Financial News

[Balta1701]

Not taking the deal makes them do both.

As does taking it. That's the point.

[southsider2k5]

As does taking it. That's the point.

 

Not really, but that's OK.

[Balta1701]

Not really, but that's OK.

Then can you outline a path where Greece accepts this deal and then isn't right back here in 6 months being asked to take a new one?

[southsider2k5]

Then can you outline a path where Greece accepts this deal and then isn't right back here in 6 months being asked to take a new one?

 

 

Which is exactly why they haven't defaulted.

[Balta1701]

Which is exactly why they haven't defaulted.

Because the rest of Europe keeps telling them "make more people unemployed and we'll find a way to pretend that what we're doing isn't called a default".

 

Except that it keeps getting harder every time. And there's no end or solution in sight.

[southsider2k5]

Because the rest of Europe keeps telling them "make more people unemployed and we'll find a way to pretend that what we're doing isn't called a default".

 

Except that it keeps getting harder every time. And there's no end or solution in sight.

 

Well what do you expect? People aren't exactly thrilled to have to support Greece, especially when they are basically flipping the bird to the people keeping them afloat.

[Balta1701]

Well what do you expect? People aren't exactly thrilled to have to support Greece, especially when they are basically flipping the bird to the people keeping them afloat.

So what is the end game? Aside from default and/or dropping the Euro, what is the end game?

 

Another round of austerity measures in 6 months in exchange for another debtor haircut will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut, which will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut...

 

You said "Not really" when I said that the only plausible endgame was defaulting and/or leaving the Euro. Outline another option.

[Y2HH]

So what is the end game? Aside from default and/or dropping the Euro, what is the end game?

 

Another round of austerity measures in 6 months in exchange for another debtor haircut will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut, which will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut...

 

You said "Not really" when I said that the only plausible endgame was defaulting and/or leaving the Euro. Outline another option.

 

The end game is a lot of people lose a lot of money, and when they go down, the credit market dries up for any country in any similar look/style/situation. They can leave the EZ all they want, and have cheap money, but nobody will lend them more, and other countries get to fall with them, and nobody will want to lend them anything either.

 

And that = bad.

[Balta1701]

The end game is a lot of people lose a lot of money, and when they go down, the credit market dries up for any country in any similar look/style/situation. They can leave the EZ all they want, and have cheap money, but nobody will lend them more, and other countries get to fall with them, and nobody will want to lend them anything either.

 

And that = bad.

Now you can write this...and emotionally that's going to be the visceral reaction...but if doing business in Greece becomes a better deal because the labor there is cheap and the workforce is well trained...will people make decisions that cost their firms money in a global economy because of spite.

 

You'd be correct that lending them money would be nuts if there weren't systematic reforms to prevent the goldman-sachs enabled debt hiding shenanigoats that went on for the last decade. If those reforms happened and they stayed in the Euro, they'd still be facing a decade+ of no growth and depression level unemployment. If those reforms happened and they left the Euro, they might have a fighting chance.

 

What they're facing if they keep accepting these bailouts also = bad.

[southsider2k5]

The end game is a lot of people lose a lot of money, and when they go down, the credit market dries up for any country in any similar look/style/situation. They can leave the EZ all they want, and have cheap money, but nobody will lend them more, and other countries get to fall with them, and nobody will want to lend them anything either.

 

And that = bad.

 

Exactly. The whole "cheap to do business" thing only goes so far. Subsaharan Africa is as cheap as they come. I don't see a lot of businesses flocking there. It will be even less likely to happen in Greece because the places that would usually invest there will be collapsing because of the Greek debt. They will literally be on their own in the world. No currency, no exports, no imports, and no lending.

[Balta1701]

Again, you still haven't given a reason why that won't happen anyway, or any way by which the every 3 month new bailout scheme has a way out.

[Y2HH]

Again, you still haven't given a reason why that won't happen anyway, or any way by which the every 3 month new bailout scheme has a way out.

 

It probably will happen anyway, but they've invested this much into saving it, they can't just stop now or the losses compound. Well, they can stop now -- but they'd look like "bad guys" in the eyes of the world.

[caulfield12]

So what is the end game? Aside from default and/or dropping the Euro, what is the end game?

 

Another round of austerity measures in 6 months in exchange for another debtor haircut will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut, which will lead to...another round of austerity measures in 6 months in exchange for a debtor haircut...

 

You said "Not really" when I said that the only plausible endgame was defaulting and/or leaving the Euro. Outline another option.

 

Simple, Athens is the heart of democracy.

 

They don't want to be ruled by Sarkozy and Merkel anymore than you or I would want to be as American citizens.

 

Of course, the conflict is that 70% want to stay on the Euro system but 60% are opposed to the bailout/austerity measures, which, as noted, will lead to further cuts, public sector death, mass unemployment and out of control rioting.

 

In essence, they're taking the ball and punting it back to the people and leaving the populace to decide their own fate.

 

On the face of it, going back to the drachma and defaulting will doubtlessly benefit Greece (who will be able to recover more quickly than continuing to adhere to the austerity plan/s, especially their export sector with a new cheap currency and cheap business environment for new reinvestment)...Thailand, for example, and Russia, recovered very quickly from the 1998 Asian financial crisis. Similarly, Iceland let its banks collapse (instead of bailing them out with taxpayer dollars, a similar referendum to what Greece is now dealing with) and are much better off for it, as well.

 

What happens next? Portugal also falls away from the euro system and all the intensity begins to focus 100% on Italy and the dysfunctional "All In the Family" political mess that makes the Guillen/KW relationship look like "Ozzie and Harriet" or the Cosby Show.

 

If France is backed into a corner, where they actually need to produce actual money instead of just leveraging existing assets to rearrange the deck chairs on the Titanic, then they will also be insolvent.

 

Meanwhile, the credit swaps kick into place that starts the dominoes falling again with a run on the banks and 100% Greek and probably Italian defaults.

 

As Balta pointed out, whether austerity is set at 150% or 120% or whatever rate/ratio of GDP, it's simply not working, it's not tenable as an economic recovery strategy.

 

The only counter-argument is Latvia and Turkey...about 1% of the countries in the world that can actually semi-legitimately claim that austerity/government reallocation/cutbacks are working the way they're intended in boosting the economies of those 2 anomalous countries.

Edited November 2, 2011 by caulfield12

[caulfield12]

It probably will happen anyway, but they've invested this much into saving it, they can't just stop now or the losses compound. Well, they can stop now -- but they'd look like "bad guys" in the eyes of the world.

 

 

It doesn't really matter what happens with Greece if Italy goes down...in some ways, it might be better to get it out of the way in one fell swoop instead of putting the finger in the dike over and over again like we have in the US.

 

Greece and Portugal leave the EU and go back to their currencies.

 

France and Germany decide if it's worth it to save Italy and the entire system...in all likelihood, voters in neither country (especially after watching Greece walk away) will most assuredly NOT be in the mood to save other profligate/wasteful countries.

 

And France itself isn't doing well enough to prop up the EU without Germany.

 

The Germans have to assess what the hit will be to their export numbers in this new scenario where there's a collapse of the entire system. The Chinese, who are the biggest net exporters to the EU, have to be asking themselves the same exact question.

 

Cost/benefit of saving the EU versus the risk of letting the entire system fall (along with all the bank defaults/contagion/automatic swaps that will kick in throughout the system with systemic failure of the sovereign debt pyramid)...

Edited November 2, 2011 by caulfield12

[Balta1701]

It probably will happen anyway, but they've invested this much into saving it, they can't just stop now or the losses compound. Well, they can stop now -- but they'd look like "bad guys" in the eyes of the world.

That's the worst reason I've read yet.

[southsider2k5]

http://www.bloomberg.com/video/79368356/

 

Great insight on the MF case. It is pretty certain that massive fraud and securities violations happened. The most amazing part is that Man used the old Refco unit to commit the fraud. They have been apart of some crazy stuff over the years. Remember they were the ones involved in the Hillary cattle trading, along with their own blow up in the Ruble and subsequent shell game of hide the losses until they got busted for securities fraud and sold to MF. One thing I would bet on is that Corzine is going to jail.

[Balta1701]

One thing I would bet on is that Corzine is going to jail.

I'll believe it if I see it, but if you're right, that would mean at least 1 former Goldman exec is finally there.

[southsider2k5]

I'll believe it if I see it, but if you're right, that would mean at least 1 former Goldman exec is finally there.

 

Listen to the video. There is pretty much no chance that Corzine didn't know about this. There is a very small chance that this accounting fraud has been short term. That means he has probably lied to regulators repeatedly, and it means he seemingly lied to the companies who were looking to buy the company, such as Interactive Broker and Jefferies. All of those are securities crimes, and doing them willfully is a slamdunk for jailtime.

[NorthSideSox72]

Again, you still haven't given a reason why that won't happen anyway, or any way by which the every 3 month new bailout scheme has a way out.

Further austerity should help give the Greek government the right incentives to fix what they can, and thus roll back those measures over time. But, quite simply, you have a better chance of digging yourself out of a 6 foot hole than a 12 foot hole.

 

And Greece becoming cheaper to do business? Not at all. Part of "cheap" to do business is stability and low risk - and a Greek nation teetering on default will attract NO busiiness because of the risks. Furthermore, if it does end up just defaulting on all debt and starting over, they have very little capital to work with to get their government operating again. Or do things like build roads, or anything else that businesses may need. Do you see where this is going? Not taking the deal makes the road back to economic strength much MORE difficult. And then there is the issue that, even if Greece does by some miracle break out of the EZ, default, and then eventually rise from the ashes... a generation will have passed.

 

I don't understand how you can see not taking the deal as a good thing, or a better thing, or even the same thing as taking it.

 

[Balta1701]

Further austerity should help give the Greek government the right incentives to fix what they can, and thus roll back those measures over time. But, quite simply, you have a better chance of digging yourself out of a 6 foot hole than a 12 foot hole.

 

And Greece becoming cheaper to do business? Not at all. Part of "cheap" to do business is stability and low risk - and a Greek nation teetering on default will attract NO busiiness because of the risks. Furthermore, if it does end up just defaulting on all debt and starting over, they have very little capital to work with to get their government operating again. Or do things like build roads, or anything else that businesses may need. Do you see where this is going? Not taking the deal makes the road back to economic strength much MORE difficult. And then there is the issue that, even if Greece does by some miracle break out of the EZ, default, and then eventually rise from the ashes... a generation will have passed.

 

I don't understand how you can see not taking the deal as a good thing, or a better thing, or even the same thing as taking it.

Here's the problem with your metaphor though...You're shrinking the size of your shovel at the same time as someone else helps you fill in the hole.

 

Greece cannot pay off the debt it has relative to GDP while everything is denominated in Euros. If you shrink the debt, it might be able to pay off a portion of that debt...but only if the economy doesn't shrink as well. Continued contraction of the Greek economy will feed back into Greece being once again unable to pay off the new debt amount.

 

And every single thing you said about what might happen if Greece doesn't take the deal is already happening. They have no capital. They are paying 200% interest rates on 1 year loans. They have no stability, they have no outside investment, and they have no prospect for any of that changing at any point in the future even after accepting that deal.

 

That's why I keep asking what the endgame is. Every response has been, including yours..."Look how bad things might get if they do default!" But that still doesn't give a path out.

[southsider2k5]

Here's the problem with your metaphor though...You're shrinking the size of your shovel at the same time as someone else helps you fill in the hole.

 

Greece cannot pay off the debt it has relative to GDP while everything is denominated in Euros. If you shrink the debt, it might be able to pay off a portion of that debt...but only if the economy doesn't shrink as well. Continued contraction of the Greek economy will feed back into Greece being once again unable to pay off the new debt amount.

 

And every single thing you said about what might happen if Greece doesn't take the deal is already happening. They have no capital. They are paying 200% interest rates on 1 year loans. They have no stability, they have no outside investment, and they have no prospect for any of that changing at any point in the future even after accepting that deal.

 

That's why I keep asking what the endgame is. Every response has been, including yours..."Look how bad things might get if they do default!" But that still doesn't give a path out.

 

And yet not accepting it makes things even worse.

[Balta1701]

And yet not accepting it makes things even worse.

By making what is going to happen anyway...happen.

 

Edit: the correct quote...from a fairly knowledgeable Vulcan, is..."Since it is logical to conclude you will kill us in any event, I choose not to cooperate."

[Rex Kickass]

Listen to the video. There is pretty much no chance that Corzine didn't know about this. There is a very small chance that this accounting fraud has been short term. That means he has probably lied to regulators repeatedly, and it means he seemingly lied to the companies who were looking to buy the company, such as Interactive Broker and Jefferies. All of those are securities crimes, and doing them willfully is a slamdunk for jailtime.

 

This makes me sad to hear.

[Jenksismyhero]

Here's the problem with your metaphor though...You're shrinking the size of your shovel at the same time as someone else helps you fill in the hole.

 

Greece cannot pay off the debt it has relative to GDP while everything is denominated in Euros. If you shrink the debt, it might be able to pay off a portion of that debt...but only if the economy doesn't shrink as well. Continued contraction of the Greek economy will feed back into Greece being once again unable to pay off the new debt amount.

 

And every single thing you said about what might happen if Greece doesn't take the deal is already happening. They have no capital. They are paying 200% interest rates on 1 year loans. They have no stability, they have no outside investment, and they have no prospect for any of that changing at any point in the future even after accepting that deal.

 

That's why I keep asking what the endgame is. Every response has been, including yours..."Look how bad things might get if they do default!" But that still doesn't give a path out.

 

Add to that the type of culture that Greece has - i'll work 3-4 days a week and not buy anything or pay any taxes - and it compounds the problem even more.

Edited November 2, 2011 by Jenksismybitch

[Y2HH]

That's the worst reason I've read yet.

 

I never said it was a good reason, but it IS one of the main reasons they're doing it now.