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Will Germany leave the Euro ?
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View Poll Results: Will Germany leave the Euro
Yes 8 17.02%
No 36 76.60%
Don't know 3 6.38%
Voters: 47. You may not vote on this poll

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Will Germany leave the Euro ?

  #31 (permalink)
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Fat Tails View Post
This is a favourite subject of British and American subjects. The above posts are not very serious.

I don't understand these comments.

Quoting 

The Problem


Southern European countries historically never have kept their budgets under control, but have spent more than they could afford. Also Greek governments have in the past shown a high degree of incompetence and corruption. Greece is a country that

- has had a sovereign debt of 143 % of its GDP by the end of 2010
- has run a budget deficit of 15.4 % of GDP in 2009 and of about 10.4 % of GDP in 2010

If I use the terms of Hyman Minsky, Greece is now a Ponzi borrower. For those who are interested, here are the definitions by Minsky :

- Hedged borrowers, who can meet all debt payments – interest and principal repayment – from their cash flows.
- Speculative borrowers, who can meet their interest payments, but can only repay principal when the asset is sold.
- Ponzi borrowers , who cannot pay the interest, let alone the original debt, and rely entirely on rising asset prices to allow them continually to refinance their debt

The traditional way of Southern European countries of dealing with Ponzi borrowing was a currency devaluation and the increased use of the printing press, both leading to high inflationm which in the end may solve the debt problem.

Being part of the Eurozone, Greece can neither access the printing press nor devalue their currency. This means that they need to cut back their expenses and reduce their salaries. Both is not compatible with their Southern European heritage. That is why they are crying.

Although they have spent more than they can afford, they are now blaming each other, Germans and whosoever may serve as a scapegoat to explain their misery.


The Solutions

Solution 1: Greece defaults on its debt and declares bankruptcy. Creditors will heavily bleed.

Solution 2: Greece leaves the EuroZone and reintroduces the drachma. This will also lead to bankruptcy, as their debt is in Euros and not in drachma.

Solution 3: Greece is bailed out by other European countries to avoid the bankruptcy.

Looking at the different solutions, they need ot be judged against the outcome. Any outcome that maintains the current Ponzio scheme is not sustainable, but will just postpone the solution and lead to a greater problem in a few years. In its current state of finance, Greece cannot survive, so it is necessary

-> to cut back the sovereign debt to a sustainable level
-> let the holders of Greek bonds bleed to let them know that high interest Ponzi schemes are not sustainable
-> agree with Greece on a way to cut back expenses to match revenues

Now let us judge the three solutions against the potential outcome.

1. Possibly the best solution. It is a clean cut, allowing Greece to breathe afterwards. The problem is that there is no agreed procedure for the bankruptcy of a sovereign state. It would require an international chapter 11. After the bankruptcy, it would be easiest for Greece to install spending discipline and leave the ponzi scheme for the next years to come.

2. The drachma is no solution at all. It will lead to bankruptcy in any case and will make it near impossible for Greece to finance their debt. Greek investors will have all their assets in Euros, and who will purchase Greek bonds denominated in drachma?

3. The bail out will not work due to incompetence of politicians. A real bail out would have to include a restructuring of Greece's € 120 to 150 billion debt. Somebody else would need to pay - not to guarantee - for the losses, and in Europe nobody will be willing to do that. The problem will be postponed again and again. The Ponzi scheme will thus be maintained alive, just because nobody wants to make the necessary decisions.


Summary


The Euro makes it impossible to reduce national expenses and expropriate investors in Greek bonds via inflation. Therefore national expenses need to be cut back nominally and the investors need to be exproriated in a more explicit way. As usual, nobody likes to announce the truth. That is called politics.

By the way: My favourite restaurant round the corner is a Greek restaurant. I am friends with the owner and love their food. Don't let incompetent politicians and bankers have an impact on your personal relations or on judgement of another culture.

It seems that Greece was drawn into an already existing ponzi scheme.
Perhaps that ponzi scheme needed new "members" to continue !
Not with-standing the scheming of the likes of Goldman Sachs.

Imo, the term "bailout" does not reflect the truth of the situation.
Greece, and indeed, no debtor gets "bailed out".
That luxury is for the creditor/s, as we have clearly seen.
Just look at the fire sale of Greek assets that's taken place.
I think there was literally an action in London a few months back.

I can only try to imagine how the Greek people felt as their ports, transport, electric, water, government buildings, to mention just a few, and some of their Islands and historical sites were auctioned off...



Fat Tails View Post
Germans certainly do not want to bail out Greece. And by the way Finnish and Slovakian and other Northern or Central European Nations do not want either.

The problem is asymmetry. Some of the institutions of the European Union are centralized and others are decentralized. The European Parliament has little power. There is no common economic and financial policy. Some countries favor deficit spending, others try to maintain a reasonable budget. Udner these circumstances each government sets up its own rules, and they all come together and agree that they want to defend local power against the central institutions. The real problem is that the European institutions have no proper legitimation, as there is no powerful Parliament controlling them. The real political power therefore remains in the hand of local politicians.

Apparently 2/3 rds of laws we now live under in the UK are, in some shape or form, a consequence of European directive.

Quoting 
In Italy you have a criminal premier, Greece has incompetent politicians, so why should the civilized world pay for all that mess? Paying presupposes common institutions, a common financial and economic policy, and a powerful, legitimate Parliament to control the institutions and central policy makers.

In short, the main preconditions for transferring money are not satisfied. The money which could be distributed would soon be out of control and end up in the hands of corrupt or criminal politicians.

So it's ok for the Fed to bail out German banks (as well as their own and UK banks etc) ?
It's ok for the IMF to do their "business" across South America and Africa ?
Presumably because non of the above suffer from any corrupt politicians or that the distribution of money would be "out of control" !

Who are you to determine who is "civilized" ?

Where would our civilization be without the Greeks or the Italians.
The Greek people are, as we sit back in a civilized demur, these very days, protesting against their
governments decisions to accept any money from the IMF/ECB and EU.

The people of Greece don't want our money !!

What you say is main stream media drivel.....



Quoting 
So not astonishing that the story is perceived as a nightmare by the taxpayers in Northern Europe.

I've highlighted some text in blue and hope I've not taken them out of context, (apologies if I have) but can't help think it's unfortunate to see such comments posted.

In times of obvious acute suffering, it seems a little insensitive to disparage the peoples of another country
and a little naive to give these things as reason for the plight Greece now finds herself in.

We can all, no doubt, look to the past and indeed the present, of our own countries histories and actions for evidence
of corruption, incompetence and wrong doing.

I only draw attention to this in hope that the thread will remain relevant to the original question at the very least, and that
any views, that are welcome, are at the very least without conventional stereo typical non- sense.

I'm now going to listen to the football while the "civilized world" pay footballers hundreds of thousands of pounds per week and bomb the living hell out of one of the only countries on the planet to have no debt...and then I might have a lie down...


Thx

Every moment I wake up I realize I know nothing, and then I smile...

Last edited by zt379; October 8th, 2011 at 10:02 AM.
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  #32 (permalink)
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@zt379 Thanks for your response, enjoyed reading it!


zt379 View Post
I can only try to imagine how the Greek people felt as their ports, transport, electric, water, government buildings, to mention just a few, and some of their Islands and historical sites were auctioned off..

What about paying taxes? The greek are not poor. I would say that they are better off than Eastern Germans.


zt379 View Post
Who are you to determine who is "civilized" ?

It was a mockery from my side. Obviously Greece is civilized, and I am fond of the Greek culture.


zt379 View Post
The Greek people are, as we sit back in a civilized demur, these very days, protesting against their governments decisions to accept any money from the IMF/ECB and EU.

The people of Greece don't want our money !!

They do not want the money, but they have already taken and spent it. The sovereign debt is now close to € 350 billion.
They will never be able to pay back, what they have spent, so somebody else needs to pay, or they have to declare bankruptcy.

Unlike Portugal - which is poorer in temrs of revenue per capita - Greece continues to run a high deficit. If they do not stop deficit spending, they can not solve their problems. Greece is a country which is not poor, but simply continues to run high deficits. Even if someone pays the € 350 billion debt, they cannot survive if they continue to run a high deficit.

This is an example of Ponzi finance. Whether crisis or not, Greece spends money that it has never earned.

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Who is responsible for those deficits?

(a) Greek policy makers
(b) The Greek people because they have elected those policy makers
(c) Banks who have lent money to Greece although they are running a Ponzi scheme

And why should Germans and other Northern European countries pay for the outcome?

If your neighbours buys a large house that he cannot afford, will you go to him and make him a gift of 10,000 pounds to help him to keep it?


Last edited by Fat Tails; October 8th, 2011 at 07:59 PM.
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  #33 (permalink)
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Think Jim Rogers said it best:


Why should a good, honest German taxpayer, a guy who saved his money, suddenly get a bill from the German government saying you have got to pay for some Greeks sitting on the beach drinking ouzo? That's absurd. - in Business Week

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  #34 (permalink)
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Socialists

The socialists spent easy and cheap money buying votes ( Greece and Portugal)


My country( Portugal) has one of the best highways in Europe and now we can not pay for it

At least we have one beautiful and pleasant country to live with nice beaches and a lovely wheather


We still have Madeira ( best world climate ...average mild temperature) and Azores island and we are pround in it

we are stuck with bad nation management ...and now we`ll have to pay it

At least we have the right parties on power which in world fair economic situation can solve the problem


Fat tails has as always a very appropriate view and don´t embark in extremist opinions

regards to everyone and nice week end

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  #35 (permalink)
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gktk View Post
Think Jim Rogers said it best:


Why should a good, honest German taxpayer, a guy who saved his money, suddenly get a bill from the German government saying you have got to pay for some Greeks sitting on the beach drinking ouzo? That's absurd. - in Business Week

The picture is not correct, they do not sit on the beach drinking ouzo. There are not so many differences. By the way I also dring ouzo sometimes. The German Parliament - the Bundestag - has voted for guarantees of € 211 billion ($ 282 billion) for supporting the weaker Southern European countries. That makes $ 3,439 per capita. With a family of four my personal share is $ 13,756.

I do not really mind helping Southern Europe. But the politicians once more do not understand how much money they spend. And remember, the income per head in Eastern Germany is about as high as in Greece, but the weather is worse, so more money is needed for housing and heating.

The real problem is the lack of sensitivity. Although Germany is heavily bleading for Greece and other deficit spenders, there are no thanks, but the Greek media are behaving exactly as welfare recipients, who claim a right to be fed over the next 100 years. Some pictures for your enjoyment:



Merkel and Sarkozy throwing deficit spenders into the sea (brilliant idea ...)

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and a not very sensitive one ( I don't think she is that explosive ....)

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and this one from Russia (Merkel got him by the balls, Sarkozy is more hanging on then supporting her ... )

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At least having some fun for the money spent! Any comments?

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  #36 (permalink)
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pedrobraz View Post
My country( Portugal) has one of the best highways in Europe and now we can not pay for

Very true. The roads of Berlin are full of holes, because the city is bankrupt.

Eastern Germany's industrial heritage was a whole bunch of factories for the 1930's that had not been properly maintained. West Berlin had no industry left, when reunification came unexpected in 1990. Still there is not a single company of the DAX (equivalent to DJIA) having its headquarters in Berlin. All of them are located in Western Germany.

The positive side: Life in Berlin is cheaper than in Athens. According to the Mercer Index

Athens ranks 28th (index value 85.9)
Berlin ranks 49th (index value 80.8)
Lisboa ranks 64th (index value 76.3)

So why do you think that there is a budget deficit in Greece in Portugal? They have much lower taxes than Germany.

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  #37 (permalink)
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@zt379 Thanks for your response, enjoyed reading it!

Thanks
Our civility prevails, although I'm surprised you're so easily entertained !

Quoting 
What about paying taxes?

I'm not an economist and try to understood more about these things, but I can't help thinking what you say is an over simplification.
I imagine most citizens pay.
This, imo, is not about the average citizen.
It's what corporations don't pay, and by that virtue how our interests are not properly served by so called elected officials.

I don't see this as an issue just for Greece, all though they, for various reasons, seem to be getting the most attention on this issue. We are all in the same situation I believe, in respect of how our money is being spent by our respective governments.

Only this Thursday for example the B of E made this announcement of an additional £500 Billion.
Bank of England's QE2 may reach £500bn, economists warn - Telegraph

Where's all this money going, and who's now on the hook to re-pay it !


Quoting 
The greek are not poor. I would say that they are better off than Eastern Germans.

I agree. However, it seems to come down to who owns what and in who's interest are the contracts and proceeds.

This may be of interest..
Greece has 40 billion barrels of oil, and thousands of tons of Gold and Uranium





Quoting 
They do not want the money, but they have already taken and spent it. The sovereign debt is now close to € 350 billion.
They will never be able to pay back, what they have spent, so somebody else needs to pay, or they have to declare bankruptcy.

"They" being who ?
Again, I believe, generally, the citizens of all of Europe are asking the same questions.
As you stated in a previous post. we would do well not to be persuaded what and how to think of each other, by our politicians.


Quoting 
Unlike Portugal - which is poorer in temrs of revenue per capita - Greece continues to run a high deficit. If they do not stop deficit spending, they can not solve their problems. Greece is a country which is not poor, but simply continues to run high deficits. Even if someone pays the € 350 billion debt, they cannot survive if they continue to run a high deficit.

This is an example of Ponzi finance. Whether crisis or not, Greece spends money that it has never earned.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Who is responsible for those deficits?

(a) Greek policy makers
(b) The Greek people because they have elected those policy makers
(c) Banks who have lent money to Greece although they are running a Ponzi scheme

I don't know the answers to these questions.
We are collectively responsible for what we have I guess.
But at the very least, perhaps it is the people, across many nations at this time, that are taking a decision that they no longer want what they have.

This is a very simplistic 4 minute clip to explain a complicated issue.




And a documentary that may be of interest.

"Debtocracy"



Thx.

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  #38 (permalink)
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zt379 View Post
Thanks
Our civility prevails, although I'm surprised you're so easily entertained !
I'm not an economist and try to understood more about these things, but I can't help thinking what you say is an over simplification.
I imagine most citizens pay.
This, imo, is not about the average citizen.
It's what corporations don't pay, and by that virtue how our interests are not properly served by so called elected officials.

I don't see this as an issue just for Greece, all though they, for various reasons, seem to be getting the most attention on this issue. We are all in the same situation I believe, in respect of how our money is being spent by our respective governments.

Only this Thursday for example the B of E made this announcement of an additional £500 Billion.
Bank of England's QE2 may reach £500bn, economists warn - Telegraph

Where's all this money going, and who's now on the hook to re-pay it !

I agree. However, it seems to come down to who owns what and in who's interest are the contracts and proceeds.

This may be of interest..
Greece has 40 billion barrels of oil, and thousands of tons of Gold and Uranium




"They" being who ?
Again, I believe, generally, the citizens of all of Europe are asking the same questions.
As you stated in a previous post. we would do well not to be persuaded what and how to think of each other, by our politicians.

I don't know the answers to these questions.
We are collectively responsible for what we have I guess.
But at the very least, perhaps it is the people, across many nations at this time, that are taking a decision that they no longer want what they have.

This is a very simplistic 4 minute clip to explain a complicated issue.




And a documentary that may be of interest.

"Debtocracy"



Thx.


I watched that vid on the oil and gold and really don't know what to make of it. I come to the conclusion that they are full of it. I can't see how a goverment this broke would not exploit these opportunities, just doesn't make sense. For the record I'm not attacking your post, only commenting on that particular video

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kbit View Post
I watched that vid on the oil and gold and really don't know what to make of it. I come to the conclusion that they are full of it. I can't see how a goverment this broke would not exploit these opportunities, just doesn't make sense. For the record I'm not attacking your post, only commenting on that particular video

I agree kbit, who knows the if's and why's.

For coincidence, why are all the counties either under attack militarily or financially, sitting on a wealth of natural resources.

A slight digression from the theme of the thread, so please excuse my own hypocrisy.

IRELAND: SITTING ON A FORTUNE; EXCLUSIVE EUR5trillion Oil Field Could Defeat Recession but Gloom Grows – Royal Dutch Shell plc .com


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Silvester17 View Post
........
makes you wonder if there is actually a solution everybody can agree on.

Silverster17..perhaps some ideas for us all to think over...an interesting discussion non the less imo.

Ellen Brown: Finance Capital vs. Public Banking | Global Research TV

thx

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