America's role in this Greek tragedy

[xchrom]

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jun/25/greece-debt-default-crisis

The European authorities are playing a dangerous game of "chicken" with Greece right now. It is overdue for US members of Congress to exercise some oversight as to what our government's role is in this process, and how we might be preparing for a Greek debt default. Depending on how it happens, this default could have serious repercussions for the international financial system, the US economy and, indeed, the world economy.

The US government has a direct and significant role in the Greek crisis because the US treasury department has the predominant voice in the International Monetary Fund (IMF). The IMF, together with the European Commission and the European Central Bank (ECB) – the three are commonly referred to as "the Troika" – are negotiating a new austerity package with the Greek government, in return for a new bailout deal. This package promises more suffering for the Greek people – that is acknowledged by all sides. But the Troika thinks it can ram the programme through the Greek parliament on Tuesday, with the threat that the IMF will not disburse the next $17bn instalment of Greece's current loan package – thus putting Greece in a situation of sudden default.

The Troika won the first round of its battle against the Greek citizenry, with a parliamentary vote of confidence last Tuesday; and if the ruling party's slim majority holds up this coming Tuesday, they will have a slim majority again in favour of the austerity package. But it is a high stakes gamble, and this week's vote won't end the instability.

It has been largely forgotten, but there was a Greek debt crisis just over a year ago, in May 2010, that rattled world financial markets. It was exacerbated by the extremism of the European Central Bank, which was also playing a game of brinksmanship back then. On 6 May 2010, the ECB refused to commit to buying European government bonds in the midst of the crisis. The idea was that this would be a form of "monetising" the debt of the weaker eurozone countries, just as the US federal reserve has monetised some $2tn of US government debt (through quantitative easing) in the last few years. This was anathema to the ECB, which is considerably to the right of the Fed. But after a harsh negative reaction in world markets, including a plunging US stock market, the ECB reversed its position four days later and began buying European government and private debt.

[bemildred]

1. All jets on full, Sir.

[Demeter]

2. The only recourse is to shut down the IMF

and I may live to see it happen.

[xchrom]

3. ...

:thumbsup:

[BlueMTexpat]

4. Let's also not forget the big role that our own Goldman Sachs played in the

Greek tragedy. http://www.spiegel.de/international/europe/0,1518,676634,00.html

There's certainly enough blame to go around.

[dkf]

6. That just means they avoided austerity for years and should have done it earlier.

What Goldman did is screw investors who didn't know the true financial state of Greece. If the Greek people knew their debt was getting out of hand would they have accepted cuts earlier? They would have been out in the streets earlier I imagine.

[The Big Vetolski]

7. They did know. They've been demonstrating for years. Just...

because you didn't see it on CNN, MSNBC, Fox, or in your case, most likely CNBC, does not mean it didn't happen.

[dkf]

5. Forget bailing out the Greeks. Instead put the funds into shoring up whoever owns the debt.

Greece has to sink or swim on it's own. I've read that it they get off the Euro, they would need to devalue their currency by 50% which would double the price of imported goods. And we think our energy prices are high. This is how Argentina got their economy back in order by shrinking imports and increasing exports.

That will mean pain for the Greeks, but it's the only way to get them back into something sustainable. They aren't interested in austerity...they just dont realize it will be worse on their own.

[The Big Vetolski]

8. Interesting you don't mention Brazil. They created a new currency..

and inflated a lot of their debt to Western banks away in doing so, screwing Goldman Sachs and Wall Street in the process. Methinks you are a neoliberal Wall Street apologist, saying austerity is the only way out for the Greek people. They should simply refuse to pay. If that brings down our financial system, well, our financial system hasn't done jack squat for me lately, so that might actually be a good thing in the long run.

[bemildred]

9. Yep, that's the way to deal with debt.

The old sell high, pay back low trick. You can look for that here soon, too.

[dkf]

11. That has the side impact of increasing the cost of imports.

Which is what I was talking about. If they inflate the currency they lower it's value, then the cost of imports will go up. So their price of oil which they import will go up. They won't be able to afford the things they buy now.

[The Big Vetolski]

12. And provide more incentive for domestic industry. This country was

founded on high tariffs to protect nascent American industry from British competition. As for as the price of oil, it will go up anyway as we've hit peak oil production worldwide. Might as well do something to spur investment in alternative energy before it's too late, if it isn't already.

Full disclosure--I drive an old Saturn that gets 35mpg city and highway. So the rising gas prices haven't hit me quite as hard as it has hit the SUV-drivers. Their squeals of pain are music to my ears. Especially the ones with Teabagger bumper stickers.

[bemildred]

15. Which encourages local business and jobs, and keeps the revenue local too. nt

[dkf]

10. Hello I was talking about creating their own currency.

How else do they move Their own currency?

[girl gone mad]

13. Lending money you know can’t be paid back should result in you losing your investment.

Unless you are arguing for a system outside of free market capitalism.

[Prometheus Bound]

14. Let's face it. Most everyone knows Greece will default at some point.

This is just procrastination.