If it Smells like Panic, Looks like Panic, and Sounds like Panic .. ( Greece )

[Melonie]

... It's probably Panic ! From


(snip)"It’s so much easier to conduct a bank run than in the old days. The Greeks are in full panic mode, withdrawing billions from Greek banks. There are some lines like the 1930s, but these days a telephone call or internet transfer will accomplish the same result without it being visible to the TV cameras. Money is a funny thing. It’s just a piece of paper. The only thing that gives it value is trust. People must believe it is worth something. Have the politicians and central bankers of the world given you a nice warm feeling over the last few years? Do you trust them? The average person may not be that intelligent. Bankers and politicians have counted on this fact for decades. But they have gone too far. The trust is dissipating rapidly. Greeks are panicking today. The Portuguese will panic tomorrow. The Italians next week. The Spanish the week after. Trust is a funny thing. It is built up over a long period of time, but it can collapse suddenly.

I’m sure glad it can’t happen in the U.S. We have trustworthy bankers and politicians. Our currency is the strongest in the world. We’re the chosen people. We’re the shining beacon on the mountaintop. We are fiscally responsible. Right?

The size of the run on Greek banks is not at all clear: while it seems that something on the order of €1 billion has left the banks of late, it’s less obvious whether that was over the course of one day, three days, or two weeks. The big picture, though, is unambiguous:



What you’re seeing here is Greece down to its last €165 billion or so in deposits, and at the margin the rate of decrease is probably accelerating, despite the fact that most sensible Greeks will have already stashed their hard-earned euros safely outside the country a long time ago. I don’t know what the minimum amount is that Greeks need on deposit just to serve their near-term liquidity requirements, but we’re not there yet: Greece’s total population is only 11 million. So there’s a long way further this number can fall — especially since the Greek banking system isn’t receiving the support it needs from the ECB.

The more realistic constraint is simply that many Greeks lack the education and sophistication and language skills needed to move their money out of the country. This, for instance, is telling:


A 60-year-old textiles store owner who gave his name only as Nasos said he had transferred 10,000 euros over the phone to a bank in fellow euro zone state Cyprus on Tuesday afternoon.

If Greece exits the euro, there’s no doubt that there will be a massive banking crisis in Cyprus — it’s pretty much the least safe haven conceivable for someone looking to move their money from Greece. The only reason to move money to Cyprus rather than, say, Luxembourg is that they speak Greek there, and the logistics of moving money to Cyprus are easier than the logistics of moving money to any other country.

Meanwhile, in the rest of the eurozone periphery, foreigners are already pulling their deposits from Italian banks, while the Spanish banking system is only getting increasingly precarious:



All of which is to say that the causal relationship between sovereign crises and banking crises is rather more complicated than one causing the other: in reality, they cause each other, in a vicious cycle which clearly isn’t close to being broken in any of the southern European states. Greece is further along in the cycle than Spain or Portugal or Italy, but they’re all still moving in the wrong direction.

Greece’s banks, remember, are the mechanism by which the rest of Europe will force Grexit. Banks are the circulatory system of any economy: if they stop pumping money, the country dies. And so, in extremis, Greece will need to do a complete blood transfusion, replacing all euros with drachmas, if the only alternative is to see the flow of euros dry up entirely.

In the meantime, however, expect to see deposits continue to leave Greece — and the rest of the European periphery as well. Even if your euros are reasonably safe in a big Italian bank, they’re surely safer in a big German bank. And the first thing that all depositors want is safety. Now that questions have been raised about the solvency of various southern European banking systems, it’s going to be very hard to reconstitute the eurozone in a robust fashion. The Eurozone was never designed to cope with millions of Spaniards moving their money out of the country, behaving like middle-class Venezuelans with offshore accounts in Miami. And it also was never designed to cope with capital controls. But increasingly, it looks like we’re going to end up with one or the other. Or both."(snip)

[Melonie]

with this latest tidbit from Reuters ... from

(snip)"(Reuters) - The European Central Bank has stopped providing liquidity to some Greek banks as they have not been successfully recapitalized, the ECB said on Wednesday, confirming news earlier reported exclusively by Reuters.

The news sent the euro lower against the dollar, fanning concerns among investors and in Greece that the country may have to leave the euro zone.

The development highlights the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union.

"As recapitalization wasn't in place, the ECB stopped monetary policy operations," a euro zone central bank source told Reuters, declining to be identified. "They are now in the ELA of the Greek central bank."

The ECB only conducts its refinancing operations with solvent banks. Banks which fail to meet strict ECB rules but are deemed solvent by the national central bank (NCB) concerned can nonetheless go to their NCB for emergency liquidity assistance (ELA).

The sources did not name the banks concerned.

An ECB official later added: "Pending the recapitalization of Greek banks that are severely undercapitalized as a result of the recent PSI (debt restructuring) operation, some of the Greek banks have been moved to Emergency Liquidity Assistance."(snip)


What's being unsaid here is that yesterday Greece failed to make a required principal and interest payment on their gov't bonds ... because A. they were unwilling / unable to 'raise' the necessary money themselves via cutbacks in gov't spending or increased tax collections, and B. the EuroZone 'bailout' lenders refused to 'front' them any more loan money since Greece 'refused' to enact the austerity measures mandated by the 'bailout' lenders. This is being perceived by almost every international financial entity, and 'smart' Greeks, as a turning point for Greece away from the Euro and back into the Drachma.

The reason for the return to the Drachma is that, unlike Euros, the Greek central bank can 'print' as many brand new Drachmas as they like in order to repay gov't bonds, pay gov't employee salaries, provide gov't social welfare benefits etc. ... essentially the same thing that the USA has been doing for the past several years. But the unavoidable consequence of this money 'printing' is a loss of 'purchasing power' via exchange rate devaluation. In the USA this is arguably happening at a rate of 3-5% per year. However, in Greece, this is likely to happen very quickly i.e. something on the order of a 50% loss of 'purchasing power' immediately after the Drachma is reintroduced. For the savers / retirees / businesses most affected by such a devaluation / loss of 'purchasing power', this is huge ... thus many Greeks are now attempting to withdraw their savings in Euros and move them out of the country before their Euros are magically transformed into new Drachmas only worth 1/2 as much in real terms as their Euros were.

[Eric Stoner]

This is nothing new. Greeks have been withdrawing their money from Greek banks for months. Anyone capable of doing so has been moving their money out of Greece.
Another problem is that Greece is already experiencing a serious "brain drain". Anyone with a marketable skill and employment prospects elsewhere is leaving Greece or making plans to do so.

Thought I was exaggerating when I called Greece the "European Haiti" ?

[Melonie]

^^^ yeah, agreed. But what about somewhat similar economics now developing in California etc. where the bankrupt state doesn't have the same last resort option of exiting the US dollar and 'printing' their own money in order to ( superficially ) balance their state budget ?

[Eric Stoner]

^^^ yeah, agreed. But what about somewhat similar economics now developing in California etc. where the bankrupt state doesn't have the same last resort option of exiting the US dollar and 'printing' their own money in order to ( superficially ) balance their state budget ?

True that. Plus you can add the resentment of successful "have" states like Texas being expected to pick up the tab to bail out spendthrifts like California.

As for Europe, the end appears to be in sight as Greece will have no choice but to exit the Euro. It is politically impossible for Greece to adopt the austerity measures necessary to get Germany and the other "haves" to keep propping up their banks. Greece's credit rating was just lowered from B- to CCC. On the one hand the ECB et. al is tired of the Greek tail wagging the European dog. On the other hand , they fear the political instability and extremism that will inevitably result.

It never ceases to amaze me how forgetful poeple can be. It was not that long ago that Greece was ruled by a right wing political junta. Spain was ruled by Franco. Portugal by Spinoza. France has continually been pulled back and forth by the left and right. The Germans DO remember. One of the central tenets of national policy for over two generations is a stable currency and low inflation. Which is why "Krugie" et. al. will NEVER be listened to. The Germans will not permit inflation to rise because the hyper-inflation post W.W. I is indelibly burned into their memory and national culture.

Krugie is either historically ignorant, or just his usual intellectually dishonest self, when he tries to blame ( as he did in his Times column today ) the current mess on the Financial Crisis alone. Yes, there was a bubble in Europe, especially in real estate prices BUT Krugie ignores ( probably deliberately ) the spendthrift policies in the PIIGS.
The pre-crisis boom did not tell anyone to boost wages, benefits and pensions way beyond anything sustainable in good times, let alone the current deflationary mess. Greece's borrowing spree was not to pay for infrastructure but to fund its welfare state.

Greece lied to get into the EU in the first place. The other members KNEW they were lying about their budget , borrowing and debt and let them do it. Now Greece must leave the EU and go back on the drachma. Which of course will quickly have the equivalent worth of USED toilet paper. According to Krugie this is a "nightmare" scenario because it will strengthen and embolden political extremists. Especially on the right. Let it. The rest of Europe will survive. It won't be pleasant and a lot of European banks will have to write down a lot of Greek debt. A lot of American banks had to write down a LOT of Latin American debt in the 80's and Mexican debt in the 90's along with a lot of Russian debt in the late 90's. They will get through. A few are even starting to learn the lesson that a generous welfare state needs an INCREASING base of young workers to pay for all those 50 year old retired bureaucrats and Europe has no way to get them. They have an aging population and a negative birth rate.

Spain and Italy are much more problematic. If for no other reason than both are much larger than Greece.

[Melonie]

indeed ... this just in from Phoenix Capital ...

The election 'news' is included because it is an integral part of Eurozone economic problems thus, via US bank exposure to EU debt, potential US economic problems !


(snip)the BIG STORY in the French elections was the fact that the hard right, anti-Euro, anti-immigration party, the Front National Party, or NFP, took the most votes from French youth.


I just got off the plane from Europe. I went there because I wanted to see the effects of the French election as well as get an "on the ground" perspective of what's really happening in Europe.

I can tell you, the situation in Europe is far FAR worse than the media is even willing to acknowledge."(snip)

(snip)"That is correct. When it came time to vote in round one, more French youth voted for a party whose leader wants to break up the Euro, who wants to deal with immigration by kicking out any immigrant who cannot adhere to French principles or who commits a crime, and who once compared the legal French tolerance of Muslims praying in the streets to putting up with Nazi occupation.

Oh, and her father, who founded the NFP, wanted to do away with the concept of immigration completely and once commented that Germany's occupation of France during WWII was "not particularly inhumane..."

As a whole, the NFP took in 20% of ALL French votes during the first round of the French elections. That’s a record high for the party and not far off from Sarkozy’s and Hollande’s first round showings of 25% and 28% respectively.

Put another way, Nationlism is on the rise in France. And it's not over by any stretch.

France will be holding elections for its lower house, the National Assembly, on June 10th and June 17th.

Right now the socialists are in the lead to win, leaving the loosely organized center-right party, Union for a Popular Movement (UMP), with the following options:

1) Join forces with the NFP to take the control of the National Assembly, or...
2) Hand France completely over to the Socialists

I cannot say how this will play out. But for now, we must take into account that there is a very real possibility that the NFP may take control of France's lower house.

IF this happens and Francois Hollande proves to be a Presidential dud, then it is not a stretch to imagine that the NFP will gain even more traction in French politics.

Put another way, France could become a Nationalistic, anti-EU nation in the not so distant future.


And that is nothing compared to what's happened in Greece.

Greece has gone through two Governments since its Crisis began: one was the long- standing President, the other was an EU-appointed bureaucrat.

Now, Greece cannot even form a majority in its parliament. In fact, by the look of things there will be a run-off elction in mid-June in which the ANTI-BAILOUT Syriza party will win the majority.

If this happens you can kiss the Second Greek Bailout good-bye. And that's the BEST potential outcome here: the alternative is once again Greece cannot form a majority in parliament and the country descends into total anarchy and chaos.

After all, if Greece cannot form a government... who will be negotiating on its debt/ bailout agreements/ etc. with the rest of the EU?


Make no mistake, the situation in Europe is bad... How BAD? Well, France, Spain, and Germany have ALL implemented border controls.

That's not a typo. Spain, France, and Germany can each close their borders for up to 30 days at any point if they so choose.

Why are they doing this? Because they know that when the stuff hits the fan and the EU collapses (which it will in the next few months) people are going to attempt to flee with their money... so they have made it so that no one can get in... and no one can get out.

The US media has completely ignored this story because the implications are truly horrifying: that the EU and its banking system could very easily collapse in the coming months.

After all, there are already bank runs taking place in Spain and Greece. Once things pick up steam NO ONE will be immune.


"So what?" You might say. "The EU won't affect the US or other banking systems."

WRONG.

According to Reuters once you include Spain and Italy as well as Credit Default Swaps and indirect exposure to Europe, US banks have roughly $4 TRILLION in potential exposure to the EU.

To put that number in perspective, the entire US banking system is $12 trillion in size.

Heck, no less than Ben Bernanke, Mr. "the sub-prime crisis is contained" has publicly admitted that if the EU goes down, it will potentially take the US with it.

Make no mistake, what's coming will be bigger and worse than 2008. We're talking about bank holidays, civil unrest, and the worse.

On that note, if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!"(snip)


If the author is to be believed, Americans aren't even close to receiving the 'whole story' in regard to the extent of the mounting problems in the European economy. And given the exposure of US banks to Eurozone debt, there is no way that the US economy is going to escape the 'downdraft' if and when the EuroZone economy really starts experiencing debt default problems from Spain, Italy etc.

[Melonie]

and to add 'ammo' to potential EuroZone economic problems ... from


(snip)"Trichet Declares War


This is an open declaration of war folks:

Europe could strengthen its monetary union by giving European politicians the power to declare a sovereign state bankrupt and take over its fiscal policy, the former head of the European Central Bank said on Thursday in unveiling a bold proposal to salvage the euro.

That's an open declaration of war and should be responded to in kind.

There is no power superior to that of the budget within a nation. None.

If other nations and firms don't like a government's expression of their sovereign power in the form of their budget they have the right to refuse to lend to it. But there is no claim one can make on a sovereign's budget on a forcible basis -- that is functionally identical to an invasion.

Trichet has just invited a shooting war in Europe, and I predict that if this sort of meme spreads he's going to get exactly that."(snip)


Stated bluntly, if taken at face value, this latest EuroZone rescue proposal would involve the creation / strengthening of a 'European Central Authority' ... dominated by the Germans and the French ... who would be granted by every EU country ( or should I say state ) the authority to override the economic will of the country's ( or should I say state's ) gov't / voters and to impose economic measures within that country ( or should I say state ) that would alter taxation / social welfare benefits / gov't employee pay rates etc. to assure that the country's ( or should I say state's ) debts are repaid !!!

[renaissancelove]

Cheers to you Melonie (and Erik too) for these wonderful posts. I have been a firm believer in this for years, quite frankly this is the last place I would expect to see such well writen posts as yours. I mean that simply because the entire world is oblivious to what is happening. Let the great transfer of wealth in our history happen! I hope that others open their eyes with your helpful articles... prepare, invest and think positively.

[Melonie]

^^^ Thanks Renaissance. But it really shouldn't be all that surprising to see discussions concerning economic fundamentals. After all, like professional athletes, one 'secret to success' for serious professional dancers and camgirls is to preserve the 'wealth' they are able to save and invest during their comparatively brief period of peak earnings years. Obviously anybody who invested in EUO or shorted the Euro by some other means since Greece's problems got serious is 'smiling' right now.

[Eric Stoner]

The EU was recently described by Britain's foreign minister, William Hague , as " a burning building with no exits ". The whole idea of one monetary policy but dozens of fiscal policies was doomed from the start. It was like giving alcoholics the keys to the liquor cabinet.

Greece has an election in June. The leading candidate is crypto-communist Alexis Tsipras and his far left Syriza coalition. Should he win, he has promised to default on Greece's loans and launch a new spending spree. Krugman economics on steroids ! This prospect is already causing a serious run on Greek banks as Greeks desperately try to withdraw Euros before getting stuck with worthless drachmas. This amidst a mass psychosis in Greece. Greeks want to stay in the EU AND continue to spend as freely as they have been over the past few years. The Germans in particular refuse to keep buying the ouzo and retsina as Greece parties on. The austerity that has Greek underwear in knots now is nothing compared to what is coming. Tax evasion is a way of life in Greece. Two thirds of Greek doctors reported incomes below 12,000 Euros, the threshold for paying income tax. Many workers retired on a full pension at 50. Greece has four times as many teachers per capita as Finland. Greece ranks at the bottom of education in Europe. Finland is at he top. The Greek state railroad is so poorly run that it would be cheaper to simply pay for cab rides for every passenger.

The British are letting out a gigantic sigh of relief for not having joined in this monetary foolishness. The French and Germans KNOW that Greece and to a lesser extent the Spanish, Portugese and Italians bamboozled them to gain entry to the EU. They phonied up their budget numbers to hide their extensive borrowing so they could borrow on Germany's credit card. BUT , that means that Germany has control and it hates inflation. Oil and water is an understatement.

The Greek economy has already shrunk 20 % and is shrinking 5 % a year. Its banks are going broke. Greece will have no way to pay for essential imports like medicine and, as Melonie has pointed out, the "Haves" are bracing to keep out a flood of economic refugees from Greece. To deal with the inevitable chao sGreece could easily turn to some sort of strongman. In contrast to our own austerity ( our recent and deep recession ) the austerity in Greece was imposed by their creditors. This is one of several contributors to a rebirth of nationalism in Europe. In fact, it has reopened more than a few long closed wounds from Germany and its occupation of Europe from 1940-5.

We have our own Greece right here in the U.S. It is called California. The most recetn effort to close California's budget deficit by increasing taxes on the so-called rich resulted in the budget gap INCREASING from $9 billion to $16 billion. Jerry Brown's solution is to tax EVERYBODY more by raising the sales tax. Califonia has 12 % of the U.S. population but one third of its welfare recipients. It is spending $68 billion it does not have on high speed rail it does not need. $4 billion of which is going for a section the L.A. Times has dubbed the "train to nowhere ". Just in the lasst 10 years , pension costs rose 2,000 %. Revenues rose only 24%. Pension and health care costs just of retirees are set to triple over the next 10 years. More than 12,000 people are collecting over $100,000 per year in pensions. The unfunded liability in the California pension System is already $500 billion and growing.

Like Greece, California is terminal. There are only so many Mark Zuckerberg's to tax. Many are following Eduardo Saverin into tax exile or at least to another low tax state. Just like all the tax exiles from Britain in the 70's.

In my lifetime California has gone from a fiscally sound, business friendly , LOW TAX state to the first state that will have to somehow, some way declare bankruptcy.It's debt has achieved "junk" status and it is highly doubtful that California will be able to avoid default.

[Melonie]

^^^ yes, but !!! With the 'but' being the fact that California ( and other high tax rate big spending states like MI and NY and IL ) have the 'federal' taxpayers of more fiscally responsible states ( like TX, FL, LA etc. ) available to provide ongoing 'stealth' subsidies for their profilgate spending ... and ultimately to 'bail out' the otherwise defaulting muni bond debt of those profilgate spending states. Without a 'federalized' Europe, the Germans and smaller countries with reasonably strong economies can simply refuse to use their taxpayers' money to fund ongoing 'bailouts' for their big spending PIIG neighbors ( via stealth or out in the open ). The only way that TX, FL, LA etc. could exercise a similar option would be a new 'secession' effort ( which some would point out is NOT impossible ! ) that would effectively eliminate the Washington DC conduit for TX, FL, LA etc. federal income tax dollars being funneled to CA, MI, IL, NY etc. 'stealth' subsidies.

And before anyone attempts to defrost a 'red herring', the types of 'stealth' federal tax dollar subsidies I'm talking about are
- federal share of medicaid costs
- federal funding of extended / emergency unemployment benefits
- federal 'loans' ( which will never be repaid ) to state unemployment insurance funds
- disproportionately allocated 'stimulus' funds
- disproportionately allocated federal block grant money
- disproportionately allocated federal money for green energy / TARP / auto industry
- disproportionately allocated tax deductions for green energy / 'offshore' software
- disproportionately allocated tax deductions for high state and local taxes paid

[Melonie]

It would now appear that the IMF and Bundesbank are pushing Greece into default ... from


(snip)"Strong messages from the head or the IMF, the head of Deutsche Bank, and the president of the Bundesbank are highly likely to drive Greek voters away from New Democracy and Pasok in the June 17 elections.

The Guardian writes It's payback time: don't expect sympathy – Lagarde to Greeks.


The International Monetary Fund has ratcheted up the pressure on crisis-hit Greece after its managing director, Christine Lagarde, said she has more sympathy for children deprived of decent schooling in sub-Saharan Africa than for many of those facing poverty in Athens.

In an uncompromising interview with the Guardian, Lagarde insists it is payback time for Greece and makes it clear that the IMF has no intention of softening the terms of the country's austerity package.

Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."

"I think they should also help themselves collectively." Asked how, she replies: "By all paying their tax."

Asked if she is essentially saying to the Greeks and others in Europe that they have had a nice time and it is now payback time, she responds: "That's right."

Jens Weidmann, president of the Bundesbank, poured cold water on the idea – which is strongly backed by the French president, François Hollande – and also said financial aid to Greece should be cut off if it failed to keep to the bailout deal.

Jürgen Fitschen, joint head of Germany's biggest bank, Deutsche, described Greece as "a failed state … a corrupt state".


Purposely Inflammatory Statements to Benefit Syriza

Those statements are not only inflammatory, but purposely so. Lagarde has to know that her message stating more sympathy to Africa than patients refused life-saving drugs in Greece is bound to incite Greeks.

Recall that Antonis Samaras (the head of New Democracy) and Evangelos Venizelos (the head of Pasok), have promised voters they will renegotiate the terms.

Greek voters just had that promise yanked away in no uncertain terms. IMF and Deutsche Bank statements also make German chancellor Angela Merkel look like a cream-puff with her offer of potential stimulus efforts.

In contrast to the lies of Samaras and Venizelos, Syriza leader Alexis Tsipras says the bailout is null and void, while stating Greece will remain in the euro.

It is had to say with certainty whether his promise to remain in the eurozone is a purposeful lie as opposed to pure fantasy, but given there is no provision to kick any country out of the eurozone, he just might believe it.(snip)

(snip)"IMF Purposeful Attempt to Incite Greek Exit

The IMF has had enough. It does not want to deal with a coalition of Samaras and Venizelos given falling revenues in Greece and no hint of any true structural reforms. Rather, Lagarde wants to drive Greek voters to Syriza so that Greece can default and the Troika can cut off all funding in "clear conscience"

All funding should be cut now (in fact three years ago), but the IMF hopes to absolve itself of blame.

Mike "Mish" Shedlock(snip)

[KatGrrl]

Greece has an election in June. The leading candidate is crypto-communist Alexis Tsipras and his far left Syriza coalition. Should he win, he has promised to default on Greece's loans and launch a new spending spree. Krugman economics on steroids ! This prospect is already causing a serious run on Greek banks as Greeks desperately try to withdraw Euros before getting stuck with worthless drachmas. This amidst a mass psychosis in Greece. Greeks want to stay in the EU AND continue to spend as freely as they have been over the past few years. The Germans in particular refuse to keep buying the ouzo and retsina as Greece parties on. The austerity that has Greek underwear in knots now is nothing compared to what is coming. Tax evasion is a way of life in Greece. Two thirds of Greek doctors reported incomes below 12,000 Euros, the threshold for paying income tax. Many workers retired on a full pension at 50. Greece has four times as many teachers per capita as Finland. Greece ranks at the bottom of education in Europe. Finland is at he top. The Greek state railroad is so poorly run that it would be cheaper to simply pay for cab rides for every passenger.

I was just recently in Greece, trying to observe and understand the extent of it's financial desperation fully, though through a tourist's eyes, and partly trying to learn about the unsuccessful election held in May. I love that I can come to this site and read the situation so articulately and unbiasedly stated, when it's certainly a complicated matter. This surprised me - Greece ranks at the bottom of education in Europe. I thought otherwise. And it's tourism industry definitely seems to be way undervalued in spite of it's vast, rich, stunning, accessible exotic climate.

I'm not contributing much beyond what has been stated above (and is true), thank you for this resource and perspective!

[eagle2]

I love that I can come to this site and read the situation so articulately and unbiasedly stated, when it's certainly a complicated matter.

I wouldn't call Melonie's posts "unbiased". She always tries to portray everything in the most negative/pessimistic way.

[Eric Stoner]

I wouldn't call Melonie's posts "unbiased". She always tries to portray everything in the most negative/pessimistic way.

Some of us think it is done in a realistic and objective way.

You have cause for optimism about Greece, do you ? Based on what ? Does your optimism and positivism include Spain and the Spanish banks. You are aware that the latest bailout plan for Spanish banks fell through ?

[Melonie]

She always tries to portray everything in the most negative/pessimistic way.

I always try to portray things in a FACTUAL way. I can't help it if the actual economic FACTS of a situation don't allow for a positive / optimistic 'spin'. And I can't help it if my conscience won't allow me to keep my mouth shut when 'tortured' or 'cherry picked' statistics are rolled out with the intent of misrepresenting a positive / optimistic 'spin'.

But I did make it a point to include a positive element in regard to the PIIG problems ... which was that investors shorting the Euro should profit nicely !!! EUO is up another 5% since I posted about it earlier in this thread !

[mikef]

Hard to believe this is what is really happening.....



Most Aid to Athens Circles Back to EuropeBy LIZ ALDERMAN and JACK EWING
PARIS — Its membership in the euro currency union hanging in the balance, Greece continues to receive billions of euros in emergency assistance from a so-called troika of lenders overseeing its bailout.

But almost none of the money is going to the Greek government to pay for vital public services. Instead, it is flowing directly back into the troika’s pockets.

The European bailout of 130 billion euros ($163.4 billion) that was supposed to buy time for Greece is mainly servicing only the interest on the country’s debt — while the Greek economy continues to struggle.

If that seems to make little sense economically, it has a certain logic in the politics of euro-finance. After all, the money dispensed by the troika — the European Central Bank, the International Monetary Fund and the European Commission — comes from European taxpayers, many of whom are increasingly wary of the political disarray that has afflicted Athens and clouded the future of the euro zone.

As they pay themselves, though, the troika members are also withholding other funds intended to keep the Greek government in operation.

Last week, the Athens office that tracks revenue said Greece could run out of money by July. If so, Greece could default on its debts — except those due to the central bank, the monetary fund and the European Union.

“Greece will not default on the troika because the troika is paying themselves,” said Thomas Mayer, a senior adviser at Deutsche Bank in Frankfurt.

http://www.nytimes.com/2012/05/30/bu...ilout-aid.html

[Eric Stoner]

Hard to believe this is what is really happening.....



Most Aid to Athens Circles Back to EuropeBy LIZ ALDERMAN and JACK EWING
PARIS — Its membership in the euro currency union hanging in the balance, Greece continues to receive billions of euros in emergency assistance from a so-called troika of lenders overseeing its bailout.

But almost none of the money is going to the Greek government to pay for vital public services. Instead, it is flowing directly back into the troika’s pockets.

The European bailout of 130 billion euros ($163.4 billion) that was supposed to buy time for Greece is mainly servicing only the interest on the country’s debt — while the Greek economy continues to struggle.

If that seems to make little sense economically, it has a certain logic in the politics of euro-finance. After all, the money dispensed by the troika — the European Central Bank, the International Monetary Fund and the European Commission — comes from European taxpayers, many of whom are increasingly wary of the political disarray that has afflicted Athens and clouded the future of the euro zone.

As they pay themselves, though, the troika members are also withholding other funds intended to keep the Greek government in operation.

Last week, the Athens office that tracks revenue said Greece could run out of money by July. If so, Greece could default on its debts — except those due to the central bank, the monetary fund and the European Union.

“Greece will not default on the troika because the troika is paying themselves,” said Thomas Mayer, a senior adviser at Deutsche Bank in Frankfurt.

http://www.nytimes.com/2012/05/30/bu...ilout-aid.html

On the one hand , I sympathize with the "haves" who don't like seeing their hard earned money going to the spendthrift Greeks. And to the Spanish and probably the Portuguese and Italians. But where were they when alarm bells were going off about the true state of these countries finances BEFORE they were admitted to the EU ? European unity was considered to be so important that history, culture and simple math were all ignored and for what ? How was the rest of Europe supposed to benefit from the admission of Greece ? Would Santorini in the summer be any cheaper ?

European unity didn't last under the Romans. Nor under Charlemagne. It certainly didn't work out for Napoleon or Hitler.

[mikef]

The halves are not giving their money over to the spend happy Greeks..... They are giving it to the looter banks.

[eagle2]

Some of us think it is done in a realistic and objective way.

You have cause for optimism about Greece, do you ? Based on what ? Does your optimism and positivism include Spain and the Spanish banks. You are aware that the latest bailout plan for Spanish banks fell through ?

Nobody is saying things are going great in Greece, but the "panic" discussed in the OP hasn't materialized. Two weeks after the post, Greek banks are still operating just as they were before the article was posted.

[eagle2]

On the one hand , I sympathize with the "haves" who don't like seeing their hard earned money going to the spendthrift Greeks. And to the Spanish and probably the Portuguese and Italians. But where were they when alarm bells were going off about the true state of these countries finances BEFORE they were admitted to the EU ? European unity was considered to be so important that history, culture and simple math were all ignored and for what ? How was the rest of Europe supposed to benefit from the admission of Greece ? Would Santorini in the summer be any cheaper ?

Germany is benefiting greatly from Greece, and some of the other weaker economies in Europe, on the Euro. Greece and the other weaker economies in Europe have kept the value of the Euro down, which has greatly benefited Germany's export industries. If Germany had its own currency, it would obviously be a lot stronger than the Euro, and German exports would be a lot more expensive.

[Melonie]

Two weeks after the post, Greek banks are still operating just as they were before the article was posted

Actually, this isn't technically true. Greek banks are still operating for one and only one reason ... their ability to continue to draw Euros from the European Emergency Stabilization Fund despite the fact that the Greek Gov't ( and Greek citizens / taxpayers ) have breached the terms of their 'bailout' agreement. Several loud European voices have already called for the ESF to be shut down after the last Greek election on the basis that Greece's now inevitable path back to the Drachma means that every additional Euro provided to Greece is 'good money after bad'.

[Eric Stoner]

Actually, this isn't technically true. Greek banks are still operating for one and only one reason ... their ability to continue to draw Euros from the European Emergency Stabilization Fund despite the fact that the Greek Gov't ( and Greek citizens / taxpayers ) have breached the terms of their 'bailout' agreement. Several loud European voices have already called for the ESF to be shut down after the last Greek election on the basis that Greece's now inevitable path back to the Drachma means that every additional Euro provided to Greece is 'good money after bad'.

Yet another "we told you so".

[Melonie]

and now the [email protected]!t is seriously starting to hit the fan ... although mainstream media isn't providing much coverage ... from


(snip)"Tourism, Greece’s second largest industry after the shipping industry, and already in a downdraft, is taking another hit as tour bus drivers will go on strike for four days next week; wage negotiations have deadlocked. Owners demand that drivers take a 50% cut in pay and benefits on top of the 20% cut they’ve already suffered.

The National Organization for Healthcare Provision (EOPYY), Greece’s state-owned health insurer, hasn’t paid pharmacists for months and owes them €540 million. In turn, pharmacists are refusing to sell medications to insured patients, including cancer patients, unless they’re paid in cash—and even hospitals are reporting shortages.

Greece’s ship repair and shipbuilding industry, a highly competitive activity in a global market, has collapsed. Over 90% of its union workers are jobless—though Greek shipping companies own 16% of the global merchant fleet, more than any other nation. They’re just not having their ships built and repaired in Greece anymore—whatever the reason, high cost of labor, lack of investment, changing shipping routes, strikes. A sign that there are fundamental problems related to competitiveness that a bailout, no matter how generous, won’t be able to solve.

And yet, President Barak Obama—whose reelection hinges on the US economy, which is wobbling, and on the jobs picture, which remains dismal—blamed European leaders, specifically German leaders, for refusing to bail out Greece and the rest of the tottering Eurozone at taxpayers’ expense, just so he could sail to four more years. Everything in the book, from the loss in US manufacturing jobs to cancelled IPOs, was “attributable to Europe and the cloud that’s coming over from the Atlantic,” he said at a fundraiser in Chicago.

German Chancellor Angela Merkel shrugged off the bullying and just said no to Eurobonds, again. Despised in Germany, they’re seen as an insidious transfer from bleeding German taxpayers to other countries. Instead, her government wants struggling Eurozone countries to overhaul their economies with utmost speed—and Germans are willing to dole out hundreds of billions of euros to make that possible—but it’s proving to be impossible, at least in Greece, and very painful everywhere, to unwind years of an economic gravy train fueled by cheap euro debt. Read.... Germany Walks Away From Greece.

And unpaid bills are now threatening Greece’s electricity supply. State-owned Electricity Market Operator (LAGIE), a clearing house for power transactions, hasn’t paid independent power producers for electricity it bought from them. They, in turn, haven’t paid their natural gas supplier, Public Gas Corporation (Depa), which now doesn’t have the money to pay its supplier. Payment is due on June 22. Alas, its supplier is Gazprom in Russia, and they insist on getting paid. If not, they will shut the valve, and Depa won’t get the gas to supply the independent producers, which will have to take their power plants off line, removing about a third of the country’s electricity production.

But Germany isn’t even worried about Greece’s return to the drachma anymore—a fait accompli. It’s worried about Spain and Italy. Greece simply is the model. The costs appear to be steep, but most of the actual costs have already been incurred. They’re hidden in Greece’s debt, now held largely by European institutions, such as the ECB, and in the infamous Target2 balances within the European System of Central Banks. Hundreds of billions of euros. They were spent on everything: social benefits, German frigates, inflated wages, now weedy and abandoned Olympic facilities, profits, bribes, votes. What remains aren’t productive assets to service this debt, but simmering unrest and the debt itself.

International companies have long been preparing for Greece’s return to the drachma, quietly and in secret, but occasionally word seeped out. According to the latest revelation, Heineken NV has moved excess cash out of Greece, doing what the Greeks themselves have been doing. And currency traders were surprised on Friday to see the new identifier for the drachma (XGD) on their Bloomberg terminals; a test, the company said, so that it would be ready for trading drachmas.

When Alexis Tsipras, leader of the Radical Left Coalition (Syriza)—in first place with 31.5% in the latest poll—laid out his program, he left no doubt: his first action if he won the June 17 elections would be to annul the bailout memorandum signed by the previous government. The memorandum spelled out the structural reforms Greece would have to implement in order to receive further bailout payments. He’d stop the privatization of state-owned companies, undo wage and pension cuts, lower the Value Added Tax, offer debt relief to households, raise the minimum wage back to the original €751, raise unemployment benefits.... His program had vote-buying promises for practically everyone. And yet, he wanted to keep the euro and expected taxpayers of other countries to fund his promises. Program of “dignity and hope” he called it.

Antonis Samaras, leader of the conservative New Democracy—in second place with 25.5%—also laid out his program. He’d renegotiate the bailout memorandum, though he stressed that Greece should stay in the euro—whose flood of cheap debt had made the Greek elite rich, and certainly he wouldn’t want to stop the gravy train. He promised to raise pensions, private-sector wages, child benefits ... undoing much of the economic restructuring already agreed to. And he threw in some new goodies: unemployment benefits for the self-employed and compensation to Greek institutions for the haircut they’d suffered on their Greek government bonds. Every item on the long list was at the expense of restive taxpayers in other countries.

Greek politicians, even the new generation, are sticking to their time-worn strategy: vote-buying with ruinous promises that can only be fulfilled with an endless flow of borrowed money. Thus, they define themselves as leaders who need a central bank that can print however much is needed to fund these promises, with periodic devaluations or defaults to get a fresh start."(snip)


The bottom line here, of course, goes back to Margaret Thatcher's famous quote that ' ... sooner or later you run out of other people's money'. Ultimately, no matter which way the citizens of Greece decide to vote, Swiss pharmaceutical suppliers, Russian natural gas suppliers, international corporate suppliers of consumer goods etc. are simply NOT going to keep making future deliveries to Greece until they get paid for deliveries already made. It would appear that the only route now open to Greece to accomplish this will be to return to the Drachma and start 'printing' new Drachma out of thin air by the billions. This of course will effectively 'screw' these holders of unpaid Greek debt via a probable 2:1 or 4:1 or 10:1 devaluation ... as well as 'screw' any Greek holders of Euro denominated assets ( like grandma's life savings, grandpa's pension, international corporations doing business in Greece, etc. ) that will be forcibly converted to devalued Drachmas.

[Eric Stoner]

Greece has no choice. They have run out of other people's money. The ONLY people who want Greece to stay in the EU are the EU fanatics.