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Debtocracy, the Greek debt and Odious debt
Posted: 07 October 2011 08:53 AM   [ Ignore ]   [ # 16 ]
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Chris Crawford - 06 October 2011 09:27 PM

It’s a question of short-term pain versus long-term gain, and I do not envy the position in which the German people find themselves. I myself would not know what to do in their place. My uninformed opinion is that, in their place, I’d pretty much do what they’re doing: offer the Greeks a bailout with very tough terms requiring genuine, fundamental reform and economic restructuring. If the Greeks turned down the offer, I’d let them collapse and prepare to depart the euro zone.

With all due respects to the Germans who are northern Europeans, hardworking and prudent, the easier going southern European Greeks would perceive the terms for a German bailout (if it is sufficient at all) as imposing their values on them. One must keep in mind that these are two distinct countries with different national cultures and work attitudes.

While the erozone politicians cannot decide what to do, the ECB and the Bank and England are taking action ASAP.

From this article
HERE

President Barack Obama urged European leaders to act faster to tackle a sovereign debt crisis that threatens global economic recovery.

The European Central Bank threw a lifeline to commercial banks by turning up its liquidity pumps to provide longer-term cheap money for the growing number of European lenders which have seen wholesale funding dry up as market confidence ebbs.

The moves came amid fears that Greece, the most heavily indebted euro zone state, may default within months, setting off a chain reaction of sovereign downgrades and bank failures.

And this article at the BBC

Bank of England governor fears crisis is ‘worst ever’

Bank of England governor Mervyn King has said this financial crisis could be the worst the UK has ever seen.

“This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever,” he said.

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Posted: 07 October 2011 09:05 AM   [ Ignore ]   [ # 17 ]
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TromboneAndrew - 07 October 2011 08:23 AM

I agree with Chris, that odious debt can’t apply to Greece. There isn’t actually a regime change, for one thing, so the difference between Greece and a regime is inconsequential. Also, how do you punish the regime? If it’s out of power, you can’t because it presumably doesn’t exist any more. If it is still in power, the punishment can only be to overthrow it . . . are you suggesting that western Europe militarily invade Greece and install a different government?

Odious debt is not about a regime change at all. It was created by the present regime which is corrupt.

As such, the present regime can be held responsible for it.

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Posted: 07 October 2011 09:19 AM   [ Ignore ]   [ # 18 ]
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In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

In other words, the regime should be solely accountable for its mismanagement of the finances of the country and not the people who should not be made to pay for the debt by austerity enforced by the regime.

Oh? And how is the regime separated from the state?  This is laughable.
Take any form of odious debt.  Surely it could be justified to be beneficial to the needs of the state.  Look at our own bailouts. Large portions of the state are not happy with these bailouts. Yet they were successfully justified to the state(The bank bailouts for instance). Are the banks the regime? Who’s the regime? 
The debt incurred in these situations is to prop up and sustain the regime.  The task of the regime is to convince the people that they and the regime are the state. In otherwords…there is no “people” there is no “regime”,  there is only state!
That’s how it’s always been.  The trick is in justifying the benefits of “odious” debt. Sometimes dicey, but in the end analysis usually just routine.  State is a wonderful magic trick that is naturally perpetrated on people by appealing to social behavior. Most of the time “state” is run very unfairly.
But that’s all natural behavior too.

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Posted: 07 October 2011 09:39 AM   [ Ignore ]   [ # 19 ]
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GdB - 06 October 2011 11:23 PM

Just think about the consequences of one country (Greece or Germany, for opposite reasons) leaving the Eurozone. This cannot be done in a day! There are no Greek or German Euros with a one to one exchange value, that can be changed. They are all the same euros. Think about what people/companies/banks would do… You are, so think about it…

Of course it cannot be done in a day, but it is not impossible (as a last resort), if all else fails.

Read this article HERE

Quiting the Euro

I asked a Slovakian economist the other day how his country had managed the monetary transition when it divorced the Czech Republic. “Very easily,”  he replied. “One Friday, after the markets had closed, the head of our central bank phoned round all the banks and told them that, over the weekend, someone from his office would come round with a stamp to put on all their banknotes, and that, until the new notes and coins came into production, those stamped notes would be Slovakia’s legal tender. On the Monday morning, we had a new currency.”

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Posted: 07 October 2011 09:50 AM   [ Ignore ]   [ # 20 ]
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First, a comment on odious debt: usually the term is applied to regimes that incur debt for odious reasons: enriching the family and friends of a dictator, building a large army and security apparatus to oppress the people, and so forth. The Greek debt was not spent on such things; it developed largely to establish a fiscally unstable but generous set of government grants to a variety of special interest groups comprising a goodly portion of the Greek population. In other words, the Greek government borrowed lots of money and gave it to the Greek people. Now the bill for that borrowing has come due and the Greek people who benefited from that borrowing don’t want to pay back the money they got.

But more important is this comment:

One must keep in mind that these are two distinct countries with different national cultures and work attitudes.

That is precisely why the euro zone is unstable. You can’t have countries with profoundly different work attitudes sharing the same currency. The euro was, I am beginning to think, a mistake. They really should have enforced their own rules; giving countries a pass when they broke the rules doomed the euro.

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Posted: 07 October 2011 10:19 AM   [ Ignore ]   [ # 21 ]
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VYAZMA - 07 October 2011 09:19 AM

Oh? And how is the regime separated from the state?  This is laughable.
Take any form of odious debt.  Surely it could be justified to be beneficial to the needs of the state.  Look at our own bailouts. Large portions of the state are not happy with these bailouts. Yet they were successfully justified to the state(The bank bailouts for instance). Are the banks the regime? Who’s the regime? 
The debt incurred in these situations is to prop up and sustain the regime.  The task of the regime is to convince the people that they and the regime are the state. In otherwords…there is no “people” there is no “regime”,  there is only state!
That’s how it’s always been.  The trick is in justifying the benefits of “odious” debt. Sometimes dicey, but in the end analysis usually just routine.  State is a wonderful magic trick that is naturally perpetrated on people by appealing to social behavior. Most of the time “state” is run very unfairly.
But that’s all natural behavior too.

The regime is the government in power. The state is the country. The people are the humans who reside in the country. They are all distinct entities.

In other words…there is no “people” there is no “regime”,  there is only state!

This is doublethink.

Regarding the bailouts, it is odious debt.

From this article by Paul Krugman
HERE

In the process, it has been easy to forget just how outrageous the story of our economic woes really is. So, in case you’ve forgotten, it was a play in three acts.

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis.

And the US is a debtocracy.  smile

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Posted: 07 October 2011 10:30 AM   [ Ignore ]   [ # 22 ]
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kkwan - 07 October 2011 09:39 AM

I asked a Slovakian economist the other day how his country had managed the monetary transition when it divorced the Czech Republic. “Very easily,”  he replied. “One Friday, after the markets had closed, the head of our central bank phoned round all the banks and told them that, over the weekend, someone from his office would come round with a stamp to put on all their banknotes, and that, until the new notes and coins came into production, those stamped notes would be Slovakia’s legal tender. On the Monday morning, we had a new currency.”

That is an interesting idea indeed. Hope the ECB is reading this…

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Posted: 07 October 2011 10:34 AM   [ Ignore ]   [ # 23 ]
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Chris Crawford - 07 October 2011 09:50 AM

That is precisely why the euro zone is unstable. You can’t have countries with profoundly different work attitudes sharing the same currency. The euro was, I am beginning to think, a mistake. They really should have enforced their own rules; giving countries a pass when they broke the rules doomed the euro.

Exactly. There were rules, but it was obvious that countries would not be able to comply to them…

But it does not provide a solution… hmmm

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Posted: 07 October 2011 10:41 AM   [ Ignore ]   [ # 24 ]
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Well, I was going to qualify that, but I figured wait a minute…someone will comment and fill that in.  Crawford filled that in.  Odious Debt!  International law!
Yes there are small examples where the state, the people and the regime are distinct.  These are not places like Greece, Germany or the US, or Italy etc…
These are places like:  Ghana, Lybia, and other Junta or “regime” controlled countries.  Fly speck places that only know open, undisguised oppression/corruption.
Nobody is going to enforce Debt Law on a Euro-Zone nation.  They all share the same currency.  They all are responsible for each others debt. It’s that simple.
I say get out of the Euro too!  Of course I’m a firm supporter of Nationalism. Germany should be just as culpable as Greece. What did they think they were getting into? That’s how I feel about many of our trade pacts too.  What did we think we were getting into?  Well some folks knew!  They are making loads of dough. 
Again I stand firmly by my other statements above.  I will debate them strenuously here. 
To highlight:  What is the fine line between corruption and the perception of “benefiting the state”.  The fine line?  Obviously there are standard, easily identifiable contrasts between corruption and ie…bailouts. But then there are other types of “debts” that many view as corruption!
What is the regime? What is the state? And what is the people? You said they are separate.  For what purposes?  The purpose of this discussion?

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Posted: 07 October 2011 11:20 AM   [ Ignore ]   [ # 25 ]
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Chris Crawford - 07 October 2011 09:50 AM

First, a comment on odious debt: usually the term is applied to regimes that incur debt for odious reasons: enriching the family and friends of a dictator, building a large army and security apparatus to oppress the people, and so forth. The Greek debt was not spent on such things; it developed largely to establish a fiscally unstable but generous set of government grants to a variety of special interest groups comprising a goodly portion of the Greek population. In other words, the Greek government borrowed lots of money and gave it to the Greek people. Now the bill for that borrowing has come due and the Greek people who benefited from that borrowing don’t want to pay back the money they got.

Not quite so.

From the article

HERE

............one of the main culprits for the country’s reputation for graft and excessive spending: that everyone from doctors to lawyers to civil servants to government officials are on the take, costing Greeks $1 billion a year to pay them. The findings were in a report from Transparency International Greece which showed that Greece is awash in corporate, government and private thievery, a dagger in the heart of Greece as it was released the same day last week that Prime Minister George Papandreou announced further piling-on of wage cuts and higher taxes, even at pensioners, who stood outside his official residence and screamed, “You give money to the rich but nothing to us,” which did nothing to make him change his mind.

.......in the country in which only the poor and immigrants seem to go to jail.

Not all the Greeks are corrupt. The poor and immigrants have no money to buy their way out.

That is precisely why the euro zone is unstable. You can’t have countries with profoundly different work attitudes sharing the same currency. The euro was, I am beginning to think, a mistake. They really should have enforced their own rules; giving countries a pass when they broke the rules doomed the euro.

The eurozone consists of 17 countries with disparate cultures. With only economic and monetary but no fiscal union or common governance it is a recipe for disaster and that is what is happening now. For instance, Germany cannot directly intervene into the political/economic/financial practices of Greece and vice versa.

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Posted: 07 October 2011 11:28 AM   [ Ignore ]   [ # 26 ]
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VYAZMA - 07 October 2011 10:41 AM

What is the regime? What is the state? And what is the people? You said they are separate.  For what purposes?  The purpose of this discussion?

For all purposes whatsoever.

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Posted: 07 October 2011 11:36 AM   [ Ignore ]   [ # 27 ]
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That is precisely why the euro zone is unstable. You can’t have countries with profoundly different work attitudes sharing the same currency. The euro was, I am beginning to think, a mistake. They really should have enforced their own rules; giving countries a pass when they broke the rules doomed the euro.
Kkwan-
The eurozone consists of 17 countries with disparate cultures. With only economic and monetary but no fiscal union or common governance it is a recipe for disaster and that is what is happening now. For instance, Germany cannot directly intervene into the political/economic/financial practices of Greece and vice versa.

The fiscal union and common governance was supposed to be an artificially propped up parity amongst the nations the Euro-zone.  Then the capitalists could run rampant to and fro fencing their native and foreign made wares on a continent that had the same money and the same “buying Power”. 
It was a great experiment that is now failing. 
A country like Germany sacrificed it’s economic prestige to be on par with a country like Greece in hopes that Greece would be able to catch-up through consumerism. Didn’t work!  There’s not enough employment.  The same with the US now.  The consumerism, power capitalism is failing too.  We sacrificed our industrialization and manufacturing in hopes that we could boost China into parity with us. China makes-we buy, cheap! Oops! Didn’t work.
The jobs are fading away.  And they won’t be coming back any time soon. We discussed this about 2 years ago here.
The crisis of 2008 was the paradigm shift!  The tectonic shift!  We haven’t recovered since.  The Eastern Hemisphere is now controlling the resources:material, intellectual, human, and otherwise!

[ Edited: 07 October 2011 11:52 AM by VYAZMA ]
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Posted: 07 October 2011 11:38 AM   [ Ignore ]   [ # 28 ]
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kkwan - 07 October 2011 11:28 AM
VYAZMA - 07 October 2011 10:41 AM

What is the regime? What is the state? And what is the people? You said they are separate.  For what purposes?  The purpose of this discussion?

For all purposes whatsoever.

Absolutely not!  For purposes of diagram, for purposes of ideology-YES!  For the actual governing of a nation-state, NO!
If you are an American citizen KKwan, how could you possibly debate this?  America could be the most shining example. But, it could apply to any country!

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Posted: 07 October 2011 02:36 PM   [ Ignore ]   [ # 29 ]
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kkwan - 07 October 2011 09:05 AM
TromboneAndrew - 07 October 2011 08:23 AM

I agree with Chris, that odious debt can’t apply to Greece. There isn’t actually a regime change, for one thing, so the difference between Greece and a regime is inconsequential. Also, how do you punish the regime? If it’s out of power, you can’t because it presumably doesn’t exist any more. If it is still in power, the punishment can only be to overthrow it . . . are you suggesting that western Europe militarily invade Greece and install a different government?

Odious debt is not about a regime change at all. It was created by the present regime which is corrupt.

As such, the present regime can be held responsible for it.

Okay, how do you hold the present regime to be responsible for it? I can see no way to do this without destroying the regime.

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Posted: 07 October 2011 02:48 PM   [ Ignore ]   [ # 30 ]
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Yes, if the present regime is responsible, then there’s no point in helping them at all—because they’re “odious”. But any new regime elected under the same constitution would be indistinguishable from the present regime, so, by kkwan’s logic, it would be morally appropriate to forgive the debts but also to refuse any further assistance until there’s a revolution or the constitution is fundamentally rewritten.

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