Is Greece going to set off the long feared next wave of the Great Recession?

@roger,

Quote:

Wonder how much research went into the conclusion that a bond default was undesirable

There is no doubt that it is undesirable from europe's point of view. From I and G point of view it looks a lot different though. I have heard some pretty good arguments that not only is default in their best interest, but that they are unlikely to avoid it. Ireland when into massive cutting of their public sector economy long before Greece did, and it sure is not working out well from them. I think it was Krugman who said straight up that they made a mistake.

Somebody last week was saying that the bailout of Greece was a one time deal, that the European leaders will not be able to do it again no matter how much bad debt their banks are holding that they are trying to salvage because the people will not stand for it. Sounds like maybe we are going to have some fireworks soon.

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It is REALLY hard to imagine this ending well, which is of course what I have maintained all along.

Quote:

Business
Beware of Greeks Bearing Bonds
As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.

http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010

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@roger,

roger wrote:

. . . researchers argue that default in Ireland and Greece is “unnecessary, undesirable, and unlikely.”

Wonder how much research went into the conclusion that a bond default was undesirable. They get paid for this?

It's undesirable from the standpoint of the banks holding those bonds - they'll have to face big write-downs in case of default. But if the only way it can be avoided is by inflating the currency - and these countries don't have their own currencies any longer - other countries in the eurozone, especially France and Germany, will not go along; in that case a "restructuring" (managed default) is inevitable. Whence article linked near end of previous page outlining "Brady-type" bonds (as done for Latin American debt) to be issued in exchange for outstanding bonds of these 3 countries.

Speaking of the previous page, the unspeakable Hawkeye has managed yet again to prove he can't read - the article he just posted on this page was linked by me days ago > http://able2know.org/topic/144149-10#post-4350196 > which is when it first appeared on the online issue of Vanity Fair.
This is the umpteenth time he's been proven to be a pretentious fool on this thread alone - you'd think he'd have learned to keep quiet by now Smile

http://able2know.org/topic/144149-10#post-4350243

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@dyslexia,

dyslexia wrote:

well, what can I say, both georgeOB and Setanta self-describe themselves as "Irish". just saying.

So you think Ireland is so quiet because it managed to export all its troublemakers? Interesting - how can we test that theory?

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@roger,

Things are getting worse. Ireland, Greece, California, Illinois, NY, are now all on the "restructuring" (polite for "default") candidate list:

Quote:

".....Wolfgang Schäuble, Germany’s finance minister, has raised the temperature by describing the US economic model as being in “deep crisis” and criticising the US Federal Reserve’s decision to pump an extra $600bn into financial markets. “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank’s] printing press.”
........................................................
“The scope of the changes since 1971 certainly matches those between 1945 and 1971 that prompted the shift from Bretton Woods I to II,” Mr Zoellick writes. “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
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http://www.ft.com/cms/s/0/eda8f512-eaae-11df-b28d-00144feab49a.html#axzz14gcGxITX

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@High Seas,

I think Schauble's criticism was apt.

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@georgeob1,

Schäuble's interview (in English) with Spiegel-online:
'The US Has Lived on Borrowed Money for Too Long'

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@Walter Hinteler,

The Atlantic shows signs of widening I fear.

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@spendius,

I think you exaggerate the recent trends, but may be right overall. It is true we are (rather late in the day) beginning to fall for some of the welfare state illusions and excesses that previously duped European governments - ironiocally, just as Europpe is cutting back on them. I'll also agree our current government is out of synch with economic reality in its self-serving and largely futile attempts to "stimulate" economic recovery. However, I believe political trends in this country are swinging away from the illusions of 2008 and that trend will likely continue for some time.

However, apart from all that, the Atlantic (to use your metaphor) has been widening for a long time.

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@georgeob1,

georgeob1 wrote:

However, apart from all that, the Atlantic (to use your metaphor) has been widening for a long time.

About one inch per year, if I remember correctly. And the Pacific Ocean Basin is becoming smaller ...

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@georgeob1,

I wasn't thinking of trends George. Hints dropped in certain places. Or with a clang in Herr Schauble's case.

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@Walter Hinteler,

Do you by any chance know what Schäuble had to say on Ireland debt now yielding almost as much Greece's junk? Thanks.

http://media.economist.com/sites/default/files/imagecache/news_package_primary_landscape/20101113_FNP003_412_1.jpg

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@High Seas,

Nothing new, I'm afraid (The latest is two [three, here] days old).

Schäuble, however, is in a quite weak position in the cabinet right now .... I could imagine that we'll get a new finance minister sooner or later.

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@Walter Hinteler,

He never suffered fools gladly, but Kohl trusted him absolutely with "erledigen" all negotiations for East Germany. He's obviously been in pain since that mad Marxist shot him in 1990 and all his recent operations can't have helped. But I'm not sure Mrs Merkel can afford to let him go.

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@High Seas,

High Seas wrote:

since that mad Marxist shot him in 1990

It wasn't a "mad Marxist", who shot at him but a mentally ill person (with paranoid schizophrenia).

High Seas wrote:

But I'm not sure Mrs Merkel can afford to let him go.

Well, she can't govern against her own party - but since Schäuble assured that he will work with co-operate with both coalition fractions, it seems to be all good now again ...

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@Walter Hinteler,

Sorry - confused him with the man who shot and killed the Treuhandanstalt boss. Was he ever caught?

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@High Seas,

Who? Rohwedder's ("Treuhand boss) murderer? No, but it most certainly was done by someone from a follow-up organisation of the RAF. (Very perhaps by this man.)

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@Walter Hinteler,

Yes, Rohwedder - this scared everyone dealing with liquidating the bankrupt East. Glad to hear your suspect is dead - he was very probably involved with murdering Herrhausen as well. I hope Merkel's (really Schäuble's) new plan - no more EU bailout money unless the creditors take a haircut - succeeds.

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@High Seas,

High Seas wrote:

Things are getting worse. Ireland, Greece, California, Illinois, NY, are now all on the "restructuring" (polite for "default") candidate list:

As is Portugal according to an article in today's Financial Times.

http://www.ft.com/cms/s/0/8bfb96d6-f0bb-11df-8cc5-00144feab49a.html#ixzz15Mgs6Nq4

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@JPB,

Wouldn't worry about Portugal just yet - they just had to take a number, not being quite so crazy as to guarantee all bank deposits in their country bringing their debt to GDP ratio to about 500%. Maximum sustainable (aka repayable) level is under 100% as you know. Ireland is bankrupt.

The little peripheral euro-countries can be rescued from their own folly; the main worry is what happens if one of the bigger ones (Spain or Italy) gets wobbly. We could easily avoid this monetary instability by fixing the euro to dollar rate at 1 to 1 as a first step to international monetary reform. Our current leadership isn't capable of seeing that, the German finance minister definitely is, but can't implement it without support, and then there are others:
http://www.bloomberg.com/news/2010-11-19/ireland-crisis-might-give-china-break-it-seeks-simon-johnson.html

1 Reply

Is Greece going to set off the long feared next wave of the Great Recession?

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