I am pro Euro integration for the economic efficiencies, but it seems like we were too quick to do our due diligence before allowing countries to join.

Cracks are showing with Spain and who knows what problems there may be with other countries.

The German parliament has agreed to the Greek bailout but if another country needs financial support it will probably be much harder to get support and I wonder what would happen to the Euro economy then?

For instance, the civil service jobs really are for life – it’s very nearly impossible to get sacked. So many of them simply stop going to work, and then get another job! For years and years on end, paid by the Government for not even showing up, and for their new employer.

Sorry but the idea that the Greeks and the US are in the same boat – or that the Greeks have suffered through no fault of their own – gets less tenable with every new fact!

I think the fraud is part of the problem. As well as the fact that something is afoul when you look at the numbers of wealthy Greek citizens (or those who declare themselves as such) actually paying taxes. My guess is that there is some serious black market activity going on there. At least here in France, there is the sense that the Greeks need to tighten the belt a little bit to pay for the crookery of their government. I mean, retirement ages here in France are heading up, health care coverage is dropping. People have to make ends meet.

That said, I’d love to see Goldman Sachs get roasted for this . . . or some other technicality. As for the US government. . .URGH. I’m just glad to be overseas right now.
.-= Simple in France on: Radical simplicity, frugality–for couples only? =-.

Five crucial differences:

i) Greece is stuck in a continental single currency with very little control over its own monetary policy which severely limits what they can do to reduce their deficit. The UK by contrast still has full control over its monetary policy (one thing for which we can thank Gordon Brown).

ii) the Greeks were dishonest and fraudulently misreported their public accounts for years to make things seem much better, which has angered the Germans and frightened investors

iii) The Greek public finances and economy are worse than in Britain; their GDP is still contracting unlike Britain; and their national debt to GDP ratio is far higher than in the UK.

iv) UK gilts have perhaps the longest maturation rates in the developed world, which means we have far longer to refinance our debts and so are less vulnerable to short term speculation in the bond markets.

v) the Greeks have a history of defaulting on their debts; the Bank of England has never done so in the 316 years of its existence. Confidence matters.

Almost right, Investor. Remove the word “potentially” and you are spot on.

No, the US is not Greece, but this unabated printing of dollars is completely unsustainable and the collateral damage will be felt by those of here in the States – especially us savers.

That is the real issue, in my opinion. Whether or not the country will technically end up in default is immaterial to me. Who cares whether we are in default or not if the US dollar is devalued to such a degree that it eventually becomes worthless? Talk about cold comfort.

I’m afraid that if we don’t put the reins on the Fed, this is going to end very badly.

You and I both know, Investor, that the US government has no incentive to control the inflation that eventually has to come in a world awash with too many dollars to count. Why should they?

To a gov’t that has committed itself to throwing financial discipline out the window (like the USA), inflation is a beautiful thing because:

1) Inflation is a method of taxation without representation.
2) Governments do not feel the effect of inflation since they can print the money
3) Best of all, government debt to its citizens is eroded away through inflation.

The losers are the little people.

All the best,

Len
Len Penzo dot Com
.-= Len Penzo on: The Great Paper Towel Test: What Brand Is Your Best Value? =-.

But you can’t brush off the world reserve currency status. It’s a major factor in the US being able to print more of its own money.
.-= MoneyEnergy on: Different Banking Cultures Around the World =-.

Greece’s problems can be summed up in one word: corruption. This is an internal problem which you cannot blame on Goldman Sachs. A good background story is here:

http://online.wsj.com/article/SB10001424052702303828304575179921909783864.html

Corruption is the ultimate cause of the Greek debt crisis.

Credit ratings tell you one thing and one thing only: the ability of the borrower to repay. They are not giving you a rating of the quality of governance, of the character of the citizens, or of the weather conditions. The ratings agencies are surely morally bankrupt but without doubt they have been overly optimistic about the situation in Greece for a long time, not overly harsh.

The US government is the definition of triple A. It will remain so. All’s fair in love and finance.

Thats sure to put some puff back into the greek govvie bonds… if stavros et al can stop rioting and put a bit of backbone in too.

US v different. A problem but a v different problem.

To continue our Twitter conversation, I think I have to say we’re going to agree to disagree.

As I say, the US versus Greece situation is entirely different. The US can print its own currency. This makes technically defaulting entirely optional. The way it would default is by printing so many dollars that they fall in value (which is arguably already happening). But that’s not a pure default. It can also be downgraded because investors fear that will happen, which again is like a default but isn’t really a default, but rather a confidence cut leading to a de-rating of its debt, higher yields etc.

Greece cannot print its currency, because it’s in the Eurozone and only the ECB can do that. This means it CAN technically default because it runs out of money. It can also suffer in the same way as the US can/could – from a lack of confidence and the selling of its debt. That’s what’s already happened, in fact.

The European Central Bank could print more money like the US to pay Greece’s debts, as you tongue-in-cheek suggest. The trouble is that what’s good for Greece would/could be bad for other countries in the Eurozone. As confidence deserted the Euro, the yields of all Euro-denominated bonds would go up, which would increase the debt burden for all European nations. Very unlikely.

In my view what’s far more likely is Greece will agree with its creditors to take a haircut of say 30% on debt, and lots of aid. There has to be a chance it will be ejected from the Eurozone. (See my article from March 2nd on why it’s great the UK ISN’T in the Euro for these reasons, for more on my view… ).

RE: The US being like Greece, sorry to be blunt but I couldn’t disagree more. Don’t believe everything the blogosphere says, would be my cheeky advice.

Yes the US has tonnes of debt, but it’s not making the world poorer, it’s making future US citizens potentially poorer. The US is effectively selling its assets / writing IOUs to have more stuff now. If it’s richer in future, arguably no problem. (Obviously there’s a limit to how far this strategy can be allowed to run).

As for the rest of the world, I think you’ll find the hundreds of millions of Chinese and Indian poor who have been lifted out of poverty in a boom predicated in China’s case almost entirely on exporting stuff to voracious US citizens are very happy the US is so willing to borrow!

Economically speaking, Greece and the US are worlds apart. The US has the world’s largest economy, many of its greatest and most innovative companies, assets everyone in the world would love to own, a young-ish well educated population, and a fairly lean welfare system. Plus it’s the only superpower, though that’s not massively relevant here.

Greece has no productive industry except arguably tourism. Many of its citizens are used to retiring in their early 50s. Its public sector workers have seen their pay near DOUBLE in a decade (where inflation was low like everywhere). It’s basically borrowed tonnes of money on the cheap because Germany and to a lesser extent France’s success has kept European interest rates low.

This is not the Greek citizens’ fault in that it’s hard to ever say it’s Joe Bloggs’ fault when their Government does something, but the Greeks did do it to themselves by living way beyond their means (much worse than the US) and consistently refusing to accept reality (do you see Americans striking and rioting with the highest unemployment in 30 years and cuts ahead? No they’re not. Different culture).

IMHO you’re on much stronger ground with the California analogy. That is indeed like the Greek situation — California can’t print its own currency to pay debts, so it is relying on the central US government to bail it out, which introduces moral hazard and the risk it will have to bail everyone out. But even then it’s still not comparable.

Just as Warren Buffett says he would prefer to pay (say) $10 billion for the rights to the Coke logo and not $1 for a bottling plant, so I’d happily buy the super-powerful US.

As I say, this isn’t to say the US deficit isn’t big and real etc. But it’s more like a high-rolling 40-year old executive earning say $100,000 a year but with say a $750,000 mortgage. We think he’s got a bright future, his salary is increasing — but what a risky mortgage!

Greece is more like a 60-year old ex-Walmart checkout worker earning $10,000 with a $50,000 mortage still to pay off.

(I could be clever and match these salaries/mortgages with the national debts, but I’m too lazy… )

Sorry for the ramble, and appreciate as I say we may need to agree to disagree on this one.