Is the end nigh for the Euro? [vol. 3]

Is the end nigh for the Euro? [vol. 3]

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Mr Whippy

28,945 posts

240 months

Saturday 7th March 2015
quotequote all
AstonZagato said:
Third way is for the next bailout debt tranche to be 150year or perpetual. No voters understand time value of money so it would sort Greece out without causing ructions from the man on the Strasse.
Government debts are already perpetual, give or take.

They never plan to pay any of it off, just kick the can of debt on to the next generation, plus some inflation.

Problem is finding the inflation these days.


The system is screwed, it's just a matter of time now that the driving force behind the ponzi has dried up!

Dave

AstonZagato

12,652 posts

209 months

Saturday 7th March 2015
quotequote all
LongQ said:
AstonZagato said:
davepoth said:
Claudia Skies said:
Steffan said:
Greece will default in the end....
When is this "end" of which you speak? I've been scouring the atlas and the calendar but haven't yet found "nigh", let alone "end".

It's like religious extremism - radical belief that the messiah will come, despite his persistent non-appearance.
Greece is bankrupt right now. Every single time they have to talk to their creditors about the terms, they're a flippant comment away from default. And while Greece has eliminated the current account deficit, they are hobbled by the debt.

There are two ways out of this - Greece defaulting and falling out of the Euro, followed by others, or steps taken towards the proper financial union that the Euro needs to survive.
Third way is for the next bailout debt tranche to be 150year or perpetual. No voters understand time value of money so it would sort Greece out without causing ructions from the man on the Strasse.
Surely economic theory based on numbers, assuming the numbers are meaningful in some way, are already based on extended credit far into the future. No different to any other Ponzi scheme.

At some point there will need to be a series of events that humans will think of as a disaster to reset the indebtedness.

One might assume they want to promote the idea of climate disaster as an escape route. Failing that would be a large meteor strike but if all natural events fail to deliver before the system goes hypercritical then humanity will have to self induce some form of calamity quickly - the most likely being a huge war but that could also be the least acceptable representing, as it would, an acknowledgement of failure for the human race project.

Still, it would zero the numbers in the account department.
Greece's problem right now is not the interest on its debt but the repayment of the principal. As each tranche of debt falls due, they need either to find the money (which they cannot) or to refinance it in the market. Most governments operate in this way (which is indeed Ponzi like). However, unlike Ponzi, most governments can ultimately print more money to pay the debt. - so creditors are confident enough to allow them to roll the debt (borrow new money to pay off the old loans).

In the Eurozone, this option of printing money is not available. With Greece, the creditors know they will not get repaid so will not allow them to roll the debt.

150 year bonds stop the problem. Greece would then have semi-permanent capital. It does not need to refinance. Inflation would, most likely, slowly eat away the debt problem and paying it off in 2165 will be a doddle (probably).


Edited by AstonZagato on Saturday 7th March 16:22

Steffan

10,362 posts

227 months

Saturday 7th March 2015
quotequote all
LongQ said:
AstonZagato said:
davepoth said:
Claudia Skies said:
Steffan said:
Greece will default in the end....
When is this "end" of which you speak? I've been scouring the atlas and the calendar but haven't yet found "nigh", let alone "end".

It's like religious extremism - radical belief that the messiah will come, despite his persistent non-appearance.
Greece is bankrupt right now. Every single time they have to talk to their creditors about the terms, they're a flippant comment away from default. And while Greece has eliminated the current account deficit, they are hobbled by the debt.

There are two ways out of this - Greece defaulting and falling out of the Euro, followed by others, or steps taken towards the proper financial union that the Euro needs to survive.
Third way is for the next bailout debt tranche to be 150year or perpetual. No voters understand time value of money so it would sort Greece out without causing ructions from the man on the Strasse.
Surely economic theory based on numbers, assuming the numbers are meaningful in some way, are already based on extended credit far into the future. No different to any other Ponzi scheme.

At some point there will need to be a series of events that humans will think of as a disaster to reset the indebtedness.

One might assume they want to promote the idea of climate disaster as an escape route. Failing that would be a large meteor strike but if all natural events fail to deliver before the system goes hypercritical then humanity will have to self induce some form of calamity quickly - the most likely being a huge war but that could also be the least acceptable representing, as it would, an acknowledgement of failure for the human race project.

Still, it would zero the numbers in the account department.
Interesting and well argued posting.

I do wonder whether this debt growth can or will in fact be controlled effectively by the self serving politicians in power, who see this as a vote winner to get elected and a means to feather their own nests on the gravy train that. Politics has become. J K Galbraith might have had some idea of the right strategy to adopt to wind the problem down over time. I doubt anyone in power currently has his intellect or knowledge. Therefore I doubt if the long term even exists for those self serving apparatchiks. All I want is everything now, could be the true mantra that modern politicians have adopted.

I regret to say that as LongQ is suggesting this madness is spreading all over the Western world. I really do not know what the answer is to this seemingly universal vice of modern politicians. They of course do not care, personal aggrandisement, world stage strutting and gold plated pensions will be their prize and that sadly is all that they care about.

The Syriza lot have found another way to obfuscate their inadequacy and ensure plenty of headlines showing how brilliantly they are performing in ensuring recovery within the Greek economy. Thus protecting their persinal positions whist doing sod all useful for Greece see:

http://www.bbc.com/news/world-europe-31780354. Snoopers wanted to catch Tax avoiders in Greece!

Headling grabbing and ensuring good press but of course it will never actually be introduced. What is needed is a simplified and much better controlled taxation system with direct taxation which everybody pays when they buy something directly and us easily collected from the businesses in Greece. The taxation gatherers in the UK realised long ago that taxes like VAT are much simpler and much cheaper to collect than complex equitable personal tax arrangements. That is why the sales taxes is such an efficient (cheap and easy to collect) form of taxation favoured by most Western Governments.

The costs of actually chasing clever articulate educated tax avoiders is way to high for any realistic avoidance measures to be introduced in Greece that would actually collect as much as they cost to introduce. Tax evasion has become a hobby in these failing states and all Syriza are doing is preening their "we are tough' poses and blagging the possible results. It will never produce anything worthwhile.

Meanwhile Greece is sliding steadily into wholescale Bankspruptcy and no doubt Syriza are taking on more and more civil servants whose salaries will simply increase the rates of collapse in the Greek economy. This is not going to end well!






Mr Whippy

28,945 posts

240 months

Saturday 7th March 2015
quotequote all
AstonZagato said:
150 year bonds stop the problem. Greece would then have semi-permanent capital. It does not need to refinance. Inflation would, most likely, slowly eat away the debt problem and paying it off in 2165 will be a doddle (probably).
Assuming the magical inflation comes back and is a workable economic model alongside fiat currency for 150yrs.

So far unbased fiat and debt model has got us about 30 years of 'good times' before it started turning sour, so how anyone would trust a 150yr, never mind a 50yr, is beyond me.

I don't even believe I'll be getting a state pension for all my NI paid today for example. Another ponzi based promise that is tied to the idea of perpetual growth and can kicking possibility... All great in a world with growth and advancement but it's clearly not that straight cut.

More so when we have a skimmer parasite creaming off the proceeds of the tiny bit of real growth there is left in what you could call the new normal world.



The Greeks must love the idea that 50% of their payments is just feeding the euro bank/politico gravy train.

EskimoArapaho

5,135 posts

134 months

Saturday 7th March 2015
quotequote all
Was this posted before - http://www.pappaspost.com/steve-forbes-pens-open-l... - Steve Forbes letter to Tspiras?

The solution is privatisation, waaaay lower taxes, less red-tape and all sorts of other pro-capitalism/small-state goodies.

Good luck persuading a socialist party to do any of that! biggrin

AstonZagato

12,652 posts

209 months

Saturday 7th March 2015
quotequote all
To be clear, I'm not making a prediction that 150yr bond will be the solution, just that it is one potential "solution" that the man on the street wouldn't understand.

Mr Whippy said:
Assuming the magical inflation comes back and is a workable economic model alongside fiat currency for 150yrs.
Inflation has been fairly constant because of the fiat currency model. If one prints more money, then you need more of it to buy the same stuff. The problem is not inflation but creating any trust in the currency. They have to make you believe they won't print more of it. QE is creating inflation but not at the RPI level - it is real estate and financial assets that are going up.

Mr Whippy said:
So far unbased fiat and debt model has got us about 30 years of 'good times' before it started turning sour, so how anyone would trust a 150yr, never mind a 50yr, is beyond me.
No sane individual would buy it. But they wouldn't be asked to. It would be bought by the Eurozone bailout fund - by the other governments of the other countries who would tell their credulous voters that their money is safe, since Greece has not defaulted. The can has been successfully kicked waaaaay beyond the point that anyone today can be held accountable. Their voters would continue to go about their business, none the wiser that Greece has been given their money.

Mr Whippy said:
I don't even believe I'll be getting a state pension for all my NI paid today for example. Another ponzi based promise that is tied to the idea of perpetual growth and can kicking possibility... All great in a world with growth and advancement but it's clearly not that straight cut.
NI and pensions are not actually linked. It's just another tax. Eventually pensions are unaffordable but, again, they can be debased. You will almost certainly receive something. Whether it is worth anything is another matter.

Welshbeef

49,633 posts

197 months

Saturday 7th March 2015
quotequote all
Perpetual govt debt

Now the point which will infuriate many here
1. given youth unemployment is 50% and growing and were having one maybe 2 generations who are in this situation. They are disengaged have not contributed anything into GDP they feel worthless etc etc.

Solution increase employment - how decrease state pension age/forced retirement it might be more or les net neutral re not paying Welfare to the young and to get them working hard. We can then move retirement age back at some point in the future.



tumble dryer

1,999 posts

126 months

Saturday 7th March 2015
quotequote all

Cursorily, I'd be interested in learning/hearing more on that. (No BS)

Could it be workable?




911Gary

4,162 posts

200 months

Sunday 8th March 2015
quotequote all
Spain is no better having just returned from Barcelona the Austerity is palpable,the people we spoke to are apathetic and depressed,tramps everywhere,there was a church with a food queue down the street, really quite shocked TBH,the people we spoke to want out and are watching Greece, it really will cause a problem when they leave.

Welshbeef

49,633 posts

197 months

Sunday 8th March 2015
quotequote all
911Gary said:
Spain is no better having just returned from Barcelona the Austerity is palpable,the people we spoke to are apathetic and depressed,tramps everywhere,there was a church with a food queue down the street, really quite shocked TBH,the people we spoke to want out and are watching Greece, it really will cause a problem when they leave.
Any thoughts on my suggestion?

Walford

2,259 posts

165 months

Sunday 8th March 2015
quotequote all
911Gary said:
watching Greece, it really will cause a problem when they leave.
For any countries doing OK, but with open boarders to the EU

911Gary

4,162 posts

200 months

Sunday 8th March 2015
quotequote all
Welshbeef said:
Any thoughts on my suggestion?
The principle is fine however IMO the biggest hurdle is national debt and no economic output capable of servicing (IE paying down) swathes of past,present and future QE and bailout.All the sticky plaster fixes wont create work or profit but merely move the demographic up or down the age scale.Its business they need,or a"Haircut".


Welshbeef

49,633 posts

197 months

Sunday 8th March 2015
quotequote all
911Gary said:
The principle is fine however IMO the biggest hurdle is national debt and no economic output capable of servicing (IE paying down) swathes of past,present and future QE and bailout.All the sticky plaster fixes wont create work or profit but merely move the demographic up or down the age scale.Its business they need,or a"Haircut".
I guess the key question is what is Greeces main economy? Tourism? Olive production um...


Surely they might want to look into vast solar energy production to sell to other countries

turbobloke

103,744 posts

259 months

Sunday 8th March 2015
quotequote all
Welshbeef said:
Surely they might want to look into vast solar energy production to sell to other countries
Borderline at best, it may well require subsidies - so not really viable in Greece which can't afford a no-subsidy pot to piss in. Elsewhere in the EU subsidies are bing cut back or withdrawn and the industry is at risk.

DECC Subsidy Cuts
http://www.businessgreen.com/bg/news/2377188/could...

Germany Subsidy Cuts
http://www.theguardian.com/environment/2014/nov/05...

Spain Subsidy Cuts
http://www.thelocal.es/20140511/sun-sets-on-spanis...

Portugal Subsidy Cuts
http://renewables.seenews.com/news/portugal-cuts-3...

Welshbeef

49,633 posts

197 months

Sunday 8th March 2015
quotequote all
Apart from olives and tourism what could they do?

What's the base skill set- from an exporting or create internally over import perspective? If a hotchpotch then they have big issues

Steffan

10,362 posts

227 months

Sunday 8th March 2015
quotequote all
Welshbeef said:
Perpetual govt debt

Now the point which will infuriate many here
1. given youth unemployment is 50% and growing and were having one maybe 2 generations who are in this situation. They are disengaged have not contributed anything into GDP they feel worthless etc etc.

Solution increase employment - how decrease state pension age/forced retirement it might be more or les net neutral re not paying Welfare to the young and to get them working hard. We can then move retirement age back at some point in the future.
911Gary said:
Welshbeef said:
Any thoughts on my suggestion?
The principle is fine however IMO the biggest hurdle is national debt and no economic output capable of servicing (IE paying down) swathes of past,present and future QE and bailout.All the sticky plaster fixes wont create work or profit but merely move the demographic up or down the age scale.Its business they need,or a"Haircut".
Both interesting posts and I will offer my thoughts on the matters raised.

Perpetual Government debt is not a solution, (A term used frequently by the EU when they have actually not got a clue how to solve this Greek position,), that can be readily applied in this case, to debts where there have already been serious haircuts to Greek debts and an agreed bailout has already been instituted in full by the EU. If another round of haircuts is needed then the fundamental dishonesty in the EU position woukd become aparent. Any admission that this debt was in fact not recoverable within that agreement, would immediately call into question the terms agreed three years ago between the EU and Greece.

If the EU were to change in any way that agreement with Greece there would be a massive knock on effect damaging the confidence in this solution actually being a solution at all and all of the markets as well as the individual solvent EU states, who would have to pick up the debts of Greece in this process was shown to not be real solution. Such a change would effectively recognise that the entire nonsense is madness. That would immediately repudiate the current acceptance that this is in fact a real and workable solution. How could it be if another "solution" is needed to bail out the old "solution"?

That is precisely why I believe the EU are foist by their own petard in the matter. The markets would also immediately begin to have doubts on the reality that Spain, Portugal and a significant number of the otter currently failing states might in fact seek the same approach. The domino effect would undoubtedly seriously affect confidence in the real strength of the EU and Euro currency.

The EU can therfore only make this Greek insolvency continue by throwing Billions of Euros away printed through QE for as long as they can hold this together as an apparently workable solution. Greece is massively worse off now economically, than it was three yars ago when this crooked business was first set up. There has been no recovery whatever in the Greece throughout the last three years. In fact the Greek economy is in tatters and failing steadily. With a recently elected Socialist Government in Greece offering better living standards to all, more public employment and taking on staff happily in Greece, a blind man on a dark night would see that this is outright dishonesty and a wholly unworkable nonsense.

All the solvent EU states supporting this deal, currently expect repayment in full from Greece, entirely in accordance with the terms of the agreement under which the money was offered to Greece to enable recovery from the failure of their ecomony. Substantial losses and haircuts on the Greek debts were agreed to achieve that aim, and enacted to reduce this debt to the point where Greece would recover and the Troika would oversee that recovery in the plan priffered three years ago by the EU. Greece, by every economic test there has been, has clearly not recovered in any way whatsoever.

Nor can Greece ever recover economically because Greece simply cannot afford to remain in this currency which was always way beyond what Greece could actually afford. The deal was set up to hide the problems that would otherwise become aparent if Greece fell away from the EU and the spotlight was turned onto the financial fiddles by the EU that enabled Greece to become members years ago. Not going well is it?

There has already been serious concern apparent and expressed by these lender states within the EU that they are infact now looking looking at a pig in a poke deal. If the EU starts trying to alter this agreement that concern would overwhelm the EU and the attitudes would turn en masse against the currency and Union. The consequences of that would be totally disastrous fior the EU. Therefore more of the same, failed QE subsidies are being thrown away be the EU to buy just a little more time. The EU does not have the ability to ensure that Greece recovers. Greece Is not going to recover and sadly is going to fall out of ths union.

As Gary says all the sticking plasters in the world will not fix the economic maladies of Greece, pharaphrasing his words from memory, after writing the above, which is distinctly tricky for an old man (me!smile. I am fortune to have made it this far! smilesmile).

Your suggestion is theoretically possible but trying to introduce such a change given the hstory of this "solution" so far and the massive debt haircuts and reductions already agreed before this deal was offered to Greece and the steady undercurrent of concern that is now apparent acrss the EU this is simply not a possibility for the EU anymore, IMO. The EU have to enable Greece to recover economically for this to continue. That they cannot do. Changing the deal agreed with Greece, dramatically now, would endanger the whole game.



turbobloke

103,744 posts

259 months

Sunday 8th March 2015
quotequote all
Welshbeef said:
Apart from olives and tourism what could they do?
Shipping? Either cargo or debt.

London424

12,826 posts

174 months

Sunday 8th March 2015
quotequote all
I see there is more noise for an EU army...obviously no one predicted this a while back either

http://www.cityam.com/211045/junkers-calling-eu-ar...

LongQ

13,864 posts

232 months

Sunday 8th March 2015
quotequote all
turbobloke said:
Welshbeef said:
Apart from olives and tourism what could they do?
Shipping? Either cargo or debt.
Do what the UK has done.

Sell infrastructure assets (that they have not already sold) go into "Financial Services" in a big way (Or something with a similar modus operandi), rent out some miltary facilities to the Russians.

Trade, based on the shipping tradition, and piracy might be options.

Allocate a couple of islands to asylum seeker processing - pretty sure several EU colleague nations would fund that.

Make one of the bigger islands a tax haven/R&R playground for Google/Amazon/Apple and their employees. It worked for the JunkMan in Luxembourg so I can't see why Greece should not be allowed to take on the role for an alloted term.

If the Eurozone is ever to be the cohesive fiscal unit that the dreamweavers wanted it to be then all the members have to get together to devise some creative ideas and make them reality. It they don't the zone is not the zone as advertised and that must be made clear to all who as yet have not recognised that weakness.

I don't think anyone in power wants to do more than keep Greece on life support. Cure or dispose of the client and they would have to find another to act as the smokescreen. No point when you are so far inot working oout how to run this one.

Mr Whippy

28,945 posts

240 months

Sunday 8th March 2015
quotequote all
London424 said:
I see there is more noise for an EU army...obviously no one predicted this a while back either

http://www.cityam.com/211045/junkers-calling-eu-ar...
Jeez.

Please collapse soon EU!

The last thing we need to give the ultimate unelected gravy train is a lethal means to expand their neo-socialist ideals.