General Discussion
In reply to the discussion: A lot of people here seem to have no clue about what's happening in Greece..... [View all]MFrohike
(1,980 posts)You're missing a few things and you're wrong about others.
1. No mention of the housing bubble. That's kind of important because it's the entire reason the first bailout was done..
2. While you're right about facing harder terms, I'd have called the referendum a sham. I'd also have mentioned that the Greeks brought a proposal at the end of June that crossed their red lines and the EC told them to go further.
3. Yeah, you're totally confused. Greece's debt is almost entirely held by sovereign entities. The Greek banks are failing because of a bank run that started in November, not loans to the state. The ECB has stated they'll cut off ELA if there's no deal by Sunday. That alone is an indication that we're talking about banks being unable to keep up a sufficient amount of money for withdrawals, not a loan problem
You're also confused on the issue of the sovereign debt and the IMF. Greece is already in default to the IMF. Lagarde made the report on July 1 to her board. The default date for the ECB is July 20. You are mostly correct about a reversion to the drachma. Your comparison of a small nation that gets a lot of tourism is really odd because Greece IS a small nation that gets almost 20% of its GDP from tourism. That's not really a good example of why continuing to use the euro would be bad.
Your inflation argument is not only wrong, but bizarre. You do know that the stated policy of Mario Draghi is to increase inflation, right? Europe's in a deflationary cycle because they're depressing demand through moronic fiscal and monetary policies. Inflation is a measure of supply-side failures, not the old goldbug bullshit about money printing. Well, I should say hyperinflation, but that's really what you meant anyway.
4. Greece has already had maturity extensions and interest rate cuts that have dropped the real value of its debt to about 70% of GDP. While more would help, that won't reverse the deflationary cycle by itself. The only thing that will do that is spending. What needs to happen in Europe is a rejection of the Maastricht Treaty, a central fiscal authority to route money to depressed areas (think of our automatic stabilizers), and Germany's trade surplus with Europe needs to disappear, preferably through German investment in productive businesses in its in fellow European trade partners. Do that and Europe will probably heal.