The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Greece Runs Out of Other People’s Money

Posted on | June 27, 2015 | 115 Comments

The Eurozone’s problem child throws a tantrum:

Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. An official with Greece’s Capital Markets Commission, the markets’ regulator, also warned that the Athens Stock Exchange may be unable to operate on Monday without a cash injection into the banking system. A Greek central bank spokesman said it was making efforts to supply money.
The European Central Bank’s governing council was expected to hold a conference call on Sunday to review the banks’ liquidity condition, said a Greek official, who asked not to be named in line with policy. The Frankfurt-based central bank said in a twitter post that it’s closely monitoring developments and would review the situation “in due course.” . . .
Euro-area finance ministers rejected Greece’s request for a one-month extension of its aid program, which expires Tuesday, shutting down any last chance for a financial stopgap until the referendum is held.
After withdrawing more than 30 billion euros as the anti-austerity Coalition of the Radical Left, or Syriza, took power, depositors are now reacting to the latest twist in the five-month standoff with European leaders and creditors.

(Via Memeorandum. More at Legal Insurrection.)

In addition to Margaret Thatcher’s famous maxim about socialists eventually running out of other people’s money, there is also Stein’s Law. This was coined by Herb Stein, chairman of the Council of Economic Advisers during Richard Nixon’s presidency: “If something cannot go on forever, it will stop.” And the problem of the Eurozone’s weaker nations expecting bailouts from their rich neighbors obviously cannot go on forever. So what happens when it stops? We don’t know.

Portugal, Spain, Italy and Ireland — the other fiscal weak sisters in the Eurozone — may manage to avoid default, and the richer EU nations may be able to stabilize the overall regional economy. If so, the Greek problem is just a Greek problem. On the other hand, who knows?

Greece’s European partners shut the door on extending a credit lifeline to Athens, leaving it facing a default that could push it out of the euro after the leftist government rejected tough lender demands and put their bailout deal to a referendum.
Finance ministers of the other 18 countries sharing the euro met for the first time without Greece and flatly rejected its pleas to extend an expiring bailout until after the referendum on July 5 and setting the stage for Athens to default on a crucial IMF payment on Tuesday.
The 18 pledged to do whatever it takes to stabilize the common currency area and said they were in much better shape to do so than at the height of the euro zone crisis a few years ago. In a formal statement, they also implicitly urged Greece to impose capital controls to stabilize its banking system.

We’ve spent seven years in a slow, weak recovery from the crash of 2008, and it might be that the Greek crisis will trigger a worldwide recession. Riots, famine, hyperinflation — anything is possible.

“Fire and brimstone coming down from the skies! Rivers and seas boiling! Forty years of darkness! Earthquakes, volcanoes! The dead rising from the grave! Human sacrifice!
Dogs and cats living together! Mass hysteria!”

OK, probably not that bad. But you never know . . .





 

Category: Economics, Europe, Greece

Comments

115 Responses to “Greece Runs Out of Other People’s Money”

  1. OrangeEnt
    June 28th, 2015 @ 10:57 am

    Always, always focus on the important things! The minor stuff like defaults and exits can wait….

  2. Look on the bright side, the exchange rate should be great when visiting Greece… | Batshit Crazy News
    June 28th, 2015 @ 11:00 am

    […] Greece, but tourists should benefit (at least in the short term) from the economic turmoil. TOM: Greece Runs Out Of Other People’s Money AoSQH: Will Greece Bail on the Euro? Zero Hedge: Referendum Moot and Market […]

  3. Matt_SE
    June 28th, 2015 @ 11:19 am

    Oh, by the way:
    Don’t forget that China’s stock market fell 7.5% last Friday (as in, a ONE DAY fall). That needs to be resolved on the same day as the Grexit.
    Personally, if the stock market falls on Monday I’m going to blame it on the SCOTUS rulings. #CapitalismWins

  4. Matt_SE
    June 28th, 2015 @ 11:31 am

    I’m going to buy liter jugs (damned metric system!) of Greek olives and bathe in them like Scrooge McDuck in his vault!
    Muhahahahhahahahhahahahah!

  5. Jim R
    June 28th, 2015 @ 11:36 am

    I make no doubt, certainly for the short term. As near as I can tell, they’ve done just about everything to discourage a work ethic, paying taxes, saving, and living within one’s means. With the figurative credit cards cut up, it will be VERY hard for them.

    But I wonder if the bureaucrats fear that Greece will be OK. “Damn! They’ve proved that they don’t need us. What if… What if… WHAT IF EVERYBODY STARTS THINKING THAT???”

    Or even, “Damn! People see this catastrophe and – SOMEHOW – think that WE shouldn’t have let it happen and – UNBELIEVABLY – even that our policies and decisions caused it. What if a lot of people figure it ou… Um… Share this delusion???”

  6. Art Deco
    June 28th, 2015 @ 1:25 pm

    China’s had an asset price bubble for a while.

  7. Art Deco
    June 28th, 2015 @ 1:28 pm

    No. The subprime aspect of our problems was wretchedly exaggerated. The most salient aspect of that problem was that the Financial Products Unit of AIG was until 2005 writing credit default swaps on scuzzy mortgage pools. That chicken came home to roost big time in September 2008. Also, our economy is ginormous compared to Greece’s. This Greek trainwreck has been under observation for five years, ample time for prudent people to adjust their positions.

  8. Art Deco
    June 28th, 2015 @ 1:30 pm

    Other metrics hit a plateau – e.g. the share of value added attributable to the real estate sector (stopped increasing in 1985) and the share attributable to finance (stopped increasing ca. 1998). This one never did before it abruptly exploded around about 2000. It’s been declining, but who knows just where it settles?

  9. Art Deco
    June 28th, 2015 @ 1:32 pm

    I’m not following you. Social Security is not difficult to repair: put retirement ages on a more rapid cohort-by-cohort escalator and contain Medicare spending by replacing the fees with a deductible adjusted every year. They just don’t feel like fixing it.

  10. DeadMessenger
    June 28th, 2015 @ 1:58 pm

    3-4 pages in pdf, as i recall

  11. Adobe_Walls
    June 28th, 2015 @ 2:05 pm

    All of the loans including the liar loans and more legitimate subprime loans were good financial decisions on the part of the institutions making them. This is not because of the underlying financial products but rather the implicit where not explicit guarantees by the government. Even AIGs swaps and insurance ”paid” in the end. The only people well and truly screwed turned out to be the auto company creditors and stockholders and of course the average taxpayer.

  12. Rick Caird
    June 28th, 2015 @ 2:39 pm

    While Keynesians have been predicting an expanding economy since the stimulus of 2009. That worked out poorly and has only served to radically increase debt.

  13. Matt_SE
    June 28th, 2015 @ 3:11 pm

    If it were easy, it would already have been done.

  14. Instapundit » Blog Archive » GREECE RUNS OUT OF OTHER PEOPLE’S MONEY: “In addition to Margaret Thatcher’s famous maxim abou…
    June 28th, 2015 @ 3:12 pm

    […] GREECE RUNS OUT OF OTHER PEOPLE’S MONEY: “In addition to Margaret Thatcher’s famous maxim about socialists eventually running out of other people’s money, there is also Stein’s Law. This was coined by Herb Stein, chairman of the Council of Economic Advisers during Richard Nixon’s presidency: ‘If something cannot go on forever, it will stop.’ And the problem of the Eurozone’s weaker nations expecting bailouts from their rich neighbors obviously cannot go on forever. So what happens when it stops? We don’t know.” […]

  15. Matt_SE
    June 28th, 2015 @ 3:13 pm

    Then if the US DJIA drops by 400-500 points, I suppose it will be a great shock to you.

  16. Matt_SE
    June 28th, 2015 @ 3:15 pm

    And? What is that supposed to prove?
    Do you think noticing there’s a bubble somehow eliminates the pain when the bubble bursts?

  17. Instapundit » Blog Archive » ISIS ATTACKS IN AMERICA ARE COMING, Max Boot warns at Commentary: By its own depraved standards, l…
    June 28th, 2015 @ 3:31 pm

    […] ISIS ATTACKS IN AMERICA ARE COMING, Max Boot warns at Commentary: […]

  18. Quartermaster
    June 28th, 2015 @ 3:34 pm

    OK. The domain is hotmail.com. The rest later.

  19. Quartermaster
    June 28th, 2015 @ 3:35 pm

    The left is going to steal everything from the ants. Grasshoppers are nothing if not irresponsible.

  20. VictorErimita
    June 28th, 2015 @ 3:40 pm

    Because the “market” you’re talking about is not driven by investors, who pay attention to long term fundamentals and take long term positions. It is driven by traders, who are speculators on rumors and trying to make money outguessing greater fools. It’s the casino part of the market.

  21. Another_Lurker
    June 28th, 2015 @ 4:12 pm

    The problem is not that the Greek default is sort of expected but what will happen later because of the default. It has the feel of July 1, 1914. There is crisis and can resolve itself without much collateral damage or it can explode into a complete disaster. All will take is few politicians to make the wrong read as the situation unfolds.

  22. ThomasD
    June 28th, 2015 @ 4:24 pm

    Dang, we are doing a cruise in two weeks, supposed to have stops for Athens and Santorini.

    Gonna bring dollars, lots of dollars. But still might just stay on the boat in Piraeus rather than get stranded in Athens.

  23. Patrick Carroll
    June 28th, 2015 @ 5:42 pm

    Back in 1995 I got a seven course meal – complete with unlimited wine – at a really good restaurant right by Istanbul’s spice market, for $15. At the time the exchange rate was about $1 == 250,000 Turkish lire. I left quite a stack of paper.

    Anyway, I was really impressed by Turkish hospitality, the hamams, and Gallipoli. Given the right price I’d go back, even with the current state of the world.

    Roll on deflation!

  24. theBuckWheat
    June 28th, 2015 @ 5:46 pm

    Socialism is based upon the sins of lies, coveting and theft. Its fruits are evil. Let it burn.

  25. Patrick Carroll
    June 28th, 2015 @ 5:51 pm

    I can’t believe anyone is worried by this.

    The EU already tried this once, with the Exchange Rate Mechanism (ERM). The Euro is a fig leaf in front of ERM #2, and it’s going as well as the original ERM. You know, disastrously.

    The Euro is going to collapse, sooner rather than later. You may see currency unions in the future, mostly centered around France and Germany, with the UK happily aloof, but this turkey is done – put a fork in it.

    Look to how the original ERM came apart, and you’ll have a good idea of how the Euro will come apart. I recommend reading “The Rotten Heart of Europe.”

  26. Micha_Elyi
    June 28th, 2015 @ 6:51 pm

    …Austrian inspired disaster scenarios…

    Austrian inspired disaster scenarios may not come true in the USA today or even 5 years from now. But they have a habit of coming true somewhere with upsetting regularity. Zimbabwe, Venezuela, Russia Russia, and now Greece are just a few examples that have occurred since 1990.

  27. Micha_Elyi
    June 28th, 2015 @ 6:58 pm

    All parties have had ample time to price in a default re the value of Greek debt.

    I expect German Chancellor Angela Merkel will at some point decide that the German banks have had enough time to unwind their Greek positions and scramble to financial high ground. I suspect that day is not too far off now. And when it comes, she’ll pull the plug on Greece.

  28. Micha_Elyi
    June 28th, 2015 @ 7:01 pm

    According to evangelicals and fundamentalists (of which I am one), first comes the Rapture.

    Yeah, I read Hal Lindsay’s Late, Great Planet Earth. The world didn’t end on his schedule either.

    Humpf, after 5 centuries of being wrong the Protestants should just repent and return to the Church that Jesus founded.

  29. Adobe_Walls
    June 28th, 2015 @ 7:03 pm

    They’re not even Grasshoppers. At least Grasshoppers find their food while it’s free and easy. and they then have the decency to die when the easy pickins are gone, the left has no such decency. In fact everything about the left is indecent. Kill them all, God has already sorted it out.

  30. Micha_Elyi
    June 28th, 2015 @ 7:16 pm

    I’ve come to accept that just when things look pretty bad for the US dollar, the Europeans will blow up their currencies, thus rescuing the dollar by making it look safe and sweet in comparison. The Europeans have done it plenty of times before.

  31. Daniel Freeman
    June 28th, 2015 @ 7:29 pm

    The name that I use there is in the URL for my Disqus profile.

  32. Daniel Freeman
    June 28th, 2015 @ 7:34 pm

    The people that will buy or sell to you right this instant live in the now. They are not rational. They are driven by fear and greed.

    The rational people with long time preferences are only in the market when it’s irrational in their favor; so the prices of a moment, a day, or even a year or more, are not necessarily determined rationally.

  33. DeadMessenger
    June 28th, 2015 @ 7:35 pm

    I didn’t give a schedule. The Bible gives the sequence of events, not me. Read it for yourself.

    Also, I AM in the church that Jesus founded.

  34. Michael Lang
    June 28th, 2015 @ 7:43 pm

    Let Greece burn as an example of failed socialist policies.

  35. Daniel Freeman
    June 28th, 2015 @ 7:49 pm

    Social Security is not difficult to repair: put retirement ages on a more rapid cohort-by-cohort escalator and contain Medicare spending by replacing the fees with a deductible adjusted every year.

    I guess that you live in a white-collar bubble. People that work with their bodies still wear their bodies out on the same schedule as always, because nature doesn’t care. We need to separate Social Security from disability benefits, and then any remaining issues could likely be solved by removing the cap on the wages that are taxed for the program.

  36. Art Deco
    June 28th, 2015 @ 8:05 pm

    There is crisis and can resolve itself without much collateral damage or it can explode into a complete disaster.

    Greece has about $420 bn in outstanding debt, of which about 3/4 is held by public sector agencies.

  37. Art Deco
    June 28th, 2015 @ 8:18 pm

    People that work with their bodies still wear their bodies out on the same schedule as always, because nature doesn’t care.

    Whatever you fancy nature cares about, the future life expectancy of a 20 year old youth stood at 46 years in 1940 and stood at 59 years in 2010. It was remarked by Milton Friedman that labor force participation among men between 65 and 70 was higher in 1950 than it was 50 years later. The share of the population employed in agriculture, construction, and industry is notably lower now than it was in 1940 as well.

    Cohort-by-cohort increases take account of changes in life expectancy so that the share of the retired population to the working population remains constant. The total fertility rates in this country are about at replacement level and have never been below for any length of time, so the country does not face a Japanese problem with younger cohorts appreciably smaller than older cohorts. Unless you imagine we are in an ongoing public health disaster and producing an increasingly enfeebled population, your complaint does not compute.

  38. DocScience
    June 28th, 2015 @ 8:19 pm

    The Keynesians now tell us that their useless tool of attempting to create growth by digging the debt burden even deeper has no more down to go. So, in addition to the non-help of the lavish debt, we are out of ways to make debt even more attractive and make saving any less attractive.

    The solution? I predict more printing of money in an attempt to invoke the friendly and beloved demon of massive inflation, always the socialists’ last card.

  39. curmudgeoninchief
    June 28th, 2015 @ 8:39 pm

    The Greeks need to go back to the drachma, withdraw from the Euro, establish an exchange rate with the world’s other currencies, and manage their own economy with their own financial system, just like they used to. If they want to hyperinflate, print billions of new drachmas every time the gubmint runs out of money, let them.

    This was the obvious solution years ago. Politically infantile and irresponsible countries can’t get along financially with countries that actually save and invest. The rest of the European Union would get along just fine without the PIIGS countries, and maybe this should be the first step.

  40. Daniel Freeman
    June 28th, 2015 @ 8:57 pm

    What I am advocating is empathy for the individual. As your own comment demonstrates, the extension of average life expectancy is associated with a lower rate of hard physical jobs. What does it matter to the men with broken bodies that there are fewer of them than before?

    The whole point of Social Security is so that when people are too worn out to work any longer, they will still be able to keep their homes and feed themselves. If you don’t give a damn about when people get broken, then you don’t give a damn that they are broken, and we might as well scrap the whole damn system.

  41. Quartermaster
    June 28th, 2015 @ 9:12 pm

    He didn’t set a schedule. He did state a speculation and hedged it as such.

    Every born again Christian is placed in the only church that matters at Regeneration. The rolls of that Church are kept in Heaven, not in Rome.

  42. Daniel Freeman
    June 28th, 2015 @ 9:20 pm

    To my way of thinking, our arrogant, intrusive government’s acceptance of cryptographic currencies is sufficient evidence to demonstrate that they’re scared to death of deflation and will accept any monetary expansion that they can get.

  43. Daniel Freeman
    June 28th, 2015 @ 9:34 pm

    The European Union was an interesting experiment and I admire the optimism inherent in the project, but culture will out and it just doesn’t make sense.

  44. DeadMessenger
    June 28th, 2015 @ 10:15 pm

    I’ve thought about that a lot. I’m not an expert in geopolitics, by far, but my understanding is that Iran would support Syria. And, Iran wants to “wipe Israel off the map”.

    We know from Isaiah 17 that Damascus will be destroyed (which has never happened) and will never be rebuilt. We know from Psalm 83 that we can expect a war in the ME, which seems…appears…to be the predecessor for the Ezekiel 38-39 “Gog of Magog” war. The Ezekiel war seems to be massive and destructive.

    We also know that the Bible calls the Antichrist “The Assyrian”. But we know, too, that the Assyrian Empire never extended as far south as Kenya.

    This is stuff we know. Speculation is not fruitful, but I’m going to anyway, because I’m a woman, and I like to do that. 😀

    “The Assyrian” refers to Sennacherib (a huge narcissist, by the way). The Assyrians were vicious and bloodthirsty; the world’s first terrorists. They would skin men alive and hang their skins from city walls for their wives and children to find, for instance.

    Perhaps “The Assyrian” doesn’t refer to a geography, but a type. The Occupant is surely a narcissist; but he’s also bloodthirsty. He doesn’t care how many people die in the race war he’s fomenting. Nor does he care how many innocent people – or even how many American troops – die in the ME. Even a complete wussy milquetoast would at least verbally condemn what ISIS is doing to Christians (and American journalists). But this guy? Not a peep. We know he’s “an” antichrist. Could he be “The Antichrist”, given what The Bible says about prophecy, combined with the Occupant’s actions (or lack of)?

    I don’t see why not.

  45. theoldsargesays
    June 28th, 2015 @ 10:22 pm

    You are a sexist.
    You are a misogynist.
    You have good taste.
    :-

  46. robertstacymccain
    June 28th, 2015 @ 10:30 pm

    You know, I hadn’t really noticed that until he mentioned it. Now I can’t get it out of my mind. Damn these commenters!

  47. theoldsargesays
    June 28th, 2015 @ 10:48 pm

    Truth be told, as I scrolled down page reading and got to the picture, my own eyes zeroed in on…LEGS!

  48. Daniel Freeman
    June 28th, 2015 @ 11:00 pm

    We are so similar and yet different. I was scrolling down, and then all of a sudden…BUTT!

  49. theoldsargesays
    June 28th, 2015 @ 11:14 pm

    What are you using as a monitor, a 55″ LCD?
    I wear glasses and am reading this on my Nexus 7 tablet, had to really zoom in to catch panty lines.
    (Which, of course, I did after you mentioned it.)

    Crikey, some of those womyn may actually have a legit gripe about guys like us.

  50. theoldsargesays
    June 28th, 2015 @ 11:18 pm

    Edited?