Maybe Greece Should Go Bankrupt

http://www.cato-at-liberty.org/2010/02/10/maybe-greece-should-go-bankrupt/

by cwan • 16 years ago

21 25 16 years ago

_delirium6• 16 years ago

The article keeps talking about how civil servants are overpaid, which I don't think is true. There are too many of them, but they aren't particularly well paid; the average is around €20,000.

dantheman2• 16 years ago

In America many civil servants are overpaid when you look at total compensation. The amount of retirement that needs to be paid is ridiculous and most govs didn't actually set aside money to pay it.

_delirium6• 16 years ago

That I agree with, but it's a more general issue about the temptation to make future promises you can't pay for, and is also true in the private sector. Employers in general, public and private, make promises of future payments they can't pay for, don't set aside the money, and just kick the can down the road to the next generation of management. It's one reason so many American companies go bankrupt about 30-40 years after their peak, which coincidentally is when their pension obligations start coming due.

yannis• 16 years ago

From http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab4...

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.

The IMF recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

emilind3• 16 years ago

Cato will never go bankrupt 'cos the wingnut welfare don't stop.

rglovejoy2• 16 years ago

Flagged. This is not Reddit.

emilind3• 16 years ago

I'm sorry, people are free to post right-wing propaganda, but not free to comment on it?

iujhygfbh3• 16 years ago

What exactly does it mean for a country to go bankrupt? Do the creditors get the assets?

If a chinese construction company is owed money for a government project do they get part of the country?

_delirium6• 16 years ago

It just means they default on the loans. The creditors only get what the country chooses to give them (if anything), which is usually negotiated with some eye towards balancing the country's interests against the harm to their future ability to get loans if they screw the creditors too much. See: http://en.wikipedia.org/wiki/Default_(finance)#Sovereign_def...

iujhygfbh3• 16 years ago

But bankrupt means you don't run the company/country anymore - they call in the receivers, and KPMG or whoever sell off the assets for scrap.

emilind3• 16 years ago

This is fun, maybe I can get my points into negative territory!

dkimball• 16 years ago

I'm not a libertarian, to say the least, but I think that this writer has a point. I don't know where the saying originates that "a democracy only survives until its citizens realize that they can vote themselves money" -- I believe it was a British historian writing about Athens in the 1750s -- but it's intensely relevant here. Greece, or any country, can only support a large public sector (apparently not overpaid so much as overpopulated) on the back of a large productive sector -- not necessarily a private sector (just ask the People's Liberation Army and its subsidiaries), but something or other that's generating wealth.

I'd also emphasize _delerium's passing comment about a state needing to worry about its future ability to get loans. The combination of the Industrial Revolution and pogrom-proof banking have made this less likely, but as late as the 18th century there was always the possibility of a country running out of money; Philip II's bankruptcy is a particularly famous one. If that (or extreme inflation) starts happening again, it will make everyone's lives harder.

Maybe Greece Should Go Bankrupt

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