2015 - Greece drops Euro?

[jk]

Re: 2015 - Greece drops Euro?

Perhaps there is a difference? In sub-Saharan Africa the Chinese appear to be after what resources they can extract from those nations, and what equipment and surplus labour they can export and install to achieve that.

Unless the Chinese have suddenly developed a taste for olive oil over the traditional peanut oil in their woks, in the case of Greece it would seem they wish to invest in the infrastructure as one gateway for their products into the European market. A Grexit would seem counterproductive in that situation.

chinese goods must at some point cross a boundary to enter the eurozone. does it matter if that boundary is the one TO their intra-eurozone greek port facilities, or the one FROM their extra-eurozone greek port facilities?

the duties would presumably be the same either way. but post-grexit, BUILDING and OPERATING their greek port facilities would be a lot cheaper.

[GRG55]

Re: 2015 - Greece drops Euro?

chinese goods must at some point cross a boundary to enter the eurozone. does it matter if that boundary is the one TO their intra-eurozone greek port facilities, or the one FROM their extra-eurozone greek port facilities?

the duties would presumably be the same either way. but post-grexit, BUILDING and OPERATING their greek port facilities would be a lot cheaper.

I suppose it all depends on where the EU decides to place the inevitable tariffs on imports of Chinese goods...

[gnk]

Re: 2015 - Greece drops Euro?

JK, when it comes to understanding Greece, it's difficult to compare it to either a stable (yes, with institutionalized graft) Western democracy or a (strongman rule) sub-saharan country. It's far from either.

The US founding fathers carefully crafted a system of checks and balances utilizing a three branch form of government. They did this because they feared two things: 1) a monarchy or aristocracy - elite rule and 2) a hyper democracy ruled by the masses.

Modern Greece, post junta (1967-1974), and actually starting in the 1980s with the elder Papandreou up until the crisis, to me is best described as the US founding fathers' second fear - rule by the masses, the majority, etc. As I wrote in my post in the crisis in Europe thread - politicians actually delivered on their promises to the masses. They looked the other way during tax time, they gave as many government jobs away (based on party affiliation) as they could often using economically unsustainable government owned enterprises, they increased government salaries, lowered retiree age limits and increased payouts, gave massive subsidies to small businesses and farmers, supported guild monopolies and unions, etc... The politicians with the most promises won... and delivered.

Such an environment is difficult for outside investors. There's no stable institutionalized system of graft to rely on, nor a single strongman (single source power structure) to deal with. It is an extremely unpredictable environment. I guess one can even argue that Greece has the most highly evolved democracy in the world! Yes, too much of a good thing does exist when it comes to democracy.

The US, on the other hand, is evolving towards elite rule - concentrated power based on wealth. Greece,up until the troika, was evolving towards the other direction, though an elite component does still exist in Greece, one only need compare tax structures to see that it is nowhere near the strength of the US elites.

Honestly, I envy those Scandinavians (and occasionally Canadians) when it comes to government. We could all learn something from them.

One can learn a lot about a country just by looking at its tax code and health care system to see where the power lies, or at least, if there is any noblesse oblige sentiment among its elites.

But back to the topic, I honestly don't believe Greece could handle its own currency, at least not yet. The global investing community knows this. Historically speaking, Greece's best economic steward was the Junta. But needless to say, a dictatorship has its own downfalls, and shouldn't be an option.

There is one thing the Greeks are benefiting from in this crisis - it's better, more efficient government and a better investment environment. All that would unravel if Greece left the Euro and no longer answered to the troika.

What Europe has to eventually do is to mimic the US model of using the Federal taxing and spending power to redistribute money throughout the EU. For example, wealthier states such as California and New York actually lose money to Washington DC, whereas Mississippi and Louisiana gain, it's a wealth redistribution. To accomplish this, Europe needs to slowly harmonize regulations between the nations and increase Brussels' power, in order to have a Euro Department of Defense, for example. Right now, Greece, due to its location, spends more money per capita defending Greece (and therefore Europe), than many other countries in the EU have to. For example, what existential threats does Luxembourg have? Why should they get a free ride? That and many other things have to change.

Thus, since Europe lacks a central authority on the same level as Washington DC in the US, the EU will continue to accomplish what Washington DC does, but ad hoc, with whatever tools they have, and often too late.

The EU is still a work in progress. Greece is merely an example of the many bugs that exist in the current system.

[touchring]

Re: 2015 - Greece drops Euro?

Another consideration is what happens in Ukraine. If the much feared Spring offense happens and Russia intervenes, there will be economic repercussions on the EU.

I think I'll hold back on NBG until Ukraine becomes clearer.

[jk]

Re: 2015 - Greece drops Euro?

Thus, since Europe lacks a central authority on the same level as Washington DC in the US, the EU will continue to accomplish what Washington DC does, but ad hoc, with whatever tools they have, and often too late.

The EU is still a work in progress. Greece is merely an example of the many bugs that exist in the current system.

thank you for your post, above, gnk. i found it very interesting. i've just quoted the last few lines above, because i think that is where our understandings diverge. the e.u. founding documents FORBID the regional redistributions that you [and i] think are necessary for a truly functional eurozone. and germany, the most powerful country within the eurozone, has made clear that it will oppose such redistributions in any form, overt or covert, with all its might.

so to say that true progress in greece is dependent on there first being true progress in eurozone economic integration is saying that true progress in greece will not happen for a very, very long time, if ever.

i have said repeatedly in the euro-crisis thread that i don't think there will be any significant changes until germany enters recession. HOWEVER, i think even those changes won't do what you're looking for. i think that when germany enters recession, it will finally relent on the notion of economic stimulus. germany will have to tolerate a bit of inflation in order to get its own economy moving again, and german stimulus will leak out into the rest of the eurozone. [the situation is comparable to the u.s. stimulus which leaked out to china via the u.s. consumption of chinese made goods.]

this won't achieve what you're looking for, however. that integration is a long way down the road, if ever.

so what is greece to do in the absence of true eurozone economic integration? i think it will have a hard road no matter what it does. it's interesting to me to hear your description of at least some positive outcomes from the troika imposed regime, and those developments will be to the good going forward.

but how will greece improve its people's economic situation when germany refuses to stimulate german consumption, and ecb policy is essentially geared to the german economy, not the eurozone economy?

[touchring]

Re: 2015 - Greece drops Euro?

but post-grexit, BUILDING and OPERATING their greek port facilities would be a lot cheaper.

One big misconception we have is that the Chinese depend solely on low cost labor.

http://www.joc.com/port-news/port-pr..._20140624.html

http://www.bunkerportsnews.com/News....f-9d17f94f90f5

[GRG55]

Re: 2015 - Greece drops Euro?

thank you for your post, above, gnk. i found it very interesting. i've just quoted the last few lines above, because i think that is where our understandings diverge. the e.u. founding documents FORBID the regional redistributions that you [and i] think are necessary for a truly functional eurozone. and germany, the most powerful country within the eurozone, has made clear that it will oppose such redistributions in any form, overt or covert, with all its might.

so to say that true progress in greece is dependent on there first being true progress in eurozone economic integration is saying that true progress in greece will not happen for a very, very long time, if ever.

i have said repeatedly in the euro-crisis thread that i don't think there will be any significant changes until germany enters recession. HOWEVER, i think even those changes won't do what you're looking for. i think that when germany enters recession, it will finally relent on the notion of economic stimulus. germany will have to tolerate a bit of inflation in order to get its own economy moving again, and german stimulus will leak out into the rest of the eurozone. [the situation is comparable to the u.s. stimulus which leaked out to china via the u.s. consumption of chinese made goods.]

this won't achieve what you're looking for, however. that integration is a long way down the road, if ever.

so what is greece to do in the absence of true eurozone economic integration? i think it will have a hard road no matter what it does. it's interesting to me to hear your description of at least some positive outcomes from the troika imposed regime, and those developments will be to the good going forward.

but how will greece improve its people's economic situation when germany refuses to stimulate german consumption, and ecb policy is essentially geared to the german economy, not the eurozone economy?

Most commentators and observers refuse to accept or acknowledge that Germany is the biggest impediment to an integrated Europe and a workable EMU.

The divide between Germany and pretty well every other EMU nation will never be made up by the imposition of austerity in Greece (and Portugal, Ireland, Spain, Italy, France...). There has to be some redistribution, whether the Germans like it or not. Even in Canada we have an "equalization payment" program between the Provinces, where the less well off receive funds in an attempt to reduce the gap in the quality of various government provided social services in different parts of the country. The Germans and the Troika could start by acknowledging that instead of increasing Greek sovereign debt as they have, what was/is needed is debt relief.

I have difficulty imagining an outcome where Greece alone leaves the EMU. What you describe as a Greek exit is essentially the Greeks forcing the issue of debt relief. If it is "asked" or "allowed" to leave, it seems almost certain that others will follow and apply whatever template is used to achieve the same end. Already there are significant nationalist, anti-austerity, anti-EMU political parties in both Italy and France. I expect even Germany would find it unthinkable that one or both of those two large nations would exit.

I think the Germans need to be very careful what they wish for. Or, alternatively, they need to start to think through how they leave the EMU.

[touchring]

Re: 2015 - Greece drops Euro?

I have difficulty imagining an outcome where Greece alone leaves the EMU. What you describe as a Greek exit is essentially the Greeks forcing the issue of debt relief. If it is "asked" or "allowed" to leave, it seems almost certain that others will follow and apply whatever template is used to achieve the same end. Already there are significant nationalist, anti-austerity, anti-EMU political parties in both Italy and France. I expect even Germany would find it unthinkable that one or both of those two large nations would exit.

I think the Germans need to be very careful what they wish for. Or, alternatively, they need to start to think through how they leave the EMU.

You have described the situation very well. I believe German politicians know very well that Grexit is not an option, but on the other hand, they can't make it too easy for Greece, otherwise other countries too will demand for debt relief.

If the Greek voters are smart, they will know that they still have the upper hand and will vote in the anti-austerity Syriza party to demand or rather should I say bargain for some debt relief from the Germans. After Syriza gets voted in, they will soften their rhetoric as all opposition parties do once they go into power.

The uncertainty in the meantime will spook the stock market once again.

[santafe2]

Re: 2015 - Greece drops Euro?

...Germany is the biggest impediment to an integrated Europe...

The divide between Germany and pretty well every other EMU nation will never be made up by the imposition of austerity in Greece (and Portugal, Ireland, Spain, Italy, France...). There has to be some redistribution, whether the Germans like it or not. Even in Canada we have an "equalization payment" program between the Provinces, where the less well off receive funds in an attempt to reduce the gap in the quality of various government provided social services in different parts of the country.

You've described the core reason the EU will not work. The Old South and California or New York may not have much in common and may even disrespect each other but that doesn't stop federal funding from flowing out of California and New York every year and into southern states, (and New Mexico...thank you). Without revenue sharing the US would be even more fractured than it is currently....hey New Mexico, New York called and it's austerity for you....Eeee, we already live in houses made of dirt?!

[GRG55]

Re: 2015 - Greece drops Euro?

You've described the core reason the EU will not work. The Old South and California or New York may not have much in common and may even disrespect each other but that doesn't stop federal funding from flowing out of California and New York every year and into southern states, (and New Mexico...thank you). Without revenue sharing the US would be even more fractured than it is currently....hey New Mexico, New York called and it's austerity for you....Eeee, we already live in houses made of dirt?!

Hmmm. Place like that could easily fetch $900k in my hometown of Vancouver...

[lakedaemonian]

Re: 2015 - Greece drops Euro?

Hmmm. Place like that could easily fetch $900k in my hometown of Vancouver...

It could also be Kabul where it would be 10 Afghani a month in 2000, to 10,000 USD a month in 2010, to a bit more than 10 Afghani a month in 2015.

[lakedaemonian]

Re: 2015 - Greece drops Euro?

Most commentators and observers refuse to accept or acknowledge that Germany is the biggest impediment to an integrated Europe and a workable EMU.

The divide between Germany and pretty well every other EMU nation will never be made up by the imposition of austerity in Greece (and Portugal, Ireland, Spain, Italy, France...). There has to be some redistribution, whether the Germans like it or not. Even in Canada we have an "equalization payment" program between the Provinces, where the less well off receive funds in an attempt to reduce the gap in the quality of various government provided social services in different parts of the country. The Germans and the Troika could start by acknowledging that instead of increasing Greek sovereign debt as they have, what was/is needed is debt relief.

I have difficulty imagining an outcome where Greece alone leaves the EMU. What you describe as a Greek exit is essentially the Greeks forcing the issue of debt relief. If it is "asked" or "allowed" to leave, it seems almost certain that others will follow and apply whatever template is used to achieve the same end. Already there are significant nationalist, anti-austerity, anti-EMU political parties in both Italy and France. I expect even Germany would find it unthinkable that one or both of those two large nations would exit.

I think the Germans need to be very careful what they wish for. Or, alternatively, they need to start to think through how they leave the EMU.

Where is the US in all of this?

US policy of destabilisation in the developing world has been discussed.

What of more carefully disrupting peer level monetary competition?

[shiny!]

Re: 2015 - Greece drops Euro?

Where is the US in all of this?

Where does Goldman want the US to be in all of this?

[santafe2]

Re: 2015 - Greece drops Euro?

Hmmm. Place like that could easily fetch $900k in my hometown of Vancouver...

I bet. Maybe the ad can say: Earthy feel! Original vintage condition! Lots of potential! Low maintenance yard! This one won't last!

[lakedaemonian]

Re: 2015 - Greece drops Euro?

Where does Goldman want the US to be in all of this?

I just had a long lunch two days ago with a fast rising executive of a top 50 brand.

He hails from Spain, but is running Central/South America.

He was sharing with me the trials and tribulations of his less mature networks(most of them) having to pay in US Dollars due to a resurgent greenback resulting in a lot of time both re-pricing product and shaping behavior of privatized portions of the distribution chain.

Coincidentally, and being a finance guy, he was talking about shopping for a home in Spain(no plans to return as he is early 30's, more likely long-term visitation and eventual retirement plans) and mentioned that both in Spain and one specific location he mentioned in the US where he has seen aggressive movement on the part of Goldman and he even mentioned Morgan Stanley buying up en masse at very substantial discounts.

In the Spanish locations, he said there is a lot of noise about the drastic rent increased.

Which when combined with pennies on the dollar mass buy up, sounds like some potentially substantial returns.

I guess that's why iTulip pointed members towards the Eastham Fund opportunities for consideration!