BBC News Item

The Geek Prime Minister, faced with a 'solution' brewed up by the EU powerhouses (France and Germany basically) that in fact is not at all a solution but will still mean huge hardship for the majority of his people for a decade to come, decides he can only do one thing - ask the people who elected him to make a decision. Let them decide their own fate. This is Greece by the way, the country that invented democracy, and fought wars to defend it when the rest of us were barely able to build mud huts.

The reaction of stock markets round the world and the other governments within the EU? Immediate panic. Uproar. Threats.

So there you go. The elite simply don't trust the rest of the population, and would rather anything than actually let you or people like you actually decide anything important. Even if anyone with half a brain can see the plan they've cooked up is little to do with helping the Greek people and very much more to do with 'restoring confidence in the markets' i.e. allowing the financial sector to carry on playing silly buggers with everyone else's money.

I dare say he'll be cast as a buffoon by the media but I think this is one of the bravest things I've seen a politician do in years. Faced with selling his country and it's people down the river (admittedly on a flooded river his predecessors created) he stood for the principles his people fought and died for centuries ago. He stood with his electorate. Bravo.

It may be the Greek people make the 'wrong' decision, and we all pay for it in one way or another. But I'd rather take hardship based on the decisions of a nation of people, decided under the most fundamental guiding principle of western society, than I would on the decision of a few hundred politicians and merchant bankers, who apparently consider democracy an inconvenience.

Jon

Looks like there will be a vote of no-confidence in the Greek government on Friday which is touch-and-go.

I think the government will fall leading to fresh elections.

Can't see any way the Greek people will vote for cuts so don't understand why Euroland doesn't just let them crash out of the Euro unless, of course, they are frightened this will have a domino effect with Italy, Spain and Ireland also crashing out?

It almost certainly will, but that's not the reason. It's dogmatism. The Euro Cannot Fail and the political class in Europe won't let it, even if it means putting everyone in Europe in the poor house to keep it going. Greece should never have been let in the Euro in the first place, but it was, because the Euro is a political instrument much more than an economic one.

Jon

There would definitely be a huge domino effect. It would be a messy divorce to say the least - there was never any provision made for a member state to exit the Euro gracefully, apparently the Euro was designed to fix everything by its mere existence, so no country would ever think of leaving.

There's no point in supposing that Greece can simply decide to exit the Euro and get off without paying its bills though. After leaving, they will still have huge debts, which are due for payment in what would now be a foreign currency, and one against which their relaunched drachma would sink like a stone. Greece won't be able to go to the money markets for any new loans until they have negotiatied with their creditors. Creditors that is who are primarily either Eurozone governments, or else Eurozone banks underwritten by those governments. Those guys will have to make an example Greece because if they let those guys off easily, then Portugal and Ireland might get ideas, and the Italians are always thinking naughty thoughts. So what comes next is that Germany (already pissed off at Greece before this) is obliged by self interest to screw the Greeks hard and deep. Which they will, sideways with a baseball bat. They can forget that 50% private sector write down, Germany will demand something horrific, and then make an example of them when they can't make the first payment.

Without new borrowing, nobody gets paid. There's no money for the teachers, the pensioners, cops or soldiers, except what they can print. Nobody can print money that fast (except possibly a German company called Giesecke & Devrient - I think that's the guys who handle Zimbabwe's hyper-inflationary requirements). The Greek economy will continue to run on Euros, their own cash will be worthless for a long long time. They can go it alone, but in so doing, for good or otherwise, they will serve as an example. And they aren't going to be in charge of the good or otherwise bit.

And to make matters even worse for them, they will be left to the tender mercies of the IMF, who are known to consider the Eurozone bailout a farce and to have said so (semi-privately) from the very start. They will still have to privatise assets too fast, but now will get much less cash for them. They will have to raise the retirement age to about 80, close entire universities (not much of a loss given the state of those). They might get their membership of the EU suspended (not sure that's such a huge problem for them actually - their agricultural output sells for comparatively high prices, but any loss of border privileges would be a huge problem). THere's loads of other [LIFTED] that can go wrong for them too, a coup is perfectly possible, and they have a recent history of very nasty civil war.

When considering all this in an ancient historical perspective. I must point out that Athenian democracy came to a very sticky end because they made a suicidal collective decision (to invade Sicily), with absolutely no consideration of the potential downside (they got done up the butt by a foreign power). Perhaps the Byzantine empire offers a nicer alternative. Those guys had a massive financial collapse, the emperor of the time got his nickname (which I forget tbh) based on the rapidly increasing cost of a bushel of wheat during his reign, the empire went dramatically bust. But the Russians took pity and sent lots of gold to keep it afloat because they had close religious links.

I guess we can ignore the bit where Russia gets invaded by the Mongols, and all the population of Byzantium eventually became Turkish slaves - that's out of our analogical scope.

maybe this is too simplistic

let the nations who have the Euro float that nations Euro on the market separately

one Euro is still one Euro but it will cost more to pay for goods with the Greek Euro as opposed to the German Euro ...

and +100 to the birth place of democracy for holding a referendum on this which effects the whole nation and its peoples ...

Which was always the problem and the reason why if we had a vote I would vote no to joining the Euro. (Personally I think the Euro should be made legal tender in the UK and shops to price in both Euros and sterling and then see if the Euro slowly takes over)


Yes they can – other countries (Argentina) have done it – you just say all bonds are null and void. International investors are still owed over $100 billion in unpaid Argentinean bonds
However they would have a new currency and that would devalue sharply – so making exports cheaper and imports more expensive



Exactly (my bolding) they will just “print” – both physically and electronically new money. Yes they will have inflation but so long as they apply reasonable controls to the money supply then it should be controllable

That will just create yet another way currency speculators can

a) make a quick profit
b) do something stupid which destabilises a given country's currency leading to economic chaos.

The whole point of the Euro was that it effectively turns Europe into one 'market' and that is was therefore less vulnerable to currency speculation. OK, local value varies - same as it does with the dollar in the US - but over the whole you have roughly equivalent worth and some level of sane control. If you leave the financial industry to manage the value of things on a macro scale you end up.. well, where we are now.

Jon

Every country has the government it deserves! Not better, not worse. People vote politicians into office so people can't complain about what politician do.

Letting Greeks vote in referendum is just plain stupid. What does an every person knows about economics, money and banking? Nothing!! It's like asking you two year old what he wants for dinner: chocolate cake or a broccoli. He will tell you what he wants to eat, not what is best for him...

I understand the principle of representative democracy and all that so I do get the point you're making but that's simply not a good argument. If it were the case, the system wouldn't work for that long. Politicians have to worry that what they are doing has the approval of their voters most of the time or you haven't got democracy, you've got a series of short term dictatorships. The fact the government only gives a crap what the voters think for the last year of it's term here is part of the reason for voter apathy in the UK.


Unfortunately, there is a massive amount of evidence that the bankers and politicians know very little that's any use about economics, money and banking either. Or we wouldn't be in this mess in the first place.



Are you familiar with the concept of The Wisdom of Crowds? Individuals don't have to be knowledgeable (in fact it's better if they aren't) as long as you ask enough of them. If you ask enough people you tend to average out at a good answer. That's not true if you only ask a few people even if they claim to be experts.

Jon

That's a bad example because they still need knowledge and experience to get to a consensus.
You can ask every two year old on the planet or you can ask ten nutritionists. Ten nutritionist won't all agree on the solution but at least you can say they know what they are talking about and THEN you get the wisdom of crowds.

That would be fair in a situation where you have a range of options to choose from, some of which are better than others. You don't in this case though. You only have two options.

You're also ignoring my point that in this case the 'experts' have been shown to make bloody awful decisions anyway. If you let a bunch of nutritionists decide what we all ate and they we re as successful as the financial institutions have been we'd have global famine on a biblical scale.

Jon

Is this a bad time to state that asking any Nutritionist is liable to get you bad advice as the title requires no qualifications whatsoever?

Try asking a Dietician

Does everyone know the story of the emperor’s nose? I first read it in the following by Feynman, which I have on my shelf:

http://www.textbookleague.org/103feyn.htm

It is interesting, because the theory of The Wisdom of Crowds would say that, regardless of the fact that nobody has ever actually seen the Empreror's nose, the 'compound guess' would still end up being very close. Feynman's example is what any scientist would say should happen, whereas TWoC is an explanation for what we observe happening in some other cases. They're effectively competing hypotheses to explain the same phenomenon and the only way to prove which is right would be to actually perform the experiment.

It however doesn't change the point that, in the case of economic management within the Eurozone, the statement 'you have to leave it to the experts because they know what they are doing' is not supported by observation.

There is also the point that while economies do tend to be stable over the long term, the 'waviness' of the line is noisy i.e. in the smaller scale it's a chaotic system. In the scale of decades the economy is cyclical and therefore any changes you make are likely to be irrelevant. In the scale of years you can change things but it's almost impossible to predict exactly what effect your changes will have.

To put it bluntly, economic strategy is a mug's game.

Jon

Re Wisdom of crowds, you either get a good decision or an amazingly bad one. The trick is providing the info properly and fairly, thendeciding which it is.

Didn't the necromancer Blaine do something on this?