Citi Predicts Greek Hyperinflation Breaks Out In Two Years

Tyler Durden's picture

Earlier, we showed that according to Citigroup (among many) for Greece to have any hope of surviving, it needs a masive debt haircut: the bigger, the better, with Citi tossing out numbers as high as €130 billion. Still, even if Greece does get debt relief, as long as it remains in the Eurozone, its economy has nothing but hell to look forward to.

Here is how Citi previews the next few years:

From an economic and financial sector angle, the success or failure of a third programme will depend on i) the strength of a possible economic recovery in coming quarters, following an overhaul of the Greek banking system, and on ii) whether debt re-profiling discussions look likely and take place as envisaged. On the first item, the degree of fiscal austerity and outright reforms to be implemented in a short period of time is likely to result in a prolongation of economic recession in coming quarters. And we need to factor in the economic costs from the (very likely) persistence of stringent capital controls and the lack of liquidity in the economy. We recently updated our real GDP growth forecasts and now expect the Greek economy to contract by at least 2.4% YY in 2015 (compared with -0.2% YY projected in June), with the economy likely to remain in recession at least until Q1 2016. Such a poor performance in terms of economic activity would mean a higher risk that Greek economic and fiscal performance would undershoot its programme targets, which could likely challenge its membership in the Eurozone. In addition, debt re-profiling is likely to be deferred, conditional and tranched, and is unlikely to boost the government’s fiscal space for public spending increases or tax cuts. Failure by the Greek authorities to lift capital controls in a meaningful way and a further increase in unemployment (we forecast that the jobless rate will rise from 27% in 2015 to 29% in 2016) could also increase social tensions, in our view.

 

In the near term, the government probably will face a continued cash shortage, given the likelihood that bank liquidity will remain heavily restricted, that tax payments will be delayed (or not made), and that financing assistance will be kept to a minimum. As a result, we continue to see significant near term risks (before a third programme begins) that the government will have to slash spending further, accumulate further arrears and even – as a last resort – to issue scrip.

And while the one line item everyone traditionally looks for in every Greek economic forecast is what its debt will be now that reality is finally allowed to creep in, a number that Citi now expects to hit 238% by 2018 as highlighted in the row below...

... it was another number that caught our attention: Citi's estimate for Greek HICP (inflation) in 2017.

  • 22.5%

In other words, Citi predicts that by 2017 Greece will have hyperinflation even if it remains in the Eurozone.

But... but... the whole point of not reverting to Drachme was to have a "stable" currency and to avoid the country's collapse into a hyperinflationary abyss.

It appears that what Tsipras has done is gotten the worst of all possible worlds: not only will Greece somehow have an imploding economy (with 30% unemployment) and hyperinflation, but it will also remain forever a vassal state of Germany, which will be able to purchase trophy Greek assets at even cheaper prices once the entire economy finally locks up permanently some time in the next two years.

But at least it will have the Euro.

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Looney's picture

... But... but... the whole point of not reverting to Drachme was to have a "stable" currency and to avoid the country's collapse into a hyperinflationary abyss.

That’s how one small skidmark inside of Tsipras’ pants became one giant pile of shit for his country.

Looney

Hugh G Rection's picture

Godzilla predicts destruction in Tokyo

disabledvet's picture

Godzilla has a Billy Jack moment!

Oracle of Kypseli's picture

<<Citi predicts that hyperinflation will occur even if Greece stays in the Euro.>>>

The answer to that is what the a blond housewife told the state trooper when she was stopped and told that she was traveling at 80 miles per hour.

Her answer: "That's impossible I only left the house 20 min. ago."

EscapeKey's picture

huh? what am i missing? they predict 22%/yr - hyperinflation is generally considered 50% per month.

Tom Servo's picture

Wonder what magically happens in 2018?  LMAO...

 

daveO's picture

Looking at their estimates, what happens next year?New currency? Otherwise, more deflation within the Euro is the same and only path. 

J Jason Djfmam's picture

They fail to mention that inflation will be the same or worse everywhere else as well.

Kaervek's picture

They probably know there's more Euro QE incoming. This might cause delayed but massive inflation in the Eurozone.

Rising prices aren't necessarily bad if real wages also increase. Everything gets more expensive, but only some people also get paid more. So while Germany shrugs off some Euro inflation like it's nothing, guess who will get fucked over hardest by this whole scheme - the Greeks, and all their mediterranean friends.

Without their own currency they will remain slaves forever.

JustObserving's picture

So Greeks have 2 years to convert their money into gold and silver?  Today may be a good time to start,.

ChooChoo's picture

Let me tell you from experience... Today is already too late!  

disabledvet's picture

Yeah no shit. "Two years? Maybe two weeks. Two days even!"

Meanwhile in Energy Booming to Infinity USA "suddenly interest rates for actual cash go through the roof!"

Talk about valuable 18 wheelers!

Ain't talking trucks either....more like Boeing 747's!!!

crazytechnician's picture

gold is getting cheaper by the day for the last 5 years , much better to buy bitcoin , then cash out of bitcoin into gold when it's really as cheap as chips.

disabledvet's picture

Huge spike in dollar borrowing rates doesn't sound bad for gold.

This is CASH starved USA tho....not liquidity starved.

Should be interesting to see how Bank America traded here. Hmmm. "Ouzo, Colt 1911 or the Ginsh 2" indeed...

kchrisc's picture

The banksters' and Zion's shell game:

One shell is fiat-currency. Another shell is bitcoin--cryptocurrencies. And the pea under the last is really one's own wealth, stolen.

Now find the pea, while also avoiding losing one's wallet to the game operator's pickpockets.

Liberty is a demand. Tyranny is submission..

AGuy's picture

"much better to buy bitcoin , then cash out of bitcoin into gold when it's really as cheap as chips."

You sound like a stock broker of financial advicer: Buy high, sell low.

 By an over inflated paper investment (bitcoin) then sell it to buy gold later when its at much higher price.

1. China is close to a financial meltdown and is likely to depreciate its current to bailout its economy. The Chinese will start buying gold again as thier currency, stocks and real estate tank.

2. The EU is close to a financial meltdown. After Greeces comes Portual, Spain and Italy. Its likely the the EU will go Big QE to prevent a fast crash. Northern EU (Germany, Sweden) exit the EURO as the EU implodes and Club Med goes Poof!

Hard to say when gold price will start rising again, but its probably not in the distant future.

 

 

daveO's picture

$875/oz. is the 61.8% point of the whole move starting in 1999. When the FED raises rates, next week or September, we'll probably get there. It will then be at nearly a 50% discount to US debt. That's a steal.

GotGalt's picture

Except premiums will be around $300/oz at that price, so yeah. 

Hugh G Rection's picture

Don't forget copper... Copper-jacketed lead

disabledvet's picture

US Army uses caseless ammo now.

Lotta lead though...

youngman's picture

By then most companies that can..will have left..and all that will be left is goats and imports....but the USAs inflation will be that too..if not more so...

ted41776's picture

sounds like a misplaced decimal point in their calculations

Anasteus's picture

Citi's preview is full of lack of liquidity, overwhelming debt, increasing unemployment, slash of government spending and accumulation of further arrears, yet Citi concludes inflation in euro will be skyrocketing? Or is Citi referring to scrip IOU inflation within the eurozone?

A pretty confusing preview, or just another crap.

Or, has Citi silently counted unlimited printing of €10 bills?

jakesdad's picture

general govt debt (%gdp)

 

2014 177.4

2015 192.0

2016 211.9

2017 235.8

2018 238.0

2019 238.3

 

I believe that's what's known in physics as an "event horizon"...

The Delicate Genius's picture
The Delicate Genius (not verified) jakesdad Jul 21, 2015 2:27 PM

ah, but black holes really exist, while fiat - is fiction.

daveO's picture

Fiat, the other black hole. 

The Delicate Genius's picture
The Delicate Genius (not verified) Jul 21, 2015 2:24 PM

In 2 years Golden Dawn will kick the IMF/NATO out {which doesn't mean they'll *stay* kicked out}.

The debt is unpayable - the scheme to pay it anyway, absurd.

Those who make peaceful revolution impossible....

Hugh G Rection's picture

I'm a big fan of watching Kasidiaris slap this commie bitch in the mouth.

https://www.youtube.com/watch?v=Nte1UtRww_k

layman_please's picture

you do understand that golden dawn was literally a local mafia that somehow transformed into a political party?

 

oh... wait.

Blubaba's picture

Greece can not print the money to make inflation. I thing its a typo

DetectiveStern's picture

BKAUATWW
202
MIDLGB22
:20:213804/887
:21:494934/DEV
:32A:150527GBP1285,40
:53B:/151580xx
:58A:ABNANL2A

This is what money looks like now. Once that is received on another banks screen they now have that "money". You have to admire the sheer faith that people have to have to believe that that message means "money" has been received.

MsCreant's picture

Two weeks? Two months?

This will happen before two years.

[Tsipras:] "Don't Cry For Me Graecia"

 

Omega_Man's picture

Doesn't make sense. 

jimfcarroll's picture

I was about to type the exact same comment.

Fred Hayek's picture

Don't you just love getting these authoritative pronouncements from the Fredo Corleone of Too Big to Fail Banks?

Eddy Vluggen's picture

How does one have local hyperinflation?

In a union with free movement of goods and people?

MsCreant's picture

Is there free movement with capital controls?

Eddy Vluggen's picture

Still doesn't explain local hyperinflation, the Euro-area shares a single currency.

What will the cities on the border with Italy experience? Half-hyper-inflation?

Greeks will be the first to loose trust in the banks, and thus, the currency - because once bitten, twice shy.

WTFUD's picture

Shiti Citi predicts they'll need another Tax-Payer Bailout next week in order to keep making predictions.

Cold-Pragmatism's picture

Ok I can't let of this one.

Citigroup is this the same scandolous Citigroup that can't get anything right? Is this the same Citigroup that was in that scandal in Indonesia? And got kicke out from there!

Are we really going to listen to Citigroup, a financial house that knows nothing about financial matters?

Take note Citigroup, how the hell do you think Greece is going to cause inflation when they have no access to their own currency and to print money? Who is going to bid everything up and cause inflation, when nobody is buying anything?

Citigroup are just the Greek version of the financial world.

Citigroup should be read as Citimorons.

Oh brother!

MsCreant's picture

What happens when there is nothing to buy?

smacker's picture

"Citi's estimate for Greek HICP (inflation) in 2017."

Yeahbut Citi also predict that it falls to 12.9% and 10.4% in 2018 and 2019 respectively.

Fahque Imuhnutjahb's picture

I didn't see any mention of a two tiered currency arrangement, so I'm not sure if I understand how Greece, using the Euro, could experience hyperinflation.  That would be the equivalent of one of the 50 US states

experiencing its own hyperinflation, independent of the rest.  I would be curious to see Citi's projections for the other Euro members, to see if they forecast Greece to be an anomaly.  Possibly they are saying that prices

for Greece will be much higher, like California's housing and gas prices being higher than the rest of the country, but that is a different matter.

Latitude25's picture

So the logical conclusion of this article is that THE ENTIRE EU will be in hyperinflation.

youngman's picture

and some rating agency just upgraded Greece....its a better credit today...lol....buy up all those bonds they are about to sell....what a joke our markets have become...its called a bailout bond...Greece will use the money from the new bonds to pay interest on the old bonds....sounds good to me...I am in for 50 billion....make em 50 years too...

lasvegaspersona's picture

This is a twisted definition of hyperinflation (and a wrong one). It is currencies that hyperinflate not economies. The Euro is not likely to lose it's value even if it cost a lot to eat in Greece.....OK now I'll read the article and aplogize if they got something right.