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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 11:23 am

I made sure to load up on euros first before my brilliant question moves markets! But anyway everybody is saying this Greece issue is weighing on the euro, and the timing of this recent slide coincides with some formal bailout agreement or something.Economically, this makes no sense to me. Have they said anywhere that Trichet will devalue the euro, or will be forced to? I don't see that happening. Those Europeans are not some third-world dump. Germany runs that place, and they are nothing like Mexico or Russia. If anything, economic growth and the supply of euros will contract as this passes through the system, and US economic growth will mean more dollars relative to euros, and a higher price for the euro.I will position trade the euro the whole way to 1.42!So enlighten me.
 
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Martinghoul
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 11:46 am

What happens when the ECB has only two alternatives: either say goodbye to the EMU or proper "nucular" QE? That sort of dilemma is looking increasingly likely. Whichever one they choose, it ain't gonna be good for EUR.
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 11:53 am

QuoteOriginally posted by: MartinghoulWhat happens when the ECB has only two alternatives: either say goodbye to the EMU or proper "nucular" QE?I don't see them going the inflation route, no way. But I don't see how the alternative is bad for the currency. The only thing bad for the currency is printing more of it. I don't see how Greece burning to the ground or whatever, causes them to print euros. So maybe Greece restructures some debts, it ain't really my problem. They are certainly not going back to the franc and deutschemark!Greece is not going to fix anything by issuing new Greek-coin denominated debt. Maybe they can pay off their public-sector employees in some new Greek money...So elaborate on this "goodbye to the EMU" scenario. How does it come about? And even if there were some way it could, absent printing more of the stuff, I don't see how it hurts euros.While we're at it, I hear California is broke, maybe they can go back to the gold nugget.
Last edited by farmer on May 3rd, 2010, 10:00 pm, edited 1 time in total.
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:03 pm

And another thing, there are all these yahoos out their shorting euros. Whatever. This is a real currency used in zillions of dollars of real transactions every day. In a few days some Japanese businessman is going to buy a Mercedes Benz, and your little trades will be lost in the ocean...
 
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Martinghoul
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:08 pm

QuoteOriginally posted by: farmerQuoteOriginally posted by: MartinghoulWhat happens when the ECB has only two alternatives: either say goodbye to the EMU or proper "nucular" QE?I don't see them going the inflation route, no way. But I don't see how the alternative is bad for the currency. The only thing bad for the currency is printing more of it. I don't see how Greece burning to the ground or whatever, causes them to print euros. So maybe Greece restructures some debts, it ain't really my problem. They are certainly not going back to the franc and deutschemark!Greece is not going to fix anything by issuing new Greek-coin denominated debt. Maybe they can pay off their public-sector employees in some new Greek money...So elaborate on this "goodbye to the EMU" scenario. How does it come about? And even if there were some way it could, absent printing more of the stuff, I don't see how it hurts euros.While we're at it, I hear California is broke, maybe they can go back to the gold nugget.But that's my point... At the current juncture, the Eurozone powers that be aren't quite ready to let Greece ride into the sunset all by its lonesome (and loathsome) self, 'cause they know that where Greece goes, Italy, with its EUR 1trn outstanding sov debt, follows. Is that good for EUR the ccy?My point is that, in my view, the Eurozone's problems, at this point, have very little to do with Greece. It's all about the next line of defense, where the choices are: let Italy/Spain go or print.
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:15 pm

QuoteOriginally posted by: MartinghoulAt the current juncture, the Eurozone powers that be aren't quite ready to let Greece ride into the sunset all by its lonesome (and loathsome) self, 'cause they know that where Greece goes, Italy, with its EUR 1trn outstanding sov debt, follows. Is that good for EUR the ccy?It does not hurt the currency when someone doesn't have any of it to pay his debts. In isolation, that helps the currency. Like suppose someone waiting for his coupons sold euro futures to hedge. If Greece defaults, he is going to have to buy back those futures, huh?From the point of view of a creditor, devaluation, default, and restructuring all mean the same thing. But if Germany is to be rational, it is better to let Greece default, than to have both Greece and Germany effectively default through inflation.Greece and Spain defaulting does not destroy the currency. And destroying the currency does not save Greece from default, it just gives it another name. So my guess, is they would let Greece default without destroying/devaluing the currency.
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:24 pm

Germany's economy has to be 10 times the size of Greece. It makes no sense to destroy their own ability to borrow, to save a couple crybabies.The safe borrowers in Europe must have twice the outstanding debt of the unsafe borrowers. There is no way they will kill everything to save one third.That would be like a guy who makes $250,000 a year helping his broke friend rob a liquor store. More likely he would do what Germany is doing: Lend them a couple bucks.
Last edited by farmer on May 3rd, 2010, 10:00 pm, edited 1 time in total.
 
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Martinghoul
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:25 pm

QuoteOriginally posted by: farmerQuoteOriginally posted by: MartinghoulAt the current juncture, the Eurozone powers that be aren't quite ready to let Greece ride into the sunset all by its lonesome (and loathsome) self, 'cause they know that where Greece goes, Italy, with its EUR 1trn outstanding sov debt, follows. Is that good for EUR the ccy?It does not hurt the currency when someone doesn't have any of it to pay his debts. In isolation, that helps the currency. Like suppose someone waiting for his coupons sold euro futures to hedge. If Greece defaults, he is going to have to buy back those futures, huh?From the point of view of a creditor, devaluation, default, and restructuring all mean the same thing. But if Germany is to be rational, it is better to let Greece default, than to have both Greece and Germany effectively default through inflation.Greece and Spain defaulting does not destroy the currency. And destroying the currency does not save Greece from default, it just gives it another name. So my guess, is they would let Greece default without destroying/devaluing the currency.That's fine, I don't disagree... The point that it's all relatively easy for Germany has been made by a number of people. All I am trying to say is that there's a lot more than Greece at stake here. Fine, let's say the Germans at the steering wheel would not resort to the printing press to save Greece. Do you think their choice would be the same when it's time to say goodbye to Spain, Italy, Belgium, etc? So let's stop talking about Greece, since I agree that Greece is irrelevant. It's all about the next domino to fall.
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:37 pm

QuoteOriginally posted by: MartinghoulDo you think their choice would be the same when it's time to say goodbye to Spain, Italy, Belgium, etc? So let's stop talking about Greece, since I agree that Greece is irrelevant. It's all about the next domino to fall.That takes time, and in time their economies will pick up and I think things will be fine. In the short term, I don't think any speculator today can "break" the euro in anticipation of these future possibilities. He would have to use so much leverage, he would get wiped out between now and the bad things actually happening. There is no imminent danger - feel free to enlighten me on that one - but at worst a long slide. But I disagree that such a slide makes sense. In the meantime - until such time when they devalue the currency - this thing could get squeezed up 18 points.
 
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Martinghoul
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:44 pm

QuoteOriginally posted by: farmerQuoteOriginally posted by: MartinghoulDo you think their choice would be the same when it's time to say goodbye to Spain, Italy, Belgium, etc? So let's stop talking about Greece, since I agree that Greece is irrelevant. It's all about the next domino to fall.That takes time, and in time their economies will pick up and I think things will be fine. In the short term, I don't think any speculator today can "break" the euro in anticipation of these future possibilities. He would have to use so much leverage, he would get wiped out between now and the bad things actually happening. There is no imminent danger - feel free to enlighten me on that one - but at worst a long slide. But I disagree that such a slide makes sense. In the meantime - until such time when they devalue the currency - this thing could get squeezed up 18 points.Dude, have you seen the mkt today? The only reason I am entertaining these possibilities is because the mkt today has been turning "possible" into "probable" all day. And it's not leveraged speculators, either. The real money community is properly panicking, so what we be having is a run on peripheral sovereigns. In fact, last I heard it was spreading to France, so it's gone beyond periphery to soft-core and now to core. And that is after the most potent promise of help we've had so far. I hope I am being the devil's advocate here, but it's not looking pretty, I assure you.
Last edited by Martinghoul on May 3rd, 2010, 10:00 pm, edited 1 time in total.
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 12:51 pm

QuoteOriginally posted by: MartinghoulDude, have you seen the mkt today? The only reason I am entertaining these possibilities is because the mkt today has been turning "possible" into "probable" all day. And it's not leveraged speculators, either. The real money community is properly panickingI was hoping it would bust through the low, and then I would buy. And other buyers like me, who are hoping for a washout, would step in. It went through the low but it didn't bust. So I bought anyway.I have never worked on a big currency desk, but I would expect that "pricing in" possibilities in currencies like they are value stocks is a very risky proposition. If you need to translate some currency, you do it. But the only LONG-TERM position traders in currency are trend traders. Because the market can stay irrational longer than you can stay solvent.So we have seen the speculators take their shots. If it doesn't bust, and economics have even a few days to cause upticks, it could get squeezed back the other way like crazy.
 
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Martinghoul
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 1:07 pm

I hope and pray you're right, farmer-san...
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 1:14 pm

QuoteOriginally posted by: MartinghoulI hope and pray you're right, farmer-san...My burden is a little higher than that. I will be pyramiding the whole way up. So really I am betting that there will be no downticks!
 
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farmer
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Why is this Greece situation bad for the Euro?

May 4th, 2010, 8:44 pm

QuoteOriginally posted by: farmerI will be pyramiding the whole way up. So really I am betting that there will be no downticks! The downtick thing isn't so bad, actually, when you haven't built the pyramid yet. I only lost 30 or 40 ticks... So now I will try it again a point lower.
 
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GiusCo
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Why is this Greece situation bad for the Euro?

May 5th, 2010, 12:49 am

The problem with Greece (and others) is that Eurozone works as a single market but from a political point of view they are neither United States nor a Confederation. So who's going to pay in the case one of the local Euro printing press starts piling out rubbish? Other States in the Union would not give a monkey, but it would crack the entire process called Europe... imagine Greece forced out... then Portugal (why not after one sent out already)... then Spain... finally Italy. No more Europe, no more single currency, no more single market. Ashes and smoke.You may argue Continental Europe (Germany, France, Benelux, Sweden, Norway, Denmark) would carry on as a super Union and that's the most natural conclusion if left to the brutal force of market. But we have a dream........ dreams keep people together when life is harsh and a "readjustment" (call it diminished wealth due to globalization) doesn't appear to make ashes of the European dream yet.
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