Puerto Rico or Ireland? The choice facing Greece

The Financial Times has an article discussing the situation in Greece, which is described as being pretty bleak.  Living standards have fallen significantly:

The new report was prepared by IMF staff ahead of a February 6 board meeting to discuss the fund’s participation in an EU-led €86bn bailout of Greece and signals the continuing hard line the IMF is taking on debt relief for Athens. It offers a bleaker view of Greece’s economic dilemmas than an analysis prepared last year, warning that the debt load is “highly unsustainable” and would not improve even if it implemented further reforms recommended by the fund. . . .

“Even with these ambitious polices in place, Greece cannot grow out of its debt problem,” IMF staff warned in the report, seen by the Financial Times and drafted as part of the fund’s annual review of member economies. “Greece requires substantial debt relief from its European partners to restore debt sustainability.”

The IMF declined to comment, citing a policy of not commenting on leaked material.

The fund calculated that Greece’s debt load would reach 170 per cent of gross domestic product by 2020 and 164 per cent by 2022, “but become explosive thereafter” and grow to 275 per cent of GDP by 2060.

In contrast, the Germans believe that the Greeks need to tighten their belts, and get on with economic reforms.  Given that I’m a utilitarian, why do I favor Germany’s “tough love” approach over the soft love (or at least less tough love) approach of the IMF?

First let’s consider the “austerity” question.  In the Keynesian model, austerity may be a foolish policy during a temporary recession, or even a fairly long depression. But in the very long run, countries face hard budget constraints.  And by any stretch of the imagination the period from 2022 to 2060 must be viewed as “the very long run.”  It’s impossible to justify large and growing budget deficits during that 38-year period on the basis of “fiscal stimulus”.  That’s the road to bankruptcy.

It’s not easy to find accurate data on government spending and taxes, but the OECD has a graph showing that Greece spends just under 50% of GDP.  The IMF is simply wrong when it claims Greece’s debt situation is unsustainable.  If Greece had a smaller government sector, say closer to the 36% of GDP in Australia, or the 23% of GDP in Taiwan, then it could easily handle the challenges out to 2060.

Screen Shot 2017-01-28 at 8.18.17 PM

The counterargument is that those sorts of cuts are not politically realistic in Greece, and at the moment I’d have to agree.  Some would claim the Greeks have already suffered from severe austerity.  You might wonder how that can be, given that nearly 1/2 of Greek GDP goes into government spending.  The problem here is that as G has fallen sharply, so has GDP, leaving the G/GDP ratio little changed, even as the Greek people have seen slashes in important programs.  The deeper problem is that Greece does not produce like a developed country, but its citizens expect the level of services and pensions normally associated with a developed country.  That’s why there is so much hostility to Greece in the middle-income countries of Eastern Europe, where benefit levels are lower.  I can see both sides of the debate, but next I’d like to explain why I think the German approach is the best option.

Greece faces two options.  One is to become a sort of ward of the EU, kept afloat by endless subsides, with a loss of sovereignty.  Here a model might be Puerto Rico, or the US possessions of the South Pacific, or perhaps the Native American reservations within the US.  These regions consume more than they produce, with the help of transfers from Washington.

But there is another model.  When I was young, Ireland was quite poor.  Articles were written explaining how the Irish poverty reflected some sort of flaw in the Irish culture, or even a lack of intelligence.  But then Ireland adopted a neoliberal economic model, and it has now become one of the richest countries in the world (although that’s a bit overstated, as its GDP exceeds its GNP due to heavy multinational investment.)  Still it’s a successful economy.

When I researched neoliberalism back in 2008, I was puzzled by Greece’s relatively high GDP per capita, given that it had the least neoliberal model in the entire developed world.  Of course we all know what happened next, that flawed model finally caught up with the Greeks.  Greece tried to maintain developed country living standards with a third world-type economic structure, riddled with corruption and statism, by borrowing lots of money.

I sympathize with the Greek people, but the hard truth is that they continually elected the flawed and corrupt governments that brought Greece to its current situation.  The Germans are right; Greeks need to tighten their belts and adopt neoliberal economic reforms.  This will allow them to boom like Ireland, and eventually get back to much higher living standards.

The Puerto Rican option might look tempting–have other countries pay for your consumption–but in the end the political winds in Europe will shift and Greece will be left to fend for itself.  Thus the reforms should start right now.  If they start running budget surpluses then the Greek debt is certainly serviceable in this new world of ultra-low interest rates.

Unfortunately, I don’t think they will follow my advice.  I predict that Greece will choose the Puerto Rican option.  The only question in my mind is whether the Northern Europeans will allow it.  Perhaps that’s one tiny silver lining from the new nationalism sweeping the world.

PS.  The more I find out about Trump, the less I like him.  He doesn’t even know how to do populism right:

Republicans and Democrats in Congress and in state legislatures have recently pushed legislation to rein in the long-standing practice of police seizing the cash and property of suspects who haven’t been convicted. . . .

Likening such efforts to the Iran nuclear deal he has often lambasted, Trump said no one understands the phenomenon.

He said Congress would be “beat up” badly by the voters if it stood in the way of police efforts to conduct civil asset forfeiture.

A 2014 Washington Post investigation found that police had taken billions of dollars in cash from motorists without search warrants, and without charging them with a crime.

If you read libertarian media you frequently come across almost unbelievable abuses in this areas, things that you’d expect from law enforcement in Nigeria, not America.  And Trump opposes any reforms.  Sad!

He’s just an appalling human being, in every possible way.  Fortunately he’s President of the US rather than the Philippines.  The courts will at least somewhat limit the damage over here.


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34 Responses to “Puerto Rico or Ireland? The choice facing Greece”

  1. Gravatar of Helmut_Schmidt Helmut_Schmidt
    7. February 2017 at 16:15

    I don’t think I ever was aware that people actually believe in neoliberalism any longer.

    Newsflash: simply look at the Third Reich. A small country, the size of Texas with no oil, simply negated all foreign debt, banned foreign exchange as Plato proscribes in _Laws_, and built, from nothing, the industrial and technological power necessary to challenge the combined forces of the British Empire, the Soviet Union and the United States – polities that controlled most of the world.

    You do not understand that money is a political concept. The Greeks don’t have to do anything, but they also have the choice of rising up and burning your world and all its laws and rules (i.e. the fiction that money is scarce!) to the ground.

    You are positively unhinged if you think Greece, or any country, will tolerate such misery for a generation.

    And, the world is transitioning to Keynes’ Bancor, as was intended at the first UN conference. Figure out how that factors into your equation, and get back to us. And, if you have no idea what that is or what’s happening, I’d start with the Peterson Institute for International Economics.

  2. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. February 2017 at 17:22

    The Greeks are expecting someone to come bearing gifts;

    https://www.wsj.com/articles/greeces-response-to-its-resurgent-debt-crisis-prosecute-the-statistician-1486396434

    ———-quote———-
    Four times in four years, Greek investigators or prosecutors have concluded that Mr. [Andreas] Georgiou merely applied EU accounting rules and committed no crime. Senior politicians and judges have nonetheless kept the [conspiracy] accusations alive. He could face five trials, and life imprisonment in one case.

    Throughout Greece’s debt crisis—history’s biggest sovereign bailout and the deepest developed-country depression since the 1930s—much of the governing class has denied responsibility and instead fallen back on conspiracy theories.

    That’s raising doubts in the German-led eurozone about whether Greece is willing to learn from past mismanagement and avoid repeating its mistakes.

    Berlin officials say they worry Greek statistics will become a political plaything again. Some EU countries have privately discussed freezing further loans and debt relief until Greece supports its statisticians, according to proposals viewed by The Wall Street Journal.
    ————-endquote———–

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. February 2017 at 17:24

    Btw, Trump racked up a big win today. Betsy DeVos defeated the NEA-monopolists with a tie-breaker from Mike Pence.

  4. Gravatar of ssumner ssumner
    7. February 2017 at 17:54

    Helmut, I’m sure the Greeks will do well adopting the economic ideas of Plato, especially in the area of foreign investment. What could go wrong?

    And yes, Ireland is certainly a neoliberal hellhole—wouldn’t want Greece to take that path. Better to adopt Hitler’s policies.

    Seriously, sometimes I wonder where you people come from.

    Patrick You said:

    “Trump racked up a big win today. Betsy DeVos defeated the NEA-monopolists with a tie-breaker from Mike Pence.”

    As long as conservatives keep promoting fools that are in way over their heads, they will keep losing the ideological battle with the left. Anti-intellectualism is fine in small doses, but I think the GOP exhausted the benefits of this pose long ago. Time to grow up.

  5. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. February 2017 at 18:03

    Beating the teachers’ unions is evidence that you’re in way over your head?

  6. Gravatar of Steven Kopits Steven Kopits
    7. February 2017 at 18:06

    This is the program for Greece.

    http://www.prienga.com/blog/2015/2/19/a-program-for-greece

  7. Gravatar of Scott Freelander Scott Freelander
    7. February 2017 at 18:19

    DeVos is obviously unqualified to run the Department of Education. I wouldn’t mind her being named if the only goal was to eliminate the department, limiting the federal role to vouchers, for example, and ending all subsidies for higher education. But, that’s not what’s being discussed.

  8. Gravatar of Market Fiscalist Market Fiscalist
    7. February 2017 at 19:07

    Would Greece be better off abandoning the Euro if it is to do austerity ? This would allow monetary offset – without which austerity may be too tough economically to be seen through.

  9. Gravatar of Jerry Brown Jerry Brown
    7. February 2017 at 19:52

    Greece should leave the Euro and institute its own currency again and use that currency to pay off its debt that is denominated in Euros or any other currency immediately. And of course Greece’s new currency will drop like a rock, and they will have to produce enough to export what they need to import, and their country will have to enforce its tax laws finally, and they may find they can’t afford to pay people to do nothing. But they would have a good chance at least to get themselves out of the disaster at that point.

    They can not expect to consume more than they produce going forward, and they can never pay back their debt in Euros in any case. So they might as well bite the bullet and get a fresh start.

  10. Gravatar of Benjamin Cole Benjamin Cole
    7. February 2017 at 20:29

    Jerry Brown:

    “They (the Greeks) can not expect to consume more than they produce going forward….”

    Okay, so for a nation to consume more than it produces is bad. Greece is proof, everyone says so.

    But, the U.S. should run permanent trade deficits, and consume more than we produce.

    Of course, we can sell assets, and we do. So much so that real estate prices are ballooning—as they do in nations that consume more than they produce.

    Can’t the Greeks just keep selling land to finance their consumption?

    In Asia they say, “First you sell your labor, then your belongings, then your land. Then your daughters.”

  11. Gravatar of Jerry Brown Jerry Brown
    7. February 2017 at 21:19

    Benjamin, the US is in a different position than Greece is. For starters, it has its own currency. And that currency is valued for other reasons than for buying US goods and paying US taxes. Greece is not likely to see its (new) currency valued outside of Greece except for the purpose of buying Greek goods.

    Greece is in a horrible situation and has been there for about what 8 years now? It isn’t getting better at any sort of acceptable rate.

  12. Gravatar of Jerry Brown Jerry Brown
    7. February 2017 at 21:39

    Benjamin, I think that Asian saying is very wise. And something to be avoided.

  13. Gravatar of Scott Freelander Scott Freelander
    7. February 2017 at 21:40

    I favor Grexit, but am not glib about it. It will cause an acute crisis from the moment people consider it a real possibility. There will be some combination of bank runs and capital controls, as people will be desperate to grab their Euros before replacement by a significantly less valuable Drachma. And this would be managed by a government that rivals that of Trump for incompetence, dishonesty, and cowardice.

    On tbe bright side, hopefully the Syriza-led government would be swept out with the Euro, a danger which unfortunately keeps Syriza from either leaving the Euro, or engaging in the kinds of structural reforms needed to restore growth.

    I favor Grexit, despite the extreme short-term costs, because after so many years of Great Depression-type conditions, Greece still isn’t committed to becoming more like a northern European country. Best to cut their losses and take the acute crisis behind door number 2. I suspect most will agree that if Greece is unwilling to sufficiently structurally reform, they should leave the Euro, and sooner rather than later.

  14. Gravatar of Scott Freelander Scott Freelander
    7. February 2017 at 21:45

    Scott,

    I’m curious. In absence of monetary policy reforms or leaving the Euro, do you think it would be a good idea for Euro countries to mandate wage flexibility to help deal with nominal shocks? For example, have hourly compensation fall in line with output?

  15. Gravatar of Ray Lopez Ray Lopez
    7. February 2017 at 22:17

    OK I’ll bite. Seems Sumner wrote this blog just for me, begging for my attention, since I live on occasion in Greece (when I’m not in the USA, as now, or in the Philippines with my girl). First off, Helmut_Schmidt is right in Germany used the ideas of Friedrich List as a counterpoint to Adam Smith, and for Germany it worked (https://en.wikipedia.org/wiki/Friedrich_List), as it did for Asia the last century (cite: Joe Studwell). Possibly this is due to Germany’s more cohesiveness as a society (keep in mind their labor unions cooperate with management more so than the USA/UK). Second, Sumner ignores that the Celtic Tiger (Ireland) got that way from being a tax haven for big multinationals parking their IP revenue there: Trump’s new geographical VAT may gut Ireland. IRE supports 1000s of workers as a tax haven. Finally, it’s said that 50% of the Greek economy is government (by some estimates) because the private sector cannot afford to hire more people. The only alternative to working for The Man in GR is to emigrate from Greece (to Germany, to the UK, to Australia, to the USA) as was done by Greeks post WWII. Does Sumner know that Greece has nothing to offer the world except ruins, sun, surf, mountains (tourism) and a few agricultural products like olive oil, feta cheese, citrus fruit? Perhaps if they legalized pot they could also offer cannabis, the climate in Crete is perfect for growing it, as it is in Africa. Greece’s biggest export is the 20% of their GDP that caters to the drunk college crowd who comes two months of the year (June, July) to party in the Cyclades islands. That would be Sumner’s students. They care nothing about history, the classics, the ruins, care nothing but getting high on drug spiked booze (called “bombas”) and partying naked, getting drunk, having sex on the beach. Good times, good times. Well, I never had bombas nor sex on the beach, though I did get laid by a middle-aged hot girl from Serbia I met on a GR island. Good times. But this is not a sustainable business model. In short, the IMF is right: the only way for Greece to get back on track is (N)-fold: have Germany open their borders to all Greeks, and offer them jobs, like they do the Turks, then, have a willingness of Greeks to go work (doubtful, it’s an old population, and they have money, it’s the GR government that’s broke), and, failing that, it’s much, much easier to just write off the debt in the form of debt relief, a sort of neo-Marshall Plan. The Germans, being frugal and idealistic, refuse to do this, but it’s the only realistic option IMO. You cannot expect the Greeks to start building their own factories like the Germans, nor do they have 50-70M million people like Spain, UK, Italy, France to sustain a diverse service economy. Heck in GR even my lawyers don’t use email (and it’s rare that they respond, even when they have email; it’s just not a developed world service sector economy). Greece only has 10M old and getting older people. Just write off the debt and walk away, forget about the Greeks. Either that, or, like Samson chained to the temple, or Atlas maybe shrugging the world off his shoulders–Atlas Shrugged Mr. Libertarian Sumner!– (Hercules was foolish to take on Atlas’s burden, he almost got trapped, don’t you agree reader? Yeah right, like the numbskulls reading here know anything about GR literature), the Greeks have the power to bring down the EU. There’s probably an Aesop’s fable (or an app for that) that explains this predicament perfectly. Maybe the Fox and the Hedgehog, the kissing edition (never read that one before). Or this one, where Greece tries to be the ass, to please Sumner: http://www.english-for-students.com/Monkey-Business.html

  16. Gravatar of S D S D
    8. February 2017 at 00:35

    “The deeper problem is that Greece does not produce like a developed country, but its citizens expect the level of services and pensions normally associated with a developed country.”

    This is something that everyone involved in the Greek programme is afraid to say for fear of causing offence to the Greeks.

    There is a country just north of Greece called Bulgaria. It has productivity levels (GDP per worker) levels one third of that of Greece.

    It has very low public debt, no current account deficit and has maintained a currency peg with the euro (previously the DM) for two decades.

    Bulgaria has lots of problems, but public finance management is not one of them.

    Most eastern European countries are like this:
    -productivity levels and living standards below western Europe
    -public spending broadly matching revenue over the cycle
    -Currency pegs to euro or euro membership (with all the costs involved)

    Citizens of these countries simply cannot understand why permanent exceptions should be made for Greece.

  17. Gravatar of Benjamin Cole Benjamin Cole
    8. February 2017 at 04:57

    I suspect Ray Lopez is right.

    Greece is a small country, and the ECB should print euros and pay off the bad Greek debts (which is what the People’s Bank of China does in China, btw). Really, how long will this go on, otherwise? And what is being done now is not working, unless you call a permanent depression in Greece okay.

    Then Greece should step out of the EU, and print drachmas.

    BTW, the Bank of Japan reported today is already owns 40% of outstanding JCBs. Of course, in general Japan runs trade surpluses, not deficits.

    http://asia.nikkei.com/Politics-Economy/Economy/BOJ-now-holds-40-of-Japanese-government-bonds

    So we see that running a national budget deficit is nearly meaningless, in Japan’s case. The central bank, which is part of the national government of Japan, owns 40% of the debt.

    Adair Turner says Japan will eventually have to give up the ghost, and stop pretending it owes itself money.

    The BoJ should probably just go to straight helicopter drops, and the national government to big tax cuts.

    Maybe Greece should do the same thing, as they print drachmas. Become the cheapest place in Europe.

    You know, when reviewing Japan, or the PBOC, trade deficits and consequent property values, I wonder if orthodox macroeconomics needs a huge revamp.

    Back to Ray Lopez, he Grecian oracle: He raises serious questions about national character and economic competitiveness. True, the Greeks have a small domestic market, which makes building a multi-national difficult. You never get off the ground, before you are flattened by an extant multi-national. Even keeping domestic business alive is a trick.

    The Greeks are not Swiss or Taiwanese. They are what they are. So, does being a part of the EU and globalism work for the Greeks?

  18. Gravatar of A Definite Beta Guy A Definite Beta Guy
    8. February 2017 at 07:14

    Requoting this, because a lot of people seemed to have missed it:

    When I was young, Ireland was quite poor. Articles were written explaining how the Irish poverty reflected some sort of flaw in the Irish culture, or even a lack of intelligence. But then Ireland adopted a neoliberal economic model, and it has now become one of the richest countries in the world…

  19. Gravatar of Viking Viking
    8. February 2017 at 08:48

    I feel vindicated! I was convinced in 2010 that none of the money lent to Greece after that point would be paid back. When will people actually practice the adage about not throwing good money after bad money?

    In my conversations with a German in 2010, I asked him, why would you give any money to Greece without getting an island in return. He simply answered, that would cause the kind of nationalist sentiments that cause war.

    Also, we northern Europeans are victims in this madness, without the propping up of deadbeat Greece, the prices for tourist services in Greece would be less.

    I also argued a similarpoint to friend with an economics degree in the early 1990s, my contention, was that Fannie Mae would increase house prices by providing loans to people that shouldn’t get loans. Thus punishing net tax payers twice, both in terms of paying more for housing due to the competition, and also footing the bill. Posterity vindicated me again.

  20. Gravatar of DDD DDD
    8. February 2017 at 10:20

    @ Helmut: “simply look at the Third Reich. A small country, the size of Texas with no oil, simply negated all foreign debt, banned foreign exchange as Plato proscribes in _Laws_, and built, from nothing, the industrial and technological power necessary to challenge the combined forces of the British Empire, the Soviet Union and the United States – polities that controlled most of the world.”

    from nothing? Germany had been the largest European economy even before World War I. And the government expenditures under Hitler were clearly at the expense of Investment and Consumption at other place of the economy.

  21. Gravatar of sean sean
    8. February 2017 at 10:26

    I wouldn’t associate the asset forfeiture thing by trump as malice. I think its incompetence. He probably hasn’t read up on the issue…which of all this is a rarely small issue. Most well read people have seen a dozen or so articles on the issue, but I’m going to guess he hasn’t and is just assuming the police are taking the assets of drug dealers.

  22. Gravatar of Greg Greg
    8. February 2017 at 12:20

    The world should pay Greece to take all Syrian refugees. Problems solved all around.

  23. Gravatar of ssumner ssumner
    8. February 2017 at 13:20

    Scott, You said:

    “I wouldn’t mind her being named if the only goal was to eliminate the department, limiting the federal role to vouchers, for example, and ending all subsidies for higher education.”

    That’s probably something you, I and Patrick can all agree on.

    Market, In retrospect, they would have been better off leaving the euro in 2008. But now they should probably focus on supply side reforms.

    Scott, I’d make it voluntary.

    Ray, I won’t read comments that long—-from you.

    SD, Good points.

    Ben, You said:

    “The Greeks are not Swiss or Taiwanese. They are what they are.”

    That’s what they said about Ireland, when I was young.

    Viking, You were right!

    Sean, He’s always been totally pro-police. Look at his disgraceful behavior in the Central Park rape case.

  24. Gravatar of Cooper Cooper
    8. February 2017 at 13:59

    The IMF’s forecasts for Greece are a cruel joke.

    In 2010, they forecasted that real Greek GDP in 2015 would be nearly 25% larger than what actually happened.

    The IMF also predicts that Greece will run a primary budget surplus of roughly 3.0-3.5% of GDP, every single year, forever. That’s the magic number that they need to input into the model in order to generate a sustainable debt burden over the long term.

    Serious question, does *anyone* believe that a 3%+ primary budget surplus is feasible in Greece? The United States has only managed to run a primary budget surplus larger than 3% of GDP in 7 of the last 75 years.

    Canada managed a few large budget surpluses in the 1990s but this didn’t last forever.

    Now factor in a falling labor force. Greece had 5.12 million workers in 2010. By 2015 this had shrunk to 4.93 million. By 2050, the Greek workforce will have only 3.8 million workers while the pool of pensioners grows.

    The math is impossible. Greece cannot run a sustained, massive budget surplus under these conditions.

  25. Gravatar of Tomasz Wegrzanowski Tomasz Wegrzanowski
    8. February 2017 at 14:20

    Wow, you are even more delusional than Angela Merkel. You’re expecting from Greece the kind of performance no country ever achieved, and you’re completely ignoring every possible economic theory to get this.

    Austerity absolutely kills any economy in any kind of shared monetary system (be in gold or euro), and even if it didn’t, there’s just no realistic path of GDP growth and primary budget surpluses to get debt under control. Even disregarding worsening demographic situation, and anybody who can leaving Greece for less oppressed countries.

    Even if Greece found biggest oil field in the world out of nowhere tomorrow, there’s no way out your way.

    The only thing Greeks can possibly do to get out of their hell is massive debt reduction (with or without cooperation from creditors), abandoning euro, and huge devaluation.

  26. Gravatar of Cliff Cliff
    8. February 2017 at 14:25

    Re: Central Park 5,

    Didn’t the official report conclude that they probably did commit the rape? And the other guy came along after they were done?

  27. Gravatar of ssumner ssumner
    8. February 2017 at 19:03

    Cooper, Can’t or won’t? Obviously it can, for reasons I explained in this post. Is it politically feasible? Probably not.

    But debt is not the problem in Greece, statism is the problem. Greece needs to replace statism with neoliberalism, otherwise they’ll end up like Puerto Rico.

    Tomasz, You said:

    “You’re expecting from Greece the kind of performance no country ever achieved, and you’re completely ignoring every possible economic theory to get this.”

    I guess you’ve never heard of Ireland.

    Greece’s problem is not debt, it’s statism. Greece desperately needs neoliberalism. They need rapid growth.

  28. Gravatar of ssumner ssumner
    8. February 2017 at 19:05

    Cliff, The media claims that DNA evidence exonerated the suspects, and pointed to someone else. I don’t think that’s even controversial, but I am relying on what I’ve read.

    http://www.nbcnews.com/politics/2016-election/donald-trump-says-central-park-five-are-guilty-despite-dna-n661941

  29. Gravatar of lysseas lysseas
    9. February 2017 at 00:26

    I am late on this, so I will just contain myself to the following:
    – Dr Sumner, yes, unfortunately chances are we will not go for the really small government reforms; however the odds for that are slightly higher in the last year. Because of the new leader of the opposition and because of the troika pushing somewhat harder on reforms than before. Again, only slightly higher.
    – SD, I sympathise with your views and let me tell you that they are shared by a lot Greeks too. Don’t know if we are the majority, but still. All I can say in defence, is that the Greeks are in a state of a really bad hangover from decades-long illusion of the good and easy life; I had hoped and thought that getting hit in the face by reality would do the trick, but apparently it doesn’t for most people. Now I ‘m just hoping that several years of reality getting rubbed in one’s face can eventually do it before it is too late.

  30. Gravatar of ssumner ssumner
    9. February 2017 at 07:55

    Thanks for the update lysseas.

  31. Gravatar of Scott Freelander Scott Freelander
    9. February 2017 at 08:55

    SD,

    Of course, currency pegs are very different from sharing a currency.

  32. Gravatar of H982 FKL H982 FKL
    9. February 2017 at 12:05

    The real question here is, why is the IMF making Greek debt projections out to 2060? If they’re really going to make such a specific long-term projection, why stop at 2060? I for one would be fascinated to hear what the IMF thinks of the expected Greek debt load in the year 3060.

    If the authors of this report are unaware that making projections of more than 4 decades is insane, I can’t take anything they take seriously.

  33. Gravatar of lysseas lysseas
    9. February 2017 at 12:58

    H982 FKL,
    I don’t mean to defend the IMF or blame the US Treasury, but they go all the way to 2091.

    See pages 5(13) and 50(58) of the pdf file for example:

    https://www.fiscal.treasury.gov/fsreports/rpt/finrep/frsummary/index.htm

  34. Gravatar of H982 FKL H982 FKL
    9. February 2017 at 16:49

    lysseas,

    Wow, good catch. I find it terrifying that people are actually paid to make these forecasts – at the IMF, at the US treasury, anywhere. Has it ever been possible to forecast anything accurately in a 75-year timespan? Are these people aware of how crazy this all is? (I can’t tell what’s scarier – if they aren’t, or if they are but make the forecasts anyway)

    In summary, my faith in government just dropped another notch. Taleb was right!

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