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Nick Calavrias reveals how issues are resolved in his family and who can't understand why their bank is not proving to be very friendly

Nick Calavrias reveals how issues are resolved in his family and who can't understand why their bank is not proving to be very friendly

Nick Calavrias*

I borrowed a considerable amount of money from a number of banks to finance my family’s lifestyle which included, overseas holidays, buying a holiday home, a new boat and an aeroplane.

Over time, I convinced myself that I was entitled to a lifestyle beyond my income.

I also reasoned that as the banks wanted to lend me money, they must believe that I am a good credit risk.

As I had heaps of borrowed cash in my bank account, it was a lot easier to give in to demands from the family to increase their weekly living allowance rather than to cause disharmony at home.

Last year however we had a crisis when the banks decided that they wanted their money back.

As I was pondering my misfortune, a German bank came along in the nick of time and saved the day.  They did however insist that I reduce my family’s living expenses and sell assets to pay down debt over the next few years.

Instead of selling assets I decide that I should start a program of austerity. Although the family suffered a lot as I kept on reducing their incomes, I was unable to substantially reduce my debt.

Last week, the family held an election to choose the annual head of the household. My wife decided to run against me with the promise that if elected she would restore the family incomes and negotiate a 50% reduction in the family debt.

As expected my wife was elected as the new head of the house. She promptly advised the German bank that as their loan was to the previous administration the family was no longer bound by the terms of the loan. She did however have a mandate from the family to pay back half the loan.

The bank eventually conceded to these demands allowing the restoration of the old allowances to the family. Boy, did the family drink a lot of Ouzo and break heaps of plates to celebrate.

The lower debt has now put us in a positive cash position once again allowing us to apply for a new bank loan to cover renewed spending.

We have just received notification that the German bank no longer wants to do any business with us which the family finds hard to understand.

This however is not a problem as the Russian banks will.

-----------------------------

Nick Calavrias is the former chief executive of Steel & Tube Holdings and a former director of The New Zealand Initiative. He also held several leadership roles in New Zealand’s Greek community.

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42 Comments

Austerity is not going to be a goer anymore in Greece.  They have a new young charismatic PM with a great rapport with the BRICS and he will be the one calling the shots to EU and to Germany, despite the economic condition of Greece.  
He may be the one that the EU turns to for answers as capitalism suffers its dying throes and a new wave of socialism comes as the answer through Greece and Italy etc.  He can call up Putin and the Chinese military anytime he wants.  

How do you work that out then?  For austerity not to be an option, Greece needs to get a ton of money from somewhere else.  Who in their right mind is going to give Greece the billions and billions it needs?
 
You seriously think Putin or the Chinese are going to pony up cash without a horrible price all of it's own?  You think either one of them is going to war over Greece's bills?

Maybe if the Greeks had thier own central bank they could do some QE, as many countries with funding difficulties are doing. 

Geopolitics will overcome Greece's internal economic situation.  Forget about the debt. - that can be easily swept away by military threats from Russia,  'solutions' for Middle East peace, and  with a pro- Palestinian stance Alexis will have all the Arab States on his side.  
This conventional media spin over Greeces debt and how dire their situation is completely misguided.   Greece and their PM is in the dominant position.    

You may be right about geopolitics overshadowing the Greek situation but the military threat comes from NATO and Washington not Russia who has acted entirely defensively in the face of extreme provocation from Washington and its NATO servants.
Victoria Nuland , US Assistant Secretary of state, admitted funding the coup in Ukraine which appears to have started this crisis. They went on to sanction Russia with no evidence of any significant Russian agression, they demonised Russia over MH17 again with no evidence,( As they are actively suppressing the enquiry evidence now it is clear it was the Kiev Ukrainians that were responsible and in my opinion it was a false flag from the king of false flags) and they continue to provoke Russia at every oportunity.

I was more pointing out that Greece or the Greek PM is in a very strong situation through Tsiparis' willingness and relationship already with Putin, Russia, China & inviting Chinese Military, as well as courting the Pope with a pro Palestian peace plan.  So he has those links as power up his sleeve.   His own Communist and Atheist beliefs also place him completely outside any Western or historic sympathies with the judeoChristian heritage of Europe - so he is not going to submit to Germany or the EU current governance.  
We may see another rollout of Marxism,    In Europe of all places... 
 
 

There is an increasing chance that Greece will do a Cuba or Chile.  Nationalise everything, relabel a scrip currency for internal use, and offer payment "take it or leave it" in that.

It's no longer a case of who will give Greece their billions....  Anyone could do that.  YOU could actually do it (personally).   It's about a couple of smaller things (1) getting the interest (service) debt wiped, once the debt service cost equals zero it can sit on the books as an asset indefinately.  (2) getting Greece into a mode where it has more income than spending, which means no extra borrowing; without this no progress is going to be possible.  (3) and being wary of the loan sharks who are always looking for someone desperate willing to make a bad deal - chances are when it comes to bankruptcy time the legitmate banks and the loan sharks will divide the victim equally while everyone else gets to stand around gap mouthed as the Families take their due from those who won't pay their bills, all to worried about their own hides to stand up.

cb. Watch the Greek Army carefully - they are unlikely to stand by and allow communists to rule, given the country's history.

An elected left wing Govn and not communist.  Not sure a military Junta will be accepted by the greek ppl readily, but a risk never the less.
 

LOL trying to paint the Greeks as living a luxurious lifestyle.  The German bank should have stopped lending to the Greeks seven years ago.  The fact that they didn't implies the Germans do stand to gain from the Greeks, as do the Russians.  If the Greeks were to sell the family business as you suggest, how exactly does that make it easier to pay back the loans?  All they are left with is hungry mouths and no income, good luck with that.
 
It's just a matter of time until most of the developed world follows down the path of Greece to default, borrowing money to buy the groceries is not an arrangement with much of a future.  Japan is lucky enough to be able to borrow from its own bank, maybe the Greeks should try that, oh right the Germans own the Greeks banks. 

Which just goes to prove that the Greek government/people and economists have no mental grasp on what austerity is.   Which isn't surprising because if they did they wouldn't have ever got themselves in that problem in the first place.

(1) Where is your income coming from?

(2) That plane, boat, holiday home..... they're _not_ assets.  They're liabilities.

(3) austerity is about spending less, creating less liabilities, and increasing income.

(4) The banks and foreigners will keep lending so they can seize your assets - this happens to NZ too.  Give them your liabilities, you never part with assets.

(5) Your wife didn't stop you getting in difficulties before - what makes you think she knows the answers now.  In fact she has less experience and the bank sharks will just sense new blood.     Does she even know where your income comes from?

(6) Clearly if your wife is happy only paying back half the debt then the customers are only going bother to pay half of what they owe you.

(7) You neighbours all warned you about "party today, worry about the bill tomorrow" would have problems tomorrow.   You didn't care because that was tomorrows problem.  Well Tomorrow is here, parties over.  Furniture is trashed, the house is a mess, booze bottles and unemployed party mates are sprawled around wondering if there are any dregs in the bottles.  You partied away your future, your kids future, gambled away all your property with the banks - including a bunch of stuff your friends helped you with ... hell not even enough left to keep paying protection money to your favourite gang to keep neighbourhood thugs from moving in on you.  A once great family reduced through partying and big spending... Do you you even still have the gold watch?  (and I thought it was the Italians which were all show and "badda bing")

 What happens in Greece when the old families have wasted away all their money?

This is rather precious, this probably more accurately describes New Zealand's economic behaviour more than the Greeks. We're in a better position because we have our own Reserve Bank who issues our own currency and allows us to carry out our own monetary policy. Not to mention we have a former investment banker with contacts in high places who knows what concessions are required to placate our creditors.

household economics != national economics.

next unless $population =~ /^Becomes_educated/ ;

that's actually rubbish steven.  propogated by apologists.

nations borrow and must repay. households borrow and must pay.
some households can pull a chapter 11 or bankruptcy and do defaults or pay cents in the dollar to credits.
households can buy into good debt, or they can blow to much on consumer debt - just as nations can bond into economic expansion activities, or they can blow it on unneeded infrastructure and non returning projects.

The only difference is that in the household it's harder to BS due to scale and lack of vested interests.

I always thought Germany was the beneficiary of an artificially low euro, and helped her as an industrial nation to support a fantastic current account surplus.  The converse being true for Greece, whose exports like tourism dried up with the adoption of the euro.  With no free float currency economic imbalance build up in the form of debt - the chickens eventually come home to roost.   I'm sure that's far too simplistic an interpretation though.

This opinion piece just illustrates, the farcical nature of any comparison between the balance sheets of the government and individual household budgets. The author may be an authority on the operations of a large enterprise but the article evinces his complete ignorance about the workings of the modern banking system. He appears not to realise that NZ Government securities form the basis of private banking reserves which underpin their ability to issue credit to New Zealand households and businesses. Papers published by various central banks around the world and New Zealand's Banker's Association acknowledge the vast majority of the country's money supply is composed of private bank issued credit backed a specific proportion of NZ Government securities. You reduce government debt, you also reduce the credit available to the public. It will also remove a crucial mechanism for the Reserve Bank to manage monetary policy and a benchmark for the financial sector to set interest rates, and furthermore the money markets would lack a low risk, stable asset to invest in. The Bill Clinton's administration had to mull over the implications of just such a scenario when they thought they may run a budget surplus in the late 1990s.
 
 

Yes Indeed.  Thank goodness for Steve Keen who is blowing these simplistic macroeconomic ideas right out of the water with his Minsky software.   The reserve banking system as you describe is modeled here.  Why then, with all this information, are Bill English and John Key trying to run a surplus?  Why is a noble laureate economist like Paul Krugman still peddling the rediculous "loanable funds model", that somehow banks are simply intermediaries between borrowers and savers.  Why all this deliberate misinformation?

Well I learnt about the functioning of the banking system before I read Steve Keen. He has done much to get the issue into the wider public consciousness though.
 
I think its purely down to politics. One can't repel demands for increased investment in social services and benefits with the response that their isn't enough money, when people are aware that the money supply is practically infinite and that private banks create the majority of the money supply merely at the tap on a keyboard.
 
Its not so simple though. In New Zealand we have a massive trade deficit which  cumulatively totals $336 billion.
 
The cumulative effect of decades of current account deficits is $336 billion of foreign claims on the New Zealand economy, or $150 billion net of New Zealand assets abroad.
The $150 billion of net liabilities is equivalent to 65.3 per cent of GDP. It is the lowest, measured against the size of the economy, that measure has been for 13 years.
 
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1132...
 
Our government may be only notionally and politically limited in how much money it creates, but we are still at the mercy of our foreign creditors, to whom we owe 65% of our GDP for their generosity over the past several decades.
 
 

And the banks lent Nick Calavrias all the money he could spend on as much rubbish as he desired.
Even though the banks knew Nick Calavarias could never ever pay these loans back they kept lending to him.
Yes its ALL Nick calavias fault and the banks are completely blameless.
 

and much of the "rubbish" was german.
 

Well Soros is a well known Russia hater, so very interesting to hear he is funding a Russian trojan horse.  Though it does explain why Russia is such a threat to the EU, having the balls to go against the status quo is the threat, and Russia is leaing by example.  Putting national interest before the interests of the english speaking anglo elites. 

The heavily left wing Greek Govt's biggest problem is the Govts of the other weak european countries who all have left wing "anti-austerity, debt forgiveness" parties clamouring for power. None of them want the election of a left wing Govt in Greece to see any upside for the Greek population.

Well I think there is enough data out there to point to austerity doesnt work, so its hardly surprising that ppl want it stopped.
I think I said a while back I expect Govns to go left.
 

Whether thats true or not about austerity Steven, my point is correct, those other Govts will not want a left wing Govt to get back in and seemingly make life easy for its population because of it. And I agree, I have no doubt that the respective other populations will ultimately want to vote left wing Govts back into power in the southern european countries, that's who got them into crisis over the past 30yrs in the first place by not living within their means with financial boundaries, and they remember those "good times" - some never learn. I used to be amused hearing the likes of Helen Clark stating that her latest visit to the european socialist countries was to learn more about how they operate as they "knew how to balance the fiscal and social pressures"...yeah right was what I thought then, and history proved it, you just can never know how long it will take.
 
Either way Greece is shot, they should exit the euro, take the huge short-term pain that will come with it, and ultimately recovery. But it won't be back to the good old days until they vote themselves that Govt that will provide that, then the next crisis will be on the horizon some years further on. Meanwhile the Germans remain bewildered at what they see across their borders as a comfortable life rolls on for them - at least some learn, but I guess it took them two goes to do so themselves, the Greeks, a multitude and ongoing.

Austerity works fine enough....
What the Greek government has been doing, the "Anti-Austerity", won't work.

- -
On a similar note does anyone know of a metric or name of the metric for B2B business that serves each other in the economic world (eg steel makers & engineering firms, builders and building suppliers).  eg for more than 50% of their revenue.

Most of the time my observations rely on economic principle of B.....C.   The idea that business must eventually reach a consumer, where business and consumer both are taxed.  
But B2B trade that both serve each other, the trade would show as a deductable expense and be GST recoverable and not liable for direct interest cost.  There only real outgoing would be PAYE/INC.

There is a matrix you can use showing the intersection of c2c, b2c, b2b, g2b etc etc.  then show the proportions... 
Its the Ebusiness market segmentation model.  
Would link.  But I'm on the iPad!  

Just as a side remark, it was French banks who were the biggest creditors of Greece, not German banks. The reason why the German government (totally stupidly) bailed out Greece and thus the French banks was to save France itself from defaulting. The resaon for that was that the entire (also totally stupid) EU poiltical architecture would come unstuck, if France was to be shown for the incompetent state it is. 
 
In the end this cannot come to a good end. Reality will catch up with all those "elites" who stubbornly deny it to preserve their ill-gotten privilege.

I think its moot when Germany is owed 16billion v france 40billion, oh and Uk 10billion and the USA 6billion btw.  and that doesnt I think incl what greece owes the EU which is in turn German. If Greece defaults then with numbers this big its going to be ugly all over.
 
 

Which is why there was such a concern when the French wanted to have then considered for Euro membership, and many warnings and finger waiving was done and the time.

Does Mr Calvarias think it would be a good idea for his family to go into further unrepayable debt in order to keep funding the current loans from the German bank. His analogy completely ignores the fact that the whole situation is a ponzi scheme with the rank and file Greeks being the last ones in, you know the ones who can not find more suckers to provide funds.
The new Creek government at least attempted to deal with the situation honestly. They were met with a hardball approach from the EU institutions who have painted themselves into a corner as any easing towards Greece would result in demands for similar treatment from Spain Portugal etc.

and he has no idea on National economics.  Why do we get such people to opinion?

They were borrowing a lot of money to buy German Submarines, BMW cars and Fench Frigates.
http://www.theguardian.com/world/2012/apr/19/greece-military-spending-de...
 

Yep, the apologetics to swing world opinion for Greece against Germany have started.  The Greek PM has friends in high places globally, & financially backed by Soros, ... We will see the sentiment turning with stories placed by top influencers. 

George Soros must have been whispering into the ear of that bastion of the liberal establishment at the Daily Telegraph as far back as last October. He really must be a wizard to have predicted the triumph of Syriza so early.
 
"France may look like the sick of man of Europe, but Germany’s woes run deeper, rooted in mercantilist dogma, the glorification of saving for its own sake, and the corrosive psychology of ageing."

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/111503...

Try standing on a corner with $50,000 and shouting "Who wants to borrow some of this money. No credit checks necissary"
Within minutes the $50,000 will be all gone.
Now try and get those people to make their monthly payments.
You will be lucky if you get half of it back.
That is what banks were/are doing in Europe.
Banks should have been regulated years ago.
 

Is this a serious artical or a piss take ?
The guy is just laughing as it would appear people are just going to keep lending them money so they can continue a lifestyle they cannot afford and in the back of their mind they think they never need to ever repay the money anyway. The country then defaults so they offically never need to pay it then they think some other idiots going to lend them more money to carry on !!! are you serious ? Greece should be just let go from the EU and watch as it flounders as a warning to others who think they can carry on the champagne lifestyle on a beer budget.

Are you not aware this applies equally to New Zealand. We owe 65% of our GDP to the rest of the world, because of our trade balance has been negative for decades. One could certainly define that as living well beyond our means, don't ya think?

We are not even close to Greece in financial terms. I have been there, they make nothing but a bit of olive oil and rely heavily on tourism but they clearly still think they are as great as the once were. Off the top of my head they owe 165% of their GDP so there is simply no way back for them they are screwed and should have pulled their heads in years ago if they ever intended to get out of the mess.They are simply deffering a problem to some point in the future and displaying incredible arrogance by not cutting back.

They forced the private sector to cut back (reducing the GDP, and making local trade and development much harder).

Because they believe that government finances are different somehow from all other types of finance.  

And that by keeping up government spending, they were all going to get rich.  And those providing services to government did get rich.  But everyone else is poor.  Except the government employees, lots and lots of them.  But most of the private business and local production is in a state of poverty, so all those profits go across borders to non-Greek businesses.

 Nothing much the private sector can do about it, until they can remove the heavy tax burden to pay for all the government spending, and create their own scrip currency as markers for private trade.

It doesn't help that much of the government stuff is either: unprofitable and non-sustainable (and thus costs everyone more money than it returns, therefore requiring more borrowing or heavier taxes. "negative" ROI).  OR is consumable (eg reports.  they add no retained value to anyones future so never have a ROI). OR is infrastructure (eg gets used by anyone, the suppliers get rich whole project happens, but no-one but the government can afford to pay for it, because no-one else has any money after being taxed to pay for it - the Keynesian benefit of spending stimulus is limited only to those working on the project and is too localised to kickstart growth elsewhere)....