dagblog - Comments for "The Greek and Eurozone crisis - A Drama Lesson in Economics."

Gold donuts ?

cmaukonen — Sun, 19 Jun 2011 16:13:46 +0000

In reply to That what you tweet around,

Gold donuts ?

That what you tweet around,

we are stardust — Sun, 19 Jun 2011 15:50:16 +0000

In reply to Amen, brother. And good old

That what you tweet around, with a "How's about a cup o' coffee and a...doubloon?"

Amen, brother. And good old

quinn esq — Sun, 19 Jun 2011 15:02:27 +0000

In reply to The Euro is an anachronism

Amen, brother. And good old North London DOUBLOONS!

The Euro is an anachronism

Cho — Sun, 19 Jun 2011 14:40:54 +0000

In reply to I believe you are correct.

The Euro is an anachronism anyway. Good riddance. Monetary union in the age of electronic banking is all downside and no upside. I'm looking forward to the return of lire, pesos and drachma. Local color and all that...

I believe you are correct.

cmaukonen — Sun, 19 Jun 2011 14:22:46 +0000

In reply to Greece has to default. There

I believe you are correct. And Greece will pull out of the Euro followed most likely by Spain and even Italy and Ireland. By by Eurozone.

As I said in a comment to this post on another blog, this is one of the biggest flaws in Globalization and Free Market ideologies. That each country/business will do what's best for itself and the hell with everyone else. Especially when push comes to shove. The result of these theories is not economic and political stability but quite the opposite. Extreme instability and anarchy.

Greece has to default. There

Cho — Sun, 19 Jun 2011 08:35:27 +0000

In reply to The Greek and Eurozone crisis - A Drama Lesson in Economics.

Greece has to default. There is no way around it. Their debt is around 170% of GDP and it costs them 10% of GDP to just manage the interest payments. Just to compare - total US federal government revenue is around 14% of GDP, so imagine 70% of all those taxes going to just pay the interest on debt. It's just not sustainable. What is happening is that the EU and ECB are playing for time as they slowly transfer all the holdings of Greek bonds from big French and German banks to the ECB, so that all the eventual losses will go to european tax payers rather than to TBTF bankers. So another bailout, just one in very slow motion.

What might make this plan fall apart is the possibility of big Euro banks shorting Greek debt and triggering a CDS payout. Because the big Euro banks hold most of the Greek debt but US banks have written insurance (CDS) on much of that debt. So some Euro banks may be net short Greek Debt, and as such set to gain from triggering a so-called credit event, whereby their insurance pays out.

Crunch time is next month, when Greece will be in technical default due to an inability to pay, barring a deal with the private-sector banks. So 50-50 risk of a Lehman, part-deux next month. It's getting hot over here...