Some interesting currency moves today

[JR8]

Blood on the street today, as Greece looks all set to default. I hope this turns out to be good opportunity to buy.

I'm gunning for a small Greek island myself.

How about a joint venture on Lesbos

[x9200]

So what are the likely scenarios for Greece and the eurozone? I guess the piss at limit is about to be reached or was already reached last weekend.

[JR8]

Read a couple of the recent posts (of this week) from this guy. Very smart, very well connected (ex UK govt minister), no agenda. ->http://johnredwoodsdiary.com/

I also thought this article summed up the basics of the situations, for the average citizen/holidaymaker/consumer. Given this is spreading around the world, I don't think the 'British' in the article's title is relevant.
'What a Grexit means for you: What's happening in Greece - and how does it affect Britons as debt default looms?'
http://www.thisismoney.co.uk/money/news ... ct-us.html

[Strong Eagle]

So now the question becomes... how does the world lessen the fallout, both for Greece and the rest of the world, as Greece exits the Euro? It sure looks like it is going to happen.

As Paul Krugman has stated, Greeks would do well to reject the upcoming referendum because it will leave them exactly where they have been for years... punitive austerity measures, high unemployment, and no hope of jump starting the economy. http://www.huffingtonpost.com/2015/06/2 ... 87960.html

[x9200]

Read a couple of the recent posts (of this week) from this guy. Very smart, very well connected (ex UK govt minister), no agenda. ->http://johnredwoodsdiary.com/

I also thought this article summed up the basics of the situations, for the average citizen/holidaymaker/consumer. Given this is spreading around the world, I don't think the 'British' in the article's title is relevant.
'What a Grexit means for you: What's happening in Greece - and how does it affect Britons as debt default looms?'
http://www.thisismoney.co.uk/money/news ... ct-us.html

Thanks JR8 for that. Two questions:

So why the "medication" prescribed to heal the Greece economy didn't work?

If Greece does the grexit, Is the only reason for expected mess and market panic the magnitude of the debt or there are some other reasons? It would appear the grexit would be a good thing longer term for the eurozone.

[Strong Eagle]

So why the "medication" prescribed to heal the Greece economy didn't work?

Because austerity in and of itself is not enough to heal the economy. Without a devaluation of the currency as well... think Canada and Iceland... to make goods and services attractive to outsiders, and therefore build economy, austerity causes a contraction, resulting in lower government revenues, making everything worse.

[x9200]

So why the "medication" prescribed to heal the Greece economy didn't work?

Because austerity in and of itself is not enough to heal the economy. Without a devaluation of the currency as well... think Canada and Iceland... to make goods and services attractive to outsiders, and therefore build economy, austerity causes a contraction, resulting in lower government revenues, making everything worse.

But this is something Greece has to take care by itself (it is related to the quality of the work they do) and not the international monetary organisations or other countries in the eurozone? Same I would expect for the tax evasion. What surprises me is for example this, taken from the John Redwood's blog mentioned above:

My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them.

[Strong Eagle]

So why the "medication" prescribed to heal the Greece economy didn't work?

Because austerity in and of itself is not enough to heal the economy. Without a devaluation of the currency as well... think Canada and Iceland... to make goods and services attractive to outsiders, and therefore build economy, austerity causes a contraction, resulting in lower government revenues, making everything worse.

But this is something Greece has to take care by itself (it is related to the quality of the work they do) and not the international monetary organisations or other countries in the eurozone? Same I would expect for the tax evasion. What surprises me is for example this, taken from the John Redwood's blog mentioned above:

My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them.

Because Greece uses the Euro, they cannot devalue the currency. They are f*cked, especially in light of Merkel's intransigence.

But, in the longer run, leaving the Euro, and raising the Drachma from the grave is in Greece's best interest. There will be short term hurt. Greece will need to print Drachmas backed by nothing... there will be inflation... and there will be significant currency depreciation that will make foreign goods exceedingly expensive for the Greeks.

But if the government puts in currency controls to stop capital flight from the country... and I think they will... things will improve in a short period of time. Greece tourism, a substantial part of the economy, will explode with half price deals. Greek labor will become competitive and soon goods production will be outsourced to Greece just as they are to Asia.

Greece will seriously f*ck itself if it votes "yes" to the continued austerity measures. Much better to shoot your dealer in the heart, accept the pain of withdrawal, and awake the next day with far better prospects of recovery.

Edited to add... [rant] look at the last major Asian financial crisis... Thailand, with an open border capital philosophy was absolutely f*cked when banks that were pouring billions into the country suddenly started taking billions back out. The foreign banks killed local banking, then deserted the economy, creating a great deal of financial anguish.

Switch to Malaysia... like it or not Malaysia mostly told the banks to f*ck off... no money move offshore, no conversion of Ringgit to dollars... kind of like the Chinese still try to behave. Bottom line... the money stayed in Malaysia, much to the consternation of the bankers... and the financial fall in Malaysia was much less severe.

You already know my sentiments... F*CK THE BANKERS! [/end rant]

[Addadude]

Blood on the street today, as Greece looks all set to default. I hope this turns out to be good opportunity to buy.

I'm gunning for a small Greek island myself.

How about a joint venture on Lesbos

Thta sounds like the theme for a very hardcore blue movie...

[JR8]

So now the question becomes... how does the world lessen the fallout, both for Greece and the rest of the world, as Greece exits the Euro? It sure looks like it is going to happen.

As Paul Krugman has stated, Greeks would do well to reject the upcoming referendum because it will leave them exactly where they have been for years... punitive austerity measures, high unemployment, and no hope of jump starting the economy. http://www.huffingtonpost.com/2015/06/2 ... 87960.html

'It's a right pickle' [i.e. mess], as they say back home. Greece is relatively tiny, something like 4% of the economy of the Euro-zone. The markets, as usual, are already looking beyond Greece to who might be next. That means Italy, Spain and Portugal. Italy and Spain are significant economies, so if Greece is causing this mayhem, then if Italy and Spain get any separatist thoughts the Euro is in very serious trouble. That's why the markets are being beaten up so very hard. My feeling is that this is why Greece is being given such a rough ride, as a warning to Italy and Spain as to where it leads.

But Greece (as a result of this over-riding motive) are being put in an untenable position. It's like Germany/France etc held their noses to let Greece join the Euro, in the hope that they'd start behaving like model north Europeans: All so the EU could eventually boast that the Euro-zone has a larger economy than the US. I've made that point before, and am clear that was the thinking. Same reason you have all the other basket cases on the list of 'succession countries' - Turkey (mostly in Asia), Morocco (wholly in Africa), and others - anything to be bigger than the US. And hence the complete FU we are facing right now with no clear way out: The EU/Euro was intentionally designed with no exit doors.

How to limit the fall-out? Go the whole hog and require intra-state fiscal transfers (non-repayable). Similar to what I believe exists in the US, richer states support poorer ones. The US wouldn't stay together without it. But the problem in the EU is there is no way tax-payers in the richer states are going to agree to hand over their money to other countries. A lot of EU citizens hate the EU and pretty much everything it stands for. That fact is likely never going to change, as the EU itself cannot change in any material way... it's course of 60+ years is set in stone.

So I expect some kind of fudged last minute 'deal' to be made. Paper over the cracks again for a while, until next time it blows up. It really is a ridiculous situation. I wish there was some form of coalition of non-EU heads of state who would create some pressure to bear on how this is being handled... nothing is apparent yet though.

[JR8]

Thanks JR8 for that. Two questions:
So why the "medication" prescribed to heal the Greece economy didn't work?
If Greece does the grexit, Is the only reason for expected mess and market panic the magnitude of the debt or there are some other reasons? It would appear the grexit would be a good thing longer term for the eurozone.

Good question, I wonder how Merkel would answer that
Maybe it's like beating the living crap out of someone then demanding they run a marathon? The critical mass of opinion in Greece is now very highly anti-Euro. The people will not accept massive austerity for a promise of a brighter tomorrow (still under the German jackboot). They just want out, but that will never be permitted.
Grexit might well be great for Greece, but it also might be terminal for the Euro, and the EU 'project'*. It is very unlucky for Greece to be caught right in the middle of all of this, this... show-trial.

* I.e. on economic fundamentals it would seem obvious Greece should leave the Euro, it's just the politics that won't let that happen.

[JR8]

Because austerity in and of itself is not enough to heal the economy. Without a devaluation of the currency as well... think Canada and Iceland... to make goods and services attractive to outsiders, and therefore build economy, austerity causes a contraction, resulting in lower government revenues, making everything worse.

^ +1, Well put. You've made the point I would have if I'd have thought of it in such succinct terms

[JR8]

What surprises me is for example this, taken from the John Redwood's blog mentioned above:
My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them.

It is an interesting point. Most of the powers the EU has it has granted itself over the heads of the people. Just about any referendum held on the EU has been voted against; which is why the EU learned very quickly to not have any more referenda (the last one being the vote on the Lisbon Treaty about 10 years ago?). That's another reason why a significant proportion of people despise the EU with a passion. The EU has arrived at the point it is in via stealth and lying to the citizenry. I do not think the EU and democracy can co-exist. It is a top-down project, that will always have to be run in the same way.

Let's not forget that Greece is the original and ancient cradle of democracy. Hmmm... inconvenient The Greeks want to put the IMF/etc proposals to a vote, a VOTE!?... but that means there's uncertainty, the people might interfere with the greater vision! This is why northern Europe/IMF/Eurogroup are clutching their chests and having heart palpitations ... the future of the Euro left in the hands of the mere populace. This was not a part of the plan, I cannot imagine how boiling with fury Merkel must be. And the only mildly amusing part is that Greece are pretty much beyond caring any more, they've little further left to lose. Hence Tsipiris cozying up to Putin And this week Turkey offering to take on Greece's debts

[JR8]

But if the government puts in currency controls to stop capital flight from the country... and I think they will... things will improve in a short period of time. Greece tourism, a substantial part of the economy, will explode with half price deals. Greek labor will become competitive and soon goods production will be outsourced to Greece just as they are to Asia.

Life after the Euro? Oh no, Germany will never let that happen. Greece will not leave without being destroyed. 'Lest other countries get any ideas'.

[Strong Eagle]