These charts demonstrate how private loans to Greece have been transferred wholesale to the public ledger, i.e. taxpayers.
I have heard this mentioned by others but don't understand it.
Who were the private loans from and who were they to? Individuals? Corporations? Greek Banks? Other nations? The ECB?
Once I understand which loans we are speaking of, then what is the mechanism by which they are transferred to the public ledger (taxpayers). (Is this the taxpayer bailout of the insolvent Greek banks?)
Thanks in advance. And I so appreciate having financially sophisticated people here to ask these questions to!
I am by no means financially sophisticated, but I believe what happened is the initial loans were from mostly French and German banks. As a direct and planned result of the various EU-engineered "bailouts" (of EU banks, not Greece), the new loans from the EU Stabilization fund and funds pledged by EU nation-members, the initial private loans were paid off with the new public EU loans.
This might shed additional light:
A Pain in the Athens: Why Greece Isn't to Blame for the Crisis
"We’ve never understood Greece because we have refused to see the crisis for what it was—a continuation of a series of bailouts for the financial sector that started in 2008 and that rumbles on today. It’s so much easier to blame the Greeks and then be surprised when they refuse to play along with the script."
… but now add in legally required spending. That is, money that, officially, you spend, but the government mandates that you spend it.
Include licensing, health insurance, auto insurance, social security, workman’s comp, unemployment insurance…
I think we can add in another 20% at least, bring the US to 55%.
Oh, and don’t forget city spending and public-university spending.
The quoted Greek debt is just money lent to the Greek government. It is sovereign debt.
CHS noted another classification of debt that was more expansive - total external debt - which includes both government and private debt (that is held by foreigners) but I am not sure if that figure was net or gross.
If net, that means that after you subtract all the debt instruments held by Greeks, such as French bonds or BMW debt, amounts to nearly $570 billion.
But this number is rarely bandied about in the press. Everything you read refers to the total outstanding sovereign debt of Greece which would be equivalent to the $18 trillion of the US…or possibly the $14 trillion that exists outside of the SS system, depending on how things are being counted in Greece…
Greece cannot support it's present population with olive groves and goats cheese Kevin.
Or can they?
The Limits to Growth study says that capital will have to be moved from industry to agriculture. It would appear that Greece is showing the way.
Perhaps a radical re-think of their agricultural practices may produce surprising results. I am not prescribing anything, but Permaculture, food forests and Mycelia spring to mind.
Does anyone know what the natural environment of Greece was before man got there? It is my contention that the environment is very degraded and neglected and is capable of much improvement. And will yield surprising results.
However, the people will need to abandon the present industrial rewards system. They will all have to row together, or starve.
The problem then becomes how to defend their creation? Other, less farsighted people will see Greece as a green and virgin empty land, just waiting for "improvements".
This is a pattern that has many presidents. Terra nigra of the Amazon, the chanampas of Mexico, the carefully manicured meadow-like bush of Australia. There are many examples. Wasn't the east coast of the USA covered in Beech nuts?
I am not imposing any one-size-fits-all means of getting our daily nourishment Robie. Neither am I excluding any.
However the thought of a pleasant walk through a mature food forest and eating whatever presents itself for free, without shopping, with no dishes to wash and all that is required of you is to bury the seed in some possibly viable soil is just too attractive.
Instead of rapeing the Earth we could be making love to her.
it is easy to give and get wrong ideas when these typed means are all we have for communicating, we haven't devolved sufficiently to employ such.
a poor and reluctant typist
Ok. They have just agreed to a third bailout loan in return for structural reforms. This is my order of events
Greece will increase their debt to GDP ratio as a result of this bailout loan but this doesn't matter because it buys them time to increase tax receipts, reduce costs such as pensions, welfare state, military spending etc. and generally get their finances on a sustainable footing
When they have their finances sorted out, they will default on 100% of their debt.
European tax payers will foot the bill, which will be even larger now because of this bail out.
… anyone's guess. My guess is Germany will leave the EU to stop footing the bill for rest of Europe when they start to default, if they can.
Fed spending (3.8) + State (1.6) + Local (1.2), or about 6.8, or about 40% of GDP
[1] You, as do many others, note that all public spending must be paid for by the public sector, but whether education, garbage collection, medical care, roads (toll), transit, etc are public or private sector does not much matter in the end in terms of (end-user) costs. European countries have a larger public sector but also more public services, which makes a comparison between any two countries much more complicated than it seems at first blush.
[2] Another point: The Federal debt is about 6x revenue. In Greece it is less than 3x, and in most European countries it is under 2x [Government spending comes from revenues, not from GDP]. On top of that, Fed debt does not include GSE liabilities and those at other levels of government, whereas in Europe the public debt is the consolidated public sector debt.
[3] The automatic rebalancing of trade deficits by currency trades that you mention does not work half as well in practice as it does in theory. There are numerous studies on this topic. It is kind of like the doctrine of free trade and Ricardo's comparative advantage. Many studies show that in practice this does not work as predicted. The US$ example of printing money (reserve currency) is also quite different than is the case for Greece and other countries.
I do like to read your analyses, by the way. You are one of the most incisive commentators I know about.
…it seems like (IMO) we're entering a new stage of the financial "crisis" (and who never lets a good crisis go to waste?): from bailouts to strip-mining sovereign assets (which can include bail-ins too, I suppose [hi Cyprus!]).
It's developments like these that make me feel as if this will go on for another decade-plus before reaching some sort of endgame state.
There are still so many assets left to loot. The "game" is not even half over.
The bad news: this is social, financial, and political engineering on a planetary level. And it's not an egalitarian full-of-opportunity world that's being created.
The good news: IMO we have quite some time (10-15-20 years?) before TPTB run out of things to loot and we reach the real termination of the crisis (war? revolution? utter collapse?). (Having said this, it'll all come crashing down later this week, right? <smile>)
The bad news: they're going to come for everything you have too, given enough time.
The good news: you have plenty of warning and if diligent, crafty and hard-working, you can make it difficult (or perhaps more trouble than it's worth) for them to expropriate your assets. So get to it…
Do you have a source for this number? I think this must include the Indian Army, which was a separate entity, and the British Army. Clearly they worked closely together, but in terms of soldiers from England serving in India, I think the number was still very small at partition in 1947.
Thank you for making these points, Reb, all good. We can also add the complexity of assigning services to public or private in the US, for example, healthcare is public (Medicare etc.) and private, but much of the private spending is controlled by the state, i.e. quasi-public.
How is defense spending categorized when contractors are private firms but the funding is govt? Same issues arise in higher education and other sectors. Govt. probably accounts for more than 40% if we count mandated spending etc.
That's a good point about rebalancing being of mixed efficiency. Some people feel labor market flexibility is as key as currency rebalancing, no doubt that's also a mechanism but terribly disruptive. I suppose global wage arbitrage is another mechanism.
Flexibility and speed of adaptation are important but hard to quantify. This may be one reason why the US gets away with a much higher state-revenues to debt ratio. That, and the reserve currency as you mention.