World War

[BlindSniper]

The First world war and the second world war was about 25 years apart, It has been almost 70 years since the end of the second world war, I'd say we are overdue for number 3. Who do you think will start number 3 ?

Personally I think both Israel and Iran are willing to attack each other, they just need a catalyst.(Although if they fight it might not end up as a world war unless they drag their allies into the fight and even then I doubt it)

[dilettante]

I'm not totally convinced we ever really left WII. Since the official end we've almost been in a state of Perpetual War with brief "respites" where proxies were used for the initial stages of opening up a new theater of war.

Maybe the main distiguisher was that in 1945 the "fascists" were done and the conflict became Communism vs. Capitalism... and later I'm not quite sure what to call the two sides.

[NeedSomeAnswers]

I'm not totally convinced we ever really left WII.

Of course we did, just because there lots of other smaller wars afterwards doesn't mean they are all part of the same conflict.

With that argument you could say that there was no world War II at all it was just a continuation of World War I.

Who do you think will start number 3 ?

no one just yet, wars are expensive (just look at the amount of money the US in particular and the UK have spent in Afghanistan) and i dont think anyone has the appetite for a really big war just yet.

Saying that i am sure we will see more wars, just like i am sure the sun will rise tomorrow, i do think we will probably see more smaller wars rather than 1 big war, it looks to me that there is a fair amount of conflict out there still.

[dilettante]

The messes in Korea and Indochina began as a direct offshoot of WWII.

http://www.freespeech.org/video/vietnam-american-holocaust

[techgnome]

When you consider the Korean War (you can call it a conflict if you like, but people shooting at each other is war as far as I am concerned) and the Vietnam War, the Cold War, Grenada, Iraq, Afghanistan, there has been a conflict of one kind or another every decade... one could view it as a precursor to something larger (like pre-shock leading up to larger earthquake) or smaller tremors that relieves the pressure.

Personally I think the next major war that happens on a global scale will be an economical one... or if there is going to be a physical war the catalyst will be financial based rather than philosophical or socially based.

-tg

[Shaggy Hiker]

Actually, there has been these conflicts throughout American history, and before that they came throughout Eurpoean history. Each one sows the seeds of the next, in some way. WWII directly resulted from the decisions made at the end of WWI, while the Korean War and Vietnam War arose from the decisions made at the end of WWII. A good book on the subject is In The Ruins of Empire, which chronicles the conflicts that arose after the Japanese defeat in places such as the Philipines, Vietnam, Indonesia, Korea, and China. However, if you add in Grenada, then you really have to add in all the very similar, and closely related, actions that the US took in the area for a couple centuries. The book The Savage Wars of Peace, shows that these conflicts have been nearly perpetual. Peace is relatively rare.

If you go further back, you can see that what the US calls the French and Indian War led to the Revolution, which led to the War of 1812. It all ties together in some way, though some wars tie more strongly to others than the rest. Still, conflict is the only real constant, and anybody who goes looking for relationships between the sequences of wars will find those relationships.

[techgnome]

So very true... I'd heard of "In The Ruins of Empire" ... haven't read it though... might pick it up from amazon after I'm done with my current book. Never heard of "The Savage Wars of Peace" ... but I certainly can agree to the conclusion... actually it would be pretty hard to refute it... all you can really do is maybe argue the cause/effect of wars that precede/follow.

-tg

[Shaggy Hiker]

That latter book describes all the minor American conflicts from the Barbary Pirates campaign (the shores of Tripoli) up through Vietnam. The Vietnam War is included, though only very lightly, because the author contends that it was actually a mis-handled 'small war' rather than a large war. The number of conflicts is really pretty impressive. Quite often, the size of the US forces involved was a company, or so, and there was often very little actual fighting going on, but there sure were lots of invasions.

The one that they don't talk about was the phony war between the US and France. I've seen two references to it now, and all I know about it is the time frame (1790s, I think), and that it was just naval, but all that does is makes me curious.

[kleinma]

However, if you add in Grenada, then you really have to add in all the very similar, and closely related, actions that the US took in the area for a couple centuries.

Couple centuries? US has only been a country for a little more than a couple centuries.

[Shaggy Hiker]

True, and we have been invading countries in central and south america, as well as islands in the area, for pretty nearly the entire time. That's what the book was about: All those minor, largely forgotten, actions. We learned a great deal during that time, and the Marine Corps actually wrote a book on how to conduct these small-scale operations, but the book was largely forgotten as a result of WWI and WWII. The author argued that the Vietnam War was largely a result of the US trying to apply the lessons of WWI and WWII to a situation where the earlier, then forgotten, book on small wars would have applied more readily.

[BlindSniper]

True, and we have been invading countries in central and south america, as well as islands in the area, for pretty nearly the entire time.
That is what bugs me about the US, they are always having a fight with someone.

[BlindSniper]

Found this on google news.
You guys think this article has any basis ?
http://www.ynetnews.com/articles/0,7340,L-4186698,00.html

[techgnome]

no... not really... the better argument has been why they won't...
1) what will the bombing accomplish? Not a lot... it'll only set them back a few years. So what's Israel going to do? Continuously bomb Iran ever 2-3 years? Highly unlikely. It's unsustainable.
2) Even if Israel were to bomb Iran's nuclear capabilities... Iran's still going to have conventional weapons... enough bring down a rain of terror on Israel.
I'm sure the Israeli govt is watching them... there's probably a fair amount of nervousness going on ... but they're not stupid.

-tg

[techgnome]

That is what bugs me about the US, they are always having a fight with someone.

that's an absurd notion... every nation is guilty of this to some degree... UK, France, Spain, Russia, the Romans, the Greeks, just to name a few. There has been some kind of armed conflict going on some where every decade in the world for ... some time. Sadly, it's human nature... I doubt the human race will ever achieve full enlightenment and ascension. We're too arrogant and too primal.

-tg

[Shaggy Hiker]

As long as a country feels strong, it will pick on others. That does seem to be the rule throughout history. The countries that don't get into fights with anyone else are those who are too weak to even consider it.

As for the article, it states early on that only a few cold wars have resolved without turning into hot wars. So what, that doesn't make the result of Iran-Israel automatic. Frankly, I think that one is more likely than not to resolve in a more peaceful fashion. Not entirely peaceful, mind you, considering that it hasn't been peaceful so far, but I wouldn't be surprised to see the direction of Iran change in the coming decade. The leadership of that country is somewhat at odds with its people, and has been for over a century. The direction the country has taken has veered dramatically at different times, usually as a result of horrible mismanagement by the supposed leaders. Another wide deviation seems more likely than not. Whether the new direction will be towards peace or war is an open question, but peace seems somewhat more likely, to me.

[FunkyDexter]

I think some form of conflict in the middle east is actually fairly likely, particularly given the Arab Spring which is going to further muddy the water.

At the moment the region is mostly divided along religious lines. The Arab Spring will bring a new ideological division between the surviving autocratic systems and any new democratic systems that form. The autocratic regimes stand to lose a great deal of credibility if new democracies succeed so it's in their interests to undermine them. And new democracies do tend to try and export their democracy - which usually isn't welcome.

The scenario of a middle east conflict growing into a world war seems far less likely to me though. You get world wars when great nations fight and, in our modern globalised world, the great nations have far more to gain by staying out of direct conflict with each other than they do by piling in. That doesn't mean you won't continue to see proxy wars - particularly if another power grows to rival the US economy - but the conflicts will be kept low key and as deniable as possible.


edit>
As long as a country feels strong, it will pick on others. I think it's even more basic than that. Folks just fight... the strong ones win.

As for the article, it states early on that only a few cold wars have resolved without turning into hot wars. You don't even need the "So What", on that point the article is just plain wrong. Plenty of cold wars have been resolved without escalating to a full blown conflict. The British Empire was built on a succession of cold wars with the European powers during the 18th and 19th centuries. The Hundred Years War was far more cold than hot. Hell the ancient greeks were at it in the Peloponesian wars which spent far more time cold than hot. We just tend to learn about the hot bits because the cold bits are quite boring. In fact you could argue that all nations have engaged in permanant cold wars with each other ever since someone came up with the idea of trade tariffs.

[honeybee]

Peace is relatively rare.


It's the lull between the reports when both sides reload their guns, or scout for alternative battling sites.

I am sometimes afraid the WW 3 may never happen and we may be wiped out just like that. That would be pathetic.

Someone said economic wars? That's been going on since the invention of money. And all the wars have basically driven out of the economic hunger. So the two are two sides of the same coin.

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[BlindSniper]

Well it would be quite stupid if no one survives, and with current technology that would only be possible if Russia and/or the US carpet bombs the earth with nuclear missiles.(I wouldn't mind seeing a carpet bombing of nuclear missiles, but not on this planet.)

[Shaggy Hiker]

Would carpet bombing result in rug-ed terrain?

Once again I find myself agreeing with FD. After all, what the heck is a cold war?

[Shaggy Hiker]

One lousy pun and the thread has given up the ghost....

[jcis]

Not related to a world war but: Did anyone read/heard about the problems between England and Argentina about Malvinas (Falklands)? England won the war in 1982, now Argentina has proposed that the Islands sovereignty dispute should continue pacifically but offcourse England won't agree with this. England has already sent war ships and submarines to the islands and the newspapers say they recently contacted Chile (Chile has been a very important base for them in 1982 for fuel recharging).
I'm from Argentina but i'm not taking sides on this, just hope all this won't end like in 1982.

[Shaggy Hiker]

Of course they won't continue it pacifically, the islands are in the Atlantic.

The dispute over these islands is pretty strange. After all, it doesn't sound like the few residents of those stark, wind-swept piles of rock (which I'd kind of like to visit, actually) are getting much say. It also sounds like the residents lean British, but ties to both countries are sound. Both sides have valid claims.

So what's the point in the current conflict? The old war sounded like a little political ploy by the old regime in Argentina, rather than an issue that people really cared about. The only thing I can think of regarding those islands is that somebody wants the fishing rights within the territorial waters around the islands. Is there anything else there other than sheep and rain?

Oh wait, that's probably why England wanted the islands in the first place: Rain? Check! Sheep? Check! Islands? Check! No France in sight? Check! Yup, those islands have it all.

[LaVolpe]

...I'd say we are overdue for number 3. Who do you think will start number 3 ?
I think it still has several decades to evolve. I think the trigger will be natural resources whether it be oil or possibly fresh water.

Until that happens, unless a superpower starts a war to assume dominance over a resource-rich region, I think battles will be either ignored/tolerated or joined by small groups of nations vs. involvement of all of the superpowers. I do think the next big one will be over oil or water

[Shaggy Hiker]

Back in our salad days, it was always over Oil and Vinegar.

[jcis]

..Rain? Check! Sheep? Check! Islands? Check! No France in sight? Check! Yup, those islands have it all.
One more thing: oil? Check! (http://www.bloomberg.com/news/2012-01-19/britain-s-oil-grab-in-falkland-islands-seen-tripling-u-k-reserves-energy.html) and more here (http://www.thesun.co.uk/sol/homepage/news/money/3996957/Falklands-oil-strike-to-infuriate-Argentina.html)

[honeybee]

I guess the costs of mounting a proper war are too high. Most of the times we shall keep seeing sporadic instances of bombings, either by humans or drones, and threats and counter threats. It's too early to start a full blown offensive. The US of A certainly can't afford it anymore at this point in time, and naturally no one else would be stupid enough to do it on their own.

The Falklands is an interesting diversion from the usual Iran and the general Middle East debate, or the Chinese human rights record, for that matter. Sadly newspapers here are not much interested in global news that far away.

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[Shaggy Hiker]

One more thing: oil? Check! (http://www.bloomberg.com/news/2012-01-19/britain-s-oil-grab-in-falkland-islands-seen-tripling-u-k-reserves-energy.html) and more here (http://www.thesun.co.uk/sol/homepage/news/money/3996957/Falklands-oil-strike-to-infuriate-Argentina.html)

I hadn't realized that. Oil does tend to grease the skids.

[FunkyDexter]

Certainy the Falklands conflict in the 80s was cause by little more than politics, on both sides. I wasn't aware of the oil resources jcis linked to so that raised an eyebrow for me and certainly gives an explanation as to why it's all being dredged up again now. (If I was Shaggy the pun in that last sentence would have been both deliberate and funnier but for me it was entirely accidental).

This time round I doubt it's going to come to armed conflict but I do think the politicians on both sides could do with growing up and not squabbling like little kids. Surely Kirchner must realise that us Brits are not going to give up the Falklands or refrain from tapping any oil reserves it has so she's just picking a fight for the look of it. Equally, Cameron's sabre rattling and jingoism in response was totally over the top and unneccessary. I'm guessing the truth is both just needed a bit of a popularity boost and decided to appeal to the lowest common denominator in their respective electorates.

Would carpet bombing result in rug-ed terrain?You just keep pileing on the puns don't you. We'd try to hem you in but personally I'd rather have a nap instead.

[BlindSniper]

Would carpet bombing result in rug-ed terrain

While doing a 60km mountain biking exercise, I understood your pun. lol

[Shaggy Hiker]

You just keep pileing on the puns don't you. We'd try to hem you in but personally I'd rather have a nap instead.

Gawd! This is turning into wall-to-wall puns.

[honeybee]

While doing a 60km mountain biking exercise, I understood your pun. lol

You have amazing control over your bike, I must say.

And I realized the pun about two days after it was posted, partially due to my head feeling lighter and heavier at the same time.

.

[BlindSniper]

As you can imagine, a 60km mountain bike is not very good in the corners, but luckily we have loads of open space here.

[FunkyDexter]

Gawd! This is turning into wall-to-wall punsIt's true. Weave gone too far.

[InvisibleDuncan]

The dispute over these islands is pretty strange. After all, it doesn't sound like the few residents of those stark, wind-swept piles of rock (which I'd kind of like to visit, actually) are getting much say. It also sounds like the residents lean British, but ties to both countries are sound. Both sides have valid claims.


They do indeed "lean British". In the most recent referendum held on this issue in the Falklands, over 90% of the populace voted to remain British.

For what it's worth, the British government have on several occassions offered to take this dispute to the International Court of Justice:

Following the Argentine claims, the UK repeatedly (in 1947, 1951, 1953 and 1954) offered to take the matter to the International Court of Justice in the Hague but this was turned down by Argentina. When Britain took the issue to the court unilaterally in 1955, Argentina declined to cooperate, citing a lack of jurisdiction.

I think this is quite an interesting take on it, where the Falkland Islanders invite the Decolonization Committee president to visit:

http://en.mercopress.com/2011/06/21/falklands-publicly-invites-decolonization-committee-president-to-visit-the-islands

Propoganda, eh?

[Shaggy Hiker]

They do indeed "lean British".

Well, it is clear that nobody leans American. We're getting less and less lean every day!

[Spoo]

Would carpet bombing result in rug-ed terrain?


Methinks Shaggy needs a (ahem) shag.

[ezninja]

i submitted 10 puns to a pun contest, hoping one would win.
but no pun in 10 did

[ADQUSIT]

Very nice piece of thoughts, given by all respected members but whatever the situation may be, But we should all pray that May God protect our earth, our homes, our lives, children, parents, brothers and sisters and all others, along with entire humanity, from the evils of war and terror.

[Nightwalker83]

As long as a country feels strong, it will pick on others. That does seem to be the rule throughout history. The countries that don't get into fights with anyone else are those who are too weak to even consider it.


Reminds me of Itchy and Scratchy from The Simpsons where they are trying to blow each=other up using bigger and bigger weapons each time with the world in the center.

[honeybee]

Very nice piece of thoughts, given by all respected members but whatever the situation may be, But we should all pray that May God protect our earth, our homes, our lives, children, parents, brothers and sisters and all others, along with entire humanity, from the evils of war and terror.

I hope you realize you are asking God to protect all those things which cause all the wars?

.

[dday9]

I hope you realize you are asking God to protect all those things which cause all the wars?

.

I think that if the world has good morals, be it christianity, buddism, or just a guinuine love for another human being's life the world would be at peace(somewhat). My religion/lack of religion is better than the yours, so you can live and believe in mine or perish! Those are the people that make Earth an unpeaceful place.

As for the op, I think right now it would be Isreal and Iran. But in a year or two it could be US v. Confeds. Then in another year or two it could be Switzerland v. Canada! Who knows, it will happen, just time will tell.

[honeybee]

[QUOTE=dday9;4162179]I think that if the world has good morals, be it christianity, buddism, or just a guinuine love for another human being's life the world would be at peace(somewhat). My religion/lack of religion is better than the yours, so you can live and believe in mine or perish! Those are the people that make Earth an unpeaceful place.
QUOTE]

You do realize, don't you, that all the religions basically started out the same way, but the very factors mentioned in your earlier post caused the people to change/amend/interpret the religions in ways which suited their selfishness?

So it's not the religion, or the lack of it, but the greed in people out of all those vices which makes Earth what it is today.

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[Shaggy Hiker]

The fault lies not in the stars, but within our selves.

[dday9]

The fault lies not in the stars, but within our selves.

I personally think that the fault lies with the swe's :P

[Shaggy Hiker]

swe????

Single White Elf?
Swedes?
Standard White Envelope?

[honeybee]

Social Welfare Employees?
Socio Economic Warfare (assuming it was a typo)?

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[FunkyDexter]

Seriously wobbly evangelists?

I blame the stars. Operah Winfreys been looking at me funny lately and Russel Crow's been asking for it for ages.:mad:

[dday9]

The people from switzerland :P I can't spell.

[Shaggy Hiker]

The people from switzerland :P I can't spell.

:lol::lol::lol: Seriously! I laughed when I read that. Kind of an epic spelling failure, but quite entertaining. I even guessed a country and guessed the wrong one. That was a hoot!!!

[dday9]

Their neutrality is haunting o.O
I really hope I spelt neautrality right :P

[honeybee]

See, you want to blame the neutralists!

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[thebuffalo]

The U.S. will help Israel when Iran finally invades them, and Russia will frown upon this. This is how WWIII will start.

[honeybee]

Well, does Iran have sufficient military power to overpower and invade Israel?

.

[dday9]

Well, does Iran have sufficient military power to overpower and invade Israel?

.

Did the us have sufficient military power to overpower the Brits in the late 1770's? Or did the VC have any military power to overpower the US and France(I think it was France that there before the us was...)? Either way, if somebody believes in something very passionately, then the tide can turn very easily for the underdog. I mean, haven't you ever watched an 80's boxing movie :P

[Shaggy Hiker]

In all of those cases, the larger force was invading the territory of the smaller force. The US could not have successfully invaded England (several decades later we failed miserably when we attempted to invade Canada). The VC could not have gotten anywhere invading the US or France, either. Similarly, Israel would probably lose if they invaded Iran, but HB was talking about it the other way around: Iran invading Israel, where the underdog would have to be Iran, despite the relative land area size and population size.

[honeybee]

Did the us have sufficient military power to overpower the Brits in the late 1770's? Or did the VC have any military power to overpower the US and France(I think it was France that there before the us was...)? Either way, if somebody believes in something very passionately, then the tide can turn very easily for the underdog. I mean, haven't you ever watched an 80's boxing movie :P

In all of those cases, the larger force was invading the territory of the smaller force. The US could not have successfully invaded England (several decades later we failed miserably when we attempted to invade Canada). The VC could not have gotten anywhere invading the US or France, either. Similarly, Israel would probably lose if they invaded Iran, but HB was talking about it the other way around: Iran invading Israel, where the underdog would have to be Iran, despite the relative land area size and population size.

I am assuming you mean Viet Congs?

Shaggy has nailed it. Although when I compare Israel and Iran, Iran seems to be the undisputed underdog (not that it's likely to use that status effectively).

I won't claim to know what Iran has in its arsenal, but I believe it's far less than what Israel has. Even if Iran did get hold of an atomic weapon I doubt it would be used. Even if it were to be used, Israel would have already deployed counter measures to prevent it. I am sure Israel has the plans A, B, C and maybe even D already worked out in these scenarios, and even if Iran did manage to pull a surprise attack, Israel would be ready with a counter-attack in no time.

So I actually thought 'thebuffalo' was being funny when he/she said Iran would invade Israel.

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[thebuffalo]

I was, I was. The only way they would invade anywhere is if they were to somehow manage to find an ally willing to politically and almost literally commit suicide.

I do believe that if there were to be a WWIII, it would be between China and the U.S mainly and then others would branch it according to who they like more.

[Shaggy Hiker]

I am assuming you mean Viet Congs?
.

In my case, I was talking about Venture Capitalists, but dday may have been refering to Viet Cong.

[dday9]

Yup, I was my wife's papa calls the Viet Cong, the vc. But thebuffalo, I couldn't see China and us going to war. Atleast not with our current dependency on china, what's the biblical verse... Ah, the borrower is a slave to the lender.

[thebuffalo]

Yeah but when that slave doesnt pay you back.. then what do you do?

[Shaggy Hiker]

In this case, there is a mutually co-dependent relationship. China is tied to us just as tightly as we are tied to them. That can all change, but the current situation is that if China called in its loans, we'd go belly-up, and they'd be crushed. The hit they'd take to their economy would be harsh enough to destabilize their government, and they fear that more than anything.

On the other hand, some people said that about western Europe in the years prior to WW I. Still, the debt relationship between the US and China is a pretty peculiar one, if only because of the size.

[FunkyDexter]

I agree with Shaggy. If history teaches us anything it's that any predictions we make will be wrong. I reckon you can predict major events maybe 20 years ahead at most in Geo-Politics and even then you'll get it wrong more often than not. I don't think anyone would have predicted the fall of the Berlin Wall more than 5 years ahead. Nobody saw the war on terror coming before 9/11 actually happened. And I didn't see many people talking about an Arab Spring until things kicked off in Egypt.

The world tends to stay still for a long time, then change comes real fast.

[honeybee]

I read a few comments in one of the issues of 'The Economist' on the elections in some European countries, including Greece and France, and the tone indicates that the mood is slowly swinging towards getting out of the European Union and going solo (the author has actually said these countries would shut themselves out of the rest of the world). So the EU won't get involved into any wars, most likely there won't be any EU in the next few years.

The US and China are so tied together, they both need to prop each other to survive, or else both of them are doomed, just like Shaggy said above. It's true that China holds a massive stake in the US through its investments, but the US is probably one of the biggest market for the Chinese products. If the US collapsed, there would be no place where the Chinese factory output can sell, prices will crash and the Chinese economy will collapse too.

The middle eastern nations like Iran are still at risk, since they are being ruled by people who can be labelled more fanatic than rational. Although personally I think Ahmedinejad is a rather shrewd man, there's no guarantee what he will NOT do if pushed into a corner.

North Korea seems to have been forgotten for a while now, so we can assume it will take a few years more for things to get back to the war levels between these two Korean fractions.

Nope, I don't see a war (at least a military one) looming on the horizons as yet. I fear more about an economic war. Japan has shut down all its nuclear reactors, and has now become dependent on imported oil and gas. This is bound to shoot costs up, increase production costs and prices and force the Japanese manufacturers to move their production activities outside Japan or lower the wages and consequently the living standards of the average Japanese Joe (or do you call him Joe-san?). Either way it's a blow to the economy and it will reduce the demand that Japan generates for the various products/services.

India is facing a lot of economic issues along with massive scandals in almost every government operated sector, at both the central and the state levels. It would be a miracle if the Congress coalition could retain power. The new government is likely to mess up the policy confusion even further. This would force investors (not the speculative share market FIIs but serious industry players like Arcelor-Mittal for eg.) to either freeze or pull out their investments. This will affect not only India but also the respective companies. I am doubtful if this alone could spiral into a crisis beyond the national levels but given the role India is playing in the world market there's a chance it could.

I am just citing two examples that I know a little about. I am sure various factors are adding to such economic crises the world over. So it's these little battles which may scale up into full-fledged wars.

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[Shaggy Hiker]

I reckon you can predict major events maybe 20 years ahead at most in Geo-Politics and even then you'll get it wrong more often than not.

If a coin flip would be more accurate, I wouldn't call that a prediction, I'd call it a guess.

[honeybee]

I agree with Shaggy. If history teaches us anything it's that any predictions we make will be wrong. I reckon you can predict major events maybe 20 years ahead at most in Geo-Politics and even then you'll get it wrong more often than not. I don't think anyone would have predicted the fall of the Berlin Wall more than 5 years ahead. Nobody saw the war on terror coming before 9/11 actually happened. And I didn't see many people talking about an Arab Spring until things kicked off in Egypt.

The world tends to stay still for a long time, then change comes real fast.

Maybe because we don't have a 'handle' to all those things which influence the course of things? There are so many variables, you simply cannot track each of them and then correlate its movement with the outcome.

Maybe game theory will help, but I have no clue what it is. Might as well learn it!

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[FunkyDexter]

I read a few comments in one of the issues of 'The Economist' on the elections in some European countries, including Greece and France, and the tone indicates that the mood is slowly swinging towards getting out of the European Union and going solo (the author has actually said these countries would shut themselves out of the rest of the world). So the EU won't get involved into any wars, most likely there won't be any EU in the next few years.
My personal prediction is that they'll bomb out of the Euro but stay in the EU. Technically the rules of the Euro say that if you leave the Euro you have to leave the EU as well but that rule was created as a deterrent to stop people leaving the Euro rather than somehow protect the EU; there are plenty of countries (UK for example) who are part of the EU but never joined the Euro in the first place. With that in mind I think the rules will be relaxed and Greece will be allowed to remain in one while quitting the other. After all, having them leave the Euro is going to be damaging enough (and not just to Greece) so why further that damage by forcing them out of the EU.

Alternatively, Germany may get it's head around the fact that, if it wants the trading advantages it undeniably gets from having a stable Euro, the price is going to be to pay for Greece's deficit, at least until Greece can get back on it's feet. And there's no point in forcing austerity measures on them because, the truth is, they just can't afford to maintain them.

If a coin flip would be more accurate, I wouldn't call that a prediction, I'd call it a guess.True. I started that post thinking maybe 20 years was short enough to make a prediction then, as I started thinking of examples, I started realising that it just isn't. A bit of careless editing left me making a non-sensical opening statement :blush:

Maybe game theory will help, but I have no clue what it is. Might as well learn it!Sonic's better than Mario. That's all you need to know.

[honeybee]

and there's no point in forcing austerity measures on them because, the truth is, they just can't afford to maintain them.


!

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[SJWhiteley]

And there's no point in forcing austerity measures on them because, the truth is, they just can't afford to maintain them.

holy, what?! I had to look up 'austerity' again because, seriously....what!? This is what we refer to in the good ole' US as 'Drinking the Kool-Aid'.

The word 'austerity' doesn't actually exist those who act responsibly and are responsible for others. Usually, before enough time has passed for some lame-brain, high-altitude, economist invents such a word, the corrective action takes place. In this case: STOP SPENDING MONEY YOU DON'T HAVE.

The EU is destined to break apart as the reality of debt starts to crumble the facade of a European economy.

European countries, over the decades, have had each other to hide their own failing government policies which have destroyed a sustainable economy, culminating in the transition to the Euro. As the failed economies were hidden - and supported by - more robust economic entities (read: productive) those failed mechanisms have continued and appeared to demonstrate a 'successful' social-economic structure.

It is baffling that so many hide behind the argument of a 'depressed world economy' for such a tragic failure [Greece]; they ignore the real reasons for failure. The tragedy being that Greece's very own people continue to gnaw away on the bones of the long-dead golden goose, mystified - and violently angry - that they don't get what they want.

World war? Not so much, but there are only so many body parts you can cut off to feed your starving children.

[honeybee]

All that pent up anger... I felt the steam hiss out of the post and the monitor.

.

[FunkyDexter]

STOP SPENDING MONEY YOU DON'T HAVEIn general I agree with you. Greece, Ireland, Spain, Portugal, Italy, Iceland... all these countries have spent the last two decades hiding their deficits and spending money they didn't have. And yes, it is irresponsible for a government to spend money it doesn't have. In that regard I'm definitely not a Keynesian. I don't believe spending money on public services purely in the name of growth is sensible because that growth will be illusory. (I do believe in high public services investment because I believe it's good for society but that's a whole 'nother argument)

However, with the situation as it is now is the reality and needs to be dealt with. The productive members of the Euro are faced with a choice of bank-rolling the poorer members or watching the system they built collapse. Thus far they've chosen to bank roll the poorer members but have said these nations must reduce their government deficit to the 3% of GDP level that was originally stipulated for entry into the Euro (and which, BTW, even Germany failed to achieve at least once in the last decade). And Greece has attempted to do just that. It's raised it's tax levels through the roof, it's selling off it's infrastructure (including it's road and rail networks) and it's reduced public spending as close to zero as makes no difference... and it still isn't enough. The truth is they're a tourist and agrarian economy and, while locked into the Euro and therefore into an unrealistic exchange rate parity with Germany, they simply have no mechanism to make those industries competitive. Normally they would reduce their exchange rate, therefore making those goods cheapper and more competitive, but the Euro removes that option. Simply put, their is simply nothing Greece can do in the present climate to reduce their deficit any further. They just don't have the means.

Now, I'm sure you'll argue that they shouldn't have got themselves into that situation in the first place and you're right, they shouldn't have. But that doesn't change the fact that they did and that's the reality that has to be dealt with now. You're saying that Greece should stop spending money it doesn't have and that's exactly what they've done... but the bills are still coming in and they simply don't have the money to pay them.

So where does that leave Germany? Well, they're going to continue to posture and demand further austerity (it's a real word by the way, it's in the dictionary and everything) measures because that's going to please their electorate but they already know that the Greeks can't actually meet those demands. So sooner or later they're going to be faced with a choice: 1. Back off the posturing and continue to bank roll Greece but without imposing conditions or 2. Refuse further finance at which point Greece WILL default on it's debts, crash out of the Euro, reduce it's exchange rates and finally have a shot at becoming competitive.

On the surface it might look like option 2 is the obvious one for Germany to take, why shackle yourself to a drowning man, right? The problem is those debts Greece is going to default on. The creditors are Germany and Britain. Option 2 will lead to a second banking lockup in those coutries and we'll all head into another massive recession.

The truth is neither option is attractive and either is going to lead to a bunch of pain. Option 1 will mean ongoing moderate pain for at least a decade, probably 2 or 3. Option 2 will lead to massive pain right now. Bankrolling greece is essentially just about deferring that pain and buying time. Which is Ghe right option really depends on whether you think we can buy enough time for growth to come back into the world economy. If we can then we will be able to take that pain during a period of growth when we're fairly well equipped to cope with it. If we can't then the pain will be even worse and we'll still be taking it in a time of recession when it's going to hurt most. I personally think we can buy enough time but I certainly wouldn't claim to know it. Anyone who claims to know what's going to happen is a liar.

And before you climb on your high horse you may want to look at this chart (http://www.gfmag.com/tools/global-database/economic-data/10395-public-deficit-by-country.html#axzz1vJcOZ3MW). The US and the UK are actually both in worse shape than Greece. The only difference is that the money markets believe we can handle it. If that belief changes, and it's ephemeral at best, then we face exactly the same situation that Greece is now.

[dday9]

I would like to see where China and Russia are on that chart :P

[honeybee]

I think Russia has long dropped out of running and I don't know if it really mattered economically. With the disintegration of the Soviet Union at least the truth is now bare. With the European Union it's difficult because as long as the union stands the individual members will never be scrutinized enough to know how bad off they are.

China is most likely in the place where it needs the US to survive because a lot of Chinese money is invested in the US, plus most factories there are being run for the US companies. So if the US goes down, it might drag China along too.

Looks like barter economy was better! We surely seem to be heading that way, maybe in the next fifty years or 100 years. Now if that prediction came true, FD will have proved a point!

.

[dday9]

A barter economy is an economy that lacks a commonly accepted currency, so all exchanges must be made with goods and services because money does not exist in these economies.

I can honestly say that my own grandfather remembers trading 3 chickens for his first truck

[FunkyDexter]

China is most likely in the place where it needs the US to survive because a lot of Chinese money is invested in the US,China is to the US what Germany is to Greece, just on a bigger scale. The one obvious difference is that in the German-Greek relationship the creditor is the more advance country while in the Sino-US relationship the creditor is the less developed economy.

It's quite interesting to ponder how that will play out politically if the US economy did get into trouble and teh money markets started turning their backs in it. Internationally we can kind of understand Germany making political demands of Greece because we view Germany as more politically advance so we tend to assume they're demands will be just (which is a wholly fatuous assumption btw). I wonder how the world would look on China making political demands of the US.

edit>Looks like barter economy was better!Definitely not! It's always tempting to take this view because it's simple and easy to understand. You know you're getting a fair shake. Economics is complex, obtuse and leaves you with the vague feeling that someone somewhere is taking you for a ride. But a barter economy simply could not sustain the world population today. The same is true of the gold standard. It feels solid and reliable but all it actually does is limit your options for no real benefit. Money is trust. As long as we trust each other money works. When the trust fails the economy fails. But neither barter or gold standards change that.

[honeybee]

In barter I at least know what I am getting for my goods/services. With the currency values falling rapidly you never know the real worth of whatever you are getting.

Imagine this: I get salary at the end of the month. After that I spend it over the next month. If the currency were to decline in value during the month, I am incurring a loss. Though some might argue that I receive and spend in a single currency, whatever I spend on has been procured from other currencies at some point in time. So somewhere the floating currency hurts me. This effect is more obvious over a longer period of time or in very highly volatile currency market.

In case of Greece, the Greek currency may lose its value very soon (in case it breaks away from the Euro) or the Euro will suffer (if it stays on and the EU foots the bill for its economic problems). Either way residents of other EU members will be paying for what happened with Greece.

I have read reports of cash withdrawals from the Greek central bank which will trigger a collapse of the banking system there. This cash will be as good as useless if the economy collapses. What better than resorting to a barter system then?

[FunkyDexter]

The problem with barter is that it only works between two individuals and only if they each produce what the other wants. I paint fences, you raise chickens. I want a chicken and you need your fence painted. There's a pretty easy deal to be done there.

But what if I don't paint fences? What if I bring Joy. Dday's been feeling a little low but he does paint fences. He's not going to paint your fence because you can't make him happy. You're not going to give me a chicken because I can't paint your fence. And I'm not going to cheers Dday up because he can't give me a chicken. None of us get what we want even though everything we all want is available somewhere within the system. We could all win but instead we all lose.

The solution is quite obvious, of course, it's an extended barter system. Dday agrees to paint your fence in return for a chicken he doesn't actually want and then he exchanges that chicken with me for one of these: :bigyello:

What Dday just did was make an investment. He trusted that by the time he came to me with the chicken I would still want one. He trusted that the bottom wouldn't fall out of the chicken market while he was holding it. He also trusted that the chicken you gave him was going to live long enough for hiom to pass it on to me. He trusted it would retain it's value. And, as I said before trust is... money. Money is trust (or belief if you like). It's purpose is to move a resource from where it is to where it's wanted.

Barter does not remove these fundamental issues. It merely means you know you're getting a fair shake right now. But you still don't know that the deal you're getting is going to be fair tomorrow. And it doesn't guarantee that Dday's not going to use dodgy paint that runs off the first time it rains. There simply is no system that will guarantee those things.

Money's actually the best system we've ever come up with and the more abstracted it becomes from real resources the better. Because those real resources lead us into a false sense of security nad also add an external instability because the world can change and the suppply of that resource can go up or down, artificially pressuring the currency that's tied to it. If you want to see an example of this phenomenon the best one I know is the collapse of the Spanish Empire. It's quite bizarre that the Spanish Empire collapsed because it became too wealthy.

The nations of Europe made their currencies out of gold. When the conquistadors conquered the tribes of South America the volume of gold coming out of the region flooded the markets. The Spanish thought this was making them rich. After all, they now had all the gold so they had all the money, right? What was actually happening, of course, was that the real value of gold plumetted like a stone. All the other nations switched to printing money as paper promissary notes while the Spanish insisted on sticking to gold. The other nations got on just fine because it wasn't actually the gold they wanted anyway, it was what the gold would buy them. And the paper was happilliy fulfilling that role now. Meanwhile the Spanish got left with a worless resource and a worthless currency. Massive inflation, bye-bye empire.

[SJWhiteley]

All that pent up anger... I felt the steam hiss out of the post and the monitor.
I read the federal Treasury Statement every 8th business day of the month: it raises the blood pressure (interestingly, April gave a surplus of around $59 billion due to increased revenue - it was April, after all - not that it matters much. We are in the hole $719 billion since October. The debt ceiling will be hit AGAIN around September/October by my guess).

However, Greece is going to have to default. And it will be painful. while the government has attempted to reign in spending, the people that they represent continue to try to throw them out for doing what is their own best interests. This is the root problem - several generations that have grown accustomed to the government giving all that is both needed and wanted.

Oh, and I know what Austerity is - I was being quite facetious. it is one of those words/phrases designed to hide the reality of it's meaning (kind of like saying someone dies of lead poisoning).

The reality of accumulating debt is a double-whammy. For example, when you get paid, you have $100 cash. You also have a credit card which you spend an extra $100 [credit]. That's $200 [cash and credit] of stuff that you can buy (woohoo!). However, to pay off the debt - with that $100 cash - means that you have $200 less to spend and you only pay off $100. In effect, the 'spending loss' is far greater than the gain. This is why so many entities are in trouble (individuals to governments to whole countries).

Also, you have to understand: where does this credit come from? We cannot ignore the interest - The US paid (double checking the figures, here) $30 Billion in April. Someone is getting rich. It's not just the Chinese, but the UK has a big holding of our federal debt. It's the fact that the US individuals give [sic] approximately $200 billion every month that prompts people to lend money to the US: the ROI is pretty good. It's also a good reason to not piss off those taxpayers (note, I say again, Taxpayers, not people). The revenue stream is good for the lenders.

As far as barter goes, it's good for goods and services of almost equivalent value. as a world gets more technical and advanced, disparity of localized value in goods and services promotes a common currency. But an economy needs to be suitably advanced: the European nations are not advanced enough to adopt a inter-nation currency (this was, I guess in hindsight, the hubris of European governments and self professed enlightened thinking). I do have a lot to say why the US has succeeded in a common currency but that's a story for another time.

[FunkyDexter]

Oh, and I know what Austerity is - I was being quite facetiousI know. So was I.

However, Greece is going to have to default.It already has. It's creditors agreed to write off a portion of it's debt several months ago when the bail out was agreed - that's a default right there. The only question is whether it will be uncontrolled default called unilaterally by Greece or a controlled default agreed with the creditors in advance.

while the government has attempted to reign in spending, the people that they represent continue to try to throw them out for doing what is their own best interests. This is the root problem - several generations that have grown accustomed to the government giving all that is both needed and wanted.I pretty much agree but the one point you seem to be missing is that the reality is what the reality is. And the reality is that, even with low public spending and high taxation, the interest on the loans Greece already has is larger than it's income. The answer to this isn't austerity measures, it's getting Greece out of the Euro so it can control it's own exchange rates and make itself competitive. The choice to be made is whether they leave now in a crisis or later in (hopefully) a controlled manner. A controlled manner would be less painful but does mean they'd have to be bank rolled in the meantime.

when you get paid, you have $100 cash. You also have a credit card which you spend an extra $100 [credit]. That's $200 [cash and credit] of stuff that you can buy (woohoo!). However, to pay off the debt - with that $100 cash - means that you have $200 less to spend and you only pay off $100. Sorry, I didn't follow that. You seem to be saying you'd be $200 worse off for having spent spent the credit but that's not right. You're $100 worse off in cash but you're holding $100 worth of goods. You're not actually any better or worse off at all. The cost of credit is the interest accrued. I can't help feeling I've miss-understood you here though.

Borrowing is not necessarily a bad thing (stupid and irresponsible borrowing is). To go back to my bartering analogy, suppose HoneyBee's chickens aren't laying because they find the current colour of the fence distressing and he can't afford to give away a chicken yet because he needs them to lay the next generation of eggs first. In that scenario it makes sense for him to agree to pay Dday 2 chickens in a years time to get his fence painted now because getting his chickens laying again now is worth more to him than the extra chicken it's ultimately going to cost him.

Of course, it's possible a fox'll get into the coop tomorrow and kill all his chickens anyway and then he'll be really stuffed He'll now owe two chickens and his nicely painted fence won't be doing him any good at all. That's the risk with all transactions. We don't know what tomorrow will bring so we can only go on the balance of probability.

The revenue stream is good for the lenders.Agreed but there's a tipping point and that's where Greece is now. To a creditor, a debt is an asset, it's a revenue stream exactly as you say. But only as long as it's actually getting paid. When a debtor becomes unable to pay (or just refuses) that asset becomes worthless. At that point the creditor is faced with a choice 1. Take the debtor to court to get as much of the debt as they can enforced (this is the equivalent of kicking Greece out of the Euro) in the knowledge that that's all they're ever going to get or 2. Agree more affordable terms with the debtor (this is the equivalent of continuing to bail Greece out) in the hope that the debtor will be able to pay more back over a longer period. That's a tricky judgement call to make.

But an economy needs to be suitably advanced: the European nations are not advanced enough to adopt a inter-nation currency Here I'm afraid I really disagree with you. You cannot seriously be saying the dollar is somehow more advanced that the franc or deutschmark were or the pouns is. The differenc is nothing to do with advanced economies and everything to do with political unity. The US has it, europe doesn't.

A currency cannot work if it's not controlled by single government. Interestingly the Euro was really an attempt at political rather than fiscal unity. The Franch and German governments have been pushing for a Europe wide super state since the end of the second world war. The Euro was basically a gamble that a fiscal union would force the hand of dissentors because a political union would be the only wasy to avoid the situation we're now facing. Unfortunately they underestimated the will of the constituants of the EU to avoid a federalised Europe and now find themselves hoist on their own petard.

[SJWhiteley]

...

Here I'm afraid I really disagree with you. You cannot seriously be saying the dollar is somehow more advanced that the franc or deutschmark were or the pouns is. The differenc is nothing to do with advanced economies and everything to do with political unity. The US has it, europe doesn't.

...

To clarify, you are exactly correct: you cannot bring independent and diverse countries together with differing socio-political mechanisms and expect them to play nice under a unifying inter-government with a single currency. It is not just the economics that drives currency, as you noted.

The US, on the other hand, was built from a single political framework - independent states are reserved full control under that framework, with a minority of control explicitly defined for that central government.

This has nothing to do with the individual nations currencies - except for the fact (lets face it) that no-one outside of the US liked the fact that everything was compared to or traded in US dollars. The US Dollar was the, undoubtedly, largest currency in the world by almost any measure. The Euro (perhaps necessarily) makes the dollar slightly less a dominant currency. A prime example of the folly of trying to unseat a dominant currency is the British pound: while not necessarily a minor currency, it isn't going to be challenging anything for dominance, except in the fact that it is a persistent and strong currency from a small but influential nation (even without the Empire!). Currency investors will take the Pound over the Euro in almost any world-wide economic situation, if the aim is long-term stability - the Euro is a good 'get rich quick' scheme. But as most schemes turn out, losers lose hard (sorry, Greece).


Sorry, I didn't follow that. You seem to be saying you'd be $200 worse off for having spent spent the credit but that's not right. You're $100 worse off in cash but you're holding $100 worth of goods. You're not actually any better or worse off at all. The cost of credit is the interest accrued. I can't help feeling I've miss-understood you here though.

Most people I talk to don't understand this. until you start thinking about it dynamically, rather than statically. Also, play it out: get out a wad of $100 bills and start spending (use pennies, match sticks, or whatever, to physically represent the flow - dynamic - of money). You can get used to spending $200 every period. But when the time comes to start paying off the debt, instead of spending $200, how much are you putting towards paying off that debt? If you spend $200 less does that mean you can pay off $200 of debt? Obviously not. If you spend $200 less, you can only pay off $100 of debt.

These are some of the simplest numbers to represent the dynamic of money flow with respect to debt, and it is surprising how few don't really get it. It gets more worrisome when you start to think about what is purchased with that debt. And that's the critical issue: there is almost nothing that someone or an entity buys with credit that is actually worth what they spent (and don't say 'property' as if this is a healthy and 100% safe investment opportunity...).

The 'cost of credit' being interest is, indeed, a cost. But the cost actually is quite small: and that's why people do borrow money, regardless of interest rate. That isn't what cripples them. It is the capitol - borrowed amount - that is the coffin: the interest determines whether you have gold fixings and satin or plain iron and cotton.

(Not much of a world war...but meh).

[FunkyDexter]

To clarify, you are exactly correct: you cannot bring independent and diverse countries together with differing socio-political mechanisms and expect them to play nice under a unifying inter-government with a single currency. It is not just the economics that drives currency, as you noted.

The US, on the other hand, was built from a single political framework - independent states are reserved full control under that framework, with a minority of control explicitly defined for that central government.

This has nothing to do with the individual nations currencies - except for the fact (lets face it) that no-one outside of the US liked the fact that everything was compared to or traded in US dollars. The US Dollar was the, undoubtedly, largest currency in the world by almost any measure. The Euro (perhaps necessarily) makes the dollar slightly less a dominant currency. A prime example of the folly of trying to unseat a dominant currency is the British pound: while not necessarily a minor currency, it isn't going to be challenging anything for dominance, except in the fact that it is a persistent and strong currency from a small but influential nation (even without the Empire!). Currency investors will take the Pound over the Euro in almost any world-wide economic situation, if the aim is long-term stability - the Euro is a good 'get rich quick' scheme. But as most schemes turn out, losers lose hard (sorry, Greece).I couldn't agree more with this and obviously miss-understood where you were going with the previous post. I've thought the Euro was doomed from the start. The ERM failed because it was too constraining on the currencies involved so why anyone thought that developing a similar but even more constrained system was going to work is utterly beyond me.

I was actually working as a financial analyst at the AA when Black Wednesday happened and I'd managed to predict it using nothing more than a spreadsheet. My boss, who was the forecaster, had asked me to build a spreadsheet comparing the exchange rate limits the ERM specified with the interest rates from teh various member states. It looked fine at first but as the Germans started dropping their interest rates the whole thing turned into a sea of red. The first thing he said was "your spreadsheet's wrong". Sadly it wasn't.

Most people I talk to don't understand this. until you start thinking about it dynamically, rather than statically. Also, play it out: get out a wad of $100 bills and start spending (use pennies, match sticks, or whatever, to physically represent the flow - dynamic - of money). You can get used to spending $200 every period. But when the time comes to start paying off the debt, instead of spending $200, how much are you putting towards paying off that debt? If you spend $200 less does that mean you can pay off $200 of debt? Obviously not. If you spend $200 less, you can only pay off $100 of debt.Ah, I think I get where you're coming from. You're talking about the relative pain between the position you were in when you were spending vs the position you're in when you're trying to pay it back. I'm talking about the actual pain you're in at any given point in time. Both are useful measures and need considering. It's the actual pain that truly constrains how much the Greek government can pay back but it's the relative pain that the people will feel because that describes the drop in their living standards.

don't say 'property' as if this is a healthy and 100% safe investment opportunity...Hah, I wouldn't. Property is widely recognised as one of the worst investments there is. It's no safer than anything else and and it's about a non-liquid as you can possibly get. I think it's popular mainly because it's an investment that's easy to understand. The only people who really make money on property are those who put work into the property to directly increase it's value.

[SJWhiteley]

The only people who really make money on property are those who put work into the property to directly increase it's value.

What is this 'work' of which you speak? Is that some olde-worlde thing? Sure beats answering 'my code no worky' questions...

[dday9]

SJ, I tried code and it no work. PLX HELP!!! Lol, sorry I just had to.
I'm amazed at how the thread has gone from WW3 to religion to investments to code.

[SJWhiteley]

...
Ah, I think I get where you're coming from. You're talking about the relative pain between the position you were in when you were spending vs the position you're in when you're trying to pay it back. I'm talking about the actual pain you're in at any given point in time. Both are useful measures and need considering. It's the actual pain that truly constrains how much the Greek government can pay back but it's the relative pain that the people will feel because that describes the drop in their living standards.

...

Couple this with your link to a rather interesting article regarding Deficit: it shows deficit as a measure of GDP. Since the UK and the US - two strong currencies - are in a similar position to Greece, why is Greece having a hard time? Obviously, we are taking these numbers at face value.

This is part of the economists folly. There's a very small band in which economic indicators hold true. Once a divergence occurs, there are so many variables that it becomes hard to predict. The ability to determine the major influences at any given time is rare.

As an example, the US feds controlling base interest rates can, to a certain extent, steer economic activity. However, as we can see, it is doing nothing, currently (some argue that it'd be worse without it - but that just demonstrates ignorance). So, an economic rudder goes from a clear controller to completely and utterly broken.

At the end of the day, we are dealing with people, who, ultimately, are irrational. No matter how smart, well intentioned, or influential, there's no getting away from the Furby effect.

[SJWhiteley]

SJ, I tried code and it no work. PLX HELP!!! Lol, sorry I just had to.
I'm amazed at how the thread has gone from WW3 to religion to investments to code.

What do you mean, 'gone from'?

Religion...war.
Money...war.
C# vs VB...war.

[honeybee]

Barter goes down to the purest basics: What you need and not what you can accumulate. It eliminates the perceived needs and focuses on the real ones. If I need rice and I know nobody has it around, I shall grow it. If someone has it around and if I have a gold bracelet, I won't have any grudge trading the gold for rice, because rice will keep me alive. The 'value' of things is directly related to the basic needs. Once we reduce the luxuries and other comforts and only focus on the basic needs, the problems introduced by money will disappear.

Today I can hoard money because it's not perishable (barring the exchange fluctuations) and I know I can buy any damn thing I want with it. So I focus on accumulating as much money as I can. Now the supply of money interestingly depends on the very goods/services which would participate in the barter, so in theory the supply is limited. When one person starts accumulating money, the others start losing it. If you printed additional money, only the value of the currency would fall, but the overall situation would remain the same.

If money were taken out of the equation, whenever I go to fill up gas in my car, I shall have to provide the gas station owner something of value, something of real value, like maybe painting his fence or repairing the plumbing or some other thing. This will cause me to acquire some real skills rather than just trying to spot trading opportunities.

.

[Shaggy Hiker]

I've got rice, but I don't want your bracelet. What else do you have?

Oops, you NEED rice, but all you have is that bracelet which has very little value to me? Sucks to be you in a water economy.

@SJWhiteley: but that just demonstrates ignorance

Frankly, I don't need any more demonstrations of that principle. I totally believe in it. On the other hand, I'm skeptical about whether intelligence exists. Perhaps that could be demonstrated a bit more often, maybe then I would find it more probable.

[FunkyDexter]

it shows deficit as a measure of GDPNothing wrong with that. Essentially it measures income vs expenditure, or in other words the solvency of your country. It's not a folly.

Since the UK and the US - two strong currencies - are in a similar position to Greece, why is Greece having a hard time?Because the money markets no longer believe Greece will be able to meet its obligations. They still believe that the US and the UK will be able to - but that belief can slip away in a heart beat.

Governments borrow money in the form of government bonds. These are essentially an agreement between a government and an investor where the government says "Buy this bond for X and I guarentee to buy it back after a fixed period time for Y". Investors will take up this deal if they believe the premium between X and Y is enough to offset the risk of the government failing to meet that obligation. Governments almost never fail to meet their obligations so bonds are normally low risk, low yield investment. However, Greece is at high risk of defaulting so Greek bonds are now a high risk, high yield investment.

Since Greece entered the EU it has been able to sell bonds at a very low premium (for which read interest rate) because it's success or failure was tied to Germany, the UK and France's in the form of the IMF... and everyone believed they were good for the cash. The trouble is that the recent crisis followed by talk of Greece leaving the Euro has crashed that confidence. The money markets are no longer confident that the IMF will be paying the bill for Greece's bonds.

That puts greece in a position where to attract continued investors it must offer a higher and higher premium on it's bonds. Essentially it's having to borrow at higher and higher rates of interest. And it has no choice in this. It sold bonds at reasonable rates previously but they're now coming due - they must be paid. The only way Greece can afford to pay the bonds already out there is to sell more bonds, essentially borrowing more money, but this time at exorbitant rates. It's that or default.

Re-borrowing like this is not unusual and, normally, isn't a problem. If the level of confidence remains high then a nation can just sell a second bond at the same preium they sold the original for. They pay off the original bond and effectively extend the debt. There's nothing wrong with that. It's only a problem for Greece now because we're in recession and Germany is declaring loudly that they're not going to help. If Germany were to turn round tomorrow and say "We'll bank roll any Greek bonds, no questions asked" the Greek economy would recover pretty much instantly. If course, that would mean the entire risk would be in Germany's hands and that's a risk they're increasingly unwilling to take.

And consider this. If Greece defaults, it will be UK investors who will take the hit. They will have massively reduced funds to buy bonds from other governments and credit for all of us, including the US, is going to dry up. If that happens we will head into the same death spiral greece is currently experiencing because who's going to buy a bond from us if they don't have the confidence that we'll be able to fulfill it when it comes due - and if we can't borrow, we cwon't be able to fulfill it. It becomes a self fulfilling prophecy.

As an example, the US feds controlling base interest rates can, to a certain extent, steer economic activity. However, as we can see, it is doing nothing, currently (some argue that it'd be worse without it - but that just demonstrates ignorance). So, an economic rudder goes from a clear controller to completely and utterly broken.

At the end of the day, we are dealing with people, who, ultimately, are irrational. No matter how smart, well intentioned, or influential, there's no getting away from the Furby effect. Yes and No. Certainly people are an unpredictable element and the markets don't always behave as we expect them to. Indeed it was mostly the conceipt of bankers who felt they could reliably predict the markets (or actually computer programmers who thought they could build models which would do that) that led us into this state in the first place. It was started by corruption in the US martgage market, furthered by the UK's "I can predict anything" money market culture and then exopsed teh underlying problems that the eurozone has been hiding for the last two decades. The whole thing has been a perfect storm.

On the other hand governements can affect this system. It's all about giving confidcence to the money markets.

It can devalue it's currency by printing more money which, in turn, devalues it's debt and also puts cash directly into that government's coffers. In the short term this increases confidence because they can now meet their obligations. In the long term it's bad because, if you do it too often, many markets realise the government is simply going to devalue it's asset before paying it off so will demand a higher return.

If it's struggling because it's industries are non competitive in the international marketplace and therefore it's tax take is low it can drop it's exchange rate. the hope is that this makes the industries more competitive and increases the tax take. The problem here, though, is that the tax take is in the domestic currency and the borrowing is likely to be in an international currency. By dropping the exchange rate they actually increase the amount it must pay back in terms of it's own currency or leaves it constant in terms of the international currency. So if the industry doesn't manage to become more competitive because, for example, another major produccer of that commodity does the same thing at the same time, then the government will actually take a loss.

If like the UK and the US, it's economy is heavily based in the financial sector like the UK and US, it can offer to guarantee the investments that sector makes. In the short term this makes it's industry way more cometitive but shifts the risks from the private sector to the public. This in turn makes them a less attractive investment to those same money markets they're guarateeing, puching up the premiums they must offer.

The point of this is that there are a bunch of levers a government can use but each comes with a price. It's good that we have those levers because it does give us some control. While we cannot exactly predict the behaviour of the owrld and national economies we can predict it with a somewhat better than 50% chace of success. We can then pull the levers we think will give us the best outcome. We may get it wrong sometimes but we will get it right more often having a net positive effect.

@HB. I'm sorry but the barter system fails as soon as you have a situation where more than two parties are involved. And the system you're dscribing is, in fact, monetised. Rice is non perishable. And when you plant your field of rice you are making an invetment. You're hoping that the rice commodity will still be desirable by the time your srop come to maturity. You just turned rice into a currency.

It's real easy to look at the money markets as evil but that's really just naive. They serve a very real puropse: they move resources from where they are to where they are needed. That is what allows our industries to function. That is what allows our technologies to advance. That is why we all have a better standard of life than we did four centuries ago.

And this is coming from a lefty ex-communist. I hate half the stuff I'm saying here but I can't deny it. I think I need to go and take a shower and wash the stink of capitalism off.

[SJWhiteley]

(Grrr. posted a long reply and lost it - I guess someone will be relieved).

Suffice to say, all this money lending and borrowing....on and on and on. What is the money being spent on? While we can argue all day about the reasons for default (although I pretty much can see your argument) the money had to be going somewhere. While the immediate issue needs resolving, unless the root cause is addressed, it's going to happen again.

[Shaggy Hiker]

What is it ever spent on? Whether government, private business, or personal finance, so much of what we spend is not because of what we need, but because of habits we are in. We don't NEED most of that crap, but we are so used to it that it feels like a need. For that reason, it is going to be brutally hard for Greece to get out of this in real terms. It's often easier for our friends to see our financial situations in a MUCH different way than we see them ourselves. We think that latte is essential, they see it as profligate waste.

[honeybee]

I think SJ's question was mainly on the government spendings.

In that respect even I wonder where the money is spent. Though I have a fair idea where 'exactly' it is spent.

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[FunkyDexter]

(Grrr. posted a long reply and lost it - I guess someone will be relieved).I hate it when that happens. I feel your pain, brother.

although I pretty much can see your argumentJust to be clear, it's not my argument. I've merely explained how economies actually function, what money really is and I've laid out the choices that are available to us. It's all undeniable, if somewhat distasteful, fact. The only time I expressed an opinion was when I said that I thought we probably should bail out Greece in the short term but I qualified that by saying we cannot know whether it is the right choice or not - it's just the one that looks to me like it will have the best (or least worst) outcome.

Suffice to say, all this money lending and borrowing....on and on and on. What is the money being spent on? Partly on public services, partly on acquiring the funds in the first place and, let's face it, partly on corruption and folly. But that doesn't change the way economies function.

Look, I'm no fan of the Euro. I said right at the beginning that you can't have fiscal union without political union. The Euro was an attempt by Germany and France to force a potlitcal union on the rest of Europe by creating a situation where it would be disasterous not to federalise. Where Germany and France got it wrong was that they didn't realise the constituents of Europe would rather have the disaster than the federalisation.

It also seems to have escaped Germany's attention that part of being one federalised super state is that the more productive parts will subsidise the less productive parts. We do it in our own nations already so why would that be any different if applied to a federalised Europe?

[SJWhiteley]

I think SJ's question was mainly on the government spendings.

In that respect even I wonder where the money is spent. Though I have a fair idea where 'exactly' it is spent.

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Indeed, As I may have noted elsewhere, I read the federal government budget every month.

Looking at the expenditures, while (armchair quarterbacking) I can wave my hand and say 'We don't need that!'. However, looking down the list with a neutral eye, it is very hard to say such a thing. We do 'need' all those things - but to what extent, and what is the collateral cost?

This, of course, is the US books. I can imagine the European books look very similar - indeed can an individual get such a thing? I'd be interested to see a comparison of expenditures.

Greece will survive - with their own currency. Of course, that may not happen, yet, as the media seems to be playing the 'on the brink!' for all its worth, and, similar to the US debt ceiling, there will be a last minute reprieve before 'war' really breaks out. But if Greece isn't bailed out and it goes it's separate way, there are other countries (Portugal?) who will then be the low contributor on the EU totem pole.

It also seems to have escaped Germany's attention that part of being one federalised super state is that the more productive parts will subsidise the less productive parts. We do it in our own nations already so why would that be any different if applied to a federalised Europe?

That is true, but generally, a subsidy of some sort must come with a benefit - generally in some other field. What would be the benefit? If the subsidy is a on-time deal, then it is probably fair to say that a benefit can be minimal. But a continuing subsidy with no benefit is sheer folly. But then, isn't that what has been going on for years?

(Edit: incorrectly quoted and corrected).

[honeybee]

SJW, that quote you have attributed to me, about Germany, isn't by me. :o I am usually not that profficient or fluent or lucid or coherent in expressing my thoughts by the time I am able to surf here.

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[SJWhiteley]

SJW, that quote you have attributed to me, about Germany, isn't by me. :o I am usually not that profficient or fluent or lucid or coherent in expressing my thoughts by the time I am able to surf here.

.Sorry, not sure where the quote 'by you' came from: a cut-copy-pasta error. I'll edit that...

[FunkyDexter]

That is true, but generally, a subsidy of some sort must come with a benefit - generally in some other fieldI'm not sure that's true. Or at least, I'm not sure it's that simple.

The analogy I'm thinking off are the various regions of England although I'm sure you can find similar example in any developed country. Over here we pretty much spent the last century systematically dismantling the industries and economies of various regions in England. We gave up on mining which left the Welsh with nothing to do but drink and engage in close harmony singing. We let the car industry go which left a large hole in the Midland (or left the Midlands as a large hole). The West country was never good for much except pasties and cream teas (they are very good cream teas mind). The North hasn't produced much since we let the weaving industries decline after you Americans got all uppity about self rule. And Scotland would pretty much be a wasteland if they hadn't got lucky and found Gas in the North Sea. The only exports from Liverpool and Manchester are crime, Men with perms and Women with too much fake tan.

I'm being deliberately flippant (because, at core I'm a very small and petty man) but the point is that the wealth generation of England is disproportionately centred in London and the South East. Us Southerners could fold our our arms and turn our back on the rest of the country. We could wag a finger at them and say they need to be more austere and live within their means. It's not like they really need shools and hospitals is it? And if they do want those things, well then, they'll just have to knuckle down and work harder. Obviously they're just all lazy ne'er do wells who are leeching of the taxes of the fine upstanding people of the South East.

But of course, we don't do that. We pool our tax intake as a nation and, on the whole, spend it for the good of all. We build hospitals in Wales and Scotland because we recognise that drug addicts and alcoholics are probably going to need them before too long. We build schools in Manchester because we recognise that even shell-suited men need an education (mostly in the hope that they'll learn to buy proper clothes). We build prisons in Liverpool because, well, it saves on transportation.

The point (which I hope I haven't completely buried under an avalanche of regional slurs) is that we recognise we're all one society and all in the same boat. That sentiment is still missing from Europe as a whole. It lacks the sense of shared identity that would allow them to operate as a cohesive society.

After all, but for an accident of birth we could have all been French:p!

[honeybee]

Sorry, not sure where the quote 'by you' came from: a cut-copy-pasta error. I'll edit that...

Nah, leave it as it is. It's good to have some sensible post after your name in Chit Chat, although wrongly attributed. Keeps the sense of being intelligent alive.

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