EU & Euro spot of bother

[SillyBilly]

I chucked a wad on the FTSE 100 today as soon as the Tsipras letter came to light. I am now balls deep in the Greeks voting yes this weekend. I am taking the view that the can is being kicked down the road on this one and that the Greeks will be bullied into saying "Yes" on the day. Hoping to get a quick few % before dumping again. Will see how this one goes.

 

 

 

 

[AndyinLiverpool]

The IMF have been pulling these stunts for years.

Punitive terms that will lead to even greater debt and greater poverty.

This time it's different in that the IMF are doing it to a European nation and not an African one.

They have on their side the governments of Greece's political and economic partners and the bank which issues its currency. 

With friends like that who needs enemies?

Follow your conscience, Greece. Do what's best for you and not what's best for that unholy trinity.

[SillyBilly]

Trouble is, it's 1.6bn this week. Then it's something like 3.3bn next month etc etc.

Since 2010, they've received €252bn from IMF, ECB and EU. €232bn of this has been used to repay debts to (yes, you guessed it) IMF, ECB and EU.

It's just never going to end. Do you think any bank would let any of us do that?. "Hello Mr bank manager, you know that £100k you lent to me the other year, well, I can't afford to pay it back, so can you lend me another £120k, to pay the loan and interest to you".

There's fault on all sides but people need to realise that Greece is never going to be able to pay off their debts. They are in a deep recession and what does the IMF want them to do?. Cut spending and raise taxes. How is that going to help the economy recover, so they can start to afford the repayments?.

I agree with the sentiment but never quite as simple. After all, countries armed with a printing press can meet their liabilities by creating new ones through central bank money creation (cue bond prices at record highs). Unfortunately we can't simply add a few 0's to our bank statements when times are tough; the analogies don't translate too well. I accept Greece can't do what we can with our own independent central bank though.] but even there are technicalities with the ECB.

More concerning is the fact there isn't a chance that the USA, Japan and UK can meet their debt head-on (and they know it) but unlike Greece we can manipulate interest rates directly (record lows) and buy our own government debt with printed money (fund perpetual deficits until market confidence collapses). I don't see us as much better off in short but we can hide it better and therein lies the problem. This is a scheme which can only work if the debt is inflated away by the loss of purchasing power/value of the currencies the debt is denominated in. They are banking on the fact this intended inflation is gradual enough so the general populace doesn't make the connection between their gradually declining standard of living and their solution to the debt crisis. And of course, they will throughout this time report the true figure of inflation below what it actually is by tweaking the formula/make-up to suit. The next crisis will be when the markets realise this is what is happening. When creditors and bond holders realise their investments will be returned to them on maturity in a currency which has depreciated more than the combined return of the principal and the yield/interest accrued. Perhaps we can then rebuild from this economic mess because this is a f**ked up way of managing your current account and I can't see it lasting for long.

[SillyBilly]

This is also why China and the East are getting p*ssed off with the West. If the true relative depreciation of the dollar in value after QE is 5-10% over 5-10 years then the situation is grave for China and beneficial to the U.S (and other QE merchants). Say the Chinese hold $3 trillion dollars in US securities (China is the largest buyer of US debt) then for every 10% loss of dollar value this represents a $300 billion dollar cash gift from the Chinese to the Americans. Basically we borrow money at full value, spend it at full value and get all the benefits from its 100% purchasing power. A few years later we return it for the principal sum plus a bit of interest and give our creditor enough to buy a loaf of bread from his million pound loan.

This is why the system is going to collapse the western world won't be allowed to inflate and debase their currencies at the expense of the East/their own taxpayers anymore, the game is changing. You can see this happening with the Russians and Chinese reducing their exposure particularly in US securities (and also buying record amounts of gold). We won't be allowed to run up huge deficits to be paid for off the backs of others' productivity.

[eddie]

I chucked a wad on the FTSE 100 today as soon as the Tsipras letter came to light. I am now balls deep in the Greeks voting yes this weekend. I am taking the view that the can is being kicked down the road on this one and that the Greeks will be bullied into saying "Yes" on the day. Hoping to get a quick few % before dumping again. Will see how this one goes.

Come on, 'no' voters.

[SillyBilly]

The IMF have been pulling these stunts for years.

Punitive terms that will lead to even greater debt and greater poverty.

This time it's different in that the IMF are doing it to a European nation and not an African one.

They have on their side the governments of Greece's political and economic partners and the bank which issues its currency. 

With friends like that who needs enemies?

Follow your conscience, Greece. Do what's best for you and not what's best for that unholy trinity.

Agreed. Its much better for the Greeks to say no but I can't see it, the pressure and scare-mongering will go into overdrive over the coming days.

[Shang]

This is also why China and the East are getting p*ssed off with the West. If the true relative depreciation of the dollar in value after QE is 5-10% over 5-10 years then the situation is grave for China and beneficial to the U.S (and other QE merchants). Say the Chinese hold $3 trillion dollars in US securities (China is the largest buyer of US debt) then for every 10% loss of dollar value this represents a $300 billion dollar cash gift from the Chinese to the Americans. Basically we borrow money at full value, spend it at full value and get all the benefits from its 100% purchasing power. A few years later we return it for the principal sum plus a bit of interest and give our creditor enough to buy a loaf of bread from his million pound loan.

This is why the system is going to collapse the western world won't be allowed to inflate and debase their currencies at the expense of the East/their own taxpayers anymore, the game is changing. You can see this happening with the Russians and Chinese reducing their exposure particularly in US securities (and also buying record amounts of gold). We won't be allowed to run up huge deficits to be paid for off the backs of others' productivity.

Really appreciating the insight SillyBilly. Super interesting and explains a lot of things going on at the moment, especially with China seemingly increasing military defenses across their coasts. They're preparing for something.

[Mafiabob]

[i-Ram]

This Crowdfunding thing is interesting

https://www.indiegogo.com/projects/greek-bailout-fund#/story

As it heads towards a million euros pledged within a couple of days, it’s clearly not going to reach 1.6billion, but it’s symbolic more than anything

To bail out the Greek and prevent what looks like being major global negative repercussions that will affect us all, would take just 3 euros per European person. Who wouldn’t pay that if it meant safe-guarding the planets financial future? It’s a tiny amount – not even a half of beer

I’m not getting into the argument of “why should it be our responsibility to bail them out?” – so don’t even bother

I’m just making the point that if this goes badly the whole world will feel it – yet it could be sorted so easily by “people” rather than the politicians who are supposed to represent our best interests – who seem to be following their own covert agendas

 

The problem isn't £1.6bn though is it.  That is there short term need. Structurally Greece is a huge basket case, and whilst I feel sorry for the large majority of its people I will spend my next £3 on myself or my family feeling no guilt whatsoever.

[StringerBell]

The Greeks are like Portsmouth fans. They stuck their head in the sand when they're clearly living beyond their means and then they get vocal when it goes tits up

[Shang]

The Greeks are like Portsmouth fans. They stuck their head in the sand when they're clearly living beyond their means and then they get vocal when it goes tits up

That's the whole of Europe... Greece is just the first.

[Stive Pesley]

What's interesting to me is the Greek politicians  like Finance Minister Yanis Varoufakis are at a point where they have nothing left to lose and are just being brutally honest and actually saying what they think. None of the careful words and scripted fluffy nonsense we get from our politicians. It absolutely wonderful to see from that point of view.

Even the IMF are now saying that they need another 50 billion dollars and a payment holiday of at least 20 years if they are to stand any chance of getting the country back on its feet

A lot of lazy arguments blaming the Greek for the size of the mess. Yes they messed up, but the insurmountable size of the mess is purely down to the way they have been treated by the ECB. Where has all the money from the previous bail-outs gone? It's gone to pay off part of the ECB loans. Why? Because they were never bailing out the Greek - they were bailing out the Germans and the other wealthy EU members who had invested in Greek debt! The Germans wanted some of their money back, so all the ECB bail outs weren't designed to help the Greeks. They were designed to help the creditors.

[Wolfie]

What's interesting to me is the Greek politicians  like Finance Minister Yanis Varoufakis are at a point where they have nothing left to lose and are just being brutally honest and actually saying what they think. None of the careful words and scripted fluffy nonsense we get from our politicians. It absolutely wonderful to see from that point of view.

Even the IMF are now saying that they need another 50 billion dollars and a payment holiday of at least 20 years if they are to stand any chance of getting the country back on its feet

A lot of lazy arguments blaming the Greek for the size of the mess. Yes they messed up, but the insurmountable size of the mess is purely down to the way they have been treated by the ECB. Where has all the money from the previous bail-outs gone? It's gone to pay off part of the ECB loans. Why? Because they were never bailing out the Greek - they were bailing out the Germans and the other wealthy EU members who had invested in Greek debt! The Germans wanted some of their money back, so all the ECB bail outs weren't designed to help the Greeks. They were designed to help the creditors.

Well put & welcome.

It's interesting how the language has changed in the past few weeks, with the normal spin on both sides giving way to frank debate and open accusations of double-crossing.

It would indeed be good to see that here but wouldn't happen because our politicians aren't allowed to have a personal opinion without it being portrayed as controversial and analysed to see if it matches the official party line. Nobody can learn and change their point of view over time without it being portrayed as a humiliating U-turn. It's pathetic but is why we seemingly have 600 odd bland, grey MP's.

[SillyBilly]

http://www.hl.co.uk/shares/shares-search-results/g/global-x-funds-ftse-greece-20-etf

Time is fast approaching when solid Greek stocks will be the buy of the decade. I'll hold out for now but at the first sign of a deal, this fund is a good bet for a doubling within a year or so I'd have thought. The sell-off as always is brutal and hard. Buy when others are selling!

[SillyBilly]

What's interesting to me is the Greek politicians  like Finance Minister Yanis Varoufakis are at a point where they have nothing left to lose and are just being brutally honest and actually saying what they think. None of the careful words and scripted fluffy nonsense we get from our politicians. It absolutely wonderful to see from that point of view.

Even the IMF are now saying that they need another 50 billion dollars and a payment holiday of at least 20 years if they are to stand any chance of getting the country back on its feet

A lot of lazy arguments blaming the Greek for the size of the mess. Yes they messed up, but the insurmountable size of the mess is purely down to the way they have been treated by the ECB. Where has all the money from the previous bail-outs gone? It's gone to pay off part of the ECB loans. Why? Because they were never bailing out the Greek - they were bailing out the Germans and the other wealthy EU members who had invested in Greek debt! The Germans wanted some of their money back, so all the ECB bail outs weren't designed to help the Greeks. They were designed to help the creditors.

Good points. The crux of the issue is that 2008/09 firmly showed the world where its priorities are, the banks will not be allowed to fail at any cost. Knowing this, the ball is in the Greek court so far as I see it. They know the terms. But the messages they give out are confusing. They want the Euro but not the austerity that the creditors will impose with it. As such they are floundering as they are holding diametrically opposed desires. They have been told they cannot have both, not because it is unaffordable to the EZ (the size of the debt makes this a red herring) but because a lack of discipline here paves the way for an unaffordable development within the wider EZ (Spain/Italy).

The Greeks need to decide if they want the Drachma or not as that is the only way this charade will end.

 

 

[SillyBilly]

Really appreciating the insight SillyBilly. Super interesting and explains a lot of things going on at the moment, especially with China seemingly increasing military defenses across their coasts. They're preparing for something.

No problem. China's economic policies of late have been indirectly very hostile to the US. China and Russia announced in 2014 that they'd commit to $100billion in bi-lateral trade in Yuan and Roubles and to increase this further in future years. This is significant as it has no other basis other than a 2 finger salute to the dollar and the international monetary system. As I described this system benefits the West at the expense of the East - they effectively fund American military spending - countries with trade surpluses have to invest their reserves in dollar/reserve currency denominated debts (as its the only liquid pool of investment big enough to absorb this volume of cash). The result is the Americans/Brits/Europeans/Japs devalue their currencies by printing more money (and spending it, for instance on technically unaffordable military budgets) so they can pay the debt back in what is in real terms a fraction of what it cost the borrower to lend.

Russia announced in March this year ongoing discussions to create a currency union with Belarus and Kazakhstan (Roubles). I think it is obvious that China and Russia are doing everything in the power to undermine the dollar and its unfair advantages and this will have profound global impacts. The defences being strengthened are just an extension to this, America will not sit by and allow this to happen. It is insolvent without dollar hegemony.

[SillyBilly]

Duplicate

[SillyBilly]

http://www.telegraph.co.uk/finance/economics/11705716/China-stocks-plunge-into-bear-market.html

Sorry to hijack the thread but with all the Greece shenanigans, people don't seem to be talking about China's impending implosion which would bring the whole pack of cards crashing down. The Chinese stock market is nose-diving at the moment. There have been a few documentaries now about China's ghost cities and infrastructure, the state of the completely unregulated shadow banking sector and the over-capacity and dependency of state-run Chinese companies. George Soros suggested recently that the internal problems developing in China are leading to China inventing (and potentially acting upon) external threats to stabilize its political system.

On a side note, I was on a flight from San Francisco the other week and having got upgraded was sitting next to a very wealthy NZ businessman who owned several properties out there. He told me the wealthy Chinese are knowingly and happily investing in bubble markets in London, Singapore, NZ, Sydney, Melbourne etc. on the expectation that it still represents a great hedge against the impending collapse of the Chinese debt and property bubble. Remember, the Chinese have very strict money controls so the only meaningful way to get capital out of China is to invest in property in investor-friendly markets. A 30% devaluation in a London investment is nothing to worry about should China collapse and the Yuan take a battering, the foreign currency once exchanged would more than hedge them when and if repatriated. He said he was moving out of property in the next 1-2 years. It did get me thinking though.

I stand by the fact a crash is coming, just little pieces of the jigsaw slotting into place.

 

[Mafiabob]

[Pearl Ram]

It dismays me to see this blanket coverage on Sky of this damned referendum. Adam Boulton and his sidekick are jizzing themselves over this and frankly it's giving me hives.

There's talk of Chris Martin being sold yet I am expected to be bothered whether Greece keep the Euro or not, who gives ?

Can anyone tell me in two sentences why what Greece decide will have any relevance to my life ?

By the way for those that are interested in this outcome please accept my apologies for my ignorance/ lack of interest it's just that I've flicked Sky news on again for a quick round up and this bloody referendum is being talked about yet again.