I Wish I Understood What is Happening in Greece

Started by SGOS, May 24, 2015, 04:47:42 PM

Previous topic - Next topic
Print
Go Down Pages1
User actions

SGOS

May 24, 2015, 04:47:42 PM Last Edit: May 24, 2015, 05:02:35 PM by SGOS
http://news.yahoo.com/greece-issues-fresh-warning-imf-payment-june-115223346.html

They keep running out of money and have to borrow from the EU, but now they can't pay back what they borrowed.  One of the reader comment points out it's not Greece's fault.  They borrowed a bunch, and then the Euro doubled in value, meaning that now they have to pay back double.  I don't understand how that works.  In finance here in the US when the value of money increases, borrowers benefit because they pay back the loan with inflated dollars.  They don't have to pay more because the value of money went up.  Media articles often don't explain important things.  All they do is tell us Greece is out of money.  I'd like to know how they got out of money.  For some reason, it seems important to know how they managed before they joined the EU.  Why can't they do what they did when they were on their own?  Is Greece just bad at managing finances, or is someone taking advantage of them and screwing them, as that one comment implies, or is Greece screwing the EU?  Or is it something else?

When it comes to macro finances like government spending or managing Microsoft's cash flow, I'm in territory that I don't understand.

Gerard

#1
May 24, 2015, 06:17:00 PM Last Edit: May 24, 2015, 06:19:06 PM by Gerard
Quote from: SGOS on May 24, 2015, 04:47:42 PM
http://news.yahoo.com/greece-issues-fresh-warning-imf-payment-june-115223346.html

They keep running out of money and have to borrow from the EU, but now they can't pay back what they borrowed.  One of the reader comment points out it's not Greece's fault.  They borrowed a bunch, and then the Euro doubled in value, meaning that now they have to pay back double.  I don't understand how that works.  In finance here in the US when the value of money increases, borrowers benefit because they pay back the loan with inflated dollars.  They don't have to pay more because the value of money went up.  Media articles often don't explain important things.  All they do is tell us Greece is out of money.  I'd like to know how they got out of money.  For some reason, it seems important to know how they managed before they joined the EU.  Why can't they do what they did when they were on their own?  Is Greece just bad at managing finances, or is someone taking advantage of them and screwing them, as that one comment implies, or is Greece screwing the EU?  Or is it something else?

When it comes to macro finances like government spending or managing Microsoft's cash flow, I'm in territory that I don't understand.
As far as I understood they are bad at managing their finances. When they joined the EU they spent lots of money on unproductive things and jobs for political friends. And they seem to make it very easy for their people to avoid paying taxes. Stuff like that is what I heard. Wasteful expenditure and low productivity made them vulnerable. And then comes a worldwide financial and housing bubble that causes a crisis on top of that and......
Well that's what people are saying anyway, but basically I'm in the same territory as you are in.

Gerard

SGOS

#2
May 24, 2015, 07:06:19 PM
Quote from: Gerard on May 24, 2015, 06:17:00 PM
As far as I understood they are bad at managing their finances. When they joined the EU they spent lots of money on unproductive things and jobs for political friends. And they seem to make it very easy for their people to avoid paying taxes. Stuff like that is what I heard. Wasteful expenditure and low productivity made them vulnerable. And then comes a worldwide financial and housing bubble that causes a crisis on top of that and......
Well that's what people are saying anyway, but basically I'm in the same territory as you are in.

Gerard

Yes, I've heard those things too, and in fact they are tempting to believe, but I'm starting to question it some, because 1)I've heard other viewpoints to the contrary, and 2)If financial mismanagement was the original cause, it's difficult to believe that they got a bailout and just went ahead and blew that too, and 3)If Greece is governed by a bunch of wacky financial losers, why would they have been allowed into the union in the first place?  Wouldn't that be inviting a disaster that would affect the entire EU?

I wouldn't share a checking account with a neighbor that was constantly having his car repossessed, but my neighbor would think sharing a checking account would be a great idea.  I wonder.  Is Greece that kind of neighbor?

Gerard

#3
May 24, 2015, 07:43:32 PM
Quote from: SGOS on May 24, 2015, 07:06:19 PM
Yes, I've heard those things too, and in fact they are tempting to believe, but I'm starting to question it some, because 1)I've heard other viewpoints to the contrary, and 2)If financial mismanagement was the original cause, it's difficult to believe that they got a bailout and just went ahead and blew that too, and 3)If Greece is governed by a bunch of wacky financial losers, why would they have been allowed into the union in the first place?  Wouldn't that be inviting a disaster that would affect the entire EU?

I wouldn't share a checking account with a neighbor that was constantly having his car repossessed, but my neighbor would think sharing a checking account would be a great idea.  I wonder.  Is Greece that kind of neighbor?
Well, you wouldn't do that of course but we did. That's how the present Europe came about. Back then we wanted it to work so badly, that we waved away the risks. And then it all became "too big to fail"....

Gerard

SGOS

#5
May 24, 2015, 07:57:58 PM
I remember wondering how that system would work.  I assumed there were safeguards in place to keep something like this from happening, and I'm guessing there were some safeguards.  But while I gave it some casual thought, I didn't come up with anything on my own.
Print
Go Up Pages1
User actions