Greece...

Uxb

GunJack wrote: »

ok, not specifically Greece, but what would happen if all debt worldwide was written off? If you read around, even briefly, it appears that every country is in debt, but no country seems to be in surplus/be owed that money, so who created all this dosh that everyone seems to owe to everyone else??

Well things like your pension fund would cease to exist. They will have bought someone government's debt amongst other stuff.
Many large national and international companies would have bought government debt and if it was written off never to be repaid then they too would become instantly insolvent.
All of this money was created just as you earn money by the companies doing things and then investing/saving it.

Debt can equally mean your deposits in a bank...and I reckon you would not be too keen on that being written off!

zagubov

Wasn't the last Balkan state that totally accepted austerity and paid off its debt Romania? How's Cousescu doing now?

Generali

michaels wrote: »

Is lending to countries in essence any different to lending to individuals. The most risky borrowers will pay a higher interest rate to compensate the lenders for the fact that some borrowers will default.

When it happens to individuals they are bankrupted and rehabilitated after a period, debtors prisons and working of indentures are a thing of the past. Is it reasonable to try and apply such strictures to a country? After all the ability of a country to repay is only the sum of the ability of its citizens to do so.

The big difference is that bad risks can't borrow in their own currency: they can't borrow in the currency their income is in. That's what screws over poor countries; as soon as there's a hint of a problem the currency goes through the floor and their coupn payments double.

vivatifosi

The Philip Atticus blog of last week was interesting again. He says that Syriza's proposals to make people pay income tax only on incomes of 12k euros and above will take 3m people out of paying tax. The problem with that is that there are only 3.5m people in employment.

http://www.philipatticus.com/

Crashy_Time

michaels wrote: »

Some borrowers can borrow at 1.5%, others at 5% suggesting a risk premium of 3.5% - over 1 year that 3.5% would pay for 3.5% of such borrowers to make a 100% loss to the banks (unlikely given that the property is collateral) or 14% to suffer a 25% loss. I would have thought we would have to see a huge surge in unemployment as well as a collapse in house prices before the banks lose out with such margins....

Yes, because the banks are really strong and would never need to be underwritten by the taxpayer or anything like that......

chucknorris

Crashy_Time wrote: »

So all the risky mortgage borrowers in the UK are paying an interest rate that reflects their risk are they?

Of course interest rates on loans attempt to reflect the risk, that is why:
1. You get lower mortgage rates for a lower LTV mortgage (less risk for the lender).
2. Self employed tend to pay a higher mortgage rate, or at least have less choice of lenders/products (which in turn can lead to a higher rate).
3. Mortgage rates (which are secured on a property) tend to be a lower rate than a personal loan.
4. Why a personal loan (with criteria) has a far lower interest rates than a credit card.
5. Why a credit card (with criteria) has a far lower interest rates than a payday loan.

Generali

michaels wrote: »

Some borrowers can borrow at 1.5%, others at 5% suggesting a risk premium of 3.5% - over 1 year that 3.5% would pay for 3.5% of such borrowers to make a 100% loss to the banks (unlikely given that the property is collateral) or 14% to suffer a 25% loss. I would have thought we would have to see a huge surge in unemployment as well as a collapse in house prices before the banks lose out with such margins....

Repos are expensive.

Firstly the bank is going to lose a minimum of 6 months payments. Then if it's a fixed rate mortgage there's an interest rate swap (well part of one) to pay for. On top of that are paperwork costs which will come in at the hundreds at a minimum. Lastly there's the fact that at the very least the house will have deprecated (carpets, kitchen, bathroom etc wearing for example) and at worst the repossessed party will trash the place (engine oil on the carpets is a favourite apparently).

Averages don't capture that stuff. I suspect most repos are done at a loss, after all if you had much equity in your home you'd sell!

antrobus

vivatifosi wrote: »

The Philip Atticus blog of last week was interesting again. He says that Syriza's proposals to make people pay income tax only on incomes of 12k euros and above will take 3m people out of paying tax. The problem with that is that there are only 3.5m people in employment.

http://www.philipatticus.com/

Only 3.5m people in employment? Out of a population of 11m? Surely that must be a mistake?

Oh, hang on,

In 2012, the number of employed people in Greece was 3.8 million, while pensioners and the unemployed totaled 4.1 million, out of a population of 11,062,500.

http://www.nytimes.com/2013/12/10/opinion/greeces-dismal-demographics.html?_r=0

And it is of course entirely possible that 300,000 Greeks have stopped working since 2012.

P.S. And Jiminy Cricket those demographics do not look good.

antrobus

GunJack wrote: »

...and isn't that a large part of the issue? Dodgy deals done in private, with no concern shown for people (who are, incidentally, not commodities)....

A larger part of the problem would be the fact that Greece has simply spent too much money.

GunJack wrote: »

...I think it's time the Capitallist dream bubble was popped somewhat and a fairer global system was designed. /there surely must be a middle way?

On the basis that previous attempts to pop the "Capitallist dream bubble" have resulted in (a) lots of being people getting killed, and (b) everybody getting poorer, forgive me if I'm not that enthusiastic about the prospect.

antrobus

Generali wrote: »

The big difference is that bad risks can't borrow in their own currency: ...

And really bad risks can't borrow at all.:rotfl: