Tom Winnifrith BearCast - Grexit would be great for Greece!

Comments

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   wildrides

   4 April 2015, 15:05

   Shockingly bad political advice from Winnifroth yet again . The worst thing Greece could do is default on its debt with European partners .
   Greece needs to man up and quit moaning ……….. Just pay the fecking debt you lazy bunch of good for nowts . For fecks sake the interest on Greece debt is only 3% of Greek GDP . Thats LESS than the French interest % of GDP on the French deficit . When we borrowed billions off the Americans to defeat Germany in world war we did not whine about it for ever more . No we buckled down and paid it off ……… interest first and then the capital . We honored our debt and it took until last year to pay it off . Yes thats right we finished paying for the world war one and WW two LAST YEAR . The Greeks should pay the interest due now each year and spread the capital out over 100 years .
   The Greeks should man up and work it off . No one would ever trust them again if they default . They should also address the structural problem of almost no Greek exports and almost ZERO tax levied in Greece actually gets collected . They are basically bone idle . A quick way out would be to bulldoze them all into the sea and fill the country full of Germans who know how to manage finances and GDP .

   And Labour did lower the previous Tory government deficit in reals terms Tory boy .

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   Jason

   4 April 2015, 16:05

   Greece has suffered a contraction in the size of their economy worse than most (all?) nations experienced in 1930s great depression. Much is self inflicted by the rich & powerful but that doesn’t make debt of 170% of GDP affordable or repayable for ordinary Greeks when you’re economy is shackled to a common currency and 1 in 4 (3 in 5 young) are out of work.

   They should hoard their last foreign currency reserves, default on the lot and take the resulting pain for a few years.

   As to the UK none of the major parties have tackled or faced up to the scale of the UK’s debt & deficit. All are promising spending left, right and centre instead of living within nations means. If Labour get in, markets get spooked by the leftie coalition, how long will it be before they go cap in hand to the IMF and Greek-style cuts are imposed by outsiders on UK? I suppose that means that the British are all bone idle too?

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   wildrides

   5 April 2015, 02:28

   Jason,
   Defaulting is benefit culture talk ………. thats what makes Winnifroth a hippo ………crit . He is happy to slag the welfare safari of the uk , and especially here in my homeland , the frozen North . But Greeks are some sort of special case he says , that can extract the worlds biggest ever benefit cheque from us all and expect to have no consequence from the massive fraud on the EU that is modern Greece today.

   Its time for them to grow up and take the consequences of their own actions . That means repaying the capital borrowed , even if it takes 100 years .

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   J P Spaghetti

   5 April 2015, 05:02

   “We honored our debt and it took until last year to pay it off”

   Wildes – I remember becoming aware that we were still paying off the debt accrued through fighting one of the greatest evils the world had ever seen about the time I was introduced to the wonderful world of paying tax, but I didn’t realise it took until last year to finally settle it (if taxes are raised fairly, spent wisely and on the truly deserving rather than squandered or embezzled I’ve no problem with them, by the way). Anyway, I remember feeling real indignation about it. I mean, given it would probably have just been a (shortish) matter of time before the US had been invaded had Sea Lion been successful (maybe that’s contentious but I think it’s valid), couldn’t the rest of the ‘civilised’ world have seen fit to write that one off? Bleedin’ ingrates! When all is said and done it was – after all – way before my time! .

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   Jason

   5 April 2015, 05:09

   Wildrides I look it at from a lenders perspective as well as taking a pragmatic view. As a lender it is obvious that the Greek economy can’t service the existing debt and will need another bailout / loan extension just to kick the can down the road for political ends. Seeing that there’s little point in pouring good money after bad or pretending the loan is not impaired.

   Even if the existing lenders took a significant haircut it doesn’t address the simple reality that without a huge ongoing transfer of wealth from Northern Europe to Southern (never going to happen) there can be no convergence of economies so Greece would be consigned to a future of abject poverty.

   Better to default, exit and suffer a spell of even worse poverty with a devalued drachma with some future hope if politicians make needed reforms than the certainty of generations of no-hope, humiliation and civil unrest.

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   Jimbo

   5 April 2015, 08:20

   Wildrides, you don’t seem to have grasped the scale of the problem. Greece has a national debt to GDP that is not far off being 200%. See:

   http://www.nationaldebtclocks.org/debtclock/greece

   Think of it as you or I being in debt to the tune of twice our annual earnings and having no assets to sell to be able to repay the debt. At some point (and Greece is there now), all your income goes on paying the interest and you can’t actually repay the principal. You are therefore going to end up bankrupt. This all shows up in the fact that Greek public healthcare workers pensions were seized a couple of weeks ago and the money used to pay off imminent liabilities. To give you an idea of how bad the current situation is, Greece has some EUR 20 billion of loans to refinance/roll over before between now and the middle of August. This figure does not include IMF SDRs that must be repaid, but you can safely add another EUR 3 billion to that EUR 20 billion to account for those. Now, if Greece are having to take desperate measures such as raiding public sector pension fund money to meet less than EUR 2.5 billion of immediate payment obligations (see: http://globaleconomicanalysis.blogspot.com.au/2015/03/one-minute-to-midnight-athens-raids.html), do you really think they’re going to be able to refinance more than EUR 20 billion of loans they cannot repay before August without external help?

   In my opinion, they have no choice but to do an Iceland and default, and this will surely mean a Euro exit. I think they will be far better off for this (as Iceland have been) and as for the dumb greedy bankers who were stupid enough to lend them the money in the first place, screw ‘em. The current problem has been 100% caused by Greece being allowed to join the Euro and as a consequence of a perception on the part of lenders that Germany would underwrite the Eurozone in the event of any future difficulties, be able to borrow money at rates that hitherto only Germany had been able to achieve. Bond investors need to take responsibility for their own stupidity in lending money to Greece at those rates, and take the loss on the chin. Since when was lending money to sovereign powers risk free? Seriously, f*** ‘em.

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   Jimbo

   5 April 2015, 19:10

   Forgot to mention in my last post that Greece are currently shut out of Sovereign Bond Markets by the powers that be in Brussels (they must agree to the conditions imposed by the Troika in order to be able to access debt markets) so selling more bonds to roll over that EUR 20 billion of debt due for refinancing is not an option. They’re out of all currently visible options, but given the propensity of Brussels to bring in road building equipment to extend the road down which the Grexit can has been kicked, I can’t rule out one more can kick before August. I sense German patience with the whole thing is starting to wear thin though…