Wednesday, 11 May 2011

Of course Greece will default

Look, let's be clear. There's not enough bail-out cash in the whole of the EU to prevent Greece from going bankrupt. Right now, Argos wouldn't even give Greece a storecard. Despite the bubble of recent years, Greeks aren't rich - there's far less fat to be cut than the stories of State largesse would suggest - and they simply can't afford to service their banks' bail-out debts. And again let's be clear - it's the liabilities of the Greek banks, not the personal debts of her population, that are being bailed out.  

Before long, Greece will announce that the payout on its junk bonds will be thirty cents in the Euro, and the redemption terms will double. The only question is whether this will happen before or after the UK has thrown another £3bn of our tax money into the mess. And they will leave the Euro. Right now in a security printing firm in Hamburg or Munich great stacks of drachmas are being printed to replace the doomed Euro. 

I know it, you know it, the entire banking and financial world knows it. Even Cameron and Osborne know it - but they're likely to throw our money away anyway, lest they be accused afterwards of precipitating the collapse by not contributing. So C'mon, let's get on with it. 


Anonymous said...

Radders - how do you know that a secure press is running in Hamburg, printing Drachmas? Or is this a guess? I kind of agree with you even though my panic side is saying NOOO

Coney Island

Raedwald said...

It's informed speculation - several reasons

1. For reasons of national security, no country in Greece's, Portugal's or Ireland's position is going to be without a Plan 'B' if it all goes pear shaped

2. Having a national currency printed under the strictest security and secrecy will become known to France's and Germany's security services and is a good way of securing another bail-out paid for by them

3. The US Fed reports the cost of printing banknotes is about $60 per 1,000; for just a million dollars you can print over 16 million banknotes. In terms of risk mitigation - where the probability of the risk is high, and the consequences catastrophic - the remedy is ridiculously cheap.

Raedwald said...

Oh, and for info the ECB currently has 824 billion euros worth of notes in circulation, of which Greece's share is 1.965%, or €16bn. One presumes they'd have to match this with an equivalent face value of drachmas; with an initial swap rate at parity (1 drachma = 1 euro) they wouldn't need that many drachma notes. Of course the drachma would plunge immediately, but that's Greece's salvation.

Blue Eyes said...

The main problem for Greece is that it cannot do a proper Argentina.

Ed P said...

Greece could service their debt if anyone there paid their taxes. They are chronic tax-avoiders - only one third approx actually pay up!
Still, holidays should be cheaper when they default, so there's a bright side.

TheRagingTory said...

"Before long, Greece will announce that the payout on its junk bonds will be thirty cents in the Euro, and the redemption terms will double."

Will that be enough?

For servicing purposes, it takes debt down to 48% of GDP, but thats still quite a lot, although below Maastricht.

Assuming redemption is a third as well, its possible survivable, in the good years.
But we arent in good years.

Sean said...

Dont put it past the Greeks not to have a plan B, or even a C,D,E ect.

These swivel eyed Euro Luvies are the true faithful.

Anonymous said...

Ed P wrote: They are chronic tax-avoiders - only one third approx actually pay up!

Now that is a great idea for the rest as well.

The larger the amount of money available to government, the greater is the tendency for them to spend like drunken sailors. The debt that they incur is then passed on to the taxpayer, but not before the banks have leant them obscene amounts of money. Huge amounts of money for politicians to spend, makes both borrower (government) and banks (lenders), behave irresponsibly.

In the case of Greece, by joining the EU and the Euro, they made the the rest of the EU responsible for their debt (smart move).

Bill Quango MP said...

Agree with what you think.
Except Greece won't leave the Euro. Greek banks would be bust. They can't borrow except from the ECB.So Greece stays in and another bailout, and probably another 2 and then default. in a year or so time.

greg tingey said...

REALLY SCARY article in the Irish Times - by the professor who predicted their crah - and was rubbished by the corrupt Irish politicians for doing so: