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The Forum > Article Comments > Does the Greek tragedy have lessons for Australia? > Comments

Does the Greek tragedy have lessons for Australia? : Comments

By Andrew Leigh, published 28/5/2010

The effect of Greece on the Eurozone shows that within a monetary union contagion is a serious problem.

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The Greek Debt problem has been greatly exaggerated. Let's put things in perspective shall we:

Let's compare the Greek GDP v's the EU GDP v's the World GDP.
GDP of the EU : $12,500 billion euro.
GDP of Greece : $240 billion euro.
GDP of the World (PPP) : US$70,000 billion (2009)
So the whole of the Greek economy comes in at less than 2% of the EU economy, in other words if the whole of Greece ceased to exist tommorow by some extreme unrealistic event, say a mega earth-quake, the rest of Europe's economy would notice if they were looking for it but wouldn't be concerned about it and the world's economy would barely detect it at all. (This is in terms of cost of impact, however, in terms of the loss of services and products the EU and world would notice because Greece supplies a sizable part of the world's shipping-- in fact Greece is the world's largest maritime nation with about 18% of the world fleet is Greek, but the debt crisis has had no negative impact on this).

If the Greek Debt crisis has any lesson at all for Australia it would be that the media and general public have no sense of perspective! Things reported in the media are rarely as bad as the seem and usually turn out to be nothing more than insignificant footnotes of history.
Posted by wiggies, Friday, 28 May 2010 11:15:48 AM
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Interesting,
Those financial institutions that lent money to Greece would notice if the country disappeared.
Whatever the significance of the Greek crisis,there's a lesson for anyone that proposes a monetary union between Australia and NZ, without a political union.Is there much support for the idea in either country?
Posted by mac, Friday, 28 May 2010 1:51:36 PM
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wiggies, you could not be more wrong. The facts & opinion you espoused are sort of true, up to a point, but its about the domino effect, whenever this sort of thing happens.

One bank goes bankrupt when an entity can't repay, then the other bigger bank it borrowed from, then the "Dud Loan" insurance company is in trouble, etc, etc, etc.

"The Great Depression" was hardly a footnote in history.

mac, correct, but they have also, often, "kite flown" about an ASEAN &/or APEC, Economic Union. Care for a slice of US debt anyone, or Japan's?

Sorry Andrew, most of your article was good, except for the third sentence. The red/green/getup/labour coalition did not save OZ from recession at all, they only delayed it.

If they had not given Westpac & the Commonwealth bank taxpayers money to take over Bankwest & St George our banking industry would be less concentrated than it is now, more competitive.

If they had not done, cash give aways, or alleged, "infrastructure" wasted spending, our economy would have experienced a slight retraction or downturn. The incoming conservative government would have SOME surplus money to turn it around, more quickly, easily, gently or conservatively. Yanking on the economic levers, clumsily, does not help, tweaking gently, does it.

Now, the cupboard is bare, when GFC#2 hits us, as it always was, it will be deeper & for longer. Thank you red/green/getup/labour coalition.

http://barnabyisright.com/

The opposition, in QLD especially has only been, the least worst of the 2 "Major Mistakes". Vote for real minor parties & independents.

Number the red/greens last, getup/labour second last, liberals third last, nationals fourth last, then number every real minor party & independent ahead of them.

http://www.democrats.org.au/

http://www.australiafirstparty.com.au/cms/

http://www.ldp.org.au/
Posted by Formersnag, Friday, 28 May 2010 3:50:39 PM
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Formersnag: "... its about the domino effect, whenever this sort of thing happens. One bank goes bankrupt when an entity can't repay, then the other bigger bank it borrowed from, then the "Dud Loan" insurance company is in trouble, etc, etc, etc."

The domino effect that you've just described is not a real reflection of economic reality. This is because when *any* country or private investor lends money they calculate the risk of borrower default and factor it into their calculations about how much they can safely lend and at what rate. Default of a single borrower is never a problem. For example, every year in Australia thousands of business and individuals go bankrupt yet the banks still make billions of dollars in profit.

The Greek debt would be a problem *if* there were a row of domino countries primed to fall. However, it is very unlikely that there is a row of dominoes. The only time a domino effect occurs is when the default of some debtor effects the system in some *unknown* way that the lender cannot/hasn't planned for and that effect causes even more debtors to fail. No one has as yet pointed out exactly how a Greek default could cause major unforeseen negative knock-on consequences.

The media makes out that if Greece defaults then the other PIGS -Portugal, Ireland, Spain- will fall, simply because they themselves have large debts. However, they have not as yet clearly detailed any mechanism how a Greece default will lead to further defaults. Just because some countries have massive debts with the a just few lender countries doesn't necessarily mean that the whole lot will fail just because one does-- there has to be a previously *unknown* strongly negative feed-back connection for this to happen.
As an example, if I have a next door neighbour who is a chef and another who is a doctor and both have massive debts and one goes under that won't effect the other neighbour because the two are distantly related economically-- even if they both use the same currency and the same bank.
Posted by thinkabit, Friday, 28 May 2010 5:26:33 PM
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The problem is...when my plan of Global Governance, facilitated by my Climate Change scam is fulfilled.. we will have mutually assured economic destruction. Of course.."I" will not be effected by this, because I already have my luxury pads here and there... my private jet etc and I also control around $5,000,000,000 of other peoples money.

I am (through my company, Generation Investements LLC) one of the 10 top shareholders in 'Climate Exchange' Europe and this guarantees me an unlimited supply of money when Cap and Trade laws are implemented.

My friend Maurice Strong and I have done very well out of the Climate Change/Global governance thing.. and we don't really care if the Economies of nations collapse, because "we are alright Jack".

We have structured things in this Global Govenance manner to enable us to maintain tight control over what people do, say and even think.
Our regional functionaries "Human Rights Tribunals/commissions" carry on this work at regional Tax payer expense.. we love that!

LESSON from Greece? Yes.. "globally interdependant/connected economies" mean "mutually assured destruction" when the poo hits the fan and the money runs out. (Except for mine and Maurice's and our mate George Soros..our money won't run out)
Posted by ALGOREisRICH, Friday, 28 May 2010 5:39:39 PM
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*No one has as yet pointed out exactly how a Greek default could cause major unforeseen negative knock-on consequences.*

We do know what could happen. A very large chunk of Greek Govt
debt, is owed to French and German banks. If the Greeks don't
pay, down go those banks, which has huge ramifications for
both the French and German economies. That is why France
and Germany are paddling so hard, to find a solution.
Posted by Yabby, Saturday, 29 May 2010 9:26:00 PM
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