Greece Opts No New Proposal Today
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BBC, Al Jazeera and NPR are my favourite news outlets.
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@Dashrender said:
China is the world's second largest economy (again according to an article I just read). If it slumps, the whole world will feel it hugely!
It was second before this all happened. But only barely. The top many are all pretty close. It is only in the last two years, I think, that it passed Japan and Germany. But Japan and China are going down while Germany is going up. So that might have changed already.
But it is misleading. China is the world's second largest economy but is more than 1/3rd of the planet's population. The EU is not listed as a single economy but as separate ones with several: Germany, France, Italy, UK and Spain being very close to China in size. So as a block, the EU dwarfs all other economies including the US, so the Greek issue is an order of magnitude a bigger deal right now.
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@scottalanmiller said:
@Dashrender said:
China is the world's second largest economy (again according to an article I just read). If it slumps, the whole world will feel it hugely!
It was second before this all happened. But only barely. The top many are all pretty close. It is only in the last two years, I think, that it passed Japan and Germany. But Japan and China are going down while Germany is going up. So that might have changed already.
But it is misleading. China is the world's second largest economy but is more than 1/3rd of the planet's population. The EU is not listed as a single economy but as separate ones with several: Germany, France, Italy, UK and Spain being very close to China in size. So as a block, the EU dwarfs all other economies including the US, so the Greek issue is an order of magnitude a bigger deal right now.
Why is it a bigger deal? If the EU as a block dwarfs all other economies, and Greece's economy is the size of Miami's, are you saying that if Miami defaulted that the US would be shaking in it's boots economy wise? Man I wouldn't have thought so, though in reality I definitely don't understand macroeconomics, so maybe we would.
I recall when California was looking to default... I don't recall that being the harbinger of doom. Sure it didn't look good, but I don't recall the news making it seem like the US economy might collapse because of it - but as I write that, perhaps they don't want to say that so they don't panic everyone.
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@Dashrender said:
Why is it a bigger deal? If the EU as a block dwarfs all other economies, and Greece's economy is the size of Miami's, are you saying that if Miami defaulted that the US would be shaking in it's boots economy wise?
Yes, if Miami defaulted (and Puerto Rico is about to in reality) it would devastate the US. A default of Greece is a literally unprecedented move. No first world economy has ever failed to this level. That Greece is only a small piece of the world's biggest economy is misleading. This is a full economic collapse of part of the EU. And Greece isn't a city, it is a state. It would be roughly the equivalent economic impact as if Florida defaulted or maybe Florida and Alabama together (the EU has about half the member states of the US, so it is to the US much like two states going.) It's not like California (Germany), New York (UK) or Texas (France) failing, but it is still really big.
This isn't a "bad economic downturn", this is a default. It's epic. This will shake the entire global economy and do so instantly. The impact to Europe is going to be enormous, no matter what the result is. China is big, but it is not nearly as big and they are only in a slump. It's a very different thing.
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@Dashrender said:
I recall when California was looking to default... I don't recall that being the harbinger of doom. Sure it didn't look good, but I don't recall the news making it seem like the US economy might collapse because of it - but as I write that, perhaps they don't want to say that so they don't panic everyone.
In the US if a state defaults it is normally covered by the fed. In Europe, if a state defaults, it collapses. It's somewhat different. California was never looking to have their access to banks cut off or losing the right to have US currency. California had the ability to be seized by the US Federal government and taken over. In Greece, that would require an invasion.
It's important to remember that while the EU is in many ones one economy, it's not quite. Greece is still a single country going down in flames. This is not the same as an internal component of a larger economy going down. These are people who can't access money, can't do business, can't pay taxes, can't buy food, etc.
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Please help me to understand.
So you're saying that Greece's economy is really more akin to Florida and Arkansas, not just the city of Miami? So the comparison made in the above linked article is wrong?Also, I know at the 10,000 ft level that a city defaulting is bad for a state economy, but I'm not sure why that would be devastating to the US or world economy?
Love the discussion, please keep bringing the knowledge!
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OK I understand why it's worse for Greece than say California, but what's the fix? Just keep letting them bleed to death?
I'm sure if they collapse that some countries (probably the US) will start sending ships of food over there to help keep the people from starving.
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@Dashrender said:
So you're saying that Greece's economy is really more akin to Florida and Arkansas, not just the city of Miami? So the comparison made in the above linked article is wrong?
It is hard to compare because it is a full nation, not just a component of another one. And it is one entire "state" in a confederation of about ~28 nations. So compared to the US which is a smaller overall economy split into ~51 components. So each EU nation is a bit like two states in comparative size. Greece is a full country, but a small one by every measure (population, economy, land mass, world influence, people caring, etc.)
So in one aspect it is like two states. In another, it is not like a state at all because it is going to fall and there is not federal government responsible to pick up the pieces. The default of Greece pretty much guarantees the Grexit which could domino the Eurozone. No amount of Miami or Florida collapsing is going to leave the people who live there without a way to eat or do business. But in Greece, their real estate is going to hit zero, they are going to be begging for food on the streets and foreign powers are going to be able to literally buy the country for pennies on the dollar.
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@Dashrender said:
OK I understand why it's worse for Greece than say California, but what's the fix? Just keep letting them bleed to death?
There are two proposed fixes:
- Pump money into them and keep upping the stakes in the hopes that it works.
- Let them collapse and take the hit now before the stakes get raised.
The issue is corruption and lack of integrity. Greece is essentially stealing money and the population is flaunting their ability to do so to the rest of the world (including the US, we are one of their creditors.) They are using terms like "terrorist" to describe people who were kind enough to bail them out. It's a very bad situation.
France and Spain want the first option. They want to keep pumping in money (like China is doing) and figure out how to "spend their way out of the problem."
Bavaria's FM is demanding that no more money be wasted on a corrupt, ungrateful people and to let them fall so that other countries don't think that they can threaten and intimidate the bigger countries to bully them into handing over their lunch money, so to speak.
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@Dashrender said:
I'm sure if they collapse that some countries (probably the US) will start sending ships of food over there to help keep the people from starving.
If the ports stay open. Remember, there is no way to pay employees there, even now.
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Greece produces some food, so likely food will become available once a barter system happens. But they need to get there first. They will need to implement a valueless new currency. How they will even do that, no one knows. Likely they will keep using Euros and Dollars for a while, a long while, but will have no national bank behind them leaving them at the mercy of the EU and US.
They won't actually starve for long. But they will be homeless not just not, but for generations as foreigners snap up all the local real estate and businesses and run them with foreign money. When they finally "recover" they will find that they no longer own their own country.
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@scottalanmiller said:
@Dashrender said:
I'm sure if they collapse that some countries (probably the US) will start sending ships of food over there to help keep the people from starving.
If the ports stay open. Remember, there is no way to pay employees there, even now.
So we'd bring our own people to run the ports - there always seems to be an abundance of charity.
Will people still starve, die, etc.. sadly, yes - but damn.. spending has never (that I'm aware of) actually gotten anyone out of a jam before.
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@Dashrender said:
So we'd bring our own people to run the ports - there always seems to be an abundance of charity.
That's what they should fear the most. Us taking over the country by force. Once we have control of the ports, we own them!
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@Dashrender said:
Will people still starve, die, etc.. sadly, yes - but damn.. spending has never (that I'm aware of) actually gotten anyone out of a jam before.
It does, actually. Economies are complex beasts. China is spending like mad because it is a proven means of saving themselves.
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@Dashrender said:
Will people still starve, die, etc.. sadly, yes - but damn.. spending has never (that I'm aware of) actually gotten anyone out of a jam before.
US History would generally disagree with this, although not always.
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@scottalanmiller said:
@Dashrender said:
Will people still starve, die, etc.. sadly, yes - but damn.. spending has never (that I'm aware of) actually gotten anyone out of a jam before.
It does, actually. Economies are complex beasts. China is spending like mad because it is a proven means of saving themselves.
That can't last forever.
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Famous examples of "spending your way out of a depression":
- New York. A small state with limited economic resources decided to "spend through" the huge depression of the 1880s. What did it do? It built the Erie Canal, the largest engineering project until its time. The result? New York became the world's economic center and NY not only made NY rich but put the US on track to become the world's biggest economy as a result.
- US. After the Great Depression in the 1930s, FDR's New Deal was a "spend through" strategy to put people to work and keep the economy moving when private investing had failed. The result? A war. But after that an unbelievable economic boom with the US having over 50% of the world economy.
- Spain. Happening today. Spain was where Greece was just three years ago. What did Spain do? They paid their bills, listened to their creditors and spent through investing in themselves. The result is that Spain pulled out of the recession faster than most anyone (other than Ireland who did so using austerity measures) and is well on the road to recovery.
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@scottalanmiller said:
- US. After the Great Depression in the 1930s, FDR's New Deal was a "spend through" strategy to put people to work and keep the economy moving when private investing had failed. The result? A war. But after that an unbelievable economic boom with the US having over 50% of the world economy.
I'd give the GI Bill it's fair share of credit too. Either way it certainly produced results.
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This mostly sums up the Greek Situation:
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China's morning of trading sees them down another 3.6% so far. All of Asia is falling from the collapse in China.
