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Why Greece Might Very Well Say “Goodbye To All That”
Submitted by Karl Weber of KW-invest AG (pdf)
Has anybody noticed the changes in the macro picture?
If GDP statistics are anything to go by, this move in the right direction is noteworthy: in 2014, the Greek economy has shown signs of stabilising or even growing a tad. It looks as if the Greek GDP growth trend was even better than that for the Eurozone. Greece also appears no longer be lagging to the other Southern European nations.
Analysts, in general, expect the Greek economy to improve in the foreseeable future. Their estimates for 2014 had to be revised upwards (E +0.9%); and their forecasts allow for a bit of optimism (2015 E +1.7%, 2016 E +2.4%) even if we anticipate continued moderate deflation.
While industrial production is still shrinking, there are tangible indications of improvement: the steady increase in the capacity utilisation rate in manufacturing, moderate growth in domestic demand and better external trade data in goods and services.
And yet, these signs of "recovery" may easily be subject to the “too little, too late” argument in reference to the labour market. Since 2013, the unemployment rate in Greece has slightly fallen, as it did in Portugal and Spain (but not in Italy). However, at around 26%, this rate still marks a painful depression. The jobless rate for under 25-year olds is, now as before, dreadfully high (50%).
Euroland: youth unemployment (jobless rate for under 25-year olds) in Southern Europe + Ireland
Deflation is aggravating the economic plight; consumer prices are now down 2.5% from a year-ago. This is the worst picture in the eurozone.
Consequently, the market turned its back on Greek government bonds. Fears grew again that under these conditions the nation has no chance to produce sufficient growth and tax income to service the outstanding debt. (In stark contrast, yields on other Southern European government bonds kept falling rapidly.)
The Hellenic Republic bond I looked at six months ago (and decided not to buy), with a life until 2024 and a coupon of 2%, had a redemption yield of 4.0%. Today it shows a yield of 8% and a bid price of 59% (down from 83%)... Clearly, I would have incurred a marked loss, had I bought the "deflation is good for bonds" thesis.
The synopsis of all this: any betterment related to overall domestic demand is fenced by the huge debt burden and the resultant complete loss of manoeuvering room for fiscal policy.
To state again the patently obvious: Greece's government debt mountain looks now as before insurmountable.
In the current political negotiations between the Eurogroup and the new Greek government, the latter wants to deal with the heart of the problem and do away with this debt burden. Greece has obtained the critical mass of political clout by threatening to walk away from the monetary union.
It would be no easy taks for the Eurogroup to create a template for an orderly eurozone exit (for more than one country). Some form of asset destruction in the balance sheets of the large European banks would be inevitable. And for the export locomotive Germany, a stronger (!) euro would be costlier than a few billion Euros sent as bridge money to Greece.
There are two facts which put the new government in a credible position should it want to play the gambit of Grexit:
Firstly, there is a current account surplus, overall exports were higher than imports in 2014. This would give a newborn Drachma some support.
Secondly, Greek achieved a primary fiscal surplus (before interest cost on borrowings).
This is a favourable starting position for a nation who envisages a default and a start from scratch.
I assume that the overall costs (and risks) of Greece saying "Goodbye To All That" are considered too high by both the Eurogroup and the new Greek government. (In practice: a 5- day bank holiday, issuance of Drachmas, the conversion of euro assets into Drachmas and the announcement that 90% of outstanding debt will no longer be honoured.)
Eventually, there will be a compromise aimed primarily at gaining time. The Eurogroup will continue to allow the minimum financing of the Greek state ("extension") and say that they will need time to think how a "debt restructuring" could like like.
Mr Tsipras and Mr Varoufakis will be content having secured "bridge funds" for another 6-9 months while still in possession of the trump card "Grexit".
Finally, I would like to share a thought about Greek banks. Since 2011, their share prices have slumped 80%-99% (!). They are more like options now. An investment in Greece bank shares cannot be recommended to the faint-hearted. But for an investor who bets against the political wild card "Grexit", this could be a rewarding deal since valuations are very low (allowing for the blurred visibility).
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It sure would be nice to see someone pull away and say fuck you to the can kickers and deal with the issue now. I am so fucking sick of bubbles getting bigger and turning into more bubbles. Fuck the can kickers. Deal with the shit today, not tomorrow.
In the game of eurozone musical chairs, the music has stopped and Greece will be left standing. As Greece bids goodbye to the euro, the music starts again, this time with one less chair. Who will now be left standing? Maybe Ireland? The music is still playing.
It's ironic that Greece was the birthplace of Democracy.
World Zionist (WZ) power is “counterfeit money” power to enrich themselves and power gained from immoral pernicious usury, a plague on the human race that causes massive debt-slavery and starvation worldwide for all others, plus the power to tax all others and also the powers to evade all criticism, laws and agreements.
Why are we reliving the past. Some of my ancestors controlled and beat the fuck out of jews and anyone else who didn't agree with us, including your own ancestors. Wanna go back to the good ole days.
First Greece, then Italy or Spain, but hundreds of billions of Euros worth of unpayable debt will either be written off or monetized. The choice in the US was easy...monetize it all. I hope the German taxpayers don't get stuck with bailing out the German banks that will lose their ass on this, but something tells me they won't have a say in it.
As long as the can can be kicked, it will be kicked -- at least by the Greeks.
The flaw in most Grexit analyses is the assumption that the Germans are economically rational actors who will act on a cost/benefit assessment. I'm betting on Teutonic self-righteousness upsetting the applecart when it's least expected.
I don't see it as self-righteousness to cut off the booze to the alkie.
How does a drggie ever quit when unlimited drugs are available, for free?
I can only imagine how frustrating 'kicking the can' must be for someone with 'short' in their username. LMAO!
However........I do agree. Nothing more than a bunch of fuckheads trying to keep their overpaid worthless asses in a job.
Lobbies' puppet admits: “Troika insulted Greece’s dignity”
Greece has no dignity, she´s a broke debt slave, that´s why they cannot be insulted. And we all know JC Junker is a notorious liar.
Junker is just following tradition:
Junkers , derived from the noble title Junker, came to refer to, especially in popular usage, the members of the landed nobility in Prussia from the 19th century. They owned great estates that were maintained and worked by peasants with few rights.[
Having nothing left to lose and being cornered can be good in the bigger picture.
"We must, indeed, all hang together, or most assuredly we shall all hang separately."
-In the Continental Congress just before signing the Declaration of Independence, 1776. -Benjamin Franklin
Who amongst us has the balls to sign and put their name on a Declaration of Independence from TPTB today? It was like signing your own death sentence, there was no turning back.
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0
GDP data is pure fiction.
I am betting greece's new leaders do exactly that: default and tell EU hit the bricks jack and never come back. they just have that look,been fooled before but this time it's different.
Oh what the hell, BULLISH!!!
Oh what the hell, BULLISH!!!!
Okay folks, lets call paper what it really is,...well it's just that,....paper or digits on a computer screen.
Paper gold, paper silver, paper t-notes, paper stock/bonds, paper futures, paper money, paper everywhere!
All left brain abstracts, socially constructed to serve you better!..(irony).
My point: Paper/fiat money ain't nothing but a "place holder", a believe system everyone agrees on, for now!
Money created out of thin air" (i.e. a computer entry) by Govt's Central Banksters is/was never intended to be "paid back", since it's fantasized invention (money) never exisited in the first place,... pay it back to who?
The dirty little secret: Govt debt do not matter!
Hence, always plenty of "funds" for wars, black ops, corp tax brakes etc.
Debt is solely intended to keep you, me, countries, "in line", a control mechanism, a hammer!
Govt's and the mafia banksters want to keep it secret so that, you, I and everyone else continues to make payments (derived from your sweat and labor) to,....the banksters.
Can't wrap your head around it (yet) ?....for good reading;
John R Searle "The Construction of Social Reallity".
Yes Virginia, the black box is not black,...its painted bright orange!
https://www.youtube.com/results?search_query=ratm+wake+up+lyrics
Eurozone blinked first. That's why it extending funding to Greece.
The Eurozone politicians are terrified that Greece might actually walk away from their cosy club. Because if Grecce walked away, the precedent would have been set and the stage set for a potential Spanish/Portugese/Italian eurozone exit.
The tipping point of Greek debt has been reached.
Replacing old debt with new debt cannot work for Greece.
The Eurozone will blink again.
If the Eurozone had troops, they would already be amassing at the border, ready to preserve the Union.
The EU needs a full politican and fiscal union, which will provide for an general draft of unemployed young men into an EU Imperial Army.
Generally agree while Eurozone decisions in hands of current actors:
A. Merkel will pay anything to keep the WW2-fueled guilt dream of the United States of Europe alive;
B. Draghi will pay anything to keep the EUR-alive (otherwise, he has no job).
But:
Some of the new loan ideas require permission from some EU-parliaments.
The Netherlands doesn't have any WW2 guilt, and doesn't really care about the EUR (or the EU-anthems, flags, etc.)
They just want a free trade area.
I think they will refuse...
Watson
Are those unemployment figures as bogus as ours?
All govt data is pure bullshit. Anyone coming here with an article thinking we believe the tripe put out by governments obviously hasn't spent much time on ZH.
I think the first chart is BS as it is Greece sucking on bailout funds (austerity) that is the reason for the rise.
One of the big targets for issuing new credit cards are people that just come out of bankruptcy. Sure, their credit history sucks, but when they come out of bankruptcy many are debt free -- making them better risks than people with houses, car loans, student loans, etc
This is BS and whoever Karl Weber is should know better. The greek Gdp growth is smoke and mirrors from all the belt tightening and wage reductions they've rammed down everyone's throats. It's unsustainable. That's why Syriza won. They have to unwind this which means the gdp growth will go down
Great interview:
Dr. Paul Craig Roberts on Greece - Interview w/ Erin Ade, "Boom, Bust"
http://thenewsdoctors.com/?p=285655
>>Why Greece Might Very Well Say “Goodbye To All That”<<
*Yawn*
I still hope they just go away and chew Olives.
>Eventually, there will be a compromise aimed primarily at gaining time. The Eurogroup will continue to allow the minimum financing of the Greek state...
I found myself thinking along the same lines today... While the theatre is good, it is very unlikely that there will be a real Grexit - it would be worse for both sides. Seems a much more plausable solution would be to freeze their existing obligations and then extend some kind of "economic aid" or whatever they call it to Greece - basicallly to print some money and give it to Greece, and then some more. Why take the pain today when it could be postponed at least until tomorrow, right? This is the approach everyone is taking everywhere these days and will likely be taking for the foreseeable future while money still holds, so why make this particular problem different?
What Irishcyclist said.
Like a fish in a bucket - still flipping and squirming but its over.