Grexit (Greece exiting Euro) what would be the consequences?
- Thread starter uexkuell
- Start date
I think that european politicians aren't afraid that Greece will go bancrupt without euro. They are afraid that Greece will improve their economy without euro.
euro is now higher than friday's close.
The effect in Greece would be significant, imports would become expensive, but debt burden would be eased. Inflation would pick up steam. There will be immediate liquidity problems. In the Euro zone the effect in 6 months would hardly be noticeable. In global markets, other than in those closely tied to the Greek economy, the effect would be nearly undetectable.
The total amount of the Greek debt is a tiny drop in the international finance bucket. Greece could default on all debt tomorrow, never pay a drachma back, and the net effect globally would be virtually zero. It's too small an amount to be significant overall. US markets are reacting partly because of hedging against a market reaction, which is a bit ironic. Those who hold assets related to the Greek economy will rest uneasily unless they are fully hedged or insured, and those who see the market falling will panic as they always do. And of course the reaction will be over done, as it always is. For very short term traders this is, once the selling stops, a buying opportunity.
If Greece were to drop out of the Euro zone, it could actually help strengthen the Euro, by removing one of the albatrosses around its neck. It is possible that Greece would go back to the drachma, but remain in the Euro economic community. If I were to bet, I would bet on a last minute accommodation however..
Of much more impact will be the Fed's decision in the fall. The U.S. market has been trying to put in a top for months now, and this little fracas my help things along. Eventually it will fall, and of course the reaction to anticipation of tightening, which has already begun, will be overdone as always. The Fed will tighten, when they finally do, in a very gradual and measured way. Once people realize the sky is not falling, the market will recover some, but it will remain tepid for an extended period of many months if not several years. After all we have enjoyed six years of a continuous bull market following the 2007-2009 crisis. Now THAT was a REAL crisis!
The total amount of the Greek debt is a tiny drop in the international finance bucket. Greece could default on all debt tomorrow, never pay a drachma back, and the net effect globally would be virtually zero. It's too small an amount to be significant overall. US markets are reacting partly because of hedging against a market reaction, which is a bit ironic. Those who hold assets related to the Greek economy will rest uneasily unless they are fully hedged or insured, and those who see the market falling will panic as they always do. And of course the reaction will be over done, as it always is. For very short term traders this is, once the selling stops, a buying opportunity.
If Greece were to drop out of the Euro zone, it could actually help strengthen the Euro, by removing one of the albatrosses around its neck. It is possible that Greece would go back to the drachma, but remain in the Euro economic community. If I were to bet, I would bet on a last minute accommodation however..
Of much more impact will be the Fed's decision in the fall. The U.S. market has been trying to put in a top for months now, and this little fracas my help things along. Eventually it will fall, and of course the reaction to anticipation of tightening, which has already begun, will be overdone as always. The Fed will tighten, when they finally do, in a very gradual and measured way. Once people realize the sky is not falling, the market will recover some, but it will remain tepid for an extended period of many months if not several years. After all we have enjoyed six years of a continuous bull market following the 2007-2009 crisis. Now THAT was a REAL crisis!
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Greece doing well after exiting the euro is sure a nightmarish scenario for the Eurozone, especially with Tsipras mates getting the city halls recently in Barcelona and Madrid.
I sure wish it doesn't work alright for Greece
You mean experience to spend the "future" money ? This is no different from those that over spend in their credit card.
How does one reduce debt if not by means of massive currency devaluation? Ultimately we are all doomed anyway.
The problem is the all the central bank in the world are not able to find other alternative to create growth and wealth.
I waited till opening on monday to limit risk:
- long EURO (winning trade against losing one for you, except if you closed it almost at opening), the upwards correction was even bigger than the drop!
- short ES (20 points lower entry then you, but much less risk)
your EURO gamble was wrong and will eat the profit of your ES position.
my ES trade will have a smaller profit than yours, and I have no loss in EURO/USD but a profit.
risk/reward for what I did was much better.
2 times profit and no open losing positions will bring in total more profit than what you did.
Trading is also about strategy. Not only about not being afraid to jump in and out. Control carefully what you do and know why you do it ( or not do it).