[dzp111]

I'm not too savvy in the world of economics which is why I'm scratching my head trying to figure out just how Greece's economic woes have such an impact on the rest of us, on a seemingly global level.

Can anyone explain this to me as if I was a 13-year old? (I'm 47 btw)

: )

[Phileas]

Banks are global and investors are nervous.

For us up here in Canada, and also for the US, this isn't all that bad news, as money is flowing our way looking for a shelter from the storm.

The Europeans can't let Greece go into default but there is much anger that Greece has basically lied to get admitted to the Euro-zone. Now, they are equally guilty for not checking properly of course, but that's another story.

[angelmb]

Spain is the real test case for the Euro.

[turtle777]

Originally Posted by dzp111 

I'm not too savvy in the world of economics which is why I'm scratching my head trying to figure out just how Greece's economic woes have such an impact on the rest of us, on a seemingly global level.

Can anyone explain this to me as if I was a 13-year old? (I'm 47 btw)

This is what the US will face in 2-5 years.

-t

[dzp111]

Originally Posted by Phileas 

Banks are global and investors are nervous.

But what are the bankers investing in this country? Not to demean Greece. But are the exports/imports within Europe so valuable within Greece where its' debt can have such an impact? Or is it all about the Euro? If so, would a good example be that if Canada dealt with US dollars, would we be as screwed (economically) as them?

This is what the US will face in 2-5 years.

Turtle, Is that quote pessimistic? Reality? Or are you joking..

[aberdeenwriter]

A financial tremor in one corner of the globe can leave cracks in an investment portfolio. That’s a painful lesson for many U.S. investors, who are seeing the crisis in Greece cause big swings in the market and losses this week.

Investors worry that a $144 billion aid package for Greece won’t be adequate to keep debt problems in Europe from spreading. And the cuts the Greek government is making, in part to get the bailout, sparked rioting that left three people dead Wednesday in a torched Athens bank.

Read more: Why investors should care about Greece's financial crisis - KansasCity.com

The Greek crisis raises questions about the financial stability and growth prospects of Europe, a major trading partner. It suggests some European governments are at the limit of their ability to borrow, and to stimulate their economies in response to a further downturn. It raises questions about the stability of the euro, which is an important facilitator of intra-European trade.

So the situation is bad for the growth of a major partner, with a remote possibility of catastrophe.

The story also prefigures policy issues here in the US. All governments face constraints on their ability to borrow, and as they press against those constraints the costs and difficulty of borrowing eventually become prohibitive. The US is far stronger and more flexible than Greece, but those constraints still apply to us. We will at some point face debates of deficits similar to those underway in Greece and Germany.

Why should Americans care about Greece? | Analysis & Opinion |

Simply, the EU cannot afford a Greek default. Digaloma said if Greece were to default, investors would likely follow a similar pattern that came out of the financial crisis when Bear Stearns collapsed in March 2008. After Greece would likely follow Spain, Portugal, Italy and Ireland – not necessarily in that order – all Eurozone countries with heavy deficit projections.

Why We Care About Greece - FOXBusiness.com

[dzp111]

So much for explaining to me like I was a 13-year old..

: )

[dzp111]

Okay, say that me Daniel (Canada) deals with Turtle (Europe). A part of Europe is Greece (aberdeenwriter).

I have my own economic system, Turtle has his, and aberdeenwriter has his but he's part of a bigger picture..

The US have their own problems and we could leave it at that.

Oh, I see now..

Sorta.

Did the Euro create one big economic system? Where the rest of us became dependent on?

[mduell]

The rest of the world has loaned them €400B and they'd like to see that money back eventually. If they don't get it back, the rest of the PIIGS will see their ability to raise funds destroyed as everyone becomes very nervous about lending to the Eurozone.

[downinflames68]

Basically... the economy is shit because the USA buys tons of stuff, but basically exports nothing. Because of this, we are taking more than we are making. Our entire nation is hopelessly in debt, which will lead to huge issues. The gigantic recession last year was one thing, and now everyone is talking about the economy rebounding, but it won't, because we as a nation have no money.

[Doofy]

Originally Posted by dzp111 

Turtle, Is that quote pessimistic? Reality? Or are you joking..

No, he's being optimistic. Amerika's crash will be biblical, making the current Greek thing look like peanuts.
I'm not joking.

[mduell]

Since the US controls its own currency it can inflate its way out of debt. Greece would be in a much better position if they could start printing drachmas.

[ctt1wbw]

Originally Posted by downinflames68 

Basically... the economy is shit because the USA buys tons of stuff, but basically exports nothing. Because of this, we are taking more than we are making. Our entire nation is hopelessly in debt, which will lead to huge issues. The gigantic recession last year was one thing, and now everyone is talking about the economy rebounding, but it won't, because we as a nation have no money.

You're talking about the trade deficit, dumb ass.

[mattyb]

After Greece would likely follow Spain, Portugal, Italy and Ireland – not necessarily in that order – all Eurozone countries with heavy deficit projections.

Also known as the PIIGS. And no, its not a joke.

While 'Europe' isn't one country (yet) an an exporter you could probably look at it that way. A bit like one of the smaller US states going through problems, Greece will be helped by the other countries (with money), and hence there will be less money for buying things or for giving people pay rises or even for employing people. Which (to simplify) means less people will buy iPaddys and iMaccys. Voila your impact.

I watched a pretty good documentary the other night called Addicted to Money. The first 2 episodes are good, the 3rd goes off on a tangent. But there are some interesting figures about global trade and how certain Vikings impact West ham supporters and Chinese garment makers.

[turtle777]

Originally Posted by mduell 

Since the US controls its own currency it can inflate its way out of debt. Greece would be in a much better position if they could start printing drachmas.

Printing money = stealing from the middle class.

It's the most dishonest and disgusting way of default.
The US is going to be epic at robing the people of their few saved dollars.

Doofy is right, it's going to be epic.

-t

[turtle777]

Originally Posted by dzp111 

Can anyone explain this to me as if I was a 13-year old? (I'm 47 btw)

Read this



Amazon.com: How an Economy Grows and Why It Crashes (9780470526705): Peter D. Schiff, Andrew J. Schiff: Books

It's very entertaining, and explains economics so easy that a 13 year old CAN indeed understand it.

-t

[Phileas]

I've heard that Greece is considering to default, leave the Euro zone and revert to the Drachma. Any truth in that?

[Simon]

Originally Posted by Phileas 

I've heard that Greece is considering to default, leave the Euro zone and revert to the Drachma. Any truth in that?

I don't really think they want that. Imagine what kind of ratings they'd get on their own and hence the kind of interest they'd be forced to pay on their loans.

I'm surprised the Eurozone countries haven't talked more openly about throwing them out. In principle they should. My suspicion is that Germany and France basically both don't want to broach the topic because they too violated Maastricht criteria in the past and were all too glad nobody really gave a damn about it. Plus German industry is having a blast with the weakened Euro.

Paul Krugman on the other hand has suggested that in the end exactly that will happen. Greece will leave the EMU and re-install their Drachma. I'm anxious to see if he's right. Good luck with that, Greece.

[turtle777]

Originally Posted by Phileas 

I've heard that Greece is considering to default, leave the Euro zone and revert to the Drachma. Any truth in that?

The only question is WHEN.

I doubt Greece will do it now. They'll first take the money from the EU, but will default in 2011 or 2012, once they realize that w/o a default and own currency, they can not dig themselves out of this shithole.

That's my prediction.

-t

[turtle777]

Originally Posted by Simon 

Paul Krugman on the other hand has suggested that in the end exactly that will happen. Greece will leave the EMU and re-install their Drachma. I'm anxious to see if he's right. Good luck with that, Greece.

That's about the only thing I agree with Krugmann recently. Let's hope he's right at least this time.

-t

[Phileas]

Originally Posted by turtle777 

The only question is WHEN.

I doubt Greece will do it now. They'll first take the money from the EU, but will default in 2011 or 2012, once they realize that w/o a default and own currency, they can not dig themselves out of this shithole.

That's my prediction.

-t

That's bound to make the Germans happy, for sure.

[turtle777]

Originally Posted by Phileas 

That's bound to make the Germans happy, for sure.

Personally, I don't get why the German people are not already up in arms demanding that their politicians stick to a "no" regarding the bailout.

Germany has been pay-rolling Europe for many decades. It will stop sooner or later.

What the EU doesn't realize: pushing Germany to pay up will only push Germany closer to leaving the Euro.

-t

[PB2K]

The EU was once a great union with strong economies joined to increase possibilities for trade. Then suddenly these eager politicians ( who couldn't even run a candyshop) invite all small economies to it, even Turkey is an option (all they need to do is to admit the Armenian Genocide !) I think Greece should get kicked out of the EMU, if only just because of their lies.

[Phileas]

Originally Posted by turtle777 

What the EU doesn't realize: pushing Germany to pay up will only push Germany closer to leaving the Euro.

-t

I am not sure the Germans will do that - European unity is the German's insurance against the rise of the ghost of the German past, however unnecessary that might be these days.

[turtle777]

Originally Posted by Phileas 

The Germans won't do that - European unity is the German's insurance against the rise of the ghost of the German past, however unnecessary that might be these days.

I'm not so sure.

65 years after the end of WWII, the Germans feel less and less guilty about the past.
Plus, economic realities can shift past thinking and behavior.

Once the wasted moneys start causing German's economy to hurt bad enough, the Germans will pull out.

-t

[Simon]

I don't see Germany pulling out of the EMU either. They are actually its main driver. With their heavily export-oriented industry they will be the last to complain about a somewhat weaker Euro.

[turtle777]

Originally Posted by Simon 

I don't see Germany pulling out of the EMU either. They are actually its main driver. With their heavily export-oriented industry they will be the last to complain about a somewhat weaker Euro.

That's today.

Just wait till the Germans realize that pulling out of the Euro will wipe out their debt w/o inflation or default, just by virtue of a stronger currency.

I wouldn't bet on the Germans staying put.

-t

[PB2K]

the EU gathered 600.000.000.000€ to aid it's economy. Meanwhile in Greece people are protesting against economic reforms. Whats the consequence of letting Greece go?

[turtle777]

Originally Posted by PB2K 

Whats the consequence of letting Greece go?

Party in Germany. Why ?

-t

[dcmacdaddy]

Originally Posted by PB2K 

The EU was once a great union with strong economies joined to increase possibilities for trade. Then suddenly these eager politicians ( who couldn't even run a candyshop) invite all small economies to it, even Turkey is an option (all they need to do is to admit the Armenian Genocide !) I think Greece should get kicked out of the EMU, if only just because of their lies.

I see parallels to the American Civil War in your statement. The leaders of the US at that time were focused on "maintaining the Union at all cost" and I think the same thing is going on now in the EU. The European leaders are SO focused on maintaining the EU that they can't see it is likely better for the EU to boot out Greece than to rescue it. It's not like this problem is due to the EU; It's due to Greece's leader fudging GDP and debt number on admission to the EMU as well as Greece's leaders profligate spending ways in the early 2000s.

[turtle777]

I bet you guys a penny that in a few months / years, we'll have the same problem with California:

They are broke, can't pay their interest, can't refinance their bonds, but can't print money to inflate their way out of it.

What's it gonna be: Federal bailout or letting California default and restructure its debt ?

I bet Helicopter Ben is gonna print money like crazy to bail out California. New York and Illinois are next. The USD is going down the toilet.

-t

[BadKosh]

So is Greece in trouble for it's internal socialistic practices? I hear they had to close a lot of state funded entities. Part of an austerity program. LOL

[BadKosh]

Originally Posted by turtle777 

?

I bet Helicopter Ben is gonna print money like crazy to bail out California. New York and Illinois are next. The USD is going down the toilet.

-t

All 3 states mentioned are run by liberals who are trying to ruin the USA now. The pattern is obvious.

[finboy]

Originally Posted by dzp111 

Turtle, Is that quote pessimistic? Reality? Or are you joking..

Greece doesn't have the natural resources that we do, but the analogy is apt. If people lose confidence in our ability to repay our sovereign debt, then we'll have to cut pensions and government spending.

Heck, if California goes bankrupt, it won't take 2-5 years. Let's say another big hurricane gins up this year, or gas prices go to $5 for another reason. That may be all it will take.

People just lack imagination. Same with 9/11 -- people never imagined that it could happen.

I'd like to think that we have a better producer/consumer ratio than Greece, but I don't know that for sure. Producers don't have time to riot in the streets, or protest wars, or whatever. So maybe that will save us.

[Simon]

Originally Posted by dcmacdaddy 

I see parallels to the American Civil War in your statement. The leaders of the US at that time were focused on "maintaining the Union at all cost" and I think the same thing is going on now in the EU. The European leaders are SO focused on maintaining the EU that they can't see it is likely better for the EU to boot out Greece than to rescue it

Nobody is considering to kick Greece out of the EU. It's Greece staying in the EMU (Euro zone) that's being challenged. There are several EU countries outside of the Euro zone. In fact, of 27 EU countries only 16 are members of the EMU. Greece could be booted out of the EMU and re-install their Drachma without changing their EU membership status at all.

This is not about keeping the EU together (which is a no-brainer really), it's about confidence in the Euro and the EMU.

[turtle777]

Greek (and other PIIGS) bailout will cost US at least $48.6 billion.

The IMF's piece of this thing is allegedly €220 billion, or about $286 billion as I type this.

Since the US is "required" to contribute 17% of the IMF's funding, this means you, the taxpayer, have just been hit for $48.6 billion to cover the debts of nations who spend more than they make - and no, they're not the United States (or the states IN The United States.)

But You Love Bailing Out Greece, Right? - The Market Ticker ®

You gotta love how politicians are saving the world by continuously handing out free money to the irresponsible.

-t

[dcmacdaddy]

Originally Posted by Simon 

Nobody is considering to kick Greece out of the EU. It's Greece staying in the EMU (Euro zone) that's being challenged. There are several EU countries outside of the Euro zone. In fact, of 27 EU countries only 16 are members of the EMU. Greece could be booted out of the EMU and re-install their Drachma without changing their EU membership status at all.

This is not about keeping the EU together (which is a no-brainer really), it's about confidence in the Euro and the EMU.

You are correct. I was confusing political union with economic union. (Or really, assuming the two are inextricably linked.)

I still think Greece should be booted out of the EMU.

[Simon]

I agree with that.

Ironically the German government doesn't want to see that happen. Apparently the Germans believe that kicking Greece out of the EMU will lead to a default and in turn to lots of German investors losing a lot of money in Greece. So instead they propose to bail out Greece.

To me that sounds all too familiar: politicians prefer to have citizens pay for huge bailouts through inflation before they let a bank (no matter how foolish their investment) lose money. My question is then, how is free market capitalism supposed to succeed if the market isn't allowed to correct for bad investments or bad business?

[turtle777]

Originally Posted by Simon 

My question is then, how is free market capitalism supposed to succeed if the market isn't allowed to correct for bad investments or bad business?

That's the big irony, in Europe as well as the US.

Free market capitalism is blamed fro problems that were created when politicians intervened and overrode free market principles.

It just shows what a bunch of dishonest liars politicians are.

-t

[Doofy]

Originally Posted by Simon 

My question is then, how is free market capitalism supposed to succeed if the market isn't allowed to correct for bad investments or bad business?

Yer politicians don't want free market economics to succeed. To do so would be admitting that they weren't needed and thus they'd have to go get a job flipping burgers (if found capable of doing so, of course... ...which I doubt).

[el chupacabra]

Originally Posted by dzp111 

So much for explaining to me like I was a 13-year old..

: )

You see in the world of us small peasants, when we think of the economy we think of me paying 5 coins for 2 oranges for me to eat. I will work and get paid and save up my money and buy stuff I want.... I may pay 1000 coins for a new computer; and in turn the person who got that money from me will save it and buy stuff for themselves...each person/company having their niche. And we then trust a bunch of government bureaucrats to add up this cash flow and call it the GDP/ Economy/or whatever....We are used to thinking of the economy as people trading assets that they can see and hold and use.

Unfortunately this simple peasant view isnt how the world works anymore, especially with increases in world trade. The banking products and services eclipse all the other services and products we think of. Most of the banks products are worthless garbage (loans, bonds, derivatives, and derivatives based on other derivatives). So when an international niche (banking system) has a problem over seas... everyone feels the effect.

its not that Greece sells us anything that we need... its that they got involved in all this paperwork banking gambling crap that involves really large numbers...which may or may not be made up numbers. It most likely started with their real estate, thats something they do have.

[turtle777]

Well, Gold just made an all-time high today, despite the USD being "strong" (LOL).

Gold right now: $ 1231.

Silver exploded to $ 19.40 today, the highest in more than 25 years.

I'd say the EU bailout worked

-t

[Doofy]

Originally Posted by turtle777 

Well, Gold just made an all-time high today, despite the USD being "strong" (LOL).

Gold right now: $ 1231.

Silver exploded to $ 19.40 today, the highest in more than 25 years.

I'd say the EU bailout worked

Brown resigned. Markets are gonna be buoyant.

[Simon]

Not once they hear about the moron who just became your new PM.

[Doofy]

Originally Posted by Simon 

Not once they hear about the moron who just became your new PM.

I know, I know. Hopefully will be large fail and another election with proper people called later this year.

[Simon]

I can only wish you guys better luck next time around. I'll keep my fingers crossed.

[mattyb]

Originally Posted by Doofy 

I know, I know. Hopefully will be large fail and another election with proper people called later this year.

And the list for this wonderful selection of 'proper people' is where exactly? And done by whom?

[Doofy]

Originally Posted by mattyb 

And the list for this wonderful selection of 'proper people' is where exactly?

There you go. That's the list.

[mattyb]

23 years in Parliament, yeah he knows about real life.

Get someone like Branson, or Dyson in there. Or even Stelios.

[Doofy]

Originally Posted by mattyb 

23 years in Parliament, yeah he knows about real life.

Get someone like Branson, or Dyson in there. Or even Stelios.

You must have missed the "former SAS" and "former senior Tate and Lyle executive" bits.

Stelios would be serving you kebabs right now if it wasn't for daddy's money. Don't get me wrong, he's a good lad, but he ain't the man for the job.

Branson hangs out with people who don't bother paying their plumbing bills.

Dyson is awesome, but has no political experience. Running a company is one thing... ...negotiating your way into the vipers' nest every morning without getting bitten is a whole different ball game.