Currency question For Greece.

[Jim Bremner]

So, there's a chance that Greece might move away from the Euro as their form of currency.

If they bring the Drachma back, do you think that the Drachma will rise or fall after it's introduction?

This might make some people some decent coin.

[Moses]

Depends if adoption of the new Drachma is linked to a default on the Euro debt. If Greece defaults and doesn't adopt some austerity policies, I think the Drachma will have little demand and little value.

[john70t]

Great time to visit?
(edit: changed the "." to a "?". A friend went a few years ago and didn't complain about prices.)

[Dottore]

Greece will be fkd for a very long time. I can't think of a single reason the Drachma should increase in value after it is reintroduced. The opposite is a far better bet.

[tharbert]

It's amazing that an economy the size of Massachusetts' is wreaking so much havok. I think the E.U. will make another deal to keep Greece "in." They can't afford to have a country successfully bail on the euro.

[jcommin]

Originally Posted by Dottore

Greece will be fkd for a very long time. I can't think of a single reason the Drachma should increase in value after it is reintroduced. The opposite is a far better bet.

If the Greeks think their lives are bad with the Euro, it will be worse with the Drachma. I'll bet there wil be a 30% difference in currency value.

[Dottore]

Originally Posted by tharbert

It's amazing that an economy the size of Massachusetts' is wreaking so much havok. I think the E.U. will make another deal to keep Greece "in." They can't afford to have a country successfully bail on the euro.

Either way, its a lose/ lose situation.

If the anti-EU guy gets elected next week it will save the EU a very difficult decision.

[Dottore]

Originally Posted by jcommin

If the Greeks think their lives are bad with the Euro, it will be worse with the Drachma. I'll bet there wil be a 30% difference in currency value.

Closer to 50 percent IMO. But Greece denominated in Euros never made any sense to me.

I go back to the same village on Crete with some regularity. A house I considered buying pre-Euro for about $100K is now on the market for about $1.5 million. Insanity.

Greece produces nothing. It's shipping industry is largely offshore. Tourism is the main industry. Its insane how the Euro has distorted real values in Greece.

[Jim Bremner]

Right now you need $1.253 USD to buy a Euro How low do you think the Euro will go?

[Jim727]

I'm definitely not an economist (not even the one-handed one Truman wanted), but I'd guess that if Greece voluntarily leaves the Euro Zone the Euro will head back up.

Converting to Drachmas would be ugly for the Greek people. Perhaps if they follow the path Brazil used with their Unit of Real Value then there might be some hope, but I think the whole country is in such denial that it isn't likely.

Bigger question is what will the political change in France mean for the Euro. If the French reject 'austerity', then when will Germany get tired of supporting countries that reject fiscal responsibility.

I think Greece is mostly the canary in the mine.

[imcarthur]

No, the Euro would probably slide as lenders back away from other weak & vulnerable Euro countries - Spain etc. The USD would rise as well as gold & other (more) stable currencies.

Ian

[Jim727]

Could be. Will it put the other weak countries in the spotlight or will it be perceived as a thinning of the dependent countries?

If I knew the answer I could plan on becoming rich. Soon.

[imcarthur]

Well, I am still holding my gold . . .

Here is a very good assessment: What could happen next if Greece leaves the eurozone? from the BBC.

Ian

[Jim727]

Me too.

Nice link - thanks.

[Rich76_911s]

Why is a country with an economy the size of Massachusetts a problem, in one word, confidence. If Greece defaults on its euro based loans the loss of confidence that could ripple out has the potential to create another credit crisis at the same time it creates a sovereign debt crisis. Neither of which, in my opinion, is the world financial market prepared to handle.

As warren buffet puts it, "it's only when the tide goes out that you find out who's been swimming naked."

We Americans are in so deep we think no one will figure out that we left our shorts on the beach too.

[sc_rufctr]

Greece will default. It's only a matter of time.
Lets get real. They simply will never be able to repay what they already owe so giving them more makes no sense.

Their current "Rock Star" politicians are full of crap. Leftist idiots that still believe in Marxist BS that never worked properly.
The Greeks will find this out for themselves if they get elected.

At some point they'll default and leave the union.

So after it's all over... The Greeks will go on like they always did. Avoiding taxes and living simply.

[jyl]

Greek govt bond default will go along w/ Greek banking system failure.

Other Southern European banking systems will be attacked, ditto their govt bond yields. A confidence, contagion, speculator attack, for the most part. Amount of Greek govt debt held by other countries' banks is not that large. Those banks have been cutting their exposure to Greek banks for months.

ECB and EU countries will pull out the stops to defend Spain, Italy, etc. ECB has enormous lending powers due to having power of the (currency) press. Yields may soar, for awhile. Inter-bank transactions and other lending may freeze up, briefly. EU consumers may stop spending and business stop investing, for a short time. But since the ECB can back [pick your country] and it's banks with a trillion EUR, probably the defense holds.

Meanwhile, life is hell in Greece. No functioning banking system. No international credit. No drachma (can't print money that fast). Govt runs out of money. Stops paying workers. Population takes to the streets. Revenue plunges. How do you export olives when ports are shut, how do you import parts for machines when you've no bank to pay through, how do you earn tourist EUR or USD when riots are keeping tourists away? Probably Greece keeps using the EUR for some time, so don't even get a competitive help from currency devaluation.

Neighbors will close borders with Greece, Schengen be damned. Media will be all over the hell in Greece. Scare the Spanish, or anyone who thinks leaving the euro is a good idea, back into line.

At the same time, Germany will bend on stimulus. Seeing an EU country disintegrate will be as appalling to the Germans as to anyone. They're already being pressured by much of Europe, the US, the IMF, etc to take a more balanced approach.

So, it's a long hot summer. The US is hurt too, but is a relative safe haven while Europe plunges into crisis and China struggles with (what for them is a) recession.

Question - if you're the Chinese govt and your main method to stimulate the economy is to order the state banks to make loans, and just 3 years ago you had them pump $1TR of loans into every condo development, office park, highway project, new airport, etc that anyone could think of - and a lot of those loans are threatening to turn bad now - how do you accomplish stimulus part 2?

[john70t]

Again, that name pops up: Goldman Secret Greece Loan Shows Two Sinners as Client Unravels - Bloomberg
“It looks like an extremely profitable transaction for Goldman,” said Saul Haydon Rowe, a partner in Devon Capital LLP, a London-based firm that advises global investors on derivatives disputes."

[Dottore]

Originally Posted by Jim Bremner

Right now you need $1.253 USD to buy a Euro How low do you think the Euro will go?

Who knows? But if I had to guess I would say it could go as low as $1.10 USD.

[Dottore]

Originally Posted by Jim727

I'm definitely not an economist (not even the one-handed one Truman wanted), but I'd guess that if Greece voluntarily leaves the Euro Zone the Euro will head back up.

mine.

No. At this point I think a Greek default is already reflected in the Euro exchange rate. The Euro faces much bigger challenges than a Greek default. Can't see why the Euro should go up following a Greek default. Just my opinion.