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What Happens If, Europe ?


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So the only econ classes I took in college were the required macro/micro classes everyone had to take so my economic knowledge is at best limited.Greece has massive public dept, EU is talking about bailouts but it looks like it will just be postponing the inevitable. Greece will never be able to pay back their dept so what would happen if they just said "fuck y'all we aint payin'"?

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Germany gets stuck with the bill.The Euro weakens until it collapses.NothingA chain reaction with Italy Portugal and Spain in a race to see who collapses first.The US dollar becomes stronger.?One or more of the above.

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My best guess is Greece would be forever financially isolated from the majority of first world countries and that would slowly but surely make Greece into a second world place or worse. Mk, strat or Henry would have better Econ related insight.

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My best guess is Greece would be forever financially isolated from the majority of first world countries and that would slowly but surely make Greece into a second world place or worse. Mk, strat or Henry would have better Econ related insight.
Actually the best thing that can happen to the Greek economy would be if they left the Eurozone and had a controlled default on their debt.The entire concept of the Eurozone and a common currency is flawed, the countries that make up the zone are far too different to make it work. If Greece does default it'll cause a lot of pain for banks everywhere but in particular European ones that own Greek Eurobonds or banks that are exposed to banks that are exposed to Greece. Expect markets everywhere to go even more in the toilet with the $USD rising in value and the interest rate on US Treasuries to fall even further.Lots of countries such as Argentina have defaulted on their soverign debt and been the better for it.
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Recommended reading: Fault Lines by Raghuram Rajan. Most here would be too stupid to understand it, but the overall implication is easy enough to digest.The Eurozone has severe problems, most of them going back go hugely off-kilter producer/consumer (ie- debt) ratios. The lower IQ nations will inevitably burden the higher IQ nations (IQ and the Wealth of Nations is another good read). Also, Seth Klarman in a recent quarterly letter noted the very dangerous exposure of Eurozone sovereign debt had by US money-market funds and bank products. Think the financials are out of the woods? Haha. The derivatives dicktrain hasn't blown up yet, and they're STILL engaging in risky practices. Glass–Steagall needs to go back in place. So, what happens to Greece? Their standard of living returns to where it belongs... The idea that those people are "European" is a ****ing joke. Ever been there? They look like Pakistanis.

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Actually the best thing that can happen to the Greek economy would be if they left the Eurozone and had a controlled default on their debt.The entire concept of the Eurozone and a common currency is flawed, the countries that make up the zone are far too different to make it work. If Greece does default it'll cause a lot of pain for banks everywhere but in particular European ones that own Greek Eurobonds or banks that are exposed to banks that are exposed to Greece. Expect markets everywhere to go even more in the toilet with the $USD rising in value and the interest rate on US Treasuries to fall even further.Lots of countries such as Argentina have defaulted on their soverign debt and been the better for it.
yup.europe simply won't allow the greek default in any uncontrolled fashion. it would actually just crush the world economy if that happened. the fact of the matter is that most of the leaders in europe understand what is blazingly obvious about the situation, that the uncertainty around greece and with european banks is actually hurting the worldwide recovery. and they do want to come to a quick agreement! allow me to quote soros in the FT:
It takes a crisis to make the politically impossible possible. Under the pressure of a financial crisis the authorities take whatever steps are necessary to hold the system together, but they only do the minimum and that is soon perceived by the financial markets as inadequate. That is how one crisis leads to another. So Europe is condemned to a seemingly unending series of crises. Measures that would have worked if they had they been adopted earlier turn out to be inadequate by the time they become politically possible. This is the key to understanding the euro crisis.
to add to what bob said, greek's economy would actually benefit hugely by ditching the euro. for example, they derive a bunch of income from tourism, which would increase noticeably if their currency were cheaper relative to the rest of the world.the situation sucks for germany and it doesn't. they'd be in much worse shape with exports if they were on the mark instead of the euro. virtually everyone else in the EU suffers from a more expensive currency because of germany. mk h and brv all know more about econ than I do, though. I never went to class.
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My best guess is Greece would be forever financially isolated from the majority of first world countries and that would slowly but surely make Greece into a second world place or worse. Mk, strat or Henry would have better Econ related insight.
Bob and Jeff covered a lot of the realistic situation. This is the textbook situation, which is also unrealistic. Textbooks will tell us this kills them forever, but in reality the people out there buying this kind of paper have short memories...as they should. A default screws them royally for a little while - they won't be able to run a deficit (can't sell debt), and since their economy currently sucks, that involves big pain the Greeks. Long run, they'll be able to borrower, just like plenty of other countries who have defaulted in the past.
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Examples of sovereign defaults are ample throughout recorded history. The Greeks, of course, were the first to do it in, you know, something something BC.There are obviously aspects which are unique to this situation due to the shared currency. Essentially, when sovereigns default their borrowing costs go up astronomically (how long this lasts is dependent upon the settlement with creditors--i.e. how bondholders are treated i.e. hey I got .50 on the dollar for these in the worst case scenario, this isn't so bad, maybe I'll do it again down the road--and how long it takes the sovereign to get their shit together). That said, the major issue here is that the stronger EU countries don't want their borrowing costs to skyrocket on account of tiny little Greece; they don't want contagion. As I told Geoff, Germany and France are begrudgingly finding a solution to the first part of the problem (treating bondholders kindly), but the other problem (Greece getting their shit together) isn't likely to happen if Greece remains on the Euro. They don't want to (due to their economy being all tourism) so any austerity measures will be half-hearted at best and will create baggage for any politician who votes for it. The other issue with sovereign defaults, of course, is that they tend to be contagious (Latin America '30s, Africa '80s, Asia '97) and there will be panic in the event of an actual default. There are plenty of other EU countries with dogshit balance sheets who could also default if they are suddenly forced to pay much higher rates on their debt.Greece should be allowed to exit the EU and default on their debt, which will allow their currency to go back to having a million zeroes behind it and they'll be shunned by the international financial community for 3-5 years (like Argentina in 2001), but they will breach the chrysalis. It's better than continuously kicking the proverbial can. Greece can't really survive on the Euro long-term. Without tourism they're shot. People are terrified by what will happen to the Euro if they leave, but give me a break. Greece's economy contributes like 2% of EU GDP. The currency would have some shocks but long run would be stronger.

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I think the answer SAM is looking for is Zombie Apocalypse.Oh, wait, that is the answer Shake is looking for.
I'm not a big fan of Zombies.
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Examples of sovereign defaults are ample throughout recorded history. The Greeks, of course, were the first to do it in, you know, something something BC.There are obviously aspects which are unique to this situation due to the shared currency. Essentially, when sovereigns default their borrowing costs go up astronomically (how long this lasts is dependent upon the settlement with creditors--i.e. how bondholders are treated i.e. hey I got .50 on the dollar for these in the worst case scenario, this isn't so bad, maybe I'll do it again down the road--and how long it takes the sovereign to get their shit together). That said, the major issue here is that the stronger EU countries don't want their borrowing costs to skyrocket on account of tiny little Greece; they don't want contagion. As I told Geoff, Germany and France are begrudgingly finding a solution to the first part of the problem (treating bondholders kindly), but the other problem (Greece getting their shit together) isn't likely to happen if Greece remains on the Euro. They don't want to (due to their economy being all tourism) so any austerity measures will be half-hearted at best and will create baggage for any politician who votes for it. The other issue with sovereign defaults, of course, is that they tend to be contagious (Latin America '30s, Africa '80s, Asia '97) and there will be panic in the event of an actual default. There are plenty of other EU countries with dogshit balance sheets who could also default if they are suddenly forced to pay much higher rates on their outstanding debt.Greece should be allowed to exit the EU and default on their debt, which will allow their currency to go back to having a million zeroes behind it and they'll be shunned by the international financial community for 3-5 years (like Argentina in 2001), but they will breach the chrysalis. It's better than continuously kicking the proverbial can. Greece can't really survive on the Euro long-term. Without tourism they're shot. People are terrified by what will happen to the Euro if they leave, but give me a break. Greece's economy contributes like 2% of EU GDP. The currency would have some shocks but long run would be stronger.
Good post.
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Actually the best thing that can happen to the Greek economy would be if they left the Eurozone and had a controlled default on their debt.The entire concept of the Eurozone and a common currency is flawed, the countries that make up the zone are far too different to make it work. If Greece does default it'll cause a lot of pain for banks everywhere but in particular European ones that own Greek Eurobonds or banks that are exposed to banks that are exposed to Greece. Expect markets everywhere to go even more in the toilet with the $USD rising in value and the interest rate on US Treasuries to fall even further.Lots of countries such as Argentina have defaulted on their soverign debt and been the better for it.
Oh lookie, Greece really wants off the Euro.
The Euro is doomed basically.The Germans have benefited by being in the Euro Zone since the Mark would have been higher in value relative to the other European currencies and other World Wide currencies such as the USD or British Pound which has helped Germany maintain it's export business.Now the Germans don't want to pay the price to keep the Eurozone from falling apart. One of the key things is that there is no lender of last resort for the Eurozone. The ECB doesn't think it has the authority. Without a lender of last resort for the Eurozone such as the US Fed things are doomed.
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just so everyone's clear, if greece were to abandon the euro currency it would not in any way doom the currency or the future of the eu.it would be like if indiana or minnesota seceded from the u.s. good news story, but in the grand scheme mostly irrelevantspain and italy, on the other hand, would be a problem.

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just so everyone's clear, if greece were to abandon the euro currency it would not in any way doom the currency or the future of the eu.it would be like if indiana or minnesota seceded from the u.s. good news story, but in the grand scheme mostly irrelevantspain and italy, on the other hand, would be a problem.
I don't think things other than Greece are going to fall apart quickly but unless there is greater political integration and unless the ECB starts acting as a lender of last resort I don't think the Eurozone can hold.Maybe reading Nouriel Roubini is making me a pessimist
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I don't think things other than Greece are going to fall apart quickly but unless there is greater political integration and unless the ECB starts acting as a lender of last resort I don't think the Eurozone can hold.
meh, there's always the imf
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Nick Papageorgio decides that he's not gonna take the heat for making the big decision so he pussies out and puts it up for a vote and might blow the whole thing. Pussy.

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Nick Papageorgio decides that he's not gonna take the heat for making the big decision so he pussies out and puts it up for a vote and might blow the whole thing. Pussy.
Or alternatively,Why allow Sarkozy and Merkel to dictate policy to Greece--policy which is hugely unpopular among his constituents? Greece is supposed to be a democracy, after all. The referendum will show there is consensus in Greece to abandon the euro.
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