Sunday, May 22, 2011

Greek Economic Troubles...

Here is a table of who owes who in Europe:
One reason why Germany and other economically stronger EU nations have to bailout the indebted PIIGS nations with its public funds is their banks are the biggest lenders to these nations. If there is a default, the Germans might have to deal with a banking crisis at home. Looking at the above table, you can see how a contagion can possibly occur at some point in time.
The Greeks are eventually not going to pay their debts in full - given their size of debt which is 160% the size of their GDP. They have a govt budget deficit of 13% of GDP.  Many pundits are saying Greece will soon default on their debt[BBC Report] by rescheduling it because they can no longer service the debt that is due. Default fears has cause markets to fall as it will most certainly revive the panic of May 2010 when the situation reach crisis proportions. However, what is likely to happen is they will kick the can further down the road to deal with a Greek default at a better time on the assumption that the global economy will eventually recover. Allowing Greece to default now creates a lose-lose situation immediately - the Greek economy will just collapse taking many of the the European banks down with it.
The problems in Europe just shows how fragile the global economy is. Right now central banks have pumped money and keep their fingers cross that the whole system can reach a better state so that more permanent solutions can be found for many of the problems. However, if something derails the economy - terrorist attacks, natural disasters, market disruptions - these fissures in the global economy will blow open and the system can sink very quickly.

16 comments:

Anonymous said...

Whatever happen to the Greeks debt or the world economy, one thing will not change for sure. That is, Singapore will remain peaceful and prosperous and the Sing dollar as strong as ever.

Sure, there may still be wide income gap, sky high minsiter pay, high HDB prices, great public resentment etc etc.

But outwardly everything will still be peaceful and prosperous, and that's good enough for any politician.

I cannot imagine otherwise. Just as I cannot imagine our opposition taking 60% of the votes and 93% of the seats!

Can you?

Anonymous said...

Perhaps the problem with Greece is that they don't have huge reserves like what Singapore has.

Or pay their ministers top pay for top talent.

Or their ruling party controlling 93% of seats in Parliament.

Or else they will not be in trouble in the place.

Seriously they need to seek outside expert advice and guidance, like from our super minister Tharman (holding 3 appointments/portfolios)

hayek said...

One important fact that those prostitute economist do not want us to know. Countries can only be economic strong when it has strong industry.

This is self-evidence that those industrialize Europe such as Germany and Netherlands are often the creditor of the rest. When the government let the elite to sell and dismantle their industries as what UK did, they will head towards the rubbish heap.

What most PIIGS nation have is the hyped-up "service" industry. All service industry are "consumer" of wealth while real industry are producer of wealth.

Countries with service industries will incur debt inevitably.

The worst kind service industry is the "FIRE" industries, the Finance, Insurance, REal estate.

US and UK are now rotting because of a bloated FIRE industry.

Anonymous said...

Exactly. Beware whenever you hear the words 'service industry'. It just means greed without producing anything of value. Well, China will bail everyone out so don't worry. Just watch and see the US and EU say, "how high?" When China says jump. Oh, I think we'd better start posting in Mandarin as well. Nothing like speaking their language to get comfy with them. My prediction is that fifty years from now, the only governments in any country must first be approved by China to ensure good relationships and economic aid. Ok, I'm being facetious here, but remember that 'World Power' wherein no man may buy or sell without its approval in the Book of Revelations? Yeah.

Anonymous said...

先天下之忧而忧,
后天下之乐而乐。

Anonymous said...

"US and UK are now rotting because of a bloated FIRE industry."
hayek 22/5/11 09:00

Not so for the US, as long as USD is still an international currency.

In fact the USD is one of the most important currencies that the Sing dollar is pegged to.

Same thing for many other currencies too.

And for the US, even if their industry is not strong and their economy is a spender rather than maker, other countries are most willing to lend them money to spend.

And if need be, their FED can go for another round of "quantitative easing" or "money printing."

If a person is already bankrupt but if others are still willing to lend to him to spend, then what's the problem with being bankrupt?

Anonymous said...

@ Anon 11:37

Most countries are giving up hope on the USD and economy and are rather looking to Asia (China) which has seen stellar growth and a huge potential. Ask yourself, when was the last time China had a recession ever since they started market reforms? Face it, China is 1.4 billion people and will be worth 60 trillion at least given that the US is 15 trillion with 300 million people. Furthermore, they are able to keep their currency stable and have been insulated from most of the economic shocks the rest of the world has seen, so maybe it hints of really what a 'good' government is like.

Investor said...

This is a new economic world.

A world based on credit and it was allowed to grow to tremendous portion

It is so large, and so intricately woven that all the world leaders are fully aware of its implications.
It was their own creation, or at least tacit knowledge and of course gains.

It gotten too large now to turn back. Turning back or resetting all debts to zero is unthinkable.. war will erupt.

So, what are the alternatives?
None.

Just hope that as the world keeps consumming, that each of us buy cars, homes, LV bags, Ikea furniture, new Ipads, visit Peru, wine & dine.. and all will enjoy the good life.
And all will forget about these debts..

Maybe, it might work.. if it does
then we have found a new economic theory.
If it does not, well.. bend over!
tuck your heads between your knees and kiss your arse good bye.

Investor

hayek said...

Re Investor
//////////
A world based on credit and it was allowed to grow to tremendous portion....

So, what are the alternatives?
None.
///////////

I think you have IQ lower than kids in kindergarten. Just revert back to gold standard currency you will see excessive credit vaporize overnight, and a significant of debt being reset.

The bankers and government supports fiat currency for their selfish motive to rob and force debt into the working class.

But now, the end is near. They are never be able to find good collateral. There will be plenty of default, taking down one banks after another.

Sooner and later, some country will revert to gold standard, and that will spell the end of US dollar hegemony.

Anonymous said...

@Anonymous 2/5/11 07:40

I doubt Greek go thru without default. Currently Euro & China is trying to help Greek out of the Crisis, but actually they are buying time for the crisis to happen. USA will like to see Greek default, because that will let the USD flow back to them and bring down the inflation in US. Just look at DXY vs SPY from 2008 to now.

How will it impact Singapore. The SGD will be weaken against USD and It will help in singapore export. The world commodity price with also fall due to Strong DXY. This will help in control singapore inflation.

The world will also go into Recession again. Out of the a good effect of weaken SGD. HDB price will fall due to higher jobless rate. Social problem in singapore will surface higher then 2008. Example Gambling, Homeless, Medical, Birth rate & Suicide.

As PAP common practise is to increase Govt spending on infrastructure as to create GDP which mainly on spending. Reduce CPF contribution. Increase Retire Age. Blame Singaporean for not productive.

Hoping for the Best. Expecting the Worst. Good Luck.

Anonymous said...

@Hayek

I'm not an economist, but is there even enough gold in this world for each economy to back it's currency against? I don't think so...

hayek said...

Re
///////
I'm not an economist, but is there even enough gold in this world for each economy to back it's currency against?
//////

This is really a standard bankers propaganda against gold standard that I seen so many times.

Just revalue gold to US$100 000, will solve the problem. And certainly, we are all going there when FED prints and prints.

Anonymous said...

IN THE FIRST PLACE WHO START ALL THIS TO COMPARE WITH COMPANY CEO?WHY NOT COMPARE TO THE WORLD LEADER BEFORE U MAKE ANY CHANGE,OR U THINK STUPID DAFT SINGAPOREANS DONT KNOW HOW TO FIND OUT,WHEN WE FIND OUT THEN U SAY CHANGE.IF WE DONT FIND OUT MEAN U CAN KEEP CARRY ON????
U GUYS ALWAYS SAY IF GIVE THE PEOPLE THAT MUCH,THEY WANT EVEN MORE.
HOW ABOUT U GUYS????BEFORE THOSE INCREASEMENT,U GUYS ALREADY MAKE MILLION.WHY SO GREEDY????EXCUSE AND EXCUSE AGAIN WHEN U WANT SOMETHING FOR YOURSELF??
YOUR SMALL INCREASEMENT CAN LEAD TO PEOPLE WHO EARN ONE LIFE TIME ALSO CANNOT REACH IT!
IF U READY TAKE GD CARE OF THE PEOPLE BY GIVING THEM GD ROOF,THEN NOBODY WILL BLAME U.
EVERYTHING U GUYS TALK IS MONEY,TRY TAKE AS MUCH MONEY FROM THE PEOPLE.EVEN HDB U ALSO MUST EARN HUGE PROFIT FROM THERE.U MEAN UNDER PAY = CORRUIT?? GREEDY IS MORE SCARING THEN CORRUIT.WHEN TIME IS BAD,U CUT YOUR PAY TO HELP THE POOR?WHEN TIME GD U TAKE 8 MTH BONUES….BETTER THEN GO ROB.HOW ABOUT US????LAND .TAX.RESERVE GDP..WHAT EVER ALL IS BELOW TO U,WHAT BELOW TO US!!!!!!!!!!!!!SIMPLE ROOF LIKE HDB ALSO HAD TO PAY 30YRS LIKE SLAVE!!!!!
..

U MEAN THOSE WORLD LEADER ARE UNDER PAY AND WILL LEAD TO...CORR??

Anonymous said...

"Just revalue gold to US$100 000, will solve the problem. And certainly, we are all going there when FED prints and prints."

Haha !!!. It could well be anything (not necessarily gold), like a piece of paper where money is printed & we are back to square one - as long as it is an acceptable store of value.

Slowly, many are getting it and solving the bigger financial puzzle (or trickery). Else why some have to work so hard throughout their lives achieving not much (but yet labeled as lazy & irresponsible) while some others have a better smooth sailing while doing not much (but labeled as talent).

Singapura Pundit said...

"Social welfare and charitable work must be for the welfare of all the people in the country. If each individual cares only for himself, how can he survive? If we want the country to become strong and to continue to progress, it is vital that all our people have a sense of national identity. They must be public-spirited. They must understand that the success and failure of the nation is the responsibility of all." - Mr Lee Kuan Yew's speech at Ngee Ann College, 18 November 1965

Anonymous said...

@ Singapura Pundit 22/5/11 21:22

That sound logic in 1965, but it sound bullshit in 2011. This show the Speech in 1965 is not done by LKY.