Article

2015-06-25 Europe

Greek government comes under fire from its own lawmakers

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Posted by Fred 2015-06-25 00:00|| || Front Page|| [11128 views ] Top

#1 This "initial" deal is over EU8 Bil just to keep the lights on. It does not address the 100% debt to GDP issue at all.

The self important Greeks are going to find themselves in Argentine shoes very soon.

Posted by newc 2015-06-25 00:55|| 2015-06-25 00:55|| Front Page Top

#2 @newc.

The mantra about 100% debt over GDP is idiotic. Youa re compering aples and ornages, a flow and a stoc;

Did you ever buy a house? Weel, you indebted yourself for several hundres persnt of your revenue (your GDP). But repayment was to be donde in fifteen or twenty years so it din't overburden you.

When you borrow money, there tow factors to consider:

1) How high are the repayments relatively to yor revenue: if yopu owe a mere 10% of your yearly revue but must repay in one month then you are in big trouble.

2) Is how much must you payis the interestr rate? First because interest is a loss of money. In accounting when you buy something it is tanslated as X doolars have been transformed into X dolars of house/car/machine since if you resell them you wil get your money back (loss value due ti used status is accounted but differently, here we supoose the good does not lose value). But interest is a net loss. The second point is that as long as you pay inthe interest and a bit of the capital you can borrow again to repay your fits loan and your debt will dminish. Exmalpe: I borrow 1000 to 10% interest rate. I pay back 100 (interest) + 200 (capitale). Now I borrow 800 in order to refuind the firtst loan. I end with only 800 in debt. But if you can't pay the interest you cannot do that since your debt will increase instedes of decrasing.

Now I am not saying Greece is goijng well or that is good to have masive debt, just that the 100ù of GDP argument is idiotic.

Posted by JFM 2015-06-25 05:57|| 2015-06-25 05:57|| Front Page Top

#3 Buying a house and mortgage payments is not a good comparison since people typically buy one house and in the case of Greece they are buying a house every year without getting new revenue to pay.

a better analogy is trying to negotiate repayment from a drug addict; would you give them more money for rehab and food when they are siting in front of you and admitting that they will continue to buy drugs?

Posted by Airandee 2015-06-25 06:32|| 2015-06-25 06:32|| Front Page Top

#4 @newc

Now the rant about the 100% of GDP criterium being idiotic is not against you but against "experts" and journalists who use it.

Posted by JFM 2015-06-25 06:55|| 2015-06-25 06:55|| Front Page Top

#5 When the fair market interest payments on debt exceed the willingness to pay them the debt will be defaulted. When the interest exceeds the available surplus after survival needs are met, default cannot possibly be avoided. 100% debt/GDP ratio is not (necessarily) that point, but the constant increase in that ratio will make default inevitable. All the lenders are trying to do is pass that hot potato to someone else.

Posted by Glenmore 2015-06-25 07:59|| 2015-06-25 07:59|| Front Page Top

#6 Glenmore. Your points are valid but my post was about the "uuuuuuh, debt si 100% of GDP! We are all going to die!" rhetoric: millions of families go into debt for 400% of their "GDP" when they buy a house and they don't default. That is because they have 15 years, 15 GDPs, for refunding their debt.

Posted by JFM 2015-06-25 10:49|| 2015-06-25 10:49|| Front Page Top

#7 Airandee.

I was trying to explain Doublke-entry book keeping. If you buy a house for 1 million dollars you ahve one million less in cash but one million more in house. No loss. (You will hghave to account for a loss if house's value decreases or for the funds you spend in mantaining it. You will get a profit of 500,000 if you resell it for 1,5 millions). If you borrow one million dollars you get one million in cash but one million in debt. No profit, no loss. As you refund it you will have less and less cash but also less and less debt. Again no loss.

If you borrow one million, buy a house and refund there is no loss. Obviously the money will have to come from somewhere, possibly from your income so at the end you will have one million less in cash than you should but you will have one million more in the form of a house.

If you borrow one million but have to refund 1,1 million you incur a loss of 100,000$.

Posted by JFM 2015-06-25 11:34|| 2015-06-25 11:34|| Front Page Top

#8 If you borrow several trillion and have no way to repay it, who incurs the loss?

Posted by Anguper Hupomosing9418 2015-06-25 13:05|| 2015-06-25 13:05|| Front Page Top

#9 You are right. The use of raw numbers does not represent the actual situation.

The truth for the Greek situation is with their pension system and the fact that many avoid taxes, it makes their situation un-tenable for lenders.

Spain tightened their belts, Greece should as well.

Posted by newc 2015-06-25 13:24|| 2015-06-25 13:24|| Front Page Top

#10 Also, all the GDP is not there to pay the debt. It is also there for purpose of running the State.

Posted by newc 2015-06-25 13:26|| 2015-06-25 13:26|| Front Page Top

#11 GDP is made to pay for debt just like your income is amde to pat for debt. Listen, problem in Grece is not perecentage of debt to GDP I have explained what it is idiotic and besides Japan has a much higher ratio. Greece's problem is they are retirring far sooner than anyoune else and getting pensions higher than anyone else, that it doesn't even try to get taxes pauid and that, for instance, there are no controls in Athen's suburan trains so no Greek apys. So it jas huge deficy=ts and their debt is explong. THe Greeks rely on the UE to make for the apyments and UE is saying NO.

Nut the concept of debt to GDP ratio is still deeply idiotic. One ids aflow the other a stock. Have Earth slowing its rotation around teh Sun, years become two tiles longer so GDP becaomes two times higher and voila! debt to GDP falls to 50%; See how easy?

Posted by JFM 2015-06-25 17:34|| 2015-06-25 17:34|| Front Page Top

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