tag:blogger.com,1999:blog-4815867514277794362.post5011580432421549175..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Models for a Greek Sovereign DefaultJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-4815867514277794362.post-27212824119119379082012-05-28T14:05:01.782+10:002012-05-28T14:05:01.782+10:00John- I linked this post of yours to a recent blog...John- I linked this post of yours to a recent blog that I wrote on Economic Musings. Hopefully the attribution was appropriate. Enjoy your work. All the best,<br /><br />David SchawelDavid Schawelhttp://www.economicmusings.comnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-20205674292840135512012-05-24T01:40:40.047+10:002012-05-24T01:40:40.047+10:00Interesting to note that After this Monday's W...Interesting to note that After this Monday's Whit Day, The next EU-wide bank holiday won't be until Assention Day on Aug 15thAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-69485714753426691712012-05-19T21:02:44.881+10:002012-05-19T21:02:44.881+10:00What's critical now, is to backstop Spain. If ...What's critical now, is to backstop Spain. If Greek fails before Spain can be backstopped, the domino chain will become unstoppable.<br /><br />We may see the Euro's future, play out in front of us over the next 2 months.<br /><br /><a href="http://stratpark.com/europe/spain-next-banks-weak-urgent-action-save-euro/" rel="nofollow">Spain next: Banks weakening, urgent action to save the Euro</a>Thomas Whttps://www.blogger.com/profile/06287256406464617259noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-69611856115853838532012-02-13T02:43:12.374+11:002012-02-13T02:43:12.374+11:00Dmitry my dear, how do you know that greeks aren&#...Dmitry my dear, how do you know that greeks aren't working?! I work 40 hours a week for 800 euros, I pay my taxes, buy food with a tax of 23%, buy gas for 1.65/ lt, pay for medicine with a 13% tax, pay more taxes with my electricity bill, have to rent an appartment for 400/month and so on! That is the situation in Athens and now you come here telling me that we don't work?! We work longer hours than anyone else in the EU does, we get paid less and yet we buy most of our stuff way more expensive than you do!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-20158839605840528902011-10-12T00:39:39.687+11:002011-10-12T00:39:39.687+11:00Why does greece have to go back to the "drach...Why does greece have to go back to the "drachma"? I think it could just convert euro deposits into a "greek euro" worth 1.40 euros. Simple. Do you have to redominate at a rate of one-to one with a view to a quick depreciation? I dont think so- but most do<br /><br />http://ftalphaville.ft.com/blog/2011/10/07/696261/mechanics-of-a-euro-breakdown/<br /><br />Do you know any good articles on the practicalities of this approach? Greece would need fx reserves to pay creditors, and I think it could turn to Chinese lenders. Both civilizations have a lot of affinities, something that Greece and Germany don't share.Mike13noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-3864649072183550992011-10-08T00:10:23.889+11:002011-10-08T00:10:23.889+11:00Link:
http://www.nytimes.com/2011/10/07/business/...Link:<br /><br />http://www.nytimes.com/2011/10/07/business/global/how-greece-could-escape-the-euro.html?_r=1&hpHurricanenoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-78730894521544353232011-10-08T00:08:48.794+11:002011-10-08T00:08:48.794+11:00Congratulations on the mention in Floyd Norris'...Congratulations on the mention in Floyd Norris' NY Times article yesterday! You're becoming a celebrity.Hurricanenoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-73294362385041612202011-10-05T22:53:47.253+11:002011-10-05T22:53:47.253+11:00Did anyone notice that the telephone company alrea...Did anyone notice that the telephone company already belongs to the Germans? DTAG bought a controlling stake in OTE some years ago.Alexhttps://www.blogger.com/profile/17153530634675543954noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-79364095625190155752011-10-04T09:59:53.936+11:002011-10-04T09:59:53.936+11:00I would argue the root problem is not fixing the r...I would argue the root problem is not fixing the root cause. Austerity might be the solution, but then agian, if it's the wrong medicin, in the long haul, euro is doomed onw way or the other. <br /><br />The analysis in the link makes me worried everytime someone thinks German rule over Greece is the medicin.<br /><br />http://streetlightblog.blogspot.com/2011/09/what-really-caused-eurozone-crisis-part.htmlMartinhttps://www.blogger.com/profile/06621741206684073466noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-22397432308356626202011-09-30T04:23:12.049+10:002011-09-30T04:23:12.049+10:00A very minor point: Why would it be beneficial to ...A very minor point: Why would it be beneficial to max out a euro-denominated credit card ahead of an anticipated default? The liability would still be denominated in euros. Am I missing something here?<br /><br />Second,it strikes me that given Germany's current fiscal position and the massive cost of bailing out their financial system should the nightmare scenario play out (too many assets denominated in non-German 'euros'), then they would no longer be one of the best sovereign credits out there. This aspect of the generally accepted wisdom deserves further scrutiny.WellRednoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-19859996803776609562011-09-26T20:01:02.470+10:002011-09-26T20:01:02.470+10:00John
well thought out post but
curious about this ...John<br />well thought out post but<br />curious about this line<br />"You see a bank deposit in Athens is going to turn your Euros into Drachma. Overnight it will lose 70 percent of its valuation."<br />Is this actually based on calculations you have done or read elsewhere? I.e it would imply that you (or someone) thinks Greece suffers from something like 3x overvaluation, this seems pretty hardcore. <br />I've seen 20% being bandied around in Spain's case, see below<br />http://mpettis.com/2011/09/the-euro-once-again/<br />cheersEddie Bravohttps://www.blogger.com/profile/12019998828273309603noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-27270551505503007782011-09-26T02:34:41.746+10:002011-09-26T02:34:41.746+10:00It would seem my crystal ball is extra crystal cle...It would seem my crystal ball is extra crystal clear. I wrote my last comment before I went to bed.<br /><br />Here is the news this morning.<br />http://www.telegraph.co.uk/finance/financialcrisis/8786665/Multi-trillion-plan-to-save-the-eurozone-being-prepared.html<br /><br />$2 Trillion sounds about right compare to what the US brought to bear in 2009. It involves both leverage and the ECB! Also a 50% hair cut for Greek bond will result in a positively healthy debt to GDB of only ~70%! <br /><br />Crisis don't happen when everyone who can do something about it can see the crisis coming a mile away. <br /><br />For those of us who can only watch the show from a distance, we need more doomsday blogs. The more dire the better. The more dire the less likely it will happen. In the end, we'll all benefit. <br /><br />My bet is on MAD.狂猪https://www.blogger.com/profile/16599529315620633684noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-90423643913473451322011-09-25T23:36:11.647+10:002011-09-25T23:36:11.647+10:00Lets look at two of the PIIGS - Greece and Ireland...Lets look at two of the PIIGS - Greece and Ireland. Ireland is going down the Baltic route - GDP is growing semiannually despite the mess, it is ultimately a very open and liberal market for labour and everything else and never ran big government deficits. Ultimately, what determines whether you can stay in a currency union is how tightly integrated two economies are but also how similar they are in productivity growth, institutions etc. <br />Baltic states are a lot like Ireland - ultimately pretty open, reasonably good governments and a lot more German than mediterranean. <br /><br />Greece is another matter entirely, big deficits, history of default, shocking tax code even more poorly implemented and piss-poor productivity growth. I can happily bet on Ireland being more German because really, they aren't all that far away but betting on Greece becoming more German is mission impossible from my vantage point. To that end I think the Argentina example is a lot more apt for Greece. And that is why I think the ECB will print - though much more likely they will print to buy BTPs and see how Italy and Spain manage and leave the bank bailouts to sovereign states.Nemo Incognitohttps://www.blogger.com/profile/07345185457108156269noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-90359954510345985122011-09-25T15:34:35.859+10:002011-09-25T15:34:35.859+10:00Is the current situation worse than the height of ...Is the current situation worse than the height of the cold war when there are enough nukes on hair trigger to destroy the world many times over?<br /><br />To deal with that, the world had a powerful tool. It is call Mutual Assured Destruction -- aka MAD. This tool is so powerful, it has protected the world to this day. <br /><br />It is difficult to argue today's situation is some how more dire or more difficult to contain than at the height of the cold war.<br /><br />By the way, MAD is so powerful, US, Japan, and even the developing countries are jumping in to help!<br /><br />Lastly, let's not forget, Europe's debt are in euro. Ultimately the choice facing ECB is death or the printing press. What ECB will do is obvious and the evidences are very strong. <br /><br />* Consider the ECB still accepts Greek bond as collateral.<br /><br />* Consider the ECB is already buying Italian and Spanish bonds.<br /><br />Let's face it, the ECB printing press is already on!狂猪https://www.blogger.com/profile/16599529315620633684noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-64225260818809433572011-09-25T08:07:43.783+10:002011-09-25T08:07:43.783+10:00It would seem that the more thoughtful goldbugs of...It would seem that the more thoughtful goldbugs of Europe are ahead of the game. In Asia real gold and silver is patiently accumulated at artificially low prices. Don’t be surprised to see a force majeure in the New York and London gold and silver pits in the next 12 monthsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-73573858388778273812011-09-25T02:56:13.447+10:002011-09-25T02:56:13.447+10:00John,
Interested to hear your thoughts on strong ...John, <br />Interested to hear your thoughts on strong countries leaving the Euro for own currency. This was mentioned by one of the posters and I have seen it talked about on Mish's blog. Seems like the best of bad options t me. The weak countries don't have to pay back money in a strong currency while theirs is weak and the strong countries just need to take care of their own banks who will now receive the weak Euro. Exports will be hurt as well, but must be an easier sell for Germany to help German banks than to hand out cash to perceived lazy Greeks.<br />Your thoughts?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-30958515008147183702011-09-25T01:36:05.957+10:002011-09-25T01:36:05.957+10:00There is indeed a wikipedia article about everythi...There is indeed a wikipedia article about everything. From http://en.wikipedia.org/wiki/Austro-Hungarian_krone:<br /><br />After the end of the First World War it was initially hoped that the Krone could continue as a common currency of the Empire's successor states, but in January 1919 the Kingdom of Serbs, Croats, and Slovenes (later Yugoslavia) became the first successor state to overstamp the Austro-Hungarian Bank's notes to limit their validity to its own territory. Czechoslovakia followed suit in February 1919, and on 12 March 1919 the new Republic of Austria stamped the notes circulating in its territory with "DEUTSCHÖSTERREICH".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-80266989263419816482011-09-25T00:34:02.462+10:002011-09-25T00:34:02.462+10:00This is a good piece in identifying what would hap...This is a good piece in identifying what would happen if Greek defaulted - something extremely ugly that is well outside the experience of the developed world over the last 50 years. It is a bad piece at forecasting what will happen.<br /><br />Your calls on the Baltics 3 years ago were similar - your view that devaluation would have catastrophic consequences spot on, but it never happened. <br /><br />Instead after a very sharp decline in GDP, a very strong V shape recovery took hold with GDP levels in all three countries now above early 2007 levels, while Swedbank and SEB share price soared.<br /><br />The people running the EU are not total crazies. They know that to have governments suddenly defaulting or totally changing the game with massive FX devaluations could fundamentally destabilise Europe - economically, politically and socially. They have not forgotten where that led before. <br /><br />What fixed the Baltics was quickly balancing budgets, while keeping households alive with ultra low euro mortgage rates (this was why there was never an explosion in mortgage NPLs).<br /><br />In Greece the solution is structural government reform to fix their finances, with long term very low interest rate loans from the EU to allow them to make this adjustment.<br /><br />Would be very interesting to hear your thoughts on Greece in the context of what happened in the Baltics. This is likely to prove a much better roadmap than the Argentina calls which prove so long the last time the EU had similar issues.Macnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-13774793253381385412011-09-24T22:32:23.976+10:002011-09-24T22:32:23.976+10:00Perhaps Germany should leave the euro and start pr...Perhaps Germany should leave the euro and start printing its marks again...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-53754403884446513192011-09-24T19:14:31.494+10:002011-09-24T19:14:31.494+10:00Just so we put things into context, guarding the b...Just so we put things into context, guarding the borders is impossible not only because the entire armed forces of europe hardly suffice to guard the french-dutch border, but also because soldiers too, have, presumably savings in euros.<br /><br />If we (Greece) pull a Buenos Aires, there won't be any time for preparations and there will also be no warning. Portugal will follow suit, then Spain, Italy etc. The only thing that can stop this.<br /><br />Now your analysis was brilliant but you missed the really fun part: The Germans will have to pay for all that southern cash that will flood their banking system in anticipation of the new Drachmas and Escudos. This is because of the target2 settlement mechanism, which dictates that when a guy in lisbon withdraws 10 000 euros in cash, drives to Munich and makes a 10 000 deposit at Deutsche Bank, the bundesbank takes a liability of 10 000 (because sight deposits are CB liabilities) which it expects to be paid by the new Portuguese CB, which can only wire Escudos.<br /><br />This is the funniest part of the wholo story, Germans waking up to realise that the bundesbank has a capital hole of 600b or so (for comparison, consider that right now the bundesbang has over 150b of claims versus Mediterranean CBs, which correlate almost perfectly with deposit flight from the periphery).<br /><br />If it wasn't for the Target2 mechanism and the explosion in intra-eurosystem Bundesbank assets, the Germans would already have thrown us to the sharks.<br /><br />more fun facts and figures:<br />http://www.voxeu.org/index.php?q=node/6768<br /><br />and I also recommend this Alphaville blogpost:<br />http://ftalphaville.ft.com/blog/2011/09/23/684391/it-still-all-depends-on-the-humble-greek-depositor/L.https://www.blogger.com/profile/00432855028588894630noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-30956813365219116852011-09-24T18:45:18.322+10:002011-09-24T18:45:18.322+10:002 glasses of wine? Or of scotch? Ha!! Loving it. B...2 glasses of wine? Or of scotch? Ha!! Loving it. Bring on the carnage!tiruhttps://www.blogger.com/profile/09576188203768579619noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-34062384580052229182011-09-24T18:30:33.167+10:002011-09-24T18:30:33.167+10:00And following up from 9:52 on the political and pr...And following up from 9:52 on the political and practical impossibility of an imminent uncontrolled default, many people talk about Greece as the Lehman etc etc. I haven't seen anywhere that perhaps Greece is the AIG of Europe, simply because the EU/IMF funds is used to repay third parties while the debtor passes under the control of creditors who may offer initial hard terms but then, when/if things look up, they can renegotiate their severity. The AIG model worked fine. ARAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-26423263510965108412011-09-24T18:13:05.690+10:002011-09-24T18:13:05.690+10:00John
I'm not sure it has to be that harsh. Gr...John<br /><br />I'm not sure it has to be that harsh. Greek bonds are trading 50 cents in the euro, which seems about right.<br /><br />Why not the Brady solution. Buy the crap at 50 cents in the dollar, re-issue them under the new asset program and then make sure they sell their assets to repay the remaining debt.<br /><br />I don't think it has to be as bad as it sounds.<br /><br />While this is happening, keep the boot firmly on the neck while the keep firing public sector workers.<br /><br />Greece stays in.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-75758377042435941902011-09-24T13:42:05.798+10:002011-09-24T13:42:05.798+10:00Another excellent blog post; and written on a plan...Another excellent blog post; and written on a plane!<br />I'm intrigued to know which PIIGS nation is due to have an election in which a more extremist party could come to power and trigger a default/euro exit scenario. The electorate has the final say in this debate I fear.Ian Allmannoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-38620168606291988272011-09-24T12:48:28.072+10:002011-09-24T12:48:28.072+10:00@Scoff,
(off topic) Actually, most of Austria did...@Scoff,<br /><br />(off topic) Actually, most of Austria did not change to right-hand drive until the Anschluss in 1938, and Hungary changed in 1941.<br /><br />As for everything else, <a href="http://en.wikipedia.org/wiki/Right-_and_left-hand_traffic" rel="nofollow">there is a Wikipedia article</a>.Anonymousnoreply@blogger.com