Reply to: Euro hits new low as Italian bond rates spike past 7%

[DodgyAgent]

Because there will be extreme pain in the near-term. Many people will loose everything they have.

The government that does that will always be hated even though Greek children will be better off in the long-run. People on the whole are very selfish.

Exactly. The incumbent political classes will be the first to be "cleared out" which is why they are hanging on. The holders of Greek debt are also clinging on because they know that a default will cost them dearly. Even this BB is not a binary situation

[TwoWolves]

If it so obvious, why aren't the Greeks pulling out of the Euro?

Because there will be extreme pain in the near-term. Many people will loose everything they have.

The government that does that will always be hated even though Greek children will be better off in the long-run. People on the whole are very selfish.

[BlasterBates]

Argentina has grown rapidly since the country defaulted. The important factor being that the inefficiencies albeit painfully were cleared out and Argentina has maintained its sovereignty. We have a thing in the UK called bankruptcy which although harsh gives people a fresh chance to start again. I am afraid that this probably what Greece needs (or the UK for that matter) to teach itself that indulging in poor economic policies and poor governments is a bad thing.

Again I am astonished that you cannot see this. That your mind is incapable of reading through the logic even though we have reams of history books that have shown endless examples of how the markets ultimately control economics. What on earth makes you think that the markets can be ignored and that there is an easy way out?.

the Greeks have a choice either they pull out of the Euro, default and start all over again, or they submit their sovereignty to the Germans

If it so obvious, why aren't the Greeks pulling out of the Euro?

After the Argentine default, poverty doubled to the extent where the majority of the population was below the poverty line. It took four years to get back to where they were. Greece has gone through it's first tough year, and it is in no way comparable to the dire situation in Argentina.

[DodgyAgent]

What use is it printing Drachmas when inflation goes through the roof. The currency would collapse and people would end up bartering.

You should take a look at Argentina.

If it was that simple why don't they do it? No-one is stopping them. The only country that started printing money as you suggest was Zimbabwe.

You can only do so much quantative easing, if you overdo it it becomes counter productive. In other words you use other mechanisms to reduce the money supply to compensate. Greece wouldn't have sufficient leeway.

The phrase "I always thought you were as thick as pigsh*t" springs to mind.

Argentina has grown rapidly since the country defaulted. The important factor being that the inefficiencies albeit painfully were cleared out and Argentina has maintained its sovereignty. We have a thing in the UK called bankruptcy which although harsh gives people a fresh chance to start again. I am afraid that this probably what Greece needs (or the UK for that matter) to teach itself that indulging in poor economic policies and poor governments is a bad thing.

Again I am astonished that you cannot see this. That your mind is incapable of reading through the logic even though we have reams of history books that have shown endless examples of how the markets ultimately control economics. What on earth makes you think that the markets can be ignored and that there is an easy way out?.

the Greeks have a choice either they pull out of the Euro, default and start all over again, or they submit their sovereignty to the Germans

[BlasterBates]

An Exit would allow them to print Drachmas and have an exit. Without that option where do the next set of Euros come from to pay January's pensions.

The phrase I used to think you were clever.... comes to mind.

What use is it printing Drachmas when inflation goes through the roof. The currency would collapse and people would end up bartering.

You should take a look at Argentina.

If it was that simple why don't they do it? No-one is stopping them. The only country that started printing money as you suggest was Zimbabwe.

You can only do so much quantative easing, if you overdo it it becomes counter productive. In other words you use other mechanisms to reduce the money supply to compensate. Greece wouldn't have sufficient leeway.

I mean if it was so simple you wouldn't need the IMF or financial aid, would you, you could just jack open the printing presses.

[BlasterBates]

Back in November you were predicting: Never mind. It will probably blow over during the next few weeks.

It seems to be on the mend doesn't it:

BBC News - Spain sees strong demand in latest bond auction

[eek]

It would be completely pointless for Greece to do a messy exit.

An Exit would allow them to print Drachmas and have an exit. Without that option where do the next set of Euros come from to pay January's pensions.

The phrase I used to think you were clever.... comes to mind.

[Doggy Styles]

The key here is Italy, if Italy gets it's budget under control the Eurozone exits the crisis, and Italy doesn't have a particularly big problem. Still needs the political will of course but unlike Greece which is bankrupt Italy just needs to tighten its belt. 2013 it will have blown over.

Back in November you were predicting: Never mind. It will probably blow over during the next few weeks.

[BlasterBates]

So you don't see a problem if Greece exits the EU messily, taking a few banks with it?

Its clear you don't have much money.

Greece isn't big enough to take any banks out. The exposure of all European banks to Greece is well publicised. At worst there will be top-ups to the bailed out banks.

Obviously Italy doing a Greece would be utterly catastrophic.

But it is in any case unlikely that Greece would just cut, simply because if it did it would have no money to pay the pensions and the salaries. This is not comparable with Iceland. Iceland had banking debts on its books but could comfortably afford to pay pensions and salaries from tax revenue.

If Greece wanted to pay pensions and salaries it would have to go back to the IMF and lo and behold who would they meet? oh it's the Germans again. If you go and check the IMF strategy for countries in trouble it is always to enforce an austerity budget.

It would be completely pointless for Greece to do a messy exit.

[BrilloPad]

The Euro is going to slowly unravel over the next year or two. Nothing can stop that now, it's simply not and never was workable without a super state layered over the countries controlling fiscal policy.

I think it will unravel - but not slowly. At some point in 2012 one of the PIIGS will not be able to borrow any more and it will explode suddenly.

Unless of course Germany agrees to print money - that would buy a few more years.

But the rest of Europe will blame the UK for this.

[sasguru]

The key here is Italy, if Italy gets it's budget under control the Eurozone exits the crisis, and Italy doesn't have a particularly big problem. Still needs the political will of course but unlike Greece which is bankrupt Italy just needs to tighten its belt. 2013 it will have blown over.

So you don't see a problem if Greece exits the EU messily, taking a few banks with it?

Its clear you don't have much money.

[BlasterBates]

The key here is Italy, if Italy gets it's budget under control the Eurozone exits the crisis, and Italy doesn't have a particularly big problem. Still needs the political will of course but unlike Greece which is bankrupt Italy just needs to tighten its belt. 2013 it will have blown over.

[eek]

Stock markets slump as euro hits 11-month low against the dollar | Business | The Guardian

At the start of next year Italy will have to issue a massive new tranch of bonds if it is to sustain liquidity.
I very much fear 2012 will be all doom

Not quite the current pressure points are:

1) Monday when Greece may run out of cash
2) the 53bn France needs to get in January
3) the 54bn Italy needs to get in February

Yhere are few steps to pass before Italy becomes the issue.

[sasguru]

Oh dear looks like you're already wrong:

European Stocks Rebound From Two-Week Low - Bloomberg

So what? The stock market has been gyrating up and down like a tart's knickers.
Meanwhile Greek fundamentals show a steady deterioration.
It's like a tinderbox that needs a light, and sooner or later a kick-off event will occur.

[BlasterBates]

Stock markets slump as euro hits 11-month low against the dollar | Business | The Guardian

At the start of next year Italy will have to issue a massive new tranch of bonds if it is to sustain liquidity.
I very much fear 2012 will be all doom

Oh dear looks like you're already wrong:

European Stocks Rebound From Two-Week Low - Bloomberg