Seems as if it's really true. Politicians never do the right thing until it's too late. I'll bravely expose my vast ignorance and ask this. I keep hearing about Greece "defaulting". Does that mean that all Greek Govt. bonds become worthless? What happens to a nations financial infrastructure when it can't pay it's debt?
They settle for XX cents on the dollar. Default = debt restructuring. Rarely do countries ever completely stiff their creditors.
I think defaults should be targeted according to counter-party. In the case of the US, instead of settling with everyone for XX cents on the dollar, foreign Central Banks should get nothing. Domestic public and private pension funds, Social Security, Medicare Trustfund should get paid out before foreign equity. That represents real cash people made via work or taxes (paid into SS and Medicare). The FED shouldn't get a dime back. This doesn't mean we avert any sort of crisis. The moment America (or anyone) defaults, in whole or part - without CB intervention - interest rates fly to the moon, defaults skyrocket, lending collapses, and the market-economy goes into a Great Depression (-20%+ GDP). A targeted default just ensures more Americans get back their money in the form of pensions, Medicare, Social Security etc, at the expense of Foreign Central Banks who just loaned cash they print. From what I know (and I could be wrong), Greece is in a different situation because it's bonds are backed by the Eurozone, as a whole. Also, once the ECB and IMF intervenes they take control over who gets paid what, via custodial rights over the loaned funds.
EU should just cut those countries loose, those leaders are too stupid, most of their people are too lazy and greedy. I wish Greece default on its debts, therefore, people will be more careful next time when they lend their money.
"Across Athens on Wednesday, strikes and protests erupted as its crisis-hit economy reeled from another scathing downgrade of its debt and the stock exchange took emergency measures to deter speculators. Amid a growing recession, a general strike has been called for May 5 against austerity cuts that the government is enforcing to slash the rampant public deficit and debt worth nearly â¬300bn." http://www.telegraph.co.uk/finance/...Ebola-and-Europe-must-act-now-OECD-warns.html The only way to pay off debt is to cut government spending and to raise taxes. Americans will riot when their social security, medicare, food stamps, unemployment, etc. benefits get cut and their taxes go up just like the Greek people are doing. Bailouts are only delaying the inevitable. Stop the insanity and let the dominos fall already.
Right now, Greece (and other PIGS) has a feeling similar to the month or so around the collapse around Lehman, Bear, AIG... You go into a weekend with hope, and come out with the govt trying to talk GS, JPMorgan and MS into funding a bailout so the govt can avoid it. At the end of the weekend, collapse...