Greek Bond 'Haircut' of 50% Appears Set: Sources

[MannyIsGod]

The central banks of the stronger EU countries.

Not if the Greek's aren't willing to pay the price. And apparently, they're not. Plus, stronger is a relative word and right now it doesn't appear there is much strength at all in the EU.

[MannyIsGod]

Krugman basically says that the public will vote no in Greece, then Italy is the next domino, followed by France.

[Drachen]

Why do they need to be loaned money to begin with? As a nation, a sovereign nation, an en y that can print its own money and value it independently, why would you borrow money from a quasi-governmental Bank?

Greece has an opportunity to opt out of the system completely. Not just its debt, not just the EU or Europe in general, but the whooooole banking system of the world.

Will it work? Way above my head...like way above. I never understood national debt as a concept, how a nation can owe itself money because it borrowed against its potential future-growth from quasi-private en ies (who got their wealth by...?).

It will never make sense to me.

I would think that this could work if the country didn't need to buy anything from abroad.

[Drachen]

Krugman basically says that the public will vote no in Greece, then Italy is the next domino, followed by France.

You don't think that Spain and Portugal would go before italy?

[MannyIsGod]

You don't think that Spain and Portugal would go before italy?

Krugman says Italy. I don't know enough to say. The comments I've made simply stem from me thinking that a country willing to default on anything.

Basically Greece is in Honey Badger mode right now.

[DarkReign]

I would think that this could work if the country didn't need to buy anything from abroad.

Thats not necessarily true. All a nation would need, in this case Greece, is a trade agreement with at least one nation.

If Greece opts out of the EU and its dept structure, starts their own currency from scratch, then signs a trade agreement with (for example) Russia, theyre good to go.

Because Russia would willingly convert Drachma into Rubles, which can then be used to buy foreign goods.

This requires extreme debt control on the part of Greece, however, because the moment they started borrowing from Russia, the threat of takeover to collect on debt becomes very real.

So long as the conversion was with actual money, they can still buy from outside their borders.

[Drachen]

Thats not necessarily true. All a nation would need, in this case Greece, is a trade agreement with at least one nation.

If Greece opts out of the EU and its dept structure, starts their own currency from scratch, then signs a trade agreement with (for example) Russia, theyre good to go.

Because Russia would willingly convert Drachma into Rubles, which can then be used to buy foreign goods.

This requires extreme debt control on the part of Greece, however, because the moment they started borrowing from Russia, the threat of takeover to collect on debt becomes very real.

So long as the conversion was with actual money, they can still buy from outside their borders.

The only problem here is what does russia do with the drachma? No one wants to touch the currency due to the currency devaluation risk. Basically, Russia would be losing money on their stores of drachma.

Edit: Oh and if they did end up doing this, Russia would have to price the risk into the currency exchange making everything prohibitively expensive. Now we are back where we started with the country needing to produce everything (including economic demand) in country.

[CosmicCowboy]

No big deal. Following conventional progressive logic Greece should be able to spend it's way out of it's problems.

[boutons_deux]

And let's not forget that is was Goldman Sacks that showed Greece govt how to hide its debts off books, aka fraud.

[Th'Pusher]

No big deal. Following conventional progressive logic Greece should be able to spend it's way out of it's problems.

Following conventional conservative logic, the austerity measures they've taken thus far should not have plunged them into further economic depression. Austerity creates jobs because it builds confidence, right?

[Winehole23]

I mean devaluing their currency does nothing if the bonds are valued in another currency


Let's say that 1 Euro = 1000 drachma
Lets say that their monthly interest payment is 10 Euro (10,000 drachma).

Now, they devalue their currency by a factor of 10 so 1 Euro = 10,000 drachma
Now their payment is still 10 Euro, but now 100,000 drachma.

Devaluing does nothing unless the debt is in your currency.

Devaluation does something to the balance of trade/investment, but you make a good point. Still, Greece could go the route of Argentina, default, and tell its creditors to get bent.

[CosmicCowboy]

Following conventional conservative logic, the austerity measures they've taken thus far should not have plunged them into further economic depression. Austerity creates jobs because it builds confidence, right?

broke is broke.

[Drachen]

broke is broke.

well since they are taking the austerity measures, and are broke, why aren't businesses flocking in????

Buy Low, Sell High, right?

[CosmicCowboy]

well since they are taking the austerity measures, and are broke, why aren't businesses flocking in????

Buy Low, Sell High, right?

Are you actually advocating continuing the borrowing/spending until there is no other choice but default or massive currency inflation?

[Drachen]

No you were being glib, and tried to make a political statement, I responded with the same.

The answer, just like with the sub-prime mortgage issue, was that they were (for one reason or another) rated incorrectly.

[boutons_deux]

"why aren't businesses flocking in????"

flat-taxer rich-boy Steve Forbes had a conference for rich people looking to buy up Greek islands, properties, factories, whatever. aka "disaster capitalism"

http://articles.businessinsider.com/...greek-diaspora

[RandomGuy]

Krugman basically says that the public will vote no in Greece, then Italy is the next domino, followed by France.

If the vote can be framed as a referendum of remaining in the Eurozone, as it pretty much must be, then the analysis I have read says that it has a chance of passing.

I think that once the real consequences of continuing to throw an enormous hissy fit are made clear, most rational people will have to suck it up and vote yes.

[RandomGuy]

I mean devaluing their currency does nothing if the bonds are valued in another currency


Let's say that 1 Euro = 1000 drachma
Lets say that their monthly interest payment is 10 Euro (10,000 drachma).

Now, they devalue their currency by a factor of 10 so 1 Euro = 10,000 drachma
Now their payment is still 10 Euro, but now 100,000 drachma.

Devaluing does nothing unless the debt is in your currency.

Correct.

[RandomGuy]

Why do they need to be loaned money to begin with? As a nation, a sovereign nation, an en y that can print its own money and value it independently, why would you borrow money from a quasi-governmental Bank?

Greece has an opportunity to opt out of the system completely. Not just its debt, not just the EU or Europe in general, but the whooooole banking system of the world.

Will it work? Way above my head...like way above. I never understood national debt as a concept, how a nation can owe itself money because it borrowed against its potential future-growth from quasi-private en ies (who got their wealth by...?).

It will never make sense to me.

The problem with this is that you end up like Argentina, i.e. persona non grata when it comes to borrowing money again.

The Argentines are still paying a risk premium on their debt even now.

[coyotes_geek]

Following conventional conservative logic, the austerity measures they've taken thus far should not have plunged them into further economic depression. Austerity creates jobs because it builds confidence, right?

Who's claiming austerity has anything to do with creating jobs? Austerity is all about saving banks.

[coyotes_geek]

The only problem here is what does russia do with the drachma? No one wants to touch the currency due to the currency devaluation risk. Basically, Russia would be losing money on their stores of drachma.

I think it was Pepsi who back in the 80s started selling soda in the Soviet Union. They didn't trust the ruble so they took all their Russian profits and bought vodka. Then they'd import the vodka to the U.S. and sell it for dollars.

[boutons_deux]

"Who's claiming austerity has anything to do with creating jobs?"

austerity comes from cutting taxes, and cutting taxes is how the Repugs want to create jobs. Trickle down worked, so cutting taxes to create jobs will work, too.

[MannyIsGod]

Who's claiming austerity has anything to do with creating jobs? Austerity is all about saving banks.

Well no one unless you count the GOP and Tea Party.

[coyotes_geek]

"Who's claiming austerity has anything to do with creating jobs?"

austerity comes from cutting taxes, and cutting taxes is how the Repugs want to create jobs. Trickle down worked, so cutting taxes to create jobs will work, too.

Yes, the greek people are rioting in the streets because those evil austerity measures will cut their taxes.

[coyotes_geek]

Well no one unless you count the GOP and Tea Party.

link?

I know the GOP / TP crowd are saying tax cuts will stimulate the economy, but that's not austerity.