Replies to post #304548 on $Stock*Shop*Charts*News*Option$

[Tuff-Stuff]

Yes Sir! Can YOU bring them back PLEASE?

[Stock Lobster]

Hmm: Will the Euro Survive? - Hudson New York

Thursday, January 28, 2010

The Euro was created artificially giving political strength to it's member states to compete with the United States, but like the United States who exists in a greater political union it faces inflation because of the inability to devalue local economies that depend on tourism. The oversized political union is bulky. Those sectors of Europe that depend on tourism need the Euro to be worth less so that those outside of the currency can afford to visit. What is worse is even those inside the union travel outside of the union where the prices are less. The system overextended itself and has forced it's member states into situations that could of been avoided had they not insisted in including economies that did not reflect their own business culture. This is a blue print for why it is so important for local communities to have the ability to control their own economy. Centralization always fails. Even if it looks good in the short term. Because of vanity now Europe is in an uncomfortable position of treating it's members as burdens when these members would of been sustainable independently.

The euro is in serious trouble.

A decade ago, the introduction of the euro, the common currency of 16 of the 27 EU member states, was a political decision -- not a monetary one. When the euro was introduced in 1999, Nobel Prize winner Milton Friedman wrote to his friend, the Italian economist Antonio Martino: “As you know, I am very negative about the euro and I am very doubtful about how it will work out. However, I am less pessimistic about it now than I was earlier simply because I never expected that the various countries would display the kind of discipline that was required in order to qualify for the euro.”

The problems result from the recent economic crisis which have badly affected the economy of Greece, one of the countries of the eurozone. Analysts doubt whether the government in Athens is able or willing to address Greece's financial problems. If not, the other 15 nations using the euro will suffer the consequences, which is something they are not likely to accept.

Thomas Mayer, the chief economist of Deutsche Bank, warned last week: “The situation is more serious than it has ever been since the introduction of the euro. […] If the Greece situation is handled badly, the Eurozone could break down, or face major inflation.”

The problems of the euro affect the entire world. The EU currency was not introduced because of economic considerations, but because the European Union is pretending to be a genuine state and states are expected to have single national currencies. Hoping to become a powerful political force in its own right, the EU adopted the euro as the common currency of some 327 million Europeans, so that the currency's economic power would prefigure the political power to be.

The eurozone represents the second largest economy in the world. During the past decade, the euro became the second largest reserve currency after the U.S. dollar. With banknotes and coins in circulation for more than €790 billion, the euro has surpassed the U.S. dollar's circulation. The euro appeared to be very strong, with the value of the U.S. dollar, the British pound, and other currencies dramatically falling in comparison to it -- one of the causes of Greece's problems. Tourism is a major economic sector in Greece. For tourists from outside the eurozone, such as the Americans and British, the country became too expensive as a holiday destination. Last year, when the world economic crisis also affected Europe, with a huge drop in the numbers of EU-citizens, such as Italians, who headed for Greece, the Greek economy collapsed and the Greek government was no longer able to pay the country's public debts.

With Greece facing bankruptcy, the fears about Greece's financial situation have led to a drop in value for the euro. Last week, the finance ministers of Germany and the Netherlands - the two eurozone countries which in pre-euro days had the strongest currencies in the EU: the German mark and the Dutch guilder - announced that they will not help Greece solve its problems. Polls indicate that 70% of the Germans oppose using their taxes to bail out other countries. Despite the EU propaganda line that EU citizens share a common European national identity, this is simply not true. As a leader in the Financial Times Deutschland noted earlier this month: “Spain believes in 'more Europe'. Whether that's the case for Germany as well one cannot be so sure any more.”

Moreover, the German economy has also been badly affected by the crisis. Last year, Germany's GDP fell by 5%, the biggest drop since the War, with a drop of 15% in exports and 20% in the sale of German manufactured goods. The German people are not prepared to lift countries such as Greece, Romania, Spain, Portugal and Ireland out of the recession at their own expense.

There is also a lot of anger towards the Greeks in the other EU countries: for some years Greece seems to have covered up its bad economic performance by officially presenting better economic figures than was the case. The promise of the Greek government to reduce Greece's budget deficit from 12.7% of GDP in 2009 to 2.8% in 2012, is being met with scepticism. Many doubt whether the government in Athens will be strong enough to resist the domestic pressure from the powerful trade unions against the radical deficit-cutting efforts that are needed, while others doubt that the Greeks will refrain from manipulating the economic data again.

Unwillingness to help the Greeks is huge within a eurozone currently facing an unemployment rate of 10% of the workforce, the highest figure since the single currency was introduced eleven years ago. Under EU rules, however, all the 27 member states of the EU, not just the 16 member states of the eurozone, are obliged to help the Greeks if the EU decides to bail them out. Article 122 of the EU Treaty, which went into force last December, states: “Where a member state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the council of ministers, on a proposal from the European Commission, may grant, under certain conditions, Union financial assistance.”

This decision is taken on a majority vote. Consequently Britain, which always refused to join the eurozone, might be forced to help save the euro. The British press has already reported that if an EU rescue fund for Greece matches the Greek budget deficit, and if the EU decides that member states have to contribute in accordance with their own share of the total EU economy, Britain might be forced to pay a £7 billion bill to bail out Greece -- or perhaps even more, if other bankrupt eurozone countries, such as Spain, are excused their share.

British Eurosceptics fear that if Greece, which represents 3% of EU GDP, is bailed out, other eurozone countries facing financial difficulties (Spain, Portugal, Italy) might claim the same treatment. This, they say, would saddle Britain with a bill of £50 billion to save a currency in which the Brits have never believed.

Even though European public opinion is opposed to a bailout plan for the Greeks, Irwin Stelzer recently wrote in The Wall Street Journal that he expects European politicians to present just such a plan. “There is so much political capital invested in the euro by the political class,” he wrote,”that even the stern and parsimonious [German Chancellor] Angela Merkel will in the end contribute to a bailout fund if necessary.”

However, there also are indications to the contrary. Greek politicians might feel that the only way to avoid civil unrest in Greece might be to drop the euro and re-establish their own national currency, the Greek drachma. This would allow the Greek government to devalue the currency in order to stimulate exports and economic growth - a political-monetary tool which Athens lacks if it remains in the eurozone. It seems that some people at the European Central Bank (ECB), which controls the euro, favor such a move.

On Jan. 17, Ambrose Evans-Pritchard wrote in the London Daily Telegraph that at the ECB headquarters in Frankfurt the legal ground is being prepared for a euro break-up. A major problem, however, appears to be that once a country has accepted the euro it cannot get rid of it unless it leaves the EU altogether. “This is a warning shot for Greece, Portugal, Ireland and Spain. If they fail to marshal public support for draconian austerity, they risk being cast into Icelandic oblivion.” Apart from Britain and Denmark, two countries which obtained opt-outs in the EU treaties, all EU member states are obliged to join the eurozone or peg their currencies to it. Former IMF analyst Desmond Lachman is quoted in CityAM warning: “There is every prospect that within two to three years...Greece's European membership will end with a bang.”

Evans-Pritchard also reports, however, that the dominant view of financial circles in London seems to be that “if a rescue [bailout of Greece] turns out to be necessary, a rescue will be mounted.” This is a bet, says Evans-Pritchard, that Berlin will do “what it did for East Germany: subsidise forever. It is a judgment on whether EMU is the binding coin of sacred solidarity or just a fixed exchange rate system like others before it. Politics will decide.”


Which brings us back to Milton Friedman: When politicians decide to rule economic and monetary issues, the results are usually catastrophic.

via hudsonny.org


on the plus side at least Europe unlike the United States can envision a break up. The United States suffers many of the same problems because the ability to locally control the value of currency can not be done in a single political unit.
by NoahDavidSimon at 7:28 AM

http://noahdavidsimon.blogspot.com/2010/01/will-euro-survive-hudson-new-york.html

[Stock Lobster]

>>G7 preoccupied with eurozone debt, China 'bubble'

By Michel Comte (AFP) – 3 hours ago

IQALUIT, Canada — Finance ministers and central bankers from leading industrial nations Saturday held a second day of talks in northern Canada as fresh market turmoil cast doubt on a fragile global economic recovery.

Topping the agenda for the final day of "frank" G7 talks was to be growing concerns over eurozone debt as well as the yuan, which China has been accused of keeping deliberately weak to boost exports to the West.

A press conference was due to be held at 13:15 pm (1815 GMT) with Canadian Finance Minister Jim Flaherty due to sum up the debate, being held far from prying eyes in Canada's frigid far north.

The state of the public coffers in Spain and Portugal have been causing growing unease, with investors fearing a scenario similar to that in Greece.

Greece has been placed under unprecedented EU surveillance as it attempts to implement austerity measures to slash its massive debt and a 12.7-percent public deficit, while Portugal's deficit hit 9.3 percent last year, its highest since 1974.

Over dinner Friday, delegates digested Greece's debt crisis and fears that a bubble was developing in China, which is poised to overtake Japan as the world's second largest economy this year, ministers told reporters.

"Fundamentally, (Greece's debt woes) are an issue for the European Union, but a number of countries represented here are EU countries, so it's a matter of concern that I'm sure we'll talk about tonight and tomorrow," Flaherty said Friday.

European Central Bank chief Jean-Claude Trichet said Thursday the high deficit and debt in some countries was placing an "additional burden" on monetary policy and undermining the bloc's stability and growth pact.

By a roaring fire and a bearskin rug, G7 delegates were also to touch on the timing of "exit strategies" from costly stimulus measures undertaken by G7 governments, as well as concerns about their combined debts of more than 30 trillion dollars.

Flaherty had said there would be "major discussions" about China's currency over the weekend.

"This is an issue that cannot be avoided," he told reporters. "It is a G20 issue ... but it is also an issue that concerns Western industrialized countries represented in the G7."

The value of the Chinese currency, which has effectively been pegged to the US dollar since mid-2008, has been a bone of contention between Beijing and its Western trading partners, which say it is kept low to boost exports.

China has kept its yuan weak against the dollar, and critics say this keeps Chinese exports artificially cheap and has fueled a massive trade surplus with the West. China's trade surplus reached 196.1 billion dollars in 2009.

Japanese Finance Minister Naoto Kan, however, said exchange rates were barely mentioned at the dinner that officially kicked off the conference.

Rather, he said he told his counterparts that Japan was preoccupied with "China's economic conditions."

"We're concerned about a bubble" in the Chinese economy, he said.

France, meanwhile, circulated proposals for reforming the global financial system.

The talks formally opened Friday evening in this capital of Canada's Nunavut territory.

But before getting down to business, the Canadians and Europeans went dog-sledding on frozen Frobisher Bay.

The G7 delegates from Canada, the United States, France, Germany, Italy, Japan and Britain were joined by officials from the International Monetary Fund, the World Bank and the European Commission.

With the G20 taking the lead as the world's premier economic forum at meeting in Pittsburgh in September and the rise of China's economic clout, the G7 is now struggling to remain relevant.

The G7 once ran the world economy, but with high unemployment, soaring public debt and subsidized banks, some suggested that G7 nations are now holding it back.

Copyright © 2010 AFP. All rights reserved. More »

[Stock Lobster]

MO: Solution To Greece Sovereign Debt Default Scare, Easy…Kick Them Out Of The E.U.

Economics / Global Debt Crisis
The Market Oracle
Feb 06, 2010 - 03:49 AM
By: Andrew_Butter

On Friday European monetary affairs commissioner Joaquin Almunia declared;

“There is no bailout and no "plan-B" for the Greek economy because there is no risk it will default on its debt”.

The good news is that as we speak there is a team from Brussels which will start advising Greece on how to fix its finances. The bad news is that they might have to have to start from the very beginning, like with grade-school math.

Apparently Greece got into a bit of disarray all of a sudden when someone noticed a little mistake (presumably arithmetical), and it turned out that the projected budget deficit of 3.7% of GDP for 2009, would actually be 12.7%, and they found that out, apparently some time in January 2010.

So while we are on that subject, I was just wondering how Joaquin Almunia is so sure about “plan-A”…I mean did he check the math? And well if there is indeed a “plan-A”, then what are all those armies of EU financial wizards advising about?

Or is “plan-A” that the Germans will just hand over a load of money?

Anyway the EU was not well pleased to hear about the arithmetical mistake, this is what they said:

The European Commission has published a damning report on Greece's "unreliable" economic figures, increasing the chances of the EU executive launching infringement proceedings against Athens. The report on Greek government deficit and debt statistics highlights the general "lack of quality of the Greek fiscal statistics" and "failures of the relevant Greek institutions in a broad sense."

http://www.eubusiness.com/news-eu/greece-economy.28d

One thing I like to do is figure out chaotic countries that don’t have good statistics and aren’t very good at arithmetic, so thought I’d spend a couple of hours digging around trying to figure out how the Greek economy works.

I can report that statistics, you know those boring things like National Accounts and all that tedious stuff; are evidently not something that comes easy over there.

I say that because you would have thought that with 40% of the population employed in the public sector, they might have been able to come up with a set of National Accounts that you can access on the Internet, even poor countries like Kenya and India have that sort of information, and Greece is supposed to be a rich country.

Perhaps that’s one of the problems? I saw a documentary the other day that reported the Greek public sector doesn’t actually do very much; outside (according to the report) of getting the police and military to beat people up and sometimes kill them, which is something that they seem to have a very special talent for. This is what Amnesty International said last year:

A report published on Monday 30 March by Amnesty International reveals a pattern of serious human rights violations by Greek police and other law enforcement officials. The report highlights allegations of excessive use of force and firearms, torture and ill-treatment, arbitrary detention and denial of prompt access to lawyers.

http://www.amnesty.org.uk/news_details.asp?NewsID=18130

I remember when I last went to Greece which was in 1975, how time passes, seems like yesterday, lovely people. I used to hang around with some students in Athens and they told me some pretty horrifying stories. But I was surprised to hear they are still doing that sort of thing, over thirty years later.

I thought the EU had standards about that sort of thing? Although I suppose if you can’t get a country to put together a reliable set of national accounts, well it’s probably unrealistic to hope that you can persuade them to stop torturing their own citizens.

Anyway, after giving up on the obvious sources; like for example the Ministry of Planning, the National Statistics Office, and the Greek Central Bank, about the only thing I found of any use was this:

Athens, 04 February 2010: The Minister of Finance, George Papaconstantinou, sent today to Parliament a bill rendering the statistical service independent. The draft legislation entitled "Hellenic Statistical System. Establishment of the Hellenic Statistical Authority (ELSTA) as an Independent Authority - Legal Entity under Public Law" represents a major step to restore the credibility of Greek statistical data and fiscal accounts.

So what that basically says is that they don’t have many statistics right now, and the ones they have are not reliable, but the good news is that they have recognised that if you want to run a country in the modern age, they do come in handy now and then.

Come to think of it, I’m not sure what the word “restore” means?

However there was some information on the Ministry of Economy and Finance website, for example a Power Point presentation titled “The Greek Economy”, that did not unfortunately have any economics statistics on it, just percentage growth rates, plus some stirring sub-titles, like:

“Dynamic Progress, Great Potential, Bold Reform Agenda”.

I also noticed that Greece had (proudly) secured 24.3 Billion Euros of handouts for 2007-2013. That must be presumably for instruments of torture and Tazars?

But the best bit was an account of 216 new PPP infrastructure projects although I only counted ninety on the list (like I said arithmetic doesn’t seem to be a core skill), but out of the ninety projects I counted, there were:

Nine “Security Systems for the Ministry of defence (MOD) i.e. 10% of 90
Fourteen Buildings for the MOD (16%)
Fourteen Police Stations (16%)
Three Prisons (3%)
Five “Pr Government Houses” (Pr means private?) (6%)
Three Courts (3%)
Eight Port Security Systems (9%)

Clearly they take the business of torturing their own civilians in Greece very seriously! Lucky they have the EU to support them in that vital role, the Belgium and German taxpayers in particular can go to bed at night with a warm fuzzy feeling knowing that they paid for that.

Personally I don’t care, I’ve seen a lot worse, just I object to paying for that.

Anyway, that was the sum-total of the information that I managed to glean from those sources on the Economy of Greece, so I was reduced to Wikipedia in my search for the “truth”. But sadly the account on the economy appeared to have been written by a public relations firm and from that story-board you would think that Greece is one of the most economically vibrant countries in the world. But it did include a few snippets of information, for example:

In 2004, Eurostat, the statistical arm of the European Commission, after an audit performed by the New Democracy government, revealed that the budgetary statistics on the basis of which Greece joined the European monetary union (budget deficit was one of four key criteria for entry), had been massively underreported by the previous Greek government (mostly by not recording a large share of military expenses).

That might explain it, “Military expenses”? Perhaps that might have something to do with what Amnesty International called a “pattern of serious human rights violations by Greek police and other law enforcement officials”.

Perhaps they were shy to report what proportion of their GDP was deployed on that activity? Anyway the report went on to say:

However, even according to the revised budget deficit numbers calculated according to the methodology in force at the time of Greece's application for entry into the Eurozone, the criteria for entry had been met.

Well that’s nice, although by that time I suppose it might have been a bit late, and so the bureaucrats from Brussels might have figured “Oh well, what the heck”? Or perhaps someone paid some kickbacks – that’s the way things generally work in the EU.

Anyway after Wikipedia, I found some data on EUROMONITOR which I cross-checked to the other snippets I had picked up. If I’d been willing to pay I suppose I might have got more, although you don’t actually need much to figure out which way the wind blows.

Big picture when you get in a hole, all that matters is cash flow; these what I think are the big numbers for 2008 which was the year before the wheels started falling off:

GDP (nominal) 244 Billion Euros.
Current Account Deficit 36 Billion Euros
As % GDP 15%

Imports 98 Billion Euros

Exports of Goods & Services 29 Billion Euros
Tourism Receipts 18 Billion Euros
External revenues from shipping 6 Billion Euros (that’s a guess)
EU Aid 4 Billion Euros

Total external income 55 Billion Euros

Government Revenues 60 Billion Euros (24% of GDP)
Government Expenditure 69 Billion Euros (27.5% of GDP)

I think that’s right, although it’s hard to work it out since most of the statistics are just percentages, it’s hard to figure out of what? I get the feeling that was deliberate, although I suppose someone has got a copy of the National Accounts somewhere, but so far as I can see, that’s “National Security”.

In 2009 two things happened, (1) tourism tanked, it’s hard to get a number on that but it looks like revenues might have gone down 20%, (2) shipping tanked, I wouldn’t be surprised if the external revenues from the huge external shipping fleet owned by Greek Shipping Tycoons (many of whom live in London), might have gone negative.

I suspect that the tourism industry and the shipping industry were the big cash cows, those are hard to hide unlike what is reported as a large grey economy in Greece (people tend to resist paying taxes if the taxes are used to pay policemen and soldiers to beat them up and torture them), and so when those tanked – well there was no money. And since those revenues are pay-as you go, they didn’t know how bad it was going to be until the bombshell hit.

An presumably the 40% of the working force that are employed in “public service” were too busy torturing people and figuring out how to add 2+2 together and come up with “four” be able to anticipate that?

[chart]img42.imageshack.us/img42/6265/greecedebt2.gif[/chart[

So what’s “plan-A” going to be?

Well tourism receipts depend on the nominal GDP of the source countries (mainly UK and Germany), and that’s not looking too hot. Plus the margins there are affected by oil prices (and I’d be surprised if they average less than $70 going forwards regardless of the current “volatility”), since Greece is a low budget destination and therefore fuel costs matter a lot, so don’t expect an uptick of any size in the immediate future.

With regard to the debt, Greece is classified as number eighty-one in terms of doing business; in other words, it’s basically a corrupt police state. The ironic thing there is that I wouldn’t be surprised if a big part of the external debt was loaned out to the cronies to build hotels and other tourism infrastructure, and that a big part of that is now unable to service its loans.

Ironic since if it had been easier for foreigners to invest, the government which probably guaranteed those loans (that’s how it works in a crony capitalist police state), it would be foreign investors who were on the hook.

[color=red]My suggestion for Plan A:[/color]

1: Get rid of half the police force and 75% of the army and re-train the rest, the European Union has no place subsidising a crony capitalist police state, or corruption and torture.

2: Call the real estate loans and go after any shortfalls, do not allow them to slip out by saying they were “non-recourse”, and set up a transparent mechanism to make sure the creditors get properly treated; aim to sell the real estate after removing all of the hidden restrictions on other EU nationals participating in the Greek economy.

But don’t be too soft on the creditors, after all if you lend money to banana republics that make a habit out of torturing their own people, and lie on their application forms, don’t ***** if they don’t give the money back.

And if they don’t want to play ball, cut them lose and let them sink, they lied to the EU to get in, so if they don’t want to take their medicine, kick them out.

The EU regulations are very clear; the budget deficit should not be more than 3%, and you shouldn’t lie on your application form; allow that sort of thing and you might as well let Zimbabwe join the EU.

And if you really want to twist the knife; let Turkey in.

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe; currently writing a book about BubbleOmics. Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( [e-mail] ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2010 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

http://www.marketoracle.co.uk/Article17050.html