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Financial clusterfuck in Europe

59K views 1K replies 77 participants last post by  waistnick21 
#1 · (Edited)
okay, so according to the press the greeks are about to apply for imf/eu-money in the next few hours. i guess most of you have been following the story, for those who didn't, here's the short version:

the greek government has been spending pretty recklessly over the course of the last, say, decades. it was okay for them to do so because getting more and more credit used to be fairly cheap. the recession was hard on the people, it was harder on governments though, especially the ones with huge spending. due to the fact that the greek economy more and more relied on tourism (hit the most) and lacks any sort of major industries as of now, the credit default swaps went up since 2009. that means they will have to pay higher interest rates for the bonds they sell.

people were pretty sure greece wouldn't be able to cope with its financials unless external experts would take care of the mess. so brussels and washington came up with an umbrella if things were to get worse.

well, they did. as per usual, greek officials had been blatantly lying about the deficit(revised from 12,7% to ~14% in 09) - and the market place is having a field day. german bankers have warned merkel that greece is bound to end up like hypo real estate, a german banking conglomerate that swallowed billions and billions of cash just like a black hole due to its hidden accounts.

if the greeks were to default, it would have quite an impact on western europe as well: banks in france (~70 billion euros) or germany (~45) hold most of the greek debt - which is obviously why sarkozy was pushing a hellas-friendly agenda for some time now and keeps trying to get berlin to pay.

so here we are with greek basically bankrupt. the worst thing is that other countries are likely to follow: portugal's credit default swaps have been rising steadily, spain might be even worse, even france is getting some heat - and last but not least, the "last resort's", germany's, interest rates are higher than ever (still very low, but nonetheless).

do you believe we're gonna get out of this any time soon? will we see a major default in the euro-zone? and what about the u.s. or the uk?
 
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#117 ·
Re: Credit crisis in Greece, others to follow...?

@ Spain

On behalf of Ireland I would like to announce that we'll accept an initial down-payment of Cesc Fabregas, Xavi Hernandez and Fernando Torres on the $14bn you owe us.
:lol:

@ chip

i don't think goldman is a political issue. they bribe whoever they need to, be it republican or democrat. it's obvious though that the kind of de-regulation laws that made all these shenanigans possible have been almost exclusively drafted by conservative, pro-business people, fueled by a conservative, pro-business agenda. i guess the only reason for the democrats being the main "benefactor" donations-wise, if you will, is that goldman feels like it's way more necessary to bribe dems. they got the vast majority of the reps in the tank anyways, mostly because they're obedient enough. no need to splash 3-d glasses on the blind.
 
#119 ·
Re: Credit crisis in Greece, others to follow...?

i'm sorry, but if you really believe that the dems' shit regarding all things banking deregulation stinks more than the reps' shit, i just can't help you. spin it all you want, but i'm sure deep down you know fully well that it's the right wing that the banks don't need to worry about, not the left wing.
 
#123 ·
Re: Credit crisis in Greece, others to follow...?

i'm sorry, but if you really believe that the dems' shit regarding all things banking deregulation stinks more than the reps' shit, i just can't help you. spin it all you want, but i'm sure deep down you know fully well that it's the right wing that the banks don't need to worry about, not the left wing.
I apologize for responding so slowly. I've been very busy this week.

Ok then, please point me to the specific legislation passed by Republicans that deregulated the banking industry. W Bush didn't deregulate much, certainly not the financial sector. In fact, with Sarbanes-Oxley it's safe to say he actually imposed more regulations on the industry. In general, he was actually a big regulator. You might find this article interesting:

http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off

The Bush team has spent more taxpayer money on issuing and enforcing regulations than any previous administration in U.S. history. Between fiscal year 2001 and fiscal year 2009, outlays on regulatory activities, adjusted for inflation, increased from $26.4 billion to an estimated $42.7 billion, or 62 percent. By contrast, President Clinton increased real spending on regulatory activities by 31 percent, from $20.1 billion in 1993 to $26.4 billion in 2001.
Yikes, we've spent almost the last two decades regulating ourselves up the wazoo and we're still in dire economic straits, although I'm sure that's nothing that can't be fixed with even more regulations, right? Right?




It takes a lot of bureaucrats to create and enforce all those regulations. In eight years, Bush increased the federal government's regulatory staff by 91,196 employees. Clinton cut it by 969.
Do you have any evidence that supposed Republican deregulation caused the financial crisis? The deregulation that is most commonly cited is the repeal of Glass-Steagal, but that occurred during the Clinton years. HW Bush didn't deregulate the industry. Not even Reagan passed any major piece of legislation that deregulated finance. However, his predecessor Jimmy Carter, a Democrat, did pass the "Depository Institutions Deregulation and Monetary Control Act". If you believe that deregulation caused the financial crisis (and just to be clear, I don't...see my previous posts) then don't blame Republicans.

Now, don't get me wrong, both parties are in bed with big business. All I'm saying is that when a party that's getting paid by big business is touting new legislation that it claims will crack down on those very same businesses, then we'd be stupid not be skeptical. Why would they bite the hand that feeds them? In my opinion, this legislation just entrenches the big banks, making it harder for smaller local and regional banks to compete. Big banks can just come get a bailout when they screw up, so they don't need to worry about risk. The small banks will still be responsible for their own losses if they mess up, as all businesses should be. These regulations certainly won't help ordinary people, unless of course you work at a big bank. This shouldn't come as a surprise since the big banks are giving money to the people writing the law, Democrats in this case. Republicans do this type of stuff, as well, and it's just as damaging. This time around it's the Dems, though. As I said before, both parties truly do suck.
 
#120 ·
Re: Credit crisis in Greece, others to follow...?

so bank of america and jp morgan join goldman in the "no-trading-loss-ever" club.

since things in reality tend to be zero sum, when everyone makes money, someone may be tempted to ask the question, just who is losing money here day in day out?

i'm fairly sure it's all of us.
 
#121 ·
Re: Credit crisis in Greece, others to follow...?

Video of Niall Ferguson speaking at the Petersen Insitute last week.

Should be interesting for anyone with an interest in the issues of this thread. he's a superb speaker and you don't need a doctorate in economics to understand him.

Some interesting stuff about how the US and UK are "outpigging the PIGS" (25 mins onwards), performaing worse than the PIGS in terms of projections for future debt as % of GDP and interest payments as % of GDP. Also some stuff I'd never heard of about huge inflation in food prices in the US.

The key issue from his historical perspective is when a governments start to spend a rising proportion of tax revenues on interest payments. That's when countries start to get in deep shit.

http://paul.kedrosky.com/archives/2010/05/video_fiscal_cr.html

It's long but a surprisingly easy watch.
 
#122 ·
Re: Credit crisis in Greece, others to follow...?

Video of Niall Ferguson speaking at the Petersen Insitute last week.

Should be interesting for anyone with an interest in the issues of this thread. he's a superb speaker and you don't need a doctorate in economics to understand him.

Some interesting stuff about how the US and UK are "outpigging the PIGS" (25 mins onwards), performaing worse than the PIGS in terms of projections for future debt as % of GDP and interest payments as % of GDP. Also some stuff I'd never heard of about huge inflation in food prices in the US.

The key issue from his historical perspective is when a governments start to spend a rising proportion of tax revenues on interest payments. That's when countries start to get in deep shit.

http://paul.kedrosky.com/archives/2010/05/video_fiscal_cr.html

It's long but a surprisingly easy watch.
There is absolutely no doubt about it. It's a slow-moving train wreck.
 
#126 ·
Re: Credit crisis in Greece, others to follow...?

by "pro-business" i meant "pro-wall street big shots" here obviously.

yeah, you're right about the amount of democrat votes. i never said there's no guilt across the aisle. is there any website where they broke down the voting patterns of the two parties? i'm sure reps outnumbered dems pretty easily. i mean, even during the 08 campaign mccain was bragging about how proud he was to have been a part of the party that deregulated the banking business.
 
#128 ·
#129 ·
Re: Credit crisis in Greece, others to follow...?

that's bullshit.what a misleading title ..they don't SELL islands they thinking about selling some goverment propery on the islands.
Which has been happening for decades now already with private property.Half of Crete is owned by german pensioners.
 
#130 ·
Re: Credit crisis in Greece, others to follow...?

I was about to say I wanted Mykonos. But the article starts by saying only a part of the island is for sale. I wouldn't want to share it with drunken Brit and German louts. No bid.
 
#136 ·
Re: Credit crisis in Greece, others to follow...?

I actually wrote a report somewhat on Greece's crisis for my supply chain management class. Pretty interesting stuff.
 
#137 ·
Re: Credit crisis in Greece, others to follow...?

Funny, the EU was envisioned as a way to avoid the conflicts that have plagued Europe since the fall of the Roman Empire. Instead, it's having the opposite effect. Just look at the tensions between the Greeks and Germans. German authorities normally would have no business dictating policy in countries not named Germany. The Greeks know they fucked up. If it weren't for the creation of the Euro, they could solve their own problems as they see fit, and Germans wouldn't have to fear the outcome nearly as much. Union has just created resentment.

The EU allows politicians from one nation to dictate policy in separate countries, even those with different cultures, values, economies, etc. Why on earth would you give up local control in exchange for a faraway government that is only partially accountable to you? Sure, you get to send a delegation that has voting power, but that's only a fraction of the vote. What benefit did the people of Europe derive from the creation of the EU? Was it worth giving up local decision-making authority? One size does not fit all, and when you're one of the individuals who's forced to wear a size that doesn't fit, you're going to be pissed, and understandably so.

The importance of federalism is about to smack Europeans across the face.
 
#140 ·
Re: Credit crisis in Greece, others to follow...?

Funny, the EU was envisioned as a way to avoid the conflicts that have plagued Europe since the fall of the Roman Empire. Instead, it's having the opposite effect. Just look at the tensions between the Greeks and Germans. German authorities normally would have no business dictating policy in countries not named Germany. The Greeks know they fucked up. If it weren't for the creation of the Euro, they could solve their own problems as they see fit, and Germans wouldn't have to fear the outcome nearly as much. Union has just created resentment.

The EU allows politicians from one nation to dictate policy in separate countries, even those with different cultures, values, economies, etc. Why on earth would you give up local control in exchange for a faraway government that is only partially accountable to you? Sure, you get to send a delegation that has voting power, but that's only a fraction of the vote. What benefit did the people of Europe derive from the creation of the EU? Was it worth giving up local decision-making authority? One size does not fit all, and when you're one of the individuals who's forced to wear a size that doesn't fit, you're going to be pissed, and understandably so.

The importance of federalism is about to smack Europeans across the face.
100% accurate. My country is not a state. it's a Nation. Portuguese, French, English, Greek, none of us feels "European", there's nothing like "United States of Europe". USA always have been a single country, but Europe is made of lot different countries since their beginning, you can't turn them into simple "states" of a greater country. Europe is dead already.
 
#141 ·
Re: Credit crisis in Greece, others to follow...?

I would say that the EU is actually a good thing to have. On the other hand, EMU is beginning to look like a mistake. A single currency might be possible for s small group of very similar countries. Unfortunately, EMU countries are so different from each other. Greece, Estonia, Finland, Portugal to just name a few. A single currency might work well for a while, when we are not suffering from recession and all the member countries are doing okay.

Recent events have shown what happens when problems arise. It doesn't look good at all. My guess is that 5 years from now, we still have EMU but a lot less countries are a part of it than now.
 
#142 ·
Re: Credit crisis in Greece, others to follow...?

What really hapens to the world economy should the clowns in America fail to agree on a budget and default?
 
#144 ·
Re: Credit crisis in Greece, others to follow...?

I hope America and the PIGS of Europe all default. Maybe finally the world will realize governments don't have bottomless wells of cash to bail everyone out.
This would cause enormous problems for all of us. But I see your point. Maybe this is what is needed to make the point. Those who are ready to enjoy the rewards, must also be ready to bear the risk they take.
 
#147 ·
Re: Credit crisis in Greece, others to follow...?

The US government chose to default decades ago when it embarked on a monetary policy based solely on debt. All that's happening right now is arrival at that destination. I too hope for a default immediately. Sure, it would be painful for a short time, but then we can move on with a more fiscally sustainable system of government. Same goes for the various European governments.

It should also be noted that not only will it eventually default on its legal debt (i.e. the actual loans on the books) but also the welfare "obligations" that it's promised to pay in the future, that are by design off the books. Not only will the creditors be disappointed, but the people who foolishly planned their retirements around these promises.
 
#149 ·
Re: Credit crisis in Greece, others to follow...?

The US government chose to default decades ago when it embarked on a monetary policy based solely on debt. All that's happening right now is arrival at that destination. I too hope for a default immediately. Sure, it would be painful for a short time, but then we can move on with a more fiscally sustainable system of government. Same goes for the various European governments.

It should also be noted that not only will it eventually default on its legal debt (i.e. the actual loans on the books) but also the welfare "obligations" that it's promised to pay in the future, that are by design off the books. Not only will the creditors be disappointed, but the people who foolishly planned their retirements around these promises.
indeed, but when elections are coming, no one wants to be the guy who caused the recession. Obama loves his job more than his country (like Sarkozy, Merkel....)
 
#148 ·
Re: Credit crisis in Greece, others to follow...?

the end of suspense, wow, there was only 100% chances it would end this way, like it always did. next step : 20 trillions.
 
#151 ·
Re: Credit crisis in Greece, others to follow...?

And so it begins:

NEW YORK (CNNMoney) -- Credit rating agency Standard & Poor's on Friday downgraded the credit rating of the United States, stripping the world's largest economy of its prized AAA status.

In July, S&P placed the United States' rating on "CreditWatch with negative implications" as the debt ceiling debate devolved into partisan bickering.

To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt.

In its report Friday, S&P ruled that the U.S. fell short: "The downgrade reflects our opinion that the ... plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

S&P also cited dysfunctional policymaking in Washington as a factor in the downgrade. "The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed."

A Treasury Department spokesman pushed back on the rating change, saying that S&P's analysis was flawed.

A source familiar with the matter said S&P initially miscalculated the growth trajectory of the nation's debt, and then went ahead with its downgrade anyway.

The source also said S&P didn't give enough credit for the debt-ceiling compromise, which paved the way for more than $2 trillion in spending cuts over the next 10 years.

However, one of S&P's explicit criticisms of the compromise was that it didn't address the biggest drivers of the nation's debt -- Social Security and Medicare -- and didn't allow for additional tax revenue. ("What's wrong with the debt ceiling deal?")
http://money.cnn.com/2011/08/05/news/economy/downgrade_rumors/index.htm?iref=BN1

Well it's about fucking time.
 
#152 ·
Re: Credit crisis in Greece, others to follow...?

Standard and Poors are fuck**g asshole.
This downgrade is unjustified.
Go to hell S&P
 
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