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Bwee posted:Can someone please explain the pro-austerity argument, I understand that it's a "rich get richer" thing but they can't sell it like that Austerity is said to increase the confidence of foreign creditors, which lowers the interest rate on Greek government bonds, which pushes the Greek budget closer to being on a sustainable course, which further increases the confidence of foreign creditors, unlocking a virtuous cycle that will continue until Greece's credit is as good as Germany's. It also lowers interest rates across the board in Greece, making investments in Greek businesses and so on more attractive. Unfortunately, cutting government spending during a recession is economic suicide, as has been known for about eight decades, and no matter how many bank holidays the Greek government imposes, it's not really possible to stop capital from fleeing the country.
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Jul 16, 2015 07:43
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Uroboros posted:So I'm so super ignorant in this topic. Greece is heavily in debt and in a financial crisis while the US is deeply in debt but doesn't seem to be on the verge of economic collapse. Is this purely because of political power? The owners of Greece's debt are actually larger than their debtor while the U.S. has its debt spread amongst many lesser economic powers who would suffer majorly if the U.S. collapsed and thus have no interest in forcing the issue? The United States has control over its own money supply; it can weaken the dollar, do quantitative easing, and ultimately just print a ton of money and hand it to its creditors, without Angela Merkel or Mario Draghi getting in the way.
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Jul 16, 2015 23:55
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