THE GREAT BIG FAT GREEK THREAD

[interestrateripoff]

http://www.mindfulmoney.co.uk/wp/shaun-richards/two-fundamental-flaws-remain-in-europes-bailout-plans-for-greece/

This is represented by a report in Kathimerini.

Hellenic Statistical Authority data indicate that the annual decline in sales in the January-May period came to 43.7 percent, as just 59,604 new cars have been registered this year against 105,911 in the same period in 2010.

These numbers are look bad enough on an initial reading but are look even worse when we recall the Greek goverment is operating an incentive programme to encourage the scrapping of old cars and hence aid the purchase of new ones. We get a similar picture from the official retail sales figures.

The Volume Index in Retail Trade, excluding automotive fuel, recorded a fall of 17.7% in March 2011 compared with March 2010

It is my contention that month on month retail sales figures are unreliable so I took a deeper look at the numbers. Doing that shows a sequence of poor numbers which look like they are getting worse. If we look at the index itself it was rebased to 100 in 2005 and even in March last year it was at virtually the same level as it recorded 100.8. So Greek retail sales had retraced 5 years at that point which is one way of measuring the depth of the credit crunch recession. The number for March 2011 on that scale is 83.1 and the area hardest affected is clothing and footwear where the measure compared to 2005 being 100 is now 54.8.

If we take a look at the latest data for Greece we see this from the purchasing managers index.

A sharp fall in domestic demand led to the fastest contraction in new orders for three months in May. Greek goods producers responded by reducing output at a strong rate, and by cutting employment robustly……. Production at Greek goods producers decreased for the twentieth month in a row. Moreover, after slowing in March and April, the rate of contraction of output hit a three-month high in May

So the picture provided by all measures of internal economic activity in Greece remains grim and if anything appears to be getting worse. Against this the balance of trade figures have recorded an improvement with exports rising by some 12.5% in the period from January to March this year. This is how the Greek government was able to report economic growth of 0.8% in the first quarter of 2011. Whilst this is somewhat more hopeful we need to remember that balance of trade figures are the most unreliable of all and in addition the purchasing managers index report seems to suggest that it may have fizzled out or if you re-read it never have taken place.

Some grim figures, still at least with more debt they'll pay back the money they owe.

[Deckard]

What Greece needs is more austerity: Merkel said so.

SAVE GERMAN BANKS AT ALL COST !!!

[Executive Sadman]

Who'd a thunk it...incentive schemes only give a short term boost, long term costs.

A snapshot of how the UK would look today had Brown be re-elected

[Bloo Loo]

the contraction is good...providing they equally contract the public sector.

so shoes and stuff fall off the charts.

This will mean people are buying shoes and stuff THEY NEED.

all the excess production was the result of WASTE....

eventually, the waste is what they overborrowed to overpay for public services.

DEBT is the problem at the end of the day...Debt used to overpay for stuff they dont need.

[copydude]

Why start so many different Greek topics?

It all boils down to the same thing.

Don't get me wrong, I'm really interested and thanks all for posting . . . it's just so hard to follow.

Maybe mods could merge . .. or start a Greek Forum??

This is a significant issue, since the Greek crisis encapsulates all the problems between people and banks/politicians, between countries and the Euro.

It's just becoming impossible to follow it all on so many disparate threads.

[Goat]

It's in the foobarred stage?

Sorry to be pedantic but isn't it:

F***ed

Up

Beyond

All

Recognition

[interestrateripoff]

Why start so many different Greek topics?

It all boils down to the same thing.

Don't get me wrong, I'm really interested and thanks all for posting . . . it's just so hard to follow.

Maybe mods could merge . .. or start a Greek Forum??

This is a significant issue, since the Greek crisis encapsulates all the problems between people and banks/politicians, between countries and the Euro.

It's just becoming impossible to follow it all on so many disparate threads.

Possible merging all the topics after interest has died off would be good, although I think quite time consuming for the mods.

[interestrateripoff]

Sorry to be pedantic but isn't it:

F***ed

Up

Beyond

All

Recognition

To be honest I have no idea

[Guest sillybear2]

If I were sitting in the Greek finance ministry I'd be calling up De La Rue right now and start picking some nice designs for the Neo Drachma, preferably some nostalgic scenes of Axis troops being rounded up and driven out of the country.

There's no upside to staying in, best to just default and devalue and get it over with, then it's a problem for the Northern European banks and their host governments. They are already suffering all the pain of default whilst still being shackled to those morons.

Edited June 6, 2011 by sillybear2

[interestrateripoff]

http://blogs.reuters.com/mohamed-el-erian/2011/06/06/europe-struggles-with-bad-choices/

Very few of us like to be confronted with unpleasant choices. If we are, we will tend to delay a decision. And if forced to make one, we will likely opt for the choice that, in our minds at least, seems less disruptive upfront — even if we know it is likely to involve discomfort down the road.

This simple human analogy is critical in understanding why Europe’s increasingly ugly debt crisis refuses to go away. It sheds light on the choices made up to now; and it speaks to why an increasingly incoherent policy response will likely end up in tears for Greece and potentially other European economies and institutions.

Let us wind the clock back to just over a year ago when Europe first bailed out Greece, a country no longer able to pay its bills. Together with two monetary institutions — the European Central Bank and the International Monetary Fund — European politicians faced unpleasant choices and had to respond. But rather than decisively addressing the problem, they essentially opted to kick the can down the road.

There were, and still are two main reasons for Greece’s predicament: The country borrowed way too much; and it failed to grow its economy on a sustained basis. This lethal combination was amplified by weak public administration.

Yet the rescue of Greece involved making new loans to the country and was asking for a very ambitious fiscal adjustment effort. Neither the size of the debt nor growth reinvigoration were properly addressed.

I suspect this choice was not driven by a strong conviction that the approach would work. Rather, decision makers feared the complexity of the alternative which involved opting for a pre-emptive, and hopefully orderly debt restructuring, and placing much greater emphasis on structural reforms.

A year later, Greece is still in the financial intensive care unit, and needs renewed urgent attention by the “troika” of doctors — from the European Commission, ECB and the IMF.

Regrettably, the country’s condition is even more serious now, with every single one of its vitals worse than projected by these same doctors a year ago.

The economy has contracted by more than programmed: unemployment is higher, debt and deficit dynamics are worse and, with market risks measures of spreads at even more alarming levels, the country is further away from restoring access to normal capital market financing.

Understandably, the Greek government is under intense pressure at home from a population that is being asked to sacrifice tremendously but sees virtually no improvements on the horizon. Coordination among lenders is becoming more difficult as two related concerns fuel ever-growing bickering: what has happened to all the money that has already been disbursed? And, why are so many dubious liabilities being transferred to taxpayers from private creditors, who were paid an interest rate premium to take an informed risk?

No wonder Europe’s approach to its debt crisis is losing credibility. In the process, the institutional integrity of some key institutions is being undermined.

This is particularly true for the ECB which now finds its balance sheet saddled with billions of Euros of Greek bonds. Some were purchased in a failed attempt to counter the surge in Greece’s risk spreads; others are related to repo operations that have kept afloat an essentially bankrupt Greek banking system.

More at the link.

And yet if the powers that be had decided to plump for default from the off Greece might actually be growing now and living within it's means. Instead they went to bailout their banker chums with taxpayer cash and made the problem even worse.

[interestrateripoff]

http://www.zerohedge.com/article/juncker-says-euro-overvalued

It appears Jean-Claude Jun©ker has been sniffing hallucinogenic Spanish cucumbers again:

JUNCKER SAYS EURO OVERVALUED VS OTHER MAJOR CURRENCIES

JUNCKER SAYS EURO AREA SHOULD HAVE EXCHANGE-RATE POLICY

The tautological question of whether he is lying we leave to the logicians. What is apparent is that Europe is finally getting pissed they are dead last in the FX race to the bottom. Cue Tim Geithner's strong dollar policy.

And in far more important news, Greece's G-Pap says that he is willing to consider a referendum on the Greek bailout measures. If so, it's goodbye EUR: a referendum has a snowball's chance in a Comcast business channel in passing.

Another little gem here from Zerohedge. Imagine what a referendum vote would do!!!

[interestrateripoff]

http://www.telegraph.co.uk/finance/economics/8563189/Greek-industrial-output-falls-again.html

The worsening economic data follows an 8pc drop in March.

Esa, the state statistics agency, said the decline was caused by falls in the main sectors of Greek production - mining, manufacturing, electricity and water supply production.

Mining fell by 6.4pc, manufacturing decreased by 11.3pc, electricity production dropped 12.2pc, while the water supply declined by 6.8pc.

A year ago in April, the corresponding drop from 2009 was 6.3pc.

Greece's economy is struggling to emerge from a deep recession fuelled by austerity measures taken to rescue the economy from near-bankruptcy last year.

If using banana republic analysis Greek certainly is screwed if electricity production dropped by 12.2%!!!

Still at least if we give them more money they can pay back the money they owe....

[interestrateripoff]

http://www.nytimes.com/2011/06/09/business/global/09bailout.html?ref=business

Putting Germany at odds with the European Central Bank and the French government, Berlin has proposed extending the maturities on Greek bonds by seven years, insisting that private investors must share in the cost of any fresh financial aid to Greece.

The German finance minister, Wolfgang Schäuble, in a letter to his European counterparts as well as to the International Monetary Fund, the E.C.B. and the European Commission, who will meet June 20 to discuss aid, wrote: “Any additional financial support for Greece has to involve a fair burden sharing between taxpayers and private investors and has to help foster the Greek debt sustainability.”

Mr. Schäuble added that any deal to support Greece at the meeting would have to “lead to a quantified and substantial contribution of bondholders to the support effort” and would “best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years.” The letter was dated Monday and released Wednesday.

Richard McGuire, a strategist at Rabobank in London, said the letter highlighted a division among the core members of the euro zone as well as with the central bank. As a result, he said, there is “the clear risk a Greek deal could well hit a snag.” That risk was underscored Wednesday by a report from the so-called troika — the I.M.F., the European Union and the E.C.B. — monitoring Greece’s progress at meeting its goals for receiving a €110 billion, or $160 billion, bailout.

If extended for 7 years will it still accrue interest?

You've got to love the banging the head against a brick wall mentality, if only we give them more time they'll pay the money back....

[interestrateripoff]

http://www.nytimes.com/2011/06/09/business/global/09euro.html?_r=1&ref=business

In March, just as it was becoming clear that Greece might have to ask Europe for another package of loans to prop up its failing economy, Prime Minister George A. Papandreou seriously considered a radical plan intended to resolve, once and for all, his country’s debt crisis. Under the proposal, Greece would transfer as much as €133 billion — or 40 percent of its government debt — to the European Central Bank, which would then pay off the obligation by issuing its own euro bond.

It would be a “restructuring without a haircut,” in the view of the plan’s proponents, who enthusiastically described it to Mr. Papandreou in a series of secret meetings earlier this year. The result, ideally, would be to ease the weight of the Greek debt on the economy, clearing the way for renewed growth, while keeping the bankers and credit ratings agencies on board.

In many ways, the plan was a dreamy alternative to the grim calculus of Europe’s demands for more austerity from Greece in return for more loans. And Mr. Papandreou went so far as to ask a political ally and the plan’s two proponents, a British and a Greek economist, to lobby Europeans in its favor.

But, according to economists who participated in the discussions, the Greek finance minister, George Papaconstantinou, was opposed, arguing that Germany, to say nothing of the E.C.B., would never go for it. And while a number of economists contend that Europe will ultimately have to develop some sort of plan for restructuring Greece’s debt, Athens has shelved any such notion for now as it moves toward another bailout to keep the country out of bankruptcy.

How nice of the Greeks, the German taxpayers would love this idea.

[erranta]

This is what 'they' were up to a few yrs ago!

[quote[

7 January 2002

To find out the real story behind the Argentine crisis, I talked to economist Richard Salsman, who first warned me of this impending disaster last April. The cause, he says, is not free-market policies, but Argentina's systematic repudiation of those policies.

The story begins back in 1991, when a crucial free-market reform -- the stabilization of the Argentine peso under a currency board with strictly limited powers -- tamed the country's runaway inflation, bringing it from a high of 3,000 percent down to a mere 2.2 percent, slightly less than in the United States.

A stable currency attracted more investment, which was good for the economy. But Argentina's government abused this advantage, launching a spending spree financed by massive borrowing. As the nation's debt mushroomed, private lenders grew nervous, fearing the government would default. That, says Salsman, is when the turning point came. In March of 2000, Argentina turned for help to the International Monetary Fund.

The IMF, Salsman explains, provides cheap loans, subsidized mostly by the U.S. government; in return, it dictates economic "advice" to the borrower. That advice is always the same. First, the IMF tells a country to increase its taxes in order to reduce budget deficits. The IMF always advocates higher taxes, never lower spending. Then the IMF suggests devaluing the nation's currency, a kind of one-shot hyperinflation that allegedly "stimulates" the economy and encourages exports.

Free-market policies?

No, the IMF's prescriptions are as far from the free market as you can get: unchecked government spending, higher taxes and government-induced inflation.

The results in Argentina were predictable. Higher taxes sent the economy deeper into recession. Then, early last year, Domingo Cavallo, the architect of Argentina's stable currency system, made plans to demolish his work, proposing a thinly veiled devaluation that dropped the peso's value by 7 percent. Last fall, he began hinting that the peso was "overvalued" and needed to be brought down further.

Investors got the message: He was planning to make the peso worthless. They bailed out, everyone raised prices, and the economy went into a tailspin. The final result? The angry mobs of newly impoverished Argentines who rampaged in the streets in December. It's the same cycle we saw after the IMF gave advice in Russia and Southeast Asia. As Salsman quips, "Wherever the IMF goes, rubber bullets are sure to follow."

Against all reason, free markets are being blamed -- and the poison is being offered as medicine. Duhalde just announced the first component of his economic program: to devalue the peso by another 40 percent. Bear in mind that 80 percent of Argentina's private and government debt is denominated in dollars, so borrowers will now have to pay many more pesos for every dollar they owe. Under this scheme, any Argentine business that has not already gone bankrupt, will.

What advice is America offering? President Bush has offered to give Argentina financial assistance, if it can come up with a "credible" recovery plan. What counts as "credible"? The plan must be supported by the IMF.

The root of Argentina's economic crisis is not economic, nor is it limited to Argentina. It is the failure of the world's intellectuals, economists and politicians to understand and defend a genuine free market.

http://www.capitalismmagazine.com/world/americas/1344-argentina-s-intellectual-collapse-how-imf-policies-ruined-argentina-s-economy.html

[wonderpup]

And, why are so many dubious liabilities being transferred to taxpayers from private creditors, who were paid an interest rate premium to take an informed risk?

Striking how seldom this point as regards risk premium is mentioned- it's as if the idea that an investor should ever lose money has become so heretical that no one dare point it out any more.

The simple truth is that the french and german banks made spectacularly bad investments- demanded an interest rate on their loans to reflect the risk they calculated they were taking- and yet now are looking for the entire greek poulation to take the hit on their bad investments- and they call this capitalism?

[interestrateripoff]

Striking how seldom this point as regards risk premium is mentioned- it's as if the idea that an investor should ever lose money has become so heretical that no one dare point it out any more.

The simple truth is that the french and german banks made spectacularly bad investments- demanded an interest rate on their loans to reflect the risk they calculated they were taking- and yet now are looking for the entire greek poulation to take the hit on their bad investments- and they call this capitalism?

The banks lent and lost, isn't part of the risk premium to cover you in event of default?

[RufflesTheGuineaPig]

Putting Germany at odds with the European Central Bank and the French government, Berlin has proposed extending the maturities on Greek bonds by seven years, insisting that private investors must share in the cost of any fresh financial aid to Greece.

The German finance minister, Wolfgang Schäuble, in a letter to his European counterparts as well as to the International Monetary Fund, the E.C.B. and the European Commission, who will meet June 20 to discuss aid, wrote: “Any additional financial support for Greece has to involve a fair burden sharing between taxpayers and private investors and has to help foster the Greek debt sustainability.”

Mr. Schäuble added that any deal to support Greece at the meeting would have to “lead to a quantified and substantial contribution of bondholders to the support effort” and would “best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years.” The letter was dated Monday and released Wednesday.

Richard McGuire, a strategist at Rabobank in London, said the letter highlighted a division among the core members of the euro zone as well as with the central bank. As a result, he said, there is “the clear risk a Greek deal could well hit a snag.” That risk was underscored Wednesday by a report from the so-called troika — the I.M.F., the European Union and the E.C.B. — monitoring Greece’s progress at meeting its goals for receiving a €110 billion, or $160 billion, bailout.

Wouldn't any forced change in the debts T&Cs triggers all the CDSs? And basically destroy the universe.

[interestrateripoff]

Wouldn't any forced change in the debts T&Cs triggers all the CDSs? And basically destroy the universe.

AS CDSs are a zero risk bet, the universe is safe. Pity Noel isn't around to answer.

[interestrateripoff]

http://www.zerohedge.com/article/details-%E2%82%AC120-billion-greek-bailout-send-eurusd-higher

Wondering what lit a fire under the EURUSD? Wonder no more, courtesy of Reuters:

New bailout for Greece likely to total about EUR 120bln according to Eurozone sources

New bailout may comprise EUR 30bln from private sector, EUR 30bln from privatisations, up to EUR 60bln from EU/IMF

Remaining loans from initial Greek bailout would be disbursed alongside new bailout, according to Eurozone sources

And yes, as predicted the final amount will be far greater than previous expectations of under €100 billion.

We'll there is inflation, after all.

[The Masked Tulip]

BBC just reported this. Looks like we are approaching endgame.

[Lepista]

BBC just reported this. Looks like we are approaching endgame.

You think you are going to be 'the one' with your black week prediction...?

[The Masked Tulip]

You think you are going to be 'the one' with your black week prediction...?

The one?

Yes. Now, where is that narcissist smiley?

[dolf]

You think you are going to be 'the one' with your black week prediction...?

London Metro had A 'Black Thursday' headline, but it was regarding the Public Sector Strikes.

[R K]

4 Black/Endgame/DOOM threads on the main forum in 3 days!

I'm going to have to double down if you carry on at this rate TMT