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Post Forgive Greece's Debt?
Created by John Eipper on 02/02/15 3:34 PM

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Forgive Greece's Debt? (Massoud Malek, USA, 02/02/15 3:34 pm)

According to the economists Reinhart and Rogoff, since it obtained its independence from the Ottoman Empire in 1832, Greece has spent more time in default to its creditors than any other country in the world. Only Ecuador and Honduras have a worse record of meeting their debts.

In February 2010, The New York Times reported that: "In 2001, just after Greece was admitted to Europe's monetary union, Goldman Sachs helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe's deficit rules while continuing to spend beyond its means. Goldman Sachs received about $300 million in fees for arranging the transaction."

Despite Greece's default history and Greece's GDP of less than $300 billion, the European Central Bank stood behind Greek government debt of 317 billion euros, making the Greek bonds some of the hottest investments around. The Bank of America Merrill Lynch Greek Government bond index had returned more than 30% in 2014. In 2009, the yield on Greece's 10-year bond was less than 5%, but in 2012, it jumped to 33%!

It is time for Germany and the European Central Bank to forgive Greece and forget about their own mistakes. Greece, the birthplace of Western civilization, needs help to improve the lives of its impoverished citizens and solve its high unemployment problem. Germany should move some of its factories from China to Greece by making Greece a prosperous country again.

Sources:

http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all&_r=0

http://qz.com/197020/ridiculously-investors-are-about-to-let-greece-borrow-again/

JE comments:  The $300 million to Goldman Sachs does lend credence to their vampire reputation, but Greece didn't have to take those loans.  As I see it, the question is whether debt forgiveness within the EU structure is possible.  Nigel Jones told us a few days ago that Merkel has absolutely ruled out any reduction.  Harry Papasotiriou put his finger on Greece's two options:  continue with austerity, or default and see what happens. 

A middle ground would be to threaten to default and hope the other side budges a bit.


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  • Forgive Greece's Debt? (Randy Black, USA 02/03/15 6:16 AM)
    Once again, there are those among us who complain that the banks are the problem for offering loans to less than deserving borrowers. This is akin to Rosie O'Donnell blaming the Hershey Chocolate Co. because she's fat.



    As a result, we are advised that the only fair way to sweep such a matter aside is to forgive and forget the money. See Massoud Malek, 2 February.



    Once again, we are told that the crook is not the borrower but the lender.



    Is there a point in time where someone might offer, "No one held a gun to the heads of hundreds of thousands of home loan borrowers in the US during the 1980s and 1990s and forced them to buy a house with a mortgage load that the home buyer knew up front that they could not afford or were not entitled to from a credit worthiness view."



    Ditto Greece and Goldman Sachs.

    Even the writer of The New York Times article that Massoud cited said, "'Wall Street did not create Europe's debt problem...If a government wants to cheat, it can cheat,' said Garry Schinasi, a veteran of the International Monetary Fund's capital markets surveillance unit."


    The leaders of the Greek nation without doubt knew that a global bank was in the business of helping customers arrange financing for nearly any reason. The Greek government had a need and they had a willing lender that may or may not have known that the Greeks had no ability or intent of repaying the loans in order to get into the "club," aka the European Union.



    The Greeks knew that the bank in question was in the business of earning money off a financial arrangement. To claim otherwise is simply foolish and meant to obfuscate the issues that leads directly to a nation and its leaders.



    By the way, Massoud further confuses the truth by concluding that the Greeks were "impoverished." The facts overlooked is that the Greeks have a long and proud history of faking their wealth, or lack thereof, in order to avoid taxes. In 2010, Yannis Kapeleris (a Greek financial crimes authority) said, "Greece is a poor state with rich people." (He heads the recently revived financial crimes unit, SDOE.) Source:



    http://www.theguardian.com/business/2010/oct/20/greece-promises-crack-down-on-tax-evasion




    I wrote here a five years ago about the nationwide practice of tax avoidance in Greece. I recall writing about the tens of thousands of Greek citizens who avoided their property asset tax on their private swimming pools.



    It was only when Google Earth came along and helped the tax collectors to "discover" the tens of thousands of private swimming pools in the backyards of the homes in and around Athens that things began to change. From the same Guardian article: "Using Google Earth, the unit (in 2010) announced it had discovered some 50,000 'undeclared' swimming pools as well as tracing the owners of an estimated 2,500 state-of-the-art pleasure boats moored in marinas around the capital. Politicians with power cruisers costing as much as €1.5m, but which have never appeared on tax returns, have been outed.



    "We have opened bank accounts in Liechtenstein and plan to open others in Switzerland and the City of London," Kapeleris said. "We have discovered deposits that make the mind boggle, huge amounts that simply do not correspond to professed professional activity.


    "Luxury villas on far-flung islands--some belonging to Britons and other foreign nationals--that were rented without ever being declared had similarly been unearthed. We have been in touch with tax authorities in the UK and other EU states," he said. "Some of these villas are rented for tens of thousands of euros a month.


    "In a country where the black market economy has been estimated to account for nearly 30% of GDP, an estimated €30bn goes untaxed annually."


    JE comments: A poor country with (many) rich people--how many nations could we apply this to?  For Latin America, I'd say every one of them.  Randy Black convincingly documents the disease:  corruption.  But now, what about the cure?  If Grandpa has lung cancer, do we reprimand him for a lifetime of smoking and let him die, or do we try to help?

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  • Goldman Sachs and the Greek Debt (John Heelan, UK 02/03/15 6:33 AM)
    Massoud Malek wrote on 2 February: "Goldman Sachs received about $300 million in fees for arranging the [Greek loan] transaction."

    I wonder if GS ever got paid or is still owed? If not--see my comments on the possibility of a military coup in Greece.


    JE comments: Don't the financiers get their cut up front, with the commission conveniently rolled into the entire loan balance? That's the way it works with car dealers.  "Look, Buddy, you can add undercoating and deluxe floor mats for only $15 more a month."

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