[Jonm1010]

The direct effect of printing money is inflation, feel free to point a source that teaches otherwise. Are you going to argue that Japan is in a dandy and fine position? They're still in the same recession that hit them in 90's(ok they somewhat recovered mid 00's, but went crap again with the global crisis).

Funny thing though, Japan is still managing to finance their debt at a low interest rate.

[SlipperySlope]

And Im still not sure you are understanding the connection between spending cuts and the recovery. To borrow from Krugman The point I am trying to make, which is echoed by Krugman here, is that spending cuts lead to job losses and a reduction in growth. If the private sector is not able to absorb those losses, and given current hiring trends they arent, chasing spending cuts right now will in all likelihood severely jeopardize the recovery. And you have still failed to provide tangible evidence other than assumption as to why our deficit level is on some sort of precipice and can not be put off til we've recovered.

I said it myself that deficit reduction will likely put us into recession.

Frankly, I think the US will default before a real recovery gets underway. There are far too many negative headwinds right now, and the prospects for another recession look higher than a real recovery.

The current recovery isn't real. If our deficit spending is 10%/yr, and our economy is growing at only 2.something %, is it a real recovery? Our systemic issues are being hidden by the deficit spending. The real state of our economy is being masked.

So, a bubble. Now the question: Do we let the air out of the bubble gradually, or let it burst (default)?

[2San]

Funny thing though, Japan is still managing to finance their debt at a low interest rate.

Yeah, which is still a lot if you consider how great their debt is. Think about it 50% off their tax revenue goes to paying of debt(that isn't even a scariest part, but this thread isn't about Japan). I mentioned Japan as example, because it was a prime example where most people knew the bubble was going to burst in advance, but (delusional)people still kept investing anyhow.

[TedNindo]

Yeah, which is still a lot if you consider how great their debt is. Think about it 50% off their tax revenue goes to paying of debt(that isn't even a scariest part, but this thread isn't about Japan). I mentioned Japan as example, because it was a prime example where most people knew the bubble was going to burst in advance, but (delusional)people still kept investing anyhow.

But Japan is a relatively small country with a HUGE income from production and exports. They export more then half of what the US does. And they actually buy their own products.

[Evlar]

Yeah, which is still a lot if you consider how great their debt is. Think about it 50% off their tax revenue goes to paying of debt(that isn't even a scariest part, but this thread isn't about Japan). I mentioned Japan as example, because it was a prime example where most people knew the bubble was going to burst in advance, but (delusional)people still kept investing anyhow.

23.3% of Japan's federal budget goes to debt servicing...

[Plumbob]

I said it myself that deficit reduction will likely put us into recession. Frankly, I think the US will default before a real recovery gets underway. There are far too many negative headwinds right now, and the prospects for another recession look higher than a real recovery. The current recovery isn't real. If our deficit spending is 10%/yr, and our economy is growing at only 2.something %, is it a real recovery? Our systemic issues are being hidden by the deficit spending. The real state of our economy is being masked. So, a bubble. Now the question: Do we let the gas out of the bubble gradually, or let it burst (default)?

Neither? If we get the economy growing again we can raise revenues and reduce automatic spending on the poor and unemployed. That will reduce the deficit to GDP ratio and we don't have to suffer through what Europe's going through.

Any government investment that will create more tax revenue down the line than the investment cost now is worth it with interest rates so low.

[iamblades]

Neither? If we get the economy growing again we can raise revenues and reduce automatic spending on the poor and unemployed. That will reduce the deficit to GDP ratio and we don't have to suffer through what Europe's going through. Any government investment that will create more tax revenue down the line than the investment cost now is worth it with interest rates so low.

That's a big if, don't you think?

Like I said, we have 5 years max at current levels of deficit spending before we will need China's levels of GDP growth to grow out way out of this debt.

How likely do you think that is?

[2San]

But Japan is a relatively small country with a HUGE income from production and exports. They export more then half of what the US does.

That's all beside the point though. Japan has way too many issue's to talk quickly about I shouldn't have mentioned Japan. ._.

23.3% of Japan's federal budget goes to debt servicing...

Really? Surprised they managed that. Haven't looked up on any numbers recently.

[Zaraki_Kenpachi]

I said it myself that deficit reduction will likely put us into recession. Frankly, I think the US will default before a real recovery gets underway. There are far too many negative headwinds right now, and the prospects for another recession look higher than a real recovery. The current recovery isn't real. If our deficit spending is 10%/yr, and our economy is growing at only 2.something %, is it a real recovery? Our systemic issues are being hidden by the deficit spending. The real state of our economy is being masked. So, a bubble. Now the question: Do we let the air out of the bubble gradually, or let it burst (default)?

Why would we default if all we have is debt denominated in the currency we created? You keep refusing to answer questions that have been asked to you multiple times.

[SlipperySlope]

Why would we default if all we have is debt denominated in the currency we created? You keep refusing to answer questions that have been asked to you multiple times.

Who would lend to us if we inflate our way out of our debt? By the way, intentionally devaluing the dollar to lower our debt burden is pretty dang close to a default anyway. Not to mention you're hurting people's savings. Would you lend to a country who all of a sudden one day says "Screw you, what you gave to me is only worth half now! Haha!".

Edit - Plus, inflating the dollar wouldn't solve our deficit problems.

[ProfessorMoran]

Paul Krugman's latest blog: http://krugman.blogs.nytimes.com/201...rodammerung-2/ Complete and total failure of austerity due to Germany's strategy of promoting "market confidence" is about to cause on of the greatest crisis in Europe's recent history. And only 4 years ago, with the implementation of pro-growth strategy, everything could have been prevented.

The people of Greece failed at austerity, austerity itself did not fail. Greece's goose has been cooked for a long time, there's no way for them to spend their way out of this, they're already broke and they can't afford to spend more, Germany/aka the EU is basically trying to deodorizing a corpse to keep up the fascade.

No one has to give us the money, that's the nice thing. We control the dollar and everything we owe is due in dollars, so we can never ever go bankrupt and there is never the chance we can't pay our debts(of course this doesn't prevent politicians screwing everything up by not allowing the government to make the "payments" but that's another story). The reason "printing" money isn't raising inflation now is because of the situation we find ourselves in. That can change, certainly, but it won't change over night and we'll know when it does.

Who do you think actually buy your government bonds? The US has the benefit of having the dollar as the safe-haven currency for foreign countries, but that won't last forever. You still need China to keep buying your bonds and they're not going to be growing at 10% forever, the government is building apartment buildings that nobody is living in, eventually all the artificial shit will end, they're basically lending you money so you can buy shit that they manufacture.

[Evlar]

Why would we default if all we have is debt denominated in the currency we created? You keep refusing to answer questions that have been asked to you multiple times.

GIANT PLATINUM COINS. http://www.cnn.com/2011/OPINION/07/2...html?hpt=hp_c1

[Evlar]

The people of Greece failed at austerity, austerity itself did not fail.

[Always-honest]

It's idiots like these that cause worldwide panic.

[max_cool]

Who do you think actually buy your government bonds?

For one, the vast majority of US debt is owned by the American people and American corporations. speaking solely of the amount of debt through bonds owned by foreign nations, it's very significant but is only about 5 trillion total which is less that 1/2 of one years gdp for the US. In other words it's nothing to panic about.

[darkwing]

EU is too big to fail,so they won't let Greece fall, just scare tactics, EU has the money

[zomgbbqftw]

This is how it happens:

Greek elections in June, Syriza are the largest party, and the Independent Greeks are second or third. They form a coalition and refuse to play ball with the EU and take Greece out of the Euro. A bank holiday weekend is called after market close on a Thursday and on Friday at 0:01am all money in every account is electronically converted to Drachma and all bills currently in banks are franked and capital controls are introduced, no money leaves the nation either electronically or in person, every Greek person leaving Greece has their luggage checked for Euros which will be seized, and franked bills returned, the seized bills are franked to renominate them to Drachma.

On the other side, over the weekend a special session of Parliament is called and a law is passed that decrees that all Greek issued debt (state and private/commercial) is now renominated in Drachma and all debt under English/foreign law is forfeit if the creditors don't like the arrangement. This effectively cuts Greece off from the money markets. To balance this another law is passed saying that all Drachma is now a controlled currency, all tourists must go to approved central bank agents to change their EUR/GBP/USD into Drachma. Greece now has enough money to buy oil and keep petrol stations stocked and enough to buy essentials.

For around six months the capital controls remain in place and the Drachma is allowed to fall against the Euro until it reaches a floor of around 15 cents at which point they are eased. Exchange controls would have to remain in place for a number of years.

That would be our blue print for Greece returning to the Drachma, but it basically means Greece would need to act first. If they were to do it this way I think they would escape the worst and while it would be bad for a couple of years, I think after that initial adjustment period things would get better.

[SlipperySlope]

EU is too big to fail,so they won't let Greece fall, just scare tactics, EU has the money

By the way the elections went, Greece is letting Greece fail.

[LegendofJoe]

There are two primary factors that are making it so difficult for the global economy to recover. The first is currency valuation reform. The fact that many countries are allowed near complete freedom of trade without adopting a floating rate currency valuation system is a sad farce. The longer a country uses a fixed rate or a fixed floating rate currency valuation regime the longer it will take for them to transition to a floating rate regime. It distorts the true cost of goods and services and consequently it destabilizes the labor market in every country that is part of the global trading network.

The other primary factor is the US dollar's status as the de facto global reserve currency. It was an extraordinary privilege that we bargained for at Bretton Woods and were granted due to Europe and Asia's weakened state at the time. Unfortunately for us though it is a privilege that the world can no longer afford, and I think the world's financial leaders are finally beginning to agree. What will replace it will be a currency managed by the IMF, which right now in a limited capacity it already does with what are called SDRs or Special Drawing Rights.

The IMF is expanding the SDR program right now, but not at the speed with which it should. They can and should be the lender of last resort to the EU, not the ECB. That said the eurozone needs to enact fiscal authority with teeth over it's member states as soon as possible, i.e. the expulsion of the Hellenic Republic from the euro. After this is done the EU should also put into law new spending mandates on member countries that cannot be ignored. These laws have existed since the formation of the euro, but they were ignored. The example of Greece will go a long ways to ensuring that doesn't happen again.

Additionally, the IMF will have to step in and help Greece transition from the euro back to the drachma. They will also ensure that Greece will continue to have a source from which to borrow money after private capital abandons the country. It will be a long and painful transition, but it has to happen to ensure the survival of the currency union. It will essentially serve as a threat of force, that has the benefit of actually being done. It is the only method of I can think of to ensure that fiscal mandates are followed by the other 16 eurozone members. If anyone can think of something else to add teeth to Maastrict and Lisbon I'm all ears.

Also, Greece should not be left alone to face this transition. They are a part of the European Union after all, and the point of any union is to look out for the best interest of its members. There is too much arguing about irresponsibility and profligate spending, none of that matters now. What matters is using this situation as an opportunity to strengthen the global economy by fixing problems that have been ignored for too long.

[empty vessel]

You're thinking too short term. It's short term thinking that created these problems. I'm thinking in 10 year spans. How much longer do you think we can support $1.6 trillion deficits?

Given current unemployment, probably a very long time. We'll know when we reach full employment and then begin to see inflation (at which point tax increases will be necessary).

It's too big of a number to simply grow out of.

Who cares about "growing out" of anything? It's not an issue, period. The only issue with respect to the government spending dollars is the effect it has on the real economy, i.e., possible inflation (too much) or deflation/unemployment (too little). Right now, we're heavy on the latter, which means more spending is called for.

Who would lend to us if we inflate our way out of our debt?

Why do you think the US government needs to borrow US dollars? Does that make any sense to you?

By the way, intentionally devaluing the dollar to lower our debt burden is pretty dang close to a default anyway.

No it isn't. And greater spending does not devalue the dollar vis-a-vis domestic goods and services. That is inflation (which isn't happening and won't happen as long as there is unemployment). The "devaluation" being talked about is the value of the currency vis-a-vis other currencies, which makes US goods more attractive for other countries to import. Unless you are an American living abroad on your saved dollars, currency devaluation does not hurt you.

Not to mention you're hurting people's savings.

Not really.

Would you lend to a country who all of a sudden one day says "Screw you, what you gave to me is only worth half now! Haha!".

Even if this were relevant--and it isn't--why would a country that creates its own money care?

Edit - Plus, inflating the dollar wouldn't solve our deficit problems.

The US doesn't have a deficit problem.

[SlipperySlope]

Given current unemployment, probably a very long time. We'll know when we reach full employment and then begin to see inflation (at which point tax increases will be necessary). Who cares about "growing out" of anything? It's not an issue, period. The only issue with respect to the government spending dollars is the effect it has on the real economy, i.e., possible inflation (too much) or deflation/unemployment (too little). Right now, we're heavy on the latter, which means more spending is called for.

Currently, our debt is about 100% of GDP. Krugman was asked at what level he'd be comfortable increasing that amount to. He wouldn't give an exact number, but said he'd be comfortable with a 30 point rise, so 130%. On our current trajectory, we should reach that in about 3 years, without increasing spending.

What percent are you comfortable with? Because once we reach that percent, we need to start taking the deficit really seriously.

[el retorno]

This is how it happens: Greek elections in June, Syriza are the largest party, and the Independent Greeks are second or third. They form a coalition and refuse to play ball with the EU and take Greece out of the Euro. A bank holiday weekend is called after market close on a Thursday and on Friday at 0:01am all money in every account is electronically converted to Drachma and all bills currently in banks are franked and capital controls are introduced, no money leaves the nation either electronically or in person, every Greek person leaving Greece has their luggage checked for Euros which will be seized, and franked bills returned, the seized bills are franked to renominate them to Drachma. On the other side, over the weekend a special session of Parliament is called and a law is passed that decrees that all Greek issued debt (state and private/commercial) is now renominated in Drachma and all debt under English/foreign law is forfeit if the creditors don't like the arrangement. This effectively cuts Greece off from the money markets. To balance this another law is passed saying that all Drachma is now a controlled currency, all tourists must go to approved central bank agents to change their EUR/GBP/USD into Drachma. Greece now has enough money to buy oil and keep petrol stations stocked and enough to buy essentials. For around six months the capital controls remain in place and the Drachma is allowed to fall against the Euro until it reaches a floor of around 15 cents at which point they are eased. Exchange controls would have to remain in place for a number of years. That would be our blue print for Greece returning to the Drachma, but it basically means Greece would need to act first. If they were to do it this way I think they would escape the worst and while it would be bad for a couple of years, I think after that initial adjustment period things would get better.

This is the same thing that someone submitted to that "how to deal with greece leaving euro" contest. Just without the specific floor.

What would something like that mean for the rest of europe?

[empty vessel]

Currently, our debt is about 100% of GDP. Krugman was asked at what level he'd be comfortable increasing that amount to. He wouldn't give an exact number, but said he'd be comfortable with a 30 point rise, so 130%. On our current trajectory, we should reach that in about 3 years, without increasing spending. What percent are you comfortable with? Because once we reach that percent, we need to start taking the deficit really seriously.

I am comfortable with any percent as long as interest payments do not cause inflation. If you are so concerned about bond interest payments, why not just advocate that the government stop selling bonds entirely? The US government does not have to borrow to spend money. Spending (creating and distributing money into the private sector) and bond issuance (running a risk free national bank for the private sector) are wholly independent activities that have nothing to do with each other.

[SlipperySlope]

For your edits...

Given current unemployment, probably a very long time. We'll know when we reach full employment and then begin to see inflation (at which point tax increases will be necessary). Who cares about "growing out" of anything? It's not an issue, period. The only issue with respect to the government spending dollars is the effect it has on the real economy, i.e., possible inflation (too much) or deflation/unemployment (too little). Right now, we're heavy on the latter, which means more spending is called for. Why do you think the US government needs to borrow US dollars? Does that make any sense to you? No it isn't. And greater spending does not devalue the dollar vis-a-vis domestic goods and services. That is inflation (which isn't happening and won't happen as long as there is unemployment). The "devaluation" being talked about is the value of the currency vis-a-vis other currencies, which makes US goods more attractive for other countries to import. Unless you are an American living abroad on your saved dollars, currency devaluation does not hurt you. Not really. Even if this were relevant--and it isn't--why would a country that creates its own money care? The US doesn't have a deficit problem.

It sounds like you really don't care how much money the US "prints". You claim the US... doesn't have a deficit problem?!?

Edit - This is my last post for a while. Need to get food, and we're going in circles.

[empty vessel]

For your edits... It sounds like you really don't care how much money the US "prints". You claim the US... doesn't have a deficit problem?!?

I do care, and my concerns were expressed in my post. No, the US has no deficit problem, as evidenced by the 8%+ unemployment rate.

Eurozone countries, of course, do not have the luxury that countries like the US, UK, Canada, and Australia have, because they gave up currency sovereignty, and elected to be beholden to private investors for financing deficit spending.

Of course, the UK government still managed to royally fuck up even despite its currency sovereignty. And the US may not be far behind in its stupidity.

[zomgbbqftw]

This is the same thing that someone submitted to that "how to deal with greece leaving euro" contest. Just without the specific floor. What would something like that mean for the rest of europe?

Well having a floor would help combat inflation in the short term, but it would have to be removed eventually.

As for the rest of Europe. With Drachma trading at 7 to the Euro and 10 to the pound, tourism would surge. The problem for Europe is that it won't be "new" tourists it will just be tourists changing their destination from Spain/Italy/Portugal to Greece to take advantage of super low prices. Portugal would quickly fall into a similar kind of abyss that Greece have done if their tourist industry is stolen by Greece and its cheap currency, while Spain and Italy would have even bigger current account deficits as foreign capital inflow decreases from such a vital industry.

IMO, if Greece leaves the EMU, then Portugal are not far behind. Portugal leaving will turn the attention to Spain, and given that Spain's new government has already had a bust up with the EU their membership of union will be up for discussion. I figure that they will stay in and Germany will have to relent at that point, losing Spain and then Italy would send the value of the Euro skyrocketing at which point France would want out as the new President would not abide a strong currency leaving Germany and its Northern partners as lone Euro nations. It would mean that the Dutch and Finns would have to undergo some kind of internal devaluation or have a massive increase in productivity or added value to compete with Germany's, err, industrial practices. My guess is that they wouldn't and would choose to revert back to their own currencies.

So basically, my best estimate is that Greece and Portugal are done, but the ECB and EU will bring in sufficient measures to keep Spain and Italy in and run a very loose monetary policy to help the two countries get back on track. I think that the ECB will have to become a lender of last resort to both which will calm markets. The EMU can't afford to lose Spain and Italy, without these two major players the whole idea becomes worthless and completely unworkable.

[Insane Metal]

Is the world fucked? :(

[el retorno]

Well having a floor would help combat inflation in the short term, but it would have to be removed eventually. As for the rest of Europe. With Drachma trading at 7 to the Euro and 10 to the pound, tourism would surge. The problem for Europe is that it won't be "new" tourists it will just be tourists changing their destination from Spain/Italy/Portugal to Greece to take advantage of super low prices. Portugal would quickly fall into a similar kind of abyss that Greece have done if their tourist industry is stolen by Greece and its cheap currency, while Spain and Italy would have even bigger current account deficits as foreign capital inflow decreases from such a vital industry. IMO, if Greece leaves the EMU, then Portugal are not far behind. Portugal leaving will turn the attention to Spain, and given that Spain's new government has already had a bust up with the EU their membership of union will be up for discussion. I figure that they will stay in and Germany will have to relent at that point, losing Spain and then Italy would send the value of the Euro skyrocketing at which point France would want out as the new President would not abide a strong currency leaving Germany and its Northern partners as lone Euro nations. It would mean that the Dutch and Finns would have to undergo some kind of internal devaluation or have a massive increase in productivity or added value to compete with Germany's, err, industrial practices. My guess is that they wouldn't and would choose to revert back to their own currencies. So basically, my best estimate is that Greece and Portugal are done, but the ECB and EU will bring in sufficient measures to keep Spain and Italy in and run a very loose monetary policy to help the two countries get back on track. I think that the ECB will have to become a lender of last resort to both which will calm markets. The EMU can't afford to lose Spain and Italy, without these two major players the whole idea becomes worthless and completely unworkable.

I don't disagree with what your saying but you seem to think that germany isnt going to let up on greece or portugal and that only a serious threat to Spain can make germany and the ECB rethink their policies? Haven't they show in the past two or three weeks that they are opening up to the idea? I just IMO see them relenting before you do.

Also arent there countries that still are joining the euro in the next few years? Romania I think.

Though if youre right I have a 100 escudo coin that I'll get to use. I also have a greek euro. It might be worth more than that some day!

Is the world fucked? :(

No.

[Insane Metal]

Shit.

I want to watch the world burn!

jk of course. But this time things are looking bad. I just hope everything's ok.

[Zaraki_Kenpachi]

Currently, our debt is about 100% of GDP. Krugman was asked at what level he'd be comfortable increasing that amount to. He wouldn't give an exact number, but said he'd be comfortable with a 30 point rise, so 130%. On our current trajectory, we should reach that in about 3 years, without increasing spending. What percent are you comfortable with? Because once we reach that percent, we need to start taking the deficit really seriously.

You don't understand economics, there isn't a set number. It is not a law of science that exactly at 131% of debt the whole world collapses, it doesn't work like that. If you actually listened to Krugman you would know that's exactly what he said when debating ron paul and was why he doesn't want to give a number and used Britain who was at 130% at the time and it was ok and Japan now as examples. Did you go look at Japan like people told you to yet? Again, please read what people are telling you.

Edit: Didn't refresh apparently.

[darkwing]

Is the world fucked? :(

no, just the EU, best case scenario, only Greece

[NullPointer]

Why do you think the US government needs to borrow US dollars? Does that make any sense to you?

You think that's air you're breathing now?... Again.

[empty vessel]

Shit. I want to watch the world burn! jk of course. But this time things are looking bad. I just hope everything's ok.

Europe is arguably going through the worst of it right now, as their economies (the creation and exchange of real goods and services) are being suffocated by the ill-advised policy prescriptions of neoliberal elites who are protecting banks and private investors at the expense of the well-being of the members of their societies. What comes later is the cure, not the disaster.

[NathanMcMahon]

So, I'm a dumb American who has no knowledge of any of this. I'm moving to Ireland for the next three months. I plan on traveling through Europe while I'm there. What exactly should this mean to me? Should I avid the Euro? Deal in local currency? Avoid any regions? Seriously, I'm just curious.

[ElectricBlue187]

So, I'm a dumb American who has no knowledge of any of this. I'm moving to Ireland for the next three months. I plan on traveling through Europe while I'm there. What exactly should this mean to me? Should I avid the Euro? Deal in local currency? Avoid any regions? Seriously, I'm just curious.

exchange rate is looking ok

[NathanMcMahon]

exchange rate is looking ok

but if the Euro crashes (is that remotely possible?) how wold that effect me? Obviosuly, I'm not exchanging all of my money, but seems sort of risky if there is the chance of it. Or am I just playing into the same fear that pulling a run on banks incites?

[Jason's Ultimatum]

Could you imagine if McCain was President, and he cut spending? Goddamn. *shudders*

[ElectricBlue187]

but if the Euro crashes (is that remotely possible?) how wold that effect me? Obviosuly, I'm not exchanging all of my money, but seems sort of risky if there is the chance of it. Or am I just playing into the same fear that pulling a run on banks incites?

they aren't going to go back to the old currency overnight and abandon the euro Zimbabwe style

[darkwing]

but if the Euro crashes (is that remotely possible?) how wold that effect me? Obviosuly, I'm not exchanging all of my money, but seems sort of risky if there is the chance of it. Or am I just playing into the same fear that pulling a run on banks incites?

dude it won't happen in 3 months

[NathanMcMahon]

that's why I'm asking, because I have no idea about the Euro. I appreciate the info though.

[Ripclawe]

http://www.bloomberg.com/news/2012-0...-currency.html

Greece’s possible exit from the euro area moved to the center of Europe’s debt-crisis debate, with officials beginning to weigh the fallout of a withdrawal even as authorities in Athens struggled to form a government. Meetings brokered by Greek President Karolos Papoulias are set to continue today after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. The country where the 2 1/2-year-old crisis began moved closer to a new vote, and to the possibility of a euro-area exit that was once a taboo among policy makers.

Europe’s central bankers are discussing the possibility of a Greek departure and how to handle the fallout, Swedish Riksbank Deputy Governor Per Jansson said in an interview on May 11. European Union Economic and Monetary Commissioner Olli Rehn said in Tallinn that the region is “certainly more resilient” to a possible Greek exit than it was two years ago, when the bloc would have been “massively underprepared.” “I still believe that Greece can stay in the euro and find the way to make sure that it respects its commitments,” Rehn said. “It would be much worse for Greece and Greek citizens, especially for the less well-off Greek citizens, if Greece did leave the euro than for Europe as such. Europe also would suffer, but Greece would suffer more.” Under a story headlined “Akropolis Adieu, Why Greece Must Leave the Euro”, Germany’s Der Spiegel magazine today reported that the EU may provide funding for Greece even after a euro departure.

[ProfessorMoran]

So, I'm a dumb American who has no knowledge of any of this. I'm moving to Ireland for the next three months. I plan on traveling through Europe while I'm there. What exactly should this mean to me? Should I avid the Euro? Deal in local currency? Avoid any regions? Seriously, I'm just curious.

Hold on to your british pounds, it's the only currency worth spit on the continent besides the deutsche mark, the euro is going the way of the dodo.

no, just the EU, best case scenario, only Greece

Portugal and Spain might go the way of Greece, it's going to be interesting to see how long the EU will stay together with Hollande in charge of France and likely won't see eye to eye with Germany.

[Napoleonthechimp]

I've always wanted to see a post-apocalyptic scenario emerge in the real world (albeit on a small scale), sort of like how the inhabitants of the Easter islands destroyed their ecosystem and left it barren we'll get to see financial desolation and barbarism in a localised area.

[Piecake]

Hold on to your british pounds, it's the only currency worth spit on the continent besides the deutsche mark, the euro is going the way of the dodo. Portugal and Spain might go the way of Greece, it's going to be interesting to see how long the EU will stay together with Hollande in charge of France and likely won't see eye to eye with Germany.

If Spain goes, the EU is pretty much fucked

[Green Biker Dude]

I've always wanted to see a post-apocalyptic scenario emerge in the real world (albeit on a small scale), sort of like how the inhabitants of the Easter islands destroyed their ecosystem and left it barren we'll get to see financial desolation and barbarism in a localised area.

this isnt a videogame. there will be people suffering. your post is pretty disgusting.

[Napoleonthechimp]

this isnt a videogame. there will be people suffering. your post is pretty disgusting.

Only when people are suffering will they bother to change anything.

None of my family have ever had money and have lived on the poverty line for generations. They can embark on extreme austerity measures for decades and I still wouldn't notice any discernable difference. I have zero respect for the current financial system and will gladly laugh as it comes crashing down.

[LJ11]

If Spain goes, the EU is pretty much fucked

Everyone keeps forgetting about Ireland, probably the next domino after Portugal.

They'll have to contain a bank run across the continent, Germany/ECB have their work cut out for them. They feel that it can probably be controlled, but once the genie is out of the bottle...

[Green Biker Dude]

being poor isnt an excuse for being a dick. i never had disposable money until i got a job.

also, i have to WORK tomorrow so i'm leaving this. i don't care if there are people on the internet wishing for others to get screwed

[poisonelf]

This is how it happens: Greek elections in June, Syriza are the largest party, and the Independent Greeks are second or third. They form a coalition and refuse to play ball with the EU and take Greece out of the Euro. A bank holiday weekend is called after market close on a Thursday and on Friday at 0:01am all money in every account is electronically converted to Drachma and all bills currently in banks are franked and capital controls are introduced, no money leaves the nation either electronically or in person, every Greek person leaving Greece has their luggage checked for Euros which will be seized, and franked bills returned, the seized bills are franked to renominate them to Drachma. On the other side, over the weekend a special session of Parliament is called and a law is passed that decrees that all Greek issued debt (state and private/commercial) is now renominated in Drachma and all debt under English/foreign law is forfeit if the creditors don't like the arrangement. This effectively cuts Greece off from the money markets. To balance this another law is passed saying that all Drachma is now a controlled currency, all tourists must go to approved central bank agents to change their EUR/GBP/USD into Drachma. Greece now has enough money to buy oil and keep petrol stations stocked and enough to buy essentials. For around six months the capital controls remain in place and the Drachma is allowed to fall against the Euro until it reaches a floor of around 15 cents at which point they are eased. Exchange controls would have to remain in place for a number of years. That would be our blue print for Greece returning to the Drachma, but it basically means Greece would need to act first. If they were to do it this way I think they would escape the worst and while it would be bad for a couple of years, I think after that initial adjustment period things would get better.

Question:

There is no mechanism for a country to be forced out of the Eurozone. There is no such rule and no way for it to be implemented. What you're saying assumes that Greece leaves the Eurozone voluntarily.

The thing is that the biggest anti-Memorandum parties, Syriza and Independent Greeks, are against the ridiculous Memorandum terms which read like a country under occupation after losing a war, since Merkel wanted the terms to 'hurt', and against the PSI which burdens Greece with more debt so that banks can be paid, BUT, they're pro EU and pro Eurozone.
Their claims include auditing the debt to find illegal parts of it, such as extreme interest rates, restructuring debt payments under international law supporting the needs of the people coming before banks in times of crisis, and rejecting austerity.

So, if they do come in power, and they choose to stop paying parts of the debt, but also choose to not leave the Euro voluntarily, what do you think will follow? Greece can't be kicked out, not paying full value for Greek bonds is perfectly legal, what next? Why do you assume that Greece will choose to leave the euro under Syriza and Independent Greeks?

The only anti-EU and anti-Euro parties are KKE (communist party) and Golden Dawn (ultra-nationalist, essentially neo-nazi party).

[zomgbbqftw]

While inside the EMU Greece is utterly reliant on the ECB and EU for money to keep the country running. If Greece decides not to pay face value on the bonds it just issued and doesn't keep to the bail out conditions the money that it currently receives from the EU will come to a very abrupt stop. That means Greece needs to become self funded, the only way to ensure this is to reintroduce the Drachma and institute a series of capital controls.

By stopping the bail out funding to Greece the EMU would essentially be kicking the country out. For Greece to try and maintain membership of the EMU while also not adhering to the terms of their bailout seems too difficult. It would mean an overnight budget cuts and unemployment above 30% which is heading into revolution territory.

Greece would need to leave, default and go to the IMF for transitory funding while the country restructures while also introducing capital and exchange controls. It really is the only path that makes sense for Greece and Greek people. If done right I could see Greece's unemployment rate begin to drop in a couple of years and dipping below 17% in 2015, the EU the official estimates say that unemployment in Greece won't go down to that level until 2018, and those are mightily optimistic projections.

It is time to forget about the Euro, at least for Greece, and get back to market enforced fiscal rectitude. The IMF can act as a lender of last resort to Greece while it transitions, but eventually Greece will have to begin making payments on their foreign law bonds and that means some kind of growth strategy, within the Euro I just don't see how Greece grows its GDP.