The weekly: Greece to default/restructure THIS weekend? thread
- Thread starter TGregg
- Start date
"Their success is based on Greece's failure."
nonsense.
demand for german goods is highly inelastic because of manufacturing excellence. e.g. there is a reason restauranteurs, in many cases, are willing to pay 7k for a german oven vs. 3k for a chinese oven. of course german companies are also able to seal the deal with extremely cheap credit arrangements, which narrows the initial price difference by a large amount.
M
morganist
I guess it depends on what you class a success. Yes they produce good stuff but if the price rises too much people will look elsewhere. The effect of not only Greece but the other PIIGS has a huge advantage for Germany. Something I suspect they would be willing to support the failing region to maintain at least for the next year or two. Perhaps that is Merkels real intention of maintaining currency union irrespective of the costs.
Which is more cost efficient. To subsidise an austerity programme across the EU to maintain the exchange rate effect they have or to stop funding it and stop the risk of bad debt from the ESM?
What do you think is more costly effective? Currently I think the subsidy programme is a better deal. In a year or two that might change.
a revaluation of the new german currency upon leaving the euro, of as a guess, of 20% would be painful but not the end of the world. i will repeat more clearly that the credit arrangements are the deal breakers. think of what a few percentage points over 10 to 20 yrs. compounded will do to close a deal. it all works to germany's favor to reduce tremendously the price differentials with her competitors
So not correct, sorry. Greece simply reintroduces the Drachma, defaults on all debt, and begins anew. Yes, inflation will certainly pop up, but Greece has defaulted...how many times in the 20th century? Each time people lend them back money. A cheap drachma does wonders for Greece's #1 industry: Tourism.
M
morganist
This is my opinion is the most likely scenario and will be what happens in a year or two. Remember the leaders are trying to get the best deal for their country. It is currently in the best interests of Germany and the PIIGS to keep the Euro going for another year or two then it may not. That is when it will be called in.
Zdreg is right. Look how competitive Germany is with U.S. in China; even though U.S. currency is tied to Yuan, so Germany has a currency disadvantage vis a vis the $, yet they are still able to sell high tech value added products into Chinese infrastructure. Your position depends on commoditized products traded on price alone. Germany's economy is not based on such exports. They already sell stuff that is more expensive, because it is better. If you wanted a better price you could already seek substitution; but yet they sell thier quality products.
Yes & no. Cars are commoditized, regardless of if it's a Mercedes or a VW. Yes, everyone tries to differentiate them, and they are higher quality, but it's hardly an advanced microchip or something. It's still just four wheels that get you from A to B. Profit is constrained by the commoditized character of the product; a Lexus can sub for a BMW/Audi/you name it.
If I can find it I'll cite it: there was a study done of Germany's exports by the IMF or some such biggie, and they decided they are overdependent on cars, same as the US back in the sixties and seventies. It's not a story that ends well. Trying to escape commoditization by going upmarket is a limited success strategy. A commodity is a commodity is a commodity: sooner or later someone is going to catch up to you. Then what?