The Greek financial crisis is really a simple issue

The financial crisis gripping Greece is really not that complicated. Greece opted to join the Eurozone and replace its local currency, the drachma, with the euro in 2001. Its government then started tapping the Eurozone financial market taking out euro-denominated loans as part of its normal course of doing business.

However, underneath all that, Greece’s fiscal position was not sound (i.e. the size of its liabilities were perilously bigger than resources on hand to fund them), and the 2008 Global Financial Crisis (GFC) brought that underlying weakness to the fore. While stronger economies eventually weathered that storm (thanks to their stash of cash reserves), Greece came out of it severely insolvent (financialese for being in really bad shape) — much so that it required a bailout from the International Monetary Fund (IMF) and the European Central Bank. But not quite able to use those loans to get back on its feet, Greece took out another bailout in 2012. Coming out of that and the previous were creditors’ conditions piled upon one another — draconian austerity measures that progressively crushed the life out of its limping economy.

greek_financial_crisis

So, since 2012, Greece had been teetering under the weight of a couple hundred billion euros in loans that started coming due this year. Meanwhile, ordinary Greeks suffered for years under the austerity measures thanks to the massive unemployment precipitated by the drying up of available capital and drastic drops in personal income due to reductions in salaries implemented by struggling businesses and public enterprises. And over the last several months, to that injury was added the insult of ordinary Greeks getting slapped restrictions on access to their own personal funds kept in Greece’s banks to prevent bank runs.

No surprises then that Greeks voted to default on the loans in a public referendum held this week. They were hopping mad and had recently put a far-left-leaning government in power. It was a perfect storm for a vote to stop paying these loans to prevail.

Left to its devices, Greece will likely have to revert to its old currency, the drachma, and prop up confidence in it on its own. But without a vault full of gold bullion to back it, the value of the drachma really rests upon the perceived value in the Greek government’s assurance to its public that its new currency is real money. That’s gonna be a tall order for a country that limped along economically over the last 14 years (not counting the years before 2001 when it successfully masked its underlying financial rot).

So much for economic integration. Creating bigger markets only benefits those who profit from bigger markets. But for the rest of the lot who merely piggyback on other people’s capital, it comes down to the really simple definition of poverty:

A habitual entering into commitments one is inherently incapable of honouring.

It’s the universal poverty equation that consistently successfully illustrates why poverty is, regardless of all the noise surrounding it, essentially a simple human condition.

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Post Author: benign0

benign0 is the Webmaster of GetRealPhilippines.com.

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62 Comments on "The Greek financial crisis is really a simple issue"

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Fei
Guest

While the circumstances that led to their financial dire differ, I can’t help but compare Greece to Germany’s Weimar Republic after WW1. Kinda ironic that the former now owes the latter.

beenawhile
Guest

Interesting on the gold quote. Modern “Keynesian” economists refuse to agree it should have any monetary value… While happy to purchase it for their central-bank printed paper.

Ebola Ray
Guest
The oversimplification of the Greek ‘tragedy’ here ignores the fact that the ‘private’ debts of bankers were shifted onto the ‘public’ balance sheet in a ‘sleight-of-hand’ move that is criminal in nature.Much like the bailout in Ireland where the Irish population volunteered to enslave itself with debts that were not their own, but were created by bad bets made by criminal bankster’s, the ‘private’ debts of the banker’s were made into a ‘public’ debt obligation.A severe act of idiocy on the part of the Irish population this same scheme has been rejected by Greece, and rightfully so. The only other… Read more »
Ebola Ray
Guest

also ,something that can not be ignored is the corruption ingrained in the Greek economy, through rampant tax-evasion, for decades that slowly drained the country dry, then its admittance into the E.U. (which should never have been allowed due to the Greek economy/banks being insolvent/bankrupt at the time of admittance into the E.U.,against E.U. by-laws) then pick up the story in the above comment……

zaxx
Member
Have you ever seen a product marked “Made in Greece” before? Well there lies your fundamental problem. How can one run with the horses if it’s a limping rat? The Philippines has a lot to learn from the current Greek debacle! So common R.P., enough of the dreamland fantasy talk on Philippine pride – show me the money! Show me a product that we can proudly line up with Samsung, Apple and Philips on Walmart’s shelf. “Zero” is a great catchword in today’s calorie and health conscious customers, but not in the world of techno titans and olympic-class athletes. (BTW,… Read more »
Ebola Ray
Guest

the Philippines could harness its resources, add a manufacturing component and it could be a world leader, and yet…..it doesn’t. Simply relying on ‘call center’ crap jobs and OFW remittances to keep the economy hobbling along, when it could reboot, re-tool and make a difference on a global scale. Look at what Japan did, tiny little Japan….and then they ruined it with outsourcing.

zaxx
Member

Don’t rely on the government or politicians. The Chinese immigrants to this country made it big quietly doing business and have succeeded. If they can do it, why can’t the ordinary Juan do it too. If you want to start a manufacturing industry you can do it. No one’s stopping you. The Phil needs visionary leaders like you Ray. Go for it. Be the Steve Jobs of the Phil.

marius
Guest
>> “If you want to start a manufacturing industry you can do it. No one’s stopping you.” Nobody would let you be the Steve Jobs of the Phil. First the BOC would prevent you importing the equipment and supplies you need (you don’t have this and that meaningless bit of paper so you have to pay P0000’s in “fines” and “charges” to get your container released). Then the BIR would slap arbitrary tax bills on you earnings (not your profits – earnings; the Pinoy mind can’t calculate assets minus liabilities, that’s advanced math). Then you’d get a nearby “well-connected” neighbor… Read more »
Virtual Vigilante
Guest

Marius, you are so right! If only the Philippine government gets the f!@#$% out of the way of the market and stops dipping its filthy hands into the coffers of private enterprises. Philippine Government . . .You’re Fired!

(http://getrealphilippines.com/blog/2012/05/philippine-government-youre-fired/)

zaxx
Member

Sure Vigilante! (BTW, you’re not related to Duterte are you?) And while you’re at it (firing our gov’t); the rest of us will try to fire up the populace on the next revolution – The RISE of the INCORRUPTIBLES – soon coming to a city near you…

Starring: Incorruptible candidate #1 … does anyone have a clue?

andrew
Guest

“I will declare a revolutionary government. I will close congress and sell all government corporations that are connected with money making.” – mayor duterte

077Hayden007776Toro
Guest

If you borrow/owe more than you earn/can earn; you will soon be bankrupt.

Greece was like Germany , after the Armistice, after World War I. They burned their German currency to heat their houses.

It’s the same situation in our country. Our earnings are too dependent on OFW slaves.
It is an economy built on sand…

Added to the thievery of public funds. The financing of the MILF/ISIS/Al Queda by Aquino… We will be the next Greece. Tighten your belts, the Philippine economic meltdown is coming.

Ebola Ray
Guest

the Greek situation is so far from being simply borrowing more than one earns.
if the Philippines could somehow look within and create a manufacturing base it could rival what Japan did after WW2, but with the world’s highest electricity rates and banks that are scared of their own shadows….ain’t gonna happen.

77Hayden077077Toro
Guest

Most of the Filipino Brains , have migrated to foreign countries, as OFWs. Only the YellowTards, and their similar species, are the ones left…Besides, the Science and Technology curriculum in schools are outdated and obsolete.

The minds of Filipinos are focused on politics…politics…more politics. You can get rich easily by being a politician. So, why bother to be anything else..

Lemnemonic
Guest

Actually the Greek dilemma is very simple. Greece already had a lot of debt and they thought that loaning to pay loans was a good idea. They thought that joining EU and getting a dip in Germany’s credit card could solve their problems. It could have, if the government didn’t wasted it on short term welfare state luxuries and instead invested it on business. But still, they got stuck in the loan-to-pay-loan vortex and are dying an insolvent death.

997Toro00777999Hayden
Guest
997Toro00777999Hayden
A debt is a money owed…it can be sweetened to a word like : “Swap”, to mask the word: Debt. Any debt has to be paid for, in any way. If you cannot pay it; you have to file for bankruptcy. Nations are like people… It is like the term: “Informal Settlers”, for Squatters. The word: “Informal Settlers” is sweetened to mask: the filth, the grime, the hopelessness, the crimes,the below human conditions of living, the poverty, etc… of people living as Squatters. Politicians like to cover this situation in our country. Since, these people are the sources of “captive”… Read more »
Ebola Ray
Guest

All money printed in the USA & E.U. today is DEBT.I will not explain it, it is way to complicated to discuss here, BUT,believe it or not…..its true…..debt debt debt…all debt.

andrew
Guest

they can ask help from Zeus. lol!

d_forsaken
Guest
Poverty is the parent of revolution and crime. Poverty is the worst form of violence. An empty stomach is not a good political adviser. It is too difficult to think nobly when one thinks only of earning a living. There is always more misery among the lower classes than there is humanity in the higher. There is no Them. There are only facets of Us. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little. We are not rich… Read more »
Apprentice
Guest

we can use the same tactics of the “elites” against us and evolve it to help the poor..prosperous…the unconscious…awakened…the uneducated…smart in all aspects and hopeless…hopeful…we just need to be organized…like those “bastards” then the Philippines can be “Tomorrowland” for all of us and create an impact or should I say…Let’s start a Big Bang!

walter p komarnicki
Guest
Ebola Ray hits the mark with his succinct analysis, it coincides well with an email from a former workmate in Australia, part of which follows: This is what capitalism is really about. From the beginning, Merkel and the EU have operated from the position that because Greece took on debt, Greece now needs to pay it back. That position assumed — bizarrely, in hindsight — that debt only works one way: if you lend someone money, then they pay it back. But that is NOT how free markets work. Debt is not a guarantee of future payments in full. Rather,… Read more »
Ebola Ray
Guest

The entire ‘Tragedy’ is sooo complicated that it really takes a long look at the dealings pre-2009, the public assets that were targeted (Intn’l Airport landing tarriffs,the state lottery proceeds, the Greek ‘Riviera’ real estate. Just to name a few and all MONEY-MAKING PUBLIC ASSETS handed over to the Bankster’s) for permanent confiscation, etc etc etc…..due to an ‘Odious’ debt. OH NO NO NO NO !!!!

But thank you Mr. Walter,but it is only the surface I scratched.

Deep Throat
Guest

But why were the Greeks in that situation in the first place? Because their government mismanaged and they voted for wrong government to lead them in the Euro, which happens to be a leftist government who values social services more than an improved economy.

You cannot just hand out your assets to the banks without you agreeing nor you needing to give those assets because you mismanaged stuff previously right?

Ebola Ray
Guest

@ D.T., U don’t get it ? oh that is really too bad, but its just that the shifting of a ‘privte debt’ onto the ‘public debt’ and the theft of public assets to stisy ‘odious’ debts is a fuckin outrage. If you cant see this,its just to bad.

walter p komarnicki
Guest

here’s the link to the full story from Business Insiders:

http://www.businessinsider.com.au/greece-referendum-result-and-the-meaning-of-debt-2015-7

it seems to me that Greeks will be having the last laugh, and the joke is on the EU!

Deep Throat
Guest
This problem of the Greeks were created by the Greeks. even with the previous bailout which was hundred of billions of euro, the Greeks couldn’t solve their economic woes. The Greek economy cannot support the amount of social service they are giving to their people. So instead of using the bailout for economic improvement they used it for their lifestyle. The simplest analogy I could think of a person getting 30k php salary but wants to live a lifestyle of 100k per month person. so that person decides to borrow money. Instead of using it for education, finding a better… Read more »
marius
Guest

Indeed. Remind you of anywhere else? 🙂

Ebola Ray
Guest

@ Deep T, the Greeks had very little to do with it, that is the problem.

Deep Throat
Guest

I have to disagree. This a Greek created problem. Majority of the countries have debts including rich first world nations. The main difference is the Greeks cannot pay their own debts nor balance their financial capacity since they are spending beyond their means.

If you are country that was inserted more than 200b usd in 2010, that money won’t vanish unless you spend it the wrong way. If the Greeks spent that money on The right investments rather handouts and social services in the last 5 years, they won’t be in this problem in the first place.

Ebola Ray
Guest

the last 3 years ahd nothing to do with it. It is such an engineered robbery, by the 1%. think what you like. explaining it for an eternity is not in the cards for us.

Deep Throat
Guest

@ebola Ray, you have quite imagination that has nothing to do with the Greeks fault, they voted for their leaders. Their leaders fiscally mismanaged their house. Nothing to do with the Greeks? So in short if one government does not put their house in order and their people voted for them, it has nothing to do with them?

In a way we are in agreement since this mismanagement has been happening before the Greeks borrowed so much money within the past 3 years or even before they joined the Euro.

yup
Guest

The financial crisis is a gift by the Greeks unto themselves. They must have believed that “Beware of Greeks bearing gifts” saying doesn’t supposed to include themselves.

Virtual Vigilante
Guest
In contrast to the dire economic situation in Greece, the Philippines (at least for the time being) has recently (March 2013) achieved “investment grade” for the very first time in its entire economic history. (http://www.rappler.com/business/economy-watch/24936-a-first-investment-grade-rating-for-ph) The challenge, of course, is for our national government team to keep improving the sovereign credit rating of the Philippines until we are a “triple A” or “AAA” credit like Canada, Australia and Singapore. That is still a long time coming, if ever at all, given the thoroughly irresponsible spending habits of our public officials. What is clear today is that the Philippine economy, inside… Read more »
Apprentice
Guest

To summarize..were going to take control of the government through not paying taxes…and and streamline and destroy all useless institutions and set up new ones that will truly teach the people voluntarily and enhance their skills to be self sufficient and Independent of the government..in short something like the people are there own goverment? Am I right or wrong

Apprentice
Guest

While the Filipinos are their own government there is still an administrator for civil and moral order right?

Virtual Vigilante
Guest

Apprentice, that’s right. A Philippine Government that’s about 30% of the size and the bloated budgetary imposition of today’s malignant bureaucratic kleptocracy.

Presidente Emilio
Guest

We must decentralize the government first. Doing a massive overhaul while our country is too centralized on Manila might lead to disaster.

Let the provinces stand on their own and decide their own economic policies. Go federal.

Apprentice
Guest
A slow transition first huh? ok…so for Federalism to be passed down in the Philippines we must justify it first to the Lawyers then they’ll do the work…passing to the representatives next congress next senate and approval…the problem is…the “hindrances” which I wont mention because its common knowledge now…if it doesn’t pass which I think already is pending? or not passed? Then we must educate all the Filipinos by all means about federalism and its benefits…so they’re the ones who will do it and protest in front of the Senate building…giving them no choice but to implement it….Am I venturing… Read more »
Ebola Ray
Guest
The only part I disagree with is the public ‘caning’, no…FUCK THAT. The jails of the country are unpleasant enough and anyone that gets stuck there is having a difficult time as it is.The Fire Deptartment’s abolishment may lead to some serious ‘fires’, just like every major city world-wide….these guys like their jobs and when the axe swings, the torch gets lit…know what I mean? A limit on how many children can be born is long overdue but there may be a certain world religion in the way of any type of ‘control’ of the reproductive cycle of the human-being(like… Read more »
Add
Guest
Hi @Ebola Ray “BUT, believe it or not…..its true…..debt debt debt…all debt.” **** Yes, it seems that way and is complicated. My rudimentary understanding (and I’d appreciate if you’ll correct it if I’m wrong) is that it all originated, or has its roots, from the Bretton Woods (BW) agreement which came to be some time towards the end of WW2. BW set up the rules for fixed currency exchange rates which from then on was all to be pegged against the US Dollar. Each one US$, in turn, was supposed to be backed up by, or have its equivalent in,… Read more »
Ebola Ray
Guest
WOW, there is a lot there and most of it is very accurate. NICE ONE !!! “Bretton Woods’ created the USDollar as the Worlds Reserve currency, among other things.In 1971 the USA actually defaulted on its bonds and was taken off the gold standard by then President Richard Nixon, many see this as a way to finance the endless wars the country is mired in (and is good for business if your a Military conractor , LOL!) and may be correct. The ‘FED’ is , in fact though, not a mere ‘middle-man’: The Rothschilds, Rockefellers(USA interests),the Hapsbourgs,(the Queen of Englands… Read more »
Ebola Ray
Guest

@ ADD:

Please read this:

http://www.paulcraigroberts.org/2015/07/07/greece-eu-situation-paul-craig-roberts/

it explains the situation better than I/We/Us ever could. The Man is a definite BRILLIANT mind, a gift to us all.

Add
Guest
Thanks much, @Ebola Ray. Gosh, you are as contagious as the Ebola in Africa, but certainly not in a negative way. Glad to hear I have a correct info, but the links you introduced had my head spinning and my eyes rolling. I already bookmarked them as I want to understand them in my 2nd or 3rd reading. You know, I have stopped visiting sites talking of conspiracy theory and shades of it as I want to keep my sanity. Your links are definitely none of these; they seem to be a good resource for what is behind the news.… Read more »
Ebola Ray
Guest
@ ADD, that was a long one. anything IS possible. Under-cover Cops and Spies (who else works at an ‘Embassy’?) are usually not too hard to spot, the best ones though,what they do? They listen !!! the ones that ask too many questions are always EZ spots, but the really good ones? SSSHHHHH, they hear pins drop… miles away !!! Problem with these types is that they do not make a lot of money, so allegiances can be compromised easily. One MAN of uncompromising integrity is the MAN whose web-site was pointed out to you: Dr.Paul Craig Roberts. As a… Read more »
walter p komarnicki
Guest
Ebola Ray is worth reading,and thanks for the tip on Dr Roberts! “unsustainable” is becoming a hackneyed cliche, but when it comes to economic management, very few of us can truthfully say that we truly ‘live within our means’. but when it comes to nations, let’s compare the two I’m most familiar with: Australia and Philippines. Which one is more ‘sustainable’ : a nation of 23 million with a couple of dozen casinos (and Sydney is getting a second one, for the really big high rollers who’ve stopped coming to Macau) and 108,000 homeless with an almost trillion dollar hole… Read more »
Ebola Ray
Guest

@ Walter……IDK a whole lot BUT it is clear that:
GOLD will outlast all of us, including all things made from paper.

walter p komarnicki
Guest

maybe it will, but one story I’d really love to see – but probably won’t in the mass media – is how many philanthropists there have been in the Philippines compared to other nations:
I know only that compared to the U.S., there are very very few Australian philanthropists, except for people like the Myer Foundation.
Here we have had Mr Archie King, a man bigger than life who knew how to be generous.
Like they say, ‘you’ve got to give it away to keep it.’

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