Er, this turned in to a rambling rant. Some of it might be worth reading....
I don't agree with this analysis. Its a one sided argument against the current plan. Which is fine, but its certainly not the whole story. Part 15, the solution, is absurd. It has all the problems outlined in the previous 14 points. It is no solution, because there isn't a reasonable no pain solution. People are literally saying anything that pops in to their heads because the cant cope with the idea proposed already. I get that, but there isn't really an alternative. The country, or to put it another way, a big group of people, have gone way too far in to debt. An individual in the same circumstances would go bankrupt, but that is not an option for a country, as far as I know. In the end, they have to settle the debts. Not only that, borrow more money to survive.
What interests me is the reaction of the people. It all seems a bit civilised. There isn't much worse a government can do to its people, yet the people seems incredibly calm about it. I am still surprised that the people haven't stormed their parliament. This i the real test. How far can you push a population? Looks like you can push them pretty far.
Also, I still cant get my head round peoples who vote in governments then trying to separate themselves from the actions of that government. Or take out loans, then blame the banks for handing those loads out. Or scream hysterically about socialism, when its capitalism and its basic law of supply and demand that has caused the whole mess.
The biggest joke of all, in the UK at least, is that with a disaster caused by banks dishing out toxic loans, the banks are now under pressure to loan out more. Half the problem is people now working to pay off loans, reducing the amount of money that can be spent in general. We want them to borrow more, when their jobs are uncertain?
In the end, the problem is greed and impatience, and us the people demanding that we are loaned the money to satisfy that.
Im sorry, but IMHO, the whole system is a wreck, and no one wants to take responsibility for any of it. Governments are too interested in protecting votes, and that is making them avoid any harsh but effective solutions.
Anyway, point being, I'm not seeing any realistic long term solutions anywhere. The Cypriot idea is interesting to me, and rather than knee jerk against it, I am interested in seeing how it pans out. I mean, what if it works? The UK is said to have triple dipped, so what ever is going on here isn't much cop, we are just scraping along the financial gutter. Could a one off injection of all our money save the day? Its our country, our debt.
I'm stopping now. I'm boring and confusing myself....
Why is insolvency not an option for a country? It was in Sweden, which is doing fine now, and in Argentina more recently. Oh look, there's a whole lot more of them[1]. It only isn't an option for a member state of the EU. I sure don't see how Germany's strategy of starving those already struggling economies to death is going to work out.
For a country whose sole gdp generator is the banking sector, with that amount of foreign holdings it would be fatal. I'd only imagine how their relationship with Russia would be if Cyprus null'ed their holdings.
I may be exaggerating, but think of it as Switzerland losing it's bank sector. How would you begin to build up a new economy which, as of yet, biggest sector is banking, for instance. Think of the large population that would be instantly out of work.
At least, that's my guess at why an insolvency wouldn't be the best option for Cyprus.
Not that I don't agree that Switzerland loosing its finance industry would be a big blow for the country, but let's get some perspective: Banking is less than half the size of Switzerland's manufacturing industry in terms of income - in terms of workforce it's more like a third to a quarter. In international comparison, Switzerland's service industry isn't excessively large. I'd argue the country's economy would somehow survive it.
Ok sorry, I was wrong about Sweden - I thought the nation defaulted in the 90ies, but it was in fact 'only' a big chunk of their financial industry[1]. It seems that they came very close though, and the way they resolved it doesn't appear to be by tight economic grip either - the state poured 4% of their GDP into the system. However - and that's an important point that apparently went forgotten in the last US crisis - they also took the chance to regulate the financial industry more tightly, in order to avoid repeating the same mistakes.
Hm, while the economist's article points out how messy the process became, it doesn't makes an evaluation of how the default actually affected the argentinian economy.
I think that Greece and Argentina will make a good examples for comparisons of different approaches, when both recover economically (if they do recover, that is).
I think Iceland is a great example of a better option. Iceland is still a tourist destination with educated people providing other products and services. As long as your country has stuff people are willing to pay for you'll be ok (even if you go bankrupt).
Because Cyprus doesn't have the money to back the insurance on accounts less than 100,000€. If Cyprus did the same thing as Iceland, then a lot more people would be losing a lot more money.
This is the foundation or your argument and it is wrong.
At best, it's an assumption.
The best treatise on this subject, imo, is David Graeber's : Debt: The First 5000 years.[0]
Graeber is an anthropologist -- he's about to take the Chair as Professor of Anthropology at LSE -- so it is far from being a dry financial read.
It's a fascinating text that will, if not change, certainly make you rethink
any assumption you have about debt and money. In fact, in the early chapters he
disconnects debt from money entirely.
From page 2: "Surely one has to pay one's debts". It tackles your comment head on,
but not in the way you might expect.
The country is insolvent too, has been unable to borrow for some time. This makes the options available rather limited. Iceland had little government debt when it had problems.
I don't agree with this analysis. Its a one sided argument against the current plan. Which is fine, but its certainly not the whole story. Part 15, the solution, is absurd. It has all the problems outlined in the previous 14 points. It is no solution, because there isn't a reasonable no pain solution. People are literally saying anything that pops in to their heads because the cant cope with the idea proposed already. I get that, but there isn't really an alternative. The country, or to put it another way, a big group of people, have gone way too far in to debt. An individual in the same circumstances would go bankrupt, but that is not an option for a country, as far as I know. In the end, they have to settle the debts. Not only that, borrow more money to survive.
What interests me is the reaction of the people. It all seems a bit civilised. There isn't much worse a government can do to its people, yet the people seems incredibly calm about it. I am still surprised that the people haven't stormed their parliament. This i the real test. How far can you push a population? Looks like you can push them pretty far.
Also, I still cant get my head round peoples who vote in governments then trying to separate themselves from the actions of that government. Or take out loans, then blame the banks for handing those loads out. Or scream hysterically about socialism, when its capitalism and its basic law of supply and demand that has caused the whole mess.
The biggest joke of all, in the UK at least, is that with a disaster caused by banks dishing out toxic loans, the banks are now under pressure to loan out more. Half the problem is people now working to pay off loans, reducing the amount of money that can be spent in general. We want them to borrow more, when their jobs are uncertain?
In the end, the problem is greed and impatience, and us the people demanding that we are loaned the money to satisfy that.
Im sorry, but IMHO, the whole system is a wreck, and no one wants to take responsibility for any of it. Governments are too interested in protecting votes, and that is making them avoid any harsh but effective solutions.
Anyway, point being, I'm not seeing any realistic long term solutions anywhere. The Cypriot idea is interesting to me, and rather than knee jerk against it, I am interested in seeing how it pans out. I mean, what if it works? The UK is said to have triple dipped, so what ever is going on here isn't much cop, we are just scraping along the financial gutter. Could a one off injection of all our money save the day? Its our country, our debt.
I'm stopping now. I'm boring and confusing myself....