EURO:Greece actually going to sink?

[Argonaut]

So, in the UK I can't turn the television on without hearing about the EURO crisis and just how close it is to actually going totally belly-up. With the unspoken plans for Greece to leave the EURO being mentioned it seems that many ministers are accepting that Greece is fucked and there needs to be a plan in place to survive the loss of Greece from the EURO.

So, some more interesting developments for me are;-

- Cracks showing between Frances new PM and Angela Merkel.

- Greece still not getting it, "you're not having any more money" and actually it might be better if Greece just went tits-up and the surviving, stronger economies cutting them loose. Greece simply cannot have their cake and eat it.

- Smaller countries with strong economies (Finland in particular) giving out undertones that if struggling countries such as Greece and to some degree Spain and Italy can't get on board with the sever austerity measures then you're on your own. Finland's PM was fairly scathing in his judgments on the struggling countries.

- German internal politics play a huge part in the EURO political games, much larger than I had first thought.

So, would the long term plan of ditching Greece actually work? It appears we've tried everything else so what's left? Could this start a domino effect where the UK pound could also take a massive beating as the EURO folds? Or is it all panic? and finally, what will happen across the pond - are we suddenly going to get a boost to the economy as the dollar completely outstrips the EURO for exchange rate and lots of dollars get spent in Europe?

[Codex]

My guardian works at JPMorgan in London so he kept me up to date on Greece/Euro troubles as they were happening. Apparently the point of no return for Greece was around the time of the US having to extend their default deadline. In the eleventh hour, that one. Greece is gone, there's no real economy except for olive oil.

The crazy thing is that Greece could disappear from the face of the Earth and the total value lost would be less than a percent of the European economies. It's just so weird how that can cause ridiculous dominoes to fall.

Regardless, give up on Greece right now. To survive they'd need austerity measures, but not only that, a whole overhaul of the population. Rich people:"tax is for idiots" Middle Class: "Intelligentsia for the win! Why should we suffer?" Others: "WTF, MATE?"

[Nurizeko]

To be fair the real damage will probably be political more than anything. A step backwards in the great European project?

Unfathomable for many.

[Mr Carrot]

Yep, was at HMT today with my boss Dr Gerard Lyons informing the UK gov just how fucked Greece is. The Germans are not going for euro bonds and without that the entire thing is fucked.

There are major economic issues at play here, they have pissed a lot of EFSF funding up the wall, the IMF is reticent and the Chinese don't want to play ball. They could have sorted this out twoi years ago with decent policy (glad they did not though, euro had to fail at some point, glad it goes now rather then in the middle of the next cycle).

Political point is key as nuri points out, the EU being a crypto marxist organisation RELIES on constant institutional and bureaucratic expansion. And like Marxism if it pulls back the collapse is inevitable, once the hot air starts escaping etc. the entire organisation is based on a confidence trick pulled over 50 years by the French led by Giscard d'estang on preventing another European war. Except they lost control of it in the 90s when the UK essentially fucked the market into them and then the Euro which was aimed at keeping German industry down did the complete opposite.

[Belgarion]

That is interesting comment Mr Carrot. My take on this is Italy Spain and Portugal will follow in short order after Greece defaults

[roflmao]

Okay, this has to be clarified :P:

I believe it's Krugman who got the whole austerity ball rolling, the mainstream media started madly parroting the phrase until everyone actually believes it, yet the amount of austerity put in place is almost nil. It's just not reflected in any of the data. There has been no severe spending cuts pretty much anywhere.

[Mercatus] [OECD]

[Codex]

So basically we're shooting ourselves in the foot.

When are they going to realise that this debt isn't going to evaporate? Are we planning on defaulting?

Whatever, it's going to be tough as hell to find a job, and tough as hell to work off this national debt.

[Mr Carrot]

Everything Krugman has said on the crisis has been pretty much utterly wrong after that point, austerity economics was an invention of Friedman and his school of thought in the 70s - Krugman was smashing out his left of centre warning to go with his cheerleading of entitlement spending expansion under Obama who he cheerleads.

And it pains me so much to say that because the man was an absolute genius when I met him a few times at conference times - he still leads his field on economic geography (I did a PhD using his thesis as a central tenant) but his macro economic pedigree is a bit shit. Stiglitz told him as much.

But you are right there is fuck all austerity (what is happening is a slowing in the velocity in the increase of expenditure in Western Europe) and Krugman is pretty much in the insane asylum with his take on fiscal stimulus spending (the UK is a basket case for cutting so much! When its cut fuck all).

Codex debt does evaporate, you can inflate your way out of it, or you can grow your way out of it - reducing the size of it in real terms as proportion of a larger economy.

I would actually endorse the Stiglitzian take on the whole thing, which is gradually reduce expenditure but also massively redistribute into capital infrastructure investment.

Belagarion it's more than the other PIGS going after greece - this stumble of the European project is coming at a time when more and more Europeans are demanding in/out votes on the project as a whole - Spain WILL default because of the housing sector crapping out, the banks are too exposed and they can't delverage. Italy is actually ok, if they get their reforms through before 2013 they should be fine economically. But they would benefit leaving the Euro as well.

[Codex]

Codex debt does evaporate, you can inflate your way out of it, or you can grow your way out of it - reducing the size of it in real terms as proportion of a larger economy.

Assuming the debt in is GBP. A lot of it is not and is owed overseas and therefore it's in USD. For a while our debt had gotten larger because the GBP/USD ratio has gotten lower. I don't know how that trend went, but the Hong Kong Dollar is tied to the US dollar, and the value of GBP vs HKD has gone down by around 10% since I first came to England (nearly 14 dollars to the pound down to 12.15). That's horrendous, that really is. So, whereas debt in GBP reduces in value, the debt in USD increases in value relative to our money. Yay.

Also, yes, you can grow your way out of it. But growth means lessening unemployment and working our socks off with high tax rates to slowly get rid of that debt. That's not called evaporating. That's called digging yourself out of a shithole.

[Mr Carrot]

One of the few good things labour did under the last crisis was dump the pound to lower its value, it really did help.

One of the reason the current US recovery is stalling is European liquidity flight pushing up the USD value spiking export costs.

[Civik]

- German internal politics play a huge part in the EURO political games, much larger than I had first thought.

Not much to add to this, but relevant:

http://www.thedailyshow.com/watch/mo...---france-vote

[Codex]

One of the few good things labour did under the last crisis was dump the pound to lower its value, it really did help.

One of the reason the current US recovery is stalling is European liquidity flight pushing up the USD value spiking export costs.

I'm just a student, I'll ask my guardian about this as he's likely to know. It's not that I doubt you, as you seem learned on this topic, but as I've said (in the past) the Chief Secretary to the Treasury (position below Chancellor of the Exchequer who is in charge of the Treasury, for those who don't know) during the last Labour government gave my guardian weekly calls because he found my guardian interesting, and he found that my guardian could teach him about economics and the economy in general. He's just the head of the legal department in London. He's not even an economist. Okay so he knows a lot of by now, having worked for the bank a lot of his life, but still... one would hope that someone in such a high ministerial position would at least be reasonably learned about how the economy works.

So pardon me if I don't trust everything immediately.

EDIT: Of course, alternatively, source please. I'm open to other reputable sources other than my guardian, who is, after all, human.
(Please don't show me a Guardian article. The pun would kill me in my fragile state)

[Starfisher]

Of course Greece is going to fall out of the Euro. They have zero choice but to default. The austerity necessary to pay off their debt would result in devastating social chaos (take what's happening now and then tell everyone, "oh, by the way, you and your kids are going to spend your entire lives unemployed so we can pay off your parents debt", just try it). That or hyperinflate a new drachma, but what's interesting there is that since there currently isn't a drachma it might simply not work - you can fiddle with an existing currency like Iceland or Argentina, but creating a new one for the sole purpose of inflating away your debt is not going to play well anywhere. Why would anyone do any trade in drachmas?

I'm more interested in seeing what happens to Greek bondholders after the full default and just how well (if "well" is the right word here) the damage is contained. The greek domino might just be the threshold trigger for the whole damn debt-ponzi pile.

[Codex]

Of course Greece is going to fall out of the Euro. They have zero choice but to default. The austerity necessary to pay off their debt would result in devastating social chaos

Forget austerity: when a third of the population of Athens were (dunno about now) on government payroll that's a significant issue. I don't care how much austerity your country goes through, not having a functioning economy can only mean national debt at best and national collapse at worst.

That or hyperinflate a new drachma, but what's interesting there is that since there currently isn't a drachma it might simply not work - you can fiddle with an existing currency like Iceland or Argentina, but creating a new one for the sole purpose of inflating away your debt is not going to play well anywhere. Why would anyone do any trade in drachmas?

Part of Greece's problem is actually being part of the Euro. They can't inflate their currency so as to draw in more tourism, and get a cash flow in. Ironically, though, cutting it off would create lots of panic as people would have to switch to a worthless currency... It'd be totally insane. I wouldn't want to see it.

[Argonaut]

I think we all know Greece is fucked, but exactly how painful is it going to be for them to exit the EURO?

[Codex]

There's going to be chaos. Violence. Re-establishment of the drachma. People swarming banks trying to trade in valuable, useless money for the pieces of paper. But they're fucked. Totally fucked.

The real shame is they're taking down the rest of the world a notch or two by their falling. Their eventual exit should not concern anyone now: the fact of the matter is the rot began a long time ago. That they're part of the Euro only hastened their demise, it didn't cause it.

[Inq]

Australian government and Financial institutions have been slowly moving over the last 12 months to prepare for the default and exit of Greece. Smart money was quietly moving into cash prior to the debt ceiling talks.

Currently US dollars are being pumped, seen as the best hedge for the masses. Give it 12-24 months however and we'll be looking at a complete reversal when the printing presses go wild(er).

Currently accumulating gold producers and global products at heavily discounted prices. Hammering the foreign currencies a bit unfortunately. :/

[Starfisher]

Heh. Times like these I almost want to buy physical gold and stick it in the mattress. Only problem with that is that it seems to me to be a bet on a currency collapse, at which point the government will probably confiscate, one way or another, physical gold.

Time to buy a farm and create a creepy gamer-commune.

[Belgarion]

I thought you were talking suicide by "buying the farm " Star ;-)

Here we go with Spain now http://www.reuters.com/article/2012/...8GP95D20120525

It occurs to me that the Euro weakening compared to other currencies is actually helping German exports. Go figure

[Inq]

Bit hard to confiscate physical if you don't keep track of who is buying.

The other cynical argument for buying physical is the paper trail is a bit harder to get you for capital gains... Not that I'm endorsing tax evasion.

On the subject of people preparing for what they think is coming:

http://www.youtube.com/user/StormCloudsGathering

[Energizer Bunny]

It occurs to me that the Euro weakening compared to other currencies is actually helping German exports. Go figure

Broadly speaking that is what has kept the German economy going for the last few years.

[Skullcap]

Honestly wish the collaspe would happen already, the markets are sitting with there thumbs up there ass going "oh shit" every time greece pops up in the news and they tumble and lose the gain they managed to recooperate.

The IMF is abit of a laugh at the moment to with the head honcho commenting on UK austerity measures being good in one sentence but saying VAT and other sources will need to be lowered since growth has died in the UK economy, UK is sitting in double-dip recession with little being done, especially with Dave and Osborne just shaking there head and saying how bad it is, but hey U-turn on pastries and static caravans, what next on the U-turns?

Its the market uncertainty which is killing everything, German and co keeps prolonging Greece's exit due to how bolluck scared they are of the exposure of a default will do to them, but while it gets dragged out month after month economies across EU keep getting worse and the markets are so uncertain, so jittered that untill something big does happen its just going to keep getting worse.

Plus austerity measures can only go so far, can tax everyone and cut spending as much as you like but if there is no economical growth then what you take from the people isn't getting replenished and in turn everything just becomes more differcult.We also need proper growth, none of this bollucks of 0.1 or 0.2 increase being super super awesome politician back patting, been sitting at that for years.

But suppose we won't know to middle of June to what the Greeks will do, one moment there all supporting the lefty government who doesn't want bailouts and austerity, and next moment the poll recently is saying there supporting the pro-bailout party, need to make up their fucking mind already.

[Codex]

Well, Germany saddling these debts and willingly allowing the Euro to go the way it has done has benefited Germany in the short term, but hey, all countries just want what's best for themselves.

But suppose we won't know to middle of June to what the Greeks will do, one moment there all supporting the lefty government who doesn't want bailouts and austerity, and next moment the poll recently is saying there supporting the pro-bailout party, need to make up their fucking mind already.

A bailout should be a no go. As I've said before, Greece needs a functioning economy before bailouts should even be mentioned. Throwing money at the Greeks is like a compulsive gambler who knows he's beat but goes all-in with fuck all.