Eurozone debt crisis

[superfrank]

Greek stocks close at nearly two-decade low
http://www.marketwatch.com/investing/in ... tryCode=GR

the CAC is living up to its name today too!

[CaerMyrddin]

The political parties taht supported the greek deal with the IMF/EU are a minority now on the parliament, so this look dangerous now... Empty shells on europe again?

[Euler]

Just finished watching this, worth watching when it gets on BBC iPlayer

http://www.bbc.co.uk/iplayer/episode/b0 ... ro_Crisis/

[superfrank]

good prog, Portillo always worth a watch.

you can understand why the Greeks still want the Euro, but they haven't grasped what that will entail. you just can't see things improving in Greece, and i expect others will sooner or later be in the same position (e.g. Portugal, Spain and Italy).

[Iron]

EU central bankers ponder Greece euro exit - http://www.bbc.co.uk/news/world-europe-18046280

IMHO, the greatest risk is possibly a domino effect, with the other GIIPS countries thinking 'Now Greece has left the euro, the currency is already damaged irreparably, so there's no point in us persisting with this austerity nonsense!'.

Jeff

[Euler]

Roger Bootle is saying a similar thing: -

The final death throes of the Euro

http://www.telegraph.co.uk/finance/comm ... -euro.html

[superfrank]

good to see economic fundamentals asserting themselves despite all the political market bucking nonsense of recent times.

those of us who said from start that it wouldn't work without political union have, unsurprisingly, been proved correct... and political union is now off the agenda as the weaker nations pull to the left. France may get the Franc back one day.

if Greece does go then we may see a big rally Euro after all the initial market panic... the question of how the Euro breaks up will have finally been decided, and it's that the Euro will be the preserve of the strongest and any country that can't keep up (with Germany) will eventually have to leave.

[Euler]

Today we will look at the recent German shift in policy, why it was so predictable, and
what it means. This is a Ponzi scheme that makes Madoff look like a small-time street hustler.

http://www.johnmauldin.com/images/uploa ... 051212.pdf

[superfrank]

good article.

this was the best bit on Spain:

...rates came down when the LTRO was issued and Spanish banks had the money to buy Spanish government debt. Why would they buy it? Because they got to borrow money from the ECB at 1% for three years and could make a very fat spread. Making a “free” 4% is a tried and true way to garner profits that can be used to offset losses.

Once the LTRO was done, Spanish interest rates began to climb. Note that they only briefly dipped below 5%.
I think I have this straight. Spain wants to guarantee more bank debt that the banks will use to get more money from the ECB, which will in turn be invested in Spanish bonds that will provide the money to run higher deficits, which will…

This is somewhat like a destitute bar patron guaranteeing his friend’s tab so his friend will buy him more drinks. The ECB is the bartender. European taxpayers are the bar owners. We know who pays the tab in the end.

he reckons the ECB will keep printing and printing (like the FED and BoE) - he's probably right. the problem was always gonna be that, once politicians rediscovered the printing press, they refuse to turn it off as it offers an easy way out (in the short term).

[Tobedotty]

http://www.bbc.co.uk/news/business-18058270

Very interesting.

At that point it would become obvious to the citizens of Germany that they have been lending rather more to the eurozone's weaker economies than the eurozone's leaders have been telling them.

Here is the interesting question. What would be the impact on German public opinion of finding out that German taxpayers had lost tens of billions of euros on loans to Greece that they did not know they had made?

Would they feel a rush of solidarity with the other weaker eurozone economies and feel that Germany would redouble its financial support for Italy, Spain, Portugal and Ireland?

There must be a danger that, in those circumstances, there would be such a backlash of public anger that it would be even harder for Germany's leaders to provide the scale and kind of financial succour essential to the eurozone's survival.

Here is what I think happens next (we could see a very worrying and not too implausible chain of events): Greece leaves and the Germans are unable to justify proping up the other basket-case eurozone economies. More countries leave, and now Germany's finances are in a serious mess and are forced into a reccesion along with everybody else in the eurozone. At this point, nobody has any cash and there is potentially more bank collapse as expelled countries inflate to pay off debt (Cue believers in hard currency). The whole of western europe (including the UK because of our european exports) is now in a very bad state and as a result the chinese are in trouble because they have nobody to sell to and so their economy and world commodity prices collapse. Several chinese banks could collapse due to their holding of sub-prime chinese debt (the chinese government has been enouraging/forcing it's banks to aggresively lend money to promote growth in the country). I'm not sure where the US fits in, but I'm certain they'll get dragged into trouble too. The only problem is, what do you do now to protect your assets? The US is a short-term answer I suppose (maybe delarue is a good choice ).

[to75ne]

can someone clear this up for me. am i understanding this correctly which I doubt as its alice in wonderland nonsense to me.

all this “money” coming from the german tax payer supposedly going into the greek economy.

is it real money that german people have actually paid to the german government via income tax (and other taxes).

this tax money is then given to the greek government, who then give to the banks be they german banks, british, French, American etc to pay off greek national debt.. none or very little of this german tax payer money actually gets to the average run of the meal greek geezer, or to greek business’s , enabling/helping them to support themselves, get their economy going. Etc,
in short it goes as follows
german tax payer,
german exchequer,
greek exchequer,
various banks.

am i thinking correctly?

[superfrank]

is it real money that german people have actually paid to the german government via income tax (and other taxes).

no. all the bailout money is being lent by countries that are already up to their necks in debt. their debt is being bought by central banks with funny money (directly or by fantasy loans to private banks bribed to buy at it a very healthy profit, e.g LTRO).

the whole thing is a ponzi scheme as stated in the article. and we know what ultimately happens to ALL ponzi schemes.

it's also quite comic that the US, UK and EZ govts. are loaning money to the IMF. none of it is real, they haven't got any!

[to75ne]

thanks frank.

to me it all seems very bizarre. i am starting to believe that there is no real money anywhere in the world.

so if the greek debt is being paid by central banks with funny money and fantasy bank loans lent to the greeks; and as you say a ponzi scheme in all but name.

why cant the greeks (and any other country for that matter) just pay off their debt with funny money and/or funny loans, cut out the middle men. after all none of is real,what does it matter who's funny money it is.

utter madness.

[superfrank]

why cant the greeks (and any other country for that matter) just pay off their debt with funny money and/or funny loans, cut out the middle men. after all none of is real,what does it matter who's funny money it is.

utter madness.

well exactly. the middle men (private banks) actually run the show and the central banks just do what they want (to keep them in the style to which they've become accustomed).

you're right that they could just write off all the debt with funny money (a sovereign debt jubilee) but that would been seen as moral hazard and inflationary (as if the present situation isn't??!!). Zimbabwe funded it's deficits with funny money but that didn't end too well...

[kitkat1818]

Alternative View Of The Greek Bailout
Feel free to change the word Greek to Irish/Spanish/Italian or any other appropriate country…

It is a slow day in a little Greek town.
The sun is beating down and the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the local Taverna.

The Taverna owner slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.

The prostitute then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.
The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.

At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how the bailout package was meant to work !