Posts Tagged ‘PIIGS’

Newer Entries »

More Greek Default Rumblings

Sunday, September 25th, 2011

Actually, less rumblings than the roar of an approaching train. And since I temporarily seem to be ahead of the latest Ace of Spades Doom roundup, I’m going to try and give you a nice clear view of the coming crash.

“No longer a question of if, but when – that is the tone of discussions over Greece which has dominated the summit of finance ministers in Washington over the weekend.” Former Britain’s former finance minister Alistair Darling agrees, calling default “only a matter of time.”

The talk now is of how to put in a “firewall” to prevent the contagion of an inevitable Greek default from spreading throughout the European banking system.

The Euroskeptics have been completely vindicated:

Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics. The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age — they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse.

I think at this point UK residents should be feeling vrey glad indeed that they didn’t abandon the Pound for the Euro.

Bret Stephens talks about the long line of deceit and fraud that lead Europe to the current crises. “What is now happening in Europe isn’t so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one.”

Mark Steyn, using the ever popular music and political metaphor gambit, compares the breakup of the Eurozone with the breakup of R.E.M. while bringing the usual Steyn goodness: “Attempting to postpone the Club Med welfare junkies’ rendezvous with self-extinction will destabilize internal German politics (which always adds to the gaiety of nations).” And this:

As its own contribution to the end of the world as we know it, the Obama administration has just released a document called “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.” If you’re curious about the first part of the title — “Living Within Our Means” — Veronique de Rugy pointed out at National Review that under this plan debt held by the public will grow from just over $10 trillion to $17.7 trillion by 2021. In other words, the president’s definition of “Living Within Our Means” is to burn through the equivalent of the entire German, French, and British economies in new debt between now and the end of the decade. You can try this yourself next time your bank manager politely suggests you should try “living within your means”: Tell him you’ve got an ingenious plan to get your spending under control by near doubling your present debt in the course of a mere decade. He’s sure to be impressed.

Germany is near the limit of their willingness to bail out Greece.

There may even be a taxpayer revolt brewing in the Aegean.

And if the other PIIGS are doing better than Greece, it is only a matter of degrees: “Italy is the new Lebanon, Portugal the new Venezuela, Spain the new Vietnam, Ireland the new Argentina and nothing is more risky than Greece, according to today’s credit default swap market.”

But it’s not just Greece and Europe that are hitting the wall. China’s housing bubble may finally be bursting. Worse still: “growth in China may be zero [and] China has ‘European kind of numbers’ when it comes to debt.”

And the Chinese housing bubble isn’t just affecting China. It’s also affecting Canada.

And at least one observer has drawn parallels to a certain hopemonger currently residing in the White House:

Obama has no intention of really solving the debt crisis. And that brings us back to Greece. That government has been doing the same thing for a decade and the chickens have now come home to roost. Greece’s debt is 150 percent of its Gross Domestic Product. Our debt has just reached 100 percent of GDP and the debt is accumulating faster than it ever has. If we were looking out the windshield down the road, we could see the crash that’s just up around the bend.

But rather than put on the brakes, the president has chosen to pick a fight with the other passengers in the car he is driving. Talk about distracted driving! He is gambling that this fight will convince the passengers to let him stay behind the wheel for another four years. But we certainly can’t wait that long. He’s turned up the radio in hopes we won’t hear the ambulance sirens.

It looks like its going to be another rough week for world markets…

Tags:, , , , , , , , , , , , , ,
Posted in Budget, Economics, Foreign Policy, Waste and Fraud, Welfare State | 1 Comment »

More on the Greek Euro U.S. World Debt Crises

Monday, August 8th, 2011

The Moody’s downgrade of Portuguese debt link was a quick blipvert for a current event, but I wanted to do a somewhat longer roundup of pieces on the Euro debt crises and the potential for more shocks down the line. Unfortunately for both me and pretty much everyone in the world, things have been moving too fast to get a good handle on before the next crisis erupts. And after the Obama downgrade, things are moving faster than ever.

Which is pretty fast indeed. The Eurocrats, in best shoot-the-messenger style, have decided to start ignoring bond rating services in the wake of Moody’s downgrade of Portugal. If that weren’t enough, Italian police raided the offices of Standard & Poors following their downgrade of Italian credit ratings.

How did Greece get in the position of being the first domino to fall in the Euro crisis? The election of Andreas Papandreou as Prime Minister helped start the ball rolling:

On October 18, 1981, a charismatic academic with rather limited government experience and with a one-word slogan, “Change,” was elected prime minister of Greece. His name was Andreas Papandreou. Greeks may now wish that 30 years ago they had had a Tea Party movement. Things could have turned out differently.

Thirty years ago, Greece was in an enviable position on the matter of national debt, with its debt just 28.6 percent of GDP. Few advanced countries can manage that kind of debt-to-GDP ratio. By the end of Papandreou’s first term in office, that ratio had nearly doubled, with debt at 54.7 percent of GDP. By the end of his second term, the figure was in the mid 80s.

But that was just the first step. The second was letting Greece join the Eurozone in 1999 despite their patent unwillingness to get their financial house in order. “Repeatedly, and for 30 years, the Greeks have played Europe like a harp.”

June’s European Union summit illustrated the chaos perfectly: a last-minute deal with Athens to raise the Greek income-tax threshold and increase levies on heating oil was hailed as a breakthrough even though everyone involved knows that this will buy, at best, a few months’ respite from Greece’s creditors. Thus are deck chairs rearranged, as the Greek pleasure yacht (classified, of course, as a fishing boat to escape taxes) sinks below the waves. The markets duly marked up the five-year probability of a Greek default to 80 percent.

The advice to Margaret Thatcher decades ago from the Foreign Office mandarin charged with European policy was clear: Greece was unfit to join what was then known as the European Community. The backward, chaotic archipelago would be an enduring drain on European coffers. Not only that: once through the door, Athens would bring nothing but trouble.

That foolish decision to allow Greece to join lies at the root of the crisis engulfing the euro zone and lapping America’s shores. Consciously, among its pampered political elite — and subliminally in society at large — Greeks got the idea that being Europe’s backward, indulged delinquent was a highly profitable game.

A piece quoting and summarizing two different Financial Times pieces (behind their paywall, alas), both of which predict a bad end to the Greek debt crises, albeit partially from differing reasons.

Andrew Butter makes parallels with Weimar Germany. Don’t agree with everything the author says, although you I do admire this sentence: “It’s getting harder to do the austerity thing these days, now that it’s considered politically incorrect to shoot at rioters with live ammunition, which wasn’t an issue in 1923.”

So if pretty much everyone agrees that Greek default is inevitable, why keep shuffling the deck chairs? Simple: So they can stick taxpayers with the bill. “Foreign financial institutions currently own 42 per cent of Greek debts, and foreign governments 26 per cent, the rest being owed domestically. By 2014, those figures will be 12 per cent and 64 per cent respectively. European banks, in other words, will have shuffled off their losses onto European taxpayers.”

So an effort to shield Euroelites from the worst effects of the debt crisis may end up destroying the Euro entirely.

Given the already considerable length of this post, I doubt I have time to address some of the ramifications of the Obama Downgrade, so that will have to wait for another post…

Tags:, , , , , , , ,
Posted in Budget, Democrats, Economics, Foreign Policy | 1 Comment »

Portugal’s Bonds Downgraded to Junk

Tuesday, July 5th, 2011

By Moody’s.

Between strikes in Greece, constitutional challenges to the Greek bailout in Germany, and other agencies rating the latest Greek bailout as tantamount to default, efforts to prevent a Euro-default contagion may fail sooner rather than later…

Tags:, , , ,
Posted in Economics, Foreign Policy | 1 Comment »

Newer Entries »