EU

Lessons learned in Greece

Patrick Gray travels to Greece to deliver a speech but learns more there than he expected.

I was in Greece last week to deliver a speech about building flexibility into your IT organization to an audience of local business owners and CEOs. I've given scores of speeches around these topics to similar audiences, but never in the context of a crippling economic disaster. Unless you've completely unplugged from world news, you have likely been exposed to news about the economic uncertainly facing Greece and several other European countries. While I understood the news at a cerebral level, and was appropriately shocked by images of protesters in the streets, spending a few hours speaking with those living in the midst of it all was frankly a gut-wrenching experience.

The people I spoke with mentioned a raft of challenges and concerns ranging from wondering how they'll afford massive tax increases, to considering how their business can even survive, to planning on packing up their family and leaving their country in search of better opportunities. Many mentioned that the possibility of total economic collapse and anarchy are distinct possibilities that they're trying to plan and prepare for, a particularly stark outlook. While none of this is new news, talking with people living through it and attempting to mentally put myself in their shoes was mind boggling. I came away feeling I had perhaps learned more than I had taught, and would like to share these highlights:

Pack your umbrella

A recurring theme I heard from the Greeks was that many of their problems were self-made, and they knew a time would eventually come when they had to pay the piper. Many expressed outrage that their government, countrymen, and they themselves had continued to ignore the signs of economic calamity, and were now having many decisions being made forcibly by external parties ranging from French, German, and EU politicians to international banking organizations.

While delaying these painful decisions may have been sound politically, or expedient at the time, Greece is being faced with an exceptionally high price. While immediately unpopular, planning for and tackling tomorrow's problems today can make the future far less painful.

Focus on what you can control

We've all heard people lament external factors outside their control. Everything from economic conditions to changes in the weather has cost jobs, fortunes, and lives, yet the external factors are generally outside of our individual control. Some of the Greeks I spoke with were still pointing fingers at local or EU politicians, or "the other guy," but most were surprisingly sanguine about what they could and could not control, choosing to focus on their business rather than blaming others.

One could spend a lifetime blaming everything from organizational politics to international conspiracies for undesired outcomes, but focusing externally renders us powerless. If every decision and outcome were subject to an outside factor, it's likely we'd never accomplish anything. By effectively ignoring external factors and focusing on what you can control and influence, you maintain control over circumstance rather than just hanging on for the ride.

Call in the cavalry

Another interesting comment I heard was around the zeal for outside expertise. While it may be an inherently biased source, many of the conference attendees expressed a sentiment that their old ways of working were no longer appropriate. The old rules of operating in Greece had essentially been thrown out, and Greece was looking at external expertise for inspiration and guidance for building flexibility into their businesses, and exploiting opportunity engendered by crisis.

There's a risk in any environment that you can grow insular, and outside expertise can provide a breath of fresh air that can reinvigorate your business. That expertise can take many forms, from reading an article like this to a full-blown change initiative, but in all cases an independent third party can provide a shock to an existing system, help influence internal change, or even provide a cadre of content-area experts to help complete an initiative at a commodity price. One silver lining to the economic crisis impacting many parts of the world is the availability of high-quality expertise that can be acquired on an as-needed basis.

I certainly don't envy the citizens, workers, and politicians in Greece, where it seems like most decisions are a matter of choosing the lesser of a multitude of evils. One remark from my speech that seemed to resonate with the audience was that Greece has the unfortunate honor of being the first to go through this type of crisis. While their circumstance may be different from that of the average CIO or citizen of another country, there are certainly lessons to be learned from their experience that are broadly applicable.

About

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

225 comments
Con_123456
Con_123456

... In contrast, the EU quite deliberately created the most dangerous credit bubble of all: EMU. And, whereas the mission of the Fed is to avoid a financial crisis, the mission of the ECB is to provoke one. The purpose of the crisis will be, as Prodi, then Commission president, said in 2002, to allow the EU to take more power for itself. The sacrificial victims will be, in the first instance, families and firms (and banks and investors) in countries such as Ireland and Club Med. Subsequently, German savers (or British taxpayers) will bear the burden of bailouts that a newly-empowered "EU economic government" will ordain. ... Sub-prime crisis is the edge of a financial hurricane by Bernard Connolly, 20 Aug 2007 in The Telegraph

cme.meyer
cme.meyer

These comments are very interesting & typical from a North American Population, I would like to add a European view in it with my Italian collegue. Look at France, we have a huge support in healthcare for whole population, and if you look at our deficit, it is far less as the US deficit per person. We have all in Europe as well as in US a challenge to put the deficits under control. We need to cut some spendings, but the real challenge is about being more efficient. Private economy, especially Industry sector has improved drastically in the last 20 years, where States are spending more for less efficiency. My question to you folks is why are you thinking healthcare is an overkill instead of thinking how you can fund it efficiently. Any human being should think that health is the most important thing in life, and when you loose it, you are helpless, you can't work nor contribute to society. I have been working worldwide for the last 20 years, am aware of a lot of things that French people need to change drastically, but this is the one thing I will never trade on.

itadmin
itadmin

I'm glad many Greeks realise their problems are of their own making. The basic truth is that one cannot forever spend more than one earns. A day will come to pay the piper - sooner for individuals and small businesses and later for huge corporations and countries. For the USA, your day is coming, too. I've worked for 15 years as a consultant surgeon in both private and public hospitals. As far as efficiency goes, there's absolutely no contest. The ten operating theaters in the private hospital are going full out while there were many idle theaters in the public hospital. Turn around time in private is fast, while in the public hospital one spends as much time in the doctor's tea room between cases as operating. Go past knock-off time in the public hospital and the staff is surly and one's next list may be cancelled. In private, when you finish whenever you finish, be it 20H00 or 23h00, they ask you to bring more cases next week because they get bonuses on throughput. A few offices of staff handle the admin duties of the private hospital while there are floors, or even buildings, of admin staff for public hospitals. When they have to save money in public they cancel operating sessions - the very reason (to see and treat patients) for the hospital's existence. We can't win. In the public sector (not only medicine) we have to put up with gross inefficiencies while in the corporate world greed turns us into suckers to be exploited.

Jemonaco
Jemonaco

Accomplish anything ... hmmmm ... I hate to rain on sunny optimism but GNP is at best growing around 1%. We are in a static culture and economy where organizations and individuals are avoiding risk to survive (like they've been taught fr decades in B-schools). The economy will continue to decay until the cowards and money/power hoarders (professional politicians in the private and public sectors) are replaced by people of virtue - especially courage, humility, and integrity. Don't see it coming anytime soon. Government schools have indoctrinated and "dumbed us down". They're not changing - certainly not for the better. We have been conditioned to "Amuse Ourselves To Death". Sorry this is so bleak, but that's what I've observed for quite a few decades.

WanderMouse
WanderMouse

Our high national debt is mirrored by the high credit card debt, student loan debt, etc., that many Americans carry. Don't forget that is was the bursting of the housing bubble that started the recession/depression in this country, and that this bubble was the result of "the system" (define it as you like) granting mortgages to people with no down payment and no hope of ever repaying, with the idea that the home price would go up to cover the loan, and the false idea that the bubble could never burst. If everyone lived within their budget: had to put at least 20% down payment on a mortgage and honestly qualify for a mortgage on the balance; if they were only allowed to use charge cards (full balance due at the end of the month) rather than credit cards (running up huge balances at ridiculous interest rates); and if they were only allowed to get higher education at a place they could pay for reasonably- including online- we wouldn't have the problems we have wih our personal finances. If government was allowed only to finance programs they could afford at tax rates people were willing to pay (except for wartime, and the so-called "War on Terror" doesn't count,) we wouldn't have an unrepayable national debt. But delayed gratification seems to be dead, and people want what they want when they want it. And woe betide the politician who votes to cut a benefit program from which you are receiving, or will receive, money in the future. I really don't think you can change human nature, and that the problems won't be addressed until the system collapses, and we have no choice but to address them.

adornoe
adornoe

and with so many politicians and government people and pundits insisting that, what we need is more socialism in order to create prosperity, then there will be no way to recover from the worldwide depression which will surely follow; in fact, there are many economists who believe that we're already in that depression. The only way to get out of the hole we're in, is for everybody to get a heavy dose of reality, and for people to begin to realize what the real causes were that destroyed some economies and threaten to bring down a whole lot more. Before a problem can be solved, people need to understand the causes, and then work to fix the problems while eliminating the causes. If the causes remain in place, then the problems will linger, no matter how many stop-gap measures are put into play, like bank and corporate bailouts and government stimulus programs.

Kent Lion
Kent Lion

Remember, of course, that health care isn't the only problem, but a large one of many. In the U.S., to some extent, a doctor is no longer permitted by the legal system or the medical insurance system to do what a doctor is supposed to do: use his/her knowledge and judgment, first and foremost to CURE patients when possible, and only when that is not possible, to treat them when it makes sense for patients, their families and their society. Even if a doctor knows from experience they aren't needed, if he/she doesn't perform every known test, or try every known treatment (which is not the same as cure - see below) even those that are probably unsafe or probably don't work but can't be proved to be unsafe or to not work*, he/she could be sued. How much insurance pays for treatments and cures (if they exist), is determined by short term considerations of cost, not by long-term considerations of effectiveness**. Also, because our pharmaceutical industry is the main source of funding of medical research, the development of cures is effectively discouraged simply because it's not funded (perpetual treatment is much more profitable than a cure, particularly if the treatment causes other conditions that can't be proved to be caused by the treatment, and that can be treated instead of cured). This means that even if the doctor knows the patient can't be cured, that the patients life cannot be extended by more than a few months of abject misery, and that the benefit to society of treating a patient will be nil or far exceeded by the cost to society of the treatment, they must do everything they can, no matter what the cost. Because industry is greedy and everyone refuses to accept the possibility that at some point, a persons time has come, we will continue to develop more ways to delay the course of nature, forcing costs to eventually exceed not only the benefits to society, but society's ability to pay. We now have the computing power to simulate what's happening by following the value***, we just don't have any standard for defining value, so we can't do the simulation. Until that problem is (recognized and) fixed, expect the problems to continue to get worse and to continue to "correct" themselves. Individuals CAN consume more than they produce/harvest - compared to a farmer or assembly-line worker, what doctor, lawyer, soldier, religious leader, programmer, politician, CEO, banker, etc., produces/harvests or enables the production/harvest of as much as he/she must consume to live? However, humanity CANNOT consume more than humanity produces/harvests. * Example: The long term safety of many drugs cannot be tested in a "free", diverse society, because the time required and the huge number of variables would make such tests economically impractical; and the effectiveness of many drugs cannot be proved, because of the placebo effect, and the fact that every patient will have different side effects from different drugs. That doesn't prevent them from being approved and used. The FDA assumes that what hasn't been proved unsafe, is safe; and they look the other way when invalid clinical trials are used to show efficacy (see all psychopharmaceuticals) and even rigged to produce the desired results (see Cymbalta studies HMAYa and HMAYb). ** Example: If a psychiatrist is paid more by a patient's insurance for prescribing an anti-depressant than for a therapy session, the psychiatrist has little incentive to use therapy. Therapy is not a sure thing, and takes much more time and skill than writing prescriptions; and since a cause:effect relationship between psychopharmaceuticals and resulting long term damage can't be proved, psychiatrists can't be held responsible for long term damage from psychopharmaceuticals. *** This is not the same as just following the money, because in our financial system, there is no enforced relationship between the distribution of money and the creation of value.

itadmin
itadmin

As Rome was declining the rabble went around demanding "panem et circenses". Bread and circuses (gladiatorial games). Hedonism was, in that case, a prelude to disaster.

Charles Bundy
Charles Bundy

I prefer to think we humans are still operating as hunter-gatherers. Maybe I'm an optimist but I think most people know what needs doing and are mostly able to beat back the caveman screaming "that haunch of mammoth is going fast!" Delayed gratification in a resource scarce environment meant death to he/she. That is really hard to outthink... I fear there is a danger in your line of thinking. Taken a little further I hear an echo of times past when only white, male, land-owners could vote and people needed to know their place

adornoe
adornoe

I've been saying the same things forever, here and in other forums, and people still won't believe how we got here to a situation which might never have a solution. However, we have to start somewhere and the first thing we must do is to throw out those who advocate for doing more of the same things which got us into the messes to begin with. However, it's liberalism and progressive politics which are the main culprits. We would not have created the problems in the housing industry if there hadn't been a CRA and a Fannie and Freddie to get the problems started; those are the creations of big government advocates in congress and in the presidency.

elk
elk

Well said, you hit the nail right smack on the head! Bread and Circuses indeed! As Heinlein said "Once the monkeys learn they can vote themselves bananas, they'll never climb another tree."

HypnoToad72
HypnoToad72

Would you explain what you believe the "real causes"? And what if people could disprove your beliefs?

boxfiddler
boxfiddler

leading me to tentatively include you in the category "cynic".

Jemonaco
Jemonaco

Quite right! It's interesting that the Republic prospered for several hundred years until the appearance of the first triumvirate (2 - five year term limits [10 years] of the semi-dictators Pompei, Caesar, and Crassus, unconstitutional [like the failed congressional super-committee] and eventually led to the equally unconstitutional dictator perpetuo and the creation of the empire after the failed second triumvirate. Whether labelled as a "democrat" or "republican", or "liberal" or "progressive", our political system has been producing a ripe environment to promote totalitarianism and we are dangerously close. The 2012 election will decide whether we fall down that path or restore enlightenment and the constitution.

boxfiddler
boxfiddler

were nomadic, in response to scarce resource/s. We, on the other hand, set up 'permanent' shop. Technology and convenience have convinced us this is ok.

NickNielsen
NickNielsen

1. Where in the CRA are banks required to relzx their lending standards? 2. How do you explain that CRA loans defaulted at a [u]lower[/u] rate than the vast majority of no-down-payment, no-documentation mortgages issued by mortgage companies and banks not subject to the CRA?

adornoe
adornoe

Except that he didn't really say "socialism". Socialism, aka: big government, aka: expensive social spending, is the problem. That's been the problem in Europe and that's been the problem in the U.S., and that's been the problem that's bringing down the once mighty economies and their respective countries. It's also the big government intervention into the free market system, with the expensive regulations and the heavy taxation.

adornoe
adornoe

"Only the wisest and stupidest of men never change. " Wise people, tend to be mostly correct in their base knowledge and in opinions that are based on fact. Stupid people, are not capable of using facts to come up with intelligent opinions. Confucius, though thought to be a wise man, wasn't always correct in his quotes, though many would like to thing otherwise. But, Confucius must've had you in mind with the second part of that statement about, "wisest and stupidest of men". Now, logically, Confucius was neither in the category of "wisest" nor in the "stupidest". If he thought himself as being wise, then he could not have been "wisest" at the same time, because then, he would also have been one of those that could "never change". There's paradox in there that Confucius didn't consider. ;)

NickNielsen
NickNielsen

Only the wisest and stupidest of men never change.

adornoe
adornoe

Heck, the global warming scientists have conducted '"in-depth" studies and created reports for many decades now, but, their studies have been flawed all along. When a study sets out with a predefined agenda to prove, then it's not going to be fact-based, even if it ends up containing a million pages of material and conclusions. There is no hypocrisy involved in expecting a study to work with the facts, and to not be based on an agenda.

adornoe
adornoe

because, the facts were always on my side, and not on yours. You're the one that continued to argue from the perspective of blaming the wrong parties for the housing mess and the economic crisis that ensued. I laid out all the facts, and even quoted the opposing side's viewpoints and arguments, all the while pointing to the history and the real culprits in the whole debacle that was initiated by the government's insistence on getting unqualified people to "own" their own homes via the ill-advised CRA legislation.

NickNielsen
NickNielsen

You accuse another of being duped by desired-results studies. Now, you call an in-depth report from a reputable organization "spin and lies" because it doesn't agree with your desired result. Add hypocrisy to the list.

NickNielsen
NickNielsen

that CRA might have played some part in the run-up to the housing collapse. You, on the other hand, have consistently refused to consider any factors other than CRA as contributing to the collapse. By your dismissal of fact, your continual refusal to consider modifying your viewpoint in light of contradictory data, your persistent insults to those who dare to disagree with your, and your modifying terms and definitions to support your desired conclusion, you have demonstrated the inability (or refusal) to learn. In short, you have forfeited all intellectual and logical credibility. I am no longer interested in discussing your fantasies.

adornoe
adornoe

Look above for the correct version of what occurred, and how the housing crisis was created by government and those that wanted to get loans into the hands of those that couldn't afford their homes and who didn't have the credit to even get those loans. My response, directly above, to another one of your clueless posts, contains the facts. Again, the simple logic to the whole matter of the housing crisis and to the economic meltdown, comes down to: A causes B, and B causes C. C is the housing and economic meltdown A is the beginning, with government and the CRA legislation. B is what you say caused the problem. That is not only illogical, but it's idiotic.

adornoe
adornoe

First off, banks are also "mortgage" companies, in the sense that, they're the ones that write those mortgages. Banks are also mortgage brokers, so, your definition fails to consider what a "bank" is really all about in modern times. Most loans end up in the hands of the major banks, who then end up re-selling or repacking those loans and selling them to investors. Though the origination is not all from the major banks, they are the ones who end up with most of those loans, and who end up re-selling them. Here's a little lesson for you (notice that it's in simple terms so that you can understand): "A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments." The above from: 'How can mortgage-backed securities bring down the U.S. economy?' http://money.howstuffworks.com/mortgage-backed-security.htm The one single fact to keep in mind is that, no matter the size of the bank, they were all operating under the pressure of the CRA, which is what got the country into the mess it's in. You're only aware of where the fraud occurred, but, you're badly informed about what got the fraud started. So, here again is another lesson: "Jimmy Carter, Bill Clinton, Janet Reno to blame for mortgage mess" http://www.bizpacreview.com/index.cfm?fuseaction=news.details&ArticleId=50346&returnTo=john-r-smith-1 From the above: "Historians know that they can never claim wars start with a clash of armies. They know that the root causes of war start long before. In the same way that the seeds of war germinate well in advance of battle action, so too did the causes of this countrys mortgage meltdown, housing collapse, and credit crisis. Champions of Big-Brother-Government want you to blame everyone else except government intrusion for the economic plagues that currently assail us. But theres no getting around the truth. In the 1990s and 2000s, activist leftist groups like ACORN, AFL-CIO, and NEA conspired with liberal politicians to push private financial institutions into creating financial products enabling unqualified individuals to buy homes they couldnt afford. Now, those same leftists not only deny involvement in the havoc they caused, some are in the streets screaming shrilly that Wall Street caused the whole mess. The root cause of the housing disaster occurred after the federal government gave the green light and bullied lenders onto an 8-lane highway toward making money available to all comers for home mortgages. Here is the true and fascinating story of how that started:" Here's more help for you: "Community Reinvestment Act: Separating Fact From Fiction" http://news.investors.com/Article/567464/201103291826/Community-Reinvestment-Act-Separating-Fact-From-Fiction.htm From the above: "Cover-Up: Acorn clones using the Community Reinvestment Act to shake down banks aren't happy with our campaign to expose the truth about the CRA's central role in the financial crisis. The Greenlining Institute is typical. The Berkeley, Calif.-based community organizer fired off a letter to us complaining about our March 21 editorial "WaMu: Guilty Only Of CRA Compliance." In it, we argued that Washington Mutual, a CRA poster boy in the run-up to the crisis, is now a convenient whipping boy for the same regulators who pressured the bank into making the "reckless" multicultural loans they're suing it over today. "IBD's continued insistence that the Community Reinvestment Act was responsible for the subprime mortgage meltdown has been refuted by virtually every reputable authority in the field," wrote Greenlining spokesman Bruce Mirken. "That includes nine of 10 members of the Financial Crisis Inquiry Commission, including three out of four Republican appointees." " Because you seem to be quite uninformed, and can't understand more than simple logic, I'll include a primer for you: "A Primer on the 2007-2009 Financial Mess" http://floppingaces.net/2011/01/03/a-primer-on-the-2007-2009-financial-mess-reader-post/ From the above: "1. Politicians had policies which supported bad lending practices. They believed that not enough loans were being made to minority groups, so they expanded the power and scope of the Community Reinvestment Act, which was designed to get more minorities to buy homes. 2. There was the problem of minority incomes not being high enough and their credit not being good enough to get home loans. 3. FNMA and FHLMC are quasi-government institutions (now, fully government institutions) which make the rules for buying mortgages, as mortgage companies do not hold their mortgages; they sell them on the secondary mortgage market, and use that money to make new loans. In the past, FNMA and FHLMC had strict loan requirements, so that people who met those requirements were highly unlikely to default on a mortgage loan. 4. At first, some lending institutions did not go along with these practices. 5. These lending institutions were excoriated by activist groups (like ACORN). These groups even demonstrated out in front of the private homes of various bank presidents, scaring their families. 6. At the same time, there was the threat that the government would no longer buy their loans. Mortgage companies function by making loans, not by holding loans, so this would destroy any mortgage company. 7. Lending institutions which made a lot of minority loans, taking advantage of the new relaxed standards of FNMA and FHLMC, were rewarded. 8. All of a sudden, millions of people who previously could not buy a home were now qualified. This flooded the market with millions of new buyers, who did not have to qualify in terms of income and credit (strong indicators of loan-worthiness). 9. This flood of new buyers drove housing prices up, which is simple supply and demand economics. This is the great housing bubble of the early and mid-2000s where homes increased in value by as much as 100% or more in some communities. 10. Since loans had become easier to get, millions more people refinanced their homes, with the inflated home value, and pulled cash out of this refinancing. This meant more people had more money, which meant more spending, which inflated our economy and the market (some of this money was invested, of course). 11. At the same time, revenues to the state governments kept on going up, because housing values escalated to a tremendous degree. States had tons of new money coming in from taxes. 12. State governments began using this money to buy votes and to incur favor from their various constituencies. I doubt that many states recognized that this was a lot of new money coming in, and that maybe they ought to bank it or reduce property taxes. 13. When a huge percentage of these questionable loans went bad, the housing market crashed. 14. As the home values went down, some people walked away from their loans simply because they were under water (the house was no longer worth its inflated value, and, therefore, the loan against the house was greater than the value of the house). 15. As the value of the houses went down, revenue to state governments suddenly went down causing enormous state-by-state debt. 16. At one time, investing in the mortgage market was a sure thing, so virtually every pension fund and many investment groups were heavily invested in the housing market (please realize that the amount of money this represents makes ENRON look like a childs lemonade stand). 17. So, as the housing market crashed, so did the stock market and every single investment portfolio. As the stock market began to spiral because the housing market was at an artificially inflated value, this pulled down the rest of the market with it (with automatic buys and sells built into the system, this can happen in just a few hours). 18. As a result, the exact same politicians who caused this mess blamed predatory lending practicesthe same practices which their policies encouraged! Of course, they quickly blamed the President in charge (President George W. Bush, who attempted to reform FNMA and FHLMC practices, which attempts were shot down by the opposing party). These same politicians also blamed capitalism and they blamed Wall Street, because the housing market caused the entire market to crash. 19. Again, the politicians who caused housing bubble, the worthless loans, the inevitable housing bubble bursting, the resultant market crash and our present financial woes then blamed everyone except themselves."

NickNielsen
NickNielsen

[i]Most of the loans that defaulted were those of the major banks. [/i] The vast majority of loans that defaulted were originated by mortgage companies or mortgage brokers, not by banks. In 2006, this was at least 63% of the total loans.

adornoe
adornoe

understand. Look, the banks, small or large, still have to follow federal regulations. So, small or large, there was still that hammer being held over the bankers' heads, to make those loans, or else, the hammer would strike. Most of the loans that defaulted were those of the major banks. The major banks set the trend. As go the major banks, so go the smaller banks. If the major banks' loans were defaulting, whatever loans were made by the smaller banks, were in the same category, as far as size of loans, and the terms, and the markets. Once the major banks started losing with their defaulting loans, it set off a domino effect that affected the lesser banks and their loans. Loans from the lesser banks were being sold to Fannie and Freddie, just like the major banks. The loans being made had the same problems; so, whether a small bank, or a large bank, the loans being made were just as bad. The ultimate buyer were Fannie and Freddie, and the victims were the unsuspecting investors who thought that, because Fannie and Freddie were government backed corporations, that the packages were good investments. But, the loans in those mortgage-backed securities were coming from the sub-prime loans from the large and small banks. The CRA was an instrument which affected all banks, and the small banks were very instrumental in getting the sub-prime loans required by the CRA regulations. The CRA didn't affect just the large banks; it affected all banks that granted mortgage loans. You can't look at the mortgage mess as being separate for small versus large banks. The regulations worked the same for all. The mortgage frauds and the granting of sub-prime loans, affected all of them the same

AnsuGisalas
AnsuGisalas

Howcome the entities not affected by the CRA issued a greater rate of now-defaulted junk mortgages? They didn't have to, so they did it for other reasons. And in creating derivatives, they created an illusionary reduction in risk, and then pawned over that whole bundle of dynamite sticks, fuses lit, to whoever was dumb enough to believe their misleading marketing.

adornoe
adornoe

those threats oftentimes taking the form of loss of licenses if those banks did not start granting loans to the poor who would not have otherwise qualified for them. Clinton gave the CRA the very stringent enforcement regulations, which the banks had better comply with. Read about it: "The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities" http://www.city-journal.org/html/10_1_the_trillion_dollar.html That Clinton bill, along with the original CRA regulations, are the reasons for the mortgage meltdown which brought the economy down with it. A trillion dollars of CRA-based loans is nothing to scoff at. That's major money, and the defaults of so many of them was the start of the economic meltdown. The "no down payment" and "no documentation" mortgages is part of what the CRA produced. There was no other way to get the CRA to take effect, and so, no down, and no documentation became the way for banks to get themselves compliant with the requirements in the CRA laws, which was to get people in homes which they otherwise couldn't afford.

adornoe
adornoe

name is still something that has to get repaid. And, it doesn't matter how accounting is performed in different situations and in different countries. The fact of the matter is that, the debt accumulated has been killing a lot of economies, and the whole world is suffering. I wonder, where do you think debt comes from. What creates debt? What makes economies crumble?

AnsuGisalas
AnsuGisalas

It's real name is Gross External Liabilities, and it is decidedly skewed by trade relations. A liability is an accounting measure, and quite different from debts. Usually, a Liability is matched (but not reduced by) an equally large Asset. Money received, Goods owed, Goods acquired, Payment due. The slideshow linked by Bergenfx isn't about debt, and certainly not about endebted nations. It's a piece of BS to soothe nationalists in the US who want to dream a dream that other rich countries are in deeper than the US is. If the tally had been made with public debt compared to GDP, the listing would look entirely different. And it wouldn't soothe US egoes at all.

adornoe
adornoe

and a breakdown of the debt is not going to change the total debt. So, total debt is what matters most, and the U.S. is now well on the way towards a total debt of $16 trillion within a few months. We owe that money to China and other countries, but mostly to American citizens who were kind enough to invest in "America". The problem now is, how to collect on that debt, and how the government can ever pay off that debt.

AnsuGisalas
AnsuGisalas

Finland data: Public debt: 45.4% of GDP (2010 est.), net debt 17.4% of GDP[7][8] USA data: Public debt $14.972 trillion / 99.7% of GDP Using Gross External Debt as a metric is just a way of distorting the data, since it will vary according to which trade centres are located where : If a country's trade goes via London, for example there will seem to be money owed by that country to the UK, where no such debt actually exists; that's just a measure of payments received, and is part of the overall trade balance (note that in trade relations, there will be similar "debts" owed by other countries to even it all out, to the degree that the trade balance is in, well, balance). We're talking about endebted nations, so the public debt is the obvious metric.

adornoe
adornoe

but, in the long run, and because the American and Canadian economies are very dependent upon each other, Canada will meet up with the same problems. Canada has bought themselves a few years before they are caught up in the whole world economic mess, and some of what Canada did, could be "life-saving" to the American economy, that being their corporate tax cuts to around 16%, if the government in the U.S. would do the same. Tax cuts is what the U.S. needs, even if there are shortfalls in government revenue, but, that can be overcome by also cutting spending, which most politicians and government officials refuse to do. Thus, with no cuts in taxes and no cuts in spending, we're heading towards an economic death-dive off a cliff. Now, the corporate tax cuts in Canada might be good for Canada, but not good for the U.S., because, one of the biggest goals by the Canadians, is to woo American companies to their side. That would be damaging to the American economy, and by extension, the Canadians themselves, because, the U.S. is a market for much of what Canada produces, and if America ends up with fewer companies and fewer employees, then that American market will have dwindled. So, short-term, good for Canada; long-term, bad for both Canada and the U.S. Essentially, my assessment of the Canadian economy is still correct, but, they bought a few more years by cutting taxes. But, they are still committing the same mistakes the U.S. did with embedding so many social programs into the economy, and those programs do eventually create heavy damage to the economy; it just takes time before the damage builds up to unaffordable levels. Mostly, since Canada cannot divorce itself from the global economy, especially where the U.S. is concerned, all of the same problems will plague Canada, and they'll be in the same sinking boat.

JamesRL
JamesRL

You have missed decades of history. Canada was, in the early 90s, facing the kind of situation the US is in right now. Government spending was high, and the deficits kept creeping higher. But this was realized, and the Federal government cut the size of the civil service, cut programs, downloaded programs to the provinces. Provincial governments then followed suit, aiming for balanced budgets. Up until 2008, the Canadian Federal Government and most of the provinces were in surplus, and making payments on the long term debt. Taxes have been reduced. Now the stimulation spending from the recession has reversed that for the time being, but it will turn around in a few years.

NickNielsen
NickNielsen

If they hadn't told the banks to stick it. I expect Ireland to eventually do the same.

itadmin
itadmin

Their total debt may be less than that of the USA, but their per capita debt is much higher. Ireland leads the world with a per capita debt of more than $500,000.00.

adornoe
adornoe

Work, property, national debt, personal debt, government spending, government borrowing, "funny money", are all related. Perhaps you need to go back through your first 12 years of public schooling to make some sense of the world. Mostly, you need to connect to common sense in order that you can begin to understand the real world. BTW, that post above was mostly, gobbledygook, and the comments of somebody just making it up as he went. In other words, garbage!

AnsuGisalas
AnsuGisalas

Funny money : What is national debt? What is personal debt? The 'money' involved in debt is a largely psychosomatic entity, having almost no connection to the value of work or property. We're having a funny money crisis, because people are unsure if the system of counterbalanced amounts of funny money debts is held together by anything at all. It's a crisis of Faith. The emperor appears stark naked, and people are wondering if the reported qualities of his supposed clothes are an ample explanation for this appearance.

adornoe
adornoe

because, it's quite apparent that, you're in complete denial about the economic situation in the U.S. and around the world. Looks like you need a better dictionary too. We're having an economic crisis, where any and all things that could go wrong, have gone wrong. "Funny money" is just a symptom of the problem, where government is printing money in an attempt to make the problems go away. But, the problems, as long as they're not addressed with real solutions, will still be around after the funny money is spent.

adornoe
adornoe

economy doesn't undo the self-sustaining part. Even Medicare and Medicaid and Social Security in the U.S., were thought to be self-sustaining, but, there really is no such thing. Self-sustaining means that, it pays for itself. But, it doesn't pay for itself, and the government is taking in revenue, from its productive citizens, to redistribute those contributions as a service to all, including those who didn't contribute. A self-sustaining system pays its way, without taking from the whole population, and especially from the productive members of society. Like I said earlier, socialized anything, has a way of reaching into the economy, and eventually draining enough resources to cause the economy to start crumbling. Canada is at a point where the U.S. was, perhaps 30 or 40 years ago.

AnsuGisalas
AnsuGisalas

My dictionary says that's called a "psychiatrist". We're not having a financial crisis, we're having a "funny money crisis".

JamesRL
JamesRL

There is a specific tax in most provinces, and some transfers from the federal government. There had already been cutbacks in the 90s that lowered the federal transfers, and that trickled down into some of the increased waiting times etc as hospitals struggled to trim down. As for Canada being immune, of course we aren't. We weathered the banking crisis because we couldn't make those silly loans in Canada, though some banks did invest some amount in the bad US paper, and sustained some losses. We didn't lose a single financial institution though. But Canada's economy is very closely tied to the US, and if the US economy has a sustained problem, we will feel it. The old analogy was the mouse sleeping beside the elephant.

adornoe
adornoe

consideration when they did that study? Taking a snapshot of economies at certain periods of time, is not analytical. I could point out that, Mexico is warmer than the north pole, but, there are indications that, in prehistoric times, the north pole might have been warmer. What Canada is now, might be representative of the conditions in the U.S. 40 or 50 years ago, and then, things started to change, and the problems started to catch up with the economy.

JamesRL
JamesRL

For the benefit of those giving me negative votes on this, the Heritage Foundation is a conservative think tank, and they partner with the Wall Street Journal on the study. The pinko comment was sarcasm. So if you give that post a negative vote, well you might be a socialist...

adornoe
adornoe

about Canada, when I said that Canada is in better shape and doing things that will make them more attractive for American businesses to move there; that tax cut is one of the major points I made about Canada being more hospitable to businesses than the higher tax rates in the U.S. However, where I still differ, is in the mix of socialism with the free market. Socialized health care might not seem like a huge problem right now, but, sometimes the damage from socialist policies take a long time to develop. It's the same thing that happened with Social Security and Medicare and Medicaid and other social programs in the U.S. It took a long time before the problems started rearing their ugly heads, and basically, right now, Medicare and Medicaid and Social Security are operating in the red; they're unsustainable. No social program is self-sustaining, and in the long run, it will be damaging. But, with the U.S. being the biggest trading partner to Canada, Canada is not immune to the problems plaguing the rest of the world, and they will begin to feel the repercussions from a weak neighbor in the coming years.

JamesRL
JamesRL

According to the Heritage foundation, Canada ranks higher than the US in economic freedom. From those pinko commies at the Heritage Foundation in DC: "Canada???s economic freedom score is 80.8, making its economy the 6th freest in the 2011 Index. Its overall score is 0.4 point higher than last year, reflecting gains in fiscal and monetary freedom. Canada is ranked 1st out of three countries in the North America region. The Canadian economy continues to sharpen its long-term competitiveness. Scoring high in many of the 10 economic freedoms, Canada performs particularly well in business freedom, financial freedom, property rights, and freedom from corruption. Straightforward regulations and the competitive tax regime facilitate entrepreneurial activity and lure dynamic investment. The corporate tax rate is scheduled to decline further to 15 percent in 2012. Overall, regulation is thorough but essentially transparent. A strong rule of law ensures property rights and equitable application of the commercial code. Canada has emerged from the global downturn relatively unscathed, and sound public finance management has enabled the economy to undertake stimulus measures without undermining fiscal soundness and competitiveness" Here is what they say about the US: "The United States??? economic freedom score is 77.8, making its economy the 9th freest in the 2011 Index. Its score is 0.2 point lower than last year, reflecting deteriorating business freedom, trade freedom, government spending, and monetary freedom. The U.S. is ranked 2nd out of three countries in the North America region, and its overall score is well above the world and regional averages. The U.S. economy faces enormous challenges. The government???s recent spending spree has led to fragile business confidence and crushing public debt. Interventionist responses to the economic slowdown have eroded economic freedom and long-term competitiveness. Drastic legislative changes in health care and financial regulations have retarded job creation and injected substantial uncertainty into business investment planning. Ongoing regulatory changes, coupled with fading confidence in the direction of government policies, discourage entrepreneurship and dynamic investment within the private sector. Leadership and credibility in trade have been also undercut by protectionist policy stances and inaction on previously agreed free trade agreements with South Korea, Panama, and Colombia."

adornoe
adornoe

and those countries will be paying high prices for all of the stupidity which got them into trouble. There is no such thing as riding it out, and real solutions have to be devised.

adornoe
adornoe

from the same problems which are destroying the U.S. and Europe. The damage may be late to get to some countries, but the damage is beginning to be felt in Germany, and Canada will be feeling it too, with their partly socialist economy. The Scandinavian countries are small, and the damage to them may take a while, but, their economies can't be compared to the U.S. and other major economies, because, their population sizes are comparable to the size of major cities, and it's a lot easier to manage a city-sized economy than a major one.

bergenfx
bergenfx

... at national debt ranking --> http://www.cnbc.com/id/30308959/The_World_s_Biggest_Debtor_Nations (sorry it is in slideshow form, but worth going through all the same). I find it interesting that it is generally people from the extremes of both the left and the right that seem to enjoy casting the US as the biggest debtor nation without scaling the argument. When you take into consideration the size of the economies (debt as a percentage of GDP) and population (per capita debt), the picture changes quite a bit. Using normalizing methods most of Western Europe (including all of Scandinavia) rank worse in national debt than the US.

AnsuGisalas
AnsuGisalas

In the beginning there was supposed to be sanctions against countries who didn't follow good practices inside the euro-zone, but due to some start-up problems in Germany, a precedent of not punishing irresponsible behavior was set. That's what most European countries are having problems with now. Greece, Ireland, Italy, Portugal and Spain took liberties, and there should have been sanctions in place to limit that behavior. But there wasn't. Now we just have to ride it out.

NickNielsen
NickNielsen

Germany, the Scandinavian countries, and the UK have even more social programs than Canada, and much less debt than the U.S. Most of their current problems weren't brought on by social spending, but by the issues associated with the Euro.

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