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

July 21st, 2011, 4:42 pm

Does anybody here wants to speculate about what will happen after PIGS default and eurozone collapses. Turkey will go down the drain, then eastern european countries, then France. Germany will have to increase the army to defends its borders against barbarians trying to penetrate into 4 Reich from collapsed countries.
 
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Powerpuff
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 4:49 pm

QuoteOriginally posted by: trackstarObviously the pace of integration accelerated rapidly in recent years, but if you consider the iterations and passage of time since the European Coal and Steel Community, it has been a pretty long road.I agree, and I actually think the founding of the ECSC was admirable. But after introducing the euro currency things happened really fast. Maybe things would have been better if the eurozone consisted of fewer and more economically similar countries? Which would then find it easier to adopt a common fiscal policy to go with the monetary one?As for what would happen in case of default I have no idea, but I *hope* that the entire world economy collapse. Then we could go back to living in caves, grow our own food and use horses for transportation
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 4:51 pm

I was about to ask a similar question, but I would put it this way:Never mind exactly how it would work, but if EU countries were given a chance to opt out of the euro and/or opt out of the Union completely, which would do so?I'd be interested in opinions on which governments would favor either move and also which voting publics would and note any conflicts of opinion there.Since opt in was done by referendum (and some countries like Norway said no), let's assume that it would go to a vote.
 
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frenchX
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 4:56 pm

QuoteOriginally posted by: trackstarI was about to ask a similar question, but I would put it this way:Never mind exactly how it would work, but if EU countries were given a chance to opt out of the euro and/or opt out of the Union completely, which would do so?I'd be interested in opinions on which governments would favor either move and also which voting publics would and note any conflicts of opinion there.Since opt in was done by referendum (and some countries like Norway said no), let's assume that it would go to a vote.France said "NO !!!" during a referendum but the government didn't care ...
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 4:58 pm

QuoteOriginally posted by: PowerpuffQuoteOriginally posted by: trackstarObviously the pace of integration accelerated rapidly in recent years, but if you consider the iterations and passage of time since the European Coal and Steel Community, it has been a pretty long road.I agree, and I actually think the founding of the ECSC was admirable. But after introducing the euro currency things happened really fast. Maybe things would have been better if the eurozone consisted of fewer and more economically similar countries? Which would then find it easier to adopt a common fiscal policy to go with the monetary one?As for what would happen in case of default I have no idea, but I *hope* that the entire world economy collapse. Then we could go back to living in caves, grow our own food and use horses for transportation Well the critical and somewhat surprising factor was the fall of the Berlin Wall in 1989 followed so soon by Maastrict in 1992. (Granted Maastricht had been in the works for a long time, but now there were new dimensions to an already complex scheme.)Europe was very eager to support democratic and free market reforms/revolutions but that has added dramatically to the overhead in many ways. It is somewhat ironic that the weaker members of Western Europe are the poster children for insolvency today, but remember that Deutsch Marks and Ost Marks were integrated on 1:1 basis (a huge gift to the unification effort) and we could get some numbers on the costs, both explicit and hidden of the jump from the core to satellite members states to the current sprawling configuration that you have today.
Last edited by trackstar on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:00 pm

We had some good material on this from awhile back - might be in the General Forum or Economic Forum.I will cross link if I find what I am thinking about... Also, for a long time there was a lot of talk about multiple-tier or multiple-speed Europe, but when push came to shove, all the principle players except for the UK wanted in at the same time.Some fudged the books and there was leniency in some of the initial convengence criteria to allow that to happen.This is part of how the PIIGS were born.
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zerdna
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:03 pm

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: CuchulainnQuoteOriginally posted by: zerdnaGreek debt to GDP is almost double of that of Germany. Rogoff and Reinhart estimated that Greece has been in the state of default 50% of time since it's independence, more than any other european country. If there are some deep and subtle reasons, i guess someone needs to open our eyes on these subtleties. People tend to over consume when someone else is paying -- the list of examples of this behavior is endless. To me it's not subtle, maybe it is for someone else.What happened to 'due diligence'? In the old days if you wanted to borrow you had to prove you *did not* need the money...'Due diligence' was outlawed to support social policy. Making people prove they can repay favors the rich.That is not exactly accurate. What happened is fractional banking system when big banks are "owned" by the taxpayers and regulated by government bureaucrats, not by the market. Why don't i load on Greek debt paying 20% if i have no downside? If they default, they are bailed out, if not i get a big bonus. It doesn't even affect the capital bank needs to use for accounting purposes -- these are EU government bonds, the highest credit. If you had bonds trading on an exchange, margined by a clearing house, Greece would be years where it should and will eventually be -- namely in default, and German and French won't be over their heads in Greek bonds. In fact there might not even be a debt crisis to begin with, as no one would have given them money in the first place.
Last edited by zerdna on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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Powerpuff
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:32 pm

QuoteOriginally posted by: trackstarI was about to ask a similar question, but I would put it this way:Never mind exactly how it would work, but if EU countries were given a chance to opt out of the euro and/or opt out of the Union completely, which would do so?Well, some people used to say that joining the Euro was like locking yourself into a common European house and throwing away the key. I think they were kind of right, it would be extremely difficult to leave the Euro - at least if the market was aware of your intentions. To implement a policy, no to mention printing and circulating new currency, takes time. Would you keep your deposit in a Greek bank if they announced that they were leaving the euro, which would be equivalent to a large devaluation?Anyway, what would be best for Greece (and the eurozone) is IMO a default, while still being part of the eurozone. After the default short term loans should be possible (not common with *two* defaults in a short time), and they could then move back to the drachma. Hopefully this would stimulate the Greek economy. Countries with free floating currencies often adjust more quickly to changed circumstances.To make things really interesting they could avoid printing the old-new currency all together, and supply the population with cards holding electronic money! Then the new drachma would only exist in electronic form.
Last edited by Powerpuff on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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frenchX
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:38 pm

A default would be very harmful for countries holding greek debt. For me the best should be to redistribute greek debt among all the members as Cuch said in order to minimize the default on nations and then to exclude Greece of Eurozone. By returning to their currency they should be able to reboost the economy (or not). But it is not going to happen.
Last edited by frenchX on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:38 pm

Take a look at what happened to the Pound Sterling in 1991-2. That is an exciting story, with George Soros at the epicenter.But as I said, leaving the "how to" aside, I am interested in political will, both on the part of governments and the (maybe stampeding) public.Who wants to ride it out a bit longer and who wants to get the hell out asap?As you know, there was a lot of noise in some places (esp. Germany) about the original package for Greece.
Last edited by trackstar on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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frenchX
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:42 pm

It's funny because Germans funded Greece a lot and when they felt that it was turning out not very nicely they sold their junk debt to every country before it was public.
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:42 pm

Also, here is a good exercise (especially for the students!) - how would you try to make money in the event of a) Greek default, b) some countries exiting, and c) dissolution of the Union itself.Essays with supporting data, please, in single space 12 point type, not longer than ten pages for each segment of the question. Executive summaries appreciated. Let's make it a contest and I will take the winner to a fancy restaurant the next time I am in London. No problem to come to your country, if you are in Europe. **Your submission may be entertaining, but it should contain actionable and potentially profitable investment strategies. I do not want to hear about the latest branch of economics as described by HOOK in another thread today.
Last edited by trackstar on July 20th, 2011, 10:00 pm, edited 1 time in total.
 
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trackstar
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:47 pm

Some background resources:Black Wednesday - wikion Breaking the Bank of EnglandGeorge Soros - WikiI have to run, but maybe more later.
 
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Powerpuff
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:50 pm

QuoteOriginally posted by: trackstarSome background resources:Black Wednesday - wikion Breaking the Bank of EnglandGeorge Soros - WikiI have to run, but maybe more later. More what? Homework? TTFN
 
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Cuchulainn
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Actual consequences of a U.S. / Greece bankruptcies?

July 21st, 2011, 5:51 pm

QuoteOriginally posted by: frenchXA default would be very harmful for countries holding greek debt. For me the best should be to redistribute greek debt among all the members as Cuch said in order to minimize the default on nations and then to exclude Greece of Eurozone. By returning to their currency they should be able to reboost the economy (or not). But it is not going to happen.Here in the Netherlands banks hold about [2,5] bn Greek debt. So, one bank that holds 1.4 bn would lose about 300 million. This is peanuts these days. And they can pay with the money from Dutch taxpayers.
Last edited by Cuchulainn on July 20th, 2011, 10:00 pm, edited 1 time in total.
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