patrick.net

American in Japan says

Will this "3/4 default" termed as a "refinancing" of Greek debt influence Spain, Italy or Portugal in a similar way?

Greece is just a little guy compared to the other states. I doubt that they'll be able to give this deal to another state.

The troika strong-armed the bond holders to voluntarily take a haircut. It has to be "voluntary", albeit coerced, otherwise it's a default.

I think Portugal will need a second bailout sometime in the middle of this year.

Italy is sort of ok. They're exactly at the Keynesian endpoint. No problems unless there is a contraction in the GDP, another downgrade, or unexpected increase in spending.

Somehow nobody ever talks about Japan, even though they have the heaviest debt burden.

And those who predicted the euro would collapse have yet to proven right. It is in the $1.300-$1.35 range.

American in Japan says

And those who predicted the euro would collapse have yet to proven right. It is in the $1.300-$1.35 range.

Like I said, we keep kicking the can down the road. We haven't solved anything have we? We just keep preserving the status quo. The problem with manufactured stability is that everything stays the same, 'till one day SNAP! All hell breaks loose! Say hello to The Black Swan.

EU ain't goin' anywhere. Greece and a few periphery members might be put out, they weren't ready to be in yet.

Spain was the most obedient to EU deficit spending rules; Germany was one of the first to break them. No case for kicking out Spain: They followed the EU fiscal guidelines to a "T" prior to the crisis. Italy is Italy.

France, Germany, Holland, Poland, Austria all depend on the EU as the primary market for their own goods. Italy is also a big manufacturer as well as a big agricultural exporter. Spain is loaded with copper and iron.

We might see a few of the poorer states give up the Euro for now: It would be ideal for Greece. A common currency or currency peg shared between highly developed countries and underdeveloped ones is a bad idea.

thunderlips11 says

EU ain't goin' anywhere.

Well, no matter how bad things get, a few countries are guaranteed to stay in the EU, even if they're down to just a handful. So that statement is true... at least technically. However, there is no painless way to reduce debt.

thunderlips11 says

Spain was the most obedient to EU deficit spending rules

The problem with Spain has nothing to do with its government or government debt. The problem is private sector debt. When things go bad, I think it's best if they don't do any bail outs. Their GDP may temporarily contract, but I think they'll be ok. Ireland also has high private sector debt.

thunderlips11 says

Italy is also a big manufacturer as well as a big agricultural exporter.

If the only thing you're looking at are the positives, then things will always look great. There is a reason they had to be ring-fenced last year. That only means they're not as great as you might think the are. There won't be any problems so long as the ring fence holds.

thunderlips11 says

We might see a few of the poorer states give up the Euro for now

That needs to happen, but it's not that simple. There is no protocol as to how a country is supposed to leave the EU. What about the debt? What about the money supply?

As for debt, if a country's debt is in another currency but its own currency is weak (higher inflation), that country is screwed. Argentina's debt was in USD. The other EU countries can either bailout the departing country (not likely) or take over the debt. As it is, the rest of the countries already have a lot of debt.

As for the money supply, when a country leaves the Euro Zone (but not necessarily the EU) and switches to another currency, there will be less people but with the same quantity of money.

The whole world is going to go through the pain of moving from a growth model to a sustain model. In the USA and EU, Japan, and Korea, the standard of living drop will be astonishing. In the rest of the world, it will be significant. In the african bush and australian outback, nobody will notice a thing.

Mick Russom says

The whole world is going to go through the pain of moving from a growth model to a sustain model

Islamic countries are still in growth phase. Soon enough Europe will be an Islamic Republic of Europe. When that happens, growth phase again. And it will be a nuclear Islamic Republic of Europe.

tdeloco says

As for debt, if a country's debt is in another currency but its own currency is weak (higher inflation), that country is screwed. Argentina's debt was in USD. The other EU countries can either bailout the departing country (not likely) or take over the debt. As it is, the rest of the countries already have a lot of debt.

Argentina is doing fantastic ever since it defaulted:
Argentine real GDP growth (adj. for inflation):

What is the state of the EU? It's a complete clusterfuck.

A currency union w/o political union? How's that working so far?

Their demographics are even worse than ours. Too many old people w/o enough young to support them. So they have to import conservative Muslims with radically different values and correspondingly higher birthrates.

At least in the US, we're importing conservative Catholics from Mexico et al rather than conservative Muslims from the Middle East.

thunderlips11 says

I'm much more gung ho about just wiping the slate clean than austerity, which has a lousy track record.

I agree. The question is, who are the creditors? If they're mostly private citizens, they can bitch and bicker, but there isn't much they can do. Now, if your creditor is a powerful country, there's the possibility of war.

A great podcast on the Argentine Default (20 mins):
http://www.npr.org/blogs/money/2011/10/14/141365144/friday-podcast-the-price-of-default

Argentina sends representatives to these international settlement claims, but pretty much just refuses to pay anything back.

tdeloco says

I agree. The question is, who are the creditors? If they're mostly private citizens, they can bitch and bicker, but there isn't much they can do. Now, if your creditor is a powerful country, there's the possibility of war.

I hear you. Unfortunately, a lot of our debt is foreign, but not as much as I thought:

The threat of default gives us a chance to correct the one-way Free Trade.

But short of nukes, or by sinking neutral shipping (since most of the world's shipping is flagged Liberian, Panamanian, etc. and almost none of it US flagged), China has no means to really hurt us, not for a few more decades at least. Sinking neutral cargo ships would not make China any friends, and erase decades of international soft power they've been trying to build up.

I suppose if China wanted to intimidate us into paying us back without adjusting our trade relationship, they could seize US assets in China.

I'd be hard pressed not to laugh if some of these Multinational Scum didn't witness all their "Better factories in China, run by hard working Chinese and not lazy Americans" nationalized by China and then sold to Chinese. That irksome 50% ownership requirement for foreign enterprises in China.

But, since most of the production in China by US companies is contracting, the Chinese could simply be forbidden to honor contracts to produce. IE Foxconn is told to stop making iPads until US debt interest payments resume.

Or, better yet, the Chinese would simply impound the iPads, GM vehicles, etc. made in China for US companies, sell them, and apply the dollar value to our debt with them.

This exercise led me to think:

Having the world's reserve currency is nice, but being the worlds' #1 manufacturer is even better. You can't turn electronic digits into wealth if you can't access the manufacturing. Outside of military gear and food products, we simply no longer have the industrial base to mass produce a wide range of consumer goods.

When those US corps left for China, or went bankrupt, the machines were sold off or exported.

thunderlips11 says

I'd be hard pressed not to laugh if some of these Multinational Scum didn't witness all their "Better factories in China, run by hard working Chinese and not lazy Americans" nationalized by China and then sold to Chinese. That irksome 50% ownership requirement for foreign enterprises in China.

Great point. +1.

thunderlips11 says

You can't turn electronic digits into wealth if you can't access the manufacturing.

Well put. Especially when so much American talent is funneled into financial "engineering" and "innovation" (read: ingenious swindles and cons).

What is Spain thinking...What is Spain thinking...?

http://news.yahoo.com/spain-leads-europes-rebellion-against-german-austerity-183315940.html

Europe still has problems ahead, but does Germany deserve to be blamed like this?

http://www.japantoday.com/category/politics/view/italian-pm-blames-germany-france-for-eurozone-debt-crisis

There hasn't been much in the news about Greece lately? did they default yet? or is it just not being reported anymore?

A currency union w/o political union? How's that working so far?
Eurobonds are a comin' I tell ya. United we stand, divided we fall.

ATK says

There hasn't been much in the news about Greece lately

1. They got a bailout
2. They restructured by swapping their old bonds for new ones with a much lower value

European headline risk will be back.

Europe is in recession right NOW.

Is it odd that no news about it?
That is because we have an election in November.

The problem is that the EU cannot be run like the USA.

12 years after independence the USA had a constitution. europe is still working on one.

Although there have been wars in both areas the idea of a loyalty to a state is dead in the USA (for the most part). States (except vermont) must balance their budgets...while in the EU that is not the case. It is hard to have a monetary union without a real political union.

Europe is simply too diverse. Of course they know more than one language but the expansion of the USA and EU differs dramatically. With the USA states became states when they had enough of a population (for the most part). In Europe many simply lied about their debts.

It can be argued that maybe German needs Greece. If Germany and France formed their own union the currency would have a high value due to the export nature of Germany. However, that would hurt their exports and thus in keeping it that would weigh down the Euro value.

The other problem in the EU is frankly the expansion was out to the former communist east. To expect the same level of standards when it is has only been 20 years is a bit of a joke. So under what grounds would any support go from the west to the east? What does the west get and what does the east get?

Thanks for the comments Mdovell, Xenbogear3.

Update on Spain...Things are not over yet there.

Spain's-economy-plunges-into-recession (rte.ie)

American in Japan says

Update on Spain...Things are not over yet there.

Yep, the country that followed the EU and ECB rules to a "T". Much closer than Germany did.

There is an almost surefire method that works, but it's not Irish austerity. However, it would require them to dump the Euro.

Greece has TEMPORARILY avoided calamity because they got a bailout in March but they still have a systemic problem which means that they will soon be right back where they were in Jan/Feb...staring down at another major crisis. They have elections in May which should stirr things around.

In my view a Greek exit of the Euro is all but certain, it's only a question of when. Also, the Euro itself is very much in question because the friction between Northern and Southern Europe just cannot be eliminated using a magic wand.

Infact, there is already talk of the exit...
http://online.wsj.com/article/SB10001424052702303459004577363602072819094.html?mod=googlenews_wsj

The results of some elections in Europe:

http://finance.yahoo.com/blogs/breakout/french-greek-elections-rattle-global-markets-threaten-austerity-120249714.html

wthrfrk80 says

European headline risk will be back.

Market Watch reports $4 trillion has been printed to date (worldwide) and the Euro is once again backed into a corner. This battle is between central banks and the people. How long do the people allow banks to decide their destiny ? Bankers will lose their jobs if they do not force you to starve. Banks are in survival mode and will strangle the peasants, realizing those citizens can't fight back if they have no funding, food, or medical supplies. WHAT WOULD YOU DO ? The people won't fight back because, self promoting marketing paints those corporations into such wrighteous images.

Passifists thought Hitler to be a nice fellow. They said "Just leave him alone. Everything will be allright".

Glad Austerity was smacked down in France; it's about time. Austerity doesn't work, it only gets the bankers paid at the expense of everyone and everything else.

thunderlips11 says

Glad Austerity was smacked down in France; it's about time. Austerity doesn't work, it only gets the bankers paid at the expense of everyone and everything else.

But bankers are the hard-working folk that make America (and France) work! ;-)

wthrfrk80 says

European headline risk will be back.

About that juggernaut Germany:

from http://www.spiegel.de/international/germany/low-paid-workers-struggle-despite-germany-s-booming-economy-a-832724.html

"...According to a DIW (German Institute for Economic Research) study published last year, wages fell in real terms for all but the top 10 percent of earners in Germany between 2005 and 2010. This had a particularly acute effect on those earning the least. "As a rule, the lowest earners spend the highest portion of their income," study co-author Karl Brenke explains.

"...Low-wage workers also end up spending a much higher proportion of their income on mandatory health insurance, as any income above €46,000 in annual salary is not subject to premium payments. Thus, while a senior engineer earning €150,000 a year is only required to pay 6.6 percent of his total income in social security contributions, a laborer who makes only a tenth as much ends up paying 20.7 percent.

"Increasingly, such wage disparity is leading to social inequality in Germany..."

Amazingly despite all of the bad news, the Euro is still worth around $1.27.

Interesting. Spiegel catalouge the spelling I'm not going to take the time. Sears etc. Germany is an interesting place. Not history just fact. The German empire was huge at one point. Including places like Barvaria. Ruled by a family called Hohenzollern. The bitch of England is a Hohenzollern. They changed their name twice. You can look it up if you want. I'm not going to type in all that in here. At one point it took the votes of the family to make the Royal in England. Of course all those votes came out of Germany. Then there was a big fucking power struggle called WW1. They don't say much bad about the ole Kaiser their inlaw. Hitler they really hated divided Germany in two and gave it to the Russians. Because the fucking Russians really came through. Forget the west side story and things that don't make sense the Russian were arming themselves and sending out code.

So that bitch is German. Hohenzollern is a family of usury. If you want to believe all the Jesus bullshit go ahead it more like they write the story to give them Biblical permanence in peoples minds of course until "God" decides to remove them. Just like the apocolypse. Just like the bomb and well Restored and Revarnished Israel which we know is bullshit.

The Hohenzollern family are some of the fastest swindlers to ever hit the planet. They talked everyone into living in the woods. Like tree people. Which Germany is heavly forested . I won't say Forrest Gump. But people food won't grow in trees.

Lazurus, Rockchild they are bullshit compared to what these people have in assets. They have there own assets. Just look at them like an Immelt. Of GE which Immelt looks nuclear anyway its good for a chuckle. Hohenzollern the Quack of England is buried under 700 tons of bullshit of course. They are known in Germany and England well however I am sure they have ways of handling that. They though division politics would work better over there of course. Its about the assets after all. Even Rockchild said give me the only legal means of trade in a country. Set up a monetary system that is nothing but lending and loans and let the politicians blow me. Who set fucking paper hustle up or who came up with the idea who the fuck knows. Deal is they can declare someones assets or even cash. However their holdings can be hidden in corporation after corporation and holding companies so that don't mean shit. Remeber they only tell you what they want you to believe. You want the controlling votes on the Federal Reserve look up possibly Hanover or Bank of NY. The Euro starts in England and ends there. Even though its set up to look another way. Don't believe me? That bitch has 58 nations with her hooks in them. It's called the Commonwealth. All controlled through a monetary system mostly lending and loans that was invented in England. Suprise same thing your lending system is. That might tell you something. It also might tell you the American goverment is a degenerate borrower. They will lick the quacks hinney for another loan. Tell you the opposite. They will do anything for a loan. Including invading people that aren't doing anything to build someone elses asset base. Get their people killed all for another loan. They love looking like big studs with their military rental equipment. When really once again all they are is, degenerate borrowers.

Plus were for Israel yea er duh yup. You get the idea.

I watch their lackeys on television sometimes. Those sociopaths move faster than lightning sometimes. Trying to make their little templates work. All for getting another wiff of their benefactors farts. Lying their faces off. Trying to get everyone to twist their minds into pretzels with their bullshit when all it comes down to really is a privately owned monetary system. Paper the only legal means of trade. With fixed prices no less. When its so obvious everything they do is to keep them and you at work for them for all their life. What kind of fools are those? It's like watching Festus from Bonanza the all time lackey looking for a sandwich walking behind the horses carrying a shovel. All the time their benefactors laughing at the integrity they advertise for them. Because they know all they really are is fools with a shit shovel. A backstop for them just like the "Government" thats in debt to them. Want a job in either learn to play the game. They get to work in the "Big house". I wouldn't be suprised if they had to make the "pancakes" and clean the toilets. Shut up honey we goin sizzlin remember the newsjockey tells his wife. I'm the most reliable name in cleaning the crapper. Scrub faster where would we be without them? What your really looking at are a bunch of weasels with no pride very little of what a man is either.

And the European headline risk is back.

Cramer soundboard: "The house of pain!"

TMAC54 says

Passifists thought Hitler to be a nice fellow. They said "Just leave him alone. Everything will be allright".

Put it in context. Something like 1 in 6 Frenchmen aged 16-30 died in WW1, and about a quarter of the country ruined.

THAT explains the hesitation to engage in another war.

Grandpas who lose a couple of grandkids and see their house demolished by artillery and lose all their possessions tend not to growl about killing the "bad guys" from under their blue CVN-65 Eisenhower caps.

http://www.youtube.com/embed/ADA88QlizrU

This got my attention: "Austerity works when combined with growth initiatives. I am a big believer in Britain exiting their programs in much stronger shape and being better set for the next bull market. Progress is being made but Greece is the anchor holding back the EU.

The problem is Germany took a bitter pill for the better part of a decade when they integrated East Germany and emerged an economic powerhouse.

They see Greece as a basket case which wants to be a part of the EU but take none of the necessary medicine required to get well. It is no wonder they have no sympathy for the Greeks. Have the Greeks reformed their tax code or competitiveness? Let's not forget that the Greek's fudged the books to get into the EU. "
--David Urban

For what it's worth:

http://finance.yahoo.com/blogs/daily-ticker/greece-tearing-europe-apart-politically-socially-economically-william-131234803.html