Europe, a Parable

[Toro]

There are two neighbors who live in a subdivision. One neighbor is Hans, the other is Nikos. They both bought similar houses next to each other at about the same time for the same price. Hans put 20% down to buy his house and borrowed 80%. It has a fixed interest rate and his payment is well within his means. Nikos also has a mortgage, but he put 5% down and borrowed 95% with a variable interest rate. Nikos stretches to meet his mortgage payment every month.

Hans is an automobile engineer. Nikos is a clerk for the government. Hans is more productive than Nikos and earns more money. Hans works 50 hours a week while Nikos works 35 hours a week and gets every third Friday off. Nikos could work longer, but the weather’s nice so he chooses not to. Hans plans to retire at 67 and is saving for retirement. Nikos plans to retire at 57, but he doesn’t have much savings and is running up his credit cards buying lots of stuff.

But Nikos is putting too much on his credit card. He can no longer maintain his lifestyle and pay his debts. One day, Nikos skips a mortgage payment. The bank decides to check his credit rating. It has fallen dramatically. The bank then checks Nikos’s income. The bank discovers that Nikos lied about how much money he made on his mortgage application. So the bank calls Nikos and tells him they have to either raise his interest rate or cancel the mortgage. This is a problem for Nikos because he’s maxed out his credit card and can’t borrow from anywhere else.

So Nikos goes to his neighbor, Hans, and asks him for a loan. Hans, who likes Nikos but disapproves of his free-spending ways, says OK, but on the following conditions

* Nikos has to get a higher paying job, which would require him to work longer and not take a long weekend every three weeks.
* Nikos can’t retire at 57. He has to work to 67.
* Nikos has to start paying down all his other debt.
* Nikos has to start saving more.

Nikos says “No way. I like my lifestyle. I’m not giving it up.”

Hans replies, “Well, I work hard for my money. If you aren’t willing to alter your lifestyle, I’m not lending you anything. Why should I lend you my hard-earned savings if you aren’t willing to change your free-spending ways?”

“But I deserve to live this way!” Nikos yells.

“Sorry,” says Hans.

Nikos goes across the street to Francois. Francois and Nikos have always gotten along pretty well, so Nikos asks for Francois for a loan. Francois is afraid that Nikos may have to sell his home and move. Francois doesn’t want Nikos to move because he is banging Nikos’s hot Greek wife, so he lends him the money.

And that is the eurozone.

 

[editec]

Do you really think the story is as simply stated as your parable?

I mean REALLY?

 

[Toro]

Do you really think the story is as simply stated as your parable?

I mean REALLY?

Pretty much.

Greece works less, is less productive, retires earlier, spends too much, engages in massive tax evasion, corruption is rampant, and now wants to be bailed out by Germany. What else is there?

 

[boedicca]

Good parable.

Now switch that to the U.S., and give Nikos more pay than Hans, with big pension benefits - and force Hans to pay more in taxes so Nikos can retire early.

 

[Thinman]

Nikos defines the lifestyle of many here in the USA. He has leveraged his credit to the breaking point and now looks for a bailout. If he gets it, he will not have learned anything and will continue his spendthrift ways.

 

[Foxfyre]

Do you really think the story is as simply stated as your parable?

I mean REALLY?

Pretty much.

Greece works less, is less productive, retires earlier, spends too much, engages in massive tax evasion, corruption is rampant, and now wants to be bailed out by Germany. What else is there?

Greece also decided to shore up its government with a VAT and thus so further damaged its economy that it now is in the worst shape of any nation in Europe or North America. Probably South America too. It is a big component in what crashed the US markets this week and it hasn't helped Europe's any either. Portugal, who did the same thing is right behind them. There is simply no substitute for sensible financial management for Nikos or Greece or the USA.

 

[L.K.Eder]

you fuckheads leave nikos alone!

nikos did not start a war of choice to get into debt, you morons.

 

[Toro]

Tax evasion is a national sport in Greece.

ATHENS — In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools.

So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

Greek Wealth Is Everywhere but Tax Forms - NYTimes.com

 

[Big Black Dog]

Maybe our country could be over run by the Saxons and set us back far enough in history to try this whole thing again but in a smarter, more efficient way.

 

[boedicca]

you fuckheads leave nikos alone!

nikos did not start a war of choice to get into debt, you morons.

Speaking of morons.^^^


Greece's problem is a bloated government full of entitlement oriented employees who all expect to retire with big pensions in their 50s.

 

[Munin]

How about the story about "Joe the unlicensed plumber" and "Chen the socialist worker"

Joe is a guy who works hard but spends more than he earns, as a result he has to go to his bank for a loan. Once he s there his bank will advise him to give him a loan he can not afford to pay back over time, as a result he takes another mortgage on his house and sells this to his bank. Later he Joe will find out that he can not pay off his loans and the bank will come to claim his house. Joe is forced to live on the streets and becomes homeless, his production is 0 and his debt is -##### (large number). His bank now sells his house and many others on the market, but because the bank has so much success in giving people the "good advice" to take loans they can not afford it sells so much houses that the housing prices are plummeting. It seems the bank is a victim of its own success ...


Chen the socialist worker is also a hard worker and he works hard every day, he saves money and never spends more than he earns. As a result Chen has now saved a lot of money, Chen stores this money on a bank. But without Chens knowledge the bank loans its money to a man named Joe in a far away land called "United States of America".


What was the expression again with "throwing stones" ?




It is also much more complex: Both countries have the same currency, imagine California going Bankrupt and the US Federal Government bailing them out to save the $ currency and to avoid fallout in other US states. (This would be a much better comparison.)

What happened with Greece is the following: Greece wasn't ready to join the Euro-zone (Euro-currency) and was helped by an american bank called Goldman sachs to counterfeit the greec balance sheet, this way Greece was able to join the Euro even though it was not ready for it. Now people started speculating against the Euro and Greec government loans because the debt record that was falsified by Goldman Sachs has been discovered, now the European Federal government has a problem because Greece can drag the Euro into a freefall that could possibly destroy the currency (desintegration and return to nation currencies instead of European Currency: this would be bad for all EU countries as the EURO boosts trade, ...) speculators in the financial markets to speculate against Europe as a whole. A fish to big to eat it seems, as it turns out that the fish isn't even a "fish" but a shark that bites back: the Euro is saved, speculators are frightened by the new measures taken by european government: happy end of story.

As a reminder: the Greec economy gdp is less than 1% of total gdp the EU economy, the money loaned is almost nothing compared to the money generated by the total EU economy. How much of US gdp is California again?

 

[Munin]

Now that I ve read some more about the specific subject, I think my opinion in my previous post was not entirely correct. I understimated the German motivations for destabilizing the Euro, what Merkel (german prime minister) is doing is trying to lower the Euro Currency value and at the same time not doing it too much so the Euro isn't threatened in its existance: Otherwise the germans would be forced to go back to the german "mark" currency which would be the strongest currency in the world: this would be a desaster for germany because it is one of the biggest exportcountries in the world.

Devaluating the Euro is actually great for the German economy (as I said before: it is one of the biggest exporters in the world), the strange thing of chinese prime ministers and American government officials (geithner) calling the european governments to get their business in order even strengthens that point (that the germans are doing it to get an export advantage). A weak Euro would threaten the revival of both the Chinese and American economic recovery: China has linked its currency to the $, this enables China to cheaply export to the US at all times as the Chinese currency advantage will be maintained. But this is certainly not the case when the Euro devaluates from the US dollar, Chinese exports in europe would become more expensive.