Greece has run out of OPM

Quote: Wizard

Isn't it a biblical thing to have a debt jubilee (forgiveness) every seven years?

The Greeks benefited in the good years of over-spending and under-taxing so they should feel some pain when the chickens come home to roost.

I heard the Greek president saying the "no" vote gave him more bargaining power with his creditors. What would happen if he told Germany and whoever else they own money to that they have two choices:

1. Greece will pay 50 cents on the dollar of its debt, remain on the Euro, and control its own affairs.
2. Greece will entirely default.

Seems to me that door #1 would be the better option for northern Europe.

I think door #1 needs to be modified. Let them pay 50 cents on the dollar and escape the debt load but go back to their own currency. The problem occurred because they went on the Euro. When that happened then everyone in Greece thought they should make the same in Euro's as the other countries. Didn't matter whether they had the same productivity or not. All this overpayment in wages couldn't be handled they way it would normally be through inflation because that affects all the other countries using the Euro.

Quote: Wizard

I had no idea Japan was so high. I thought they were a saving nation, as we owe them much of our foreign debt. Can somebody (i.e. Paco) explain it? It seems everybody is in debt but are we all just borrowing money from each other?

Hopefully you will not mind if it is me instead?

Japan is in huge debt because they have had a sick economy since 1989. In fact it had issues before that. Some history is in order.

The average Japanese are, or at least were, huge savers. Their options for holding their savings were limited. The place it went was into Japan Post Office accounts. Japan's Post Office also acted as a bank of sorts. It paid pitiful interest rates to savers. The money then turned around and was loaned to Japanese corporations at artificially low rates. Most of us here remember the 1970s and 1980s when USA interest rates were very high. Japanese corporations could borrow at rates many basis points lower. This is when the US consumer electronics industry evaporated and autos, steel, and others fell behind. There were other reasons, but this was a big one.

By the 1980s Japan was booming, and their corporations had a market-share-at-all-costs mentality. Their corporations had formal and informal "cross-shareholding" programs. Toyota would have shares in their steel and tire vendor who would have shares in Toyota. Stocks formed a bubble. With low borrowing costs, funds were borrowed and put in to stocks. Poetically, their stock market peaked to close out the 1980s on December 29, 1989.

Deflation started hitting. Used to near constant growth since 1946, it hit hard. Every modern western economy is addicted to inflation. To go to deflation is to cut off a heroin user cold turkey. Few people really understand this. But Japan had to cure the deflation. So they spent, and spent, and spent. Their spending makes the Obama stimulus look like a miser. They built all kinds of bullet-trains and roads, but no growth. The 1990s were a "lost decade" in Japan, followed by another in the 2000s. This one is not much better.

This is why their debt is so high. Japan is weird, however, in that more of it is domestic than most nations. They more "owe it to themselves." They will never be what they were, too many other problems.

Quote: petroglyph

The "money" that is missing never existed in the first place, it was loaned into existence, that is what is wrong with fiat currency.

That is a long way from capitalism.

And this is what so few understand. I swear when you figure it out they hit you with a knockout dart and you go to one of those islands where you live in relative comfort but also in captivity.

The Fed and the EU central bank will end up loaning the money. Greece will not see a penny of it. Greece will be in the position of a degenerate gambler who owns money to three bookies who are all connected to different made guys. The made guys in a case like this will sit down and figure who gets what when, meanwhile the DG still owes it all, they are just going to simplify it.

So both central banks will create the money, then tell Greece they have to pay it back. Like Caesars Palace handing you $10,000 in credit then saying do as you like, but you owe $11,000 to pay it back, but they never had the cash to back it in play. Mr and Mrs America and Mr and Mrs Germany don't pay a direct tax, their tax is in inflation and the loss of purchasing power of their Dollars and Euros.

See you on the island, hopefully it has warm weather.

Thank you for the summary of recent Japanese history and economics. What I still don't get is on that list I linked to earlier every country listed in in debt, save for a few small countries where that field is blank. That list is evidently not counting assets in the form of loans to other countries. I'd like to see a list of (debt-savings)/GDP.

Did you know Germany just finally repaid all its debt from both World Wars. In 2010.

Now that's a handout/bailout. It's an entire person's lifetime.

Quote:

Some of the agreement included debts to be paid after the reunification of Germany. Over decades it seemed unlikely to transpire, but in 1990 another 239.4 million Deutsche Mark of unpaid coupons were revived. On 3 October 2010 the last payment was made of 69.9 million euro.[4] This is considered to be the last payment by Germany on all known debts resulting from both world wars.

https://en.wikipedia.org/wiki/London_Agreement_on_German_External_Debts

Quote: AZDuffman

See you on the island, hopefully it has warm weather.

I doubt it will look nearly as good as the brochures. : )

Quote: Wizard

The Greeks benefited in the good years of over-spending and under-taxing so they should feel some pain when the chickens come home to roost.

More accurately, Greek politicians who continually are routed for corruption, graft, and a host of financial crimes benefited during the fast and easy money years of SPV's, and other financial derivative products that no one can understand, especially since '01. Courtesy of Goldman Sachs, the same entity that crushed AIG.

It is seldom the same class of people who benefit from QE, that makes good on the loans. The ordinary Greek has no choice, they are going to feel the pain. The difference is, what they voted for, was to say to Hell with the global bankers who created the financial wizardry [no relation] that put them in this disaster.

Quote:

1. Greece will pay 50 cents on the dollar of its debt,

That is the risk that capitalist creditors take for the rake. Due diligence is the purview of the lender. The IMF and the EFSF and all the other acronym agency's loaned money to borrowers that they knew would never be able to repay, expecting taxpayers to make up the losses. The reason capitalism worked was losers were allowed to fail.

If you could create billions and billions out of thin air and loan it out at interest and never worry if the borrower could make the payments, what would stop you from loaning out trillions and trillions? Heads the bankers win, tails the taxpayer loses. Rinse, repeat, until the central bankers own the world, good gig if you can get it.

Quote: Wizard

Thank you for the summary of recent Japanese history and economics. What I still don't get is on that list I linked to earlier every country listed in in debt, save for a few small countries where that field is blank. That list is evidently not counting assets in the form of loans to other countries. I'd like to see a list of (debt-savings)/GDP.

That would be a harder list to make because it would assume taking everything from the public to pay the debt. But it is a good point. What makes a country a better or not credit risk? It is much the same as a person. Maybe I will start a thread explaining how all this banking stuff works. It really is scary.

Quote: petroglyph

If you could create billions and billions out of thin air and loan it out at interest and never worry if the borrower could make the payments, what would stop you from loaning out trillions and trillions?

Inflation?

so what do the words interest and default really mean...

interest...we make ledger notations when you repay us.
default... if you huff and puff and hold rallies about sovereignty we will simply tally up the interest to date and declare it sufficient for us and call future interest "stolen from the iMf" but that is about as meaningful as the rally held by your overpaid underworked streetcleaners.