Greek Bailout Same as Subprime Lending

Discussion in 'Economics' started by schizo, Apr 12, 2010.

  1. schizo


    How is it any different? I thought you're not suppose to lend to those with no income and no collateral. Haven't they learned anything? Why do they never follow what they preach?

    I say look for another house of cards to come toppling down. This time extending far beyond the realm of "too big to fail" banks.
  2. First the banks, then the economy, then the country, then the currency.

    Dow and gold 20K here we come!
  3. debaser you reckon gold will hit 20k?

    maybe but i thought you were a bit more optimistic.
  4. The idea is to buy Greece enough time to cut the deficit, and to reduce the funding costs by reducing fear in the Greek debt markets.

    However I agree with you this doesn't improve their solvency much, and I think at some point a partial default and restructuring is likely. Greece just doesn't seem willing to make the major fiscal adjustment necessary to avoid defaulting.
  5. No, I don't think it will hit 20K really.

    But I do feel the order I described for things to unravel is pretty accurate.

    People (or should I say economists?) always tend to link deteriorating economic conditions to depreciating assets but the devaluation could just as well ocur in the currency field and one would be wise to have at least some exposure to this scenario rather than staying all in cash or double short ETF's.
  7. The goal is to avoid a liquidity crisis in Greece that can quickly turn into a Leh-like event. The idea is, once liquidity issues are out of the way, solvency issues can be addressed in due course. Whether that actually happens is an entirely different question.
  8. Belgium is a 10 milion people country divided in basically 3 districts on a tiny surface. You can literally cross the country in 2 hours or so.

    Nevertheless, one of the districts has one of the highest saving rates and according life styles in the world, one of the other districts has been experiencing the highest level of youth unemployment in the entire Euro zone for years now.

    I'm sure the same phenomenon is witnessable elsewhere all over the world.

    In my view crises probably only really effect everyone in a bond market crash (see Greece today) or a currency crash, both of which my country has been spared off so far hence the difficulty in suplying you with an accurate image of the economic situation over here anno 2010.

    I would like to add as far as countries go who have come to endure the hardship of a bond crash or currency crash one should be wise not to underestimate the resilience of human nature and societies.

    Life goes on for most, perhaps just not as pleasant as before.

  9. I think I've posted this quote too many times, but here it is once again:

    "There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."

    - Ludwig von Mises

    And for those that get turned off by Austrians, I think the Austrian view is finally getting some cred:

    Does Austrian economics understand financial crises better than other schools of thought?

  10. I've always liked the following roundtable with Rogers, Faber and Puplave from 2003 as a nice summary of a market view which has proven it's value over the last few years.

    It's very easy understandable (probably a bit to much for some) but I remember reading it a few years back and it helped the unknown noob like myself certainly to gain some perspective.
    #10     Apr 12, 2010