Greek debt

caveman38

Not the right forum, I know. But I didn't where else to post.
Can someone with a financial nous better than me, explain.
Why can Greece not pay back their international debts whether to Germany, EEC central bank or IMF whichever is relevant. With fictitious digital produced funds like that which are used in Quantitive Easing. How is a countries assets monitored for it's legitimacy.

bowlhead99

Unfortunately for Greece, it does not control its own currency supply, it didn't borrow in Drachma. It is part of a common European currency system. While Euros can be created or some QE done by the European central bank, effectively devaluing each Euro in circulation compared to other world currencies, Greece is not going to be allowed to receive the Euros for free and then pay off its loans from other European countries with them and say it no longer owes anything.

caveman38

Thanks for the reply. I see what you are saying, in that the European Central Bank issue the Euro and therefor monitor the notes in circulation , so to speak.
If the problem was an English one, would the BOE be able to get away with it.
Sorry for what may seem stupid questions.

Steve_xx

The reality is that all banks that produce money out of thin air are gettting away with it....the question is for how long?

The difference between the UK & Greece doing it is that it is considered that the UK can pay down its borrowings in some sort sort of orderly fashion whereas Greece seems to be considered unable/unlikely to be able to do so.

princeofpounds

Having your central bank print money to pay off debt is called monetising the debt. Google it to learn more.

It is not costless. The currency falls, inflation spikes. Interest rates go higher as lending money then needs a higher rate of return to overcome inflation. That hurts economic growth and devalues assets.

Someone always has to pay for the debt and you basically force the population to pay with lower living standards. Especially savers.

It's not particularly clever and it's certainly not fair. Argentina, Zimbabwe, Weimar Republic... All cautionary tales.