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Deflation only. It's not just Greece leaving, but the chain reaction in would set off. Next: Italy, Portugal, Spain, take your pick of order. You might, and eventually will, throw France and Belgium into the leaving category.
Greece leaving, followed by the other 3, will leave the Euro hardliners with a stronger hand. Netherlands, Germany, the Baltics, Poland. Their sound currency regime would be the only voice heard.
Sound currency means lower inflation, if not deflation, but lower inflation was not an option.
Ultimately, I see a bifurcated Europe with the northern and eastern countries aligning in one block and the southern, western ones in another. Religious, cultural, and security reasons seem to me to make this division inevitable. It's not a good thing, but Europe's history is full of not good things.
I may not live to see it, but eventually it will come.
The Euro currency would probably lose plenty more of its value as people would start speculating about other countries leaving the Euro, which creates instability. Quite honestly, I don't think the Euro is going to last. The countries operate so differently. The Euro may have had good intentions but...
It's tough to say what would happen RE: currency value.
Think about 10 guys sitting at a poker game: If the worst player keeps busting out, borrowing chips from the other players to keep the game going, then suddenly leaves and doesn't pay back any of the borrowed chips, what happens to the rest of the players in the game....
Syriza party has said they will default and leave the game. And all polls show they have a comfortable lead if (when) elections are held (within weeks).
I see everyone failing their final exam in Economics, because they don't have a clue.
Quote:
Originally Posted by Lowexpectations
I think if Greece exits it could cause greater problems for the EUR. Once the gate opens will others exit? It's instability for the currency and that's never a good thing
The disturbing lack of economics on this thread is matched only by the lack of political science.
The EU is a confederation.
The Euro is a currency.
Now that life is simplified....
Greece has both a spending problem and a revenue problem.
The currency that Greece uses is totally irrelevant. If Greece had never used the Euro, Greece still would have defaulted on its loans, because Greece has both a spending problem and a revenue problem. Switching to the Drachma does not alter the reality that no one is going to loan Greece money. If Greece starts printing money, the only thing that happens is they have hyper-Monetary Inflation, the value of the Drachma drops against all currencies, Greece has extreme difficulty importing anything, because the cost is so great, due to the lower value of the currency, and Greece's problems only worsen.
As far as Monetary Inflation or Deflation of the Euro, all of you need to REDO FROM START Econ 101.
If Greece abandons the Euro currency, how do you think Greece will pay for anything in the EU?
If Greece buys goods from EU member-States using the Euro, and Greece quits the Euro, then Greece will pay for goods it buys from EU member-States in, um, you know, Euros.
Explain how that decreases demand for the Euro currency.
I guess no one understands the meaning of BIS -- Bank of International Settlements. The operand here is "Settlements" for those who didn't know.
Monetarily...
Deflation only. It's not just Greece leaving, but the chain reaction in would set off. Next: Italy, Portugal, Spain, take your pick of order. You might, and eventually will, throw France and Belgium into the leaving category.
Greece leaving, followed by the other 3, will leave the Euro hardliners with a stronger hand. Netherlands, Germany, the Baltics, Poland. Their sound currency regime would be the only voice heard.
Sound currency means lower inflation, if not deflation, but lower inflation was not an option.
Ultimately, I see a bifurcated Europe with the northern and eastern countries aligning in one block and the southern, western ones in another. Religious, cultural, and security reasons seem to me to make this division inevitable. It's not a good thing, but Europe's history is full of not good things.
I may not live to see it, but eventually it will come.
I think you're largely correct. Part of the effect of the Euro and the levels at which everyone joined has given Germany a circa 20% labor cost advantage which is part of the reason why their products dominate Europe and so much wealth has been flowing there.
For Greece, the best move is to start trading the drachma on world currency markets to establish a stable value, drop the Euro and adopt the USD for a year years, then switch back to the drachma when conditions are right.
I think you're largely correct. Part of the effect of the Euro and the levels at which everyone joined has given Germany a circa 20% labor cost advantage which is part of the reason why their products dominate Europe and so much wealth has been flowing there.
For Greece, the best move is to start trading the drachma on world currency markets to establish a stable value, drop the Euro and adopt the USD for a year years, then switch back to the drachma when conditions are right.
It's a nice fantasy, but won't happen. The Global Elite knows if they let one country out of the currency union, others will want to follow They're not going to let that precedent be set. Their goal is to completely wipe out the sovereignty of individual nation states.
I see everyone failing their final exam in Economics, because they don't have a clue.
The disturbing lack of economics on this thread is matched only by the lack of political science.
The EU is a confederation.
The Euro is a currency.
Now that life is simplified....
Greece has both a spending problem and a revenue problem.
The currency that Greece uses is totally irrelevant. If Greece had never used the Euro, Greece still would have defaulted on its loans, because Greece has both a spending problem and a revenue problem. Switching to the Drachma does not alter the reality that no one is going to loan Greece money. If Greece starts printing money, the only thing that happens is they have hyper-Monetary Inflation, the value of the Drachma drops against all currencies, Greece has extreme difficulty importing anything, because the cost is so great, due to the lower value of the currency, and Greece's problems only worsen.
As far as Monetary Inflation or Deflation of the Euro, all of you need to REDO FROM START Econ 101.
If Greece abandons the Euro currency, how do you think Greece will pay for anything in the EU?
If Greece buys goods from EU member-States using the Euro, and Greece quits the Euro, then Greece will pay for goods it buys from EU member-States in, um, you know, Euros.
Explain how that decreases demand for the Euro currency.
I guess no one understands the meaning of BIS -- Bank of International Settlements. The operand here is "Settlements" for those who didn't know.
Monetarily...
Mircea
When Greece leaves, it will renounce its Euro debts. It will start with a clean balance sheet which it will start to redden immediately. However, it simply cannot come close to repaying its debts. It is already in depression. The only industry is has is tourism. Its people, unions, politicians, have nothing more they will give up.
Whatever happens after default, it will happen after the relief from renouncing their debts is felt. The day when a nation would send its navy to enforce its claims on a debtor are long gone. I can't see Greece living with 25% unemployment for 20 - 30 years.
With the Drachma, it can serially devalue its way out of bankruptcy. It can't do that now. True, it will devalue its way into poverty, but that's a long-term problem which doesn't matter to it now.
Still, I always thought the EU would become something like the US back in the 90s but I guess this would be an example for the US in what happens if each of the individual states get too much sovereignty and start to act independently from other states? Not trying to make this entirely political, but I hear how republicans say if you want more government involvement, move to Europe, but I see it as the thing that holds the US together but Europe doesn't have an overriding central government. Though I am still hoping that the EU gets through this in "one" piece, without a "civil" war.
It was a lesson the United States learned right after gaining it's independence using the articles of confederation. The problems that occurred from that is why we have a stronger federal government under the constitution and more importantly the interstate commerce clause...although the later isn't much of a problem for Europe but it was a major problem for the United States during that time. What is a problem for Europe is that the founders of EU want a United States of Europe...problem is they based the EU in part off the articles of confederation...which was a complete and utter failure. We learned from our mistakes...the EU hasn't.
When Greece leaves, it will renounce its Euro debts. It will start with a clean balance sheet which it will start to redden immediately. However, it simply cannot come close to repaying its debts. It is already in depression. The only industry is has is tourism. Its people, unions, politicians, have nothing more they will give up.
Whatever happens after default, it will happen after the relief from renouncing their debts is felt. The day when a nation would send its navy to enforce its claims on a debtor are long gone. I can't see Greece living with 25% unemployment for 20 - 30 years.
With the Drachma, it can serially devalue its way out of bankruptcy. It can't do that now. True, it will devalue its way into poverty, but that's a long-term problem which doesn't matter to it now.
Who will lend Greece any money then? In fact, for a period of time during the Greek Depression, Greece was locked out of the international bond markets due to its atrocious credit rating. If they were locked out of the international bond market even without defaulting, what do you think will happen if they do default? The vast majority of Greek debt holders are Greeks which means their savings will be completely wiped out if Greece defaults.
Who will lend Greece any money then? In fact, for a period of time during the Greek Depression, Greece was locked out of the international bond markets due to its atrocious credit rating. If they were locked out of the international bond market even without defaulting, what do you think will happen if they do default? The vast majority of Greek debt holders are Greeks which means their savings will be completely wiped out if Greece defaults.
Banks will always lend countries money. The IMF will lend them money. The World Bank will lend them money. Smarter-by-half investors will buy their bonds.
Greece ditches the Euro. Greece becomes monetarily non-sovereign.
Greece defaults on its debts held by foreign currency (Euro), then starts over in its own currency. Greece can make its economy and all rules associated with its sovereign currency that it wants.
HOWEVER, the Elites in the Eurozone won't want that. They would much prefer Greece be poor and miserable. Expect them to inflict further economic pain on Greece even if it considered such an idea.
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