S. comptroller general—which means he was America’s top auditor. According to Walker, America only has a couple of years to deal with its deficit problems before it ends up like Greece. America could face a “crisis of confidence with regard to our own finances” if we don’t start being honest with our budgets, he says. Walker, who is now working to bring attention to America’s financial irresponsibility, warns that a big part of America’s problem is its use of “creative accounting practices”—the same ones that burned Greece.
Events in Europe surrounding Greece are pivotal, and could have dramatic economic and geopolitical ramifications (you can read articles here and here). But when comparing Greece and California, don’t forget that California’s economy is five times larger. The EU could survive without Greece, but America will not survive without California.
Unfortunately for California and the rest of America, the Greece crisis is all too familiar—it is kind of like looking in a mirror.
That's a bit of a silly article really. There is no reason to compare Greece to California when the obvious warning is that sovereign debt is becoming problematic. Which doesn't bode well for any country with high debts, but even then a country like the UK is at much greater risk than the USA which still is the issuer of the currency in which those debts are and which happens to constitute up to 60% of the world's currency reserves.
Congratulations America
It's not silly to US folks.
It really is.It's not silly to US folks.
We're stuck in a bloody snowglobe.
Yeah, it's silly to look at debt. Sovereign or otherwise. Also silly to look at retirement ages and public pensions, or taxes and budgets.
Silly me.
Take a good look at your source. I mean, really.Yeah, it's silly to look at debt. Sovereign or otherwise. Also silly to look at retirement ages and public pensions, or taxes and budgets.
Silly me.
Reactionary nonsense at its best.
We're stuck in a bloody snowglobe.
The source came from realclearmarkets.com
CA's problems are similar to Greece's. Plenty of other authors and sites write about it, too. Also analysis of US municipal bonds and Greek bonds, the use of swaps and derivatives to hide debt. I wouldn't call it "reactionary" at all.
Nonsense, Greece's problems aren't similar to those of California at all. Greece isn't part of a federation that will bail it out no matter what. California on the other hand is. Greece's infrastructure isn't falling apart, it's being paid for by the EU.
Congratulations America
The author mentioned that. Did you really read it?
If you started this to talk about Greece in particular, and not troubled debt and bail-outs in general, then I apologize for bringing up the Bigger Picture and will post this stuff elsewhere.While analysts focus on Greece, they are missing the rhinoceros in the flower garden.
Yes I did read it, and it also explains why the piece is rubbish. The problems of Greece can't be made into a proxy for the problems of California. It could only be used as a very lopsided example of the risks the entire USA is facing.
That is why the piece is rubbish.
Congratulations America
We sure as hell better stop bailing out California. Declaring CA insolvent and getting rid of the overpaid lazy bureaucrats would be great. Sadly as long as Democrats are running things in this country and utterly under the the thumb of unions we won't see that.
Hmm, so it's the article you don't like and find to be rubbish? What Greece (and CA) are facing IS lopsided, when compared to the larger groups who will do their bailing (EU/US).
But like I said, if you want to keep this thread pristine for Greece only, then okay!
You seem to missing the fact that the EU is not a country and Greece is not a part of another country. Sovereign debt is not the same as municipal debt.
Hope is the denial of reality
(IMF) No, I'm not missing those facts. The parallels are ideological or conceptual.
But hey, let's keep this to Greece! How about those strikes?
Feb. 24 (Bloomberg) -- Greek police fired tear-gas and clashed with demonstrators in central Athens after a march organized by unions to oppose Prime Minister George Papandreou’s drive to cut the European Union’s biggest budget deficit.
Hooded youths threw rocks, marble and other objects at riot police after the march today to the country’s Parliament building. At least one person was detained.
“People on the street will send a strong message to the government but mainly to the European Union, the markets and our partners in Europe that people and their needs must be above the demands of markets,” Yiannis Panagopoulos, president of the private-sector union GSEE, told NET TV yesterday. “We didn’t create the crisis.”
Half a million civil servants, who held a one-day strike on Feb. 10, today joined forces with GSEE, which represents 2 million workers, after EU warnings that Papandreou’s government needs to bring in new taxes and make more spending cuts if it fails to rein in the largest budget gap of all 27 EU member states.
Air-traffic controllers, customs and tax officials, train drivers, doctors at state-run hospitals and school teachers walked off the job to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists also joined the strike, creating a media blackout.
Last edited by GGT; 02-24-2010 at 04:21 PM.
The only thing coinciding is that we are talking about debts in both cases. Other than that Greece and California have nothing in common. Greece is the canary in the mine for other countries, not for subdivisions of other countries. For a default of Greece all the rest of the EU needs to do is swallow hard. For a default of California you'd need a complete rearrangement of the way things are done in the USA. You'd have to make several steps back in the process of federalisation that your country has went through.
The Greeks can protest and strike all they want; it's not going to get them the money or help they need to not default. For the people who would need to provide that money strikes in Greece counts for next to nothing. Seriously pissing off German, French and Dutch voters does. Greeks may whine all they want about the proposed austerity being unfair (actually a majority of them actually think it's necessary), German and Dutch voters have got a much better case claiming that they don't see why they should accept raising their retirement age to 67 in order to pay for the Greeks to remain able to retire well before they are 60.
Congratulations America
No you don't need to do much if CA defaults. People don't lend money to CA expecting the Federal Government to back it. Otherwise CA would enjoy the same credit rating as the United States.
Sounds like it's getting tougher now, at least from Germany's stance. (?)
Both sides, but if you look at the bigger picture the Greeks are simply doing what is demanded of them. They just make it sound as if they are not willing to do so, which is a bit stupid. It only gains them short term internal political gains and it prolongues the most harmful period of insecurity. The more robust they behave in their efforts the less help they will actually need and the sooner they can start their road to recovery. On a sustainable basis even.
Congratulations America
Things that stun me about this, but don't actually surprise me:
1) How, whenever reporters approach random Greeks in Athens to comment about this, a high proportion say something like "We invented Democracy, the world owes us" or "The Germans still owe us what the Nazi's stole" or some inane remark about thieving bankers.
2) Goldman Sachs and other banks are being investigated for lending money to Greece that amounts to about 1/10th of 1% (IE 00.01%) of the debt their took out over the past decade.
Well, even the Greek PM at one point started to play on German guilt, so it shouldn't surprise you people in the street do it. Anyway, we're used to this Greek nonsense and typically it gets ignored.
The issue is not the amount of money borrowed but the way in which it was accounted for. On the one hand I was a bit surprised by this investigation. To me it seems clear that the real culprit is the Greek government of those days. But maybe the rationale is that the banker made it possible for Greece to cheat and therefore should be held accountable too. As far as I know nobody really knows if the cooking of the books was, besides dishonest, also illegal. We'll see.
Congratulations America
Yes, I should have clarified -- the Greeks are the ones who cooked the books. I don't see what is so terrible about lending [relatively] small money to governments. But alas these are the times.
Hazir, are Dutch and Germans expecting Greece to raise retirement age up to same as theirs? If not, why not?
I think most Dutch and German people simply think they shouldn't pay at all for anything Greek. The retirement age is just another thorn in the side for them. People really don't think part of their retirement should go towards paying for people who cheated their way into the club.
It makes life difficult for the leaders of nothern nations; they don't want to help Greece, and their voters will punish them if they do but the fall out of a sovereign debt default in Greece will cause more damage to their economies than pulling out their checkbook will. Actually, I'm not certain who has the problem here; Greece or it's rich creditors.
Congratulations America
Greece has an entitlement attitude that seems to bother everyone.
To Dread, GS is supposedly the financial wizard of the world, with teams of attorneys and people who should know better. Helping Greece hide debt violates at least the spirit of regulation law. I wouldn't be so quick to give them the banker's pass around the board....
Banks do not lose money.
Banks create money out of thin air and then they lend it.
Unlike loses in productive companies where losses represent real assets, in the banking industry a loss is failure to fulfill repay promises of money that was created out of thin air, a broken promise on money that did not exist.
Imagine this. Someone deposits $10 in my bank. The current reserve requirement ratio allows me to create $100 out of $10 of deposits. Then I create $100 in my accounting books and now I can lend $100.
You come and borrow $100 and then you default. How much money did I lose? Nothing. I only would need to reduce $100 from the assets, but since they were never backed by real assets, but merely a promise to repay money that did not exist, the loss is not real.
Nope. Greek politicians cooked the books. Population pays the price.
But in a world in recession, Greece is likely to attract foreign European jobs as conditions of Greeks get worse.
German and French workers, for example, enjoy conditions that should not be applicable to greek workers.
Companies may see moving to Greece as a source of profit.
So the rest of Europe will pay the price of what Greek politicians (not greek population) did.
This is the same dynamics that caused US jobs to go to China.
Well, we still don't know if it was admissible back then and if not under which rules. It could be that GS will be casted as the bank that helped the villains, but that is by no means certain yet.
They may also just be a service provider for a debtor who needed a creative way to roll over his debts. It wouldn't be the first time.
None of this has any bearing on how the actions of the Greeks are viewed by the way, everybody is seriously but seriously pissed at them and their whining isn't making it any better. It's about time we start pointing out they were on the wrong side too during the Kosovo crisis. Based on the same ridiculous notions of how the world functions.
Congratulations America
The pissed-off element is fairly clear. Greece has had government corruption for a long, long time. They need to get their house in order before expecting other countries to bail them out.
(That's the reason my sister's in-laws left Greece in the first place. Those who were whistle blowers became targets.)
Bank loans are registered in books as "CDO" or "Collateralized Debt Obligation", which is some sort of a collateralized account receivable, and in case of borrower default the inexistent, for the bank the promised CDO asset (money created out of thin air) becomes a real asset with a foreclosure. Where is the loss there? Well, interests were not collateralized so it is recorded as a loss, unlike productive companies where losses come when assets are physically destroyed or when expenses exceed revenue, so the repay promise on inexistent money is not a real loss.
...and EU allowed it...
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