Emma Woolgatherer wrote:Nick wrote:The Greek crisis was caused by the lies and deceptions of the Greek government when applying to join the Euro. This was compounded by profligate spending, and their unwillingness (or maybe political inability) to face up to it. Lending to a government is generally reckoned to be a safe option, suitable for widows and orphans, but this has not proved to be the case with Greece. The banks are in no way responsible for the Greek crisis. It is the Greek government and the Greek people.
All the banks did was trust them.
Oh, please. (Or should that be purlease?)
Purlease, definitely!
The banks knew that they were taking risks in lending to Greece. They knew about the corruption and cronyism and the misspending and the widespread tax evasion.
Well, yes. The level of risk is shown by the different interest rates charged for lending to Greece. Though partially mitigated I think by credit default swaps they have always been higher than, say, Germany debt, and have been getting steadily worse over the years. To some extent, the market has been deceived by Greek aserions that we are all European now. The Greeks also kept interest rates down by shortening the loan period to a year or so (whereas the UK can still orow for 30 years). It has come to a pretty sad state of affairs when governments are not able to steer their budgets away from default.
Though I accept your point about corruption and low tax take and so on, I think the bigger problem is that electorates tend to vote for jam today. We saw that in the UK during the reign of NuLabour. Because Gordon Brown was lucky for the first half of his time as Chancellor, it became electorally impossible for the Tories to claim that he was spending too much, so they began to copy NuLabour's spending plans. In circumstances where democracy is weaker and more splintered, this sort of effect is much more accentuated. Italy is the prime example of this.
Some of them may have known a little more than others [---][/---] it does seem that Goldman Sachs and possibly other investment banks played a role in helping the (then) Greek government to understate its deficit, by arranging some kind of credit default swap deal that I don't begin to understand.
It was clear to everyone that Greece hadn't qualified to join the Euro. If Goldman Sachs were engaged in "off-balance sheet" activities, (I don't think it was likely to have been a credit default swap deal, but I don't know) just as Gordon Brown was with his PFI initiative and other wheezes, then it makes matters worse, but they should never have been allowed to join.
That's not to say that the banks caused the Greek debt crisis. Of course successive Greek governments played the leading role in creating it. But the banks "helped", as Avaaz put it.
Hmmm... so if the banks had refused to lend to Greece earlier, what would they have said? Probably that this was some sort of strike by capital. We have seen widespread calls for credit reference agencies, Standard & Poors, Fitches and others, to be outlawed, as they somehow "cause" crises. Either by being wrong (which has been true), or for being right! In this case, when they downgrade a country they are accused of wrecking the credit-worthiness of the country, whereas they are giving advanced warning of future problems.
If Greece had not been a member of the Eurozone, their interest rates would have been higher, sooner. Not least because international money would have needed extra interest to counter a falling Drachma. Euro membership acted as a dam; at first it held back the tide, but when the pressure grew too much, the dam burst, with much greater devastation. The bail-outs have been a series of efforts to reinforce the dam, which have so far been too little, too late.
And it is not an isolated crisis. It has occurred in the context of a global financial crisis in which banks clearly played a major role. I agree that it is simplistic to blame the banks for everything. But it is equally simplistic to put it all down to the Greek government and, especially, "the Greek people".
Maybe that's harsh, but I blame the Greek people for continuing to elect politicians who were not addressing the economic issues, but promising prosperity they culdnot deliver. That's always a problem with democracy. To a lesser extent, perhaps we saw this with the Labour government up to 1979. Eventually the electorate kicked them out. In Greece, not long a democracy, the government is now a bunch of technocrats. There is still a small danger that democracy will lose out to the army.
Nick wrote:Also a large proportion of the bonds which have lost their value belongs not to faceless banks but to ordinary pension savers, trying to secure their retirement incomes. Even the bank shares are largely owned by such people. The idea that it is only filthy rich money-grabbers bankers who have suffered is wildly wrong.
And not an idea I've ever claimed to espouse. Besides, I'm not arguing that banks or bankers or investors should be "punished" for any sins I'm claiming they have committed. I do think they are better able to afford to pay more to effect a solution than a Greek population that's already reeling from the effects of austerity measures.
Sorry if I have not accurately reflected your view. I have tended to generalise from your view to those more widely held. I'll try to be more careful in future.
As for the Greeks, I don't want them to be "punished" either, but because they are still in the Euro, they are between a rock and a hard place. They have to take tough decisions, eg to raise the pension age, and cut over-generous pensions, but as I don't need to point out, cuts are really difficult to orchestrate. What I'd like to see is the re-classifying of Greek debt into some sort of separate currency, so that the pain is shared between the Greek economy and the lenders, and the exit of Greece from the Euro, thus allowing the Greek economy to grow.
Nick wrote:100% of the money lent to Greece is being spent, by the Greek Government, on the Greek people. Not a cent goes to the banks, let alone the bankers.
But how can that be true? A significant proportion of the new debt
must be going to pay interest on the old debt, surely.
Hmmm... except that the banks and their fundholders have taken a 50% hit on their capital, never mind the interest payments.
Nick wrote:And the idea that Avaaz had any effect whatsoever, yes, whatsoever, on the size of the "haircut" is ludicrous in the extreme. (Please don't take that personally, I'm not criticising you for raising it as a possibility, but I am blaming Avaaz for egging you on to believe it may be true.)
I did not raise it as a possibility. That's not what I was saying and not what I think. And Avaaz hasn't egged me on to believe it's true, either. I can't find any evidence that they've egged anyone on to believe that's true.
Oh. If I have misunderstood you, then my apologies. I thought you claimed that Avaaz were, at least partially, responsible for increasing the size of the "haircut". And you are too thoughtful a person to take anyone word for anything, whether Avaaz's or mine. And I'm probably coloured by what I see as arrogance from Avaaz. (In their latest poll about internet freedom, with which I have considerable sympathy, they seem to imply that Avaaz is standing alone against the end of freedom. They don't mention that Google, Microsoft, ebay, Myspace, Facebook and many others are actually very much against it too. Its as if they'd hate to be seen on the same side as filthy capitalist corporations....)
Nick wrote:Any other industries you want to nobble too?
Ooh, yeah. The arms industry, for starters.
Fair enough! I don't agree, but that's an entirely different topic, and some distance from economic policy.
I think it's a topic that's relevant to the Greek debt crisis. I think the Greek government's high military expenditure, and its repeated underreporting of that, has contributed significantly to the crisis. It was even claimed last year that France and Germany had been putting pressure on Greece to buy military equipment from them (
Reuters).[/quote]OK, that's new to me. Wouldn't it be nice if military expenditure were lower, but it seems to me that the more insecure the government, the higher the proportion of the nation's income is spent on the military. The reasons for and suggested solutions to this go way byond economics, so that's for another time, or a thread of it's own.
Nick wrote:I agree that some aspects of banking need addressing, but I disagree, fundamenatally, that heaping abuse on the participants is the way to achieve it.
I wasn't advocating heaping abuse on anyone. I'd thought that metaphorical shin-kicking referred to painful financial losses.
Again, it appears I have been too hasty to lump you with other opinions expressed. If so, my bad. I must read your posts most carefully before replying.
You are mixing two different types of financial professional. You are referring to financial pundits and fund managers.
Yes, I was giving them as examples of subcategories for which there is evidence that they aren't as good at what they do as they're cracked up to be. I wasn't claiming that I had any evidence that that's true of any other financial professionals. Just expressing, in fairly tentative language, my own niggling suspicions [/quote]OK.. then I'm pointing out the difference. I also think it supports my contention that the bankers are responding to the market, not driving it in any particualr direction. A bit like "the wisdom of crowds". Doesn't work well all the time of course, but much better than planned markets (eg the Soviet Union, as was) or the Euro.
Yes, there's a lot of anti-banker populism around right now, and I can understand why it pisses you off. But there's quite a lot of anti-Greek abuse being hurled, too. And that's pretty unhelpful, too. If anyone's getting their shins kicked hard right now, and their knees and groins and solar plexuses too, it's the Greek people. And a lot of people seem to be suggesting, without any justification that I can see, that they're getting their comeuppance.
I don't think anyone is saying that the Greeks should be punished, as they say of the bankers. The problem is, that if the Greek situation does not change, they are going to have what they've always had: problems. Apparently, 70% of the Greek population want to remain in the Euro. I don't quite see what the Greek population think could be a real solution, apart from receiving money from the rest of the Euro area.... Hmmm... Any suggestions?