The False Case For Another Greek Debt Writedown

Today is then the day for the questionable Greek referendum about whether other countries should give them money.

I’ve already written countless times about why the Greeks don’t have a right to other’s money, and why they would have been better off if they had done like Baltics, the Irish and to a lesser extent even Spanish and the Portuguese and focused on producing more instead, so i won’t elaborate on that again.

Instead I will focus on one commonly used argument for a second debt writedown for Greece, namely that they’re is no way that they’ll be able to repay it. Well, it is certainly true that there is no way that they’ll be able to reduce their national debt level to zero.

But here’s the thing, unlike debts of private individuals or households, central government debts are pretty much never repaid, and only rarely even reduced. In almost all countries, debt levels instead in fact just keeps increasing, at least in nominal terms and usually in real terms as well. Sometimes relative to the size of the economy too.

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