M
morganist
that seems interesting. can i ask are you a walloon?
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Greek Bailout Same as Subprime Lending
- Thread starter schizo
- Start date
that seems interesting. can i ask are you a walloon?
On the issue of solvency and liquidity...didn't you all notice that the Greeks can't roll over and maintain thier current level of debt at any market rate over 6%? Wouldn't you call that insolvent?
Now the banks are loosing deposits as the Greeks with sneakers take full advantage of the "Four Freedoms," taking thier money, themselves and thier enterprises and running to higher ground. All that will remain to be ravaged by the desperate austerity will be the Greeks without sneakers...the ones that have government jobs. Wait till the details of the new austerity measures attached to this 'bail out' (of Northern Banks) start to leak out...that should be fun.
Now the banks are loosing deposits as the Greeks with sneakers take full advantage of the "Four Freedoms," taking thier money, themselves and thier enterprises and running to higher ground. All that will remain to be ravaged by the desperate austerity will be the Greeks without sneakers...the ones that have government jobs. Wait till the details of the new austerity measures attached to this 'bail out' (of Northern Banks) start to leak out...that should be fun.
Quote from Ed Breen:
On the issue of solvency and liquidity...didn't you all notice that the Greeks can't roll over and maintain thier current level of debt at any market rate over 6%? Wouldn't you call that insolvent?
Now the banks are loosing deposits as the Greeks with sneakers take full advantage of the "Four Freedoms," taking thier money, themselves and thier enterprises and running to higher ground. All that will remain to be ravaged by the desperate austerity will be the Greeks without sneakers...the ones that have government jobs. Wait till the details of the new austerity measures attached to this 'bail out' (of Northern Banks) start to leak out...that should be fun.
Obviously, what the Greeks say they need, and what they really need, are two different things. Yes, they are functionally insolvent, IMO. But so is most of the Western world. Imagine what things would look like today in the US and UK, and Japan, if no CB engaged in QE last year.
All depends on what your definition of insolvency is for a sovereign... The Greeks would claim that, once their ambitious budget plan is successfully implemented, they would be perfectly solvent (or at least as solven as the other European sovereigns). Therefore, they insist on portraying their situation as a liquidity crisis, rather than a solvency one. As long as their lenders agree with this definition, that's the way it is.Quote from Ed Breen:
On the issue of solvency and liquidity...didn't you all notice that the Greeks can't roll over and maintain thier current level of debt at any market rate over 6%? Wouldn't you call that insolvent?
Now the banks are loosing deposits as the Greeks with sneakers take full advantage of the "Four Freedoms," taking thier money, themselves and thier enterprises and running to higher ground. All that will remain to be ravaged by the desperate austerity will be the Greeks without sneakers...the ones that have government jobs. Wait till the details of the new austerity measures attached to this 'bail out' (of Northern Banks) start to leak out...that should be fun.
A soveriegn is insolvent when it can't raise money on its own in a public debt auction that it can afford to maintain; when it can't raise the debt on its own to roll over existing debt and it has no other way to pay off that debt when it matures. That's Greece now, it is not yet the U.S., Japan or the U.K.
Understand that the austerity program that lays behind this punt down the road (just a little way) of a 'bail out plan,' will actually make Greek debt/GDP ratio worse not better. You cannot solve a debt problem with more debt; you can only solve a debt problem with income. This austerity plan will drive down GDP more than debt and income will decline.
Understand that the austerity program that lays behind this punt down the road (just a little way) of a 'bail out plan,' will actually make Greek debt/GDP ratio worse not better. You cannot solve a debt problem with more debt; you can only solve a debt problem with income. This austerity plan will drive down GDP more than debt and income will decline.
Well, as it happens, I actually agree with you re: long-term prospects for Greece and I have some money on the table to that end.Quote from Ed Breen:
A soveriegn is insolvent when it can't raise money on its own in a public debt auction that it can afford to maintain; when it can't raise the debt on its own to roll over existing debt and it has no other way to pay off that debt when it matures. That's Greece now, it is not yet the U.S., Japan or the U.K.
Understand that the austerity program that lays behind this punt down the road (just a little way) of a 'bail out plan,' will actually make Greek debt/GDP ratio worse not better. You cannot solve a debt problem with more debt; you can only solve a debt problem with income. This austerity plan will drive down GDP more than debt and income will decline.
However, playing devil's advocate, I am just suggesting how the Greeks would argue. After all, the point at which a liquidity problem turns into a solvency one is not fixed hard and fast. They would claim that, here and now, what they're experiencing is a pure liquidity issue, which can be alleviated by the promise of an EU/IMF backstop.
At any rate, we will see how their bill auction goes tomorrow (if memory serves). Should tell us what the mkt thinks...
Quote from Ed Breen:
A soveriegn is insolvent when it can't raise money on its own in a public debt auction that it can afford to maintain; when it can't raise the debt on its own to roll over existing debt and it has no other way to pay off that debt when it matures. That's Greece now, it is not yet the U.S., Japan or the U.K.
I understand your technical definition of insolvency in relation to a sovereign. However, whenever I hear the phrase: quantitative easing... I immediately assume that the alternative to QE is insolvency. Now, the insolvency may not be immediate, but it is a real threat nonetheless. Deflationary episodes usually have a negative effect on tax collections, no?
Thus, if a nation can create money ex nihilio to support it's banking system or national finances, I naively assume that things aren't going too well.
The way I look at it is that they are already in default and they will soon have the economic profile of Iceland. The austerity prescription will be no 'solution,' it will produce the same economy as default. GDP will go negative, CPI will go negative, unemployment will go over 25%, debt will decline a little but the ratio of debt/GDP will actually increase to around 15%. Capital will flee the banks and tourists won't come. The only solution to a debt problem is growth and they are just 'turnining away from a skid.'
The auction tomorrow will probably be judged a success. After all its only $1.6B....if the Euro ralies and Greek Stocks and Banks ralley, I will buy the EPV once I think the false euphoria runs its course.
The auction tomorrow will probably be judged a success. After all its only $1.6B....if the Euro ralies and Greek Stocks and Banks ralley, I will buy the EPV once I think the false euphoria runs its course.
Quote from Ed Breen:
The way I look at it is that they are already in default and they will soon have the economic profile of Iceland. The austerity prescription will be no 'solution,' it will produce the same economy as default. GDP will go negative, CPI will go negative, unemployment will go over 25%, debt will decline a little but the ratio of debt/GDP will actually increase to around 15%. Capital will flee the banks and tourists won't come. The only solution to a debt problem is growth and they are just 'turnining away from a skid.'
The auction tomorrow will probably be judged a success. After all its only $1.6B....if the Euro ralies and Greek Stocks and Banks ralley, I will buy the EPV once I think the false euphoria runs its course.
I have quite a few friends and family in Greece, so I constantly hear what's going on. I agree with your assessment though. They slash spending, gdp drops as well, little to no impact on debt to gdp and deficit to gdp... yet deflation continues and capital flight intensifies...
There is now serious discussion about defaulting, and even possibly leaving the Euro. Now granted, this is not the government position, but it is increasingly thought about by many people, whereas a couple years ago it would have been unheard of.
What do you think Ed - should they bail out of the Euro? I think if it weren't for the geopolitical factors, leaving the Euro area would be a no-brainer. Otherwise, I would be torn. Or maybe the EU has a trick up its sleeve? Something to do with how they have been assessing their gold situation. But that's conjecture.