Couple of interesting charts on Greece.
Bloomberg prints an exercise in extrapolating Greek devaluation to Mexico peso crisis. It is an interesting exercise in so far as it does indicate (imperfectly) one side of the ‘pain coin’ currently spinning in the air. But it does not provide for any realistic comparatives to the other side of the same coin: the side of Greece not opting out of the euro area. Suppose the estimated path in the Bloomberg chart is correct and Greece, exiting the euro does face a devaluation ‘bill’ of some 300 percent-odd. As Bloomberg article says, there will be pain. Huge pain. Now, suppose Greece does not opt for direct devaluation. Then what? Then – exactly the same adjustment will have to happen via internal devaluation. Absent inflation (of any significance) in the euro area (and even given the ECB target inflation), this means all of this adjustment will be carried by Greek people. Except, with devaluation and exit, Greece will still retain internal markets for adjustment: with reforms (not guaranteed by any means), and with some pain taken on the side of capital / funding, it might ameliorate the period of post-default devaluation (the ‘jump’ stage in the chart below). Staying in the euro clearly implies zero adjustment on capital side, with all adjustment on households’ side (employment, earnings, pensions etc). In addition, staying with euro implies no imports substitution (no price effects), exiting implies devaluation-driven imports substitution. Finally, staying with the euro implies no exports boost from devalued currency.
Because whether Reuters wants it or not, in Europe, what the bank does, the banks’ kings say.
Ok, folks. I never was a fan of Jean Claude Juncker, the [one of oh so many] European President.
My favourite Bad Dude of German Economics, Hans Werner Sinn on Greek crisis:Orderly Grexit is, in my view, still more disruptive and costly to all sides than a facilitated debt writedown and restructuring, while allowing Greece more time and fiscal roo…
Just as the Greek Parliament engaged in a vote to hold or not to hold a referendum on Troika proposals, the IMF has decided to end any hope for any referendum to have any basis for validity. As noted by ZeroHedge (http://www.zerohedge.com/news/2015-06-…
As Greece is set for a referendum on the bailout, here is the latest opinion poll:Source: http://www.publicissue.gr/en/ In short, if there is an election called now, it appears Syriza-led Left will win with a stronger mandate (187 total seats…
The surreal nature of social media is that in failing to protect us from spam and bots, it actually blocks those of us who genuinely interact on social media without commercial interest.Thus, I have now been blocked by Twitter for “suspicious automated…
These stats will scare your pants off.
In the tropical heat of #Grexit, which banks get sweats, which get chills?
Recently, I mused about cash balances in Greece being monetised by the ECB.Here is some evidence. First Greek holdings of cash:Next: Eurosystem ELA: