Greece Economy & Currency - Euro, Drachma, Crypto

[k317x]

This is a placeholder post, so that we can move all of the posts about the failing Greek Economy to one topic.

[Allen1980s]

The latest article about Greece's financial situation addresses the need for the country to generate some inflation by being able to print more money, which they cannot, due to the nature of the Euro-zone. Only the ECB can print Euros. The notion of Greece adopting BTC as a supplemental currency in Greece is novel, but completely unlikely, since you need fiat to purchase it.

Thinking like a typical economist-type, my response to the article was, why do they not start mining cryptos to sell into the markets? They own the electrical utilities. The capital investments necessary for hardware would be a little expensive, but in the long-term, it is a viable method by which a small country can raise additional capital.

Moreover, there is already an example of a country choosing to supplant some of their existing fiat with digital currency, namely Ecuador. Greece can absorb outstanding Euros in Greece by switching to a digital currency system, swapping out balance sheet Euros for completely digital currency Euros. It would have similar effect as printing Euros but also allow for the economy to operate under a closed-loop system of digital currency. Greece's obligations are stamped in Euro currency, not digital Euros. Creating a new crypto called "D-Euros" could also supplant the existing system for five to ten years, without necessarily leaving the Euro-zone economically.

It is a little more complicated than this, but we all know that all you need is an exchange and a crypto. The government can do a pre-mine, as well as allowing outsiders to purchase and sell E-Euros on the Greek exchange. The value could also be stabilized through the Greek Central Bank. It really would not take much to solve this problem. It is the difference merely of an "external economy" and an "internal economy."

Maybe we can create a project and test it on Greece... It cannot be any worse than what they already have to go through.

http://techcrunch.com/2015/02/28/why-greece-should-not-switch-to-bitcoin/?ncid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29

[DumbRedneck]

Didnt Greece fail because the government ran it into the ground....with the Euro+loans? I know the Euro-Zone folks are not gona like this but if Greece gave the euro the boot and took back their own economy they would not be in the situation they are currently in.

As for the people using crypto they absolutly should, to bypass the Government and the euro untill those in charge pull their head out of their fourth point of contact,

[Allen1980s]

I agree. I do not believe they need to leave the Euro though. They can re-create a closed-loop economy, running off an electronic Euro that they do have control over. Yes, their management skills are somewhat lacking, considering they got themselves into this mess, but you can separate the two currency structures for them to have time to repair the damage done. All transactions outside the country are conducted in real Euros, but all internal economic activity would be done by E-Euros. Principally, they would have to fix the exchange rate to 1 Euro to 1 E-Euro. It could effectively double the economic purchasing power of the economy by doing so. I would have to sit down and go over the existing numbers. How many Euros are already in circulation there. Total outstanding debt. Annual payment amounts. Term of the loan extensions. Internal Greek liabilities to pensioners and government employees. All of this has to be taken into consideration before a temporary electronic replacement can be created. In the end, it could prove to be more advantageous to keep, as an economic structure. Companies (imports) can exchange E-Euros to Euros to pay for what they have to bring into the country. Exports would demand payments in fiat Euros to build up the central bank's supply of Euros, exchanging back to E-Euros at the central bank, for use to pay for their obligations within the country. It really is not that difficult, once you have all the economic/financial data to go through. You have to admit, it would be a coup to implement. In theory, you could also create a few years' worth of income tax abatement for citizens, since the government would control all of the E-Euros (pre-mine). In effect, you would super-charge your economy by the increased internal consumerism that would result; creating more internal jobs and GDP.

Many ideas, so little time.

[Allen1980s]

If you can recharge the battery (economy through decreased unemployment and boosted GDP), there is no need to buy a new one.

[Allen1980s]

They could call it the G-Euro or "Gyro" for short.... LMAO

[DumbRedneck]

Why (re)build on a broken economy with a broken currency? (Yes my politics are showing I know). If they need fiat for overseas debt, use trade goods/services or PMs to generate "hard" currency, and a crypto for a "soft" internal currency. No need for coins or bills and the associated mints and presses, that money can be used to create jobs, build infrastructure ect.

Oh and fire/tar/feather the fools that got them in the situation to start with.

[Allen1980s]

Why (re)build on a broken economy with a broken currency?

I would not necessarily call the Euro a broken currency. I would say that the ECB is not savvy enough to control how the EU recovers from the 2008 Financial Crisis. Yes, I know we caused that (U.S.) and you are welcome.

I know people do not like to discuss such things, I'm not bothered by it, but governments need to borrow extensively to create jobs that can boost economic recovery, such as borrowing for the reconstruction of infrastructure (projects). If you look at the U.S., one third of the budget goes toward U.S. military spending, which does not help to boost economic recovery, through job creation (roads, bridges, electrical grid). If you look at pre-WW II Italy and Germany, both governments actually did a wonderful job in recovering their economies, even while the rest of the world was suffering through the Great Depression. Most people do not look at those accomplishments in history, due in mostly to what transpired thereafter, but these economies were rebuilt through prudent borrowing and spending.

In many ways you are correct in your present assessment, because the overall quality of education, in the west, has steadily decreased over these many decades, resulting in many government officials lacking severely in advanced knowledge in Economics and Finance. Moreover, we politicize economics today to pander to small majorities who also have little to no knowledge of Economics and Finance. In the U.S., we have a conservative party in control of the Congress, with the underlying opinion that all government spending (except for the military) is bad, when history has shown us solidly that spending too little is really bad.

Again, it is not the amount of money being spent that is the bad thing, it is how it is being spent.

[BoB]

They can re-create a closed-loop economy, running off an electronic Euro that they do have control over. Yes, their management skills are somewhat lacking, considering they got themselves into this mess, but you can separate the two currency structures for them to have time to repair the damage done.

This would be no different, in reality, to the capital controls used in Cyprus, which effectively created two different Euros, if not in name then in practice. This is a major issue for currency every where. They tried to create a pan European currency back in the late 1800s and it failed, because individual nation state interests do not align with everyone else's, and a lack of financial control by the smaller unit means it can not control its own destiny. In fairness, the Greeks did not create this mess, any more than the German taxpayers expected to bail them out. The toxic combination of bankers and power hungry cash hungry bureaucrats created the mess. Yes, the people of Greece demanded more free stuff, as do people everywhere since the advent of socialist states (each and every of which has had a negative effect on prosperity), but had the bankers not been bailed out, letting the corruption continue, they would have been forced to live within their means, as they would now, if they were to leave the eurozone.

I'm not bothered by it, but governments need to borrow extensively to create jobs that can boost economic recovery,

I've got a lot of respect for you Allen. It's been demonstrated again and again that you have a sound knowledge of finance and are capable of doing things with numbers that confuse a lot of people. You have a good head for business and understand a great many things that area great benefit to those who chose to pay attention.

However, and I'm going to try and say this without sounding like I'm actually making a personal attack, this statement makes you sound like a crazy person. Keynsian economics is dangerous, lethal and not in the best interests of anyone. Government doesnot need to spend money to create jobs. They need to keep the hell out of the way while the jobs are created by market need. Everything that the government does costs a damn site more than if it was done by interested private parties for their own profit.

Again, it is not the amount of money being spent that is the bad thing, it is how it is being spent.

It's not how much, or how it's spent, but who it's spent by. When it's spent by "borrowing" from peoples futures, ie government borrowing on the promise of future tax returns, it's bad. When it's spent by productive people with the inclination to profit, it gets used wisely and effectively on projects which are of actual benefit.

In many ways you are correct in your present assessment, because the overall quality of education, in the west, has steadily decreased over these many decades

Socialism does that. Sorry, I know, politics, but when someones politics affects their economic theory to the point of putting them beyond reason and sanity, it becomes relevant. Nowt personal, mind, just, y'know. I know you're smart, so why on earth would you come out with these things?????

For what it's worth, Greece can save itself, simply. If the Greek people leave the Euro, recreate the Drachma (I'm not advocating they adopt bitcoin en masse) and learn to live within their means (those means being determined by free market valuations of their produce and service) they can survive and even thrive. They don't have the big industrial base of Germany, but they do have a load of gorgeous places and rich history that people like to visit. They can produce food enough to feed themselves and trade. They can thrive again, like they have done at times in the past, but only if they learn fast and jump free from the yolk of socialism which they desperately cling to now.

I sincerely hope that they do, because I have some Greek heritage I love Greece, I love the Greek people and I want to see them recover their dignity

[Allen1980s]

Government doesnot need to spend money to create jobs.

The reference was for during down economic times. I included the examples of roads, bridges, and or major infrastructure. These are sorely needed items in this country (U.S>) and investments in such items also spurn major growth in ancillary industries, including service industries.

because individual nation state interests do not align with everyone else's,

Agreed. As long as countries have different cultures and values, a unified currency will be very difficult to manage.

When it's spent by "borrowing" from peoples futures, ie government borrowing on the promise of future tax returns

In practice, massive outlays of capital into infrastructure structures has an historical track records of increasing per capita wealth, as well as long-term tax receipts. There are any number of scholarly research works in circulation that back the statement that: "for every $1 that is spent by the government, $0.90 is returned on the investment." Under ideal situations, selectivity could potentially yield a 1:1 return, making a project net neutral.

If the Greek people leave the Euro, recreate the Drachma (I'm not advocating they adopt bitcoin en masse) and learn to live within their means (those means being determined by free market valuations of their produce and service) they can survive and even thrive.

This would probably prove to be a fallacy statement, because Greece did not really meet the EU entry requirements form the outset. Technically, Italy did not as well. The existing EU block members turned a blind eye to the "creative accounting" that was used to meet EU membership requirements. That being said, go back to the Drachma is not going to solve their economic problems, as they will still owe the money back which they borrowed, and that is paid in Euros. Moreover, re-entry into the EU, knowing the financial management past of the various governments, would not be highly likely, and there are many economic benefits to membership (I know, it sounds like an American Express commercial, but it is true).

They can produce food enough to feed themselves and trade.

Interestingly enough, this is not true to a certain degree. The largest Greek import is crude oil, which is refined and then exported to other EU countries (mostly Germany), but at a significantly reduced quantity. In other words, Greece uses more of the refined product than they export. Should Greece return to the Drachma, they will find themselves, for a period of time, without the global acceptance of their currency. It is the same reason Argentina and Venezuela have had problems in the past, coming out of hyper-inflationary periods. No-one wants to take on a currency that is too soft. France suffered a similar problem with the conversion between "old" and "new" Francs (lobbing off zeros to revalue the currency).

To use another example, there are a number of countries around the world that have pegged their own currencies to either the GBP, USD, or Euro. Although other countries do not like this practice, it does afford the traditionally smaller countries the ability to stabilize their economies. Utilizing a digital currency that is pegged to a fiat (in the case of my example of Greece using the E-Euro, or "gyro"), it allows them two major advantages: 1) The ability to use fiat Euros to accelerate their payments to reduce their debt obligations, and; 2) Effectively doubling or tripling their usable money supply to affect economic growth through the investment in infrastructure or other economy-boosting projects.

I am not saying it is as easily accomplished as I have laid it out to be, but it certainly can be accomplished and would effectively satisfy multiple problems that currently plague the Greek government and its people.

[DumbRedneck]

Fact is, untill they figure out there is no free lunch (someone has to pay for it), its all gona be a shite sandwich. By they Im talking about BOTH the government and the citizens. They made the sandwich now they gota eat it.

Argentina is still a nightmare fresh in many minds, once very wealthy, now up to their eyeballs in debt. Moral of the story...dont take on massive amounts of debt, ever. Do take on small amounts of debt to build infrastructure It pays back over time.

I still stand by the Idea of a Crypto for a Soft Internal currancy, the outlay it saves is nothing to laugh at, its accountable, and portable.

I will just leave this here, you figure out whats broken....

“I’m at the breaking point,” said Gretchen Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8,500 this year.
“It’s not because I don’t like paying taxes,” said Gardner, who attended both meetings. “I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.”

[Allen1980s]

“I’m at the breaking point,” said Gretchen Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8,500 this year.

The irony of this is that Texas has always been a major Republican stronghold for as long as I can remember. Yet, this is the same party that is highly supportive of both the military budget, as well as major corporations receiving taxpayer welfare considerations (little to no taxes). With any political party, there always appears to be a fundamental imbalance in financial or economic planning.

[DumbRedneck]

I think you may have missed my point a bit......she could have always voted NO, and saved herself some of those taxes she is protesting, instead she made that sandwich but dont want to eat it.

[Allen1980s]

I think you may have missed my point a bit......she could have always voted NO, and saved herself some of those taxes she is protesting, instead she made that sandwich but dont want to eat it.

Not missing it really. The town I presently reside in, they have had mountains of problems getting any levies to pass to fund schools and street repairs. In the cases where they were passed, the results were far from acceptable. Another example of this:

Two years ago, a levy was proposed to fix the massively decaying (and neglected) streets. The amount was 24.5 million USD, raised over the course of a ten year period. It was levied as an increase in property taxes. To get the levy to pass, they exempted all retired people from paying the increased property tax percentage, but allowed these same people to vote on the levy. Since the majority of the town's population was comprised of renters and retired people, the levy passed, basically placing the burden on employed property owners who were under the age of retirement. This was also the minority group represented in the town (25% unemployed, with 28% retired). There was no voting the levy down, when those who would be affected the most were also the minority group voting.

[DumbRedneck]

LOL, now thats what I call "Targeted Taxation" and what will they do when the targets pack up and leave...My example and yours actually coincide, Both want something, but want someone else to pay the bill. Funny how that works.

[Allen1980s]

what will they do when the targets pack up and leave...

That was an issue the city did not care about, as someone owns these properties whether they are for sale, sold, or remained owned by the current inhabitants. There was nothing to threaten the city with. Most of us realized that whole streets would not be properly reconstructed from such a trivial sum of money, only resulting in "patches on patches" which come up during the following winter months. Oddly enough, many of my local friends wanted me to run for the soon-to-be-vacated position of Mayor; most of them being police officers. When I saw the salary, I just laughed and stated that the town was not ready for someone as radical as I am.

[k317x]

For the record, I do agree with Allen in some respects, particularly this:

"governments need to borrow extensively to create jobs that can boost economic recovery"

But I disagree that the US "caused" the 2008 disaster, rather I would say we joined in a world-wide bubble party

I couldn't find this thread earlier today & here it is popping up. I have requested a new category where we can discuss Finance & Economics in general, without necessarily involving crypto finance in a direct sense. This thread would definitely belong there.

[Allen1980s]

rather I would say we joined in a world-wide bubble party

We should rename it from the Financial Crisis to the "Global Bubble Bath?"

[k317x]

"Global Bubble Bath?"

So appropriate! Banksters took a bath & we were left with a very scummy ring.

[k317x]

I have made more suggestions for new headings here:

I could not find this Category Suggestions thread earlier, I must be bad at searching. Or too used to browsing in places where search doesn't work [wink] Thank you mods for pointing it out: This was the basis of my request, which I emailed to the mods: I just posted about the failure of Heta Asset Resolution Bank in Austria. Earlier I posted about Iceland's economy & Auroracoin, replying in the Bitcoin thread, and about Syriza / Greece here. I believe a section on International Finance would…

Please take a moment to chime in there if you agree with the request, thanks!