Porsche has sold well over 600 cars in dominican republic since 2003. Ferrari has sold over 50-60 cars in dominican republic since 2007 (in fact, they have a dealership in that island), Jaguar and Maserrati has sold wel over 40 cars each in Dominican Republic, DR is the country with most Mercedez Benz per capita in the entire continent... That's make DR a first class country?. Give me a break pal http://www.youtube.com/watch?v=W7BZW8Dh3m4 http://www.youtube.com/watch?v=6VxxDnUHSzE (Ferraris in DR)
Where do you want to get treated for cancer? In Estonia, the Czech republic? Or in the UK? Specifically, in Eastern Europe it is typical to "tip" the nurses and doctors (in cash) before you get any major treatment. Tips start at around 50 EUR (which is a big deal if one makes 500 EUR a month). Their official state salary is so low - with doctors bringing home around 700 EUR in major metropolitan centers in some countries in Eastern Europe. Not the best basis for superior health care is it? Cuba has a lower infant mortality than the US. Between the two, where would you want your wife to give birth to your child? Life expectancy in 90% of the G10 is lower than in Greece. As already outlined, this largely due to diet and lifestyle of the older population (who grew up in the 1950s in rural Italy/Greece/etc.), not due to access to superior health-care in the Mediterranean world. Google "Lyon Diet Heart Study". Interestingly (or rather shockingly), the younger population in Greece (and Italy, Cyprus, etc.) today has similar rates of diabetes, obesity, etc. like their G10 peers thanks to the proliferation of sugar soda pops and McDonalds/Buger King junk food. Unfortunately, the longer lifespan in the Mediterranean world is likely to "converge" and thus disappear thanks to our junk world infested lifestyle over the next generation or so.
No they wont because there is very little economic interest in Greece. As sad as it sounds, outside of some debt there is nothing that interests the Germans in Greece. Whereas in Spain, Portugal and Italy there is quite a bit of interest. For example Seat is Spanish and owned by Volkswagen. What people outside of the eurozone forget is that in the Eurozone the bankers don't make the rules. Volkswagen, and the industrial complex makes the rules. This is completely unlike say the UK, US and Switzerland. I think Greece will become the sacrificial lamb. But the real wrath will be given to companies like Goldman Sachs. They might as well pack up and leave the eurozone because what they did for Greece is not well looked upon by the eurozone. I think the eurozone will equate the Caymans with Goldman's and their business will dry up. After all who wants to be associated with a company that promotes dodgy practices. Goldman has good talent, but their management is dumb as straw!
The discussion was about labor productivity/export competitiveness, not about bond holders. A bond default won't make Greek labor more efficient nor more competitive on global export markets. If they still had the Drachma the "problem" would take care of itself, possibly very quickly. We'll see if nominal labor/salary rates will adjust in EUR, considering the strong unionization and willingness to riot in Greece. I have my doubts, if anything it will take a very very long time, much longer than an overnight Drachma crash would take to bring about an equilibrium.
I completely agree if Greece had its own currency it would be impossible for them to borrow. Then again I am guessing no buyer of bonds would ever go for Greek dominated bonds. They would want a "real currency" like the EUR, USD, GBP, etc. While I agree regarding your price adjustments, will the Greek people go for it? The unions are quite adamant on their "rights". And right now I doubt the EU will be willing to give money. The German people have spoken in the latest polling's and I really doubt the government will step into this hornet's nest. The German people implemented the reforms called Hartz and I was completely surprised that they did it. It was not easy for the people and thus they will not under any circumstances support Greece. Germans when they have a principle in mind can be very very stubborn, and on this one I am willing to bet that they will not budge one iota. In the end it will be up to the Greeks to figure out themselves... My guess is that they will be out of the Euro, and probably the EU... Though I don't think it will harm the EU or Euro since Greece will be the "bum" on the street where everyone says, "see what happens when you don't change... "
If your theory was correct, then why have labor productivity in Club Med been going DOWN instead of converging with Germany? According to the "wage self-adjustment" hypothesis hourly salaries would have been going down in real terms in Spain and Greece over the last 10 years. The opposite is the truth. Real wages have been on the way up and the productivity gap to Germany has been increasing not decreasing, thanks to the common currency. What makes you so optimistic real wages in the private economy will start to go down in Club Med, considering it hasn't happened in the past? It's probably a good start they're finally slashing salaries for government employees, we'll see if corporations are able to follow through.
Come on, GoC... You know better than to ask a silly thing like that. It makes all sorts of difference and you should know that.
Let's take it from the perspective of anybody that is not in Sterling. If Sterling falls by 30% with respect to my currency then that indeed is a 30% bond face value cut. In our fund we trade in USD, but have EUR, and GBP clients. We hedge the currency and then regardless of how the currency evolves the client gets the same monies. Thus for the client to avoid getting the haircut they would have to hedge the bonds with currency contracts. You can't do it with cash since cash would have a cost associated with it. For example, let's say I have a 100 USD and I want to buy GBP bonds. Since I am required to exchange my currency for the GBP bonds I can't hang onto my USD's since then I would borrow GBP's and have a carrying cost. Thus you need to convert the currency and buy the appropriate futures contracts that need to be rolled. That way regardless of what happens you will get an equal amount of USD's as a return. Of course if the face value of the bond does drop then you are hit...
Look how much Euro's the Dutch had to pour into their financial system. Close to 100 billion Euro's? For a country of 15 million people? The influence of the financial sector on the Euro zone is less pronounced but it is still there no doubt.