First Paul Krugman weighed in with his comment that some commentators have mentioned Greece’s history of having their debt relieved after WWII. So he’s on that bandwagon, too.
And Seth Godin chimed in with his post about a book on Debt and how everyone should read this insightful book that provides a history of how debt was formed and why (not Greek history but history about debt in general). He didn’t state whether he was for debt relief or Greek exit but his questions gave me the impression that he at least questions the hard-line Germany may be taking toward Greece.
The point I didn’t make in the last post was the idea that Greece didn’t get into this debt situation by themselves; someone else help them get into debt and hide their deficit to make the country’s financials look healthier. I remember reading articles in 2010 about how the bankers played a role in helping Greece hide their deficit. Bankers played the same “fast and loose” game as in the mortgage lending that led to the 2008 debacle, but they never really paid for the damage. At least not that I know of. So, again, the fingerprints of Wall Streets and their ilk are here. Now, some writers have said that Greece was not the only party to their debacle but that the lenders were also at fault. But their lenders are different from the bankers that I’m thinking of. In their case, it’s the lenders that came in after the bankers bailed out: namely the taxpayers of the European countries (probably mainly the Germans but I’m not sure). These writers are saying that the European lenders are also at fault because they drove Greece further into debt with more loans in an effort to help repay themselves. So, I’m not really understanding this because it kind of sounds like the original lenders are still around giving out more loans. But I thought the original bankers left (and got away with murder).
Now the latest news is that Greece came back with a plan which is just the austerity plan the referendum rejected. Okay. I think what is happening is Greece is not ready to exit the Euro because they probably haven’t put in place an alternative currency to replace the Euro or made any other preparations necessary to enable a Grexit. If they institute more austerity, they probably won’t get out from under the debt and the economy won’t improve. The economy might get worse. If they do a Grexit instead, the economy will probably get really, really bad before it gets better. But the Grexit probably provides more hope than austerity since austerity in the current economic environment (basically, a near depression) has proven not to work. Grexit is still an unknown but does provide a theoretical hope that things will get better, once Greece has their own currency.
Greece’s situation is probably similar to that of a couple trapped in a burning house and the only conceivable way out is through a doorway where the fire is thinnest. But it would entail stepping through some depth of fire before there is a complete exit from a burning house. In other words, Greece will probably have to go through some more economic misery (maybe even intense) before they reach safety.
At this point, nobody really knows what will happen and what should be done. It’s just a very bad situation.