Sly Bald Guys Forum
Various Non-Bald Discussions => General Discussion => Topic started by: Mr Jules on May 20, 2012, 04:16:19 AM
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Living in London UK and so very close to the rest of Europe, been following the news of the miserable, complex and unfolding financial chaos around our continent.
The Greeks have no government and are likely to literally run out of money before the end of next month. For the last 2 years, they've been living on enormous financial help from most of the rest of the EU (European Union). They've endured spending cuts, wage cuts and tax rises of the kind I cannot imagine. There will be a general election in Greece on 17 June, and its possible the Greeks may elect politicians who reject the cuts and tax rises which have been condition of the billions of euro of financial help. It's anyone's guess if Greece can keep it together even until 17 June. It's a terrible mess.
Other EU countries are embarking on similar rounds of tax rises and spending cuts. For these governments, borrowing money is just become ever more difficult.
The UK is not exempt from any of this. British banks have lent to banks who've lent to indebted countries. And we do much trade with our European partners. The British prime minister, David Cameron looks worried. Experts here predict a Greek meltdown could drag the UK back into recession with more unemployment, banks running into yet more difficulty and more spending cuts and tax rises. Indeed, our UK economy is fragile is mostly flat lining.
In truth, I suspect no one really knows how this is going to play and the consequences. It's all too close for comfort.
All we can do is follow this news which is pretty much the top story every single night.
And all I can do is just keep my job and budget carefully. We really have no idea what is round the corner.
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It is a mess, for sure, and one with worldwide implications.
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And we all have to ask ourselves "Why?". To me, it's simple...... politicians and their spending policies (I'm talking about the USA, I'm not qualified to speak on other places in the world).
As long as politicians continue to think that they can tax the people until the government is out of debt, we are doomed to fail. It CAN"T happen this way because even if you tax more, things won't get better if you DO NOT cut spending. I'm not talking about artificial cuts either...... the kind where $100 million is slated to be spent and they cut it back to $80 million...... YOU"RE STILL SPENDING $80 MILLION MORE YOU DUMBASSES!!! I'm talking about REAL cuts.
This is a subject that REALLY gets me rolling and I have a lot to say about it BUT in the interest of Forum rules I will bite my tongue.
PM me if you really care what a Harley guy living on the side of a mountain in the great state of Pennsylvania has to say.
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I don't understand why the Greeks can't get it under control but speaking to the USA and as a senior citizen, I can't understand why when we are spending billions of dollars every week on Pork in the budget and billions every week propping up governments like Iraq and Afghanistan our government always starts sniffing around Social Security and Medicare and Medicaid etc. etc. As Mike says, don't get me started.
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Thanks for your contributions.
Here in the European Union, we are faced with a choice:
Do we cut Greece free and that means leaving trying to sort their own mess with their own new worthless currency ? Who knows how the financial shock waves would ripple across the rest of Europe. Banks could collapse. There could be more financial chaos. And the Greeks could be in more trouble. Already many folks there have seen their salaries cut by 40%. A similar situation has occurred in Ireland, where public sector employees have taken 20% pay cuts. And unemployment in Ireland is now 14%. In the US, it's 8%.
or...
Do we continue to manage the problem by keeping Greece in the EU ? And continuing with the enourmous financial help with the condition that Greece carries on with ever greater spending cuts and tax rises.
We will soon find out.
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I would assume that you can't let Greece, like a gangrenous limb, infect the whole body of the EU.
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I would assume that you can't let Greece, like a gangrenous limb, infect the whole body of the EU.
It's already started.
For instance, British banks have lent to other European banks who have lent to the Greek government.
Greeks are moving their money out Greece and into banks accounts in less risky parts of Europe
Everyday, the British phone giant Vodafone, who has an operation in Greece, is moving its surplus money out of Greece and back to the UK
and over in Spain, the government there has nationalised a large bank. Other banks are on credit watch including Bank of Santander, who have a operation in the UK. In turn, some UK customers are withdrawing their money from their British Bank of Santander accounts, just in case.
The infection has started. It's how to manage the infection now.
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My two cents--for what it's worth, today at least, probably less tomorrow.
Greece, retire on a pension in your fifties, yup, fifties--and hairdressers are considered workers in a hazardous field so they get more! No significant industrial production, they live on tourists! They are running debt because among other things there is massive tax evasion, not avoidance--that's legal, this is evasion. For the last year or more the wealthy have moved their money out of the country, think Swiss Francs, so the Greek banks are undercapitalized. No one wants to pay, every one wants to take--that doesn't work any place. Now the rest of the Eurozone says, "Live within your means." Great, but there aren't any jobs so unemployment has gone through the roof. Fire government workers to save money, great idea, unfortunately those workers spend their pay with their neighbor's grocery store, clothing etc., so now their customers are out of work, and they will be out of business. Lesson, put the brakes on too hard to fast and you spin out of control--same as a car or a motorcycle, except this is an economy that's going to crash. So, elect the so called far left or the far right, actually just good old populism that takes any political label available. No solution, no economic growth pattern. It's inevitable according to many European economists that Greece has to leave the Euro Zone, whether it stays in the Common Market with the drachma is still to be decided. At least with the drachma what little they do produce becomes cheaper for foreign buyers so possible growth. Unfortunately all imported goods, including those from the US, become very expensive, very fast--possible job losses in the US because just like the local Greek grocer, our customer doesn't have money to buy our stuff.
But what's scary is that the wealthy Spanish, Portugese and Italians are now moving their money out of their banks, their banks are becoming cash poor and the Europeans don't have a Federal Reserve as we do to cushion the cash erosion in their individual banking systems. Real estate markets have collapsed in Europe too! This is incredibly complex, intertwined and definately will have an effect in the US--20% of our exports go to the Common Market! That's a lot of people whose jobs are at stake here in the States, and it's going to start getting tight by the end of the year, just when our Congress and political leaders are going to try to deal with our own debt issues. From past experience our politicians are demonstrating all the wrong characteristics right now and by this time next year these could be the good old days. Swiss bankers on the other hand have a big problem, lots of money but no one to lend it to, and that's how they make their money! Everyone has a real interest in this and it's changing daily, hourly. Google "Euro Crisis" and read what the news in other country's newspapers is--it isn't pretty, not at all.
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Pretty much spot on, Saintc.
The trouble is: in Greece, exactly how do you go about switching from the Euro to a new currency (New Drachma) which may lose 50% of its value ? One idea is that the Greek government announces the new currency, the banks close for re-domination. For a while, the Greek borders are financially sealed. All euro notes still inside Greece and then re-stamped 'New Drachma'. For the European Union, there's no presence or mechanism for what's about to happen.
And yes, real estate values in Europe have fallen. For instance, just across the Irish Sea in the Republic of Ireland, property prices there have fallen by 50% in recent years. British banks lend to Irish banks and speculators on the back of the Irish real estate boom. No wonder, the British taxpayer has contributed towards the bail out money given to the Irish government.
The US is quite right to be concerned about the unfolding financial chaos here in Europe. And with the UK doing 40% of its trade with rest of the Europe, our prime minister is worried.
Like you, it's a tangled mess. And we have no idea how it's going to play out or how awful it's going to be.
Meanwhile the UK Bank of England (similar to the US Federal Reserve) is preparing contingency plans. But they won't give details. Speculation is that the focus will be ensuring that our banking system continues. We have already had one bank run on a British bank.
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http://www.washingtonpost.com/politics/federal-reserve-grants-first-approval-for-chinese-bank-to-purchase-us-bank/2012/05/09/gIQA0VpVDU_story.html
Well, we ain't far behind. I am not an economist and I have really very little interest in the topic other than fear for the future. I just hate the idea of having to shoot someone over the contents of the dumpster behind McDonald's but I'm betting that is pretty much where we'll be here in the good ol' U. S. of A. in fairly short order.
I think the problem is that all these financial meltdowns have been engineered for decades by people waaaay more brilliant than anyone I know. In the meantime the gubmint here at home has been dividing the population into smaller and smaller segments who can never see eye to eye because of single issues like gay marriage or abortion/birth control. Believe me, these folks are not the dummies they make themselves out to be. They are absolute evil geniuses in that they know that the average American would rather shop than read and they are using that to their advantage. And we play right into their hands.
And I'm gonna apologize in advance because I am absolutely certain that my contribution to this thread will result in it being pulled. But I lack the self-control of Koz or Tom, I had to launch the rant. Sorry.
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I'm glad I got out of the UK a long time ago (I'm also hapy to be earning in yen, at least at present).
I feel that this has gone on for too long and with no end in sight. People are fatigued and jaded by the whole debackle. I think the bullet has to be bitten and Greece , who lied to join the Euro zone, be let go. It will be tough but the bottom will have been hit and the only way will be up. Up in many, many senses but the most important one will be confidence.
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People are fatigued and jaded by the whole debackle.
Exactly.
I'm starting to think we should let Greece go. But it's difficult to see how.
One suggested course of action would be seal Greece borders, or at least financially seal them. Then all euro notes within the Greece at the point of currency conversation would re-stamped 'new drachma'. At the same, Greeks banks would close while all bank accounts re-dominated from euro to 'new drachma'.
Then watch the new drachma slide in value. Anyone with savings still in Greece would their money disappear - or least when they tried to convert into another currency.
And of course Greece would still owe the rest of Europe hundred of billion of Euros.
I guess it's a question of deciding what is the least worst option. All are awful. And all will reverberate around the rest of the European Union.
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The euro situation is enormously complex because it was a monetary union without a politcal union, so in that regard it is very different than the U.S. What makes it even more difficult is that the Germans are prescribing the same solution regardless of the underlying cause. Greece's government was overextended. Ireland, Spain and Italy were not. Forcing government spending cuts on those three was the wrong solution.
Look back ten years: Argentina had pegged its currency to the US dollar to get inflation and spending under control. It worked for a time, but pressure began to build and the peg couldn't be sustained. A huge devaluation occured and overnight the Argentine middle class was effectively finanicially wiped out. Greece will have to leave the euro and I believe the government will be dominated by radicals as the Greek people vent their rage at the pols who go them into the mess.
The Banks have been profligate lenders with no lessons learned from the Mexican debt crisis and the other crises of the past 30 years. "It's different this time" is a common banler's refrain. Only it never really is different. Bankers are supposed to be cautious and prudent, not the speculators they've become.
Remember this important fact: currency is based upon confidence and trust alone. There is nothing underlying it. No gold or silver. No store of value. When people no longer trust the euro, it is finished as a currency. The dollar still has the world's confidence until our Congress farts around with foolish delays on raising the debt ceiling. That's what Americans should worry about in the short term!
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The euro situation is enormously complex
The BBC explains what happens if Greece switches from the Euro to a new currency.
It makes grim reading: http://www.bbc.co.uk/news/business-18074674
Almost wished I hadn't read it. :(
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It is scary - and think about it: Greece is a relatively small country in terms of both population and economy. Greece could find itself with hyprinflation as its new drachma plunges in value. What happens if Spain or Italy needs to follow the same course and pull out of the euro?
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Yes, it scary. We have no idea how awful this going to be.
Just remember: Sunday 17 June. This is the date the Greeks go to the polls to choose a new government. Because that new government may say "no more austerity and we're not paying back the money we own the rest of the EU (European Union).
This is when much financial sh1t is going to hit many fans.
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Things seem to hinge on Merkel's continued objection to EU based bonds, but what I find really troubling is the outline for a weekend exit set out at the 11:44a entry in the Guardian's site: http://www.guardian.co.uk/business/2012/may/23/eurozone-crisis-markets-summit-eurobonds#block-21, that coupled with the almost open acknowledgment that Brussels is advising everyone to make concrete plans for a possible exit on and individual basis and some rumors that the manufacturer of currency is dusting off equipment for drachmas makes it all very real. My personal bet is that Merkel will blink, but then have a difficult time putting together the politics to make the structural changes necessary for the bonds to issue. She may have waited too long. Hopefully Hollande and others supporting the bond concept have a viable plan B.
We in the colonies are possibly going to get a very tough lesson on how intertwined our economy is with the EU and the eurozone in particular within the next 12 to 18 months. Since it can't be explained in less than a minute--the attention span utilized and encouraged by our politicians of all stripes--it's going to be really ugly.
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Saintc,
You've nailed it with your post.
And you rightly say, there may simply not be time to rustle up workable plans to stop the Greek collapse.
If the crisis unfolds in disorganised way, you in the States will get a lesson.
In 2008, american banks were lending on the sub prime market. When that went wrong, there was a run on one of our British banks - Northern Rock. Northern Rocky turned out the be a rather 'rocky' bank. So yes, we are all intertwined.
I agree with you: the only way short term way to avert a miserable crisis is for the European Central Bank to be lender of last resort (it's not at the moment) and issue eurozone wide eurobonds.
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I agree with you: the only way short term way to avert a miserable crisis is for the European Central Bank to be lender of last resort (it's not at the moment) and issue eurozone wide eurobonds.
But first the Germans, Dutch, Austrians and others have to agree, then the EU nations have to enact significant legislation and treaties to make it possible--Step one--Hard, Step two, probably impossible. That's why there has to be a next best thing, a Plan B, and I haven't seen anything except speculation that they even have an idea what to do as Plan B.
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and I haven't seen anything except speculation that they even have an idea what to do as Plan B.
This is why our British prime minister David Cameron is making daily repeated calls to the Eurozone politicans to sort things and fast.
Because when the messy crisis unfolds, our prime minister will have to explain to the British electorate why our own economy is being dragged down too - like a smaller boat next to the sinking Titanic.
I take part in a UK based politics forum. On this forum, we are transfixed, speculative and anxious.
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All this and the hacking scandal to boot.
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Adults Only video: George Carlin at one of his fine moments.
http://www.youtube.com/watch?v=-PkWf9M3rUw&feature=related
I guess everybody can believe what makes them feel most comfortable. All the complicated economic theories are fine for some. For me the above vid breaks it down simply and effectively. BTW, adults only: It's George Carlin speaking from beyond the grave. There's a longer version of it out there somewhere where he goes into the control issues of "The Masters" but this one hits the salient points.
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I would not want to see the UK leave the EU , not sure we can continue to prop up the greek economy economy though . Christine Largade is right in suggesting that the Uk should consider reducing VAT to make us more competetive to imports . A strong sterling is not good for us in seeking new markets Stick it out and the government should be seeking for fair play
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And amidst all this Euro crisis, today it's the 57th Eurovision Song Contest. This year the contest is being held at the Crystal Hall, Baku in Azerbaijan.
26 countries will be participating with televoting in 44 countries. It's the biggest televoting television event in the world.
The 3 hr live contest starts at 21:00 CEST, 20:00 BST. And for those in the States, 15:00 ESDT.
http://en.wikipedia.org/wiki/Eurovision_Song_Contest_2012
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And amidst all this Euro crisis, today it's the 57th Eurovision Song Contest. This year the contest is being held at the Crystal Hall, Baku in Azerbaijan.
26 countries will be participating with televoting in 44 countries. It's the biggest televoting television event in the world.
The 3 hr live contest starts at 21:00 CEST, 20:00 BST. And for those in the States, 15:00 ESDT.
http://en.wikipedia.org/wiki/Eurovision_Song_Contest_2012
I have often heard of the Eurovision show but on this this side of the pond it causes barely a ripple.
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That's a great shame. Because Eurovision is BIG here in Europe. And there's always some politics involved.
For instance, this year, the Iranians have recalled their ambassador from
Azerbaijan - host nation and fellow Muslim neighbour. Iranians saying Eurovision Song Contest does not fit Muslim values.
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Now it looks like large Spanish banks need money. And the Spanish government is going to run out of money.
Well, at least it takes our minds of the impending crisis in Greece. If you recall, they go to the polls on Sunday 17 June. Greece may choose a government that wants more financial help, but with Germany's terms and conditions.
Apparently today, British prime minister had another frustrating call with President Obama.
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Ireland's financial difficulties partly stemmed from the government's backing of the failing banks, only realizing too late that the banks' liabilities far exceeded the government's ability to pay out. Sounds like the same situation Spain is facing now. It is hard to imagine the euro crisis being resolved without a massive dislocation. The austerity medicine is going to kill the patients.
By the way, in 1987, the U.S. stock market crashed, partly on fears of federal budget deficits, trade deficits and a weak economic outlook. There was a call for spending reductions and tax hikes to cure the federal deficit immendiately. A few days later, a brilliant article in the Wall Street Journal that described a White House burning the midnight oil, working with Congress to cut spending, looking into tarriffs, etc. and then revealed that this story was about Herbert Hoover in 1929 when the market crashed! As it turned out, the efforts to cut spending and balance the budget trade deficits caused an enormous contraction in the U.S. economy...and the Great Depression followed.
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Apparently today, British prime minister had another frustrating call with President Obama.
I think most people would describe any conversation with B. Hussein Obama as frustrating.
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Apparently today, British prime minister had another frustrating call with President Obama.
I think most people would describe any conversation with B. Hussein Obama as frustrating.
Ladies and Gentlemen..... we have a winner.
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Whoever american choose to elect in November, the same miserable mess will still be here in Europe. Can't help thinking a US president will keep eye on things here in Europe wondering how it will effect American jobs and living standards.
If Americans do feel the strain of the Eurozone meltdown, don't blame your president, blame us Europeans. The mess here has been mostly self inflicted.
At the moment, we are mostly blaming each other.
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Whoever american choose to elect in November, the same miserable mess will still be here in Europe. Can't help thinking a US president will keep eye on things here in Europe wondering how it will effect American jobs and living standards.
If Americans do feel the strain of the Eurozone meltdown, don't blame your president, blame us Europeans. The mess here has been mostly self inflicted.
At the moment, we are mostly blaming each other.
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Whoever american choose to elect in November, the same miserable mess will still be here in Europe. Can't help thinking a US president will keep eye on things here in Europe wondering how it will effect American jobs and living standards.
If Americans do feel the strain of the Eurozone meltdown, don't blame your president, blame us Europeans. The mess here has been mostly self inflicted.
At the moment, we are mostly blaming each other.
If only it would stay the "same miserable mess!" It will only get worse IMO when our Congress has to deal with the debt ceiling, and the expiration of the "Bush" tax rates at the end of the year. That could be the match in the dynamite factory!
Here, I know one guy pretty well whose family company manufactures specialized roofing materials that are used for "older" i.e., 100 + year buildings. 17% of his bottom line for the last several years has come from sales to Europe--his equipment was imported from Italy. Since the housing and construction crash there he's sweating bullets. And there's no help for him coming soon. It's my personal belief that many here in the former colonies don't have a real grasp on how intertwined the European and American economies really are since that's not a subject that can be discussed in the small time frames permitted by our news culture. Also, apparently based on nothing more than the news that they were "working" on a Spanish solution, NYSE went through the roof yesterday. No one seems to be aware over here that the size of the problem is still being audited! You've got to know how big the problem is before you can even think about the prospects of a successful fix. Also, the shell game that the Spanish are playing to avoid the austerity penalties being placed on them is almost laughable. In any event, the structural solutions to the problems of the European banking system are several years off--even if they can agree on a closer union regarding banks. How to sell getting closer in a system with all those problems must be a difficult sale. Then there was one comment that I found really interesting--bond returns for US treasuries and the German equivalent are at record lows--that's a lot of money moving to safe harbor, a whole lot of money. One banking commentator remarked that those numbers could be the first indicator that a bank run is already on and money from the troubled euro zone countries is moving out of the euro zone or to Germany!
But it's not all without a joke. At the recent annual festival held by our Greek Orthodox community here--the oldest in the nation--a friend who's a member of the congregation said that she had talked with her relatives in Greece. They said the joke they had heard was that Angela Merkel when she landed at the Athens airport was asked at customs, "Occupation?", "No," she answered, "just a holiday!" ;) Good to see that a sense of humor still exists!
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Here's the irony: we have congressmen and senators running around saying the U.S. debt is so out of control that we're the next Greece, yet U.S. government securities are trading at record low yields because the U.S. is seen as a safe haven. Since these are professional investors making the move, we'd have to conlcude either they are foolish or that the U.S. is not the next Greece. If you take the latter as the case, then Congress should be able to 1) raise the debt ceiling (which by the way covers existing debt, not future debt) without fear 2) work out a plan which prevents contraction of the economy in the near-term and addresses the debt in the long run. But that won't happen as long as politicians keep misreading macroeconomic signs and doing the wrong things.
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Meanwhile, in the run up to the Greek general election on Sunday 17 June, the debate is hotting up.
http://www.youtube.com/watch?v=xjVsaEUM2Ws
"Ilias Kasidiaris, spokesman for Golden Dawn, threw a glass of water at Rena Dorou, a member of the radical left Syriza party, when she made a reference to a court case pending against him. He then turned on Liana Kanelli, a Communist party member, and slapped her several times on her face."
No translation required.
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The sad truth is that our economies are tied together in a very real way. As Europe goes, so will the rest of Western civilization. If you look at collapse from a statistical perspective, we in the US are doing worse than Greece and our number will come up rapidly after the EU collapses.
Brandon
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The sad truth is that our economies are tied together in a very real way. As Europe goes, so will the rest of Western civilization. If you look at collapse from a statistical perspective, we in the US are doing worse than Greece and our number will come up rapidly after the EU collapses.
Brandon
Absolutely.
In the summer of 2007, we started to realise the extent of the US sub prime lending market. Three months later, there was a panic run on a British bank which was in danger of running out money. A year later, the British government had to bail out one very large bank, merge two other big ones, and nationalise another two more.
Of particular concern was the British bank, RBS. In October 2008, RBS came within 2 hours of collapse. A senior RBS executive on his way to a crisis financial meeting with the British government told his spouse to go to the ATM and withdraw a load of cash - just in case.
When banks fail, people panic. After all, what happens when you can't access your salary ?
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If you look at collapse from a statistical perspective, we in the US are doing worse than Greece
Actually, the US is doing remarkably better than the EU as a whole, our unemployment is between 8 and 9 %, high yes, but the EU as a whole is at 11+%, and Greece is getting up to 20. So, no we're going to get hit too, but the EU is in far worse shape.
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If you look at collapse from a statistical perspective, we in the US are doing worse than Greece
Actually, the US is doing remarkably better than the EU as a whole, our unemployment is between 8 and 9 %, high yes, but the EU as a whole is at 11+%, and Greece is getting up to 20. So, no we're going to get hit too, but the EU is in far worse shape.
The EU is in far worse shape. Hopefully our leaders can learn from some of the mistakes that were made in Europe and make some policy changes to prevent us from ending up in the same mess. But sadly, there doesn't seem to be any signs of that happening at the moment, and nothing will happen now until after the November elections.
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The following is a compelling article on the potential problems caused by the melt down in the eurozone and the writers' observations concerning the German, "Our way or the highway" insistence on achieving a solution based on austerity alone. Frankly it's not a hopeful article.
http://www.spiegel.de/international/europe/the-germans-have-learned-nothing-from-history-a-838429.html
The latest news today would indicate that the German leadership is determined to drive the whole thing, including us, into the ditch!
http://edition.cnn.com/2012/06/12/business/spanish-bank-loan/index.html?hpt=hp_t3
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If you look at post-WW2 Germany, there has been a pathological fear of inflation because of the belief that the hyperinflation (and resulting chaos) of the Weimar Republic led to the rise of Hitler and the Nazis. West Germans also have recent experience with the costs of re-unification wherein they had to bail out the struggling East. Some economists have been calling on the European Central Bank to permit more inflation so that the debt burden that is crushing Greece, Ireland, Spain, Portugal and Italy can be alleviated. Given Germany's history, you can see why they would prefer austerity to economic easing / stimulus / inflation. Unfortunately, austerity has brought on massive youth unemployment, dislocation and misery, so that the nationalist parties are on the rise again. The picture is not pretty.