Greek Debt Recession and Austerity (part 1)

A primer of why Greece is in a tough situation (more in future videos)

[xcvsdxvsx]

the solution to greece's problems: 1) exit the euro-zone and allow the free market to chose its own currency. 2) eliminate ALL entitlement programs. 3) establish a temporary government program to ensure that all people have access to food and shelter 4) privatize all state assets 5) eliminate all regulation 6) cut taxes to the minimum level necessary to sustain the above mentioned program and basic government functions.

[sondosalbosta]

i cant thank u enough for downloading this video, i have an assignment due tomorrow and i cant say how much ur video helped !

[mindauggas]

Someone - Khan, or anyone - could make a pretty good youtube channel by analyzing current affairs THIS way. Charts, facts, citations, grapth AND THE MECHANISMS BEHIND the phenomena . I'm in need for that.

[trevgue]

You sir always make everything easier to understand, thank you!!

[Uhmu]

That is about the only advantage that cutting spending before debasing your currency has, you can choose what you cut, keep the things you really need and cut away the inefficiencies and non-priorities.
"cut everything and watch what happens" attitude is indeed borderline insane.

[CPS]

@jay dee we never finish construction of the buildings, in order to avoid paying tax. This is true. When we retire at the age of 32, we get the latest Ferrari (or Lamborghini) FREE as a present from the state. Other benefits include : going to the Alps for skiing, 150, 000 free air miles (business class), staying at 5 star hotels etc

[zibbitybibbitybop]

The thing about austerity measures is that all the spending cuts do way more damage to the economy if the economy is too heavily dependent upon government spending in the first place. That's the real problem Greece has here - too much government influence on the private sector. If the private sector were more or less independent, then it would only be the increased taxes that would hurt them, and the damage wouldn't be as bad.

[HTMANactual]

Greece (now Spain & Italy) is going through exactly what Canada & Sweden went through in the 90s. Govts don't want to learn b/c it's easy for politicians to promise "free" goodies for in turn for votes.

[myn]

that is a perspective of austerity measures I never never took into account. Basically, the greek are damned if they do and damned if they don't, at least from this point in fixing their economy.

[Alphasquare]

thank you for addressing this issue. While I think I grasp the outline of this situation I expect you will show me much more.

[Uhmu]

Like Greece they did not have any other options. The question is not whether it was easy or good for everyone, the question is whether its possible. It is.

[anwee]

If you do that GDP will fall and can cause a chain reaction. It can for example create unemployment where you have to provide unemployment insurance (increasing spending, but no tax income so deficit becomes worse). Just about every country boosted government spending to stimulate the economy (increasing the GPA via fiscal policy) during the recession.

[leetcheet]

Khan, it would be nice for you to explain the monetary dynamic of the EU and how it in essence acts as a gold standard. By this I mean countries within the EU do not have the power to control interest rates(with the exception of Germany) because, they do not control their own currencies.

[TropospherePixels]

The increased figure that you see is "public expenditures in % of GDP". So if spending decreases and GDP decreases by a bigger amount at the same time, the figure will go up.

Maybe you can find a video that helps you understand how to interpret numbers that are based on two variables.

[gogyoo]

Yeah, I have heard that 50% of the Greek debt could be recovered by taxing properly all the money that has been sent to Switzerland, Luxembourg & Co. Doesn't break the cycle, but at least investors would be more inclined to inject money in Greek economy...

[TheBhuvan]

He really knows about the Greek e-Khan-omy.

[anwee]

Think of Greece as a household. The salaryman made a bad investment (gambled all his money on a toxic investment and lost all his savings). Now with the decrease in income from investments (treat income as output-> GDP) the household can't continue it's lavish lifestyle with 1000 tv channels and that new BMW that's all being used on credit because the salaryman thought the investment would cash in. Cut down on spending or borrow more money and pay more interest because you're risky to loan money

[Uhmu]

Its not impossible to come out of a crisis with austerity, it has been done before many times, but Greece has so many other problems besides the massive dept, its just hard to see how they could struggle out of this hole.

[AduhAwas]

Cutting govt spending is bad, because in times of recession people do not spend. People are fearful for the future, so they hoard their money. Any econ book will validate this principle. Furthermore, big government investment is required to spur the economy on, to revitalize faith in the system and to attract both foreign/local sources of capital. This is basic keynsian principle of bust/boom cycles, where in downturns government spends, and in surpluses government saves, evening things out.

[ESjazz]

Hi Khan, I just thought it would be a great idea if you could cover some financial history like crash of 87' junk bonds 80's past currency defaults, depression 1930's etc. Awesome videos!!!