Is the end nigh for the Euro? [vol. 3]
Discussion
speedy_thrills said:
I'd go further and suggest almost all my posts are flawed to some extent.
Restructuring 55% of Greek debt under the ESM/EFSF just painted them further into the same corner. Overall debt levels have not substantially declined despite extremely favourable prevailing economic conditions in recent years, the effective interest rate on Greek debt has been 1.5-2% since 2014. This argument that now it's all about budgetary flows and rollover risk is myopic. Greece had a rapidly declining working age population, they are running out of taxpayers to service that debt.
You can get right down into the weeds and talk about agreed pensions reform not being implemented and reducing current tax collection rates but it's actually not important to understanding that Greece is still living on the edge.
I believe with the exception of the UK for a short period under Thatcher no first world country has actually repaid debt all they can do is reduce debt v gdp by growing gdp. Restructuring 55% of Greek debt under the ESM/EFSF just painted them further into the same corner. Overall debt levels have not substantially declined despite extremely favourable prevailing economic conditions in recent years, the effective interest rate on Greek debt has been 1.5-2% since 2014. This argument that now it's all about budgetary flows and rollover risk is myopic. Greece had a rapidly declining working age population, they are running out of taxpayers to service that debt.
You can get right down into the weeds and talk about agreed pensions reform not being implemented and reducing current tax collection rates but it's actually not important to understanding that Greece is still living on the edge.
Edited by speedy_thrills on Thursday 2nd June 06:11
The aim was never repayment but stability. That has largely been achieved. The other aim was to kick the can down the road which is now done.
The fact is Greece is making progress. The egde is still in sight but they are no longer on the edge. As for demographics its a problem for most first world countries with the exception of the UK where EU immigration reversed the decline. This will likely change with brexit.
OzzyR1 said:
Wonder what happened to Steffan who started Vol 1 of this thread many years back and was a very frequent poster.
Recall he said he wasn't in the best of health at one point, then all went quiet.
No posts for years now, can only assume he didn't get better.
Wasn’t he living in Tuscany as a climate refugee? UK weather not conducive to his well-being.Recall he said he wasn't in the best of health at one point, then all went quiet.
No posts for years now, can only assume he didn't get better.
Hope he’s OK.
Mrr T said:
I believe with the exception of the UK for a short period under Thatcher no first world country has actually repaid debt all they can do is reduce debt v gdp by growing gdp.
The aim was never repayment but stability. That has largely been achieved. The other aim was to kick the can down the road which is now done.
The fact is Greece is making progress. The egde is still in sight but they are no longer on the edge. As for demographics its a problem for most first world countries with the exception of the UK where EU immigration reversed the decline. This will likely change with brexit.
Yes, ISWYM WRT debt in general and specifically Greece.The aim was never repayment but stability. That has largely been achieved. The other aim was to kick the can down the road which is now done.
The fact is Greece is making progress. The egde is still in sight but they are no longer on the edge. As for demographics its a problem for most first world countries with the exception of the UK where EU immigration reversed the decline. This will likely change with brexit.
As for demographics, it was an issue even prior to Brexit.
My local (excellent) Bangladeshi curry house lost their booze license for nearly 3 years as punishment for employing illegals. In mitigation, there was no slavery element and I know even the guys who ran the oldest (1970) curry house in the local town were struggling similarly. Not easy to get visas for curry chefs from the Indian subcontinent, I imagine.
As you rightly say, immigration (lack of) is the single most hazardous issue for ongoing growth. Difficult for government to back winners - who’s to reckon the value added and benefits to the greater quality of life of a chef, fruit picker or car washer. Sure the figures stack nicely for graduates and professionals, but that is a very blunt measure.
Mrr T said:
I believe with the exception of the UK for a short period under Thatcher no first world country has actually repaid debt all they can do is reduce debt v gdp by growing gdp.
The aim was never repayment but stability. That has largely been achieved. The other aim was to kick the can down the road which is now done.
The fact is Greece is making progress. The egde is still in sight but they are no longer on the edge. As for demographics its a problem for most first world countries with the exception of the UK where EU immigration reversed the decline. This will likely change with brexit.
Lots of countries have run nominal surpluses and repaid debt if that's what you mean. New Zealand and Canada from the mid-1990s for example. I think Australia repaid so much of it by the mid-00s they actually ran a surplus. Countries haven't tended to do it more recently because inflation (and therefore interest rates) have been very low, the incentive has been to spend because there has been little penalty for doing so.The aim was never repayment but stability. That has largely been achieved. The other aim was to kick the can down the road which is now done.
The fact is Greece is making progress. The egde is still in sight but they are no longer on the edge. As for demographics its a problem for most first world countries with the exception of the UK where EU immigration reversed the decline. This will likely change with brexit.
I think the term on Greek debt under ESM was 30 years from drawdown...but I don't expect we'll have to wait that long.
Edited by speedy_thrills on Sunday 5th June 14:51
ECB talks about new tools to avoid "fragmentation" (i.e. trying to stop less credit worthy countries being charged higher rates on bonds.)
German 10-year yields were last trading around 7 bps higher, Italian 10-year yields had jumped around 20 bps.
German 10-year yields were last trading around 7 bps higher, Italian 10-year yields had jumped around 20 bps.
speedy_thrills said:
ECB talks about new tools to avoid "fragmentation" (i.e. trying to stop less credit worthy countries being charged higher rates on bonds.)
German 10-year yields were last trading around 7 bps higher, Italian 10-year yields had jumped around 20 bps.
Do you think the German public actually understand what she means...?German 10-year yields were last trading around 7 bps higher, Italian 10-year yields had jumped around 20 bps.
.25% increase in base rate in July with more to come and talk of upto 2% rise by the end of the year
Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU .. Economist just said on the news here its not stopping and will soon be over 10% and may go higher still
One of them is wrong
Headline figures show exactly where the pain is: electricity is up 41%
gas 57%,
home heating oil an incredible 102.5% in a country where 700k homes rely on it
Private rents have risen 11.2%
Food is up 6% overall and meat 10% and dairy products 11%
It’s a world of pain
Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU .. Economist just said on the news here its not stopping and will soon be over 10% and may go higher still
One of them is wrong
Headline figures show exactly where the pain is: electricity is up 41%
gas 57%,
home heating oil an incredible 102.5% in a country where 700k homes rely on it
Private rents have risen 11.2%
Food is up 6% overall and meat 10% and dairy products 11%
It’s a world of pain
Earthdweller said:
.25% increase in base rate in July with more to come and talk of upto 2% rise by the end of the year
Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU .. Economist just said on the news here its not stopping and will soon be over 10% and may go higher still
One of them is wrong
Headline figures show exactly where the pain is: electricity is up 41%
gas 57%,
home heating oil an incredible 102.5% in a country where 700k homes rely on it
Private rents have risen 11.2%
Food is up 6% overall and meat 10% and dairy products 11%
It’s a world of pain
If we can strengthen GBP then our energy costs will drop as they are denominated in USD, and the energy element of inflation will unwind as the 12 months roll by.Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU .. Economist just said on the news here its not stopping and will soon be over 10% and may go higher still
One of them is wrong
Headline figures show exactly where the pain is: electricity is up 41%
gas 57%,
home heating oil an incredible 102.5% in a country where 700k homes rely on it
Private rents have risen 11.2%
Food is up 6% overall and meat 10% and dairy products 11%
It’s a world of pain
Earthdweller said:
.25% increase in base rate in July with more to come and talk of upto 2% rise by the end of the year
Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU ..
Higher in some of the Eastern European EZ countries, Latvia is about 17% I think. This has always been a weakness of the EZ in that it is trying go set one rate for countries in disparate situations and stages of development. High growth Ireland has a huge housing bubble while in low growth Germany there's little demand to curtail.Inflation in Ireland almost 8% .. legarde says it will be back at 2% next year across the EU ..
Other people are noting the issues that a rising rates environment causes in the Eurozone.
deckster said:
Apropos of nothing in particular, I just clicked on this thread out of idle curiosity. And then checked, and then searched.
But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
It's a completely different currency to when this thread started.But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
The ECB became a central bank and started acting like one, technically illegally.
jsf said:
deckster said:
Apropos of nothing in particular, I just clicked on this thread out of idle curiosity. And then checked, and then searched.
But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
It's a completely different currency to when this thread started.But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
The ECB became a central bank and started acting like one, technically illegally.
We are through the looking glass in that regard, but admittedly, the Euro perseveres.
The ECB announced they will hold an emergency meeting.
Bloomberg reports:
"The announcement comes after the yield on Italy’s 10-year debt rose above 4% for the first time since 2014 this week, signaling that investors aren’t convinced the ECB can raise borrowing costs and keep the bond yields of the region’s most vulnerable members in check at the same time.
...
'The fact that the euro is rebounding could suggest that investors are hoping to get more details on any potential intervention to stabilize the European government bond market,' said Valentin Marinov, strategist at Credit Agricole CIB in London."
Now, how does the ECB buy bonds and reduce inflation simultaneously?
Bloomberg reports:
"The announcement comes after the yield on Italy’s 10-year debt rose above 4% for the first time since 2014 this week, signaling that investors aren’t convinced the ECB can raise borrowing costs and keep the bond yields of the region’s most vulnerable members in check at the same time.
...
'The fact that the euro is rebounding could suggest that investors are hoping to get more details on any potential intervention to stabilize the European government bond market,' said Valentin Marinov, strategist at Credit Agricole CIB in London."
Now, how does the ECB buy bonds and reduce inflation simultaneously?
Digga said:
jsf said:
deckster said:
Apropos of nothing in particular, I just clicked on this thread out of idle curiosity. And then checked, and then searched.
But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
It's a completely different currency to when this thread started.But given that volume 3 is 9 years old, and I can't find volumes 1 or 2 to check them out - are we OK to say the answer is "no"?
The ECB became a central bank and started acting like one, technically illegally.
We are through the looking glass in that regard, but admittedly, the Euro perseveres.
The ECB only became a central bank after it was given the funds by the world strongest financial institution and after said institution stepped in single handedly saved the currency.
The Euro was dead as a dodo and we were all in a great deal of poo. Bottom line as always: don’t f
k with the Swiss. speedy_thrills said:
The ECB announced they will hold an emergency meeting.
Bloomberg reports:
"The announcement comes after the yield on Italy’s 10-year debt rose above 4% for the first time since 2014 this week, signaling that investors aren’t convinced the ECB can raise borrowing costs and keep the bond yields of the region’s most vulnerable members in check at the same time.
...
'The fact that the euro is rebounding could suggest that investors are hoping to get more details on any potential intervention to stabilize the European government bond market,' said Valentin Marinov, strategist at Credit Agricole CIB in London."
Now, how does the ECB buy bonds and reduce inflation simultaneously?
How does the Euro rebounding whilst Italys bond yield move up make sense…? If traders think the ECB will support the bond market, surely the Italian bond yield wouldn’t be moving out?Bloomberg reports:
"The announcement comes after the yield on Italy’s 10-year debt rose above 4% for the first time since 2014 this week, signaling that investors aren’t convinced the ECB can raise borrowing costs and keep the bond yields of the region’s most vulnerable members in check at the same time.
...
'The fact that the euro is rebounding could suggest that investors are hoping to get more details on any potential intervention to stabilize the European government bond market,' said Valentin Marinov, strategist at Credit Agricole CIB in London."
Now, how does the ECB buy bonds and reduce inflation simultaneously?
They are pricing in risk that the currency will fail.
The Euro is a very peculiar Frankenstein currency, at its heart you still have national banks ultimately responsible for the nations currency.
When Draghi took over and made his famous statement that the ECB will do whatever it takes, that calmed the markets which had realised that the Euro wasn't a proper currency.
When the bond markets start to diverge again, the markets are stating they dont believe the ECB is the central bank of last resort or that the Euro is a real currency when push comes to shove.
The Euro is a very peculiar Frankenstein currency, at its heart you still have national banks ultimately responsible for the nations currency.
When Draghi took over and made his famous statement that the ECB will do whatever it takes, that calmed the markets which had realised that the Euro wasn't a proper currency.
When the bond markets start to diverge again, the markets are stating they dont believe the ECB is the central bank of last resort or that the Euro is a real currency when push comes to shove.
Mrr T said:
jsf said:
The pain would have been short term and manageable for Greece. It would have cost fractions of what the bailout cost Greece.
It likely would have killed the French banks and the Euro.
As I said this was discussed in previous volumes and the pain was not manageable. It likely would have killed the French banks and the Euro.
Just some examples of the pain.
1. The Greek banking system would have failed so the government would have had to take over all the banks.
2. The Greek government would have needed IMF loans which come at a cost of immediate cuts in spending. Its unlikely the IMF conditions would have been any better than the EU.
3. The banking default and goverment default would have wiped out the saving of many pensioners who would be left destitute.
4. The new drachma would have opened at a significant discount. Greece relies on imports for many items most notable medicines. The devaluation would have meant the health service would not have been able to cope.
5. It would have been 10 to 15 years before Greece would have been able to borrow again.
There are other reasons but I would need to look them up again.
Almost the only winner from the default would have been tourism. However, Greek is already a major tourist resort its hard to see that there was room for significant growth. The only winner would have been the tourists.
The rescue was painful for Greece but a euro withdrawal and default might well have been terminal.
jsf said:
They are pricing in risk that the currency will fail.
The Euro is a very peculiar Frankenstein currency, at its heart you still have national banks ultimately responsible for the nations currency.
When Draghi took over and made his famous statement that the ECB will do whatever it takes, that calmed the markets which had realised that the Euro wasn't a proper currency.
When the bond markets start to diverge again, the markets are stating they dont believe the ECB is the central bank of last resort or that the Euro is a real currency when push comes to shove.
We are back to that same scenario once more. The fundamental question of who underwrites what/who. The lack of fiscal union, etc. etc.The Euro is a very peculiar Frankenstein currency, at its heart you still have national banks ultimately responsible for the nations currency.
When Draghi took over and made his famous statement that the ECB will do whatever it takes, that calmed the markets which had realised that the Euro wasn't a proper currency.
When the bond markets start to diverge again, the markets are stating they dont believe the ECB is the central bank of last resort or that the Euro is a real currency when push comes to shove.
All very familiar ground. Still, it seems, unresolved.
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