Quote somebody on that, OK?
The only real answer is most of Greek debt being written off, one way or another.
The ECB can buy up all Greek debt at a steep haircut using Euro bonds as payment, raise fees on member banks to pay off the bonds down the road. They could then throw Greek paper in the trash & forbid Greek borrowing for the term of the bonds. Greeks would probably be in OK shape if they weren't paying so much vigorish.
Not a chance, because they'd be admitting that Euro banks are as culpable as Greeks.
Where are you getting the bolded part from? Personally, I'd like to see a cite for that because that's not normally how lending works. Sure, you might have underwriting fees for a bond issue but to say that they reach 25% of the loan value is just absurd.That's an interesting way to put it. One needs to understand that all the money loaned to Greeks was created out of the thin air of fractional reserve banking, non-existent until it was loaned out. One also needs to understand that the transactional fees charged up front were often enormous, reaching a quarter of the total loan value. So, a bank gets to create $1B of debt out of perhaps $100M in assets, collect $250B of that to put in the pockets of the principals & execs. Greeks get $750M but start paying interest on $1B before the ink is dry.
I once talked to a few Germans about the Greeks. They were pissed off the Greeks retired earlier, had better pensions, and were deadbeat tax payers. All true. However, when I asked them why they kept lending them money they had varied answers. When I pointed out that because they kept lending the Greeks money the Greeks bought German goods that employed Germans, so they were enabling a co-dependency.
The Germans didn't like me pointing that out.
I once talked to a few Germans about the Greeks. They were pissed off the Greeks retired earlier, had better pensions, and were deadbeat tax payers. All true. However, when I asked them why they kept lending them money they had varied answers. When I pointed out that because they kept lending the Greeks money the Greeks bought German goods that employed Germans, so they were enabling a co-dependency.
The Germans didn't like me pointing that out.
The goods exists and there is demand for them. If the Greeks can't buy them, someone else will.
The productive sector is never the problem (unless they are producing products that only exist due to subsidies or other form of non free market forces).
The goods exists and there is demand for them. If the Greeks can't buy them, someone else will.
The productive sector is never the problem (unless they are producing products that only exist due to subsidies or other form of non free market forces).
The goods exists and there is demand for them. If the Greeks can't buy them, someone else will.
The productive sector is never the problem (unless they are producing products that only exist due to subsidies or other form of non free market forces).
The goods exists and there is demand for them. If the Greeks can't buy them, someone else will.
I believe you are mistaking an attempt at humor with a history lesson.I believe you are mistaken the Roman empire with the Greek city states.
How dare you question the voices in his head, sir!Where are you getting the bolded part from? Personally, I'd like to see a cite for that because that's not normally how lending works. Sure, you might have underwriting fees for a bond issue but to say that they reach 25% of the loan value is just absurd.
Agreed. It boggles my mind how anyone would feel that giving people money so that they can buy one's manufactures is a fiscally sound idea.The goods exists and there is demand for them. If the Greeks can't buy them, someone else will.
The productive sector is never the problem (unless they are producing products that only exist due to subsidies or other form of non free market forces).
I don't know what EU banking regulations are like but I assume that there not substantiallly different from the US. In that case the money would indeed be lost but it would come out bank equity capital not deposits. I assume that those are insured. But the money would of course have to come from somewhere. The most likely candidate would be the ECB since they can create what's needed and buy the defaulted bonds at some percentage of their face value.The far left often forgets that while fractional reserve banking allows lending of more than one has on account, losses are real money. If the combined banks write off 200 billion euros, that is 200 billion of people's deposits which are lost, and the reduction in money available to be lost is multiplied by the fractional reserve inverse. That is a serious blow even to a polity as large and wealthy as the EU.
I believe you are mistaking an attempt at humor with a history lesson.
I once talked to a few Germans about the Greeks. They were pissed off the Greeks retired earlier, had better pensions, and were deadbeat tax payers. All true. However, when I asked them why they kept lending them money they had varied answers. When I pointed out that because they kept lending the Greeks money the Greeks bought German goods that employed Germans, so they were enabling a co-dependency.
The Germans didn't like me pointing that out.
I don't know what EU banking regulations are like but I assume that there not substantiallly different from the US. In that case the money would indeed be lost but it would come out bank equity capital not deposits. I assume that those are insured. But the money would of course have to come from somewhere. The most likely candidate would be the ECB since they can create what's needed and buy the defaulted bonds at some percentage of their face value.
Correct, to my understanding. Individual depositors would not lose money, it would be the taxpayers of the individual nations guaranteeing the loans. But the overall deposits would drop by the losses. Although it is possible that money could be taken from other areas and programs to make up part or all of the losses. My point was that fractional banking creates money, losses must be made up from actual money.I don't know what EU banking regulations are like but I assume that there not substantiallly different from the US. In that case the money would indeed be lost but it would come out bank equity capital not deposits. I assume that those are insured. But the money would of course have to come from somewhere. The most likely candidate would be the ECB since they can create what's needed and buy the defaulted bonds at some percentage of their face value.
No problem buddy. I'm a caustic old bastard, but I do hope things work out for the best for you and your fellow Grecians. At the least, hopefully you get enough immediate aid to reopen your banks and put off payments for a few years to allow your economy to recover.My bad then
No problem buddy. I'm a caustic old bastard, but I do hope things work out for the best for you and your fellow Grecians. At the least, hopefully you get enough immediate aid to reopen your banks and put off payments for a few years to allow your economy to recover.
Pretty much. I don't think that €350B is enough in terms of all of the banks holding Greek debt to trigger any ECB buying. But since most of the banks involved are the central banks of individual countries, they would still have to make up the losses somehow. Reading between the lines of the articles I've been seeing, I'm guessing that will mean it has to come from taxpayers - which is why any deal will have to be voted on by the legislatures of individual countries such as Germany and Finland.Like the TARP program.
Looks like Germany is forcing a Grexit under the latest proposal, but of course ducking responsibility and instead presenting terms that Greece would have to walk away from, so they can then blame Tsipras.
Without a doubt. The only questions are how much damage wil be inflicted on Greece and her creditors before the proper path becomes clear.Thanks, I believe we will get over this thing eventually one way or the other.
Pretty much. I don't think that 350B is enough in terms of all of the banks holding Greek debt to trigger any ECB buying. But since most of the banks involved are the central banks of individual countries, they would still have to make up the losses somehow. Reading between the lines of the articles I've been seeing, I'm guessing that will mean it has to come from taxpayers - which is why any deal will have to be voted on by the legislatures of individual countries such as Germany and Finland.
Anyway, a leaked document show that the necessary amount for The Bailout Part Trois will be nearly 100B.
The way I understand it, about 2/3 are owned by the central banks of individual countries. In that case, they had to pay actual euros for the Greek bonds that they bought. Only the ECB can create new money, not individual central banks. You can think of it as the difference between the various Federal Reserve regional banks and the FOMC. Only the fed through the FOMC can print money, no individual bank can.Make up the losses? Why? For the sake of the bankers? Make them eat it. The money they're owed didn't exist before they lent it to Greece, nor did the fees they were paid nor the interest they've "earned".
This is only as hard as they want to make it. The ECB can buy up Greek debt for whatever it will fetch, issue Euro bonds for bookkeeping purposes, pay off the bonds with increased fees from member banks. Write off enough Greek debt to get payments down to something Greece can actually make. Forbid further lending to Greece over the term of the bonds.
Bankers don't lose anything they had starting out & everybody else wins.
Greece got free money? When you look at it like that, so did the bankers. So does Mississippi, for that matter.
This is only as hard as they want to make it. The ECB can buy up Greek debt for whatever it will fetch, issue Euro bonds for bookkeeping purposes, pay off the bonds with increased fees from member banks. Write off enough Greek debt to get payments down to something Greece can actually make. Forbid further lending to Greece over the term of the bonds.
The way I understand it, about 2/3 are owned by the central banks of individual countries. In that case, they had to pay actual euros for the Greek bonds that they bought. Only the ECB can create new money, not individual central banks. You can think of it as the difference between the various Federal Reserve regional banks and the FOMC. Only the fed through the FOMC can print money, no individual bank can.
So if those banks lose money, it has to come out of someone's pocket. That's going to be the taxpayers of each country - or so I assume. I don't think there's any mechanism for the ECB to reimburse losses.
The only way that could happen would be for the ECB to buy the bad bonds from the individual state banks. But I don't think the ECB is as independent as our federal reserve. So public opinion, especially from Germany and France, is going to matter.