The Big Bailout

Here goes nothing.

The Greek bailout is sort of like when I took out the loans to pay off my college debt and how you're dealing with mortgage. These examples are quite laughable compared to the deep deep hole Greece (and others) have dug over the past decade. Borrowing is the life blood of students, households and governments alike.

It's a lesson we learned already a couple of years ago, when Wall Street crumbled. Greece borrowed big, can't pay back its creditors, and now needs to borrow more money to keep afloat. It's the cycle of debt.

Think of it this way, ma. You are the International Monetary Fund (IMF) and/or the European Union Commission (EUC). IMF is an intergovernmental organization made up of over 100 countries, made famous by one man, a maid and a hotel room. The EU Commission is the executive body for the European Union. It's good to know these terms, they'll be popping up a lot. I'm not going to go into what kind of power each has, that gets complicated and requires a whole lot of wiki reading. But, basically think of yourself as the entity everyone goes to when there is a squabble.

Your other daughter, my sister, will be Greece. She's the big spender. We'll call her Rani (princess) in case I actually go public with the blog. So, Rani has a job working retail at the mall. Her revenue, what she earns, is spent improving the infrastructure (her closet) and providing social services such as movies and eating out. She's not making all that much, so she starts to borrow money from me and opens opens up a couple of credit lines. The cards have dad's name on them, which means he's holding Rani's debt.

This is where you, as the walking bank, comes into the picture. You'll give Rani a loan to pay of her credit cards, if she implements certain money management strategies, an austerity plan of sorts. These strategies shut down her new infrastructure projects and cut down, severely, on the social services. Of course, she needs to confer with her friends, determine if the clearing her debt is worth giving up the life she has built.

The big bailout is basically borrowing more money to pay off debt. The alternative is letting her and Greece default, which means a lot more people, the creditors will not get paid back, and will go down like the Titanic.

The problem is bigger than just having all this debt floating around. It's that a Western country is on the verge of defaulting. Countries have gone bankrupt before. But, most of them are third-world puny countries in Africa, of no consequence, sorry, where the big superpowers can swoop in and forgive debt. This is no longer case.

Now, we're waiting to see if Greece will pass their austerity plan. Greece's government will vote in a couple of days. The people are already angry and protesting because of all the cuts in social spending, and the tax increases. It doesn’t look good and will probably get worse.

To be continued.

Ok, any questions?

Related Link: http://economictimes.indiatimes.com/news/international-business/greek-debt-restructuring-could-eclipse-lehman-ecbs-stark/articleshow/9014744.cms