Peter1469
03-25-2012, 07:59 AM
About a year ago I gave the Eurozone no more than 2 years to go before it collapsed.
I thought that a Greek default would break the camel's back. It did not. Greece defaulted and the markets barely noticed. But Greek only defaulted on private bond holders and not on central banks and governments. That is an interesting lesson for the US and our debt problem- I have said before that the US should default on the treasury bonds held by the Federal Reserve- I doubt that the rating agencies would even consider that a default, and it would erase a lot of our debt.
Back to the Eurozone: Greece is going to default again. The last deal traded (E)100B of bad debt for (E) 130B of new debt! So they added another (E)30B of debt.... In 2011 Greece received bailouts that amounted to over 150% of its GDP and still ended 2011 with a 6.8% loss in GDP. Keynesians explain that!
One should be struck by the size of the $ figures in this discussion. It is peanuts. That is perhaps another reason why the markets shrugged off Greek default. But next up are Spain and Italy. Those economies are too large to ignore and their debt problems are as bad as that of Greece. The Spanish government even came out and said that it would not meet the Eurozone required debt control spending for 2012. Not even try. Spain has very high unemployment and lots of public and private debt. The markets will not be silent when Spain defaults.
I still think that the Eurozone will collapse. Perhaps even sooner than my previous 2 year prediction. Germany has already started minting its own Deutsche Marks. So it is ready to jump.
It was interesting that German demands for Greek austerity measures were, IMO, designed to force Greece to ask to leave the Eurozone. It didn't work. The Greek government agreed to them. (I doubt that they will bother to enforce them). So this makes it more likely that Germany will bail from the Eurozone (not the EU). The German people are furious that they are paying for what they consider to be reckless debt spending of the PIIGS.
And once again I point you to Iceland- the model for the current economic collapse. They allowed a complete default and currency collapse and within 3 years are recovered and growing.
The rest of us are kicking the can down the road and are either stagnant or are in recession.
I thought that a Greek default would break the camel's back. It did not. Greece defaulted and the markets barely noticed. But Greek only defaulted on private bond holders and not on central banks and governments. That is an interesting lesson for the US and our debt problem- I have said before that the US should default on the treasury bonds held by the Federal Reserve- I doubt that the rating agencies would even consider that a default, and it would erase a lot of our debt.
Back to the Eurozone: Greece is going to default again. The last deal traded (E)100B of bad debt for (E) 130B of new debt! So they added another (E)30B of debt.... In 2011 Greece received bailouts that amounted to over 150% of its GDP and still ended 2011 with a 6.8% loss in GDP. Keynesians explain that!
One should be struck by the size of the $ figures in this discussion. It is peanuts. That is perhaps another reason why the markets shrugged off Greek default. But next up are Spain and Italy. Those economies are too large to ignore and their debt problems are as bad as that of Greece. The Spanish government even came out and said that it would not meet the Eurozone required debt control spending for 2012. Not even try. Spain has very high unemployment and lots of public and private debt. The markets will not be silent when Spain defaults.
I still think that the Eurozone will collapse. Perhaps even sooner than my previous 2 year prediction. Germany has already started minting its own Deutsche Marks. So it is ready to jump.
It was interesting that German demands for Greek austerity measures were, IMO, designed to force Greece to ask to leave the Eurozone. It didn't work. The Greek government agreed to them. (I doubt that they will bother to enforce them). So this makes it more likely that Germany will bail from the Eurozone (not the EU). The German people are furious that they are paying for what they consider to be reckless debt spending of the PIIGS.
And once again I point you to Iceland- the model for the current economic collapse. They allowed a complete default and currency collapse and within 3 years are recovered and growing.
The rest of us are kicking the can down the road and are either stagnant or are in recession.