beware of Greeks...

Posted by spshapiro on November 02, 2011 (12:18AM)

So Papandreou having trouble at home, he decides (at this late point) to put the choice to a referendum, but that might not be until January. Nevermind that he probably won’t get that long; it seems to be another case of a government trying to delay the pain as long as possible.

It is clear that the other European governments felt stabbed in the back, in that they thought that they took a hit last week, on top of their own referendums of last month. So it looks to them that Greece is trying to get better terms after the deal has been struck. For sure, some one will say “Okay, the 50% haircut is off the table,” and when that happens the Euro will fall some more.

The point is everybody knows that the Greeks have known for quite some time what the choice is. One, repudiate the debts, leave the Euro, accept an inflated currency, an inability to get foreign financing and therefore a stagnate economy for years. Or two, accept that there will be across the board wages, benefits, entitlements cut for the lucky few who keep their jobs, and a depressionary environment for years Not a nice set of choices, but they’ve known this for a while. Why do you think they have been out in the streets. There is also the possibility that a leftist party will be voted in, but that fact won’t solve the problem that the country is bankrupt.

The point is the referendum, if it does take place, will not be decisive. It is only kicking the can down the road. In the end, I suspect the Euro to hold, but maybe with some less members (for now). It will hold because it is better for most of Europe to function as an economic union, even if it is imperfect. I know another imperfect union which is working on its third one hundred years, and whatever they say, I think there are few Southerners who regret losing the war.

Posted by OldFart on November 02, 2011 (09:40AM)

Actually I think the referendum is a good idea, a must. Whatever the choice is it is a difficult one and it has to be made by the entire Greek nation, not a few people in the Government.

Posted by Market Pawn on November 02, 2011 (10:47AM)

I was visiting a prospective supplier in northern Italy years ago soon after Italy joined the euro. This textile company executive told me then that as soon as Italy joined the euro their business was decimated. Prices of everything in the economy, including wages, gapped up. Overnight they could no longer compete with Asian companies.

Italy, Greece, Spain, Portugal - these countries always had weak currencies compared to England, France and Germany. It made their economies viable and successful in the European mix.

The current situation is similar, though not identical, to Latin American countries who peg their currency to the dollar. When you see the IMF come in with their dictatorial loans, you know the end is near. Austerity falls harshly on both the poor and the middle class. Sooner or later, they will reject it.

Posted by OldFart on November 02, 2011 (11:11AM)

Maybe I am completely ignorant but when I think of Greece three sources of income come to mind - shipping (think Jackie Kennedy), tourism and money pumped by NATO bcz they were an "extension" to the Iron Curtain. Shipping moved to Asia and Iron Curtain no more, only tourism left

Whatever the point I was trying to make is that the choice belongs to the Greek people not the leaders of Europe whose only goal (rightly so) is to protect their banks

Posted by billyball on November 02, 2011 (01:01PM)

OldFart said: Actually I think the referendum is a good idea, a must. Whatever the choice is it is a difficult one and it has to be made by the entire Greek nation, not a few people in the Government.

Yes, but shouldn't some sort of vote happened months ago? The decision to leave the Euro or do what is necessary to stay doesn't depend on every detail. It is not a decision to be taken lightly, but a lot of work is being done in one direction and timing can be important.

Posted by OldFart on November 02, 2011 (01:26PM)

billy - yes, I agree and it is inconceivable that democratic counties like France and Germany did not demand it as a part of the rescue deal. Be as it might be better late ...

Posted by incubus on November 02, 2011 (01:49PM)

The Battle of Thermopylae.

Posted by Market Pawn on November 02, 2011 (05:24PM)

All this is very reminiscent of the years-long issue of both German reparations debt and the debt various allies owed to the United States at the end of WWI. Basically, most of the gold from the civilized world ended up in the U.S. by the end of the war. As every country was on the gold standard at the beginning of the war, it made paying the debt impossible. Even after European countries all abandoned the gold standard, their economies could not accommodate such a debt load. The issues surrounding this debt came to a head in the late nineteen twenties, when Italy agreed to pay a fraction on the dollar, and England and France agreed to pay a higher fraction. Germany, of course, defaulted on its reparation debt. Portions of these debts were still being negotiated in the 1940s.

Expect a similar trajectory here.

Posted by treeHamster on November 02, 2011 (06:03PM)

The PM declared the referendum not because he wanted the people a chance to vote for it but because he didn't want to have to take the responsibility for only decision that can be made. We all know they will have to accept the austerity measures and the PM did what any politician does, removed himself from the blame equation so he can keep his office instead of making the hard and responsible decision to accept the measures and get them underway. It has nothing to do with the PM being for the people it had to do with the PM wanting to keep his job and not get voted out of office for a decision the people were unhappy with. Either way the people will be unhappy but with a referendum, the PM doesn't have to take the blame. It's just more political maneuvering.

Posted by incubus on November 02, 2011 (06:30PM)

Papandrou has attended Bilderberg conferences, a secretive group of the most wealthy and influential people in the world, from banking, military leaders, Central bankers and private sector CEO's. (including Geitner a few years back)

They refuse to allow any media to cover the meetings, members are apparently sworn to secrecy, which has led to a plethora of conspiracy theorists to envision a wide range of conjecture, some of which is completely bizarre..

Who knows?...this could be a case of "the Mouse that Roared", where Papandrou, as the weakest link, is now empowered to control short term movements of the global equity markets by merely hinting at subtle possibilities, which in turn could be used to the advantage of friends.

Mindful, much of the root of the Greek crisis is attributed to Goldman Sachs botching numbers in conjunction with Greek government, similarly to the way CDO valuations were lied about.

This conjecture wouldn't even be lite entertainment for me, but for the fact that organizations like the Bilderberg and Citigroup plutonomy conference are so secretive.

Highlighting the need for openness and transparency of those with the greatest power.

Posted by spshapiro on November 03, 2011 (12:20AM)

MP, after WW II, the Italian economy ‘revived’ itself by in part becoming the low cost producer of goods. As time went by, people got past the point of just surviving and wanted a bit more, so after a while wages went up and producers eventually sought greener pastures were they could pay less for labor. This has been repeated in several other places, e.g., instead of paying $26 an hour to produce cars in Detroit, they could be moved to Alabama for $13, or Mexico for $6, and perhaps somewhere in SE Asia for less.

Some people will try to justify this by some ‘right to work law’ argument, and some people also argue that evolution is just a theory. Finding someone more desperate who will work for less, works until they (or their children) want more than just a full belly, and it also requires that the work is not beyond the skill set of the people in question.

Greece will not right itself by becoming a third world country; people just don’t willingly revert to an earlier stage of production. This is not to say that sacrifices will not be necessary, no matter which of the two courses the Greek people take. I see no reason to believe that this is the end of civilization, so Europe and the rest of us will find a way to muddle through. We can count on the fact that it will be sloppy. We can count on the fact there will be more moments of brinksmanship. We can count on the fact that if they hold a referendum, and what the outcome is, will have precious little to do with an indication of a successful outcome. A better indication would be when their system of taxation becomes a measure of its effectiveness, not its susceptibility to be circumvented.

Posted by incubus on November 03, 2011 (02:37AM)

spshapiro said:
..... I see no reason to believe that this is the end of civilization, so Europe and the rest of us will find a way to muddle through. .......

A reminder from exactly one year ago, the last "Greek crisis", from Mark Hulbert that uses historic debt crisis's to back your point. -

http://www.marketwatch.com/story/a-retrospective-on-the-greek-debt-crisis-2010-11-03

the gist, historic debt crisis's have always been a good opportunity to buy.

Posted by OldFart on November 03, 2011 (10:48AM)

rumor is no referendum

Posted by spshapiro on November 03, 2011 (11:16AM)

OF, so what? My point was we have to separate political gambits from constructive solutions. You might want to use Geo. P’s gambit as the basis for a stock/option play; I’m not (usually) that nimble. It seems to me to be easier to say what it will take for a long run solution to work, than the vagaries of who is up or down in next month’s poll.

It appears to me that even the thickheaded, self interested politicians understand that eventually a set of solutions for the debt crisis must be enacted. I would feign to guess the date, so I don’t buy options, but at some point my selling (betting that the politicians will chose to put off hard choices) will prove wrong. I just hope that I ‘win’ a few times before I’m proved wrong and they “do the right thing”.

Somebody once said, “You won’t go broke betting on the gullibility of the public.” SP’s corollary;- nor the vanity of a politician.

Posted by OldFart on November 03, 2011 (03:51PM)

I am tired of this Greek comedy, tragedy or whatever it might be. The Greeks should say merci beaucoup/danke shoen and let's just move on

Posted by spshapiro on November 03, 2011 (04:54PM)

OF, you might be tired but you better get used to it. This puppy will be messing up the living room for a while. The Greeks think they are in a negotiation, like at the car dealer, they are threatening to walk out hoping for a deal sweetener. If our German girlfriend had a pair, she’d let them walk, knowing they would turn around a couple times to see if someone was calling them back. But like the dealer who has to make their quota by month’s end, Merkel, et. al., will cave. However, all this will take some time, because here’s where the analogy breaks down:- With the car scenario, you need a car and the dealer reason for being is to sell cars. In this situation, the politicians are more concerned with saving face, staying in power, than in furthering economic union, or even just moving their economy out of recession.

Posted by OldFart on November 03, 2011 (05:16PM)

sp - unfortunately I think u r right (as usual). The Greek think is more or less done and who is Greece after all - the size of RI. The risk is Spain, Italy and/or some others unknowns and these have not started

Posted by treeHamster on November 03, 2011 (05:17PM)

Haha, the politicians are just trying to reduce the damage to their approval ratings. That's the reason the PM threw that referendum out there then canceled it when the EU said it would kick them out if it didn't pass. I have no idea how he could have been so stupid as to not realize they would get kicked out of the vote passed. Even stupid politicians must have SOME brains but I'm obviously wrong. He wanted to use the referendum as a way to take the blame off himself but realized that it could just cause him more problems if they get kicked out so he recalled it.

The long term answer is that the Greeks aren't gonna get any better deal than they already have no matter how long they try to weasel it out. Heck, a 50% off on your debt is an AMAZING deal in the first place but the lazy greedy Greeks aren't even happy with that.

I personally think at this rate the EU will be dissolved between 2015-2020. It not it'll probably be more like the European Club with only a handful of members that can afford it because it was honestly a nice experiment but an AWFUL idea in the first place. The economies of the membering states are just too different.

beware of Greeks...

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