Monday, 6 July 2015

Acropolis Now?

Screen Shot 2015-07-05 at 20.05.34The new Drachma? How long?

“Greece has voted No, and resoundingly so…”

“Greece has voted No, and resoundingly so. But the reaction from Berlin tonight does not suggest that Germany is prepared to have any further negotiations with the Syriza government.”
German rhetoric suggests that they are preparing to try and kick Greece out of the Euro – James Forsyth, SPECTATOR

“Yesterday the embattled Greeks delivered still more body blows to the rotten regime of Keynesian central banking and the crony capitalist bailout state to which it is conjoined…
    “[A “no” vote] would clarify that everything at issue between the parties is false. There is no way to pay Greece’s debts, modify the troika austerity plan, save the euro, rescue Greece’ banking system or stabilize Europe’s hideously mispriced and distorted debt markets.
    “It’s all going to blow and it should. The entire European mess has been concocted by statist politicians and policy apparatchiks who falsely and arrogantly believe they can defy the laws of markets, sound money and fiscal rectitude indefinitely.
    “The truth lost in all the meaningless “puts and takes” of the latest negotiations is that the Greek state was bankrupt five years ago …”
Good On You, Greece—–But Don’t Waver Now (Part 2) – David Stockma, CONTRA CORNER

Our base case is that the pressures coming from a dysfunctional banking system in Greece will shorten the time horizon to negotiate a deal to a handful of weeks. As that pressure builds, there is likely to be a temptation to call a referendum in Greece on euro membership, and for the state to begin issuing I-O-Us or similar and giving these some status as legal tender. To the extent that pensioners and public sector employees find themselves being paid with such instruments, it takes the banks further away from solvency …”
The "Nightmare Of The Euro-Architects" Is Coming True: JPM Now Sees Grexit, Eurogroup "Split In Coming Days" – ZERO HEDGE

“Alexis Tsipras will stay as Prime Minister, and see the result as a mandate to negotiate a better deal. But that’s not how the Germans see it: their economic affairs minister, Sigmar Gabriel, has just told the Tagesspiegel newspaper that  has just “torn down the last bridges on which Greece and Europe could have moved towards a compromise” and furthermore … “With the rejection of the rules of the eurozone … negotiations about a programme worth billions are barely conceivable.”
    “Events could well spiral out of anyone’s control. Here’s what we’re now facing…”
The Greeks have voted ‘no’. Now, the real crisis will begin – Fraser Nelson, SPECTATOR

“ … The problem is thus a lack of political will throughout the country. Too many people are benefiting from the way things have always been done in Greece to risk changing it, even for a promise of greater long-term growth. Seen that way, it's no wonder the guy they elected to represent them has so stubbornly refused to go along with the demands of Greece's creditors.
    “"Lots of things need to be done, but no government—this one or the previous ones—have been willing to do them," Azariadis says. "Some of [Tspiras'] predecessors claimed to believe in reform, but when push came to shove...they promised them but they never delivered. Reform is something that no political party in Greece really wants or is willing to go through with."”
Greeks Say No to Austerity—Again—But There Was No Good Outcome in This Referendum – Stephanie Slade, HIT & RUN

“Here is how the German megabank sees the possible outcomes of what is shaping up to be a "No" vote: … “
A "No" Victory Appears Probable: What Happens Next According To Deutsche Bank – ZERO HEDGE

“That, once again, is the Varoufakis all-in gamble, a gamble which assumes the ECB will be rational enough (in a game theory context) to appreciate the fallout of a Grexit on Europe’s creditors. Here is a qualitative determination …”
Why The Eurocrats Are Petrified——What The Falling Dominoes of ‘Grexit’ Look Like – CONTRA CORNER

image“For the point I want to make, it doesn't matter if they vote YES or NO, though that may have significant repercussions for the global economy.  The critical matter from the point of view of economic theory and policy discussions is to sort out the root cause of the fiscal mess -- not only in Greece, but among several EU states. And, of course, by this logic the US situation is not immune from judgement, nor anywhere else throughout the globe.  Democratic fiscal policy appears to have an institutional problem with regard to sustainable public finance.  How do we design our institutions of public administration and finance in a democratic society so they encourage fiscal responsibility?  Lack of such fiscal responsibility entraps economies in, what Adam Smith termed, the juggling tricks of deficits, debt, debasement.  This trick sucks the vibrancy out of an economy, and if left undisciplined sinks an economy altogether in a way we have been witnessing in Greece. …”
Greece and Wrestling with the Fiscal Commons – Peter Boettke, COORDINATION PROBLEM

“They want the Eurogroup to bailout Greece without restrictions. Yup, just take money from other Euro citizens (or print it up) and give it to the Greeks. So they want the Greeks to vote "no" on  the referendum question of whether Greece should accept a recent EuroGroup tax/bailout program .
    “They do not hold the much sounder view that the referendum should be voted down, so that the Greek's can get from under the oppressive demands of the EuroGroup protectors of the banksters and launch a fully free market economy without further oppressive "bailouts." In the end, the lefties just want to make things worse for the Greeks, despite their being on the correct side of the referendum vote itself.”
Lefty Economists are Pretty Good on the Greek Referendum – Robert Wenzel, ECONOMIC POLICY JOURNAL

“Deposit confiscation will be required long before hyperinflation is an option, do note that is not exactly a reassuring thought.  In fact hyperinflation is too slow and inefficient a way to steal from the citizenry in this setting.”
Might Greece see some version of hyperinflation? – Tyler Cowen, MARGINAL REVOLUTION

“Will the euro-fanatics please stop lying to the people of Greece? And while they’re at it, will they please stop lying to the rest of us as well?”
The Eurocrats’ Big Lie——Life Outside The Euro Has Worked Just Swell For Romania, Bulgaria, Poland, Turkey, The Czech Republic Etc. – Brett Arends, MARKETWATCH

“These “emergency” measures were supposed to have healed the problems that caused the financial crisis of 2008 — the excessive leverage, the toxic assets wrapped in complex derivatives, the resultant credit and liquidity crunch that occurred when banks lost faith in each other. Meanwhile, the infusion of cheap money and liquidity into banks gave a select few of them more power over a greater pool of capital than ever. Stock and bond markets skyrocketed as a result of this unprecedented central bank support.
image    “QE-infinity isn’t a solution — it’s a deflection. It’s a form of financial subterfuge that causes extra problems. These range from asset bubbles to the inability of pension and life insurance funds to source longer term less risky long-term assets like government bonds, that pay enough interest for them to meet liabilities. They are thus at risk of rapid future deterioration …”
In A World Of Artificial Liquidity—–Cash Is King – Nomi Prins, CONTRA CORNER

“Financial experts in New York, London, and Brussels have tut-tutted Greece’s economic travails as Athens considers its future with the European Union. Why did they borrow so much money? How can they ever pay it back? Do they think that much debt is sustainable?
    “Instead of pointing fingers at the innumerates running Athens, they should consider our own situation.”
Athens on the Potomac – Jon Gabriel, RICOCHET

“Tyler Cowen is on it, with a simple message: Greece is small; China is large. Uh oh.”
Don’t Look Now But . . . China? – POWERLINE
China facts of the day – Tyler Cowen, MARGINAL REVOLUTION
China Scrambles to Put Plunge Protection Team Together: Brokers Pledge Support For Crashing Market – ZERO HEDGE

UPDATE:

Since 1830 the country has defaulted on its debts five times. Indeed, the only two countries that have defaulted more often are Ecuador and Honduras. To quote Brown: “To a person with any historical awareness, being told that Greece is on the verge of a default is like hearing Dean Martin is on the verge of a martini”.”
Same Greek default, different day – Jason Krupp, NZ INITIATIVE

image

“Actually it is the middle-class rorts that have really made the system unsustainable, like the “blind” pensioners in Greece and the affluent Australians who have their child-minding subsidised. Plus red and green tape which are the legacy of middle-class activism. Not to mention Keynesianism.”
The rise of the unsustainable welfare state – Rafe Champion CATALLAXY FILES

“Today, on day one after the Greek default, I am angry. So with apologies, here is my Athens rant.
    “The past week must have been the most extraordinary yet in the never-ending euro crisis. I just cannot recall anything like it ever happening before. What we have witnessed is an incredible combination of political dilettantism, chutzpah and aggression.
    No-one in this euro game is innocent. Everyone involved has to take their share of the blame and acknowledge their roles in the escalating crisis.
    “To start with the original sin of the euro crisis, Greece should have never, ever been made a part of the eurozone. And the eurozone should have never happened in the first place. …
    “There is only one hope. Now that Greece is finally and officially bankrupt, perhaps we might eventually see something resembling a solution to the crisis. How about Greece exiting the eurozone, devaluing its new currency, default on its debt and reform its economy? I have been arguing this case for five years in this column, and I am not the only economist who has been saying so.
    “Will European leaders finally listen to us?”
The eurozone must stop playing the blame game – Oliver Hartwich, BUSINESS SPECTATOR

“Dear Prime Minister Tsipras and Finance Minister Varoufakis:
    “You may have won a four-month reprieve of sorts from your creditors, but your situation is desperate, and everyone knows it, most particularly Europe’s paymasters, the Germans. As you just painfully learned, your ability to blackmail your creditors is a fraction of what it once was.
    “If you’re serious about saving your country and rescuing its people from a more dreadful economic catastrophe, there are basic steps you should take that would promptly promote economic growth, while giving you the priceless political opportunity to tell the troika–the IMF , the ECB and the EU (i.e., the Germans)–where to get off.
    “Here’s how you can put away your beggar’s cup for good. …”
Steve Forbes Pens Open Letter to Greek Leaders; Greece Can Teach The World A Needed Lesson – THE PAPPAS POST

“There is now a clear rift between Germany and France, perhaps serious enough to cause long-term damge to the coherence of monetary union. …
    “Italy’s Matteo Renzi said the sight of pensioners weeping in front of banks was a black mark on the conscience of Europe. “We must start to speak to each other again, and nobody knows this than better than Angela Merkel,” he said. …
    “Yet matters will be decided by handful of people in Berlin, Frankfurt, and Brussels over coming days, with the ECB in the unwelcome position of having to decide by its actions whether or not to bring the crisis to a head.
    “Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings – reportedly a ‘bail-in’ above a threshhold of €8,000 – and to prevent any banks being shut down on the orders of the ECB.
    “Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza’s attitude at this stage is that their only defence against a hegemonic power is to fight guerrilla warfare.”
Defiant Greeks Contemplate Drastic Actions——Nationalisation Of Banks And Printing Euro Notes W/O ECB Approval – Ambrose Evans-Pritchard, THE TELEGRAPH

“By now it should be clear to all that the only reason why Germany has been so steadfast in its negotiating stance with Greece is because it knows very well that if it concedes to a public debt reduction (as opposed to haircut on debt held mostly by private entities such as hedge funds which already happened in 2012), then the rest of the PIIGS will come pouring in: first Italy, then Spain, then Portugal, then Ireland.”
When The PIIGS Coming Marching In——Why Germany Is Petrified Of Greek Debt Relief – ZERO HEDGE

“Our students are thinking: “At least it’s not Argentina again.” We’re thinking: “This is great, a real-world experiment we can talk about for years.”
    “Some things to think about as the Greeks vote “no” …”
All Greece, all the time – NYU Stern Economics

“On Wall Street in 1929, it was the great banking houses of J.P. Morgan and Guaranty Trust Company. In China today, it’s names like Citic Securities Co. and Guotai Junan Securities Co.
    “They’re separated by 86 years and 7,300 miles, but Chinese financiers are turning to the same playbook used by their American counterparts to fight a crash that’s wiping out stock-market fortunes on an unprecedented scale.
    “Investors in China are hoping it works out a lot better this time around. …”
China Brokers Dust Off Wall Street’s Playbook From Crash of 1929 –BLOOMBERG

China Stocks Versus Dow Average in 1929

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