Thursday, Apr 22, 2010
Exponential !
Business Insider: This is what the Greece endgame looks like
Extend this trend for even a short period of time and it's all over for Greece's finances.
Posted by devo @ 10:24 PM (1317 views) Add Comment
11 Comments
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1. drewster said...
Nice link, thanks devo.
It will be interesting to see what happens next. If Greece wants to stay in the Euro, they have no choice but to slash spending and restructure borrowing (i.e. delay repaying the bonds which are coming to maturity). They simply don't have the money to pay the bills otherwise.
Alternatively look at what's been happening in California recently, where state workers have been partly paid in IOUs instead of in dollars. It is possible that Greece will start paying its public-sector salaries in IOUs too, and for an extended period of time. Local banks may even allow people to have two accounts, one denominated in Euros and one denominated in Greek government IOUs. The market will offer an exchange rate between IOUs and Euros. After a few years the government converts the IOUs to Drachmas and declares them to be the new currency. Voilà, problem solved.
The other big problem is contagion. If Greece lets this happen, what other countries will let it happen too? A panic flight from all currencies. Got gold?
2. titaniccaptain said...
"Got gold?".........one of the reasons that many people are looking towards gold as a safehaven/investment is because a flight into other metals seems less likely because of gold's historical use as a preserver of wealth.
Blatantly obvious I know but a fact nether the less.
And yes I have some gold sovereigns.
3. titaniccaptain said...
p.s. Could Drachma become the form that the IOU will take to make it more palatable?
4. Titaniccaptain said...
p.p.s.
On the topic of contagion.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7621289/Escalating-Greek-default-fears-rock-Europes-debt-markets.html
5. titaniccaptain said...
On the topic of contagion.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7621289/Escalating-Greek-default-fears-rock-Europes-debt-markets.html
6. crash n burn said...
Completely off topic, but here is one for you TC
http://www.telegraph.co.uk/news/newstopics/howaboutthat/7619925/Coastguard-rescue-captain-calamity-sailor-who-almost-drowned-in-DIY-craft.html
7. titaniccaptain said...
@Crash n Burn
http://www.youtube.com/watch?v=cQ4axo9rmJY
8. fallingbuzzard said...
@1, markets say that the next step is a debt restructuring ("default"), hence the 2 year/10 year yield inversion. I think they're wrong. There's no way that the US is going to let Greece fail
9. mark wadsworth said...
After Zimbabwe got in a hopeless mess, it scrapped its own currency and now uses Rand (or do they use US dollars?).
So the way forward for Greece must be to scrap its own currency and start using an international one like the Euro ... oh, hang on...
10. matt_the_hat said...
At least they have nice weather and way of life
11. drewster said...
mark wadsworth,
Well yes, this is the problem. It's all very well giving out IOUs or Drachmas, but getting the population to use them in everyday transactions will be much harder. In Greece, people often pay for large items in cash rather than by card, to avoid taxes. Even if the government declared the use of Euros illegal, I imagine the people would ignore the law and continue to hoard large wads of Euros.