Greece

[MichaelB]

Tangled webs...
With all of the emphasis on Greece and the European Union, it's easy to forget that world markets are affected by concurrent moves that don't immediately seem to be related.
China is in a somewhat unstable condition, as the Chinese Government has been doing the equivalent of quantitative easing, allowing investors low interest rates to borrow in leverage buying of Asian stocks, which now look to be overvalued. As the government attempts to slow the damage with more easing, the results may be uncertain. Chinese brokerage funds are joining to avoid a 1929 type crash. The Chinese market has doubled in the past year. Shanghai market PE ratios are super high, and therein lies the worry.

Even worse, the commodity futures trading pits didn't open this morning in Chicago or New York.

Not to change the subject, but it's not all about Greece

Not to be contrary or anything, but the title of this thread says it is all about Greece.

 

[Meadbh]

What we don't know is how much the market has built in expectations of a default and Greek exit. Since the bonds are close to 16% now, maybe this is mostly discounted?

The real danger is that more special treatment for Greece will spark "me too" demands from other EU countries, leading to breakup of the Eurozone.

 

[ERD50]

So what was the real advantage of a common currency, against the well-known risks?

For business travelers and tourists visiting more than one country, a single money exchange sure was convenient. But was there more to it? Computers easily handle all these currency valuations now, I wouldn't think that would be a problem for business. I would even think hedging a currency for future contract payments would be pretty easy, and not that costly.

-ERD50

 

[Totoro]

So what was the real advantage of a common currency, against the well-known risks?

For business travelers and tourists visiting more than one country, a single money exchange sure was convenient. But was there more to it? Computers easily handle all these currency valuations now, I wouldn't think that would be a problem for business. I would even think hedging a currency for future contract payments would be pretty easy, and not that costly.

-ERD50

Middle men and transaction costs still add up and create admin hassles.

Large businesses can handle it easier (even set up their own banks), for smaller companies it is more painful.

It also hampers creating a big common market. For example, the EU is creating a maximum call rate for roaming (it is now extortionist), as well as putting a stop to silly credit card transaction costs. Regulating that in one currency is alot easier than in 15.

 

[Chuckanut]

I suspect that the markets realize that the Greek economy is really no big deal.

Now if a country like Italy were to get into the position that Greece is in today, that would be a different matter.

 

[Texas Proud]

So debt should be forgiven if a country starts a war, but if it can't pay back the debt due to a corrupt government, then the citizens should suffer indefinitely? That's certainly an interesting take.

The country that was in a war was defeated... a new gvmt was formed... and BTW, they were occupied for many years.... are you suggesting that we go and occupy Greece so we can forgive their debt?

So far, nothing has changed in Greece... they are continuing to do the same thing that got them into the problem.... not at the same level, but still the same thing... and I think that the gvmt is still corrupt...

 

[clifp]

A number of years ago I read academic paper on countries defaulting either like Greece is or via hyperinflation. In the last several hundred years that list of countries that have never defaulted is actually pretty small (IRRC about 1/3 of the 200 odd countries). The non defaulters is the US, most of Scandinavian, most commonwealth countries, but not England. and some of the countries which gained independence after WWII.

There is a fair number of serial defaulters, Russia, Argentina, and Greece are on that list. I guess this is unique case because its the first Eurozone country to default, but defaulting on sovereign debt isn't exactly unprecedented, so I am surprised at the attention this has gotten.

 

[JoeWras]

I remember when I was still in elementary school, they were saying some of the famous ruins were deteriorating due to heavy pollution in Athens.

But I would have thought they used EU and other funds to restore all the big sites?

Pollution is much better, partly because the cars and fuel are up to EU standards, which have gotten much better. Particularly the sulfur emissions.

The ruins rapidly deteriorated due to pollution, and other indiscretions. (Google "Greek Marbles" for the long story.) Yes they are being restored by all kinds of funding sources.

I think the post you referred to which said "run down" was not the ruins sites, but rather the modern city. Athens has both good and bad like many big cities. The one thing that smacks you in your face is the graffiti. However, Greek graffiti is different than gang graffiti. It has a long history, almost a proud history, but adds to the "run down" feel of the place.

 

[Nemo2]

The Greek Government:

Syriza as a unitary party was formed through the merger of the following parties (in alphabetical order in English):[71]
Active Citizens (Ενεργοί Πολίτες): democratic socialism, patriotism
Anticapitalist Political Group (ΑΠΟ): communism, Trotskyism, anti-capitalism
Citizens' Association of Riga (Velestinli): patriotism, internationalism, democracy, ecology, social justice[72]
Coalition of Left, of Movements and Ecology (Synaspismós or SYN): democratic socialism,[73] eco-socialism,[5] eurocommunism,[74] environmentalism,[73] feminism[73]
Communist Organization of Greece (KOE): maoism, communism
Communist Platform of Syriza: Greek section of the International Marxist Tendency, communism, Trotskyism[75]
Democratic Social Movement (DIKKI): left-wing nationalism, socialism,[76] Euroscepticism[77]
Ecosocialists of Greece: eco-socialism, green politics
Internationalist Workers' Left (DEA): revolutionary socialism, communism, Trotskyism
Movement for the United in Action Left (KEDA): communism, Marxism–Leninism
New Fighter: democratic socialism, social democracy
Radical Left Group Roza: Luxemburgism, feminism
Radicals (Ριζοσπάστες): democratic socialism, patriotism
Red (Κόκκινο): communism, Trotskyism
Renewing Communist Ecological Left (AKOA): democratic socialism, Eurocommunism, green politics
Union of the Democratic Centre (EDIK): radicalism, social liberalism, centrism
Unitary Movement: democratic socialism, social democracy
Also a number of independent leftist activists

https://en.wikipedia.org/wiki/Syriza#Former_constituent_parties

All of which should address a number of questions.

 

[samclem]

As far as I know (which is, unfortunately, also not that much), the IMF debt is senior to virtually all other debts. They will be repaid. It's the ECB (European Central Bank) that will have to write off losses for the most part.

The IMF is indeed funded with US money as well, and has a heavy US representation.

Yes, the IMF has much more US presence/input than the other "troika" organizations.

It should be noted that the IMF has shown no particular special skill in discerning what will happen in Greece or in providing solutions that work. But, someone in the IMF (many suspect US delegates as being the source) decided they should release a report that is sympathetic to forgiving at least a portion of the Greek debt. This report is conveniently made public just days before the the Greek populace votes on the issue, and get selectively quoted (without the vinegar, just the sugar) to great effect by the "Vote No" proponents.

I'll bet the Europeans are very thankful for this US "assistance." Especially as the IMF loans, in a senior position, apparently won't even be subject to the write-down that the IMF report talks about. "No need to thank us. Quite a mess you have here. Good luck."

 

[tulak]

A number of years ago I read academic paper on countries defaulting either like Greece is or via hyperinflation. In the last several hundred years that list of countries that have never defaulted is actually pretty small (IRRC about 1/3 of the 200 odd countries). The non defaulters is the US, most of Scandinavian, most commonwealth countries, but not England. and some of the countries which gained independence after WWII.

There is a fair number of serial defaulters, Russia, Argentina, and Greece are on that list. I guess this is unique case because its the first Eurozone country to default, but defaulting on sovereign debt isn't exactly unprecedented, so I am surprised at the attention this has gotten.

Maybe it's a slow news day?

U.S. markets didn't seem to care much. I think the financial soap opera aspect of Greece is what makes this most interesting. If they were still using Drachmas, not many would care.

You bring up an good point though: countries defaulting on their debt is very common. Even Greece has done it a few times in the past.

The interesting aspect is a country defaulting on their debt that share the same currency with other countries. I don't think that's ever been done before.

 

[Texas Proud]

Very interesting article... says what I think much better than I could...

Greece Hits the Self-Destruct Button - Bloomberg View

 

[MooreBonds]

Even worse, the commodity futures trading pits didn't open this morning in Chicago or New York.

Get a few slick, stock photo images from the web, and you could work your half-true statement into becoming the next [-]scamming snake-oil salesman[/-] doomsday forecaster to [-]sell gullible rubes your newsletter and gold coins[/-] tell people to buy gold.

 

[Totoro]

Very interesting article... says what I think much better than I could...

Greece Hits the Self-Destruct Button - Bloomberg View

Thanks for posting that one!

The Exit camp is quickly gaining traction in media over here, it's about to become the base case vs. last resort.

To what extent it is negotiation strategy, who knows. But it isn't bluff anymore.

 

[MichaelB]

Get a few slick, stock photo images from the web, and you could work your half-true statement into becoming the next [-]scamming snake-oil salesman[/-] doomsday forecaster to [-]sell gullible rubes your newsletter and gold coins[/-] tell people to buy gold.

Not half true - totally true. Even worse, they remain closed for the second consecutive day.

 

[Running_Man]

I will throw out a counter argument...

All it shows is that they did not vet Greece properly before they allowed them into the Euro zone.... everybody has agreed that they cooked the books (even the Greeks).... so, without cooked books they would not be in right now....


SO, booting them out of the euro is only fixing the mistake they made in the first place.... not that the euro is flawed.....

the Euro is flawed precisely because they establish rules and then ignore them if it is too painful to utilize them, down the road this always causes problems, however those problems need to be handled by someone other than the person who kicked the can down the road, which is why that is always the preferred method of handling problems by major financial players utilizes kicking skills disguised as removing the problem.

 

[Running_Man]

A number of years ago I read academic paper on countries defaulting either like Greece is or via hyperinflation. In the last several hundred years that list of countries that have never defaulted is actually pretty small (IRRC about 1/3 of the 200 odd countries). The non defaulters is the US, most of Scandinavian, most commonwealth countries, but not England. and some of the countries which gained independence after WWII.

There is a fair number of serial defaulters, Russia, Argentina, and Greece are on that list. I guess this is unique case because its the first Eurozone country to default, but defaulting on sovereign debt isn't exactly unprecedented, so I am surprised at the attention this has gotten.

I think in the past Greece would have defaulted 150 billion or so Euros ago so the impact has been allowed to grow more than in the past. Since this heavily involves Germany another serial defaulter I think there is fear of repercussions to the German economy, which is the heart of the Euro. The German population is not kind in general to leaders they see as being failures.

 

[TimSF]

Whoever here called the Greek affair a 'soap opera' is on the mark. After two days of build-up to today's Euro meetings at which Tsipras is to present a final reform plan to save Greece, he and his finance minister show up with nothing in writing, just a verbal rehash, summary of last week's proposal. But, tomorrow 'maybe' there will be a written proposal. Geesh ...

 

[samclem]

After two days of build-up to today's Euro meetings at which Tsipras is to present a final reform plan to save Greece, he and his finance minister show up with nothing in writing, just a verbal rehash, summary of last week's proposal. But, tomorrow 'maybe' there will be a written proposal. Geesh ...

How do you say "maῆana" in Greek?

From the WSJ today:

. . .For most of the past several years, Greece has received considerably more cash than it has paid out. Although you would never know it from the world press, the so-called austerity that Greece has experienced since 2010 is almost entirely a result of having to rein in budget deficits that were wildly out of control.

. . . If the Greek government really wanted to come clean, it would explain that even if all the country’s debt were wiped out tomorrow, policy makers would still have to find a way for Greece to escape the current epic recession while living within the country’s means. Those who claim that the “troika” (the European Commission, the European Central Bank and the International Monetary Fund) forced monstrous spending cuts on Greece don’t seem to realize that spending cuts would have been even deeper without the over €80 billion ($88 billion) in net new loans and aid that Greece received from 2010 to 2013, equal roughly to 10% of its GDP.

 

[springnr]

Whoever here called the Greek affair a 'soap opera' is on the mark. After two days of build-up to today's Euro meetings at which Tsipras is to present a final reform plan to save Greece, he and his finance minister show up with nothing in writing, just a verbal rehash, summary of last week's proposal. But, tomorrow 'maybe' there will be a written proposal. Geesh ...

Starting to remind me of Somali pirates taking a ship hostage for ransom.

 

[Nemo2]

Starting to remind me of Somali pirates taking a ship hostage for ransom.

Geez, we're scheduled for a port stop in Corfu on November 03.......now we have to worry about being forced to sit on the dockside eating olives and drinking ouzo & retsina until they're paid off?

 

[springnr]

Geez, we're scheduled for a port stop in Corfu on November 03.......now we have to worry about being forced to sit on the dockside eating olives and drinking ouzo & retsina until they're paid off?

Yep, Greece holding possible Euro unraveling and their geolocation impact to world politics hostage for debt forgiveness....
If still in-progress or not, dockside eating olives and drinking ouzo & retsina appears to be in your future.

 

[Brat]

I think Greece should get off the Euro bandwagon. Culturally they are not fiscally self disciplined, let their own currency float based on their political decisions.

Watching that chaos will give other larger but problematic governments and their citizens pause.

Leaving the Euro should not require leaving the EU.

 

[Nemo2]

Does the Greek government even have the wherewithal to print & distribute new Drachmas? (Presuming that they've long since destroyed all the previously obsolete ones.)

We can't print drachmas, says Greece's finance minister

With speculation swirling that Greece might be forced out of the euro and have to print its own money after a weekend referendum, its finance minister on Thursday said the country no longer had the presses to make drachmas.

"We don't have the capacity," Yanis Varoufakis told Australian public radio network ABC.

In 2000, the year before Greece joined the eurozone, "one of the things we had to do was get rid of all our printing presses" as part of the bloc's assertion that "this monetary union is irreversible," he said.

"We smashed the printing presses -- we have no printing presses," Varoufakis said.

 

[NW-Bound]

Geez, we're scheduled for a port stop in Corfu on November 03.......now we have to worry about being forced to sit on the dockside eating olives and drinking ouzo & retsina until they're paid off?

If you can get something more than olives, like some protein, to go with the drinks, it will lessen the ordeal. Like this grilled fish whose photo I linked off the Web.