Greece...

mwpt

globalds wrote: »

A single currency allowed a nation that everyone knew had a bad credit history to lend like it had a perfect credit rating.

Do you think we should pass slightly more blame on the Lenders ?

Imo, there are two principles at work here where blame is predominantly attached to the borrower vs the lender. (I'm going to resort to gross simplification and speculation)

1) The first is something akin or similar to the principle of reciprocity

It is believed this is an evolved trait and that people who don't respond to acts of kindness in turn are bad for the group stability and we've evolved a response to frown upon it. Rightly or wrongly, lending TO someone is seen as a type of favour, in other words, deserving of a returned response, in this case, repayment. I understand that lending comes with returns (from risk) but most humans won't think this far and that's why the lender is seen as the benefactor and the borrower the one who is obliged to make things right. When they fail to make things right, society frowns on this.

2) The second principle at work is less benign imo.

The world economy is virtually built on debt, and more so lately in the form of very low borrowing costs. We rely on future generations productivity to pay down this debt, and hope like mad (so far it's worked) that productivity growth (and hopefully inflation) is high enough that we are able to make this mass wealth transfer, from them (the future guys) to us. And there is obviously a huge vested interest to protect this system of debt. I think we are on very shaky ground relying on this to happen, and what if cracks start to appear. What if Greece defaults and everything is ok for them? What if the indebted start to default because they realise it's more in their interest? Risk increases massively, rates must rise to follow (lenders will demand it), nations debts become unaffordable, private debt becomes unaffordable. I don't want to appear doomsday, but really, that is a very bad situation for most nations and the world economy.

I'd love to see some analysis showing how western countries could handle the markets demanding higher interest rates on their bonds.

CLAPTON

globalds wrote: »

A single currency allowed a nation that everyone knew had a bad credit history to lend like it had a perfect credit rating.

Do you think we should pass slightly more blame on the Lenders ?

Why do you feel the need to 'blame ' anyone?

The issue is the consequences for both lenders and borrowers.

HAMISH_MCTAVISH

mwpt wrote: »

Rightly or wrongly, lending TO someone is seen as a type of favour, in other words, deserving of a returned response, in this case, repayment. I understand that lending comes with returns (from risk) but most humans won't think this far and that's why the lender is seen as the benefactor and the borrower the one who is obliged to make things right. When they fail to make things right, society frowns on this..

The reality is that lenders need borrowers in order to make themselves commercially viable.

Savers need debtors to borrow in order to make a return on their savings.

The two are equally reliant upon each other and neither is morally superior.

In the case of surplus nations and deficit nations, again there is a symbiosis at work.

Where a surplus nation is failing to consume enough to sustain it's economic activity it must find a deficit nation to export to (and usually find a way to fund that nation's consumption through debt) or face economic decline.

And where a deficit nation is failing to produce enough to sustain it's economic activity it must find a surplus nation to import from (and usually fund that consumption through borrowing).

In a global situation of imbalanced production and consumption, economic activity can only be sustained through lending and borrowing, which acts as an effective rebalancing method.

The long term success of such policies relies however on countries not maintaining a state of deficit or surplus indefinitely, over very long periods of time countries do tend to switch from one to the other, but if they do not and the imbalance becomes too large to sustain the ultimate solution is default which restores balance.

CLAPTON

HAMISH_MCTAVISH wrote: »

The reality is that lenders need borrowers in order to make themselves commercially viable.

Savers need debtors to borrow in order to make a return on their savings.

The two are equally reliant upon each other and neither is morally superior.

In the case of surplus nations and deficit nations, again there is a symbiosis at work.

Where a surplus nation is failing to consume enough to sustain it's economic activity it must find a deficit nation to export to (and usually find a way to fund that nation's consumption through debt) or face economic decline.

And where a deficit nation is failing to produce enough to sustain it's economic activity it must find a surplus nation to import from (and usually fund that consumption through borrowing).

In a global situation of imbalanced production and consumption, economic activity can only be sustained through lending and borrowing, which acts as an effective rebalancing method.

The long term success of such policies relies however on countries not maintaining a state of deficit or surplus indefinitely, over very long periods of time countries do tend to switch from one to the other, but if they do not and the imbalance becomes too large to sustain the ultimate solution is default which restores balance.

this is simply wrong

mwpt

HAMISH_MCTAVISH wrote: »

The reality is that lenders need borrowers in order to make themselves commercially viable.

Savers need debtors to borrow in order to make a return on their savings.

The two are equally reliant upon each other and neither is morally superior.

In the case of surplus nations and deficit nations, again there is a symbiosis at work.

Where a surplus nation is failing to consume enough to sustain it's economic activity it must find a deficit nation to export to (and usually find a way to fund that nation's consumption through debt) or face economic decline.

And where a deficit nation is failing to produce enough to sustain it's economic activity it must find a surplus nation to import from (and usually fund that consumption through borrowing).

In a global situation of imbalanced production and consumption, economic activity can only be sustained through lending and borrowing, which acts as an effective rebalancing method.

The long term success of such policies relies however on countries not maintaining a state of deficit or surplus indefinitely, over very long periods of time countries do tend to switch from one to the other, but if they do not and the imbalance becomes too large to sustain the ultimate solution is default which restores balance.

You've quoted my post but then gone on to talk about a whole bunch of tangental stuff. I'm not really sure if you're discussing my post, agreeing with me, disagreeing, or just posting vaguely on the topic.

HAMISH_MCTAVISH

CLAPTON wrote: »

this is simply wrong

Interesting...

So you've found a way for savers to get returns without someone borrowing their money?

Or for surplus nations to continue running a surplus without someone else buying all their stuff?

Do explain further....

I'm sure the global economic community is eagerly awaiting your magical solution.

mwpt

CLAPTON wrote: »

Why do you feel the need to 'blame ' anyone?

The issue is the consequences for both lenders and borrowers.

I agree with this. But that is the narrative that the whole situation is being framed under. Socialists are blaming the other guys for not handing over more money. Centrists are blaming the !!!!less.

But very much agree with you, it is much more helpful to just omit all that and focus on the realities, the options and the consequences.

My post on the issue was just an explanation on why I believe the blame game is played.

HAMISH_MCTAVISH

mwpt wrote: »

You've quoted my post but then gone on to talk about a whole bunch of tangental stuff. I'm not really sure if you're discussing my post, agreeing with me, disagreeing, or just posting vaguely on the topic.

You expressed an opinion that society has a moral attitude towards debtor being seen as recipients of a favour, I noted that if they do it is incorrect, there is no moral superiority to either borrowing or lending.

They are two sides of the same coin.

Savers are reliant upon the generosity of borrowers to pay them a return. Borrowers are reliant upon the generosity of savers to lend them money. Neither has any position of moral superiority.

mwpt

HAMISH_MCTAVISH wrote: »

You expressed an opinion that society has a moral attitude towards debtor being seen as recipients of a favour, I noted that if they do it is incorrect, there is no moral superiority to either borrowing or lending.

They are two sides of the same coin.

Savers are reliant upon the generosity of borrowers to pay them a return. Borrowers are reliant upon the generosity of savers to lend them money. Neither has any position of moral superiority.

Right, then I agree with this post. I was simply musing on the reasons for what I see, which is that society at large attaches more blame to the borrower in the event of a failure to meet their obligations.

HAMISH_MCTAVISH

mwpt wrote: »

My post on the issue was just an explanation on why I believe the blame game is played.

The blame game is played to distract the sheeple from their own failings and allow politicians to avoid discussing uncomfortable truths.

Merkel wouldn't get very far politically if she stood up and told Germans they needed to either spend all their savings or endure a very long and painful recession as it was unfair to expect other nations to continue subsidising Germany through deficit consumption.