If Greece defaults, there will be a run on the Greek banks

Graham_Devon

Thrugelmir wrote: »

I was as told as a child there's no such word as can't.

I actually got a certificate as a kid for never using the word!

purch

No.

That was a different word :eek:

HAMISH_MCTAVISH

Thrugelmir wrote: »

The German people have accepted 15 years of no increase in living standards as being the price. Hence their hard line against those that borrowed on the back of cheap credit and frittered the money away.

Which is of course, patently absurd, given it was Germany which fueled those bubbles to begin with.

As the article below notes, Germany is the biggest problem economy in Europe.

Germany is really the No 1 problem economy in Europe.

German workers saw their wages (after inflation) actually fall by 4% in the 2000s, so they were hardly in a position to consume a growing proportion of those products turned out by German businesses.

Which means that the country exported more to the go-go economies of the south of Europe, and lent Spain, Greece and the rest the cash to buy their goods.

Put in simple terms, it's a bit like buying a kitchen and the showroom arranging a loan so you can make the purchase. And German banks were only too happy to shovel credit to the countries that couldn't really afford to buy all this stuff.

In effect, Germany blew the bubbles that popped up in the rest of Europe.

http://www.guardian.co.uk/commentisfree/2011/aug/08/number-one-problem-economy-europe

Blaming the Greeks for borrowing too much to try and drag their poor country into a modern one is like blaming gravity for an airplane crash.

Whereas the Germans should have known better, but were blinded by short term greed.

ILW

HAMISH_MCTAVISH wrote: »

Which is of course, patently absurd, given it was Germany which fueled those bubbles to begin with.

As the article below notes, Germany is the biggest problem economy in Europe.

http://www.guardian.co.uk/commentisfree/2011/aug/08/number-one-problem-economy-europe

Blaming the Greeks for borrowing too much to try and drag their poor country into a modern one is like blaming gravity for an airplane crash.

Whereas the Germans should have known better, but were blinded by short term greed.

Blimey
It appears you have turned into one of those that think that credit card balances should all be written off because they were mis sold and people are incapable of making and living with the consequences of their own actions.

Are you saying the average Greek is totally unable to think for themself?

HAMISH_MCTAVISH

ILW wrote: »

Blimey
It appears you have turned into one of those that think that credit card balances should all be written off because they were mis sold and people are incapable of making and living with the consequences of their own actions.

Don't be daft.

Borrowers have a responsibility to not overborrow, and lenders have a duty to not overlend.

Now here in the UK, we can look at the vanishingly small default rates for UK lending and see that that was on the whole the case here, even at the peak of the boom.

Our lending standards were pretty much spot on, as an average.

Loose enough to create growth, and tight enough to prevent mass defaults.

Are you saying the average Greek is totally unable to think for themself?

Not at all.

What I'm saying is that Germany got it badly wrong, as did Greece.

And that Germany is at least as responsible for the mess in Greece today as the Greeks are.

As the article notes, Germany cannot support it's own output with domestic consumption.

It relies on it's imbalance of trade with other countries in order to support it's own economy.

And if other countries cannot afford to buy German goods, then Germany is up the creek without a paddle. So it's had to lend them the money to do so, despite knowing they may not be able to pay it back. Much the same as China has done in recent times. And both countries threw a fair bit of currency manipulation into the mix as well.

I'll leave it to you to decide whether such a business model is sustainable....

ILW

Is it only Germany that Greece owes money to?

HAMISH_MCTAVISH

ILW wrote: »

Is it only Germany that Greece owes money to?

I'll let you read the relevant extract from the article again.....

Which means that the country exported more to the go-go economies of the south of Europe, and lent Spain, Greece and the rest the cash to buy their goods.

Put in simple terms, it's a bit like buying a kitchen and the showroom arranging a loan so you can make the purchase.

And German banks were only too happy to shovel credit to the countries that couldn't really afford to buy all this stuff.

In effect, Germany blew the bubbles that popped up in the rest of Europe.

ILW

HAMISH_MCTAVISH wrote: »

I'll let you read the relevant extract from the article again.....

Which means that the country exported more to the go-go economies of the south of Europe, and lent Spain, Greece and the rest the cash to buy their goods.

Put in simple terms, it's a bit like buying a kitchen and the showroom arranging a loan so you can make the purchase.

And German banks were only too happy to shovel credit to the countries that couldn't really afford to buy all this stuff.

In effect, Germany blew the bubbles that popped up in the rest of Europe.

The article is rather emotive, how do you "shovel" credit to a country? you can offer it and they decide whether to take it. Why is that so difficult a concept to understand?

HAMISH_MCTAVISH

Interesting....

Turns out that as of end 2011, €25 billion in Greek debt was held by Germany's commercial banks.

Greece's biggest creditor in Germany is the government-owned KfW development bank, and Germany's federal government acted as the loans' guarantor.

Of course, that does not include bailout funds.

pqrdef

The odd part is, those who get on their moral high horses about borrowing always seem to think that mortgages to buy houses are different somehow and don't count. But of course they're exactly the same. When it comes to borrowing, the Greeks are guilty of being as bad as British housebuyers.