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Why Greece Is The Precursor To The Next Global Debt Crisis
Why Greece Is The Precursor To The Next Global Debt Crisis
The one undeniable truth about the debt drama in Greece is that each of the conventional narratives—financial, political and historical—has some claim of legitimacy.
For example, spendthrift Greeks shunned fiscal discipline: here’s an account from 2011 that lays out the gory details: The Big Fat Greek Gravy Train: A special investigation into the EU-funded culture of greed, tax evasion and scandalous waste.
Or how about: Greek reformers want to fix the core structural problems but are being stymied by tyrannical European Union/Troika leaders: The Greek Debt Crisis and Crashing Markets.
Rather than get entangled in the arguments over which of the conventional narratives is the core narrative—a hopeless misadventure, given that each narrative has some validity—let’s start with the facts that are supported by data or public records.
The Greek Economy Is Small and Imbalanced
Here are the basics of Greece’s economy, via the CIA’s World Factbook:
Greece’s population is 10.8 million and its GDP (gross domestic product) is about $200 billion (This sourcestates the GDP is 182 billion euros or about $200 billion). Note that the euro fell sharply from $1.40 in 2014 to $1.10 currently, so any Eurozone GDP data stated in dollars has to be downsized accordingly. Many sources state Greek GDP was $240 billion in 2013; adjusted for the 20% decline in the euro, this is about $200 billion at today’s exchange rate.
Los Angeles County, with slightly more than 10 million residents, has a GDP of $554 billion, more than double that of Greece.
The European Union has over 500 million residents. Greece’s population represents 2.2% of the EU populace.
External debt (public and private debt owed to lenders outside Greece):
$568.7 billion (30 September 2013 est.)
National debt:
339 billion euros, $375 billion
Central Government Budget:
revenues: $119.5 billion
expenditures: $127.9 billion (2014 est.)
Budget surplus (+) or deficit (-):
-3.4% of GDP (2014 est.)
Public debt:
174.5% of GDP (2014 est.)
Labor force:
3.91 million (2013 est.)
GDP – per capita (Purchasing Power Parity):
$25,800 (2014 est.)
Unemployment rate:
26.8% (2014 est.)
Exports:
$35.8 billion (2014 est.)
Imports:
$62.8 billion (2014 est.)
…click on the above link to read the rest of the article…
There is Only One Way Out For Greece
There is Only One Way Out For Greece
Brussels has been dead wrong. The stupid idea that the euro will bring stability and peace, as it was sold from the outset, has migrated to European domination as if this were “Game of Thrones”. Those in power have misread history, almost at every possible level. The assumption that the D-marks’ strength was a good thing that would transfer to the euro has failed because they failed to comprehend the backdrop to the D-mark.
Germany moved opposite of the USA toward extreme austerity and conservative economics because of its experience with hyperinflation. The USA moved toward stimulation because of the austerity policies that created the Great Depression, which led to a shortage of money, and many cities had to issue their own currency just to function. The federal government thought, like Brussels today, that they had to up the confidence in the bond market and that called for raising taxes and cutting spending at the expense of the people. The same thinking process has played out numerous times throughout history. Our problem is that no one ever asks – Hey, did someone try this before? Did it work? This is why history repeats – we do ZERO research when it comes to economics. It is all hype and self-interest.
Greece should immediately begin to print drachma. By no means has the introduction of a new currency been a walk in the park. There is always a learning curve, as in the case of East Germany’s adoption of the Deutsche mark, the Czech-Slovak divorce of 1993, and the creation of the euro itself . However, the bulk of transactions today are electronic, meaning we are dealing with an accounting issue more than anything. The euro existed electronically BEFORE it became printed money; Greece should do the same right now.
…click on the above link to read the rest of the article…
Why Greeks Still Want to Keep the Euro, in One Chart
Why Greeks Still Want to Keep the Euro, in One Chart
As of midnight European time, Greece has become the first developed country in history to fall into arrears on payments to the IMF. It’s not that much money, by today’s standards: €1.6 billion. But for Greece, which is totally out of money, it’s an unreachable amount. The last time a country did such a thing was in 2001: Zimbabwe.
However the IMF ends up calling it in its institutional mumbo-jumbo, Greece has now defaulted on part of its debt. No one knows what’s going to happen next. Another emergency meeting is planned for Wednesday, so maybe….
Greeks have seen this coming months ago. So they yanked their money out of Greek banks with increasing determination, while they still could, starting last year. They have every reason in the world not to trust their banks. The withdrawals morphed into a “jog on the banks” last week.
When the central-bank spigot that had funded these withdrawals was turned off over the weekend, it brought the banks to their knees. The government, afraid of what would happen next, closed the banks for six working days. But re-opening the banks on day seven is going to be tough, unless new funding arrives in the interim. And Greeks now can’t get their money out, except in small amounts at the ATMs.
Whatever money they have left in the banks is now largely stuck there. All they can do is hope that they’ll get it back someday, in euros, not in drachmas, and not in form of equity in the banks.
But despite the deprivations, they still trust the euro and want to keep it. In the latest poll, done over the weekend during perhaps the greatest financial chaos Greece has seen in recent years, 57% of the respondents wanted to keep the euro and wanted their government to make a deal with the creditors; only 29% wanted a rupture from the Eurozone.
…click on the above link to read the rest of the article…
The Mood On The Ground In Greece: “Some Have Raised The Prospect Of Civil War”
The Mood On The Ground In Greece: “Some Have Raised The Prospect Of Civil War”
Earlier today, John O’Connell, CEO of Davis Rea, spoke to Canada’s BNN from what may be Greece’s top tourist attraction, the island of Santorini, to give a sense of the “mood on the ground.” Not surprisingly, his feedback was that, at least as far as tourists are concerned, nobody is worried. After all, it is not their funds that are capital constrained plus should the Drachma return as the local currency, the purchasing power of foreigners will skyrocket.
What he did point out, however, that was quite notable is the diametrically opposing views between old and young Greeks when it comes to Grexit. According to O’Connell, “the old people want to vote for Europe cause they have a lot to lose, they have their pensions, but the younger population – they are already poor, they are already unemployed – and they don’t have much to lose. Their attitude is it’s going to be tough, it’s already tough, and so why not just move on go back to the Drachma, and they’re ok with that. Their attitude is in 5 to 10 years I’ll be better off. They believe there’s a lot of misinformation. They believe they’re being pressured by European countries particularly Germany that are holding them to very difficult terms.”
He continues: “whatever the polls may way, the young population is going to vote to leave the Euro and deal with the problems long-term.”
Finally, his take on capital controls and tourism: “You are going to see a big, big drop off in tourism because people are not going to want to come here. People are going to worry that if people do come here with a lot of Euro, are they going to be allowed to leave with those Euros. It’s going to have a dramatic impact on the Greek economy at some point, a lot of the people that live here are underestimating how bad it could get in the short term.”
…click on the above link to read the rest of the article…
Greece Said To Prepare “Grexit”, Drachma, Bank Nationalization Plans
Greece Said To Prepare “Grexit”, Drachma, Bank Nationalization Plans
On Thursday morning, we took an in-depth look at what the progression of events is likely to be in the event a cash-strapped, negotiation-weary Greece finally, for lack of will or for lack of options, fails to scrape together enough cash to pay its creditors. As BofAML notes, a missed IMF payment and/or failure to make interest payments to either the ECB or private creditors over the coming weeks would likely lead to default within 30 days, at which point “mark-to-fantasy” becomes mark-to-market and then “mark-to-default” in very short order.
Although Greek officials came out midday with a “categorical” denial of reports that the country was set to run completely out of cash in just 7 days, it now appears Athens may be prepared to chance a missed IMF payment and all that comes with it if it means saving face and preserving Syriza’s campaign promises to the beleaguered Greek populace.
More, via The Telegraph:
Greece is drawing up drastic plans to nationalise the country’s banking system and introduce a parallel currency to pay bills unless the eurozone takes steps to defuse the simmering crisis and soften its demands.
Sources close to the ruling Syriza party said the government is determined to keep public services running and pay pensions as funds run critically low. It may be forced to take the unprecedented step of missing a payment to the International Monetary Fund next week.
Greece no longer has enough money to pay the IMF €458m on April 9 and also to cover payments for salaries and social security on April 14, unless the eurozone agrees to disburse the next tranche of its interim bail-out deal in time.
“We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” said a senior official…
…click on the above link to read the rest of the article…
