Is the end nigh for the Euro? [vol. 2]

Is the end nigh for the Euro? [vol. 2]

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Gary11

4,162 posts

200 months

Tuesday 28th February 2012
quotequote all
So does the reuters clip mean Greece have defaulted or not?
Sounds like it selective default and Greek bonds no longer able to be used as collateral doesnt bode well..so whats next S&P say the bond holders rights have been changed to their detriment and is therefore out of their hands and IS therefore in default.



Edited by Gary11 on Tuesday 28th February 14:01

Steffan

10,362 posts

227 months

Tuesday 28th February 2012
quotequote all
Gary11 said:
So does the reuters clip mean Greece have defaulted or not?
Sounds like it selective default and Greek bonds no longer able to be used as collateral doesnt bode well..so whats next S&P say the bond holders rights have been changed to their detriment and is therefore out of their hands and IS therefore in default.



Edited by Gary11 on Tuesday 28th February 14:01
My view is and always has been that by any acceptable reasoning a reduction of debt by over 50% must be an act of default.

Sadly the EU Court of the Emperors clothes clearly believes anything it likes.

I have always thought this question would come up.

Just another of the many impossibilities in the EU philosophy that the truth can be any fiction they like. Not for much longer.


Edited by Steffan on Tuesday 28th February 15:03

Crusoe

4,068 posts

230 months

Tuesday 28th February 2012
quotequote all
Germany on the hook for 1 trillion euros through the Target 2 http://www.zerohedge.com/news/goldman-germany-now-...

Can Germany afford Greece leaving...

Digga

40,206 posts

282 months

Tuesday 28th February 2012
quotequote all
Crusoe said:
Germany on the hook for 1 trillion euros through the Target 2 http://www.zerohedge.com/news/goldman-germany-now-...

Can Germany afford Greece leaving...
ECB have played a blinder. Fair play to them, I always thought they were a bit slow witted, but they've done it to them and ensured the EUSSR sails on without the say of the Germans.

bosscerbera

8,188 posts

242 months

Tuesday 28th February 2012
quotequote all
Steffan said:
Gary11 said:
So does the reuters clip mean Greece have defaulted or not?
Sounds like it selective default and Greek bonds no longer able to be used as collateral doesnt bode well..so whats next S&P say the bond holders rights have been changed to their detriment and is therefore out of their hands and IS therefore in default.
My view is and always has been that by any acceptable reasoning a reduction of debt by over 50% must be an act of default.

Sadly the EU Court of the Emperors clothes clearly believes anything it likes.

I have always thought this question would come up.

Just another of the many impossibilities in the EU philosophy that the truth can be any fiction they like. Not for much longer.
I have said on here before: Greece has already defaulted. To my eyes, Steffan's Q3 2011 was about right by any reasonable logic. Reasonable logic meaning "the point at which a debtor can't meet obligations". That happened last year.

Reasonable logic has been dispensed with ever since. More loans to a bankrupt and new words for old things. It's really extraordinary.

It's like the whole of the EU is on a mission to prove Steffan wrong at ANY cost.

Crusoe

4,068 posts

230 months

Tuesday 28th February 2012
quotequote all
Or Germany leaves which was always the better solution.

also in the last few minutes

Irish PM said:
will hold referendum on EU fiscal compact
Schaeuble said:
every member state has the right to leave the euro zone…

Andy Zarse

10,868 posts

246 months

Tuesday 28th February 2012
quotequote all
Crusoe said:
Or Germany leaves which was always the better solution.

also in the last few minutes


Schaeuble said:
every member state has the right to leave the euro zone…
That will be news to President Rumpey and Sn Barroso. Joining the euro was "forever and non-reversible" according to them.

Mind you, they're a pair of s...

anonymous-user

53 months

Tuesday 28th February 2012
quotequote all
Andy Zarse said:
That will be news to President Rumpey and Sn Barroso. Joining the euro was "forever and non-reversible" according to them.

Mind you, they're a pair of s...
hehe That did make me smile.

Mikeyboy

5,018 posts

234 months

Tuesday 28th February 2012
quotequote all
Andy Zarse said:
I went on a corporate weekend to Valencia in late 2010. My over-riding impression was that they'd* spent a utter fortune on fancy architecture and roads but beyond that there wasn't much backing it all up.

The shopping centres had the usual expensive outlets selling eurotat - gold handbags and shiny black fur collared anoraks etc - that only Russians seem to buy, but they weren't busy with people spending money. The outlying areas looked a bit grim. The oranges were nice. The harbour seemed pretty quiet, not many ships in dock. I couldn't fathom how the economy worked, something which is even vaguely possible in Italy.

Valencia was pleasant enough but I wouldn't go back.



  • The UK via the EU, Spanish banks financing insane developments etc.
Since they built the High Speed Line to Valencia from Madrid it has become the beach venue of choice for the posh Madrid set. It has as you say very little else going for it.
The Wealthy in Madrid, of which my ex is one, have not done much in the way of cuttng back yet and so its popularity has in fact grown in the past years, as you can now buy an apartment for a third of what it was in 2009. This may change though when the reality of their economy hits even the Pijos as they are called.
Spain is always a country where you wonder what people do. In the South they grow stuff in the north the fish stuff and in the middle they live in Madrid and make tiles.

0a

23,879 posts

193 months

Tuesday 28th February 2012
quotequote all
Does anyone know how the Irish are likely to vote regarding the bail-out?

Crusoe

4,068 posts

230 months

Tuesday 28th February 2012
quotequote all
0a said:
Does anyone know how the Irish are likely to vote regarding the bail-out?
No the first time and then when asked again and given some reduced rates Yes wink

Gary11

4,162 posts

200 months

Tuesday 28th February 2012
quotequote all
Mikeyboy said:
Since they built the High Speed Line to Valencia from Madrid it has become the beach venue of choice for the posh Madrid set. It has as you say very little else going for it.
The Wealthy in Madrid, of which my ex is one, have not done much in the way of cuttng back yet and so its popularity has in fact grown in the past years, as you can now buy an apartment for a third of what it was in 2009. This may change though when the reality of their economy hits even the Pijos as they are called.
Spain is always a country where you wonder what people do. In the South they grow stuff in the north the fish stuff and in the middle they live in Madrid and make tiles.
Do you know I had never thought that of Spain ,Greece yes,but the spanish manyana,siesta,hacienda del sol may well have caught up with them!
I remember when we had our house in Majorca a few years back the locals were over the moon with the exchange over to the euro and really did smack tourist ass,if you picked at a few labels in the stores and supermarkets quite often the old peseta value was still underneath to say double would be a understatement in most cases.

Steffan

10,362 posts

227 months

Tuesday 28th February 2012
quotequote all
I do think that there will be a terrible backlash within the defaulters once the good days are gone, if not for ever, certainly for many years.

It seems likely to me that many of the inhabitants of the defaulting countries understandably will seek to move to greener pastures around the EU.

I can foresee major resettlement movements throughout the defaulting countries.

Where will they go? Into the nearest EU states I suspect. France in particular and Italy, assuming they avoid the domino consequences.

I can see this becoming a real problem which, once again, the EU will fail to manage.


Globs

13,841 posts

230 months

Tuesday 28th February 2012
quotequote all
Crusoe said:
0a said:
Does anyone know how the Irish are likely to vote regarding the bail-out?
No the first time and then when asked again and given some reduced rates Yes wink
If the Irish do eventually vote for it, then they will have been very very very very stupid.
It wil also prove conclusively that you really do get the leaders you deserve.

Before the EU/ECB Ireland was a sustainable, independent country.
Now it's just a broken part of the EU/ECB experiment, told what to do and when to do it by foreigners thousands of miles away.

I still puzzle about what the IRA was all about, they hated any sign of England's control and yet they have let the europeans walk all over them and grind their faces into the dirt. Totally baffling.

1point7bar

1,305 posts

147 months

Tuesday 28th February 2012
quotequote all
Church of England/Church of Rome.


Bing o

15,184 posts

218 months

Tuesday 28th February 2012
quotequote all
Steffan said:
I do think that there will be a terrible backlash within the defaulters once the good days are gone, if not for ever, certainly for many years.

It seems likely to me that many of the inhabitants of the defaulting countries understandably will seek to move to greener pastures around the EU.

I can foresee major resettlement movements throughout the defaulting countries.

Where will they go? Into the nearest EU states I suspect. France in particular and Italy, assuming they avoid the domino consequences.

I can see this becoming a real problem which, once again, the EU will fail to manage.
I said it before Steffan. If you are kicking them out of the Euro, then you best kick them out of the EU too.

Places like Australia are already seeing an uptick in European immigrants trying to see out the economic issues in Europe.

turbobloke

103,741 posts

259 months

Wednesday 29th February 2012
quotequote all
Roll up roll up for a cheap half-trillion eeyores. It's all for a chap called E. U. Banks apparently.

Click

Digga

40,206 posts

282 months

Wednesday 29th February 2012
quotequote all
turbobloke said:
Roll up roll up for a cheap half-trillion eeyores. It's all for a chap called E. U. Banks apparently.

Click
IIRC a survey by GS over the weekedn revealed that while banks reckon take-up will be halft a trillion, private investors reckon the stricken banks will guzzle anything up to three-quarters of a trillion. Will be interesting to see...

Globs

13,841 posts

230 months

Wednesday 29th February 2012
quotequote all
Digga said:
turbobloke said:
Roll up roll up for a cheap half-trillion eeyores. It's all for a chap called E. U. Banks apparently.

Click
IIRC a survey by GS over the weekedn revealed that while banks reckon take-up will be halft a trillion, private investors reckon the stricken banks will guzzle anything up to three-quarters of a trillion. Will be interesting to see...
Makes you think, in three years all these banks could be severely fked, and shortly after that date become property of the ECB. Central banks are a dangerous cancer, hopefully more people will realise just how dangerous they are as time passes.

Mermaid

21,492 posts

170 months

Wednesday 29th February 2012
quotequote all
turbobloke said:
Roll up roll up for a cheap half-trillion eeyores. It's all for a chap called E. U. Banks apparently.

Click
Barron's (WSJ) view.

Up and Down Wall Street | TUESDAY, FEBRUARY 28, 2012
Markets Look to ECB to Refill Rx
By RANDALL W. FORSYTH
Whether placebo or palliative, LTRO eased symptoms of financial distress. How big a second dose?

If markets came with country-of-origin labels, the rally in risk assets should be stamped "Made in Frankfurt," where the European Central Bank resides. It seems to be no coincidence that prices of global stocks and commodities have increased in tandem with the expansion of the ECB's balance sheet. But now investors have to wonder if the ECB has been a victim of its own success. Having acted aggressively late last year to provide liquidity to Eurozone banks and stabilize the shaky markets for Italian and Spanish bonds, the ECB may feel less need to be as generous this time around.

The key test comes Wednesday, when the ECB announces the size of its second long-term refinancing operation. The first LTRO, conducted in December, totaled a larger-than-expected €489 billion, equal to $652 billion at the current exchange rate of about $1.34 to the euro. That provided 1% loans for three years -- nearly free funding for eurozone banks, which had found it increasingly tough to borrow -- especially after U.S. money market funds beat a retreat from lending to those institutions last year.

Since the first LTRO, risk assets are significantly higher in price. The ECB's lending to banks augmented its purchases in key European sovereign debt markets of Italy and Spain pulled back from 7%, the level at which their debt load would compound and spiral ever higher regardless of how severe the austerity programs their governments imposed. Yields on Italian five-year bonds are down 2.5 percentage point and auctions of new debt from various eurozone governments have been successful.

The bottom line is that the ECB staved off a funding crisis for debt-laden eurozone governments and their main creditors, the European banks. That provided a more stable backdrop to allow the latest Greek bailout package to prevent default in March. In other words, disaster averted.

But according to one critic, nothing substantive has changed. The ECB has provided nothing but a placebo to the markets, according to Peter Tchir of TF Market Advisors. Placebos are effective in medicines because patients believe they are. And since the markets have rallied since the LTRO, they infer the ECB's actions caused the run-up in asset prices

This rally recalls the advance following the rescue of Bear Stearns by JP Morgan Chase (ticker: JPM) almost three years ago, Tchir says.. With the subprime mortgage crisis supposedly contained, aggressive Fed easing fueled sent stocks higher for a few months -- ahead of the markets' epic collapse that fall.

Tchir doesn't look for anything like a replay of that storm of the century. But he thinks stocks are 5%-10% overvalued, especially given the ECB's placebo hasn't cured anything.

Much will hinge on LTRO 2, which is widely expected to be more modest than the first round. A few weeks ago, there was talk that the ECB double the size of its "bazooka" and provide as much as €1 trillion. As asset prices have risen, however, those estimates have come down.

Bank of America Merrill Lynch economists forecast an operation totaling €350-€450 billion, or somewhat lower than the €489 billion provided previously. That gross total overstates the actual liquidity provided by the ECB. After rolling over loans coming due, the B of A ML economists point out the net new cash would total a much smaller €150-€250 billion.

That's at the low end of guesses, which now call for LTRO 2 to have a gross size about the same as the first round. As Dennis Gartman writes in the Gartman Letter, a €500 billion operation would elicit a yawn from the euro and other markets.

But that does not mean market participants should be complacent. The best indication of what the ECB has wrought is visible in the chart of the CBOE Volatility Index on the Standard & Poor's 500, better known as the VIX. Since December, the VIX has slid from the low 30s to the high teens as the options market no longer is willing to pay up to hedge what it sees as negligible risk, at least in the near term.

That confidence also was reinforced by the Federal Reserve's declaration in January it would extend its period of near-zero short-term interest rates through late 2014. Other central banks also have been actively easing their monetary policies further; the People's Bank of China has further lowered the key reserve requirement ratio and the Bank of Japan has expanded its quantitative easing to try to contain the yen's strength. So, the global money spigot is wide open.

And global markets have responded. Risk assets are higher, not just stocks but also junk bonds as confident investors scramble for yield where they can find. And all manner of commodity prices are higher, not just crude oil. While the latter's rise has been exacerbated by jitters over Iran, copper also is up 20%, roughly in line with the S&P.

Rather than a placebo, the liquidity provided by the ECB and its fellow central bankers might better be deemed a palliative for the global markets. Do not mistake that for a cure of the world's problems, however.

Palliatives also can have side effects. In 2008 and 2011, when Fed actions previously helped driven fuel and food prices sharply higher, the real purchasing power of average American families was battered by paying $4 a gallon for gasoline. Now, prices at the pump have emerged as a major issue in this election year.

Markets will be keenly watching the ECB's second LTRO operation. A 5% uptick in the VIX Monday (albeit only to a still-somnolent reading of 19) in an otherwise flat market may betray some growing nervousness by investors hooked on the palliatives provided by the central banks.
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