News Greece, Italy and the Euro

1. May 6, 2010

Ivan Seeking

Staff Emeritus
Wow, the Dow dropped almost 1000 points today as traders watched the riots in Greece. Luckily it seems to be recovering now - back up about 500 points at 10,330.

It scared the hell out of me. For a time it was looking like 2008 all over again. Nonetheless, contagion is a problem.

2. May 6, 2010

mgb_phys

Re: Greece and the Euro

Interesting technical question though - what happens if Greece goes bust?

Greek euros aren't any different from any other, so you can't have an exchange rate.
Although there has apparently been lots of people in Germany insisting the bank change their foreign euro notes for German ones!

If you were to kick Greece out of the euro and force it to print it's own notes you would need to do it instantly and in secret - otherwise people would simply hoard euro cash (assuming the replacement new-drachma would drop like a stone)

But it took years of planning and months of implementation to swap to the Euro - there's no way a country could leave it without people finding out in advance

3. May 6, 2010

Ivan Seeking

Staff Emeritus
Re: Greece and the Euro

One trader is saying that it was a technical artifact relating to something that happened with Procter & Gamble stock.

Being up about 70% over the last year [the Obama market], some analysts are saying that the market is due for a 20% or so correction. Many are expecting this. So, beyond everything else, there is a predisposition for volatility.

Last edited: May 6, 2010
4. May 6, 2010

cronxeh

Re: Greece and the Euro

I was waiting for this to happen for a while now. I'm hoping the DOW stabilizes around 9200, but really this is a good thing for the US Dollar.

5. May 6, 2010

Office_Shredder

Staff Emeritus
Re: Greece and the Euro

Which is bad for the American manufacturing base (at least the ones that want to export)

6. May 6, 2010

mheslep

Re: Greece and the Euro

I think Greece will either
1. default because their parliament will not implement the agreed cuts and then see Argentina 2001 for the rest (including bank failures in other countries).
2. leave the Euro, switch to a devalued national currency, a huge undertaking which will cause banking failures in Greece as all the local Euro deposits flee to banks outside Greece.

Last edited: May 7, 2010
7. May 6, 2010

cronxeh

Re: Greece and the Euro

That is not exactly the case though. Considering USA doesn't export much of anything, what we do export (capital goods, industrial supplies, consumer goods and agricultural products) is still something that you can't get anywhere else in the world. Anything from Apple to pharmaceuticals we are essentially in an anti-trust with the rest of the world as far as exports go.

Just because it is more expensive for the rest of the world to buy our stuff does not mean they will stop buying it. The prices may have to be pushed down but that will be picked up by the local demand, and in turn stimulate the growth of these companies. If anything the increased aggregate demand should push us through this recession and set us up to be the dominant player in the global market. I just wish I planned for a vacation sooner

8. May 6, 2010

Ivan Seeking

Staff Emeritus
Re: Greece and the Euro

I thought it was interesting to note [wiki] that Greece has a gdp of about 356 billion; about the same as the State of Michigan. The European Union has a combined GDP of 16.5 trillion. So the Greek economy only represents a little over 2% of the Euro economy.

9. May 6, 2010

cronxeh

Re: Greece and the Euro

Sun is up in Tokyo, market opens in about an hour.. grab some popcorn and wait to see what happens. My gasoline is finally going below 3 bucks a gallon this weekend, woohoo

Here is a http://www.google.com/finance?q=INDEXNIKKEI:.N225" to Nikkei 225 index. Any bets on how low it will go? I want to say.. 10500.

Last edited by a moderator: Apr 25, 2017
10. May 6, 2010

cronxeh

Re: Greece and the Euro

10,470.99 !

Oh man

11. May 6, 2010

lisab

Staff Emeritus
Re: Greece and the Euro

...? You mean the http://en.wikipedia.org/wiki/List_of_countries_by_exports" [Broken] "doesn't export much of anything"?

Last edited by a moderator: May 4, 2017
12. May 6, 2010

lisab

Staff Emeritus
Re: Greece and the Euro

The situation in Greece is clearly causing jitters in worldwide markets, but it may not have been the primary cause of today's precipitous drop.

Wow, if that turns out to be true, it's amazing that one slip of the finger can have that effect!

13. May 7, 2010

mheslep

Re: Greece and the Euro

Eh? US goods and services exports to all countries for 2008 were http://www.trade.gov/press/press_releases/2009/export-factsheet_021109.pdf" [Broken], a little more than 10% of the US economy.

Edit: I see that also caught lisab's attention. Also I'd have to check, but I believe some of those lists short change services of which the US is particularly strong. If one uses the US Dept of Commerce figures the US is the worlds largest exporter by several hundred billion dollars.

Last edited by a moderator: May 4, 2017
14. May 7, 2010

mheslep

Re: Greece and the Euro

So the Greece bailout so far seems to be $145 billion (so far), or about$13k per Greek. I fail to see why the United States has to be paying a large portion of that, especially under current conditions.

15. May 7, 2010

mgb_phys

Re: Greece and the Euro

1, It isn't. The US is about 15% of the IMF and the IMF is about 20% of the bailout.
2, It's a loan - and at "no one else would lend to you" rates Germany is going to make a killing

16. May 8, 2010

mheslep

Re: Greece and the Euro

Sorry \$4 billion still qualifies as a lot to bailout early retirement in the Aegean.

No improvement, as the US can only loan money via the IMF that it has already borrowed and pays interest upon these days.

17. May 8, 2010

Office_Shredder

Staff Emeritus
Re: Greece and the Euro

The whole point of the bailout is that it's not at 'no one else would lend to you' rates, otherwise it wouldn't actually fix any problems

18. May 8, 2010

mgb_phys

Re: Greece and the Euro

Germany is still borrowing at German bond rates and lending at Greek bond rates - quite a spread.
Of course it's not going to fix the problem - the problem is for 40years they voted in governments that promised to spend but not collect taxes.

19. May 8, 2010

CRGreathouse

Re: Greece and the Euro

And taking on its risk, of course.

20. May 29, 2010

Ivan Seeking

Staff Emeritus
Re: Greece and the Euro

http://www.abc.net.au/news/video/2010/05/20/2905304.htm [Broken]

Last edited by a moderator: May 4, 2017