Greece

[clifp]

The following quote is excerpted from an excellent summary of the Greek situation in lay language by Prof. Anil Kashyap (originally referenced by ronin in Post 206 of this thread):
http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-on-the-Greek-Crisis_june29.pdf

Very good article. So it sounds like the IMF will get paid back many years from now (I wonder they'll get back both principal and interest) and the ECB will take a hit.

In some ways the Greeks are lucky, in the old day when countries defaulted, a fleet of ships (generally British, but sometimes American or French) would show up at the largest port and the money often seem to be found.

 

[kcowan]

In Italy, some businesses will shake their head if you try to use a card, especially on a small transaction, or say their terminal is broken, or just ask for cash...
I've gotten to asking restaurants before I sit down or order whether they will take credit cards. I think they get the hint that if they say no, I may go elsewhere or not order as much.

When we had finished our lunch seaside in Sitges, the waiter apologized that their CC machine was not working. I said I was in the business and wanted to talk to the manager. The next moment he showed up with the handheld machine and accepted our card!

But I agree that it is safer to ask before eating. Displaying the Visa/MC sign is no assurance of acceptance. But it does require them to process the charge manually if their system is broken. I always follow my card wherever it goes.

 

[NW-Bound]

Oh, I forgot about I-bonds. We have 30k of those which are paying a generous 0.0%. I could definitely afford the 0% penalty to convert those to stock if offered a great deal...

I just looked at my I-bonds last night, which I neglected for the last 3 months. A whole bunch of them is earning 0%. Darn! Since when did that happen?

So, I looked and found out that there was deflation the last 4 or 5 months of 2014. Must be due to fuel prices dropping.

Deflation continued in Jan 2015, but then inflation comes back and ran as high as 0.6% month-to-month or 7.2% annual in March 2015. In May 2015, it ran 0.5% month-to-month (6% annual) again.

Exciting time ahead?

 

[Alan]

.

 

[Lakewood90712]

.

You are a very bad man

 

[JoeWras]

You are a very bad man

After having just been on one of those busses, I have to say this is possibly the funniest thing I've seen in weeks!

Still, my condolences to the Greek people who were wonderful. Sorry for laughing at this cartoon.

 

[imoldernu]

At the risk of being off topic, I'll refer back to my post on bond rates:
http://www.early-retirement.org/forums/f52/greece-77802-2.html#post1609106

While the current discourse is about Greece, whatever happens in the neartime will be less important that what will happen in the longer time frame. those looking for a market correction will probably see it, but the underlying stability of the world markets depends on the value of bonds, and following this will likely project the opportunities, risks and failures of the world markets.

Bonds underlie the perception of strength on international markets. Both actions and perceptions by market makers establish the "agreed" safety factor.
Whether bond rates or the views of "experts" establish the strength of a nations finances. High rates, or percentages to GDP, or perceived future prospects establish the desirability factor. Current world-wide bond values are in excess of $100 Trillion, but this is but the tip of the iceberg, as bonds are the base for determining the strength of banks.

The second part of this enigma, is that those same bonds that supposedly establish stability.... are being used as collateral for leveraged investments in hedge funds and derivatives. This raises the at-risk stability factor by three to five times.

The risk perception between the major countries may well be the driving force for fixing bond rates, and within some short years, could be the driver of our economy and our personal financial status.

Assuming that this kind of a major change might take place, the time element would likely be measured in a few years, rather than weeks or months.

Just one opinion.

 

[Lakewood90712]

Somebody calculated that a 3-Euro donation from everybody in the European Union would pay off the Greek debt. Crowd-funding. The website keeps crashing from the overwhelming response.

https://www.indiegogo.com/projects/greek-bailout-fund#/story

Way off. The pop. of the EU is a little over 500 million and the Greek Debt is said to be approx 370 Billion. A wag would be about 600 euro per EU citizen. I bet the website was just a scam, and got shutdown.

 

[NW-Bound]

The site now says: €1,532,513 raised from 88,205 people in 5 days. That's €17 average per donor.

Their goal is to raised €1.6B, just for some interest on the 370B debt that was due a few days ago.

 

[Lakewood90712]

The Italian stock market index took a dump today, most of the other European markets stable.

Greece is full of antiquities. Sounds crass, but what would A billionaire or consortium pay for the Acropolis ?

 

[explanade]

I think that idea was raised years ago, to consign the famous tourist sites to some foreign private company, to run and skim off the top.

 

[redduck]

I think that idea was raised years ago, to consign the famous tourist sites to some foreign private company, to run and skim off the top.

That's thinking way too small. I'm tellin' ya (once again)--just sell the entire country to Disney.

 

[H2ODude]

I don't think we heard the word "sustainability" much until 10-15 years ago. I do feel sorry for the ordinary Greeks who have become accustomed to a system that is simply...not sustainable as far as I can tell. And yet their leadership tells them they can have a better deal with a no vote. I'm not sure from what I understand they can enjoy what they were accustomed to 4-5 years ago under any circumstance. It seems Tsipras is just counting on the rest of Europe to so fear contagion they'll budge. I hope it's solved in a way that Greece can eventually recover, but there will be a lot of pain. However, I find his tactics, if he's actually being tactical, to be offensive and dishonest what with the apparent switcheroos taking place.

As to who's at fault, the borrower or the lender, they're both guilty. You cannot create such a dire situation of unsustainable debt and not see it coming some day no matter what side you're on unless some huge unforeseen calamity occurs. And if it was the recession, surely a thinking person would have started corrective actions sooner. Maybe we should just send an invite to Greek leadership to join this forum.

We've always wanted to visit the Greek islands. Not so sure now.

 

[robnplunder]

The Italian stock market index took a dump today, most of the other European markets stable.

Greece is full of antiquities. Sounds crass, but what would A billionaire or consortium pay for the Acropolis ?

Not too far off. There was a talk of having Athens host every Olympic event. If it came true, they could have figured out a way to make money.

 

[Texas Proud]

The following quote is excerpted from an excellent summary of the Greek situation in lay language by Prof. Anil Kashyap (originally referenced by ronin in Post 206 of this thread):
http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-on-the-Greek-Crisis_june29.pdf

I finally read the attached.... and disagree with some of what it says...

First, Greece has had debt reduction... cannot find an authoritative source since when you Google it all recent articles pop up... but here is something that was in one of the articles...

• Greece has had some relief. Private sector bondholders lost 53 percent of face value in a 2012 restructuring, and remaining debts have been stretched out.

I have read that was over $100 billion, but do not have any source...


Also, they have gotten preferred interest rates for the remaining debt... I saw a interview with a former Greek official who said that part of the plan was to delay the debt payments even more and reduce the interest rate... thereby lowering the NPV of the debt substantially...





Second, Greece has not done what is needed to fix their problem... and their new gvmt has made things much worse...



Third, the IMF is saying that Greece will still need $67 billion in aid between now and the end of 2018.... so it still is not self sufficient even though they might have ran a current surplus excluding interest....


The last one if the kicker... why would anybody want to support Greece Kinda like throwing good money after bad...

 

[samclem]

The last one if the kicker... why would anybody want to support Greece Kinda like throwing good money after bad...

Anyone who does can do so on an individual level in a very straightforward way: Buy Greek bonds. The interest rate is great, you are demonstrating with your own money that you have faith in Tsipras and the whole basket that is the Greek political/economic system. Help them get some breathing room and get from under the thumb of their oppressors! And make a tidy sum--the interest rates are stupendous.

I'll buy mine later, I don't want to crowd out the true believers.

 

[explanade]

Only reason Germany might try to keep Greece in the Euro is the uncertainty of what would happen if a country exits.

Some believe that if one or more of the Southern European countries exit, the Euro would appreciate vs. other currencies, making German exports less competitive.

Certainly Germany exported a lot of products to these Southern European countries.

 

[clifp]

Anyone who does can do so on an individual level in a very straightforward way: Buy Greek bonds. The interest rate is great, you are demonstrating with your own money that you have faith in Tsipras and the whole basket that is the Greek political/economic system. Help them get some breathing room and get from under the thumb of their oppressors! And make a tidy sum--the interest rates are stupendous.

I'll buy mine later, I don't want to crowd out the true believers.

Yes the interest rate for a Greek bond is just under 15%. I wonder what that SWR is 50%/50% portfolio of stocks and Greek bonds. I bet it has got to be 8%+. In fact it is such a good deal, that I feel guilty getting such a high interest rate. Like Sam, I'll wait until later to buy my Greek bonds, because I couldn't live with myself getting rich off the labor of all those hardworking Greek government employees..

 

[ulrichw]

I finally read the attached.... and disagree with some of what it says...
[...]

• Greece has had some relief. Private sector bondholders lost 53 percent of face value in a 2012 restructuring, and remaining debts have been stretched out.

I have read that was over $100 billion, but do not have any source...

Here's a reference: Greece creditors agreed to historic deal - Mar. 9, 2012

This was part of the 2012 bailout - It sounds like the additional $130B of loans was conditioned on enough private sector debtholders agreeing to the 53.3% haircut.

Also, they have gotten preferred interest rates for the remaining debt... I saw a interview with a former Greek official who said that part of the plan was to delay the debt payments even more and reduce the interest rate... thereby lowering the NPV of the debt substantially...

Absolutely. They were given much more attractive terms.

Second, Greece has not done what is needed to fix their problem... and their new gvmt has made things much worse...

I think from what I read, they had been following the program until the new government was elected - and it was having at least some of the desired effects.

Ironically, their economy was showing signs of turning the corner last year (showing growth for the first time since 2010).

Unfortunately, implementation of the programs made the incumbent government sufficiently unpopular that the people voted for Syriza.

The results have been anything but positive.

Third, the IMF is saying that Greece will still need $67 billion in aid between now and the end of 2018.... so it still is not self sufficient even though they might have ran a current surplus excluding interest....

The last one if the kicker... why would anybody want to support Greece Kinda like throwing good money after bad...

Well yes - nobody's denying that they dug themselves in deep. But getting to the surplus excluding interest shows some light at the end of the tunnel, in my opinion.

I think the real issue has been the new Greek leadership, who at one point looked like they were shrewdly manipulating Euro politics, but whose erratic behavior has now revealed them to be in way over their heads.

The referendum will be fascinating. I think there's a real chance that the Eurozone will revive the old Plan "Z" and let Greece go its own way if the public vote "No."

If they vote "Yes", Syriza loses its mandate and some poor schmucks get to pick up the pieces. (It almost seems like Tsipras and Varoufakis are hoping for this scenario - this scenario has them coming out of this relatively clean)

 

[haha]

The last one if the kicker... why would anybody want to support Greece Kinda like throwing good money after bad...

If you look at a map of the Mediterranean, the Aegean, the Black Sea and Russia, Ukraine, the Balkans and Greece, geopolitics may trump narrow economic and "moral" considerations.

Ha

 

[clifp]

If you look at a map of the Mediterranean, the Aegean, the Black Sea and Russia, Ukraine, the Balkans and Greece, geopolitics may trump narrow economic and "moral" considerations.

Ha

That's a good point. Greece was one of the first cold war fights after WWII. Both sides poured considerable resource into the country to keep it from joining Nato/Warsaw Pact.

With Mr. Putin, craftily rebuilding the USSR, he make a play for Greece, and obviously the Greeks are smart enough to play along. I can easily see Mr. Putin circulating rumors that a Greece to leave NATO, and granting Russia a Naval Base like he has in Syria. Putin being smart chess player, he may do this just to weaken the EU and force them to bail out the Greeks rather than risk a cash strapped going along with the Russian offer.

 

[Meadbh]

That's a good point. Greece was one of the first cold war fights after WWII. Both sides poured considerable resource into the country to keep it from joining Nato/Warsaw Pact.

With Mr. Putin, craftily rebuilding the USSR, he make a play for Greece, and obviously the Greeks are smart enough to play along. I can easily see Mr. Putin circulating rumors that a Greece to leave NATO, and granting Russia a Naval Base like he has in Syria. Putin being smart chess player, he may do this just to weaken the EU and force them to bail out the Greeks rather than risk a cash strapped going along with the Russian offer.

Exactly.

 

[Texas Proud]

That's a good point. Greece was one of the first cold war fights after WWII. Both sides poured considerable resource into the country to keep it from joining Nato/Warsaw Pact.

With Mr. Putin, craftily rebuilding the USSR, he make a play for Greece, and obviously the Greeks are smart enough to play along. I can easily see Mr. Putin circulating rumors that a Greece to leave NATO, and granting Russia a Naval Base like he has in Syria. Putin being smart chess player, he may do this just to weaken the EU and force them to bail out the Greeks rather than risk a cash strapped going along with the Russian offer.

Russia is having their own problems right now... their income has dropped drastically and they are delaying or completely ending some of the spending programs...

I read recently that Putin is doing some kind of purge of the governors... that he is worried about loyalty and fixing the problem before it gets out of hand...

I would agree that helping Greece out would be an excellent long term move, but I do not think it would go over so well in Russia.... its not like there are a lot of Russians there and they have not been buying stuff from Russia (well, probably buying gas)....

 

[Texas Proud]

Here's a reference: Greece creditors agreed to historic deal - Mar. 9, 2012

This was part of the 2012 bailout - It sounds like the additional $130B of loans was conditioned on enough private sector debtholders agreeing to the 53.3% haircut.


Absolutely. They were given much more attractive terms.


I think from what I read, they had been following the program until the new government was elected - and it was having at least some of the desired effects.

Ironically, their economy was showing signs of turning the corner last year (showing growth for the first time since 2010).

Unfortunately, implementation of the programs made the incumbent government sufficiently unpopular that the people voted for Syriza.

The results have been anything but positive.



Well yes - nobody's denying that they dug themselves in deep. But getting to the surplus excluding interest shows some light at the end of the tunnel, in my opinion.

I think the real issue has been the new Greek leadership, who at one point looked like they were shrewdly manipulating Euro politics, but whose erratic behavior has now revealed them to be in way over their heads.

The referendum will be fascinating. I think there's a real chance that the Eurozone will revive the old Plan "Z" and let Greece go its own way if the public vote "No."

If they vote "Yes", Syriza loses its mandate and some poor schmucks get to pick up the pieces. (It almost seems like Tsipras and Varoufakis are hoping for this scenario - this scenario has them coming out of this relatively clean)

That was my point... the attached article said Greece had not had any debt reduction, but it has had a LOT....


And they did look like they were turning the corner until the new gvmt was elected... now it looks like they turned again and ran into a wall....

Even if they vote YES, the damage has been done and it will not be fixed soon... maybe put 10 or more extra years on their suffering...

If they vote NO, well, the damage has been done and it will not be fixed soon... maybe put 10 or more extra years on their suffering....


What I find funny is that they said Varoufakis has a PhD in game theory... but he really made some really bad calls the last 5 months... unless of course you think that his end game was to default all along and try and blame someone else for the results... that is still up in the air on who people are going to blame... I would think the people who support Greece will say they did a great job... and the rest of the world will blame them...

 

[JoeWras]

That's a good point. Greece was one of the first cold war fights after WWII. Both sides poured considerable resource into the country to keep it from joining Nato/Warsaw Pact.

With Mr. Putin, craftily rebuilding the USSR, he make a play for Greece, and obviously the Greeks are smart enough to play along. I can easily see Mr. Putin circulating rumors that a Greece to leave NATO, and granting Russia a Naval Base like he has in Syria. Putin being smart chess player, he may do this just to weaken the EU and force them to bail out the Greeks rather than risk a cash strapped going along with the Russian offer.

I got a sense that some Greeks also hope the USA would sweep in and help. As our tour director said many times, "Harry Truman is the only non-Greek who has a statue in Athens."

It is unlikely with Obama, and USA internal issues now, especially with the desire that that the USA let the EU take care of the EU. (Remember the debate during the Balkans wars.)

The Greeks are also still very distraught over what happened in Cyprus while they lost their eye on the ball during their military Junta in the early 70s. The Putin thing is possible since Syriza is in power. And there's a strong presence of the communists too. That said, when you talk to most Greeks, they do not trust anything from the Russians or Turks. (Although they love to sell furs the Russians. One of the weirdest things. Go to the eastern Greek islands, and you'll see fur shops with customers in 37C degree weather.)

So who knows?