couple good reads regarding Greece

[Lime]

newsweek overall is not very good, but Bobby Samuelson is a sharp guy and Niall Ferguson (who doesn't work for them) knows his stuff.

http://www.newsweek.com/id/237488/output/print

http://www.newsweek.com/id/237645/output/print

[Lime]

I want to highlight this piece from the Ferguson piece in particular:



The first will be a Greek default. It's simply not credible that the government will be able to deliver such severe fiscal tightening at a time of deep recession. Even if everything were to go according to plan, the debt would peak at 150 percent of GDP, with a crippling 7.5 percent of GDP going on interest payments. Greece manifestly lacks the political will to do this. Prediction: the government of George Papandreou will fall and its successor will inflict a 30 percent "haircut" on holders of Greek bonds.

The next act will be even more dramatic. For what makes the crisis in tiny Greece so serious is the contagion effect—the realization among investors that if this can happen to Greek bonds, it can happen to other bonds, too. A scan of the data reveals two other euro-zone countries with bloated debts (Italy and Belgium) and another two with Greek-style overreliance on foreign lending (Portugal and Spain).

Last week the rating agency Moody's placed Portugal's long-term government bond Aa2 rating on review for a possible downgrade. And as Spain sold five-year bonds paying 3.5 percent—compared with a yield of 2.8 percent two months ago—rumors swirled that Madrid was seeking a bailout even bigger than Greece's.

Nor is this the only way the Greek crisis can spread like a virus throughout the European economy. Their balance sheets stuffed full of dodgy government bonds, the Greek banks are heading into Lehman Brothers territory. For neighboring countries like Bulgaria and Romania, which rely heavily on Greek banks for funding, that spells a credit crunch.

Even more alarming is the exposure of other EU banks to Greek debt, which totals $193 billion, according to the Bank for International Settlements. Factor in the risk of copycat crises in Portugal and Spain, and you begin to see the outlines of a disastrous Europewide banking crisis. The only way out of that will be further compromises by the ECB about the paper it accepts as collateral. Already last week it waived its rules, continuing to hold Greek bonds, despite their junk status. If this continues, there is only one way for the euro to go, and that's down.

Keep this in perspective. When the euro was launched back in January 1999, it was worth less than $1.20, and for most of its first three years it was down below parity with the dollar. So its recent slide from close to $1.60 before the global financial crisis to $1.27 last week is far from unprecedented. But the way this crisis is unfolding, further declines seem likely. It will surely be at least a year before investors wake up to the fact that the fiscal predicament of the United States is actually worse than that of the euro zone.

[Mr. Hawk]

That last sentence is slightly alarming.

[Lime]

That last sentence is slightly alarming.

dude, we've got at least a year.

[Debit One]

That last sentence is slightly alarming.

Do not worry. Obama has one hand on the rudder of our economic ship, and a budgetary scalpel in the other.

[Rolo Tomassi]

I was watching a rerun of O'Reilly early this morning, and I actually heard a Democratic strategist say that Greece's problems can be blamed on two things:

1. Greedy Greek corporations, and
2. Corrupt European bankers.

Honest to God. Damned near crapped my pants.

[RiotFan]

newsweek overall is not very good, but Bobby Samuelson is a sharp guy and Niall Ferguson (who doesn't work for them) knows his stuff.

http://www.newsweek.com/id/237488/output/print

http://www.newsweek.com/id/237645/output/print

Good reads, especially the Ferguson piece. Scary stuff...

[Mrs. G]

No respect for those who kept the rest of us from speaking farsi (or whatever the ancient iranians spoke) for the last 2500 years. We are watching a movie on the battle of thermopylae right now. No respect, I tell ya.

Mr. Hawk - thanks for the heads up so we could flip the channel and watch your favorite flick.

[Mr. Hawk]

If Gus is watching that too, then he's a latent homosexual.

[Mrs. G]

If Gus is watching that too, then he's a latent homosexual.

If so, I hope he doesn't come to terms with it until LG is in college.

Also, he says you watched it long before he did. ;)

[mobyditch]

And no mention of the connection between European debt and US banks. Interesting. Only time will tell..

[Lime]

And no mention of the connection between European debt and US banks. Interesting. Only time will tell..

expound.

[Mr. Hawk]

And no mention of the connection between European debt and US banks. Interesting. Only time will tell..

expound.good luck on that one

[mobyditch]

And no mention of the connection between European debt and US banks. Interesting. Only time will tell..

expound.

You don't believe for a second that the US banks don't hold any debt issue by Europe now do you?? International banking is well connected between the US and Europe.

[mobyditch]

The Agenda For Emergency Economic Strategy Discussions This Weekend

First, the core problem is that the euro zone as currently designed is a failure. It has proven wrong to blend so many disparate nations into one currency, and then manage the currency according to relatively hawkish German preferences.

This is an unfortunate loss of face for the eurozone policy elite, but they need to get over this and move on.

http://baselinescenario.com/2010/05/07/the-agenda-for-emergency-economic-strategy-discussions-this-weekend/#more-7437

[Lime]

And no mention of the connection between European debt and US banks. Interesting. Only time will tell..

expound.

You don't believe for a second that the US banks don't hold any debt issue by Europe now do you?? International banking is well connected between the US and Europe.

Well, duh. Why else would investors be so rattled by the situation over there?

[TallGrass]

International banking is well connected between the US and Europe.
http://www.flashpointsocialmedia.com/Area51/Orion/Images/o_rly.jpg