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Greece to leave Euro... Eventually


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#1 DrBubb

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Posted 07 February 2012 - 04:00 AM

Greece will need a second restructuring
Saving the Greek government will not be the end
======================================

"Greece needs to come up with something. They need that money. Whether they stick to their agreements or not, we'll find out later... The Greeks will not be able to go do that path. They may stick to it a year or so... then it will become too painful."
- post #20

"Let the riots begin. They will justify the default. And that in turn will get Europe to turn its back on Greece for years to come."
- post #62

"Once Greece is forced out, the official line will be: It's contained !"
- post #71

Posted Image

Some think that Greece will announce a restructuring of its debt this week, and that will be the end of the crisis. They expect a nice rally in the markets. I don't believe it.

The fact is: the austerity measures that the government is likely to agree will have negative knock-on effects in other parts of its economy. Such as the Greek property market. Reduced incomes will make it difficult for people to servive their mortgages. This is clear in a post from elsewhere on GEI:

House prices in Athens are going down steeply ,although % information is not clear, since
there are very few transactions, market is dead, frozen. One of the reasons is that people
are taxed on the basis of Max(declared income, x), where x is an amount depending on individual
lifestyle, taking into account owned property, cars, swimming pools etc. Low income workers
who have inherited property are in trouble. Another reason is the recent 'property levy', included
in electricity bills, which may be as high as 600 Euros/year for a small apartment in Athens.
There are some people who borrowed heavily to buy an apartment. They have seen wages cut
by 15% so far ,another 20% looming, income taxes rise, tax rebates on their mortgage decrease
,
new taxes on property introduced, insecurity on their job tenure increase.
Who in his right mind would like to invest in property, even if he could,
since new mortgages are hard to obtain, given the liquidity problems in banks.

It's amazing that the cumulative recession is nominal terms (not corrected for inflation) is ONLY 20% in 5 years.
Greece or Hellas is in a deadly deflationary spiral, where only the prices of necessary goods
remains stubbornly high. If the instructions of the Troica continue to be strictly obeyed, income will decrease to
0, taxes to 100% and still the national debt could not be repayed.


A 15-20% cut in incomes, combined with rising rates and higher taxes is a formula for much lower property prices in Greece. Lower property will keep pressure on the balance sheets of banks. Some may go bust. So they are not going to be eager to lend more mortgage loans until property prices hit bottom, and that bottom could be years away.

What's the way out for Greece?
The best thing might be to withdraw from the Euro. That way, mortgages could be redenominated into a New Drachma currency, and the loss could be taken in the FX rate, not on bank balance sheets.

Posted Image

I think the restructuring of the Debts, with private lenders taking a 70% haircut, is only the latest step in a very long dance routine... Maybe leading to freedom from European "influence."
=== ===

(For the price record here):

GGGB1YR:IND 528.38400 :ph34r:
Greece Govt Bond 1Year Yield


The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#2 DrBubb

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Posted 07 February 2012 - 04:16 AM

VIEWS on how far Greek Property prices will fall:

DrBubb:
I cannot see how Greece can stay in the Euro. Those wage cuts are going to hammer property down, by maybe 50% or more from the top. And that will put the Mortgage lenders into a long term mess.

Wouldn't it be better to re-introduce the non-Euro Drachma, and avoid the deflation? Then those with big mortgages, and the banks too, might have a better chance to survive. If they can maintain their incomes, then they may be able to afford to pay their mortgages, and the banks might get their loans back.



G0ldfinger:
I'd be astonished if prices were not 50% off (the peak) from the middle class down anytime soon. I'd rather expect 70% down in the end. It should be worse than in Ireland.


If prices drop 50-70% many banks are going to be in trouble. I reckon the banks will immediately put pressure on their government to withdraw from the Euro as soon as the First debt restructuring has been agreed and completed.

Others here agree that a new currency is inevitable

You mean re-introducing the drachma? A change in currency will probably save jobs, nominal asset prices and banks, at the expense of the purchasing power of the drachma. In real terms, asset deflation, i.e. the real value of houses compared for instance with other currencies should continue to decrease. I believe a change in currency is unavoidable, unless the Greek debt is cut by a very large percentage, which is unacceptable to the ECB, and Germany.


The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#3 DrBubb

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Posted 07 February 2012 - 04:22 AM

Goldfinger also expects a new currency, and Greek Hyperinflation... eventually

It's quite interesting what's going on in Greece. Somehow, it is a deflation, but then it's not. More like a zombie deflation. The reason being of course that the ECB bought huge amounts of Greek financial crappola and hence prolonged the agony (congrats to the little Einsteins, especially to Jean-Claude). Now, as they're stuck in these way too large currency boots, necessities stay stubbornly high. A reasonable amount of hyper-inflation by re-introducing the Drachma would do wonders, would re-distribute wealth while keeping the system going (at least for a while, if it does not totally get out of control). As always, hyper-inflation is the (at least short term) socially more acceptable "solution". I am quite confident we'll see it in Greece.


Posted Image

Greece, Oct. 1944
Highest monthly inflation: 13,800%
Prices doubled every 4.3 days

In the fifth worst inflation situation of all time, Greece in 1944 saw prices double every 4.3 days. Hyperinflation in Greece

/source: http://www.cnbc.com/...ll_Time?slide=2
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#4 DrBubb

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Posted 07 February 2012 - 04:30 AM

Greek leaders face crunch talks, unions strike

Greek political leaders face crunch talks on Tuesday to hammer out a deal on unpopular reforms that have prompted the country's biggest labor unions to walk off the job.

Failure to strike a deal to secure the 130-billion-euro ($170 billion) rescue risks pushing Athens into a chaotic debt default which could threaten its future in the euro zone.

European Union (EU) officials say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15 to allow time for complex legal procedures involved in the bond swap to be completed in time for a March 20 bond redemption.

In some euro zone countries, including Germany and Finland, parliamentary approval is required to raise the bailout money.

In Paris, German Chancellor Angel Merkel on Monday expressed the exasperation among euro zone leaders at seemingly endless arguing in Athens...

/more: http://www.reuters.c...E8120HI20120207
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#5 DrBubb

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Posted 07 February 2012 - 03:49 PM

Still "in the woods"

Talks are continuing between Greece and its private creditors on a debt-exchange deal in which bondholders would voluntary trade their bonds for paper with a lower face value. Those talks, too, have dragged on for weeks, missing multiple deadlines along the way.

The stakes for Greece, the eurozone currency bloc and potentially the continent's financial system are high. The country won't be able to make its debt payment in late March without the international support, which would lead to a messy default. Analysts have said such a default could hit European banks that hold Greek debt and destabilize sovereign debt markets of larger, more systemically important, countries like Italy.
The euro jumped by 0.36% to $1.3177, while the U.S. dollar fell 0.25% against a basket of six world currencies tracked by the dollar index.


Read more: http://www.foxbusine.../#ixzz1liBEPHHg
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#6 neel

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Posted 07 February 2012 - 05:19 PM

Restructuring the Greek debt will not be the end.

It has long been my opinion that Greece should have
1) created a budget surplus
2) write-off a substantial part of its debt.

Instead there are currently efforts to implement (2) before (1) has been achieved. The result, is that following debt restructuring, the national debt will continue to increase and Greece will remain forever at the mercy and outrage of its European partners.

How to implement (1)? Greece needs only half of the public sector workers it curently has (800000 by some estimates). Reducing the public sector should have been number 1 priority. Instead, until recently all parties are vehemently against this idea. Watch the reaction of the Unions for less painful measures. To avoid firing workers in the public sector, the concept of 'efedria' was sold to the Troica in May last year. 30000 workers would retire from work in 2011 for 1 year at 60% of original pay, then if alternative employment could not be found they would have to go. At the end of 2011, the efedria counted 10000 participants but 9000 of them were workers that were very close to retirement any way and only 700 was the true count. This ambivalence of the Greek Government infuriated the Troica and the Greek government lost credibility. This ambivalence is also due to public opinion. There have been attacks against
members of parliament because salaries and pensions were cut and people are out of work and desperate and the government did not dare to implement true reforms.

The government has recently reluctantly accepted that 15000 workers must be fired in 2012 but this is because the Troica says so, otherwise most parties try to distance themselves from the responsibility of this measure . Surely the popularity of Samaras, a true demagogue in the spirit of Themistocles, is attributed to his resistance to all measures that would bring recession, but he does not present any suggestions of alternative measures that will turn around the economy.

#7 halight

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Posted 07 February 2012 - 05:42 PM

If they dont get a deal in place by the deadline of Febuary 15. They wont be getting the next round of bailout monay. This means on March 20 they wont be able to pay the bonds that come due. This non payment will make the country defult on there bonds. This will then trigger CDFs which in turn could very well bring down some very big banks. and may also set the ball rolling in bringing down other countrys.

So what i would like to know is. If they dont/wont agree on a deal, whats stopping the ECB and/or central banks that wish to take part in just redeaming all of Greeses bonds in one go off all the banks/companys that own them. This will fix the debt problem once and for all. Now Grease will not have any debt. And will not be able to raise any debt from the bond market. The Gov will soon run out of money and many brits will have there summer hoilday in a civil war zone. Not good for anyone but it will teach them to live within there means. Tough love kind of thing.

Also with the ECB andanyone else takeing on all the countrys debt.Grease will not defult all debts to private banks/companys will have been paidf back. The banks with this new maony will then be able to leand it out/invest it or do with it what ever they do. This really has to be a far cheaper way of doing things tahn letting grease defult and then haveing too bailout a load of banks that have been taken down paying out on there CDFs.



Am i right ? or way off the mark ?
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#8 G0ldfinger

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Posted 07 February 2012 - 06:01 PM

Apparently the deal is close, might follow tonight. The Papas have pushed it through, but they will get more demos.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
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#9 halight

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Posted 07 February 2012 - 06:07 PM

Apparently the deal is close, might follow tonight. The Papas have pushed it through, but they will get more demos.



But what happens if the Unions bring the Goverment down, They could end up with a bunch of hard core left wingers in, that have a back bone and dont care what the rest of Europe says for what they think about them. They could bring the hole sorry mess down.
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#10 neel

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Posted 07 February 2012 - 07:00 PM

It is true that the popularity of parties of the left has remained steady, however,
the Unions can not bring at this stage the Government down, since the government consists of
PASOK,New Democracy and LAOS representing approximately 50% of the population.
The elections to be held in April may result in gains for SYRIZA and the Communist party
that refused any participation in the present government, and appear to support the
idea of a Euro exit, without clarifying the implications.

#11 G0ldfinger

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Posted 07 February 2012 - 08:01 PM

But what happens if the Unions bring the Goverment down, They could end up with a bunch of hard core left wingers in, that have a back bone and dont care what the rest of Europe says for what they think about them. They could bring the hole sorry mess down.

Oh, yes, sure, after the next elections all this will be forgotten. But the Papas will be long gone.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
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#12 G0ldfinger

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Posted 07 February 2012 - 08:12 PM

...To avoid firing workers in the public sector, the concept of 'efedria' was sold to the Troica in May last year. 30000 workers would retire from work in 2011 for 1 year at 60% of original pay, then if alternative employment could not be found they would have to go. At the end of 2011, the efedria counted 10000 participants but 9000 of them were workers that were very close to retirement any way and only 700 was the true count.

Beautiful how Greece and the Papas who lead them have used every trick in the book to fool Merkozy and the rest of Europe. Well, I can hear the chickens coming ... Sort of a karma thing, it seems.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
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#13 Mabon

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Posted 08 February 2012 - 12:24 AM

But what happens if the Unions bring the Goverment down, They could end up with a bunch of hard core left wingers in...


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#14 DrBubb

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Posted 08 February 2012 - 12:42 AM

GREEK DRAMA - Will it be a tragedy ?

Greece facing 'dramatic dilemma'
February 7, 2012:

Greek Prime Minister Lucas Papademos meets with officials from the nation's main political parties to hammer out reforms needed to secure more bailout money.
NEW YORK (CNNMoney) -- Officials in Greece are under pressure to reach agreement on more austerity measures, as the threat of a default hangs over the country and protestors take to the streets.

Prime Minister Lucas Papademos and the leaders of Greece's governing coalition need to hammer out the details of a package of job and salary cuts, as well as pension reforms and other measures to reduce public spending.
Papademos was set to meet with party leaders Tuesday evening, but talks have now been pushed back to Wednesday, according to the Prime Ministers office.
It was the second delay since the leaders agreed Sunday on the "main elements" of the program, including a plan to reduce public spending by 1.5% of gross domestic output this year.

Meanwhile, Greek labor unions held a daylong strike Tuesday ...
. . .
The worsening Greek economy has raised calls for the nation's creditors in the "official sector" to provide some relief.
The European Central Bank, which holds an estimated €30 billion to €45 billion of Greek debt, is under pressure to forego profits on those bonds, as are individual euro area central banks.

/more: http://money.cnn.com...markets/greece/
=== ===

What's that?
The ECB is "under pressure to forego profits on those bonds"

Does anyone else react badly to this.
The @rseh@les who helped to engineer this disaster might make a profit ??!!
No wonder these negotiations are going badly, these jerk-ermers think they can escape without a haircut, and maybe even a profit.

The Papas should send them packing, and get on with their own fix.
And if the Mamas also join into making their "own solution", then they can have:



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#15 romans holiday

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Posted 08 February 2012 - 05:58 AM

Greece will need a second restructuring

Think it will need longer than that. :unsure:
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
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#16 ETF

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Posted 08 February 2012 - 01:12 PM

hahaha nice one RH

#17 John Doe

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Posted 08 February 2012 - 02:30 PM

Think it will need longer than that. :unsure:

:lol: Very good
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#18 DrBubb

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Posted 08 February 2012 - 05:22 PM

Think it will need longer than that. :unsure:

Posted Image

"What they will come up with (if they stick to the program) is a self-induced depression."
- post #20
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#19 DrBubb

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Posted 09 February 2012 - 07:22 AM

70% Haircut on Greek Debt `Won't Solve the Problem'

Jan. 30 (Bloomberg) -- Keith Wade, chief economist at Schroders Plc, discusses efforts to reach an agreement on a Greek debt writeoff and the economic outlook for Italy, Spain and Portugal. He speaks with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)

/Video: http://www.bloomberg...video/85177420/

"Greece cannot meet growth targets... it is in the fourth year of recession... cannot stabilise its economy."
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#20 DrBubb

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Posted 09 February 2012 - 07:35 AM

I am changing the Title of this thread to:
Greece to leave Euro... Eventually

(1)
Dow, Alpert Say Greece Will Ultimately Leave Euro Zone (Video)
Washington Post‎ - 332 related articles

Video: http://www.washingto...T4zQ_video.html

Feb. 8 (Bloomberg) -- Mark Dow, portfolio manager at Pharo Management LLC, Daniel Alpert, managing partner at Westwood Capital LLC, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, and Bloomberg Businessweek's Peter Coy talk about Greece's sovereign-debt crisis. They speak with Carol Massar on Bloomberg Television's "Taking Stock." (Source: Bloomberg) (Bloomberg)

"How much back door exposure people might have worries me."

"The fundamental way you become more competitive is... you devalue your currency."

"Greece needs to come up with something. They need that money. Whether they stick to their agreements or not, we'll find out later... The Greeks will not be able to go do that path. They may stick to it a year or so... then it will become too painful."

"We are going to have a very poor country in Greece."

"What they will come up with (if they stick to the program) is a self-induced depression."
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix




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