Financial Crisis

[LaoPo]

I don't understand all the fuzz about Greece.

Greece is a notorious bad boy in the EU and it has been cheating and lying upon Brussels for many years. Their GDP economy is for more than 25% (!) depending on the BLACK money market and EVERYBODY is cheating on their taxed income.

In an article I read today they did a survey amongst 150 MD Doctors in a wealthy neighborhood of Athens.

More than 50% claimed an income of less than €30K whilst there were even quite a few Doctors who claimed to have an income of less than € 10K/year...in a wealthy part of Athens....yeah right...

The EU is completely correct to not invest or help Greece with € funds since they have to learn by themselves that they can't continue like this and hold up their hands for more and more money from Brussels. Greece has ro raise their (quite low) taxes and cut spendings; the only way.

And, if they would have to leave the Euro, so be it.

What's much more important is the situation with Spain and Portugal, next to Ireland..........PLUS an eventual decision by Germany in the near future (1 to 2 years ?) to leave the Euro and leave all those sick Euro kids in hospital and have them pay for all the mistakes/faults they made in the past themselves.

It will be the only way to cure the sick patients!....not just simply use the hard-worked-for Euros from the healthy Euro-countries!!!

Only the strong nations within the EU and the Euro area (16 countries) can decide upon such a step, not the weak ones.

The Euro area has a combined population of some 330 Million people and that's about the same as the USA.

The BIG difference is that the US (Washington) as well as the UK (London) have their US$ and GBP printing machines working, full time, day-and-night 24/7, and that's something the Euro -ECB in Frankfurt- understood a lot better than the previous two countries; trying to keep the finances of all members in control.

Now that Greece and some other countries are in deep <deleted> (because of their own faults and lies!) many -outside Europe- focus their attention to those problems, forgetting, at the same time, that the USA and UK is practically bankrupt already but not yet........ because the printing machines are still working; the US with more than 50 States in the RED and factually already bankrupt and only able to survive (paying the weekly/monthly salaries of their State employees) because Washington and London take care of those "small" problems.....yeah right

We better focus on our own problems rather than to focus on the neighbors' ones.

The grass is always greener.......etc.

LaoPo

[12DrinkMore]

then why the rainbow press sensationalist headline?

What do you expect?

Unbiased factual un-opinionated responsible reporting????

[flying]

Just How Ugly Is The Sovereign Default Truth? How Self Delusions Prevent Recognition Of Reality

[teletiger]

I'd have hated to have paid a subscription when this particular gem dropped into my email box......3 years too late

"The right tools could have identified the unsustainable build-up of leverage in pockets of several economies in the years leading up to the crisis. Policy makers should work to develop a more robust system for tracking leverage at a granular level across countries and over time. One needs to look at specific metrics such as the growth of leverage, and the borrowers' ability to service debt if there is a disruption to income"

The only "tools" were the people who didn't see it coming. 'And only in "pockets of several economies." From the McKinsey report.

Regards.

[Naam]

Greece is a notorious bad boy in the EU and it has been cheating and lying upon Brussels for many years. Their GDP economy is for more than 25% (!) depending on the BLACK money market and EVERYBODY is cheating on their taxed income.

In an article I read today they did a survey amongst 150 MD Doctors in a wealthy neighborhood of Athens.

More than 50% claimed an income of less than €30K whilst there were even quite a few Doctors who claimed to have an income of less than € 10K/year...in a wealthy part of Athens....yeah right...

LaoPo

quote from a greek acquaintance some years ago: "you are considering to live in an asian third-world nation without proper infrastructure? for tax reasons? ha ha ha, hee hee hee, ho ho ho... come to Greece!

[flying]

Goldman Sachs faces 'Robin Hood tax' vote-rigging claims

The Robin Hood Tax campaign alleged that a Goldman computer was one of two computers that allegedly “spammed” the internet poll with more than 4,600 “no” votes in less than 20 minutes on Thursday.

Technical staff for the Robinhoodtax.org.uk website said the “no” counter increased at a “dramatic rate” from 3.41pm.

The number of “no” votes jumped from 1,400 to 6,000 before campaigners – who are calling for the introduction of 0.05pc tax on banking transactions – tightened the site’s security.

Robin Hood’s security team claimed it traced the erroneous votes to two computers, one of which is allegedly registered as belonging to Goldman.

A spokesman for Goldman said the bank had “just received this information and is investigating fully”.

After being flooded with concerned messages from Facebook and Twitter users, the website displayed the following message: “For all those who have noticed something strange happening on the vote, please don’t worry. Someone is playing games. But at lunchtime we posted a spy in a high tree and are working to catch the culprit. The count has been reset to remove these false votes and our guards are now back on the gate. Please keep voting (fair) people.”

By 8pm on Thursday the “yes” vote had a substantial lead on the “no” camp, with 21,300 votes compared with 2,600.

The campaign has attracted a string of celebrity endorsements, including Four Weddings and a Funeral writer Richard Curtis and Love Actually actor Bill Nighy.

The campaign, supported by groups including Barnado’s, the RSPB, the NUT and the Unite union, claims the tax – which is based on Nobel Laureate economist James Tobin’s idea from 1972 – could generate £255bn worldwide a year.

:D

Also a funny video at the link above

[sokal]

"Greece faces devaluation, default or deflation. Next stop the IMF"

hmm... some people believe what journàsslists write, others believe in blogspot lecturing and then there are those who base their conclusions on their own homework. to each his own

devaluation is inflation. People are idiots, look at Iceland. Its economy and banking system collapsed and it has INFLATION.

so the Icelanders are idiots? did 300,000 Icelanders go abroad and piled up billions of debt or was this caused by their bankers? were the country's top bankers idiots who cheated, filled their pockets with high salaries, fat bonuses and now smile because their millions are stashed safely somewhere offshore?

by the way, first the banking system collapsed and then the currency was devalued. not the other way round.

No Icelanders are not idiots, people that think that you need a functioning economy to have inflation are idiots. I don't think these bankers got off as good as you think they did.

[sokal]

"Greece faces devaluation" is utter rubbish as its currency is the €UR which cannot be devalued unilaterally. only a journàsslist who has no idea (but a wealth of that "no idea") could write this BS. perhaps this clown thinks that Greece still has the Drachma?

Although the article didn't say very much, more a mundane space filler, he was quite clear on the options as he saw them.

Default runs the risk that Greece would not be able to get access to the global credit markets, although this fear proved to be exaggerated for Russia in 1998 and Argentina in 2001. Devaluation is incompatible with Greece's membership of the single currency. That leaves deflation, grinding out improvements in competitiveness by cutting wages and keeping the lid on costs.

dam_n, a currency that resembles a gold standard. What is wrong with it is exactly what is right with it.

[sokal]

So Greece the EU will not accept IMF stringent conditions to solve this problem - So they, the euro club , all go on talking and coming out with supportive statements / Greece tries and fails to raise taxes , Unions refuse to accept pay cuts , pension cuts - What next ?

There will be a political fudge and attempt to hoodwink the markets - This surely will not work - So a sinking Euro and increased risk in Greece , Portugal , Italy , spain - We can see it coming

Can you see a solution through the politics ? Merkel for sure , I think , will not commit any German Tax money to bailing out other poorly run economies ?

Let us hear some of your research !

Your right, the Euro zone might actually have real deflation. The currency is too complicated to print and bail out so the only option is default. Contrary to popular belief, this will save the euro.

[sokal]

I'd have hated to have paid a subscription when this particular gem dropped into my email box......3 years too late

"The right tools could have identified the unsustainable build-up of leverage in pockets of several economies in the years leading up to the crisis. Policy makers should work to develop a more robust system for tracking leverage at a granular level across countries and over time. One needs to look at specific metrics such as the growth of leverage, and the borrowers' ability to service debt if there is a disruption to income"

The only "tools" were the people who didn't see it coming. 'And only in "pockets of several economies." From the McKinsey report.

Regards.

Its called a gold standard, that does not mean that you would use bullion as currency, it just means that central banks and currencies around the world would be backed by a certain percentage of gold and global trade imbalances would be settled in gold.

Population growth and gold production growth are close on a percentage basis, that is what makes gold such a good medium of exchange.

[12DrinkMore]

dam_n, a currency that resembles a gold standard. What is wrong with it is exactly what is right with it.

Yes, in taking on the Euro there were a number of conditions that had to be met and also adhered to. But the PIGS decided to exploit all the advantages of the Euro and ignore all the agreements they made. At least Ireland now realises what has to be done and is actively heading along the devaluation path. I hope that this painful process will lead to stabilising the Euro and leave it stronger.

The Greeks are a frigging joke, really they are.

http://www.thelondondailynews.com/reason-g...ion-p-3773.html

he problem of Greece, is not simply the problem of unreliable data, or a weakness of political leadership, but the intrinsic problem with the Greek public sector, which allows civil servants after serving 20 years, to retire on a full pension from 38 years old in some cases. What pension system in the world can with stand 30-40 years of an individual being paid a full pension, and not putting anything back in the system? Only in Greece.

The state broadcaster, ERT it was revealed to employ more people than the BBC, with output that comes no where that of the BBC.

Meanwhile the Greeks are now told to ask for receipts for all work carried out in the home, to prevent cash being used, and to give the Greek taxman a chance.

Maybe Greece needed to wake and accept that two homes, regular holidays, private tuition for the kids, and meals out every other day must now stop. Reality time, the mood in Brussels is clear for Greece to borrow the critical 53 billion Euros ($75 billion) this year to cover its deficit and refinance debts, the Greeks must make deep and unpopular cuts to its public sector, estimate of 4% are being touted.

and

http://www.businessweek.com/news/2010-02-0...d-update1-.html

Greece runs one of the most generous pension systems in Europe, according to the Organization for Economic Cooperation and Development, with some retirees earning more than when they worked. Early-retirement plans, used to skirt laws protecting workers from dismissal, have heightened the burden on the pension system as the population lives longer.

Concern about Greece’s finances prompted Fitch Ratings, Moody’s Investors Service and Standard & Poor’s to cut the country’s creditworthiness and credit-default swaps on Greek debt surged to a record last week.

Civil servants say they will strike tomorrow over planned wage cuts and may join a private-sector walkout on Feb. 24.

Now does anybody really think that the Germans, currently pushing up the the retirement age to 67, are really going to pay for the Greeks to retire on full pensions after just 20 years in the civil service?

Nope, it ain't gonna happen.

The adjustment is going to be difficult, but either they adjust and deflate out of the mess, or they have to leave the Euro and cope with an even bigger mess. Hopefully they can be informed and educated about basic finance, so that all the proposed strikes are called off.

[Abrak]

Its called a gold standard, that does not mean that you would use bullion as currency, it just means that central banks and currencies around the world would be backed by a certain percentage of gold and global trade imbalances would be settled in gold.

Population growth and gold production growth are close on a percentage basis, that is what makes gold such a good medium of exchange.

I often find that the very same people who believe the gold exchanges are dysfunctional because there is a lot of paper gold (ETFs, futures etc) also believe in a gold standard whereby the whole financial system is paper based and backed with gold reserves they dont even think exist.

[Abrak]

The Greeks are a frigging joke, really they are.

They certainly are - here is a nice chart...

Now does anybody really think that the Germans, currently pushing up the the retirement age to 67, are really going to pay for the Greeks to retire on full pensions after just 20 years in the civil service?

Nope, it ain't gonna happen.

I think this a tricky question. Logic would dictate that Germany should have left the Euro long ago but they have never waivered an inch in their political commitment despite their suffering. They have been subsidizing crappy economies for 20 years. Greek wages have risen 30% in real terms verses Germany over the last ten years.

As I see it they are probably torn between an illogical commitment to the Euro and breaking its underlying principles by bailing out the useless Greeks.

The adjustment is going to be difficult, but either they adjust and deflate out of the mess, or they have to leave the Euro and cope with an even bigger mess. Hopefully they can be informed and educated about basic finance, so that all the proposed strikes are called off.

I dont believe that any country has successfully deflated its way out of a mess like Greece is in, in economic history. They simply dont have the export earnings and by the time they deflated their GDP to an appropriate level, their debt/GDP levels would be completely off the map.

[churchill]

"I think this a tricky question. Logic would dictate that Germany should have left the Euro long ago but they have never waivered an inch in their political commitment despite their suffering. They have been subsidizing crappy economies for 20 years. Greek wages have risen 30% in real terms verses Germany over the last ten years.

As I see it they are probably torn between an illogical commitment to the Euro and breaking its underlying principles by bailing out the useless Greeks."

Perhaps this is a solution to create a 2 speed Europe and Euro . One for the Northern currencies with higher interest rates , low inflation , and a strong currency and another duel currency , euro 2, with lower interest rates , higher inflation and a weaker currency ? And if the southern countries get their act together a merging of currencies in the years to come .

Which would signal the failure of the Euro for the time being but a recognition that it cannot survive in its present form .

Edited February 13, 2010 by churchill

[Lancelot]

only a teenie weenie

Most guys wish for a BIG weenie

[churchill]

only a teenie weenie

Most guys wish for a BIG weenie

Some don't have to wish .

[Abrak]

"Greece faces devaluation" is utter rubbish as its currency is the €UR which cannot be devalued unilaterally. only a journàsslist who has no idea (but a wealth of that "no idea") could write this BS. perhaps this clown thinks that Greece still has the Drachma?

I would have thought there is a way to devalue. Convert everything into the 'new drachma' and float (or simply sink.)

In a single currency that deprives you of monetary policy and no ability to devalue, the only other politically acceptable solution is to default. Replacing exchange rate flexibility with credit default volatility doesnt sound too healthy.

I sort of imagine the best long term potential for the Euro is that several weak countries leave it.

[Abrak]

Perhaps this is a solution to create a 2 speed Europe and Euro . One for the Northern currencies with higher interest rates , low inflation , and a strong currency and another duel currency , euro 2, with lower interest rates , higher inflation and a weaker currency ? And if the southern countries get their act together a merging of currencies in the years to come .

Now that would be the mother of all carry trades!!

[lannarebirth]

The Greeks are a frigging joke, really they are.

They certainly are - here is a nice chart...

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

[Abrak]

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

Well yes and no.

As of this year the Euro area had to produce GAAP based accounts which included pension and social security contingent liabilities. Contingent because a Government can always cancel them. I saw this in the ECB January monthly document but the figures were new to me not new.

They didnt publish data for individual countries but stated that the average was 330% of GDP. Even more interesting Germany and France (probably 50%) were 230% and 260% respectively so there must be some big numbers. The report is below. I suspect the individual country data is readily available from the sources. Very surprised to see the UK where it is.

I dont know much about Euroland.

__mb201001en.pdf

On page 85.

(Also the figures are artificially low because they are using highly optimistic discount rates to NPV.)

Edited February 13, 2010 by Abrak

[AlexLah]

Why are some of you so focused on Greece?

The surprise will come from somewhere else.

[sokal]

"Greece faces devaluation" is utter rubbish as its currency is the €UR which cannot be devalued unilaterally. only a journàsslist who has no idea (but a wealth of that "no idea") could write this BS. perhaps this clown thinks that Greece still has the Drachma?

I would have thought there is a way to devalue. Convert everything into the 'new drachma' and float (or simply sink.)

In a single currency that deprives you of monetary policy and no ability to devalue, the only other politically acceptable solution is to default. Replacing exchange rate flexibility with credit default volatility doesnt sound too healthy.

I sort of imagine the best long term potential for the Euro is that several weak countries leave it.

What is so bad about default ? Blow it up and start fresh again. Liquidate what you can, let the bond holders take a haircut, they deserve to lose money too. Blow up the pension system and the social spending programs and start over.

[sokal]

Why are some of you so focused on Greece?

The surprise will come from somewhere else.

Like California. They cant print their own money either.

Edited February 13, 2010 by sokal

[flying]

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

This is from a couple days back

Handy sovereign risk table

[ronz28]

Well now we know Spain's Air Traffic Controllers have been overpaid...

http://www.timesonline.co.uk/tol/news/worl...icle6991798.ece

and they get the easy pensions too and perhaps avoid taxes like the rest of the country.... so will hard working Germans, etc. bail them out too to save the Euro?

[Naam]

Well now we know Spain's Air Traffic Controllers have been overpaid... and they get the easy pensions too and perhaps avoid taxes like the rest of the country.... so will hard working Germans, etc. bail them out too to save the Euro?

the politcians will not ask hard working Germans whether they agree or disagree with a bail-out

[Naam]

Its called a gold standard, that does not mean that you would use bullion as currency, it just means that central banks and currencies around the world would be backed by a certain percentage of gold and global trade imbalances would be settled in gold.

Population growth and gold production growth are close on a percentage basis, that is what makes gold such a good medium of exchange.

I often find that the very same people who believe the gold exchanges are dysfunctional because there is a lot of paper gold (ETFs, futures etc) also believe in a gold standard whereby the whole financial system is paper based and backed with gold reserves they dont even think exist.

do you expect logic in the thinking of goldbugs?

[Naam]

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

This is from a couple days back

Handy sovereign risk table

the risks implied are based on CDS values which the "market" dictates. markets are dumb! if markets were not dumb, clever investors would only make a fraction of the dough which they have made and are still making. let's hope markets will remain dumb for a long time to come. the chances are excellent

[flying]

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

This is from a couple days back

Handy sovereign risk table

the risks implied are based on CDS values which the "market" dictates. markets are dumb! if markets were not dumb, clever investors would only make a fraction of the dough which they have made and are still making. let's hope markets will remain dumb for a long time to come. the chances are excellent

Doesnt the charts also show economic indicators also not just CDS & credit ratings?

[sokal]

Well now we know Spain's Air Traffic Controllers have been overpaid... and they get the easy pensions too and perhaps avoid taxes like the rest of the country.... so will hard working Germans, etc. bail them out too to save the Euro?

the politcians will not ask hard working Germans whether they agree or disagree with a bail-out

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.