Gold

[robbo24]

Well the real risk is someone like Portugal or Spain tries to follow suit.
There is an end game to all this 'money printing" Robbo & it ain't pretty.

If you can't hold it in your hand you don't own it, they say.

I agree and take it one step further: If you can't put it in a pantyhose and bludgeon your neighbour to death with it in order to acquire their canned food in a time of anarchy, you don't own it.

In those terms I could arm a small private army

[Daytr]

Doesn't necessarily need to be a financial Armageddon scenario, but it could.
I see it more likely as a death of a thousand cuts.
Slow demise of the US's position in the world, Japan could be a catalyst for the scenario you describe as they are far more indebted than Greece!

[BlackPeter]

Blackmailing? Really. Don't get me wrong Greece has played more than their part in the situation they are left in, but so has Germany & France by ever thinking the Greeks should be part of the Euro. The Euro is flawed full stop. You can't have fiscal union without central government. If you make a bad investment such as Germany & France have made, you pay the price. Greece was never going to reform, its a cultural thing. They have never paid their fair share of tax & the black market economy has been suggested is bigger than the real economy. Plenty of countries have reneged on debt & within a relatively short time, recovered. What other option do they have? Be in chains for generations? That's what caused WWII & Germany by the way was forgiven their debts post WWII by Greece!

I guess there are a handful of issues we agree on ... and others we don't. But lets see:

EURO: I think we both agree that it was a bad idea in the first place to create a currency union between partners with so different political systems and work ethics. Sure - the Greek did lie to get into this union, but some more due diligence should have caught the lie. I agree - both the liars and the people who accepted their lies at face value need to take some responsibility for the mess they created.

Greek way of life: First let me state that I believe that the Greek people have roughly the same proportion of sloths / crooks and honest hard working people than any other nation. So nothing wrong with the Greek people in itself. However - it is now since more than one generation that corrupt Greek governments (nota bene - democratically elected by the Greek people) are splashing other nations money to pamper their own. The Greek people are to Europe what the third generation (not just South Auckland) beneficiaries are to New Zealand. Only difference: The Greek paid themselves much more generous benefits - their pension schemes used to be the most generous in all of Europe. Work less and enjoy early a really generous pension paid by other nations - this is the Greek way of life.

German debt relieve in 1953: Well, read your history books. We are talking about demands of the WW1 winners against the German Reich. Lets not get into a discussion of the overall justification of these demands (I guess the winner is always right - law of the jungle) - but it was clearly a debt of the whole German Reich. So - why should West Germany have paid for all of these debts? They had less than 50% of the German Reich territory (the rest was "DDR", half of what now is Poland, some parts of what now is Russia (like Kaliningrad) and some parts taken by France and Italy). You could argue that the only thing which happened in 1953 is that the "winner" nations accepted that West Germany had to pay only its own "fair" share of the German Reich debts. Not more and not less.

Different situation in Greece - they didn't lose a war, they didn't got split up, but enjoyed instead a long and enjoyable holiday paid with other people's money. Why shouldn't they now pay for them?

But I guess - instead of looking into the past the more important question is - how can we solve the problems of the future? Somehow the Greek people need to learn again to maintain themselves, and not just by blackmailing other nations (and hey - playing chicken is a kind of blackmail: "If you don't get out of my way than we both end up dead").

I guess keeping to pile up non recoverable debts is obviously no sustainable solution. Forgiving debts is only sustainable if it is less pleasant for the debtors than to continue with a cycle of borrowing and defaulting ... and don't forget - not paying their creditors is by now an integral part of the Greek lifestyle. They don't see anymore a reason why they should keep promises if the world just keeps pushing funds their way without ever holding them to their word.

If you see a (for all parties) sustainable solution to this criss, than I am sure not just I would be interested to hear about it ...

[JBmurc]

AUD Gold $1567oz mark my words it will make new high before to long...

Disc -Holding only ASX PM stocks

[Daytr]

I think we agree on a lot, other than the use of the term blackmail.
I would suggest the EU & IMF terms have more a blackmail terms to it.
The German debt forgiveness back in the 1950s was different you are correct but is was to achieve a similar outcome, to move forward.
The problem with Greece moving forward with the EU as you rightly point out, they don't want to change.
So it would be very likely within a decade or two they would be back in a similar situation.
So the only sustainable solution is let them default & exit & the debt is written off.
Hopefully the lesson is that there is risk with credit and lending & you have to face the music when it goes wrong.
Unfortunately the commercial banks wont learn that lesson as they have been bailed out again.
China of course could write the check tomorrow....

[BlackPeter]

I think we agree on a lot, other than the use of the term blackmail.
I would suggest the EU & IMF terms have more a blackmail terms to it.

Not sure I understand - maybe you've got some information I don't have?

My understanding is that EU and IMF conditions would require Greek to increase their public income (i.e. increase taxes) to allow them to repay at least some of their debts. They would require Greece as well to reduce their ongoing spending spree (funded with borrowed money from overseas) by reducing over the top pensions and public salaries. In my view quite justified and sensible conditions. Why would you call them blackmail?

[Daytr]

I don't think its just over the top pensions but wider than that and particularly austerity.
How is an economy straddled with debt supposed to grow with a rise in taxes and less government spending.
How would it ever pay off the debt under that scenario?
As I said the Greeks wont pay more tax, tax avoidance is an Olympic sport in Greece, its cultural.
Germany & France knew this going in. Its like a woman marrying a bad boy & hoping he will change...
Think about the NZ economy, where would it be if we weren't rebuilding CHC or spending billions on motorways.
Either way you slice it for Greece, them staying in the EU doesn't work.
They need to leave & both parties would be better off down the track.

[BlackPeter]

I don't think its just over the top pensions but wider than that and particularly austerity.
How is an economy straddled with debt supposed to grow with a rise in taxes and less government spending.
How would it ever pay off the debt under that scenario?
As I said the Greeks wont pay more tax, tax avoidance is an Olympic sport in Greece, its cultural.
Germany & France knew this going in. Its like a woman marrying a bad boy & hoping he will change...
Think about the NZ economy, where would it be if we weren't rebuilding CHC or spending billions on motorways.
Either way you slice it for Greece, them staying in the EU doesn't work.
They need to leave & both parties would be better off down the track.

You make the word austerity sound like something totally unacceptable. In economics "austerity" stands just for "a set of policies with the aim of reducing government budget deficits and may include spending cuts, tax increases, or a mixture of both" (lifted off wikipedia). Sure - if reducing their government deficit is an unbearable idea for the Greek people, than the suggested divorce from Europe (how messy it will be) seems to be the only remaining solution.

[Daytr]

Not me the Greeks or at least 61% of them. The austerity might work if the Greeks were prepared to change, but they are not so its moot.
Mind you most governments including our own think the best way out of a recession is to spend its way out.
Many in other parts of indebted Europe with 50% youth unemployment seem to agree with the Greeks.
There is a real danger that parts of Europe will have a generation where a large number haven't ever had a job & will be tougher to employ & the extreme of that could end up in militancy.

[Daytr]

From CMC markets. Note what's in bold, this is the risk I referred.



The Greek people voted unanimously to reject the deal from the ECB. This has provided Prime Minister Tsipras with a strong mandate when talks resume with the ECB and IMF, possibly later in the week.
Various scenarios have been put forward but the most likely outcome is that Greece will remain in the Euro with some reduction in the outstanding debt and/or an extension of terms. While this seems the most practical outcome, the arm wrestle is not over yet and the ECB may still take a hard-line approach as they would be mindful that other anti – austerity parties are gaining popularity in Spain, France and Italy and may also be looking to renegotiate their terms.
The EuroGroup meets tomorrow 7^th July to discuss the next steps.