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Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 11:51 am
by CrashedMint
If the U.S. de-facto defaults, and if Greece defaults defaults will this be a mostly political problem or are there actual immidiately recognizable consequences to be expected? Im my book a bankruptcy would be mass unemployment, riots, climbing food prices, interest rates going berserk, government unable to refund overpaid taxes, unable to pay retirement provision, government bonds rapidly declining in value and the like.So in other words: If I am Average Joe or Α. Β. Κάτοχος, or Joe Bloggs or whoever and would NOT hear about the defaults in the media would I notice an actual change in everyday life?

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 12:10 pm
by rmax
I am no economist, but:Greece1. Greece defaults will result in a large amount of instability due to the number of people holding Greek debt.2. Greece will not be able to raise finances - the only way out of hock is inflation3. Interbank interest rates might be low, but to any retail side rates will have a huge factor of increase due to credit risk4. Infrastructure cannot be renewed due to no public funding5. Food prices go up, riots, unemploymentUS1. We are all fucked.2. No we are really are3. I am not a big fan of the US, but we better start learning Mandarin4. You think you are going to have issues when negotiating the price of an instrument because the implicit assumption is that T-Bills are AAA, that is going to be like going down to the chemists on the scale of the universe5. Robert Peston becomes PM6. We are still fucked7. Fucked

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 12:44 pm
by CrashedMint
QuoteOriginally posted by: rmaxI am no economist, but:... US ...We are all fucked.I mean it probably sucks if T-Bills are just AA and if an even larger amount of U.S. debt is held by foreign countries, but what is expected to actually happen "in real life"? Will the government stop paying welfare so people will starve? Or will it be slightly more expensive to get a car loan?It's really hard for me to see real-life everyday consequences of any of the recent financial troubles. It always appear like a gazillion debt hole opens up, then people freak out, then another gazillion in dumped into that hole, then again, then people freak out, but it doesn't really appear to translate into riots/mass unemployments/political unrest etc.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 12:56 pm
by Traden4Alpha
Not affected today != not affected tomorrow.What scares people the most is all the interconnections whereby default by party A causes defaults by parties B and C and defaults by parties B and C causes defaults by parties D, E, F, and G. Rinse and repeat. And it doesn't even have to be full default to have an impact. A lot of entities (e.g., insurance companies and banks) have AAA ratings only because they hold AAA USTs. If the US gets a downgrade, a lot of other entities get a downgrade, too. And even if a downgrade doesn't cause an immediate catastrophe, it means higher interest rates for everyone and a higher probability of future defaults if those entities can't afford those higher rates or those entities customers can't afford to pay more for the entities' services.For better or worse, too much of the global economy assumes a ready supply of cheap capital. If the cheap capital spigot shuts downs, a lot of things get much more expensive and precarious (e.g., government programs, housing, cars, company expansions, working capital, insurance, etc.).In other words, what rmax said!

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 1:02 pm
by rmax
QuoteOriginally posted by: CrashedMintIt's really hard for me to see real-life everyday consequences of any of the recent financial troubles. It always appear like a gazillion debt hole opens up, then people freak out, then another gazillion in dumped into that hole, then again, then people freak out, but it doesn't really appear to translate into riots/mass unemployments/political unrest etc.Not sure where you live, but in Europe and the US/Canada I have seen direct impact. A lot of shops closing down, not so many bars, restaurants going out of business. See less in terms of other "less" service based industries but there is a very real impact. What is crazy (in the UK at least) is that the house prices are still so high - the triumph of hope over experience....

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 1:09 pm
by farmer
QuoteOriginally posted by: Traden4AlphaFor better or worse, too much of the global economy assumes a ready supply of cheap capital. If the cheap capital spigot shuts downs, a lot of things get much more expensive and precarious (e.g., government programs, housing, cars, company expansions, working capital, insurance, etc.).Yup, if the government stops borrowing, there will be nothing left for anyone else to borrow. The availability of capital is dependent on it being funneled from Chinese exporters to US government employee unions.If this ever stops, the great boom times we are living in could come to an end.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:01 pm
by CrashedMint
QuoteOriginally posted by: rmaxNot sure where you live, but in Europe and the US/Canada I have seen direct impact....alternating between mostly tokyo and suisse and southern germany. sure i have seen shops closing, but to me doesn't look excessive.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:03 pm
by frenchX
Usually during crisis you have an extinction of the middle class. Rich people become richer and poor people poorer. In France that's the feeling I have. And concerning the price of housing it's incredible here in Paris. It was never this high I think.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:05 pm
by rmax
QuoteOriginally posted by: CrashedMintQuoteOriginally posted by: rmaxNot sure where you live, but in Europe and the US/Canada I have seen direct impact....alternating between mostly tokyo and suisse and southern germany. sure i have seen shops closing, but to me doesn't look excessive.I am old enough to remember when the UK was bumped out of the ERM (although I wasn't working). There what I saw was a gradual erosion. It started with shops closing, and pretty soon ended up with people sleeping on the streets and increased crime etc.Have not been to Switzerland, or Germany or Japan recently so perhaps things are different there. Here I think we are on the cusp...

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:06 pm
by rmax
QuoteOriginally posted by: frenchXUsually during crisis you have an extinction of the middle class. Rich people become richer and poor people poorer. In France that's the feeling I have. And concerning the price of housing it's incredible here in Paris. It was never this high I think.And France and Germany are going to bankroll the whole of the EU. Shudder.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:15 pm
by Errrb
The Greece default would drag down all PIGS, I think it will happen eventually anyway. I don't see why germans would like to bailout lazy southern europeans and irish. There certainly no incentive for them to do this in rush, if they wait more until it looks very very bad, they can do it on their terms. After 2 failed world wars Germany is about to dominate Europe using their money as a stick.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:28 pm
by frenchX
The eurozone was just an utopy. I think that greece should retire from Eurozone, that would be the best for them ... France is struggling with Germany on this situation while UK doesn't care at all ... A great continent the Europe (yes we are friend please turn your back then I could stab my knife in your back ...) And if US defaults, it's simply the end of all hope. The brutal finishing of modern finance and ultraliberal capitalism.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:31 pm
by ppauper
QuoteOriginally posted by: CrashedMintIm my book a bankruptcy would be mass unemployment, riots, climbing food prices, interest rates going berserk, government unable to refund overpaid taxes, unable to pay retirement provision, government bonds rapidly declining in value and the like.isn't that how Greece is anyway ?

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:31 pm
by Traden4Alpha
QuoteOriginally posted by: CrashedMintQuoteOriginally posted by: rmaxNot sure where you live, but in Europe and the US/Canada I have seen direct impact....alternating between mostly tokyo and suisse and southern germany. sure i have seen shops closing, but to me doesn't look excessive.It's all a matter of reserves. In an economy where banks are well-capitalized, people have deep savings, and governments have little debt (i.e., look like good risks to creditors), these fluctuations don't matter much. But if banks, people, governments, etc. are too close to the edge of insolvency or bankruptcy, then things can go from OK to crap pretty quickly.Germany et al doesn't have the resources to bail everyone out. Maybe the Germans will try to prevent the small dominos from dropping. Maybe that will work. And maybe Germans will get disgusted with the "lazy" members of the EU, use their resources to ring-fence German banks, and let the rest of the EU collapse.

Actual consequences of a U.S. / Greece bankruptcies?

Posted: July 21st, 2011, 2:36 pm
by Cuchulainn
Solution using Observer patternMyDebt := TotalDebt/17Update all 17 observers.