Supposedly, if you're a dead beat and don't pay your bills - you don't get future loans. If you do get loans, it's usually at a high interest rate due to your history.
The idea is that banks or lending institutions are taking a RISK to loan money and that RISK is reflected in the interest rate. If you repay the loan - the lender makes money. If you don't replay the loan - the lender loses money.
Of course, with world economies and national debts, there's more at stake than someone defaulting on their mortgage or a car loan. So, for basically defaulting - Greece gets to pay a very low (almost nothing) interest rate AND gets to borrow more money.
That's fine. It's a Euro thing and they can do what they want.
I'm just tired of hearing about it.
Greece is a small, almost tiny, country. If it really defaulted (with no bailout) - some European banks (and national banks) would lose money. But it really wouldn't make a dent or blip in the economies of the other EU countries nor their industrial markets or stock markets.
Actually, it's good that the EU wants to assist a member country. If Greece defaulted and dropped out of the EU - it was be a huge depression for Greece. But basically, only for Greece.
I'm just tired of hearing about it. Enough already.
For a little perspective - wander on over to http://www.nationaldebtclocks.org/.
There's a lot of ways to look at debt. Most economist look at debt vs national domestic product. But I think that NDP (or GDP) can be inflated and misleading.
I prefer to look at dept per citizen. In other words, if a country wanted to pay off their national debt, right now, how big a check would each person have to write? That means EACH person - man, woman and child.
Greece - $34,500 each
Germany - $27,303 each
For Puerto Rico (not a nation but very close to default) - $20,000 each
Here's the eye openers -
USA - $57,300 each.
Yikes - the USA and Japan owe a ton 'o money!
So enough with the Greek bailout. It's news - but not all consuming, all important news.
1 comment:
There is one very big difference between Japan's debt and the rest on that list: Japan's debt is almost 100% domestic: not held by foreign governments etc. The J-gov owes that money to Japanese.
Not saying it's a good thing, but the debt comparison is not apples-to-apples.
Post a Comment