blutto said:
....interesting article on the Greek financial crisis...nicely maps out the battle, the players and the strategies being played out...
http://www.alternet.org/story/153795/vampire_hedge_funds_are_sucking_greece_dry/
....does anyone know if Cerebrus is one of the vampire squids involved...
Cheers
blutto
Good article which explains very neatly what is the issue with Greece. The problem is not so much any more that a default of Greece might set in motion a default of Italy or Spain like falling domino bricks. I believe we have seen that the crisis is contained in that sense (both countries had very successful bond auctions recently, I even linked to an article about that). The problem is that financial tools such as CDS's are indeed aptly described as a 'nuclear option' as we have seen during the 2008 crisis. Which is kind of ironic in that the US in particular allowed these essentially unregulated products comparable to 'financial weapons of mass destruction', while in the political world, non-existant nuclear weapons in Iran provoke a much different reaction.
rhubroma said:
Ok, so I ran into this economist colleague guy I know (if the truth be known, he's a bit unsupportable, a real, hardcore liberal) and I mentioned Escobar's article and the petrodollar issue.
Naturally he was rather dismissive about the prospect of another currency replacing the dollar, that 80% of global financial exchange is done in US$, that the Saudis and other Arab states rely upon the dollar for purchasing medicines and other vital necessities, etc. That only when the US is completely wiped out is it going to happen, etc.
Now I know zip about this stuff, but was wondering how solid is US hegemony really in this regard?
As for the status quo, your friend is pretty much correct. Currently, there is no move away from the US$. You can see that US bonds are still at incredibly low yields even though the AAA rating was lost (downgraded by I believe one rating agency). Now the reason for this might be that the US has been pro-active in not allowing countries such as Libya to carry out their plans (more cases mentioned in the linked article by Pepe Escobar). Another reason is that China is still buying US bonds due to the large trade imbalance (probably a large amount of lobbing was involved in the Chinese decision with likely an off-the-record promise by the Obama administration to austerity). Finally, the Euro never really took off to replace the $, because the largest EU trading place, the city of London, is not in the Euro zone (probably quite a bit of lobbying involved here too, and we had a thread about UK and EU here recently in which this might have been brought up).
Of course, the reasons why we do have the status quo also gives hints why it might change in the future. China might diversify its investing from US bonds to something else not denominated in US$. Right now, China might stand to lose the most on that decision, but maybe at one point, they might decide toit might be better to just cut their losses (could happen)
Some oil-producing countries (not the Saudis, but maybe Iran, Iraq, Venezuela, Russia, maybe Libya and Nigeria), might switch from the US$ to whatever (gold has been mentioned in the case of Iran-India trades) or whatnot. The question here is what the oil exporters want to invest their revenue in. It has to be something not denominated in US$, such as Euro bonds, or BRIC countries or who knows what in order to make an impact. (this is the most likely threat for the US$ right now).
The last threat is the emergence of a strong, alternative currency. For the Euro to really take off, London has to become Euro country (we had a thread on that, recently, and I see this an unlikely option, mostly because of US lobbying efforts which align well with the sentiment of the typical UK low-information voter). China is not an alternative, because of their insistence to align with the US$. That leaves what? India? Russia? the weakening Yen? Of course not. It has to be either the Euro including London (and possibly Russia), or the Asian countries (Japan, Korea, India, China at least) might agree on a common currency. None of which seems very likely at present.
You see at least three threads of which I think the second is the most likely. Which also comes back to why the US seems to be most pro-active in eliminating it.
gooner said:
As everyone probably knows the irish government done a guarantee on bank debts back in 2008. The debts of the banks were too big and ended up bankrupting our country which resulted in the arrival of the troicka(EU, ECB and IMF).
Yet today we see our goverment pay 1.25bn euros in unsecured Anglo-Irish Bank bondholders. They are outside the bank guarantee and anglo-irish is a defunct bank which does absolutely no business. The goverment put the spin out that they are being bullied by the ECB. What a load of nonsense. Yet we see Greece get a write down of 50% of their debt.
The troicka visited ireland last week to see ireland`s progress in the bailout programme and this question was put to the ECB guy and he got tongue tied. All it is done for is to protect european institiutions and the irish people arent culpable one bit. These speculators are getting away with it while ordinary person on the street has to suffer through this austerity. You can see the ECB guy getting tongue tied for yourself:
http://www.youtube.com/watch?v=HAf7J4a_T1g
Ireland is a fun example to consider. Of course, Ireland made a completely wrong decision by guaranteeing the debt, because instead of a few bankrupt banks, you now have a bankrupt country. The case which has me interested is Iceland. It is the first Western country which basically flipped the bird at the international institution, and declared bankruptcy while guaranteeing only savings of their own citizens (likely against the treaties they signed, but ok). Iceland is having a remarkable recovery. Ireland is on the other scale of the spectrum. Clearly, you have an Irish government which is only beholden to special interests. From the obscenely low corporate tax rates to the decision to socialize losses (while still continuing to privatize profits). I feel sorry for you that you have to bear that burden. Apparently many other Irish don't seem to think they should and are voting with their feet. Remember, the problem is not the ECB, EU or IMF. The problem was the rushed decision of the elected Irish government to listen to the lobbyist of private banks speculators and to guarantee every obligation by every Irish bank. EU, ECB and IMF came in later. And if little Iceland was able to withstand their collective pressure, then Ireland could probably have done the same.
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