"If it was a horse, I'd shoot it," once said a wise auto mechanic to a customer who brought his...


"If it was a horse, I'd shoot it," once said a wise auto mechanic to a customer who brought his jalopy in for repair. A corporate turnaround manager might say the same about Greece, where the sheer level of debt is likely to overwhelm any effort to better balance fiscal matters.
Comments (10)
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    Plug past articles day:
    seekingalpha.com/artic...
    21 Apr 2011, 10:59 AM Reply Like
  • Duke67
    , contributor
    Comments (142) | Send Message
     
    This really is so absurd. I like the parallel.
    21 Apr 2011, 11:10 AM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    More importantly, now that the Greece hysteria is behind us, and the short-term traders fleeced their marks, does it make a hill of beans worth of difference what happens in Greece, as it accounts for less than 1% of EU aggregate GDP?
    21 Apr 2011, 11:32 AM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    Yes it does, because Greece is similar to Spain (lots of past growth and inflation financed by foreigners). Spain's foreign debt is 200% of GDP (including all sectors), their unemployment is 20% (in the 40s if you are under 30 years old), they have no export-oriented sector (other than tourism), and cannot devalue the currency to compete with foreign wages.

     

    Since the public was "assured" that Greece "was ok" and wouldn't be allowed "to fail" I don't see why anyone would believe what they are now saying about Spain and the others. The subprime problem was also 1% of US GDP.
    21 Apr 2011, 11:55 AM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (562) | Send Message
     
    Just curious, what % of aggregate GDP was Lehman? AIG?

     

    I have no idea what the will happen if Greece goes but don't think it should be dismissed because of the smallish size of its economy. Just a shudder in 2010 was enough to send markets into a serious swoon which they didn't really recover from until QEII was announced.
    21 Apr 2011, 12:07 PM Reply Like
  • kmi
    , contributor
    Comments (4581) | Send Message
     
    The problem with Greece which people seem to routinely forget is that the banks holding its loans are not themselves healthy.

     

    Greek default is -good- for the Greeks at this point, and bad for everyone else. That's probably why the leadership in Greece is fighting so hard against default...
    21 Apr 2011, 12:12 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    Harry:

     

    The state of Spain's finances are much better than Greece, or Ireland, or Portugal. The domino theory has already run out of gas. Even the new regime in Ireland, after much sound and fury, is playing along with Europe.

     

    You might note, also, that a lot of Europe's recent economic reports (like UK recently and today) are coming in above expectations, so austerity isn't exactly proving the death knell that was forecasted.

     

    Manufactured hysteria is a trading scheme, and a very profitable one, too. But, once it's had it's day, then, the traders look for new targets. You can note how, now, restructuring talk in Greece or Ireland provokes only yawns, as it should. Speaking of those other two countries --Ireland and Portugal-- when they are added to Greece, the comprise less than 3% of overall EU GDP.

     

    The world hasn't and won't end.
    21 Apr 2011, 12:14 PM Reply Like
  • kmi
    , contributor
    Comments (4581) | Send Message
     
    Tack is right in his assertion that that Greek default elicits a collective yawn, but not because the problem has magically gone away. There are changes in place now that will reduce the calamity of the the event, such that both the impacted banks and the sovereign can be restructured in a more orderly way.

     

    That does not change the fact that the result of a Greek, Irish or Portuguese default, does indeed amount to more than a "hill of beans"
    21 Apr 2011, 12:30 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    I am sorry Tack, but you obviously have been following Spain though the eyes of the US brokerage houses. The "decoupling-theory" is based on nothing but half-truths. If you talk to the people there you will reach very different conclusions. Their real estate problem is sitting in the books marked at par waiting to solve itself in the next boom. The austerity programs announced by the government have yet to be implemented. In the meantime, their debt burden continues to grow and it is still financed by foreigners. In addition, the local governments, not only have not cut their expenses, but have discovered that they can borrow at will as the buyers think there is an implicit guarantee from the Kingdom.

     

    I have never said, by the way, that the world will end. Spain and Greece have defaulted many times without that happening.
    21 Apr 2011, 01:16 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    The problem is never Greece or a subprime CDO.

     

    Say Greece restructures in an orderly manner (somebody will have to book the losses, assume it is Germany). One year from now, someone rediscovers that Spain has not really cut expenses and their real estate problem is as big as ever (see my response to Tack above). At that time, some EU official will say that "Spain will not be allowed to fail" which is the SAME thing they said about Greece not too long ago.

     

    I do not know about you, but I would not want to hold any Spanish bonds in that scenario and there are plenty of them outside of Spain to go around. The total foreign debt is too large even for Germany.
    21 Apr 2011, 01:21 PM Reply Like
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