That's not your choices. It's either inflate by 25-30% or have your pension check go down by 25%. And once you start down the inflation path, it's hard to stop. Ask Hugo Chavez.
Not really. Greece needs to get serious about collecting taxes. Go back to your Time Magazine article on economics.
A quick check get this. Per capital GDP data number 22,25,28 in the world looks pretty damn high to me.
I don't think that is the choice. Where did you get your numbers? A Ron Paul tract? Why not say their choice is 67% to 83% inflation since you are pulling numbers out of somewhere. BTW I never said inflation was the only policy choice or change the Greeks should make. I think you are like Major and perhaps are just making a moral argument for punishing the Greeks.
It's not class warfare to demand fairness and fight for it when the powers-that-be refuse to abide by fair doctrines.
But the question is what is fair. i am not saying Greeks do not deserve to have good standard of living. How about people in Africa start riots because they do not have enough money? How about people in South America? You cannnot demand what your country cannot afford at present time. I am sure everyone would be happy if we are all going to make 100k plus in this country, but how could we justify this? Do we produce enough goods and services for that? The answer is of course no.
There is already class warfare. Are you takiing the Fox News position that only workers asking for higher wages or lower tuitions is class warfare. That reducing taxes on the wealthy or trying to eliminate the "death tax" which only kicks in on estates over $7 million is just common sense and not "class warfare". Ah. Sometimes I wish I had the contentment of moderates. Unfortunately I guess working on the problems of working folks like I do doesn't lead to as much contentment with American society as finance , the oil business or computer work.
The Greek government (really the previous administration) made promises to the populace (ie. pensioners). And they also made promises to the foreign banks they took the loans from. And now that there are obviously not enough funds available to keep those promises, the current administration has chosen to renege on the promises made to the populace in order to honor fully paying back those loans to the foreign banks, namely German, Swiss, and French. But this situation will leave Greece in an even worse economic shape going forward, with virtually no chance at growth and an eventual default down the road anyways. Perhaps even as early as this year. All sides know this very well. It's just that in the meantime the austerity program gets put in, the IMF gets its foot in the door, and most importantly - the Euro gasps a few more breaths for the ECB, et al. Plenty of nations have survived and rebounded after default. Russia being one of the most recent. This entire bailout scheme does not have Greece or its people's best interests in mind. It is all about buying the Eurozone some more time.
Some more Dean Baker. It is nice to see an economist making sennsible suggestions about how to solve the Greek problem and not just making moral arguments about primarily punishing all the Greek people so the bank guys can be paid. **** Greek Austerity Should Include a Tax Amnesty The news accounts of the Greek budget crisis have been filled with stories about the country's bloated civil service and generous Social Security program. While these areas of spending probably need reform, the other side of the equation has been largely overlooked. Greece is the Olympic champion of tax evasion. The OECD estimated that Greece has an underground economy equal to 30 percent of GDP, by far the largest of any OECD country. Some of this is involves small-time tax evaders, but many of the country's richest people also take advantage of the opportunity to avoid paying their taxes. If Greece had anywhere near normal tax compliance, its deficit problems would be far more manageable. While Greece has pledged to crack down on tax cheats as part of its bailout commitments, these pledges are less concrete than the cuts scheduled for its civil service and retirement systems. There is a simple way to put the commitment to tax enforcement on an equal footing. The Greek government can announce a special tax amnesty. During a set period (e.g. 6 months), people will have the opportunity to pay their back taxes from the prior three years with little or no penalty. After the end of this period, the government will pursue new efforts aimed at tracking down tax cheats. This time, it will impose larger fines and/or criminal penalties on those who did not take advantage of the amnesty period. This amnesty route accomplishes two important goals. First, it can raise an enormous amount of money. If Greece can collect just 20 percent of the unpaid taxes from the last three years it would be a huge step in reducing its deficits. (If taxes are equal to 30 percent of GDP and 30 percent of GDP escaped taxation each year, then the unpaid taxes over the last three years are equal to 27 percent of GDP. If the government can recovery 20 percent of this money, it would be equal to 5.4 percent of GDP - the equivalent of more than $750 billion in the United States.) Also, once a person has paid taxes on a large income, it will be easier to track their income in the future, thereby ensuring greater future compliance with the tax code. The other important outcome from an amnesty program is that it would indicate whether the country is serious about enforcing the tax code on the wealthy. If rich people believe that the government is genuinely committed to enforcing its tax code, then they will take advantage of the amnesty in large numbers, seeking to avoid more serious penalties in the future. However, if they believe that the government threats are an empty gesture then they will ignore the amnesty, just as they ignored the law originally. This will tell the Greek people whether they are being taken for a ride by a government anxious to impose austerity on ordinary workers, but unwilling to touch the income of the wealthy. There may be no easy way out for the Greek people from this situation, but they will at least know exactly where they stand. http://www.huffingtonpost.com/dean-baker/greek-austerity-should-in_b_561509.html
What makes you think the Greeks will pay these taxes without rioting? If they don't want to give up their benefits, why would they pay a lot more in taxes? It's going to be a cut in their income either way, and they are going to riot over it. It's hilarious that you are trying to make this into "rich Greeks aren't paying taxes, that's why they are in this mess." Whatever makes you feel better, I guess.
The Soviet Union had the largest underground economy in the history of the world. If they would have just taxed it, they could have staved off the collapse, right? Is it possible that the underground economy is in response to the fact that Greece has one of the least-free economies in the Western World, and that increasing tax enforcement would just make it worse?
It is possible. It is also possible we would also be rich as Buffet if we had just remained on the gold standard and had no taxes or regulations at all.
Funny, coming from someone who made up this nonsense: Please share with us the basis for your numbers. I'd love to see the math you used. So, in other words, you couldn't refute a single factual point and this is all you had left. Greece does need to get serious about collecting taxes. That's one of the austerity measures that you and the Greek rioters are so staunchly against. That would hurt the Greek people, and we'd never want that - much better to screw over millions of middle class Europeans in all the other countries.
I think you are confusing the issue here. This isnt some standard economic recession because demand for a country's goods and services went down. This is a very specific structural problem related to how their government managed its balance sheets. The Greek government did a bunch of things wrong. They employ a larger than usual portion of the labor force and in turn promised benefits that it couldnt pay for. Yes, taxation is a massive issue here because tax evasion is rampant. That however is a structural issue that cannot be fixed over night. Another issue is that by joining the Eurozone, they were given access to interest rates much lower than what they should have been for Greece. It encouraged borrowing at absurd rates which in turn meant the Greek government started handing out this money in the form of pensions, early retirement bonuses etc.. and flat out corruption. It's snowballed to the point where they certainly cant afford their debt payments but more worrying they cant even afford to fund the government even if they didnt have to pay interest on debts. This is an Argentina scenario and we have a historical example of what needs to be done. Long term stuff like weeding out corruption, tax collection, etc.. are all obvious. Short term action however has to be drastic. Every country that has defaulted on its debt (Russia, Argentina, etc..) all had to make massive currency changes. Argentina was pegging the Peso to the dollar, creating an artifically overvalued currency (similar to Greece having a currency in the Euro that's overvalued relative to its economy) and Argentina responded but delinking and sinking the value of the Peso. Yes, short term it killed savings, pensions, etc.. but long term it provided the impetus for an economic recovery by making their exports much cheaper. Greece will not be competitive in the Eurozone as it stands right now. There's no incentive to invest there, they're stuck with a currency completely out of whack with their situation, and most importantly they cant do a damn thing about it because they dont control their own currency. The Greeks are going to suffer, its only going to get worse. But this is bad enough to where there's no value in pointing fingers at the elite of Greece (who admittedly caused this) or fighting for justice for the middle class. This is a total economic meltdown of such proportions that no matter what is done it will be painful. But the correct move in my estimation is to leave the Eurozone and start over with a devalued currency.
Have to agree with geeimsobored completely. I will just add that the ~$10B of military hardware and weapons systems that Greece bought from France, US, Germany, etc in the past 5 years - should all be auctioned off to other (diplomatically friendly) countries and used to pay down their debt. As a NATO member their security is automatically insured anyways.
Besides having them try to collect taxes, what are your solutions to their current mess? I would also point out that collecting taxes, while fair and logical and rational, will cut income for the Greek people. It's not just the rich that aren't paying taxes there. The whole economy avoids taxes - it's pretty standard practice. Much of the economy is done in cash, so people avoid VAT. Much of it is avoided through universal bribery, etc. To address your second point, these austerity measures are absolutely going to cause a recession for Greece. That's life - there's no other way out of it. They've been living well beyond their means for a long time. Any country that does that eventually faces the pain of a recession - just as the US and much of the world just did over the last few years. What Greece will have going for it is that the rest of the world is growing again, and so if they choose to develop more export industries, they'll have markets and growth opportunities. As geeimsobored pointed out, this is very similar to what Argentina did, which was extremely successful and led to huge economic growth after the initial very painful crash. Not at all. My rage at the ordinary Greeks is at their protesting over the measures necessary to fix their economy, not at their actual actions over the past decades. For that part, I just think they are irresponsible. But the protesting is just ignorant - they don't want their own country to take responsibility for the mess that they created and want the rest of the world to fix their problems. That's not how it works. 2. I'm not focused on the international crowd or Goldman because they are irrelevant to the solution. Goldman was a tool that Greece chose to use. The international community isn't shorting the Euro to punish Greece - they are shorting the Euro because the Euro has very real problems unless these countries fix their policies. Like the financial system in the US, my concern is not about punishing people - it's about finding the best solutions going forward. And in this case, austerity is the best and only solution to their mess - one which they created for themselves - unless they want to leave the EU and crash their new currency (which I think is actually the ideal solution). Disagree here. The tax system is corrupt from the ground up there. It's simply part of the culture. Absolutely - and they are standing up for their themselves by putting strict austerity conditions on Greece to get their money. That's exactly what they should be doing. The US did the same when it bailed out our banks - it ensured the banks would pay a steep price for their rescue in the form of ridiculous interest rates to get their bailout funds. Any bailout should come with that kind of price - that's how you ensure the recipient has incentive to fix its problems.
