Will Greece Default on it's debt?

Solution.

All the people who bought Government Bonds in the relevant countries took a risk. They benefited from better than average interest rates, but with a small risk of losing money.

Can't the Worlds leaders meet and agree on the fact that these debts are too large for the individual nations to pay off?
Isn't it time they downgraded the value of these debts so the countries can settle them and not become stagnated?

Or am I being simplistic?

 

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If you "downgrade", which means to me bankruptcy, then your nation would default on all payments and the entire economy would come to a halt. Money wouldn't be worth anything for awhile but eventually it would start to pick up again and the whole cycle would begin. The big problem , if an economic crash isn't bad enough, would be those in charge can do the same thing over again and start borrowing more money to pay the debts instead of cutting costs when needed. So the circle remains unbroken, the rich who control everything now would control everything once again.

 

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I must admit, I don't really understand the nature of these debts.
I am happy to be educated, if someone can put it in layman's terms.

Some of it is in bonds I think.

A lot of the money seems to have been owed by the banks, and then taken on by Governments in order to save the banks.
But other debts are Government debts.

But who did the banks owe the money to?
And who did the Governments owe the money to?
You never seem to see that information.
Perhaps some more financially aware person could explain Greece's debt to us in concrete terms.

eg Greece owes x amount.
It owes y amount to ...........
It owes z amount to ...........
etc

 

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Greece owes allot of money to different things. They owe over 200 billion euros now to the UK because they were lent that money last year so that they didn't default. They owe more money to other banks for the money they borrowed from them during the last 5 years as well. Goldman Sachs was one of the firms that lent money to Greece just as another concrete term.

 

It's all round and round in circles, isn't it?
But who is the money really owed to?
Once you've cancelled out all the complications.

I doubt that the UK could have lent Greece 200 Billion.
Could be wrong.
Could you check that?
EU perhaps, but that's all baloney. No money has passed hands at all.

This is all about being in denial.
The problem is all on paper, and can be sorted.
But some people are going to lose out.
Maybe that even includes people who invested in banks to some extent, because for years banks have given interest rates higher than inflation.
People should lose money according to the risk of their investments.
It needs to be sorted.
At the moment all that is happening is money juggling.

 

Yes Greece will default if that means some who has lent funds to Greece will not get them back when promised - be forced to take a "haircut" or roll them at full face values into new bonds maturing later:

By edit on 22 July: "... late Thursday, Germany’s Angela Merkel confirmed that Greece would receive a Euro109 billion aid package. The agreement includes lower interest rates, private sector participation*, and the reduction of Greece’s debt via the exchange of existing bonds.

According to a statement from EU Commissioner Rehn, Greece will receive the necessary funding to support its adjustment towards stronger public finances and competitiveness. The EU group believes that the lowering of the interest rates and the extension of the maturities of the EU loans for Greece will substantially improve the country's debt sustainability and refinancing profile. ..." From: http://www.topstockportfolios.com/r.../1/0/99f116fe5652a204d25c0c73e51073a681840178

*Probably not really true - those mainly French and German banks will be paid in full, but subject to a new tax to help keep the voters thinking that they are not being asked to pick up the tab - the difference between face value of bonds and lesser amount Greece pays. Modern governments on both sides of the pond are controlled by the wealthy with profits assured and loses socialized to the tax payers. This bailout "socialism for the rich" is a much larger expense to tax payers (too stupid to know it) than food stamps etc. doing good for the poor, which the rich and their right-wing / tea-party followers make sure you hear about.

 

After the default, here is part of a recovery plan for the "out of Euros" Greece:

Most everyone with any wealth wants some way to protect its purchasing power so many are buying gold (and some out of dumb habit, like horse running back to his stall for "safety" in a burning barn), are buying US Treasuries. It is the governments printing ever more fiat money, in a "currency war" trying to boost their export by devaluing their currency faster than other can that is driving the rise in gold which governments can not print more of.

Trouble with even a small bar of gold is you would never use it to buy a loaf of bread, etc. - Gold, even gold coins, are too valuable for everday purchases. Pure silver coins would serve that need well.

So Greece, back on the Drachma, should coin beautiful, nearly pure silver Drachmas, and sell them globally for a ~5% percent more than their silver value. I.e. make 10, 8, 6, 4, 2, 1, 0.5 & 0.2 oz Drachma coins. Roughly coins worth $400, down to $40, $20, & $8 in value with silver at ~$40/oz.

I don't own any gold but would probably buy about $1000 worth of these intrinsic and historic value Drachmas to have some real money when fiat money becomes exactly what it really is - just paper or electronic bits.

I.e. Greece would get new jobs in the mint (which they could tax) and about $50 from me more than the silver costs them. If in EU and US 300,000,000 people did likewise, that is 15 billion dollars of new "top line" income. Won't pay all their debts, but it would help.

 

will double dips happen?

 

again, two consecutive quarters with negative GDP growth may not happen before the run to get out of the dollar (into gold and Yuan mainly when it more freely trades in FX). Then after the run, it will be a rapid slide down into deep long lasting depression - I don't know if that should be called a "double dip" or not. I would be inclined to call the worst ever depression in US and EU the society collapsing catastrophe, not a "double dip."

 

is the problem due to overspending by government and individuals? And the welfare system of the West is not sustainable?
Billy T answers in the post (while editing size):

Yes, decades of spending more than income is a major cause of current economic problems. If unemployment were < 5% and average salaries were not dropping in purchasing power, modest reforms to "entitlements" would make then sustainable IMHO.

 

"... According to Reuters, the Greek media reports that measures likely to be announced {today, 21Sept11} include accelerated layoffs of government workers, pension and wage cuts for civil servants, a hike in the heating fuel tax and an extension of a previously announced property tax.

Reuters went on to note that the troika will return to Athens early next week to continue talks on the next batch of aid.n ..."

Probably no default in October 2011, but later.

 

I would love to get JP Morgan Chase get prosecuted for teaching Greece to hide it's debt, then see it default on the debt, then see the banks that loaned the money die or take the hit and live, then see them sue JP Morgan Chase for teaching Greece to hide it's debt, then see JP Morgan Chase die in a fire.

http://www.nytimes.com/2010/02/14/business/global/14debt.html
http://georgewashington2.blogspot.com/2011/07/goldman-bet-against-its-european.html

EDIT: GOLDMAN SACHS TOO - omg...i didn't even realize, fkin bank should be dead right now...they got a bailout right??

 

I think Greek constitution prohibit layoff of government servants.

 

I doubt that, but even if true, they will not be paid when there is no more money. Not being paid would be the same as a "lay off."

 

Since I can and you use red, I'll again answer inside your post:
What is treasury note?
A "note" is some fiat paper money and conveys the idea if it will not be of long duration. Some dollar bills are Treasury notes, but when contrasted with "Bills" & Bonds, I think the note has greater duration than the Bill (Max duration a year?) and less duration than Bond. - This is only a rough / quick answer -check with dictionary etc as this is probably not fully correct.

Why use capital letter "Treasury"?When you use the capital it is a reference to some government's agency that can store and issue fiat money (or even hold non-fiat money) especially the US Treasury. I.e. with the capital, it is a "proper name" like tom needs to be Tom.

 

Nowadays, living in Greece is a real tragedy. It is not the financial situation that brings you down, it is people's faces, which are more sad than ever.

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If we leave the country, where will we go? ”

Everyone is pessimistic about tomorrow and I get angry when I realise that the crisis has nothing to do with the common man, the common labourer, or the common journalist like me, who has to work more than 10 hours a day for 600 euros per month. Would you like to live like that? Did I choose to live like that?

I am 23-years-old and my future is committed to the debt crisis. There are taxes on my salary, taxes on my home, taxes for the air I breathe! I don't know how long this is going to last.

If we leave the country, where will we go? Italy and Portugal has the same problem along with Spain and unemployment is rising in Germany.

I don't know if leaving is an option. Maybe in the 70s it was an option when our grandfathers left and went to America and Australia to seek out new opportunities but now things are different. It is not so easy.

 

How long does Greece need help?
And what is its capability to pay back ~480b USD debt?

 

Germany approves bailout, stock will jump!
The world is saved!
We can dance and drink vodka again!

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Perhaps! All those diverse European nations would just have to get together and work out a solution like we do in Washington on our big economic problems (!)

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Most big governments are run by coilitions in a parlamentary system, but we are attached to the Constitution as our "Bible" and so are stuck with its faults as well as virtues. But Europe isn't even a united states of Europe. It is in an even more hopeless situation.

brough
http://civilization-overview.com

 

My understanding is that the Greek government spent a good decade spending a lot more money than it had and sold bonds to provide those funds. Banks in Europe and to some extent all over the world, bought those bonds, those I.O.U.'s and provided the cash she needed in return for them.

It worked as long as Greece could borrow more in order to pay the interest on those bonds. But that has become ever more difficult because it has come to be perceived that she is becoming unable to even pay the interest much less pay off the loans. Thus, the value of the bonds falls which, in turn, means that their interest rates rise. She gets behind and has to sell more bonds which, at the same interest rates as the old ones brings in much less money. The higher interest rates set her back further and she has to keep laying off workers and impose ever heavier taxes. That causes their whole economy to shrink, making it even more difficult for the government to find enough money to meet its obligations.

I can think of no way out of this mess. Can anyone else? Greece will have to default if not this year than in the next, and that will bring on a crisis in the world's banking system as the vicious cycle then moves on to Italy and Spain. Like the mortgage crisis, it would hit every country.

brough
http://civilization-overview.com