Potential Consequences of a Greek Exit

 

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  • #8528

    ashvin
    Participant

    As the possibility of Greece failing to establish a “pro-Euro” government and leaving the Union rises with every passing day, it is helpful to conside
    [See the full post at: Potential Consequences of a Greek Exit]

    #3371

    pipefit
    Participant

    Hard to believe Greece leaves the Euro. Far more likely it is Germany. Once Greece exits, it is all over for the other PIIGS, Belgium, France, and maybe even The Netherlands.

    Not that there are any easy fixes, but ‘Austerity’ has been voted down. It’s really not even on the table any more.

    #3372

    YesMaybe
    Member
    #3375

    einhverfr
    Member

    There are a couple of other aspects here that aren’t really discussed.

    The first is that Greece leaving might affect Euro supply and thus lead to inflation in Europe even in the absence of other crisis factors. the Euro may be somewhat devalued just because of the fact that you have more Euros for a slightly smaller economic unit.

    The big risk that is missing in this article though is that the reason you’d see deposit withdrawals in Spain and Italy is that there would be a very reasonable sentiment that these countries were heading towards withdrawal as well. And if Spain or Portugal goes, then what next?

    A spreading crisis of withdrawal from the Eurozone would devalue the Euro drastically. It isn’t clear to me whether the Euro would, over the course of the next few years, fair better than the Drachma. That would depend on how contained the crisis is. If the Euro starts to get in bigger trouble though, would Germany stay in the union?

    Basically you could have a death spiral of the Euro taking place after a Greek exit.

    #3376

    jal
    Participant

    Here is the key phrase that is being kept out of the discussion.

    … mutually assured destruction…

    The Greeks have a bigger gun that the EU

    #3378

    pipefit post=2985 wrote: Hard to believe Greece leaves the Euro. Far more likely it is Germany. Once Greece exits, it is all over for the other PIIGS, Belgium, France, and maybe even The Netherlands.

    Not that there are any easy fixes, but ‘Austerity’ has been voted down. It’s really not even on the table any more.

    Agreed, “Austerity” has been voted down, but implicitly also the alternative to Austerity of further financing an unsustainable economic system has ALSO been Voted Down. If there is some 3rd Option between Austerity and just Printing Money to finance the economy, I do not know what that is.

    From my POV, a New Drachma is a Non-Starter. I don’t see what the Greeks have to back this up besides Olives and Feta Cheese, and I don’t think the Export Market for EITHER of those is all that good right now.

    If the Greek Central Bank RESTRICTS issuance of Drachma so as not to ruit into an HI event, then the Greeks can’t pay Pnesioners and Civil Service sectors with it, they’ll be as hamstrung as with the Euro.

    I am CONVINCED if the Greeks issue New Drachma, the notes will HI at least as fast as Zimbabwe Notes did.

    RE

    #3381

    Golden Oxen
    Participant

    “From my POV, a New Drachma is a Non-Starter. I don’t see what the Greeks have to back this up besides Olives and Feta Cheese, and I don’t think the Export Market for EITHER of those is all that good right now.” What did they have to back their currency before this silly Euro experiment? It appeared to be a functional currency. Greece will survive a massive devaluation of it’s currency if it goes back to it, much like Argentina,Mexico, Brazil etc. This end of the world decent into hell talk, if you default, is bankster propaganda. Don’t get me wrong it will not be pretty for a spell, but Greece will survive and the world will still spin. Come to think of it Zimbabwe is still on the map and somehow functioning. That printing orgy they had there made the other hypers look like a friendly game of Monopoly.

    #3390

    pipefit
    Participant

    “If there is some 3rd Option between Austerity and just Printing Money to finance the economy, I do not know what that is.”

    I think this is what all the stalling is about. They are looking for ‘the third way’. If they had even a half baked strategy they would have tried it by now.

    What is really scary is how lame the interim moves have been these last several years. Compare that to the Fed. I thought their ‘operation twist’ was a pretty clever way of muddling through another year without having to call it ‘QE-3’ during an election year, even though that is basically what it is.

    Not that ‘twist’ is a solution at all, but it seems to be politically palatable, and it appears to be buying a little time. On the other hand, the EU boys are just about out of time, it seems.

    Surely you have noticed how gold/silver have decoupled from the stock market the last couple of days? SPX has been down the last two days, continuing the decline almost every day in May. Gold and silver had been declining with the SPX in lockstep, until yesterday, and they are up big two days in a row.

    What to make of it? Could just be short covering in the metals. But, consider. Gold and silver rallied, the dollar appears to be topping, and interest rates are still falling. And the market keeps dropping. And the overhyped Facebook IPO is a bust.

    I’d say that this market is in huge trouble, except gold, which might continue to decouple. The reason I’m bullish on gold is that a. I’m a gold permabull (full disclosure, lol) and b. silver also decoupled the last two days. That is horrible news for everything else, …….

    #3397

    Golden Oxen
    Participant

    @pipefit. Glad to meet another gold perma bull, a rare breed for sure. Have been long gold and silver for over forty years. Hang in there pipefit. “Gold Will Win.” My opinion of the decoupling this week was the manipulative short sellers, Morgan and G Suchs and company, have been tipped of a big reflation imminent. This next print should be a real doozy, especially with the deflation fairy tale getting a lot of press lately.

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