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  1. is irrelevant: There is no demand for product, so there is no point in investing, so there is no point in IPOs, so the stock market is expendable.

  2. is outside the realm of plausibility. Even in Cyprus the doomsayers were proven wrong, and the Cypriot government was something out of amateur hour at the clown school. Syriza is not: It is clear from the masterful choreography on display in Greece that Athens has gamed out this scenario ahead of time and deliberately let the balloon go up on their own time table.

(Even if they had not, supermarket supply chains and distribution channels do not work that way.)

  1. has an obvious solution, that Syriza is currently demonstrating for the slow learners. Of course, that's gonna suck for the EPP-PES collaborators in the Portuguese cabinet who have been so busy throwing Syriza under the bus and will now have to eat crow. My heart bleeds for them.

  2. is another ridiculous exaggeration. There might be a small dip in the dollar/euro exchange rate, but even that should be mitigated by the skill with which Athens is managing its capital controls. And although raising interest rates in response to deterioration of the terms of the foreign trade is admittedly classic BuBa quackery, there are limits to even the ECBuBa's insanity. At the end of the day, they will not allow the spread to the Fed Funds rate to increase to several per cent. And the Fed fortunately has reasonably competent professionals like Yellen at the helm.

- Jake

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 28th, 2015 at 05:13:29 PM EST
I have to agree with Jake here.  Much as I believe this whole situation has been spectacularly mismanaged by the Troika and Eurogroup, I don't believe the markets will be all that surprised.  There will be increased volatility as the situation unfolds, certainly, and, as my own diary makes clear, I don't see there being a quick solution for the Eurozone.  However the surprising thing may well be how little a Greek default effects everything else.  Greece is only  a tiny % of the Eurozone economy and it was tanking anyway. The rest of the Eurozone is growing and in a cyclical upturn. Euro devaluation and QE will keep things ticking over.  So unless you are talking about factors and issues specific to Portugal of which I am unaware, I wouldn't be pressing the panic button just yet.  If anything the Eurogroup will be desperate to ensure it doesn't repeat the mistakes it made with Greece - and that could even increase Portugal's bargaining power - if it has a Government smart enough to realize that.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jun 28th, 2015 at 06:12:57 PM EST
[ Parent ]
I am not pressing the panic button, and I don't think the Greek people are, though the politicians (of all stripes may be), but I do worry for Portugal. Portugal needs to be protected because of its banking structure and the fact that its bank have lent so much to the periphery, and likewise, the periphery (esp. Spain) has lent so much to Portugal. Greece is an outlier because it did not have much private debt, and it was mainly an issue of public debt, and that debt came through France and Germany, which meant the big boys could wield enough violence to make the euro taxpayers fall in line, capitalize the German and French banks, almost without awareness of what was going on. With Portugal, they simply cannot sacrifice it, because the media in the big countries would quickly point out the relationship with Spanish banks. Portugal must be protected t all costs. If Greece was the scapegoat, then Portugal is the lynchpin. There is no eurozone without Portugal.
by Upstate NY on Sun Jun 28th, 2015 at 07:39:26 PM EST
[ Parent ]
That seems like an optimistic take.

It would require the key players to have learned a lesson from the Greek case, other than "Varoufakis and Tsipras are unreasonable, jumped up peasants who can't even dress themselves."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 28th, 2015 at 11:32:23 PM EST
[ Parent ]
  1. A loss of capitalisation is certainly not irrelevant for the banking system.

  2. You seem pretty optimist on this; I very much doubt the IMF will get the tranche due tomorrow.

  3. I would not call bankruptcy a "solution".

  4. Exaggeration is part of the game. However, note that the euro already lost 2% of its value since I posted this up.


luis_de_sousa@mastodon.social
by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Mon Jun 29th, 2015 at 03:01:54 AM EST
[ Parent ]
Bank resolution Is the solution for failed banks. Lack of inflation has been THE problem as it has made debt burdens and imbalances even more unsustainable.  A 2% devaluation s a mere blip.  Yes if it becomes 5 or 10% on a sustained basis it will have an impact - Mostly by reviving the Euro economy  and helping the ECB to reach its inflation target quicker.  Increases in interest rates are still a long way off, and won't be a broblem so long as they remain the rate of inflation.  All in all, a struggling Portuguese economy should welcome a Euro devaluation- even if it drives oil prices higher -itself not a bad thing in the long run.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jun 29th, 2015 at 03:40:44 AM EST
[ Parent ]
  1. Bank capitalization is not measured by market cap, and banks do not have any very large direct exposure to common stock unless they are doing things that should not be legal. So the stock market can burn.

  2. What the IMF gets or does not get does not matter very greatly for the ability to maintain supermarkets and pharmacies in stock. The IMF can be allowed to burn.

  3. That is a statement of ideological preference, not economic necessity.

  4. Two per cent is not sufficient to matter to any business model that matters to the real economy. Those who lose their shirt over two per cent, or even five per cent or ten per cent, eurodollar fluctuations should be allowed to burn.

- Jake

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 29th, 2015 at 11:44:30 AM EST
[ Parent ]
  1. You should probably read a bit more on the collapse of Banco Espírito Santo.

  2. I believe you missed my point here. When Papandreu announced the referendum back in 2011, for a few weeks Greece was only able to acquire petroleum from Iran. It is a matter of credibility.

  3. No ideology here, nor economics.

  4. Again you are past the point on this, even if the euro has flat lined against the dollar. What matters is the action of ECB in face of devaluation. A devaluation would be good for most Portuguese business and the economy in general.


luis_de_sousa@mastodon.social
by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Wed Jul 1st, 2015 at 04:17:17 AM EST
[ Parent ]
  1. banks that hold large exposure to common stock are not primarily in the business of banking. Let them burn.

  2. Syriza has been planning this for some time. There should be supplies in the pipeline for a few weeks.

  3. "Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. - Keynes

  4. the Fed Funds rate is historically a reliable anchor for ECB interest rate policy. The ECB's intellectual vacuity works in our favor here.

- Jake

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 1st, 2015 at 10:39:54 AM EST
[ Parent ]

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