Thursday, June 23, 2011

No "Right" To Opt Out!

How is it that the Greek people don't understand that their country is broke? Iceland understood it and forced their government to NOT bail out the banks. Their economy is picking up again, so short term pain led to long term gains.

Greece is only the first in serious trouble, Ireland, Portugal, and Spain are next. New Zealand went through this years ago and they recovered by selling off state assets, changing their health system, and getting rid of subsidies to farmers and businesses. What the Greeks fail to understand is that no-one is willing to buy their bonds anymore.

“After all, the scale of Greece’s problems means that markets may be reluctant to lend to Greece after the second bail-out package expires. What’s more, given the widespread opposition to the additional austerity measures, there remains a risk that the Greek government might eventually choose to default, regardless of whether a bailout package is in place.”
At some point, Germany is going to stop propping up these EU nations and start saving itself. If you have a mortgage and can't make the payments, sooner or later someone is going to come and boot you out onto the street, and everything will be lost. Greece should start packing its bags.

I guess we should look at Canada and see how the greedy unions are acting the same as the Greek people, expecting the government to bow down to their demands. At some point, the goodies have got to end, and the socialists just don't understand why. The NDP wants the postal strike to continue. So far it hasn't impacted our family except for fewer flyers. It is however impacting businesses big time, but it appears that the NDP would prefer to support unions over businesses. Why am I shocked?

Unions take dues from people who have no "right" to opt out. If that isn't communism/socialism, I'm not sure what would qualify.  Unions can even force members to donate to the political party that they dictate to be, the one to vote for. Unions could use the money they appropriate from their members to fund pensions, but that would put the onus on them to succeed, and that is simply beyond them.  


John Docherty, Stirling, Ontario said...
This comment has been removed by the author.
Droog said...

Some specifics John Docherty ? Blanket statements like yours don't add anything to the discussion, let's talk about the specific facts.

L said...

There should never be a requirement to pay union dues, as a condition of employment. This needs to change, as it violates freedom of association. John D. your comments add nothing to any discussion.

RayK said...

"There should never be a requirement to pay union dues, as a condition of employment. This needs to change, as it violates freedom of association."

Unions cannot force employees to pay dues.

Unions can and do negotiate contracts with employers that make them the exclusive provider of a certain service (security guards, pilots, electricians or labour sevices in general), but this is no different than Coke signing a contract with McDonalds to make them the exclusive provider of beverages for their restaurants.

If someone wants to work making beverages for McDonalds they have to work or deal with Coke. If someone wants to work in certain jobs for Canada Post, they have to be a member of CUPW.

liberal supporter said...

Life with unions is annoying.
Life without unions is frightening.

Eskimo said...

John Docherty, your lack of any sense of photogenic appeal is both staggering and frightening.

RayK said...

I agree that the above blanket statement doesn't add much to the discussion, but I also agree this post displays a complete misunderstanding of the situation in Greece.

First of all, it isn't Greek banks that have a debt problem, but the country itself. So, the problem is very different than that which faced Iceland.

Greece's exorbitant debt load is the product of their previous two term conservative government that entered into a series of agreements with international investment banks to borrow far beyond Greece's capacity but keep those debts "off the books". These agreements came to light during the 2008 financial crisis, after which the current social democratic government was elected. Greece's current situation has nothing to do with "socialism".

(Chart: Look at how Greek debt exploded when the deals made by the conservative government were uncovered and had to be rolled into the official national debt.)

Greece now faces two choices: try to pay off the debts or default.

Germany, France and the European Central Bank hold a massive stake in the repayment option. Banks in other European countries hold most Greek debt. If Greece defaults, then those debts become worthless, European banks lose hundreds of billions of dollars, the Euro takes a hit and this quite possibly sets off a chain reaction that sends the whole European and global economic systems into crisis.

As it stands now, if Greece were left to stand on its own, it would certainly default. National debt isn't like a mortgage. Even if Greece could cut spending and raise taxes enough to eliminate their entire deficit over night, it would still default if left to its own devices.

Government bonds come due every day. That means countries have to "roll over" those bonds--issue new bonds to pay off the old ones--even if they are paying down debt overall.

Since Greece is now in risk of default, it winds up paying a higher interest rate on all of its "new" debt (keep in mind, this isn't really new debt; it's just been rolled over). If Greece had to borrow this money on the open market, it would pay a higher overall interest rate each day as it rolled over its bonds. That higher interest rate would make it less likely that Greece would ever be able to repay all of its bonds even over time. That increased risk would drive interest rates even higher, and so on, and so on. Greece would descend into a vicious debt spiral until it had no choice but to default.

RayK said...

To avoid this, Germany and the ECB are offering Greece a deal. They're saying "take the difficult and unpopular steps (tax increases and spending cuts) to put yourselves in a position to pay off your debts going forward and we'll take over large portions of your current debt at reasonable interest rates until the market stabilizes".

This has nothing to do with realizing that the "goodies have got to end". Greece's decision is to weigh the impact of defaulting (higher interest rates in the future and the secondary impacts of a possible economic collapse outside Greece) against the impact of spending decades paying down the interest and principal on the debts run up by an irresponsible deal struck by a conservative government and a bunch of greedy bankers. Either way they are deciding how their country can provide the most "goodies" (goods and service) possible for their people. It's just not clear which path will do that best.

The Greek people are making the same argument that you are--that Greece will never be able to repay these large debts, so they should just default. They believe that the repayment option is really only being pushed so hard because of the influence of the very same greedy bankers who got them in this situation to begin with. The Greek conservative party has opportunistically decided to jump on board with the default position by opposing the social democratic party's efforts to raise taxes and cut spending to pay off the very debts the conserevative party ran up when they were in power.

I for one think Greece will almost certainly be unable to pay off its debts in the long run, and will thus almost certainly default at some point--probably sooner rather than later. But that will have nothing to do with 'the Greek people realizing their country is broke', 'the goodies having to end' or 'packing their bags'. It will be the Greek people making an informed, self-interested choice to say "screw you" to the bankers and Jim Flaherty in order to do what's in the economic interest of their people, not someone else's.

And, by the way, what's with the line "the Greek people, expecting the government to bow down to their demands"?

Yeah, it's called democracy!

hunter said...

Ignore John Docherty, it is the troll that pretends to be neoconservative. Basically, the troll is an a$$.

lqz said...


You make some good points. However it doesn't stop being "socialism" because a "conservative government" was doing it. The fact is the Greek government went into debt promising their people a lower retirement age than the Germans among other things. The Greeks as a people bought into the idea that their government could give them every thing, without asking how they are going to pay for it. The sad part is, it would appear that the "Greeks" didn't think it should be them paying for it.

read: Beware of Greeks Bearing Bonds

"He just took it for granted that I knew that the only Greeks who paid their taxes were the ones who could not avoid doing so—the salaried employees of corporations, who had their taxes withheld from their paychecks. The vast economy of self-employed workers—everyone from doctors to the guys who ran the kiosks that sold the International Herald Tribune—cheated (one big reason why Greece has the highest percentage of self-employed workers of any European country). “It’s become a cultural trait,” he said. “The Greek people never learned to pay their taxes. And they never did because no one is punished. No one has ever been punished. It’s a cavalier offense—like a gentleman not opening a door for a lady.”

The only issue I have with the idea that the Greeks should default. Is that no one mentions that the gravy train will come to an end. There will be no "freedom 52". The government will be broke and will not be able to keep its promises. If the Greek people are ready for that then they should default. If they are not then the government has no choice but to continue to play the game.

Remember Iceland is doing well because they had a banking problem. Greece has a big government problem. Iceland walked away from "bank debt", Greece has to walk away from "government promises".

If anyone should be in the streets it's the Irish. They can do what Iceland did, because like Iceland they have a "bank debt" problem, which should be of no concern to the Irish people.

RayK said...

Anecdotes--such as those in the article to which you link--aren't evidence of all that much.

Greeks have a relatively low retirement age, but they also work more hours per capita than any other developed country except South Korea.

Greek government spending as a percentage of GDP is average amongst European countries. If this level of spending is just plain unsustainable, then how is it being sustained right now all over Europe?

The problem in Greece is simply that--unlike other European countries--the government wasn't charging high enough taxes to pay for its spending. That's not a socialist trait.