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Title: Russia Holds Key Lessons for Greece on Default: Roland Nash
Source:
Bloomberg
URL Source: http://www.bloomberg.com/news/2011- ... ce-on-default-roland-nash.html
Published: Jun 20, 2011
Author: Roland Nash
Post Date: 2011-06-20 08:34:07 by lucysmom
Keywords: IMF Riots
Views: 4997
Comments: 9
European leaders fear disaster if they allow the Greek government to renege on its debt and drop the euro. But that outcome may not be as bad as it seems. The experience of Russia suggests that what looks like catastrophe before the event can be something very different after it.
After three years of crisis, rising unemployment and falling living standards in Greece and other strapped nations, the European Union and the International Monetary Fund are demanding more austerity in return for emergency loans. The logic: The pain wrought by a default and an exit from the euro would be so catastrophic that it is better to force governments to slash spending in the depths of a recession.
Neither austerity nor loans, though, are likely to solve the fundamental problem. For Greece -- as for Portugal, Ireland and Spain -- the value of the euro against other currencies is too high. As a result, their economies aren’t competitive, making it difficult for them to generate enough money to pay their debts. Meanwhile, the burden of interest payments renders them unable to stimulate the economic growth that could make their obligations more manageable.
Greece’s predicament is familiar to many governments in emerging markets, and particularly to Russia. Back in the mid- 1990s, Russia anchored its currency to the dollar, a move with similar economics to joining a monetary union. Inflation slowed and interest rates fell, but Russia quickly developed a competitiveness disadvantage. The ruble’s strong value against the dollar made Russia uncompetitive. Imports replaced domestic production, and the economy was unable to generate growth. Investors lost faith in Russia’s creditworthiness, pushing borrowing costs higher.
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#1. To: Badeye, A K A Stone, hondo68, Fred Mertz, Godwinson, go65, war, no gnu taxes, Skip Intro, ferret mike, jwpegler, brian s, mcgowanjm, Capitalist Eric, Mininggold (#0)
Throughout peripheral Europe, the first steps toward austerity have resulted in the opposite of what was intended. The cost of debt is rising and the credibility of governments is falling. National solidarity wasn’t achieved. Instead, regional governments, companies and households are doing what is rational and finding ways to avoid their obligations. Protesters are out in the streets and politicians are being voted out. The economic and political costs of resisting market pressure are rising.
Something to consider when promoting a program of austerity for the US.
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
#2. To: lucysmom (#1)
Default or exit from the euro or both.
"Keep Your Goddamn Government Hands Off My Medicare!" - Various Tea Party signs.
#3. To: lucysmom (#0)
The pain lasted only about six months, followed by a decade-long boom during which the dollar value of Russian economic output increased 10-fold and the stock market rose 20- fold.
The fall of the USSR brought about a level of desperation and crime, that still goes on to this day.
The "decade-long boom" is enjoyed by the Russian oligarchs, their hangs-on and the corrupt government workers who figure out how to profit from the deals. Everyone else can go pound sand, as far as they're concerned.
Of course, the "new" ruble replaced the "old" one... and those with strong financial or political connections were allowed to convert from (and through a variety of ways- some legit, others shockingly nasty) the old scrip to the new... For most, the government had a banking "holiday," i.e., all accounts of those NOT connected were frozen. And when they were unfrozen a few days later, the savings of normal people had been effectively siezed by the government, and the people were wiped out. As one guy told me, "I had enough saved to buy a house- after the bank holiday, I could perhaps buy a pair of socks."
Another person ran into a stroke of extremely good luck, and borrowed money to buy a new flat, just before the banking holiday. Afterwards, she was able to pay off her new flat in literally two months, because the contract was in the old scrip, and she was being paid in the new... That's the only story I've heard like that... Everyone else suffered horribly.
Holding up Russia as the example for Greece to follow, is short-sighted.
"You are not a dummy Eric, but you are a man who sees no shade of grays. Just black and white. And unless you dehumanize your political adversaries and practice psychology with no license in diagnosing mental illness where there is none, you cannot cope with politics." --Ferret Mike. Translation: 
#4. To: Capitalist Eric (#3)
Holding up Russia as the example for Greece to follow, is short-sighted.
So is promoting a program of austerity.
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
#5. To: lucysmom (#4)
So is promoting a program of austerity.
Austerity? That's basically a polite way of saying, "we're gonna' raise taxes, lower benefits, and pay the banksters to NOT foreclose on us immediately."
Of course, there's no way to pay back the debt, much less the interest.
We're not just broke, we're completely, irrevocably bankrupt. Again, the promises that were made to you (and your generation) were broken, the money stolen.
Whether the Federal Reserve continues with QE3, QE4, ad infinitum, or the govenrment simply defaults on its obligations, the end result will be the same: the safety net that you think you have, is long gone.
It sucks, TRULY it does.
But those are the facts- whether you choose to believe them or not.
Bye, rat-boy mike. We'll miss you. [NOT]
#6. To: Capitalist Eric (#5)
We're not just broke, we're completely, irrevocably bankrupt. Again, the promises that were made to you (and your generation) were broken, the money stolen.
In that case, why worry about it?
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
#7. To: lucysmom (#6)
In that case, why worry about it?
Because when the officially-sanctioned medium of exchange no longer buys anything, you'd better have a back-up plan.
DO you?
Bye, rat-boy mike. We'll miss you. [NOT]
#8. To: Capitalist Eric (#7)
Because when the officially-sanctioned medium of exchange no longer buys anything, you'd better have a back-up plan.DO you?
If I did, do you think I would tell you about it?
It is our responsibility to protect that child once that child’s born too. When we start debating a budget, let’s make sure we don’t cut 100,000 vaccines. Let’s make sure we’ve got health insurance. We seem to worship what we cannot see, but as soon as that baby’s born, oh no, we don’t want to be intrusive. Texas is going to shrink government until it fits inside a women’s uterus. Senator Leticia Van de Putte
#9. To: lucysmom (#8)
Capitalist Eric: Because when the officially-sanctioned medium of exchange no longer buys anything, you'd better have a back-up plan. DO you?LM: If I did, do you think I would tell you about it?
Orig.Question: Are you trying to protect yourself? Translated BS answer: "NO."
Bye, rat-boy mike. We'll miss you. [NOT]
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