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Friday, April 23, 2010

Greece to be bailed out

Greece has called for the help that the IMF and the Eurozone promised them a month ago. The Greek economy has not been stabilized and now they are going to be bailed out.

I have written before about how this would be a bad idea for the European Union. It is going to create a precedent that will encourage moral hazard. Countries such as Italy and Spain will be less interested in acting responsibly. And countries that have made sacrifices in the effort to restore their finances, such as Ireland, will feel screwed.

Posted by Hugh MacIntyre on April 23, 2010 | Permalink

Comments

Who will bail out the US?

I think we're too big to bail.

Posted by: Floyd Looney | 2010-04-23 10:54:50 AM


I was predicting the guarantees would fail, and this would be the outcome a month ago on Twitter.

The prevailing "confidence theory" of markets is really out of hand. It justifies throwing good money after bad in inordinate amounts in an attempt to restore "confidence" believing that "confidence" is the only thing a market needs to function well.

It basically discounts the need to deal with imbalances in the economy. Imbalances are perfectly acceptable, as long as people are "confident" in the structure.

Basically most of the world is fucking insane. But we knew that.

Posted by: Mike Brock | 2010-04-23 11:07:13 AM


Mike, I agree. In an effort to increase confidence in the short run, it is reduced in the long run in my opinion. Insider trading rules are similar. Someone with insider knowledge, who sells off as a result, sends an immediate signal to the market to beware of a bad risk. Because of the law, they cannot do that so instead it takes longer before the market finds out. And in that time some people invest who might not otherwise throw their money away.

Posted by: TM | 2010-04-23 12:21:27 PM


Confidence is only important in terms of when investors consider the following question: "how secure are my property rights". That's it. The rest of the confidence theory is bullshit. In this case, no amount of "confidence" can change the fact that Greece is bankrupt.

Posted by: Charles | 2010-04-23 12:46:52 PM


Greek society has been screwed up since 1967. In that year, the Greek military overthrew a left-leaning government under the elder Papandreou. The military regime fell apart in 1974 after the Turkish invasion of Cyprus. In the aftermath of military rule, much of the Greek right was discredited. The result was the transformation of Greek society from a traditional center-right leaning (socially conservative) country that had a bloated government to a nation that leaned strongly to the left(with a virtually socialist economy). The relatively centrist New Democracy party that ruled from 1974-1981 gave into every demand that the divided left(and its union friends called for). The situation was made even worse with the election of the Socialist in 1981(who have ruled for 21 of the last 29 years). The socialists both further increased the size of the welfare state and gave more power to the unions. The result is a society in disarray.
Greece has 11 million people and an aging population but 120,000 public school teachers. At least 20% of workforce is in government. The government allows women in some professions to retire with pension at 50(55 for men in certain profession). Teachers have their housing paid for by the government. This nanny state mentality has trickled down to much of the population. Many Greeks say that they have problems paying bills even though the government hands them cash left and right! The country has an aging poulation,a ridiculously low birthrate, but a nice high number of government financed abortions. What happened to the traditional strong Greek family ties? When students rioted against planned government spending cuts, the police were limited in moving against rioters by such rules as a 1970's law that doesn't allow cops to enter campus grounds to arrest even violent offenders. When parents crack down on disobedient youth, they are undermined by a government that has even outlawed the right of parents to spank their children. The result is a typical socialist society of spoiled people who are never held accountable for their actions!

Posted by: Boch | 2010-04-23 6:24:22 PM


When parents crack down on disobedient youth, they are undermined by a government that has even outlawed the right of parents to spank their children. The result is a typical socialist society of spoiled people who are never held accountable for their actions!

Posted by: Boch | 2010-04-23 6:24:22 PM


This post could apply to almost all western countries, including canada. I would not be a bit surprised if Spain, Italy and France were next to fall off the same cliff. This will be a wild ride that will last for years to come.

Posted by: peterj | 2010-04-25 9:32:50 PM



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