...
"What cannot be repaid, will not be repaid."
- traditional
Despite the five year drama on Greece and their attempts to stay in the EU and with the euro, it is clear that Greece will NOT repay their external debts. Despite this latest "deal", the math cannot be ignored: Greece cannot pay their debts, so they will not. Some kind of default is inevitable.
In general there are three ways extreme debtors use to extinguish debts (other than paying up):
1) Inflate them away. This (as well as number three below) is what most governments around the world are doing. Printing the money. An increased inflation rate lowers the real value of the debt, borrow money, and repay in devalued money in the future. This is easy to do.
2) Default (don't pay). This happens from time-to-time. Argentina has defaulted twice in recent years. Greece has defaulted many times in its +/- 100 year modern history as a nation. A large scale default tends to be deflationary, there are perils to a population and government in a country that defaults.
3) Increase the debts! Debtor countries, including the USA, can often get away with this as long as lenders perceive that they will get their money back (at least recently-loaned money). This is the easiest of them all in the short-term But, increasing debts almost always leads to ever increasing problems trying to pay (or later restructure). Because at some point, no one will loan them any more money...
* * *
Of course, any country just getting into trouble would find that total long-term harm is less by biting the bullet and paying their debts quickly. The problem is that politicians, and their electorates, only want EASY solutions. Paying debt is never the "easiest" solution.
Greece is in an advanced state of huge debts (their debt: GDP ratio is around 177%). They cannot pay them off, at least in uninflated terms.
Greece will default. The mathematics is irrefutable. The only question is how and when. Which of the above options they will use.
Beware. Prepare. European debts (US debt too) are a big problem, with big consequences, that will likely spread here.
"What cannot be repaid, will not be repaid."
- traditional
Despite the five year drama on Greece and their attempts to stay in the EU and with the euro, it is clear that Greece will NOT repay their external debts. Despite this latest "deal", the math cannot be ignored: Greece cannot pay their debts, so they will not. Some kind of default is inevitable.
In general there are three ways extreme debtors use to extinguish debts (other than paying up):
1) Inflate them away. This (as well as number three below) is what most governments around the world are doing. Printing the money. An increased inflation rate lowers the real value of the debt, borrow money, and repay in devalued money in the future. This is easy to do.
2) Default (don't pay). This happens from time-to-time. Argentina has defaulted twice in recent years. Greece has defaulted many times in its +/- 100 year modern history as a nation. A large scale default tends to be deflationary, there are perils to a population and government in a country that defaults.
3) Increase the debts! Debtor countries, including the USA, can often get away with this as long as lenders perceive that they will get their money back (at least recently-loaned money). This is the easiest of them all in the short-term But, increasing debts almost always leads to ever increasing problems trying to pay (or later restructure). Because at some point, no one will loan them any more money...
* * *
Of course, any country just getting into trouble would find that total long-term harm is less by biting the bullet and paying their debts quickly. The problem is that politicians, and their electorates, only want EASY solutions. Paying debt is never the "easiest" solution.
Greece is in an advanced state of huge debts (their debt: GDP ratio is around 177%). They cannot pay them off, at least in uninflated terms.
Greece will default. The mathematics is irrefutable. The only question is how and when. Which of the above options they will use.
Beware. Prepare. European debts (US debt too) are a big problem, with big consequences, that will likely spread here.
They will pay or ww3 is not very hard to follow, anyway they will pay just need some time.
