Greece has the potential to be the small domino that ends up toppling much larger dominoes.
Here is a preliminary semi-random list of thoughts on Greece’s exit from the euro.
1. I make no claim to expertise in this matter–but I don’t think there are any experts in this, as there is no real analog in recent history.
The era of living off borrowed money is over in Greece, and the Greek people now have a choice.
Almost four years ago I wrote Greece, Please Do The Right Thing: Default Now (June 1, 2011). Default remains the only real way forward for Greece and Europe.Consider the destructive “gains” reaped by four years of lies, predation, debt-serfdom and austerity in service to kleptocrats: tremendous suffering by many Greek citizens, all for nothing but propping up the evil of debt-serfdom to the Greek kleptocracy and the financial royalty of Europe.
The truth is Greece squandered four years propping up a patently false illusion that using the euro as a currency was worth everything, when it was always worth nothing.
A decision by a new Greek government to leave the eurozone or a forced exit of Greece would be even worse than the collapse of Lehman Brothers in 2008, said Barry Eichengreen, an economic historian at the University of California at Berkeley:
– “In the short run, it would be Lehman Brothers squared.”
– “While holding the eurozone together will be costly and difficult and painful for the politicians, breaking it up will be even more costly and more difficult.”
Read more: Grexit would be Lehman Brothers squared
Greece and the troika (the International Monetary Fund, the EU, and the European Central Bank) are in a dangerous game of chicken. The Greeks have been threatened with a “Cyprus-Style prolonged bank holiday” if they “vote wrong.” But they have been bullied for too long and are saying “no more.”
A return to the polls was triggered in December, when the Parliament rejected Prime Minister Antonis Samaras’ pro-austerity candidate for president. In a general election, now set for January 25th, the EU-skeptic, anti-austerity, leftist Syriza party is likely to prevail. Syriza captured a 3% lead in the polls following mass public discontent over the harsh austerity measures Athens was forced to accept in return for a €240 billion bailout.
Austerity has plunged the economy into conditions worse than in the Great Depression. As Professor Bill Black observes, the question is not why the Greek people are rising up to reject the barbarous measures but what took them so long. (more…)
So where has all the risk pooled up in the system? In foreign exchange (FX) markets, that’s where.
One of the precepts of this blog is that risk cannot be disappeared, it can only be transferred or temporarily hidden from view. This runs counter to modern portfolio management, which holds that all risks can be hedged with counterparty-issued securities, i.e. options, futures contracts, derivatives, etc.
This also runs counter to the Central Banking Cargo Cult, which holds that any eruption of risk can be smothered by the unlimited liquidity spewed by omnipotent central banks.
Tagged with: Benoit Mandelbrot
, carry trade
, counterparty risk
, foreign exchange
, tail risk
, U.S. dollar
If corporate profits decline, what will hold up the market’s lofty valuations other than the tapering flood of liquidity from the Federal Reserve?
I have often noted that profits of global U.S. corporations have been boosted by the weak U.S. dollar (USD). In a weak-dollar environment, a company need not sell more goods or services or expand margins to book more profit: all a corporation needs to do is book profits earned in other currencies in dollars.
Europe is the grand prize. And it’s always been the grand prize. Well, due to NATO and World War II considerations, the United States is pretty much captured, colonized, integrated Europe.
That’s about to change.
I think Europe is going to turn its attention eastward.
They have a parade of gold-backed currencies coming. It’s not just going to be the Russian Ruble or the Chinese Yuan. It will involve the Gulf Dinar, with the Saudis. I think it will involve the Nordic Euro.
The Germans, with their friends the Dutch, the Austrians and the Finns, Finland…
They’re all ready. They’re just waiting for the moment. They’ve got a Nordic Euro, and they’ve got plans for gold backing.
Click here for more from Jim Willie on Germany preparing a gold-backed Nordic Euro:
There are a lot of things wrong with fiat printed money like euro and dollar. But this article doesn’t point out the downside of fiat money, but the upside of Maxcoin.
Maxcoin is a coin with big opportunities for everyone. Not only as a payment system, but also as an investment.