Quote from jem:
answer... its great to be the sovereign.
They will likely be a drachma crash on the international exchanges unless they declare a mandatory balanced budget until the euro debt is paid off and they float the right amount of drachmas. It might even make sense to start out at 1 to 1 exchange rate... or 2 to 1.
Then declare a period of time where the exchange rate is fixed at the 1 to 1 or 2 to 1 rate.
Set up a system where the govt must have a balanced budget.
Set it up where the amount of drachmas circulated with allow for commerce plus debt.
Then declare as sovereign all greek citizens and govts (maybe corps) can pay all debts denominated in Euros with drachs if contract was executed prior to a certain date.
The smart move now would be to set up Greek Corps... and then pay your Euro debt in drachmas if there is blackmarket during that initial time period.
Quote from morganist:
Does it really matter it is exactly the same outcome however they do it. All that will happen is that the people who invested in Greece will not get their money back.
Quote from morganist:
Does it really matter it is exactly the same outcome however they do it. All that will happen is that the people who invested in Greece will not get their money back. It doesn't matter whether they are in the Euro or not that loss is maintained.
Quote from jem:
no, necessarily. it depends on how solid the drachma becomes.
If the greeks were to show that they would have a balanced budget and not print extra drachmas. The govt could get out of debt with one big print... The greek people would then pay back in Euros after they exchanged Drachmas. The exchange will be onerous if the govt debases the currency... but if they do not... it might work out better.
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it will be same issue every other contract has implicitly or explicitly... sovereign and currency risk.
what you and everyone else senses is that greece will debase the hell out of their currency instead of balancing their budget.
Quote from morganist:
No the Greeks have to borrow money to pay off the existing debt. So far they have borrowed from the EU to do so. They cannot do that if they leave. This means they will have to print money to pay off the debt, which means the currency will devalue and it will be like default. The first people that get paid will get something until the value collapses.
Quote from jem:
They start up the drachma. They pay off the debt with their first print... then we see what happens.
It won't necessarily devalue... it depends in part on if they run a balanced budget or not. it depends on investor expectations. it depends on interest rates... and sadly it probably also depends on if they bring in the central bankers from london, paris and or the U.S.