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Comment by anovikov | Hacker News Reader

When i was a teenager, i frequently felt shocked how politicians managed to justify even obvious crimes, like: Soviets had a theory explaining why Berlin blockade of 1948-49 was good and justified. Now as i am getting old, i am less and less surprised by anything, and yet these Greek guys stand out.

I hope i will live enough to see sovereign debt being given only with a physical collateral: a piece of national territory. Otherwise, no way currency union, or any other supranational union except those backed by force (like USA) can survive. If EU leaders had balls, they will prevent what's happening with Greece now, but nobody wants it to do in their electoral cycle.

Debt must come with strict, enforceable and unavoidable means to collect it, otherwise both sides - lender and recipient - if they are sovereign nations - are making troubles for themselves and others.

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The problem isn't that Greece cannot repay the debt. The real problem is that the people of Greece were indebted by the politicians whom most of them didn't even vote for. And those who did vote for them, were not fully aware of the implications and consequences they and everyone else in Greece were going to face.

Basically, what happened is that one small group of people sold everyone else into debt bondage. They had no moral right whatsoever to do so. Now these people lost their savings and face a daunting prospect of shortages and hardships. Call it democracy, but really it's just a crime. Perhaps it's time to rethink what role should governments play in our lives, if any.

This is exactly the reason why strict and enforceable means to collect debt is required: countries are democratic and people can vote against paying the debt, thus relieving politicians who took those decisions of any responsibility. This is why there must be a legitimate force beyond the government control to collect back the money. Or modern economy becomes an illusion.

This is a bit melodramatic. Debt is a business agreement, if it's not secured then the interest rate will be higher. There are numerous ways for lenders to protect themselves against default, but default is always an option.

There's no moral failing, it's purely an economic decision from here forward. Greece will technically default, they'll renegotiate terms, they might leave the EZ, but in the end, life will go on and banks will gladly lend to them again.

As another HN thread notes: Piketty mentions that Germany got a lot of their own debt written off after WW2. Germany itself has shirked paying reparations to Greece for all the looting they did (See https://www.youtube.com/watch?v=jOKuNAdMIEI for example). Also "pieces of national territory as collateral" has not worked out very well during say WW1 reparations -- it just encourages far right politics.

Again, I am not saying Greece should not be more fiscally prudent. The Greek government needs to be more fiscally transparent, collect more tax and generally run itself better. However clearly the austerity medication has not worked and (as the IMF itself recognizes). At some point the EU has to decide if punishing Greece's youth (who will not get decent pensions or social benefits anyway) is an appropriate response to overspending by their parents and grandparents.

Greek youth will be punished much more heavily if the country leaves the EU than if part of their territory or other assets are taken to pay the debt. Greece is a basket case: it has never paid for itself in its sovereign history and will probably never do. But being EU citizens, young Greeks can leave the country to work elsewhere. Being forced out of EU, they will find themselves in a poor country which is bound to remain poor, and with no easy way out, like say Albanians.

All lending to a sovereign is inherently unsecured. When you lend money to someone you demand to be paid interest because there is a risk you won't get repaid. Based on the risk of not being repaid, you charge an appropriate interest rate. What you propose only ends in war.

This is why i think a country should not lend the money to a country a war with which it can't reasonably expect to win so easily that no war is possible: it will yield to demands.

Demanding interest: it worked when Greece was selling their debt on the free market. I have no problem with that, whoever buys their bonds accepts the risks, and the rate is market driven, caveat emptor rule applies. But right now we are speaking of money given essentially for free, on conditions much more favorable than any market rate Greece can expect to get (this is why they are asking for money, otherwise they will just offer more bonds). So you are not right here: money given on below-market conditions may, and should, require ways to collect it back.

Debt comes with risk and reward: you give some money, get some interest, and maybe the principal back. The amount of interest depends on the risk. Usually nothing happens, and you get everything back, but sometimes you don't. That's business.

If you want some "strict, enforceable and unavoidable means to collect it", you are not talking about debt as we know it.

There is no business with a profit margin and 0 risk. Well, there is actually: the ones the private lenders made with Greece, before unloading their financial instruments onto the European governments

Land is private property in most countries, so IMHO your suggestion doesn't really make sense. Or are you trying to say the voters should personally take financial responsibility for the country?

I find it really interesting how people immediately start making moral judgements (it would only be fair if they repay it, they stole someone's money and ran off with it etc.) of the side that borrowed the money when it's on country level.

But when it's a company borrowing money and not being able to repay it - hey, that's just business for ya. The lender should have known better.

Well, but if a company refuses to repay its debt, this is called a bankruptcy isn't it? In U.S. it is either chapter 7 or 11 and means anything from takeover/sell of its assets or outright liquidation. At least in any more or less democratic countries, a company cannot just fail to pay its debt with no consequences.

In case of a bankruptcy, only stakeholders of the company suffer: management team simply gets fired, employees either get another job or work for the new owner if assets are sold. Same here: i am not suggesting making private citizens responsible for the national debt directly, just the government, which should either cede some part of its territory, or gets dissolved outright.

I am speaking about national sovereignty over land, not ownership rights. Of course, private owners of parcels of land will retain them, except paying property taxes to a different state and being bound by different laws (probably getting residence permits in a new country, too, to enable access to their property). This is annexation, not foreclosure-like sale.

"Land is private property in most countries,"

And yet, in most countries the biggest land owner is... the state.

... and borders can change (Louisiana, US Virgin Islands) and land can be long-term leased (Hong Kong).

Predatory lenders would have a ball then.

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