THE Eurozone Economics Thread pt 1 (merged) Archived

[Sixstrings]

Good. That government needs to collapse. The Greek government has been utterly disconnected from the People for far too long.

Men are not meant to be slaves, they were endowed by their Creator with inalienable rights: life, liberty, the pursuit of happiness -- and as free men with inalienable rights, they should only be governed with their consent. If most of the people don't consent and the government has ceded away the People's sovereignty to unelected foreign bureaucrats and banksters -- then it's time for a new government. Anything else is tyranny.

[jdmartin]

How's this for a guarantee: Either shovel over some money or our people won't have any funds to buy your cheaply made, useless crap.

[dolanbaker]

A Greek government collapse would put an even bigger bat up the bondholders nightdress, given Greece's recent history, there's every chance it could be a military junta!

[Sixstrings]

How's this for a guarantee: Either shovel over some money or our people won't have any funds to buy your cheaply made, useless crap.

That only works up until the moment Asia has a large enough domestic consumption market. Then they won't need us anymore. But yet we'll still owe them all this money. We'll still have made all these "guarantees." God forbid the US ever has to issue bonds in yuan, that would be a very sad day.

On the bight side, we have food.

But the way our system is, bankster and top 1%, we'd never get nationalist and play hardball our elite will just be in bed with the Chinese. Just as Ireland exported food to England even while millions died from starvation in the potato famine. Same thing will happen again, Americans will go hungry while our Big Ag exports to China.

[Daniel_Plainview]

EU Deal Unravels from Many Sides; Italy, France Bond Spreads Hit Record High vs. Germany; Bund Yield Drops Most on Record; All Out Bond Crisis

In the wake of Papandreou's Call for Voter Referendum on EU Debt Deal sovereign debt yields plunged in Germany and surged higher in most other European countries, but most notably Italy and France.

Italian bonds led declines among the securities issued by Europe’s most indebted nations after a Greek plan to hold a referendum on its international bailout added to concern the region’s financial turmoil will deepen.

Italy and France’s 10-year borrowing costs climbed the highest levels relative to benchmark German debt since before the creation of the euro in 1999. Bund yields fell the most on record, with the securities outperforming all their euro-area peers, as investors sought the safest assets.

“The run-up will put the European Central Bank, European Union and International Monetary Fund in a tough position regarding disbursements to Greece,” El-Erian wrote. The EU deal “appears to be unraveling from many sides.”

The ECB was said by three people to have bought Italian debt today as it tries to stem financial-market contagion to the euro area’s biggest bond market. Two-year note yields still rose 75 basis points to 5.75 percent, the highest since 1997. The five-year rate rose to more than 6 percent, a premium of more than 5 percentage points compared with similar-maturity German debt.

The deal is certainly "unraveling from many sides” with force, so much so that Europe is in the midst of an "all out sovereign bond crisis".

[jdmartin]

I mostly agree with you Sixstrings. Once China has a healthy domestic economy, they'll largely deal with the oil & ag producers and consume their own stuff. With their population they're willing to accept large numbers of poor and dead.

[peripato]

A Greek government collapse would put an even bigger bat up the bondholders nightdress, given Greece's recent history, there's every chance it could be a military junta!

I'm sorry, but see this picture?


There's no way the Greek people would stomach another military coup, unless it was in support of a default and exit from the Eurozone, followed by a speedy transition back to democracy.

[dolanbaker]

Top brass replaced
http://www.athensnews.gr/portal/8/49916

In a surprise move, on Tuesday evening the defence minister replaced the country’s top brass.

An extraordinary meeting of the Government Council of Foreign Affairs and Defence (Kysea), which comprises the prime minister and other key cabinet members, accepted Defence Minister Panos Beglitis' proposal that the following changes be made to army, navy and air force and the general staff:

General Ioannis Giagkos, chief of the Greek National Defence General Staff, to be replaced by Lieutenant General Michalis Kostarakos
Lieutenant General Fragkos Fragkoulis, chief of the Greek Army General Staff, to be replaced by lieutenant general Konstantinos Zazias
Lieutenant General Vasilios Klokozas, chief of the Greek Air Force, to be replaced by air marshal Antonis Tsantirakis
Vice-Admiral Dimitrios Elefsiniotis, chief of the Greek Navy General Staff, to be replaced by Rear-Admiral Kosmas Christidis

It is understood that the personnel changes took many members of the government and of the armed forces by surprise.

Just to be sure there won't be a coup, replace the top brass!

[Daniel_Plainview]

Can you guess who wrote the following apocalyptic red-alert?

Things are falling apart in Europe; the center is not holding. Papandreou is going to hold a referendum; the vote will be no. Italian 10-years at 6.29 at pixel time; that’s a level at which the cost of rolling over the existing debt will force a default, even though Italy has a primary surplus. And with everyone simultaneously pushing for fiscal austerity, a recession seems almost certain, aggravating all of the continent’s problems.

I’ve been charting this trainwreck for a couple of years, and am feeling too weary to trace through it again right now. Let’s just say that the euro was an inherently flawed idea that can work only given a strong European economy and a significant degree of inflation, plus open-ended credit to sovereigns facing speculative attack. Yet European elites embraced the notion of economics as morality play, imposing across-the-board austerity, tightening money despite low underlying inflation, and have been too concerned with punishing sinners to notice that everything was going to blow apart without an effective lender of last resort.

The question I’m trying to answer right now is how the final act will be played. At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France.

It all sounds apocalyptic and unreal. But how is this situation supposed to resolve itself? The only route I see to avoid something like this involves the ECB totally changing its spots, fast.

Aside from that, Mr. Draghi, are you enjoying your new job?

So who wrote the above? Was it ...

A) Michael Ruppert
B) James Howard Kunstler
C) Charles Hugh Smith
D) Chris Martenson
E) Paul Krugman
F) John Michael Greer
G) Karl Denninger
H) Other

You need to guess who wrote that before you clink on this link.

[basil_hayden]

None of this makes any sense to me. I mean, Greece's GDP is equivalent to that of the State of Maryland, around $300 billion.

You could buy the whole damn state or country for that price and make it your personal vacationland.

There must be much more to this, like a bunch of bankers have bets on based failure that will be used to pay for their other, unexpected failures. Default by Greece ensures the bankers win their bet while austerity makes the banks lose their bets.

Am I close?

[Pops]

Can you guess who wrote the following apocalyptic red-alert?

It all sounds apocalyptic and unreal.

That was the giveaway, you'd have to get into giant sand worms and lizard people for the others to say something like that; "things are falling apart" is what Kunstler screams when his newspaper's late in the morning.

[Daniel_Plainview]

Can you guess who wrote the following apocalyptic red-alert?

It all sounds apocalyptic and unreal.

That was the giveaway, you'd have to get into giant sand worms and lizard people for the others to say something like that; "things are falling apart" is what Kunstler screams when his newspaper's late in the morning.

Hah! You're right ... that is the giveaway.

[evilgenius]

None of this makes any sense to me. I mean, Greece's GDP is equivalent to that of the State of Maryland, around $300 billion.

You could buy the whole damn state or country for that price and make it your personal vacationland.

There must be much more to this, like a bunch of bankers have bets on based failure that will be used to pay for their other, unexpected failures. Default by Greece ensures the bankers win their bet while austerity makes the banks lose their bets.

Am I close?

This whole crisis came about, in my mind, because of tax dodging and reimbursement graft, together with a pervasive attitude of greed developed within the populace at large. The monies that the tax cheats refused to pay are all tied up in the derivatives markets. Assuming this far in that those same tax cheats still have any power in all this, the governments will be trying to shore up those markets until they can't anymore. Probably the huge bonuses paid out to corporate executives are also in those same markets, what is not tied up in shares. In the main the greed that developed in the populace at large is what has been slapped the hardest so far. If (when) the derivatives markets blow so will all of the so called profits and cash that corporations are supposed to be sitting on because they have stuffed it there in order to avoid paying taxes on it. The first deflationary leg brought oil down to around $30 a barrel from its record. The second deflationary leg will do the same, only it will probably do it on a more effective basis because the money used to speculate commodity prices up off of the floor won't exist anymore.

Or they could find a solution.

[evilgenius]

God forbid the US ever has to issue bonds in yuan, that would be a very sad day.

That's an interesting point. Simply put, that is what Greece, Italy, Ireland, Portugal, Belgium and the rest of the small fries have been forced to do under the current euro scheme, only in euros. When you can't issue bonds in a locally pegged currency value - and pay them back from that same peg, it floats - then you are destined to lose. Otherwise the risk is all one sided. The risk can never be all one sided because default destroys the positions of both parties. So, what is really happening in this case is risk that exists, but has no controlling mechanism in place for one of the parties to mitigate said risk. They believe they are going to get back the face value all the time when there should be a market defined value that adjusts risk between the two parties when those two parties exist in a financial relationship which crosses the kinds of political boundaries outside of which investors are not able to influence decision making. In other words, normally a poor economy benefits from a weak currency. The weak currency means that the payback of bonds is less compared to the expected return in another currency. The eurozone never included a means to allow that same kind of safety valve to allow re-pricing of bonds as per over-arching market dynamics. It's a two dimensional model that is trying to represent a three dimensional world. According to the laws of a two dimensional model the overlapping points which would be resolved by the dimension of height in a three dimensional model instead go chronically unresolved and are thus perpetually up for argument because there is more than one way to go.

[Revi]

The Greeks are the only thing in the way of sweeping it all under the rug. Why can't all the gamblers just get back to the tables and keep upping their bets? It's bad for business. They should tell the Greek people that they should just vote it down and we all can get back to the bacarat tables. There must be a big bet in among the big banksters on a default of Greece. It's got to be huge.

[Daniel_Plainview]

Greek 1-Yr soars to 243%

[tsakach]

Greek Leader Calls Off Referendum on Bailout Plan

After a tumultuous day of political gamesmanship, Prime Minister George Papandreou called off his plan to hold a referendum on Greece’s new loan deal with the European Union, withdrew his previous offers to resign and opened talks on a unity government with his conservative opponents.

At first, Mr. Papandreou was said to have offered to resign before a confidence vote scheduled for Friday. By late afternoon, however, Greek news media reported during the cabinet meeting that he not only was refusing to resign but was in fact calling off the referendum plan.

Divisions within Mr. Papandreou’s government flared into the open on Thursday when the finance minister, Evangelos Venizelos, and his deputy broke ranks with the prime minister to oppose a referendum, saying it could jeopardize Greek membership in the single currency euro zone.

http://www.nytimes.com/2011/11/04/world/europe/greek-leaders-split-on-euro-referendum.html

Greek parliament will still hold the no-confidence vote for Papandreou's government tomorrow, Nov 4.


Greek Prime Minister George Papandreou addresses Socialist members of parliament in Athens.


Greek Finance Minister Evangelos Venizelos reacts as he listens to a speech by Greek Prime Minister George Papandreou.

[Daniel_Plainview]

Greek Leader Calls Off Referendum on Bailout Plan

The Greek people will be heard from one way or another ... so we'll just have to wait and see ... Meanwhile ...

Mish -- Eurozone's Waterloo; Papandreou Forced to Cancel Referendum; Democracy Dies to Protect Banks; Germany's Dilemma: The Eurocratic Nanny Zone Vote

The Grand Plan for Europe became the Waterloo of the Eurozone

The facts remains the same:

-- Greece has been pushed too far and has not complied with the austerity it promised

-- We are beyond any proper solution for this mess and only the 'blame game' remains with Greece potentially leaving the EURO inside of the next three months. ...

Last week's EU Summit looks more and more like the Waterloo of the EU. ... The EU concept of a United States of Europe quickly became a political idea of building a monetary and currency zone. Unfortunately the stability and growth pact was never truly enacted and as such Europe became a house without a foundation. The EU has overstretched its ability and resources and the next 48 hours is yet again about saving the concept of the Eurozone as a powerful, pragmatic way of conducting fiscal and monetary policies, but in reality we have become saturated with debt, empty promises, and a political system which is reduced to producing plans for later plans.

Europe now needs action not empty words - but don't hold your breath as the domestic political agendas in the key players' home countries are turning increasingly hostile and herein lies the real threat!

Weak Economies, Weak Leaders, and Greece on the Brink

Europe’s leaders should have paid more attention to the distress of ordinary Greeks and less to the distress of well-heeled European bankers. Rather than trying to punish the “profligate,” they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9.

Greece needs to make serious, painful reforms, including doing away with antiquated labor rules, streamlining a bloated public sector and selling off poorly managed state assets.

continued

[Pops]

"Unity" government, eh?

'Mericns would never stoop so low.

[Sixstrings]

Obama quashes democracy in Greece:

Obama, G20 leaders push for EU debt crisis fix
http://www.cbsnews.com/8301-202_162-57317367/obama-g20-leaders-push-for-eu-debt-crisis-fix/