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Stephen King's Perspectives On The Greek Tiger
While the idea of a futuristic tale of the resurgence of Greece and how Germany shot itself in the foot could well be the work of the horror-writer, HSBC's Chief Economist Stephen King opines on what could well be with a moral for those who want Athens out of the Euro. "The idea that Greece can leave and that the rest of the eurozone will then live happily ever after – a view that is quickly becoming the conventional wisdom – is surely wrong. Departure might eventually be an answer to Greece's difficulties but it only asks questions of everybody else." And the fantastic journey King lays out is rooted in a sad reality that he sums up thusly: "Germany's gamble had failed. In the attempt to punish Greece, it had ended up with an impossible choice: creating a fiscal union or huge currency upheaval. Berlin had taken aim at Greece but shot itself in the foot."
HSBC: How the Greek tiger learnt to roar again...
...and Germany shot itself in the foot. A futuristic fable with a moral for those who want Athens out of the euro.
At the end of 2015 the Greek Government could look back with some satisfaction at its recent achievements. The outside world, once so despairing of Athens, now regarded Greece as the "Hellenic tiger". Its stock market, which had fallen by 90 per cent from its 2007 peak through to the early months of 2013, was roaring back. Interest rates, once in the financial stratosphere, were now much lower than in Italy or Spain. And while growth wasn't quite in the double-digit range, Greece was giving China and India a run for their money.
Having severed its links with Europe in response to what had become known as "the calamity," Greece's future now seemed assured, reflecting its growing connections with the world's more dynamic economies. Even as its former European partners walked away, Greece had found new sources of financial support, thanks to the deep pockets of the Russians – who were planning to build a giant gas terminal in Thessalonika at the end of a new pipeline – and the Chinese.
Even during the calamity, China had shown its enthusiasm for all things Greek: the operation of Piraeus's container terminals had been transferred to China's COSCO Pacific Ltd and the port had established itself as the hub for Chinese goods going to southeast Europe, the Levant and North Africa (much to Turkey's irritation). Meanwhile, Greece had cornered the rapidly growing Chinese market for olive oil, undercutting its southern European rivals thanks to a much more competitive exchange rate.
Athens' decision to leave the eurozone – and the EU – had been made with a heavy heart. The Greek people wanted to be part of Europe but had increasingly felt abandoned in an economic wilderness. Admittedly, some of their politicians had been economical with the truth and their wealthiest citizens had found ways of escaping the taxman's clutches but, after three years of devastation, with income down 25 per cent from the peak, it was time to move on.
At first the introduction of the "new drachma" looked like a disaster: those Greeks sufficiently fleet of financial foot removed all their money from the Greek banking system in an attempt to prevent their euros being swapped into devalued drachmas. In response, the new currency halved in value against the euro. The Greek economy shrank by a further 8 per cent as the banking crisis went from bad to worse. Yet with the introduction of capital and exchange controls – mimicking an approach seen in the fast-growing emerging world – Greece could soon insulate itself from the ups and downs of international capital markets. Within a handful of months, domestic economic collapse had been halted.
Inflation threatened, rapidly rising import prices brought big domestic wage demands, but in the absence of support from its former European partners the Greek Government persuaded its people that austerity and wage restraint were necessary for a vital one-off improvement in competitiveness. Within months there were signs of an export recovery. The economy was slowly being rebalanced.
But that was only the beginning. After the exchange rate collapse, and the final debt swap, Greece had rapidly established itself as an extraordinarily attractive destination for foreign investors looking to get a foothold in a dynamic part of the world, particularly after reforms stemming from the Arab Spring. As the investment came in, opposition from domestic Greek unions collapsed: admittedly, workplace practices had to adjust but no one could afford to ignore the sudden and welcome reduction in unemployment thanks to an influx of foreign money.
Europe looked upon this rebirth with a mixture of envy and alarm – politicians had repeatedly warned Greece about the costs of leaving the eurozone and the EU, yet it seemed as if it had emerged smelling of roses.
After Greece's success, all hell had broken loose in the eurozone's financial markets. Germany was still demanding austerity from the likes of Spain and Italy, even as their economies faced a fourth year of contraction. As investors priced in the possibility of a Spanish or Italian departure from the euro, borrowing costs for the southern European nations rose dramatically. The contrast between Greek success and Spanish and Italian failure was obvious, so much so that the Spanish and Italians began to demand their own version of the Greek escape.
The Germans, meanwhile, began to wonder what had gone so badly wrong. They thought that austerity would fix all ills. They believed the fiscally recalcitrant could be brought to heel. The Bundesbank had vehemently opposed any programmes offering support to the weaker members of the euro, fearing fiscal backsliding. Yet, with the prospect of the euro disintegrating, the risk for Germany was obvious – a huge increase in the value of its currency on the foreign exchanges sufficient to wipe out vast swathes of German industry.
Angela Merkel, now the grande dame of European politics, recognised the danger. Forcing Greece out of the euro had, it turned out, been a mistake. The costs to Greece had been outweighed by the benefits. Parts of the eurozone, however, were still mired in recession. Ms Merkel faced a choice: push for a fiscal union that would lock in for ever the transfer payments that, in Greece's case, she had so strenuously opposed; or head for a euro exit, with all that entailed for German industry.
Germany's gamble had failed. In the attempt to punish Greece, it had ended up with an impossible choice: creating a fiscal union or huge currency upheaval. Berlin had taken aim at Greece but shot itself in the foot.
This fantasy is hardly an orthodox view. There is no particular reason why the events described will happen (although the bit about COSCO taking control of container ports in Piraeus is true). But the idea that Greece can leave and that the rest of the eurozone will then live happily ever after – a view that is quickly becoming the conventional wisdom – is surely wrong. Departure might eventually be an answer to Greece's difficulties but it only asks questions of everybody else.
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In the attempt to punish Greece, it had ended up with an impossible choice: creating a fiscal union or huge currency upheaval.
EPIC FAIL!
Solution....Ctrl+P.
Fail...FOR WHOM?
It's like the Star Wars fomula for evil from Family Guy: "Something something something Dark Side; something something something Complete!"
But here it's for government BS, and it's as old as dust.
A common currency is difficult enough in a country with common values, but a common currency amongst competing countries, whose main goal is to out trickfuck their neighbor, is an impossibility.
Greece run, run as fast as you can....
You had too much fun on April Fool's. Couldn't resist eh?
Interesting story but one point should be made here: It was the unpayable debt that caused the crisis. Not the austerity. The problem is ALWAYS making promises you cannot keep. Now, had the ECB gone full blown money printing and required no austerity, the Euro would have collapsed under hyper inflation. The reason we can confidently state this is because the PIIGS would never have stopped borrowing more than they could produce. There was nothing Germany could ever do once the PIIGS borrowed and spent too much, it was simply a matter of "how" would the EU fail.
Huh. And here I thought the story was actually that of Iceland, with the UK and EZ changed to Germany and the EZ....
What Iceland did was in Iceland's best interest. What Greece did was in the interest of the European banks, not their people. No disagreement there. Allowing Greece to leave via a repudiation of debt and austerity would be in the interest of the Greek's. However, it would come at the price of the collapse of the European banking system. This includes all the banks and the pensions of public and private savers funded by sovereign debt, stocks, and the promises of European insurance companies (backed [again] by sovereign debt, corporate debt, and stocks). We are talking about a deflationary wipeout that cannot be disguised via inflation. A politically impossible position for German politicians to back. I am saying in real terms all of these things are unavoidable now that promises were made, promises which can never be fulfilled. It is simply a question of "how" the markdowns from the malinvestments occur. Allow Greece and peripherals to leave and watch a banking collapse unfold or force them to remain and print the entire EZ into an inflationary spiral where financial assets retain their nominal values but lose all purchasing power.
"Truckin', like the doodah man
once told me you got to play your hand.
Sometimes, the cards ain't worth a dime
if you don't lay em down!" -- Grateful Dead, "Truckin'"
40% of German production is for export.
When one country has net exports, other countries must have excess imports and create new debt equal to the value of the net imports.
Years of excess German exports require Import Nations at build years of mounting debt.
Wage suppression policies of Germany, China and others have created large global imbalances that resulted in our housing bubble and many of the world's current problems.
Paper money does not regulate or balance trade.
Nations that constantly run a negative trade balance will never have the funds with which to repay debts. For a nation such as Greece, that finds itself in this condition, German talk of 'austerity' is a self serving sham.
No problem has or will be solved because, as of now, no one is talking about the real problems.
Build a scenario. - Constantly refine it. - Watch technical indicators for conformation.
We may be at an inflection point. Europe may be coming to our door.
Paper money makes sustaining trade imbalances for longer a little easier ... but it is of course by no means impossible under a gold standard. We ran into the problem under a gold standard first, which led Keynes to propose the obvious solution ... punish countries running trade imbalances.
TYLER why didn't you write anything about this?
http://www.youtube.com/watch?v=oG72L05i9a0
It's bad on the streets
There is absolutely no depth to which the fiat money peddlers will not sink.
One tragic death from this selfish, brutal and if I can say petty fiat game is one too many.
This needs to end.
They are currently stuck in Save-your-ass mode. Not a pretty sight, but its going to get uglier.
You mean side from breaking the news on this side of the Atlantic and being the first to post the contents of the suicide note?
Man Commits Suicide In Broad Daylight On Athens' Syntagma Square To Protest "Occupation Government"Syntagma Square Suicide Note Ends With Call To Young Greek People To "Hang The Traitors"
She's just into lite reading ... so she missed it while otherwise engrossed in PuffHost.
I call Jinx .. I_dog
his/hers nic says it all " jus_lite_reading"
Why? We're all on the same team... or at the very least supposed to be... I forgot about Tyler breaking that news... that was all. If anything, I plan to leave "Tyler" in my will!!
would you like a group hug ?
I must apologize Tyler! I'm going crazy!
I DID SEE THAT!!
MUCH LOVE!! KEEP UP THE GOOD WORK!!
Just missed the article by -that- much!
LOL sheep ...
Maybe you Tyler should concentrate on US News because you obviously know nothing about Europe. Or your knowledge is based on visiting Disneyland in Paris, France.
tim73
So enlighten us. What is going on in Europe ? My Munchen girlfriend has gone suspiciously quiet and my wife doesn't get postcards from Gliwice anymore.
Why is the financial world still turning? How long can you fuck a chicken before all you've got left is blood and feathers?
Blood and feathers is the objective! Quite a few months to go yet.
Ask Bernanke. Apparently you tire out, long before you wear out the chicken.
What is happening in Greece, Italy, Spain, Portugal, and (insert Euro Country name here) is just a portent of what is to come. The writing has been on the wall for 99 years. It is the Federal Reserve and their masters, the banks(pronounced: Corportate whore slave traders), that run the show and will bring about the end of our economic system.
Here is what I am doing to prepare for the mathematically enevitable collapse of the dollar:
http://strayingfromtheflock.org/2012/04/05/an-open-letter-to-my-friends/
This is what I am doing. What steps are you taking to protect your family?
Silver is great, but it's also very important if not more so to get as self sustaining as possible. Planting berry plants, fruit trees, large gardens, learn to can etc.
Read my full post at:
www.strayingfromtheflock.org
I believe that a hearty home garden and a solid local network are just as vital to our survival as physical silver. Check it out.
50 cents a day was a survivable wage in the US in 1900. A days wages bought about 5/6 oz of Ag in 1900. The 1/10th oz per day may be a little low. Still, a 100 oz Ag bar represents at least a year of unskilled labor.
Initial estimates for a Spanish bailout were at 500 Bil Euros, but it will likely be closer to 800 Bil Euros.
The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit
See:
http://1.usa.gov/HqrkOA
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
* These countries enjoy lecturing Spain, but as you see have ALL borrowed heavily from the US FED.
Notice how Germany's Deutsche Bank owes $354 Bil USD to the FED, yet maintains on record, they have never borrowed or been in a State bailout.
Start shorting Deutsche Bank, they are teetering on insolvency, changed out their entire Board in an emergency move just weeks ago, and are facing multiple lawsuits totalling 100's of Bil USD, the FED will step in and take over, gaining control of the EU's largest bank and economy (Germany) in one move.
Well done, boys.
Funny this doesn't get much airtime.
Thanks to my Public Policy Professor / Mentor, Dr. V for story details.
Before I make any deep comments, let me point out that Greek yogurt is selling like crazy in the USofLove and that gyro sales are not to be underestimated.
But when disaster strikes the world needs a goat. Technology evolves, people don't really.
So at least for now let 'em demonize Greece.
But when they run out of tradtional scape goats and fall guys (dems and doz) then the in-fighting will begin.
Because the only outcome possible in a biflationary world is feudalism. Bring out yer dead.
Greek yogurt, made in New Jersey. Perhaps the Greeks could dig up an old "patent" somewhere and sue for royalties.
Indeed, I buy a lot of yogurt an non of it is from Greece.
New Berlin NY hopefully.
Yea I hear Italian sausage is selling too...so Italy's economy should be booming.
Payback for the Orthodox Church taken out on 9/11. And we will find out who really did that btw.
I was under the impression that we already know.
Too rosy. The "calamity" will be pretty damn bad.
Its still the best choice long term for Greece, but it will be a very tough few years of "death and suffering."
Correct. The analogy of ripping off the band-aid quickly instead of slowly resonates with me. Will certainly hurt more right now than if you didn't touch it at all, but it will all be over with much more quickly. If you slowly peel it off one arm-hair at a time, it still could hurt like hell, but it will certainly take A LOOOOT longer...
How about ripping off the band-aid and cleaning the wound before financial gangrene sets in.
"Yet, with the prospect of the euro disintegrating, the risk for Germany was obvious – a huge increase in the value of its currency on the foreign exchanges sufficient to wipe out vast swathes of German industry"
Our good buddy Ben could help them out of this situation. He has just the right tool.
"He has just the right tool."
He prefers to call it an array of tools.
So, if Japan and China can keep their currenciies stomped on, what would stop Germany from doing the same. After all, our boy Timmay shills out, " China not currency manipulator."
What a nice fantasy. If only it could be true. And if only we could get a real President that cares about the people, not his own re-election. If only!!!!
Everything is now just based upon pure fantasy, and what people are guessing happens next in the CGI movie....fact is no one has any clue really.
Dear Greece,
When you're ready to properly handle your shit, drop us a line.
-Iceland
Another knife in the back of "multicultural diversity."
Greek Declaration of German Independence..... http://pamria.com/?p=770
Over the 50 years preceding the introduction of the Euro, the Drachma had depreciated by approximately 95% against the Deutsche Mark. Integrating monetary policy alone, without integrating fiscal policy, cannot be expected to have completely altered this relationship.
While a Greek exit from the Euro will certainly not be without repurcussions, it is hardly "obvious" that it is the greater of two evils. Ripping the band-aid off to let the wound breathe sometimes allows healing to occur faster than slathering it in balms and ointments and layering under bandages. If anything, the Greek protests seem to indicate they want more control over their economic destiny and do not want to submit to imposed austerity measures (albeit blithely oblivious to the reality of capital markets enforced austerity that must result as a consequence). And gauging German sentiment appears to suggest a clear desire to avoid continually subsidizing profligate neighbors.
If something cannot possibly persist, it will not persist. Hence, I await Drachma 5.0 and whatever the consequences may be.
Nothing but a sales pitch for capital controls:
Yet with the introduction of capital and exchange controls – mimicking an approach seen in the fast-growing emerging world – Greece could soon insulate itself from the ups and downs of international capital markets.
Malek,
Your point is well taken and I do not agree with capital control in any way.
However, I wonder if the author is "storytelling" what he thinks would happen vs. showing approval for it. Argentina went this route, I would predict so would the Greeks. If the Greeks do not implement severe austerity WITH the replacement of the Euro (and repudiation of the debt), then the currency would be under heavy selling pressure. The currency would be (rightfully) shunned by foreigners if foreigners believed the Greeks would spend and not collect taxes (as they are known to struggle with this concept).
Hi Bankster!
I read your previous post about the Greek solution being exclusively in the banks interests.
I'm from Argentina and was these days discussing online with an economist that used to be finance minister before our 2001 debt repudiation. He compared the Greek way vs what Argentina did saying that a disorderly default like our country's was the wrong thing to do whereas the Greek agreement was the best thing for that country. I said what you mention, about it being in the banks interest and that Argenting could do it because we are not relevant in the international financial markets while Greece is tied to the Euro, and that Greece is only smoke and mirrors compared to USA, and so on...
He defended the greek solution, obviously because he has contacts with the IMF etc etc... but also said that the debt writedowns were recognized by the banks and because of that, the value of those banks has sunk. Also that CDS are to pay for the haircut... Is that true? I say it's bullshit but have no exact information appart from what I get on this greeeaaaaat site.
Thanks for mentioning us... just wanted to emphasize that before our default, banks had already sold our debt to common people like Italian retirees... who could have seen the repudiation coming??
Kind regards,
Betty
Hi Betty,
The problem in Greece is that too much has been promised to those who saved via pensions (clearly these pensions malinvested by investing in Greek bonds and stocks). The unfunded and malinvestments of the pensions and all forms of discretionary spending by the government were based upon unrealistic assumptions. This is simply to say that the people of Greece had temporarily experienced more prosperity than the fruits of their labors and investments would provide (we know this to be true because they have defaulted- there is no question of this). The temporary prosperity was accomplished by taking on debt (two types: direct government debt and the indirect debt of future government obligations).
In Argentina the "disorderly" default meant that it became immediately obvious who the winners and losers were. Those who got their savings out of the country and into physical things like gold were winners, and those who trusted the banks and the government were losers. In the case of Greece, they have temporarily stopped a banking crisis from evolving by backstopping the Greek banks (and thereby the government bonds and pensions). However, the total debt is still unsustainable and the new bonds issued are trading for pennies on the dollar (this means Greece will re default soon according to the free market-- probably within a few short years). Now clearly this is only discussing the concept of default in nominal terms vs default in real terms. You, being from Argentina, I am quite sure understand the concept of defaulting through inflation? Example: I (as a bank) say you cant have your hundred pesos today, but you can have it in 2 years. After 2 years I (as the bank) give you your hundred pesos, but it only buys half as many goods as it did 2 years prior. This is the other way the major governments of the world are defaulting in real terms (but not in nominal terms). This defaulting through inflation is the classic move of all central banks and the main discussion point of Zero Hedge.
I can't say whether this solution is better than Argentina's. Only time will tell (though I suspect this will only prolong and increase the size of the problem) because Greece is not yet solvent in real terms and so the pain has not yet been realized fully. Once (if) Greece exits the Euro Zone we will be able to decide if bailouts are better than defaults ( I suspect not).
The CDS will pay.
Any and everyone should be able to clearly see that the debts will not be paid in "real terms" in all the developed economies of the world, including the US, Japan, and the EZ. The whole point of this site is to expose the central banks for pulling the wool over everyones eyes, that these debts are sustainable and payable by their tax bases. They are not, and that is why you see massive inflation in all paper currencies against physical stores of value such as gold. I would suggest that if the Greeks look like they are leaving the EZ, you would see a major banking crisis develop. I would suggest that many things such as currency controls and massive currency devaluation that happened in Argentina, would also happen in Greece if they went back to the Drachma (however this will be necessary and in the long run better than the current solution of 50% youth unemployment and political unrest, its hard to imagine it could be economically worse than it already is).
I hope I covered your questions, its been a long day and I'm tired.
My friend Bankster... I am honoured with your detailed and clear reply, and sincerely thank you for taking the time to write it.
I agree with all your points and also with your doubts about the effectiveness of kicking the can in Greece instead of recognizing that the country is broke once and for all.
The problem I see is that no politician will take responsibility for anything so inflation and devaluation is the only way as you say that the problem will be "solved", if one can refer to this as solution. To recognize the problem and act accordingly would be suicidal for politicians, financial institutions and to the whole welfare state system that reigns since the twentieth century.
I say it only increases the pain for the peoples of the western economies and brings more poverty year after year. This same story has been repeated time and again for the last 60 years in my country as you probably already know... and the people get used to it, that's the sad part of the story.
Regarding the pensions issue, allow me to add that we too used to have the AFJP system, meaning a private pension system set up in 1994. We all had accounts in one AFJP or another.
When the default occured and the repudiated debt was exchanged for new obligations, these pension funds were allowed to maintain their balances at historical value, I mean, not obliged to mark-to-market the real value of the new bonds which obviously were of less value.
The system was so new that few pensioners ended up having their pensions payed by these institutions... and we will never know what may have occured because in 2008 those pension funds were by law absorbed by the public sector and dissappeared. So we all ended up being ripped off our savings and obviously have no hope of receiving any honourable pension in 20 or 30 years time...
That is the reason why the pension issue was not that strong at the time of our default, but if it had occured now maybe we would also have the same problems as Greece and the rest of Europe.
Not that we are any better... with the minimum pension being under the poverty line, the pensioneers need assistance from their families to survive... but we solve everything just saying that inflation does not exist in this country! Lies lies lies repeated time and again, that's the key to mass control...
Best regards to you and many thanks for your attention to this humble citizen of the once great nation Argentina.
Same move brought on by the Euro.
Half the money, was intended to buy twice as much.
If my 10 D-Marks, was now 5 Euros, THEN......my tax should have gone from 19% VAT down to 9.5% VAT, ONLY THEN would my money have twice the purchasing power, as promised and explained, ad nauseam, by the State.
Didn't work that way though, as the VAT tax rate % stayed at the same rate, thereby doubling overnight. 19% VAT under Euro currency, is equivilent to 38% VAT under D-Mark price.
Which savant came up with this trickery?
"After the exchange rate collapse, and the final debt swap, Greece had rapidly established itself as an extraordinarily attractive destination for foreign investors looking to get a foothold in a dynamic part of the world, particularly after reforms stemming from the Arab Spring. "
That is the dumbest comment of the month. Iceland did exactly that and it certainly is NOT "extraordinarily" attractive. Why don't you stupid yanks/brits concentrate on your own problems for change?! Euro will collapse 2006, no..2007, no latest 2008, no...maybe 2010, no 2012 max, no...2015...fuck off.
Yeah Im sure... enjoying your $10 Euros/gallon of gas yet? Fuck off I've got work to do.
Yeah, the price of oil is so important to you fat white whales with mouse brains. Buy a bicycle or is that too challenging?
LOL. You should do a little study on supply chain. You do eat, take a shit and wear clothes don't you? Price of gas goes up - everything goes up. People starve because they can't afford to buy food at inlated prices.
Same people also get upset and start stock piling ammunition in anticipation of further inflation from increased dollars creating higher fuel prices.
Not good.
tim73
So, when you Xenophobic Europeans start your next war, why don't you fight it yourselves. And tell your pal Bernanke to stop offering swap lines everytime you can't cash your checks.
How many wars have Americans started or were part of since 1945... somebody said about 25 wars. So who is being Xenophobic or war mongering here?! Yes, there were Yugoslavia wars but those were mostly due to Soviet Union collapsing. With bad luck USSR might just have gone out with guns blazing...we were lucky.
When USA collapses, maybe by 2020 already, you guys will be having multiple civil wars all over the place.
Try reading about the order of events in the Argentinian debt and currency crisis. Stephen King is simply creating a storyline based upon a situation of profound similarity in Argentina not many years ago. the fact that you reject what you do not understand, is of zero surprise to me.
Yeah, such a nice story that Argentina! Inflation running currently at 25 percent but anybody who dares to publish that, gets fined big time. Google it up "Argentina economists fined".
I know quite a bit about the situation and that is why I brought it to your attention. What I am saying to you is that you are misunderstanding a) the author's points b) the causes and effects of a debt/monetary crisis. In order for you to understand the foundations of Stephen's points, you need to spend more time reading and listening to others ideas instead of lashing out at everyone who disagrees with any point you make. Did it ever occur to you that you may not know the answer to everything? I know I do not, but I am much more open minded than you are, and I am willing to listen if you care to make an articulate point as to why this scenario will not play out *if* Greece leaves. The first question you should be asking is "why" did the Argentinian currency collapse? The second question you should be asking is "why" did their banking system leave the (at that time) stability of the US dollar regime?
Hey! I think I know some... The peso did not collapse by itself... it was both the way to solve the fiscal debt problem nominated in dollars, and also because of industrial lobbyist that wanted a devaluation to also liquify debts and "gain competitiveness".
We could have just default and continue with the parity 1.1 but no, the move was set to change the rules and benefit banks and industries at the expense of the people.
Now we have great inflation that was somehow delayed from 2001 because of the huge unused installed capacity we had 10 years ago, and also because certain basic things were not allowed to adjust like energy prices.
The ctrl-p is in full swing right now so the peso will follow the steps of the other currencies we had prior to our fixed parity with the dollar...
Best regards and delighted to have something to say in this fantastic site...
I agree it was to "solve" the debt problem, which in other terms means to "default in real terms" on the debt. The "gain competitiveness" argument is circular, but a common one used by bankrupt leaders in economies they've run into the ground by promising more than they can deliver in real terms. I agree with your other points. Those are the dangers of printing, the way it steals from the ordinary people at the benefit of those in positions of power. Truly disgusting behavior by central bankers. Never forget the other option, called capitalism. Capitalism would call that those who lent the money lose their investment, the banks that were reckless fail, and the politicians responsible for the collapse could be held accountable (instead of remaining in power as if nothing they did was their fault). Oh by the way, that nasty word capitalism, is being practiced no where in the developed world. So when I say capitalism, I do not mean the current central banking/central planning/socialism -- the root causes of the problem.
It sounds like the sovereign liquidity squeeze is now affecting countries like Spain, Italy, and France. Everyone talks about buying Greece for a penny but the strategic assets backed by government debt in the "other" countries are far more interesting.
I "expect" the IMF and ECB would want the "other" countries to offload their strategically held debt to support their sovereign champions before they go cap in hand to the G-20 asking for money. Surely "they" would not expect the rest of the world to finance "their" sovereign debt while "their" sovereign champions took profit or marketshare from the global taxbase?
The fact of the matter is Greece will be digested by the EU as that was always the long term plan. Greece cannot survive in today's world if left to their own vices.
The only country that can leave the EU is Germany. That is the reason there are strategic actions to force Germany into line.... hence the tone of this article.
"The fact of the matter is Greece WAS be digested by the EU". And the steaming pile is all that is left. Bankers and Central governments destroy all that is before them.
Giving Greece the Euro was like giving an alcoholic the keys to the bar.
The world used to back it's currency in gold, "but the world had moved on since then..." To quote stephen king(the fictional author), haha. Except in this case, fiat currency is the banksters pandemic flu of choice. Ironically, the banksters and stephen king both produce fictional stuff.
The best thing Greece could have done would have been to follow Iceland's lead and repudiate the debt. The Greek's puppet PM installed by European parliament put an end to that possibility.
Did someone say it's going to get ugly?
oH... ThAt StEpHeN KiNg...
Really liked that book, SK can really spin a yarn.
This post, not so much ... Greece may eventually recover, just as the rest of the world may eventually recover. But by 2015? Not likely, unless massive outbreaks of sanity across the world break out and we repudiate Keynesian economics completely, remove regulatory deadwood and deadregulations, cut taxes and government spending to breakeven / 10% of GDP......
nice post for a fantasy, though
I loved The Stand, read and watched the movie years ago... must do so again.
I, for one, welcome our new Chinese overlords.
History shall repeat itself in a far greater scale and therefore the benefit for the leading roles shall be much greater. If ancient Greeks won the battle against the barbarity of the East in favour of Europe, then modern Greeks are those who are meant to win the battle against the barbarity of both Eastern and Western world in favour of the human kind.
http://eamb-ydrohoos.blogspot.com/2012/01/global-debt-crisis.html
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By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total ...understand where this plan started just to bring all states at the same end ...understand how this type of plans are established...
Authored by PANAGIOTIS TRAIANOU