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Citi Predicts Greek Hyperinflation Breaks Out In Two Years
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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... 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
Godzilla predicts destruction in Tokyo
Godzilla has a Billy Jack moment!
<<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."
huh? what am i missing? they predict 22%/yr - hyperinflation is generally considered 50% per month.
Wonder what magically happens in 2018? LMAO...
Looking at their estimates, what happens next year?New currency? Otherwise, more deflation within the Euro is the same and only path.
They fail to mention that inflation will be the same or worse everywhere else as well.
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.
So Greeks have 2 years to convert their money into gold and silver? Today may be a good time to start,.
Let me tell you from experience... Today is already too late!
Please tell ?
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!!!
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.
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...
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..
"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.
$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.
Except premiums will be around $300/oz at that price, so yeah.
You mean bitcoin ..
Don't forget copper... Copper-jacketed lead
US Army uses caseless ammo now.
Lotta lead though...
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...
You can always play pretend and extend with mom, worked so far.
sounds like a misplaced decimal point in their calculations
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?
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"...
ah, but black holes really exist, while fiat - is fiction.
Fiat, the other black hole.
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....
I'm a big fan of watching Kasidiaris slap this commie bitch in the mouth.
https://www.youtube.com/watch?v=Nte1UtRww_k
dp
you do understand that golden dawn was literally a local mafia that somehow transformed into a political party?
oh... wait.
Greece can not print the money to make inflation. I thing its a typo
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.
Two weeks? Two months?
This will happen before two years.
[Tsipras:] "Don't Cry For Me Graecia"
Doesn't make sense.
I was about to type the exact same comment.
beat you to it! har har!
Don't you just love getting these authoritative pronouncements from the Fredo Corleone of Too Big to Fail Banks?
How does one have local hyperinflation?
In a union with free movement of goods and people?
Is there free movement with capital controls?
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.
Shiti Citi predicts they'll need another Tax-Payer Bailout next week in order to keep making predictions.
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!
What happens when there is nothing to buy?
"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.
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.
So the logical conclusion of this article is that THE ENTIRE EU will be in hyperinflation.
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...
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.
Didn't read the article. Don't need to because the title is so damn stupid. If Greece stays in the Euro and has a hyper inflation then by extension the entire eurozone has hyper inflation because that is where the money is printed.
Now on the other hand if Greece goes to the Drachma then yes they could have hpper inflation that is restricted to their borders. You would think that a money printer like Citi would have some idea of how this shit works.
This hyperinflation assumption is a BS, Greece can have a hyperinflation only if:
- euro all around the block hyperinflate
- Greece revert to drachmas
If euro remain in "normal" and Greece dont switch to drachmas, there is no way how can they have a hyperinflation. Cost of products for certain amount of euros is same and only differentiate based on size of taxes and housing cost per country. So for example if I want to buy food products from Spain and pay in euros, they will sell it for same price to me as they would to germans or anyone else as they dont care where they get the same amount of same euros from.
While Greece can get a price hikes based on increased taxes(if they do that), thats not hyperinflation and not even close to such hikes. Besides, Greece tax avoidance is among highest in eurozone. Thus this hyperinflation assumption have no ground nor logic and is a total BS.
Speak English, hippie!
Hyperinflation is normally a loss of faith in the currency. Everyone drops it, to buy ANYTHING to trade later. I get that, the currency would have to fail.
But what if there is nothing to buy? No one will do business there? I know this is inflation, not hyperinflation, but won't it look like hyperinflation if prices go up sharply, suddenly?
If there's nothing to buy, then whatever currency you are using is, for all practical purposes, worthless as a currency. Unless it has value above and beyond the 'face value', it's compost.
agree, MsC, maybe "hyperinflation" is not the right word- effectively, it seems whatever real goods the greeks want, they will have to pay an arm and a leg (via euros), cuz goods will become scarce as the economy begins to fail... a scenario that could look like hyperinflation.
Is this Reinhardt/Rogoff 90% debt/gdp rehypothicated? It went from 80 to 90, but now it seems dissapeared.
The person who intepreted the article does not understand 'hyperinflation'. 22.5% annual inflation is NOT hyperinflation...just ain't so...
Pretend Greece chooses the following strategy:
They allow a properly managed Medium of Exchange (MOE) that guarantees zero inflation over time and space. This MOE is created by traders making trading promises and paying an interest load actuarially equal to each trader's propensity to default.
Greece then creates a classically managed MOE with a nominal 4% or larger inflation leak used by the government to pay employees, dependents, and contractors. It also uses this to purchase Euros to repay international debt obligations. This MOE is replenished by taxes, fees, tariffs, inflation, and counterfeiting (the classical revenue stream for governments).
They allow exchange in Euros (which is just another classically managed MOE with a typical 4% inflation leak) managed and manipulated by a collection of governments used for intergovernmental trade.
Start the simulation (mind experiment) and predict what will happen.
My prediction is this:
The government workers, dependents, and contractors will meet their short term needs by exchanging among themselves with Greek currency as an item of simple barter. To trade for things outside of government, they will exchange their discounted government MOE for properly managed MOE predominantly used in the retail marketplace.
The international traders will meet their trading needs by exchanging Euros. Responsible traders will be able to exchange properly managed MOE they create for improperly managed Euros at a discount. All traders will prefer the properly managed MOE to any improperly managed MOE for trades over all but the shortest time periods, due to its guaranteed zero inflation characteristic.
Responsible traders will meet their needs by getting their trading promises certified by the properly managed MOE and delivering on those trading promises. Short term needs would be things like payrolls and retail floor plans. Long term needs would be plant and equipment for their going concerns. Repayment would be from normal trade with their customers. Most would require that government traders visit their local scalper to exchange the classically managed government MOE with which they are paid, for properly managed MOE before allowing a trade. More sophisticated traders will set up their own scalping services to deal with the improperly managed government MOE (i.e. deal in both currencies with prices in the properly managed MOE changed only due to supply and demand changes of the objects sold ... not to changes in the MOE value itself).
All will likely meet their long term needs by getting their trading promises certified in the properly managed MOE, or buying, at a premium, the properly managed MOE (with a guaranteed 0% inflation leak) from speculators in classically managed MOEs. This is because this will obviously be the most highly valued MOE over all time and space. With guaranteed zero inflation it is a perfect store of value in the long term.
New government debt will be denominated in something besides the properly managed MOE. The properly managed MOE will recognize this government debtor for the deadbeat trader they are and impose 100% interest load, thus shunning them from this market. They will not be able to get their trading promises certified because of their irresponsible trading history (i.e. 100% propensity to default ... rollovers are defaults). Government MOE will used to pay government taxes. Since it is so redily counterfeited by the government itself, it will be easily obtained in exchange for properly managed MOE, properly managed MOE being guaranteed to have higher exchange value due to its zero inflation.
Local, regional, national, and international governments can continue to play their shell games. Responsible traders using the properly managed MOE can keep a marketplace going, comfortable in the knowledge it is free from manipulation by deadbeat traders and criminal banking farming operations (i.e. business cycles).
All is well in paradise (unless you are a government where may the best cheater win).
Leave the Eurozone or leave the ECB? You can be in the Eurozone and not use the Euro. Whether or not they stay in the Eurozone has nothing to do with their currency. I don't see how you could get hyperinflation in Greece if they are still in the Euro. Euro isn't going to hyperinflate because of Greece. Something isn't right about this article. Namsayin'???
Greece meets none of the traditional hyperinflation mechanisms. They are buried within the Euro system.
Virtually all hyperinflations in history were due to exchange rate pressures. Zimbabwe being a notable exception.
The exchange rate comes under pressure for various reasons, but mostly it is due to external debts.
In order to pay the external debts, the country tries to exchange some of its currency for the "foreign currency"
Private Banking "shorting" bear raiders sniff the wind, and see that there is pressure. They then tip it over using techniques, which mean loaning even more of the nations currency into existence. This creates a flood of new "inflation" bank credit. At the end of the day, the shorting bear raiders then take their winnings now that the curency was driven down in value. Yet, it was their very action that drove the currency down. Soros is a good example of a raider; which effectively is a theft mechanism.
Almost always it is a sovereign country with its own money, and that country is under exchance rate pressure. Also, that sovereign country will not have enough FX reserves.
Country being attacked likely will not have enough FX reserves, especially if it is disallowed from trading goods in export surplus.
Greece is in the Euro system, it does not have its own money.
Even with a Scrip system running in parallel to Euro, the Euro will not come under exchange rate pressure with itself.
Growing Euro denominated debts (held external to Greece) are trying to recall Euro money...that is deflation scenario. Euro's located in Greece want to capital flight to France and Gemany, where the bonds are held.
Greek people will lose trust in their banks, and tend to trade with Cash on hand.
In the meantime, foreign debt instruments are still demanding recall of the Euro denominated cash. Capital controls might staunch some of the bleeding, but overall, the Euro will drain from local Greek money supply.
The hyperinflation scenario is preposterous unless a new source of Euro's is found. Even more so, the new source of Euro's has to be disallowed from finding its bond.
Tell the felons to shut up.
Cost of living will increase because of higher taxes(already happening)
Cost of goods will increase with the same rate as EU.
Cost of services/labour will plummet.
Greek people get screwed.
As states borrow money to balance budgets.