Discussion in 'Economics' started by wilburbear, Nov 7, 2011.
This is an interesting article from Gwynne Dyer...
So the EU is shoveling enormous amounts of money into Greece to forestall a default, while forcing European banks to take a âhaircutâ of 50 percent on their Greek loans. Even with all that, however, Greece is still drowning in debt, and the EU is no closer than ever to creating a financial authority with the power to protect the euro. It canât, because there is just no political support for a genuinely federal Europe with harmonized economies.
When will Greece finally default and get it over with? Hereâs a clue. Euro deposits in Greek banks fell by 14 percent last year, as depositors moved their money abroad to protect it from being converted into ânew drachmasâ at a huge discount when Greece crashes out of the euro. In just the past month, euro deposits fell by a further six percent. It may not be long now.
Note on Dyer: I have followed him for a while and he is not an average journalist. Unlike most journalists these days who constantly scramble for 'something... anyting' to say, he does not make comments on things about which he is ignorant. He criticizes ignorant journalists (there are soooo many) and likes to point out when popular thinkers are wrong. He is not an economist but he has knack of seeing how groups and nations respond to political issues/conflict.
The book, When Money Dies, makes it clear that timing of economic crises often hinge on the temperament of key decision makers. If Merkel is determined to defer Greek default, it can be deferred. There are many players who could change the game but there would have to be a valuable reason for them to intervene. You can't be absolutely certain of any prediction. However, I can't imagine why Germany would bail out Greece with Italy waiting in line to be bailed out next.
Another element of the rescue that doesn't make sense to me is that the plan to bail out Greece is not straight cash. It depends on attracting other (Chinese) money to assist in the bail out. The Globe and Mail said it is a complicated plan and hard to understand.
Greece has defaulted five times in the past couple hundred years but not since 1932.. they are a few decades past due for defaulting!! They are hesitant about allowing the most recent bailout scheme to be put over on them but, oh, what the heck, if Germany insists, they will take the money and the reduction in the amount owed just to keep the grownups happy. It totals only a few tens of thousands $ per capita anyhow.
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