Posted on 05/26/2012 5:43:20 AM PDT by Kaslin
According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
(Excerpt) Read more at finance.townhall.com ...
” Excuse me for asking but how would they attempt to do that? Print Euros? “
Obama’s Stash!!!
(I don’t think he’s quite bankrupted my great-great-great grandkids yet, so he’s got a little bit extra left...)
Seems to me the Euro would get a boost from the Greek exit.
Who is Dallara, what is the IIF, and why should I give any credence to what he says?
I’ll give the story a “C-”
And to answer the question, they’d raise taxes on the Germans. Or force the non Euro EU countries (UK) to join the Eurozone.
My own view, apropos of nothing, is that a Greek exit from the Euro would badly weaken the Euro, strengthen the dollar, and kick the bloody crap out of gold and silver. (and I am a bull on those metals) But it could take $200-$400 out of gold.
However I *do not* think that ass-kicking would be permanent, and that it would be entirely possible for that episode to create a multi-year bottom in the PMs, permitting further rampage. (You care what happens next, but you also have to ponder what might happen next-next and next-next-next) IOW, a super buying oppty.
Greece is not really the problem. The problem is the precedent that Greece would set for the upcoming countries of Spain and Italy.
So the cost will be about €100,000 per Greek? Or about three years of Greece’s GDP? Either someone is exaggerating or else they are planning on covering everyone’s bet on the euro on this.
The SHTF if the new Greek government walks away from its debts. Then the dominos start falling in an endless cascade of CDS payouts that could bring down the whole system.
My own view, apropos of nothing, is that a Greek exit from the Euro would badly weaken the Euro, strengthen the dollar, and kick the bloody crap out of gold and silver. (and I am a bull on those metals) But it could take $200-$400 out of gold.
+++++++++++++++++
What is your rationale for the weakening of gold?
Typical leftist scare tactics.
Leftists are always absolutely horrified at the prospect of losing control and power over others.
Think about the way democrats act when they lose an election.
‘Zactly what I said. If the Euro weakens or collapses, at least Greece but perhaps several Euro-countries might well abandon the Euro. Bank depositors go to sleep Friday night with a pile of Euros in their accounts and wake up Monday back with drachmas or Marks or whatevers. It matters not if the currencies are replaced 1:1, the markets will set the relative prices of the different currencies and their respective buying power(s). We in the US, however, live in a world where we see the POG denominated in USDs. Any form of Euro collapse would IMO produce a flood of buying into the dollar that will be ghastly, dramatic, jaw-dropping.
Now, I don’t state the above scenario as an “endpoint”, which is why I say we have to be concerned with “what’s next” and “what’s next-next”. It is entirely possible that the Euro fractures and the respective countries print like mad, producing the ultra-inflation some of the gold fanatics foresee. The US would *have* to respond with a weakening of the USD or our exports would be smoked.
So, while I *do* positively see an event that would produce that kind of whackage to gold, it could precede a bottoming and then multi-year ramp thereafter. But, if gold gets whacked to $1000 or $1200, then we’d be talking about a 30-40% gain required to get back to where we are now. EVERYBODY would get “what they want”. Gold ramps furiously, but, it ramps from $1000-$1200 and we’re just back to where we’ve already been.
But the simple answer is, the collapse of the Euro almost inarguably would produce a fiendishly strong dollar....temporarily.
What we’ve seen so far (that being no guarantee of anything in particular) is that defaults are declared to be non-defaults...as you’ve stated. I don’t believe anyone can predict one outcome or another in the CDS space. Perhaps the payouts will occur, in hyperinflated currency, or, things occur as they have to date. Perhaps CDS payouts occur in old, dead currencies, and going forward, new currencies replace old currencies. All of these types of activities have already occurred, multiple times throughout history. Perhaps most CDS are just declared null and void since the insurers never had the money to pay out at face and thus most of these arrangements were frauds from the outset(s). I am definitely more confident predicting fraud and more fraud going forward than any other outcome. What is hard to argue against is that governments have no better means of supporting themselves than screwing the people who pay the taxes. Including ours.
I am just forecasting one possible scenario with my “super-strong USD” possibility. I have no better crystal ball than anyone else. Still, seasonally, gold typically gets weak half-2/3rds through the year, even if we have no major dramatic event in currencies.
I unnerstand the PLA has got the cash lying around, but China GDP is going to possibly contract later this year or the next. Sure, they'll paper it over, you'll never see it published, but they could be at the beginning point of writing checks even their ass can't cash.
And that, my friends, is Chinese civil war, with a black swan painted on every shield.
Same trick they used last year. The Treasury exchanges dollar credits for euros. Essentially “loaning” them the trillion.
ponzi schemes MUST grow. Hence, a global fed.
Dallara is the managing director of IIF accoring to
Laying out the groundwork for "it was unexpected" (my emphasis): "OECD chief economist Pier Carlo Padoan told the Wall Street Journal. “We don’t compute the probability of a Greek exit (but) it’s higher now than six months ago.”
Re: “It could take $200-$400 out of gold.”
But only because the USD is the “least poisonous” currency still standing.
How long can USA interest rates stay at zero with $50 trillion in unfunded liabilities coming due?
On the other hand, I am personally amazed at the performance of American business during the Great Recession.
Taken as a whole, I am not shy about claiming that America has the best managed global corporations and small companies in the history of the world.
Time and again, business has pulled America out of the fire.
Maybe they can answer the bell one more time?
Thanks.
I still give the story a C-. The writer didn’t even have a decent high school journalism course.
Interesting plan being contemplated. Germany and France leave the Euro. The Euro remains a currency for the weaker nations and does not put a drag on the large countries.
Just might be a good idea.
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