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Euro Exit to Cost Over $1 Trillion
Townhall.com ^ | May 26, 2012 | Mike Shedlock

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 ...


TOPICS: Business/Economy; Editorial; Foreign Affairs
KEYWORDS:

1 posted on 05/26/2012 5:43:26 AM PDT by Kaslin
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To: Kaslin
Grexeunt omnes, pursued by a bear [market].
2 posted on 05/26/2012 5:50:25 AM PDT by Lonesome in Massachussets (The Democratic Party strongly supports full civil rights for necro-Americans!)
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To: Kaslin

” 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...)


3 posted on 05/26/2012 5:55:58 AM PDT by Uncle Ike (Rope is cheap, and there are lots of trees...)
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To: Uncle Ike

Seems to me the Euro would get a boost from the Greek exit.


4 posted on 05/26/2012 6:08:27 AM PDT by Eric in the Ozarks
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To: Kaslin

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.


5 posted on 05/26/2012 6:12:26 AM PDT by PAR35
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To: Kaslin

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.


6 posted on 05/26/2012 6:23:28 AM PDT by Attention Surplus Disorder (A conservative, a liberal and a moderate walk into a bar. Bartender says "what'll it be, Mitt?")
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To: Kaslin

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.


7 posted on 05/26/2012 6:30:17 AM PDT by KarlInOhio (You only have three billion heartbeats in a lifetime.How many does the government claim as its own?)
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To: Attention Surplus Disorder
So far the Credit Default Swaps haven't triggered because the haircuts on Greek bonds technically aren't defaults (they were negotiated).

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.

8 posted on 05/26/2012 7:16:04 AM PDT by Gideon7
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To: Attention Surplus Disorder

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?


9 posted on 05/26/2012 7:16:39 AM PDT by InterceptPoint (TIN)
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To: Kaslin

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.


10 posted on 05/26/2012 7:29:40 AM PDT by Iron Munro (If you want total security go to prison. The only thing lacking is freedom. D. D. Eisenhower)
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To: InterceptPoint

‘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.


11 posted on 05/26/2012 7:32:03 AM PDT by Attention Surplus Disorder (A conservative, a liberal and a moderate walk into a bar. Bartender says "what'll it be, Mitt?")
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To: Gideon7

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.


12 posted on 05/26/2012 7:53:21 AM PDT by Attention Surplus Disorder (A conservative, a liberal and a moderate walk into a bar. Bartender says "what'll it be, Mitt?")
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To: Lonesome in Massachussets
How in the hell did the Germans agree to float bonds [again] bought by the PLA [again] to cover kicking this down the road [again]??

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.

13 posted on 05/26/2012 8:27:39 AM PDT by StAnDeliver (=)
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To: Uncle Ike

Same trick they used last year. The Treasury exchanges dollar credits for euros. Essentially “loaning” them the trillion.


14 posted on 05/26/2012 8:54:15 AM PDT by Kozak (The means of defence against foreign danger, have been always the instruments of tyranny at home JM)
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To: Kaslin

ponzi schemes MUST grow. Hence, a global fed.


15 posted on 05/26/2012 10:08:44 AM PDT by the invisib1e hand (they have no god but caesar)
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To: PAR35
IIF=Institute of International Finance

Dallara is the managing director of IIF accoring to

Wikipedia

16 posted on 05/26/2012 10:26:24 AM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin
I read this Socialist website for some light entertainment, but on occasion they print some interesting info. Looks like a Perfect Storm headed our way.

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.”

Mounting signs of deepening global slump

17 posted on 05/26/2012 11:44:05 AM PDT by Oatka (This is America. Assimilate or evaporate.)
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To: Attention Surplus Disorder

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?


18 posted on 05/26/2012 1:08:57 PM PDT by zeestephen
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To: Kaslin

Thanks.

I still give the story a C-. The writer didn’t even have a decent high school journalism course.


19 posted on 05/26/2012 1:39:45 PM PDT by PAR35
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To: Kaslin

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.


20 posted on 05/26/2012 1:48:39 PM PDT by cornfedcowboy (Trust in God, but empty the clip.)
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To: zeestephen

Re: “It could take $200-$400 out of gold.”

But only because the USD is the “least poisonous” currency still standing.

The least toxic major one. The Cana dollar is in pretty good shape. Still. Numbers is numbers, dollar gets strong, gold gets weak, to us. I’ll acknowledge my theory is just that; theory; but it’s inarguable that a strong dollar, especially propelled by rocket fuel, will make gold look like it’s taking a serious poop relative to the USD. Now, one might say, “well, all those Euro folks should buy gold, or certainly some will, and that will provide a floor to the POG”. Yeah, could. I’m building up cash to re-buy some gold that I sold at $1750, about 1/3rd of mine. I doubt I’ll ever be all the way out of it, but I think gold and silver rest here for the interim. Maybe get weaker.

How long can USA interest rates stay at zero with $50 trillion in unfunded liabilities coming due?

If there is no other game, there’s no other game. Lotta people have gone broke over the past few years betting that rates will rise and rise a lot. Those liabilites are a decade or more off in the future. If US rates go significantly higher, the US will *not* be able to pay the interest on its current debt, never mind future liabilities. That would be the functional equivalent a Greek default, right now (or whenever it happens) And...the bazillions in debt the Fed has bought will suffer massive losses as well. We would see Ben squirm like nothing we’ve imagined so far.

On the other hand, I am personally amazed at the performance of American business during the Great Recession.

I agree, the US economy is an incredibly adaptive beast, in so many ways. Truly, lots of business profits have come from layoffs, but there are lots of profits anyway. However, if the Eurozone collapses, those profits will be seen to suffer, and they will, both in perception and in reality.

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.

No doubt.

Time and again, business has pulled America out of the fire.

Maybe they can answer the bell one more time?

Don’t forget the US consumer. The consumer, in my mind, should get all kinds of awards for spending his rear end off through all manner of recession and job loss. IMO the consumer was really the saving grace in the period 2000-2007.


21 posted on 05/26/2012 3:32:57 PM PDT by Attention Surplus Disorder (A conservative, a liberal and a moderate walk into a bar. Bartender says "what'll it be, Mitt?")
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