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Greece's descent into economic oblivion
by Satyajit Das
The proposed bailout agreement ignores the referendum and the troubles of the Greek people are only likely to intensify.
he final outcome of the Greek debt crisis has been obvious from the beginning. The Hellenic nation will need to restructure its debt, writing off a substantial portion of what it owes. It may need to leave the euro, allowing the country to devalue to regain competitiveness relative to its peers like Turkey. No one wants to acknowledge this inconvenient reality.
The meaningless referendum
Since the February 2015 ‘deal’, the parties had inched close to a new agreement in a prolonged battle of alternative drafts. On June 27, Greece’s Syriza-led government refused to commit to the latest terms presented by the creditors, choosing instead to call a referendum on July 5.
The referendum was a cynical exercise in political expediency rather than democracy. If this step was deemed necessary, it could have been called months ago when the position of the creditors had become very clear.
While the referendum required Greeks to simply vote yes or no, the questions were less intelligible. It was not clear whether the citizens were being asked to vote on the agreement, membership of the single currency, participation in the European Union itself, or all of these things.
The first question in the referendum was largely irrelevant as it was on a plan that had already lapsed. The EU had withdrawn its June 25 offer. With the expiry of the existing deals on June 30, there was no pact to extend. The second question on the International Monetary Fund (IMF) Debt Sustainability Analysis was on the projections of Greece’s ability to service its debt under different scenarios. It is certainly the first time, as one Greek observer noted, that a national referendum has been conducted about a spreadsheet.
I guess you must learn the hard way. When we lose our democracy, you will have yourselves to blame for being a part of its downfall.
in the foot when you tamper with what I post on here. Have a good day...
I guess you expect them to read between the lines. Perhaps they are learning to go elsewhere.
But Dr. Schaeuble is not alone. German hearts are no more in this than Greek ones. The German tabloid Bild is disgusted at the prospect of more money going to lazy Greeks: German opinion polls show a clear majority in favor of Greek exit. There is a rift in the governing coalition between the pragmatic Angela Merkel, who sees more disadvantages than advantages from a Greek exit, and the ideological Dr. Schaeuble, for whom there can be no relaxation of the rules in order to allow Greece to stay.
Eastern European and Baltic states are broadly on the same page as Dr. Schaueble. And Finland is even more hard line. For them, Greece cannot have debt relief, because to do so would break the rules. If Greece’s debts are unpayable, or Greece will not accept the level of austerity needed to make them payable (yes, I know, this is economically illiterate – pace, macroeconomists!) it must leave the Eurozone. If it wishes to stay, it must swallow its bitter medicine – as they did.
Jul 30, 2015 @ 7:38 PM 10,013 views
The Wheels Are Already Coming Off The Greek Deal
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Two weeks ago, the world breathed a sigh of relief as the Greek government forced through Parliament a new bailout deal. Prime Minister Alexis Tsipras admitted to his supporters that he had signed a text he did not believe in: his Finance Minister, Euclid Tsakalotos, described the day after the Euro summit as the “toughest day of his life”. But with the support of opposition parties, the first tranche of reforms were forced through the Greek parliament on July 15th, followed by a second tranche on July 22nd.
Some reforms – notably the VAT rises – were immediately implemented. But we know that Greek hearts aren’t in this. Neither the government nor the Greek people really want this bailout. They want debt relief and an end to austerity: but what they are getting is more debt and even more austerity. Will they swallow it? The creditors are – understandably – sceptical.
Nonetheless, legislation has been passed, and that is supposedly sufficient for talks about a third bailout to begin.
Except that it isn’t. Every excuse under the sun has been used to avoid actually starting talks. Firstly, there were “logistical issues”. The Greek government had reluctantly agreed to work with the hated Troika technocrats, but that didn’t mean it was going to make their lives easy. Citing security concerns, it insisted that they stay in a hotel outside Athens. This did not go down well. The Troika representatives refused to hold the talks in the hotel. Eventually the Bank of Greece offered to host the talks.
And as soon as the talks started, a group of creditors led by the German delegation moved the goalposts. They demanded that the Greek government push through.....
Of course, the fox always has blamed the rooster.
Einstein said "Not everything that counts can be counted; and not everything that can be counted counts" Now comes the hard part: think.
Just because you have the money to present your side of the argument first, doesn't mean your are going to win... when the chips fall where they must.
The necessity of a $15 minimum wage is the effect-- NOT the cause. You capitalists cheat your workers for decades and wonder how to fool the people one more time that the victim is the guilty party.
Or were you waiting for mass starvation so you could blame it... well, everything else but the real cause. Occam's Razor says the simplest hypothesis is likely the truest. You've gotten away with cheating the working man ever since Reagan killed the unions. Now it's those same former union members in poverty who are the cause. Up north we have a name for this. I'd better abbreviate it though. B S #$%$
SSE Composite Index (000001.SS) -Shanghai Watchlist
3,725.56 Down 345.35(8.48%) 3:01AM EDT
That said, there is one piece of comforting evidence perhaps suggesting the index is not necessarily in an out-of-control free-fall situation. Looking at the chart of the Shanghai Composite, despite the tumult over the past 2 weeks, the index has held a major level of indicated support over the past several days. Now that may change by tonight, who knows. However, the fact that an index which is currently swinging by 5% a day is conforming to a chart level that it “should” (so far) is an indication that there is still orderly trading afoot.
Here is the level we are talking about.
As the chart shows, 2 key Fibonacci Retracement levels line up in close proximity to the 3900 level:
•The 38.2% Fibonacci Retracement of the 2013-2015 Rally is ~3907
•The 61.8% Fibonacci Retracement of the February-June Rally is ~3862
Take note that the lows over the past 4 days of wild action in the SSEC were 3875, 3848, 4044 and 3911. These lows were right in the vicinity of the key Fibonacci Retracement cluster and suggest that, for now, the index is trading in an orderly, though wide, manner. Importantly, if the index can continue to successfully hold this 3900 level, it has a chance to move higher and, perhaps, commence a new up-leg. Should it fail here, the next level of major support would not come in until perhaps near the 3100 area.
There is no doubt that the trading in the Shanghai Composite has been wild. It is certainly not for the faint of heart. And maybe it is another bubble in the process of popping. However, up until this point, it has held its most important line of support. This is an indication that A) it has a chance to bounce from this support area and B) the selloff, while wild, is still somewhat orderly.
Stay tuned – it’s always exciting on the Shanghai Express.
Jul 02, 2015 at 3:17 PM
Wild Shanghai Express Makes An Important Stop
Without a doubt, the stock market of the year over the past 12 months has been China’s Shanghai Composite (SSEC). From June 30, 2014 to June 30, 2015, the SSEC was up a staggering +109%. And that takes into consideration the relative bloodbath dealt to the SSEC during the past 2 weeks, during which time it lost as much as 24%. This correction has heightened the China “bubble” talk among investment circles, which was already at a feverish level before the selloff. Taking a step back from the dueling conjecture over whether the Chinese market is a budding opportunity or a bubbly time bomb, the chart of the SSEC shows orderly, but wild, price action.
What do we mean by that oxymoron of a statement? Well, just over a year ago, we published this chart of the Shanghai Composite noting its historically low volatility at the time:
As the chart illustrates, the SSEC’s % Average True Range (essentially, the largest of the distance from high to low or from the previous close to the high or low divided by the close) at the time on a 21-week basis was less than 3%. That was the 2nd smallest in the SSEC’s history and had us opining whether a “big move was pending?” Well, all back-slapping aside, even we could not have envisioned the 100%+ gain over the next 12 months.
Fast-forward to today and it is a different story. Currently, the 21-day % ATR on the Shanghai Composite is at 5%! Again – that is on a daily basis! For reference, the 21-day ATR last July was less than 1%. This 5% range is something that was only seen in the after-math of the 2007-2008 bubble.
This jump in volatility is certainly a concern. Not only because of what happened the last time the index’s ATR got this high, but the mere size of the price swings naturally adds risk to investing – or trading – in Chinese securities.
To paraphrase the late Illinois Senator Everett Dirksen, "A trillion dollars here and a trillion dollars there, and pretty soon you're talking about some real money." Of course, back then he was talking about billions; and that's only 1/10 of one percent of trillions. Capitalism has come a long way since the republican party of Senator Dirksen.
U.S. debt holdings were $2T when all the other reputable news sources were claiming that it was only $1T. Shortly after I posted this information, Ripley's website had deleted the $2T U.S. debt holdings claim. Perhaps this information finally filtering down thru the system has caused a delayed reaction which we are now witnessing in China's market crash.
Oh to hell with it.
If any of Trump’s potential debate opponents were watching, it should have been a very instructive few minutes. Even on Trump’s signature issue, his policy positions are tissue-thin, and don’t stand up to the lightest questioning.
Why he begins to be required to answer substantive questions – and to defend his answers – in a forum he doesn’t control, The Donald may just end up firing himself.