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240 posts

Master Geek
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Topic # 93423 21-Nov-2011 14:23
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Hi

I came across this video about the result of Greek assets sales. 

http://youtu.be/bISfaVkszo0

How close is New Zealand to this sort of thing?





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Uber Geek
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  Reply # 547896 21-Nov-2011 15:11
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Theres other threads here on this , and I haven't watched the entire video you link to.... but, in essence Greek debt is Government debt. (monies borrowed by the politicians to pay state wages and bills).

In New Zealand we have high Public debt, that is money that individuals have borrowed from banks that have borrowed from other (offshore banks) institutions. (mortgages business and credit card debt).
Our Government debt is not (currently) seen as being too scary or past the tipping point.



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Master Geek
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  Reply # 547897 21-Nov-2011 15:14
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So Public debt is on the individuals hands not Ours as a country I hope..

Thank you for putting me straight 




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  Reply # 547899 21-Nov-2011 15:22
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public debt is government debt

private debt is non-government debt (home loan, company etc)





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  Reply # 547900 21-Nov-2011 15:28
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Possum:
How close is New Zealand to this sort of thing?


Answer... miles away,

The issue with all of these problem in the EuroZone is not that they have lots of Debt ( Although that is the trigger) , it is that the regular methods of reacting to any crisis caused by the debt are closed.

Greece, Italy, Spain, Ireland, Portugal all have no ability for their currency to devalue,(and they don't really have one, they all share the Euro which is controlled by France and Germany, well mainly Germany)  nor can they use their central bank to assist with the repurchase of loans to ensure the financial system continues to function.

The first thing that would happen in NZ if the rest of the world got concerned about our debt is the currency would fall through the floor, this would slow down imports of consumption goods and assist exporters, helping to rebalance the economy toward the productive sector...

This would essentially lower the standard of living for many people ( on an international comparison) without this ability to lower incomes via a currency, the only way it can happen is for firms to go bust, lots of people to become unemployed, and wages to reduce like they are doing in parts of Europe, all so they can remain using the Euro Currency....

People are just beginning to realise how bad an idea it can be to give up your local currency and adopt one controlled by a much more powerful country... (which is why the idea of an ANZAC currency with Australia is now totally and utterly dead in the water)

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  Reply # 547910 21-Nov-2011 15:52
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wellygary:(which is why the idea of an ANZAC currency with Australia is now totally and utterly dead in the water)


What do you mean by dead in the water? Because I bet you it is not the last we have heard of it!
 

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  Reply # 547913 21-Nov-2011 15:56
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nakedmolerat: public debt is government debt

private debt is non-government debt (home loan, company etc)

Thanks for this correction (meant to say private instead of public)

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  Reply # 548057 21-Nov-2011 19:53
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well, doesn't china own the entire world (apart from maybe singapore, and a few rich state countries in middle east and central europe)? however if the world can't repay china IF/when they need cash, then china will be in trouble too. so ....

PS - this is my extremely ignorant/limited knowledge of global economy

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  Reply # 548172 22-Nov-2011 03:36
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High levels of public debt does not bring a country down. Even when a country cannot service its debts, it can simply increase the money supply. Look at the USA.

What brings a country down is high levels of public debt, coupled with a weak economy. That is when investors lose confidence. The country still can increase its money supply (i.e. pull money out of thin air) but the problem with this is hyperinflation, which is what is happening with Zimbabwe. When that happens, the only way out is to default on your debts, which then of course will cause all investors to run from your country and avoid it for the next century or so.

People have to realise that in this day and age, money is simply paper/plastic. Money is fiat, meaning it is not backed up by silver or gold anymore. Money is backed up by the reputation and the economy of the country that 'prints' it. Money isn't even printed these days, countries can just add money as and when they like, it is called 'money supply'. But of course, there is no free lunch in the world, if countries add too much money into their money supply, their money becomes worthless, and hyperinflation sets in, like what is happening in Zimbabwe.

I think the USA has an even higher debt level than Greece, Ireland etc, but you don't see it getting into trouble yet. This is simply because its economy is much better than Greece's and Ireland's etc, so people don't lose confidence.

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  Reply # 548176 22-Nov-2011 04:12
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oxnsox: Theres other threads here on this , and I haven't watched the entire video you link to.... but, in essence Greek debt is Government debt. (monies borrowed by the politicians to pay state wages and bills).

In New Zealand we have high Public debt, that is money that individuals have borrowed from banks that have borrowed from other (offshore banks) institutions. (mortgages business and credit card debt).
Our Government debt is not (currently) seen as being too scary or past the tipping point.


Errr...that is not really true. Public debt and gov't debt are the same thing.

New Zealand does not really have high public debt, I just looked this up. NZ's public debt is only about 20% of its GDP. (http://www.stuff.co.nz/business/5106876/Government-debt-rises-to-71-6-billion)

Just for comparison, Greece's debt is 140%, USA's is around 100%, Japan's is around 200%. (https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html)

Not all public debt are the same as well. Some public debt are held by foreigners (these are considered risky) while some are held by the locals (these are considered safe, because the locals won't want to bankrupt their own country, hence, they are mostly willing to compromise or allow longer repayment periods if the need arises).

You also have to consider the money the country has in its reserves when looking at public debt. Singapore's debt is around 100% of its GDP, which is around 250 billion dollars, as it includes unpaid pensions, but the country probably has 4 times that amount in its reserves, so basically the country is in debt because it chooses to issues bonds (mainly to gauge the market's evaluations of its bonds, to get more liquidity etc).

Japan's public debt is very high, but I think most of its debt is held by the Japanese people, so there is not much pressure on them. But Japan is in trouble, no doubt about it. Ageing population, sluggish economy for the past two decades, very high debt levels....

The USA cannot fall, simply because it is the world's reserve currency. The US dollar is the contemporary gold standard. If Greenback (US dollar) hyperinflates, then good luck to all the advanced economies on this world.

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  Reply # 549167 24-Nov-2011 04:13
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Sorry if I went off on a tangent. I quite enjoyed recalling what I learnt in University. I studied Economics in Uni. :)

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  Reply # 549188 24-Nov-2011 08:21
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Thought it was very well written and learnt a lot from it so thanks.




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  Reply # 549717 25-Nov-2011 01:08
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nice .. please explain "USA is the world's reserve currency"? thanks!!!!

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  Reply # 549720 25-Nov-2011 01:35
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joker97: nice .. please explain "USA is the world's reserve currency"? thanks!!!!


Umm...ok...think of it this way, we all save money right? To save money, you put your NZ dollars into your bank account or in a nice piggy bank.

Gov'ts save money as well. But they normally don't save their money in their own currency, they tend to save their money in other countries' currencies. They do this because it is safer, think of the adage 'don't put all your eggs in one basket'. And also because it allows them do other things as well, like protect their own currency or influence it.

Basically right now, many countries (or probably all countries) in the world have 50% of more of their 'savings' aka 'foreign exchange reserves' in US dollar notes.

So the US cannot fall, if it does, every country and every bank in the world basically 'lose all their savings'.

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  Reply # 549721 25-Nov-2011 02:18
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Wow! Yikes!!!!

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  Reply # 550718 27-Nov-2011 23:11
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Possum: Hi

I came across this video about the result of Greek assets sales. 

http://youtu.be/bISfaVkszo0

How close is New Zealand to this sort of thing?



Interesting video thanks (just got around to watching it now). I had always wondered why a country in big debt doesn't just tell the lenders to get stuffed, it's not like they can send in some thugs to cart off a power station or something. Turns out it's actually been done by Greece and Iceland in the past.
Can't borrow any more but who cares, by that stage you are probably only borrowing to pay the interest on the debt anyway.
We've gotten rid of our credit card (and not sold off our asset), about time NZ did the same.

PS what's happened to CatJones. I thought his posts were useful.

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