I just did a board search for “greece”, “portugal” and “spain” for the past five days and the only result was something in the Game Room about the World Cup (whatever that is).
Is nobody worried about recent events? Greece sovereign debt has been downgraded to junk by S&P, and contagion appears to be spreading to Portugal and Spain with ratings downgrades of their own. Polls say 60% of Greeks now want to leave the Euro zone, and popular German opinion appears to be “good riddance.” Commentators are saying this could be a re-run of 2008 with sovereign debt meltdown freezing credit markets as subprime meltdown did two years ago. Any thoughts?
WAG - it’s a new topic for this American-centric message board as well as the American media. Our own economic issues (a la Goldman Sachs congressional hearings) have the front page right now. Give it time.
Understand, but well, it is going to become our issue sooner than we think. The Goldman Sachs hearings as far as I can see are a backward-looking dog and pony show. The Euro zone crisis is what’s going to have y’all standing in soup kitchen lines a year from now.
Ran across this brief comment in the Atlantic, which starts out (bolding mine):
Is Greece all that significant? Instead of bailing out failing operations, let them go bankrupt. Guess what-Greek government employees don’t do all that much-so Greece would probably run better without them. Reorganize and privatize.
Is it too much to ask that government downsize? Its like the USA-we could easily do without the Dept. of Education, large parts of the Interior dept., and most of the CIA. Besides a large part of the Greek economy operates underground-untaxed and off the radar screen-isn’t that a pretty good indictment of the Greek government?
I wouldn’t say I’m worried about the current situation with the PIIGS as much as the overarching situation, which is that the massive debts in the financial system still exist and have just been underwritten with massive amounts of sovereign capital and the central banks printing money. The global financial system is even more overleverages than it was at the start of 2008 and this will all come to a head at some point and that’s when I’m going to start to get worried. Right now the ECB can just print money and buy up PIIGS sovereign debt, take a Paulson bazooka to the bond markets. They’ve already quietly been doing that via third parties (Eurobanks buying sovereign debt and reselling it to them) to the tune of a couple of trillion but then they started cutting back. They’ll probably ramp it up again but if they do the crisis will just be deferred and break out at some point in the future. It looks like the long term way out of this is massive global debt restructuring, basically countries around the world exchanging their short term bonds for long term ones to give them more time to pay it off. It doesn’t change the face value of the debt but it gives the debtholders a long term haircut via inflation and it means the issuers don’t have to keep rolling over short term debt and have a bit of security. Basically General Motors writ large, on a global scale.
It’s going to be interesting to watch over the next few weeks though. If the Germans dig their heels in with the ECB and stop them printing money we might not have much of a Euro left in a couple of weeks. The contagion is heading east too, Hungary’s bond spread with Germany is taking off and the Baltic states aren’t too far behind. If any of those countries default the Eurobanks that hold their debt (and they hold a ton of PIIGS debt too) will need bailing out again. And they’re all linked via vast sums on various derivatives contracts and other business to American banks and a lot of big Eurobanks are primary dealers in the US too, so the potential for a global meltdown to dwarf the 2008 one is right there. And the world’s big economys are all tapped out and in massive debt now and would really struggle to bail the system out again. That’s when things could get really interesting. I did a big post about all this the last time we were talking about this, or maybe one or two threads before.
I’m very worried that taxpayers are going to have to fund another multi-billion Euro package. And a contagion of such packages to all kinds of shitty economies in Spain, Portugal, Ireland and Britain. Greece needs to leave the Euro-zone and default or restructure its loans. The banks that have been so foolish as to buy Greek bonds will have to take their losses themselves. I don’t give a damn if they go bankrupt for it. Other and more deserving banks will grow up where the idiotic ones failed. They say Greece will need 100+billion euro loans over a three year period, but the numbers keep rising, so who knows what the real amount will be. I sure as hell wouldn’t hold my breath for any of this ever being repaid. And what for? A massive debt load hanging over future Greek generations like a yoke will not be in the best interest of the Greek population. It is only in the interest of the banks that are now settled with a shit load of junk bonds. Let them eat their junk themselves, don’t pass on the losses to unsuspecting taxpayers. And in any case, why should German taxpayers have to fund Greek government services and pension plans that are better than those of Germans themselves?
Fortunately it seems that Denmark – being outside the Eurozone - will not have to fund any of these idiotic “help” packages. And sure as hell the whole fuckup has made a Euro sceptic out of me, where I was previously positive.
When I was at university in England every holiday for three years I flew to Athens to work in a youth hostel I’d stayed in the summer before I started university. It was the best place you could possibly imagine to hook up with women, and women from dozens of different countries too, not just your bog standard English/American girls. It was next to a park called Areos Park and that’s where any big political rallies, and there are dozens of them every year held by Greece’s large number of political parties, were held. Every May Day the Communist Party rally was so big it used to shut the neighborhood down for the day. You literally couldn’t move for people from all over Greece.
Greece does a natty line in violent political demonstrations that take over the capital, mass civil disobedience and mass strikes by Communist Party/socialist parties/union alliances too. The current bailout plan, likely to become much more severe over the next couple of years, calls for Greeks’ income to be cut by 30% and the nation to pay 8 or 9% of GDP to foreign debtholders inperpetuity, a percentage exceeding the level of reparations that Germany had to pay the allies after WW1, something that was instrumental in bringing [Godwin redaction] to power. If anybody thinks the Greeks are going to stand for this for any length of time I’ll take all of their action. Problems ahead.
The Greek default, when it comes, will be very painful for Greeks, and very painful for the taxpayers in the countries whose banks have lent excessively to Greece and need more taxpayer bailouts. It will have a material negative impact on the economy globally, which none of us need.
But I’m not seeing any real threat to the viability of the euro - that’s just wishful thinking from the antis. The value of the euro would probably fall, but that won’t do the eurozone any harm at all, quite the contrary. For instance, it will help Greece and Portugal gain some competitiveness, and further strengthen German exporters.
Germany does need to increase exports to get their GDP growing again and countries like Greece need to get competitive in world markets. But the countries who were running trade deficits so countries like Germany could run surpluses are all tapped out and in massive consumer debt and won’t be buying a lot more anytime soon. In the absolute best-case scenario you’re going to have many years of grinding wage and asset deflation in uncompetitive Eurozone countries which won’t exactly help economic growth, will it? And even if countries like Greece are more competitive what are they going to export? Would you rather buy a Greek dishwasher or a German dishwasher? And getting out of this by increasing exports is every Eurozone country’s answer to the problem. I see a problem here. What we really have is a big lack of global demand. So in order for the Eurozone to sort itself out, which planet is going to start increasing its importing?
The Euro, while not as terrible an idea as often argued, got bloody unworkable when the illiterate gits in Brussels started letting in every bloody slap happy EU member, ready or not.
And as there’s not an obvious good way to deal with scoff-laws -which the Greeks most certainly are, useless bastards - Brussels and the capitols are all mubbling about in utter confusion.
By itself, no.
In context of the “PIGS” (Portugal, Italy [Greece] and Spain (sometimes PIIGS, Portugal, Italy, Ireland, Greece and Spain), right bloody significant.
Because Euro zone hasn’t any proper mechanism or even the vaguest shadow of a political spine, if Greece goes down Italy, Spain and Portugal may very well follow. And that would touch off a global financial crisis that makes your bloody sub-prime thing look like an amusing side show. Spain and Italy have big enough economies that sovereign defaults on their parts would blow up the whole financial system - given how much of their paper is out there.
Spoken like a true American with not one hint of “skin in the game” as you say.
If it were just Greece, I’d say let the lying scum who falsified their government books (amazing, you expect that from bloody 3rd world countries) for a decade bloody well hang.
But the fuckers have a very real potential to take everyone down with them.
Well yes, the Greek government and entire political culture is utterly and completely bankrupt (in any moral or competence sense) and the lot of the spoiled bastards deserve a bit of suffering (pox on “oh the Greek elites are at fault”, Greek elections aren’t rigged affairs and the Greek’s addiction to corrupt off the book dealing is as much the Little Man as the elites.)
You cite UK and skip Italy? Italy is going to be a problem before UK, any case not in Euro Zone so any UK sovereign issues can be addressed - painfully albeit - via another Sterling depreciation.
If it can be done in an orderly manner
Anyone who “doesn’t give a damn” is a fool who’s not paid any attention to how just such ‘fuck-em’ policies in 1929 - the infamous serial bankruptcies from the Creditanstalt event - set off a death spiral.
Well, given little Denmark’s trading partners are most EU and Euro zone, you’ll be a right bit less smug when a default happens and you find that your entire economy is collapsing because your banks hold Euro debt and as well their main counter party banks are going bankrupt. Myopic smugness and beggar-thy-neighbour policy is exactly what made 1929 a nightmare.
Not that the namby pamby reform packages put forth by the Brussels fools make me terribly happy, the arrogant gits should just give it over to IMF which can be a right bit more tough as needed.
Good comment. This is bloody scary stuff. And as Alessan highlighted, worse there’ s not any proper clear-headed decision making, everyone is bumbling along by committee.
Had dinner with an older trader buddy of mine last week in HK. He works for a hedge fund owned by one of the glob’ top 10 banks. He just shook hisz he4 in wonder saying it h&d just dawned on him the Euro can’t survive. germany won’t pay for every one elsels party and Brussel’s canLt force fiscal responsibility.
More importantly, traders the world over are lining up on one side to profit from taking out the PIIGS, and once that hits a tipping point the Euro collapses. And it is a very real risk.
It’s not really a commitee issue. Half the countries in the Eurozone are themselves in a dificult situation (Italy, Spain, Portugal, Ireland) hence in no position to bail out anybody, and the other half relatively small economies (Belgium, Austria, Slovenia…) .
So, basically the bail-out issue is discussed essentially between France and Germany. France supports it. Germany is officially quite opposed to it, but elections are approaching and the German population really doesn’t like the idea of a bail-out hence Merkel can hardly afford to appear to support it. So we’ll probably have to wait a couple weeks (after the elections in Germany) to know what are the real intents of the German government and what kind of plan will be proposed (probably involving both the EU and the IMF).
What seems obvious is that it’s going to be very harsh for the greek population, and given the current level of agitation in Greece, it might be that the Greek government won’t be in a position to accept the plan (some people seem to fear a real popular uprising). In which case all bets are off.
wmflellos opines:
Quote:
Instead of bailing out failing operations, let them go bankrupt. Guess what-Greek government employees don’t do all that much-so Greece would probably run better without them. Reorganize and privatize.
Spoken like a true American with not one hint of “skin in the game” as you say.
If it were just Greece, I’d say let the lying scum who falsified their government books (amazing, you expect that from bloody 3rd world countries) for a decade bloody well hang.
But the fuckers have a very real potential to take everyone down with them.
You lot to.
So the solution is to keep throwing money down a rathole?
Face it, Greece is NEVER going to repay its loans-the country doen’t generate enough GNP to do so.
So keep funding it, the debt keeps growing, and the (inevitable) crash will be worse. This is like FDR prolonging the Great Depression. Instead of writing off the bad debt and starting over, let’s ahave decade of bailouts and subsidies-long enough for the “smart” money to move their assets out-so that the EU taxpayers get stuck with the bill.
Sound reasoning indeed!:smack:
No, it’s take a proper organised restructuring action before this thing spins out of control and produces Great Depression II.
“Let them go bankrupt” is positively pushing for GDII. I personally don’t much care for that, my dear father was a child of GDI and can’t say it made him very sunny.
Well, YES, that’s that the whole bloody problem.
If they don’t restructure, they’re fucked… well more fucked than they already are. And if they just go bust, they take everyone down with them. An orderly restructuring with them sucking up a proper bit of pain might just save us.
The IMF coming in is all about taking action… not just forking over billions to the bloody Greeks.
Eh? Well, I’ll let some of your compatriots argue that queer statement.
So very easy when you don’t actually think about what “just writing off the bad debts” means.
As for the Greeks. I’ll be more than willing to help if I thought it would be for the benefit of the Greek people, rather than privately owned financial institutions – and provided the Greeks had showed real intention and documented action towards fixing their problems long term. Such as the pension system wherein in Greece you get to have the state pay you pensions from the age of 61 – in some cases apparently in the 50s or even 40s. In Denmark it is 67. Greece can come back when they have raised the pension age to at least 67. And abolished laws that protect civil servants from being fired. And abolished a shitload of other stuff that the taxpayers of the countries expected to fund the bloated Greek mess can’t afford for themselves.
Hate to break it to you, but the “last” war relative to Europe and finance was the 1970s.
Nothing bloody theoretical about this default risk.
Fuck the stupid Greeks, they brought this on themselves. One should be worried about one’s own damned economy being fucked to hell by a debt crisis / panic.
But yes, there’s got to be a structured approach so that the private banks take some pain as well.
Well yes, I absolutely agree. The sun-burned bastards need to take the same pain that everyone else has, rather than rioting over their “right” to take early retirements after shuffling god knows what useless Greek red tape around.
I don’t disagree, the miscreants aren’t particularly worthy of any sympathy. The problem is just letting them hang causes us as much pain as them.
At least the Spanish did reasonably useful things with their debt, unlike the Greeks.