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 loki old fart wrote:
I can't see why they didn't do an Iceland, and let the banks fail.

Problem with Greece had nothing to do with the banks.

They had (have) a national debt problem, not a financial system problem.

 loki old fart wrote:

 sebster wrote:

 whembly wrote:
Yeah... been catching up on Greece lately... looks like they'll be okay, but they'll be hurt'n for awhile.

Yeah, I think so. It is no longer a case of how this will collapse, but how long it will suck for.

I honestly thought the US currency is more screwed... it goes to show it isn't an exact science eh?

What's the matter with US currency?

15 trillion in debt. China converting US debt into gold. China and Russia moving away from using dollar, when trading oil.

You say that as if no European countries are running massive deficits.

 loki old fart wrote:
15 trillion in debt. China and Russia moving away from using dollar, when trading oil.

That isn't a problem with currency. Currency doesn't work that way.


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 Grey Templar wrote:
You say that as if no European countries are running massive deficits.

There are debts, and long term they need to be brought in to line. But none of them are of the sort that can produce currency problems or other issues.

I mean, people go 'yaargh look at British debt' but here it is over the last 100 years, relative to GDP;



Debt had been almost five times what it is now, without any kind of collapse of anything.

 sebster wrote:

 loki old fart wrote:
15 trillion in debt. China and Russia moving away from using dollar, when trading oil.

That isn't a problem with currency. Currency doesn't work that way.

How do you see it working ?.

What he means is that being 15 trillion in debt and the dollar slipping in its use internationally isn't a problem with the currency itself.

 Grey Templar wrote:
What he means is that being 15 trillion in debt and the dollar slipping in its use internationally isn't a problem with the currency itself.

If the dollar ceases to be the standard unit of currency when buying oil. That's got to hurt it's credibility. and as a fiat currency, credibility is all it has going for it.
Your money is only worth, what other people think it's worth.

Still, it has nothing to do with single currency vs multiple currency debate.

The issues you describe would happen regardless. They just get compounded by multiple economies sharing a single currency.

 loki old fart wrote:

 Grey Templar wrote:
What he means is that being 15 trillion in debt and the dollar slipping in its use internationally isn't a problem with the currency itself.

If the dollar ceases to be the standard unit of currency when buying oil. That's got to hurt it's credibility. and as a fiat currency, credibility is all it has going for it.
Your money is only worth, what other people think it's worth.

It's the other way around. The dollar has been the currency for oil and most other business because of its credibility.

And if the economy that the dollar is representing is weaker its going to suffer for it.

Because if you use a particular currency for buying oil, any money gained will only be useful if it eventually comes back to the US to purchase US goods or services. So if the US economy is in a slump those dollars aren't going to be as valuable.

This may be off topic but someone tell me why greece is in this state in simplistic terms?

The last time I checked I read that because many greeks do not pay their taxes which was several years ago.

I am not very sure if what i read was true.

I seem to remember it being a combination of massive debt, largely caused by entitlements, along with an overall gakky economy. IIRC, they've had economic problems for years.

they kept borrowing money, and more money, and more money, with no conceivable way of paying it back.

People also began rioting because they don't want the government to stop the various entitlement programs.

Unemployment is at 27%, so a huge chunk of the population isn't working.


Things are so bad some people down there were demanding WW2 reparations from Germany.

Mostly as Grey Templar states, huge state funded benefits and pensions combined with poor tax collection/payment was brought to a head when the Eurozone collapsed and they could get the funding they had become used to.

 loki old fart wrote:
How do you see it working ?.

The value of the dollar is defined by demand by demand for it and the supply of it. Demand is needing the currency to buy consumer goods and services or assets priced in that currency. Supply is people who currently hold that currency, who want to convert to other currencies, to buy consumer goods and services or assets priced in those currencies.

And given the massive trading volumes in assets moved between countries every day, this means it's actually all about the demand for assets, which in turn are largely driven by the interest rate differential between countries. This is why, as an example, Australia's government debt increased considerably from 2009 to 2011, but it's currency appreciated about 50% - because our economy maintained high interest rates through that period.


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 loki old fart wrote:
If the dollar ceases to be the standard unit of currency when buying oil. That's got to hurt it's credibility. and as a fiat currency, credibility is all it has going for it.
Your money is only worth, what other people think it's worth.

Not really. I mean, that summary can be used for some extreme examples, banana republics suffering a credibility crisis and credit flight, but for the most part credibility just ain't an issue - there is no serious money out there worrying that the UKP or USD will suddenly be worthless.

What drives value is simply demand and supply. When people want your dollars (in order to buy your goods and services, and most importantly your assets), and there's more of them than there are people holding your dollars wanting to convert them (in order to buy some other country's good and services, or more importantly their assets) then the dollar goes up.


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 Grey Templar wrote:
Still, it has nothing to do with single currency vs multiple currency debate.

The issues you describe would happen regardless. They just get compounded by multiple economies sharing a single currency.

The recovery is affected by the shared currency though. In another situation Greece could respond by devaluing the drachma*, making their exports more competitive, and domestic production more competitive overseas. There would be an initial hardship as people found the cost of living much higher, but recovery would be much quicker.

But Greek currency is tied other much bigger economies which are doing much better, which means no devaluing, which means the solution to their economic woes has to be found in flat wages and outward migration. Which is much more socially harmful, and is drawn out over a much longer time period.


*Indeed, with a free floating local currency, this would happen without anyone doing anything.


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 notprop wrote:
Mostly as Grey Templar states, huge state funded benefits and pensions combined with poor tax collection/payment was brought to a head when the Eurozone collapsed and they could get the funding they had become used to.

Yeah, that's largely it. At the core of Greece there's been an incredibly corrupt oligarchy that's been taking overpaid government contracts for decades (the stories that came out during and after the Athens Olympics would make a financial controller cry), and paying little to no tax. At the same time there was a very generous welfare system.

But what's interesting about those two things is they're not really not that uncommon, especially not in the poorer developed nations. Both things are actually affordable, as long as the overall standard of living is low enough (a pension starting at 55 is quite affordable when you're only paying $100 odd a week). But following Greece's entry in to the euro, living standards started increasing really rapidly. Once that happens the cost of living goes up, so the pension goes up, and you either need to stop paying so many pensions or start building a tax base to cover it.

Greece did neither, in part because its own financial reporting was so poor it had no idea of the scope of the problem.