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All the PIGS have this issue. Money pouring out from Germany/France/etc has bumped wages and prices way the hell up.
Of course, apparently the Eurozone doesn't understand downward nominal wage rigidity and is intent on suicidal deflation rather then just inflation in Germany and the like.
It means Greece becomes the setting for Fallout 4.
Their existant IRS is so massively corrupt, it's a goddamn joke.
Basically all that happens is no one will lend you money for years/decades. And when people do loan you money...it'll be like running a country on a visa card. But imagine your Greece and your yearly deficits are 10%...without loans you need to make up that money.
Defaulting is simply telling the people you borrowed money from that they won't be getting it back, so it's mainly done to avoid the rather suicidal act of a country selling off everything of value to their creditors. It also is mostly just done by countries that owe lots of money in a currency they don't control, since otherwise they could go "here's your money, hot off the printing presses!"
If a country defaults that more or less locks them out of borrowing money from the markets, at least at any reasonable interest rate, since they've shown that lending money to them is a good way to lose that money. This also tends to wreck their financial system completely, and local banks tend to be one of the main groups holding onto a bunch of that debt that just got wiped out. In turn this also usually really screws with the currency of the country, like if they go to a new/old one to avoid foreign lenders. For example, if Greece went off the Euro and back onto the Drachma, hyperinflation of the Drachma would not be that unexpected. The financial chaos would likely take out a bunch of businesses outside of the financial sector as well.
From there, you might have things revert more to a barter or underground markets, or even disintegration of social order in some places. Or you might have a very strong armed government running things trying to prevent that and take heavy control over the economy. Especially expect the government to clamp down on imports and exports and the flow of capital into and out of the country.
In the short term it is more or less guaranteed to be a mess, but the thing is it is quite possible to recover from that and do okay in the longer term. Argentina, for example, was able to grow their economy a decent amount in the years after their default, although it definitely wasn't easy going for them early on.
And like you said, it's really hard for it to turn into a 3rd world nation over night, which is why this austerity BS doesn't work- it's just really, really hard to lower their wages enough for them to get sweatshop jobs. Meanwhile, all the rich people who had extra money to spare for taxes have already left the country.
Um, public sector employees generate wealth. Proof by contradiction:
1) Assume, for the sake of argument, that public sector employees do not generate wealth.
2) If so, then in the limiting case where a country's entire workforce was public sector, that country would generate no wealth; the populace would borrow or starve.
3) The USSR had, for a period, 100% public sector employment without borrowing or starving.
4) Contradiction from 1-3
5) Therefore, 1 is false.
One of my least favorite of the commentaries on Greece is the running anti-public-sector thread. I suspect that there are monied interests out there very much interested in giving Greece a 'shock therapy' treatment similar to the former USSR, where state assets were dissolved and sold to private interests at fire sale prices; the consequence was massively impoverishing the people who had formerly held them collectively in order to birth a new generation of super-plutocrats. No thanks.
I understand it will basically cause like 40% unemployment though since the public sector would collapse.
Greece actually exports quite a bit of agricultural stuff (specifically), albeit with very heavy protection of European agricultural policy.
Has this happened to another country recently? Or is this the first time an industrialized nation has had this happen since the creation of the internet?
One thing is: is the country running a domestic primary surplus (i.e., can it meet all its domestic obligations from domestic tax sources?). If so then it is only defaulting on foreigners and given that the world economy is very, very large, the impact might be mitigated.
Greece wasn't running a primary surplus a while ago, but I have seen reports that its latest budget might be doing so.
I would imagine that having its capital city be "not on fire" would make both those things more productive...
I'm sure they'll come to some final solution about handling the euro.
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Just goes to show that the one with the most money has the most power.
Regardless of whether or not public sector employees generate wealth, that example is fatally flawed. The USSR's public sector included factories, farms etc. which (I assume) the Greek public sector does not.
Well, most of the money will be lent by France and Germany since they are the only large economies in the EMU that aren't fucked. Since they stand the most to lose on the gamble it's not more than fair that their opinions are worth more.
The chairmanship of the EU is nothing more than being responsible for organizing the meetings basically. It was never intended to be more than that either so that local newspaper probably have some sort of angle on the subject.
Crowds of protestors chanting, "Make the rich pay!" will do that ...
Very.
Haha. Good one!
:^:
But hey, I know how much they like to riot in Greece.
Put those 20% unemployed-but-able-to-work to work.
Your reserve bank is in Germany and the board is dominated by Germans. It's mission is also just to keep inflation down unlike the Fed which has dual missions of low inflation and full employment.
To be fair to them, they are doing exactly what it says on the label.
They refused to adopt the Euro unless they got that control. They are absolutely terrified shitless of inflation. Mostly because they had a bad experience with it back in the '30s.
Wheelbarrows full of billion-mark notes and whatnot.
What about also incorporating the rioting and make it a profession? Might get it down to 10%.
If you're referring to the famine in the Ukraine, that was politically engineered. And even if it weren't, if public sector employment truly didn't generate wealth, it would have been a lot more people starving than just the Ukrainians. Opportunities for snark aside, it takes very little to realize the falsity of the claim I was disputing.
Who pays them? The government that has absolutely negative money and still has to find new places to cut?
On the plus side a faint smell of cooked lamb is making neighbouring countrys increase imports hehe.