Comments on: Greece and the Threat to the Euro http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/ Wed, 23 May 2012 08:59:35 +0000 http://wordpress.org/?v=2.6.3 By: Alfonso Lovet http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-52417 Alfonso Lovet Fri, 21 May 2010 23:33:42 +0000 http://www.irisheconomy.ie/?p=6075#comment-52417 Greece made its own bed. Despite the decry of outside banks, Greece spent way beyond its means and then recruited the help of the financial system to outright hide it's debts from the very EU neighbors it was trying to con. For all the talk about investigating Goldman, the EU really needs to stand up for itself and investigate Greek figures, and wonder why it's allies decided to lie about their finances. Greece made its own bed. Despite the decry of outside banks, Greece spent way beyond its means and then recruited the help of the financial system to outright hide it’s debts from the very EU neighbors it was trying to con. For all the talk about investigating Goldman, the EU really needs to stand up for itself and investigate Greek figures, and wonder why it’s allies decided to lie about their finances.

]]> By: blue monkey http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-50091 blue monkey Mon, 10 May 2010 23:08:40 +0000 http://www.irisheconomy.ie/?p=6075#comment-50091 Greece and Spain won't pay back. This was a calculated Risk, and a Lesson for the Banking System. The only thing Germans can do is: REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain. U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever … Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged. Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output. Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse. http://www.defenseindustrydaily.com/Greece-in-Default-on-U-214-Submarine-Order-05801/ Don't worry; the ECB, the Fed or both will print the money. And all of us will share the pain, with our hard-earned money. Bad is never good until worse happens. Greece and Spain won’t pay back. This was a calculated Risk, and a Lesson for the Banking System. The only thing Germans can do is:
REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
http://www.defenseindustrydaily.com/Greece-in-Default-on-U-214-Submarine-Order-05801/
Don’t worry; the ECB, the Fed or both will print the money.
And all of us will share the pain, with our hard-earned money.
Bad is never good until worse happens.

]]> By: The Irish Economy » Blog Archive » Jacques Melitz on Greece and the Euro http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-48497 The Irish Economy » Blog Archive » Jacques Melitz on Greece and the Euro Mon, 03 May 2010 13:17:47 +0000 http://www.irisheconomy.ie/?p=6075#comment-48497 [...] have never really understood the idea that the Greek fiscal crisis is “a threat to the euro” but have generally sensed the [...] [...] have never really understood the idea that the Greek fiscal crisis is “a threat to the euro” but have generally sensed the [...]

]]> By: Geckko http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-42321 Geckko Tue, 30 Mar 2010 21:51:53 +0000 http://www.irisheconomy.ie/?p=6075#comment-42321 The threat is the moral hazard. If Greece get a bailout on favourable terms, we'd be mad not simply to forget about fiscal austerity and let rip with the fiscal pumps. And that is where your game theory comes in handy. You really need to be the first to play this hand. Greece looks to be getting the first mover advantage. The threat is the moral hazard. If Greece get a bailout on favourable terms, we’d be mad not simply to forget about fiscal austerity and let rip with the fiscal pumps.

And that is where your game theory comes in handy. You really need to be the first to play this hand. Greece looks to be getting the first mover advantage.

]]> By: Ciaran Daly http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41673 Ciaran Daly Sun, 28 Mar 2010 11:06:19 +0000 http://www.irisheconomy.ie/?p=6075#comment-41673 The threat to the euro is very simple, it is the political consequences of mass unemployment and continued downward cost / wage adjustment. The threat to the euro is very simple, it is the political consequences of mass unemployment and continued downward cost / wage adjustment.

]]> By: Pat Donnelly http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41628 Pat Donnelly Sun, 28 Mar 2010 04:35:29 +0000 http://www.irisheconomy.ie/?p=6075#comment-41628 Fiat currencies can work but to date, all have failed. (Discuss!) The current crop are devaluing as fast as possible and the best way to do that is to sell it down, while talking it down. See! It works! The reserve currency, freed for the moment from sell offs as countries start to wake up, is commodities. As a result commodity rich countries are not devaluing their fiat crap. The US$ and the Euro are both dropping. So is the GBP. Put into punts, what is the current exchange rate betwixt Ire and Eng? (Or "that is what you get for buying in GB"!) Fiat currencies inspire dishonesty in states, Discuss! Greece does not matter hence it is the ideal way to slowly devalue the Euro. When they get to talk like this about Italy, look out belooooooow!!!!! Remember, people, the MSM are for hire. PR. Spain got its independence from the Moor! (The end of the first Islamic invasion.....!) Fiat currencies can work but to date, all have failed. (Discuss!)

The current crop are devaluing as fast as possible and the best way to do that is to sell it down, while talking it down. See! It works! The reserve currency, freed for the moment from sell offs as countries start to wake up, is commodities. As a result commodity rich countries are not devaluing their fiat crap. The US$ and the Euro are both dropping. So is the GBP. Put into punts, what is the current exchange rate betwixt Ire and Eng? (Or “that is what you get for buying in GB”!)

Fiat currencies inspire dishonesty in states, Discuss! Greece does not matter hence it is the ideal way to slowly devalue the Euro. When they get to talk like this about Italy, look out belooooooow!!!!! Remember, people, the MSM are for hire. PR.

Spain got its independence from the Moor! (The end of the first Islamic invasion…..!)

]]> By: The Irish Economy » Blog Archive » Ryan: Save Anglo or Leave the Euro http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41590 The Irish Economy » Blog Archive » Ryan: Save Anglo or Leave the Euro Sat, 27 Mar 2010 22:25:25 +0000 http://www.irisheconomy.ie/?p=6075#comment-41590 [...] on from yesterday’s post on misleading hyperbole about Greece choosing to leave the euro or being expelled from it, it was [...] [...] on from yesterday’s post on misleading hyperbole about Greece choosing to leave the euro or being expelled from it, it was [...]

]]> By: David O'Donnell http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41564 David O'Donnell Sat, 27 Mar 2010 17:26:47 +0000 http://www.irisheconomy.ie/?p=6075#comment-41564 @Edgar ..... next move, of a few, ... post May elections... http://www.nakedcapitalism.com/2010/03/eu-willing-to-sacrifice-hedge-fund-jobs-to-clean-up-industry.html EU Willing to Sacrifice Hedge Fund Jobs to Clean Up Industry @Edgar

….. next move, of a few, … post May elections…

http://www.nakedcapitalism.com/2010/03/eu-willing-to-sacrifice-hedge-fund-jobs-to-clean-up-industry.html

EU Willing to Sacrifice Hedge Fund Jobs to Clean Up Industry

]]> By: David O'Donnell http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41556 David O'Donnell Sat, 27 Mar 2010 16:07:39 +0000 http://www.irisheconomy.ie/?p=6075#comment-41556 @Michael Hennigan Thanks Michael - the IFSC both clarifes (as too much Green) and further complexifies my amateur sleuth attempts to map and understand 'financialization' (-; “We hope that it will reassure all the holders of Greek bonds that the Eurozone will never let Greece fail,” said Herman Van Rompuy, president of the European Council, at a press conference. “If there were any danger, the other members of the Eurozone would intervene.” http://www.finfacts.ie/irishfinancenews/article_1019330.shtml @Edgar we await election results ... but a push on in internal EZ institutional reform? & on Derivatives/CDSs etc This story is far from over ... @Michael Hennigan

Thanks Michael - the IFSC both clarifes (as too much Green) and further complexifies my amateur sleuth attempts to map and understand ‘financialization’ (-;

“We hope that it will reassure all the holders of Greek bonds that the Eurozone will never let Greece fail,” said Herman Van Rompuy, president of the European Council, at a press conference. “If there were any danger, the other members of the Eurozone would intervene.”

http://www.finfacts.ie/irishfinancenews/article_1019330.shtml

@Edgar

we await election results … but a push on in internal EZ institutional reform? & on Derivatives/CDSs etc This story is far from over …

]]> By: Maurice O'Leary http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41550 Maurice O'Leary Sat, 27 Mar 2010 14:25:12 +0000 http://www.irisheconomy.ie/?p=6075#comment-41550 @KW and KO'R I have always interpretted the much quoted Eichengreen paper to show that it is practically impossible for a weak economy to leave the Euro. But he does show that it would be quite practical for one or more strong economies to leave and found their own new currency(ies). So in the event that the entire Euro project descended into farce with 1923 looming, Germany, Austria, Luxembourg and the Netherlands could set up the Euro Mark II, to commony known as the Mark. @KW and KO’R

I have always interpretted the much quoted Eichengreen paper to show that it is practically impossible for a weak economy to leave the Euro.

But he does show that it would be quite practical for one or more strong economies to leave and found their own new currency(ies). So in the event that the entire Euro project descended into farce with 1923 looming, Germany, Austria, Luxembourg and the Netherlands could set up the Euro Mark II, to commony known as the Mark.

]]> By: Mickey Hickey http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41544 Mickey Hickey Sat, 27 Mar 2010 13:29:28 +0000 http://www.irisheconomy.ie/?p=6075#comment-41544 Greece in relation to the EU as a whole is but a pimple on an elephants derriere. We all know what that makes Ireland. As Frau Merkel played the cold, lukewarm, warm game with Greece she accomplished two things. The first and most important was to create uncertainty in currency markets and the second was to mollify the electorate. She was very successful in that the EU declined 8% against the US$ and the waters are sufficiently muddied by bringing in the IMF that she is off the hook with respect to having the hard working and honest volk saddled with the bailout of profligate or worse Greeks. Overshadowing the whole shebang is as Karl pointed out Portugal, Spain, Italy, I would add France and Belgium to that list. You can rest assured that the German, French, UK, Austrian and Swiss banking fraternities are lobbying their respective governments in a frantic attempt to save themselves from the risk posed by their sovereign debt exposure. Self interest makes strange bedfellows and if Ireland was standing alone in its present predicament we would be bailed out in a flash. As Sarah O'Connor stated, there is no mystery as to why the Irish gov't embarked on its austerity program with alacrity. The need to roll over short term low cost debt ranks right up there with NAMA on our list of risks. The unanswered question is, did we impress Gross of Pimco enough to ensure he will take a tranche of our future debt offerings. Greece in relation to the EU as a whole is but a pimple on an elephants derriere. We all know what that makes Ireland. As Frau Merkel played the cold, lukewarm, warm game with Greece she accomplished two things. The first and most important was to create uncertainty in currency markets and the second was to mollify the electorate. She was very successful in that the EU declined 8% against the US$ and the waters are sufficiently muddied by bringing in the IMF that she is off the hook with respect to having the hard working and honest volk saddled with the bailout of profligate or worse Greeks. Overshadowing the whole shebang is as Karl pointed out Portugal, Spain, Italy, I would add France and Belgium to that list. You can rest assured that the German, French, UK, Austrian and Swiss banking fraternities are lobbying their respective governments in a frantic attempt to save themselves from the risk posed by their sovereign debt exposure. Self interest makes strange bedfellows and if Ireland was standing alone in its present predicament we would be bailed out in a flash. As Sarah O’Connor stated, there is no mystery as to why the Irish gov’t embarked on its austerity program with alacrity. The need to roll over short term low cost debt ranks right up there with NAMA on our list of risks. The unanswered question is, did we impress Gross of Pimco enough to ensure he will take a tranche of our future debt offerings.

]]> By: Edgar Morgenroth http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41535 Edgar Morgenroth Sat, 27 Mar 2010 10:49:45 +0000 http://www.irisheconomy.ie/?p=6075#comment-41535 @Karl - I agree with your analysis. The key issues are possible contagion, reputation (more political than economic reputation) and the potential loss to banks in Germany and France. As you say, what's wrong with a weaker Euro? Nobody commented on the heavy involvement of Barroso - he is Portugese and perhaps more than Spain and Ireland, Portugal is next on the hitlist of speculators. Many in Germany would love Greece to pull out of the Euro - they made a mistake letting them in but that's spilled milk now. @David O'Donnell - I am no longer convinced that there will be a significant change in the German approach to the problem after the NorthRhine-Westfalia election. Merkel has backed herself into a position she can't change from without huge political damage in Germany. @Karl - I agree with your analysis. The key issues are possible contagion, reputation (more political than economic reputation) and the potential loss to banks in Germany and France. As you say, what’s wrong with a weaker Euro?

Nobody commented on the heavy involvement of Barroso - he is Portugese and perhaps more than Spain and Ireland, Portugal is next on the hitlist of speculators.

Many in Germany would love Greece to pull out of the Euro - they made a mistake letting them in but that’s spilled milk now.

@David O’Donnell - I am no longer convinced that there will be a significant change in the German approach to the problem after the NorthRhine-Westfalia election. Merkel has backed herself into a position she can’t change from without huge political damage in Germany.

]]> By: Cormac Lucey http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41525 Cormac Lucey Sat, 27 Mar 2010 07:55:22 +0000 http://www.irisheconomy.ie/?p=6075#comment-41525 The key risk to the Euro project if Greece were to exit is political. The Euro is a monetary subset of the greater European project. For some this project has elements of a pseudo-religion. It is supposed to move steadily and inexorably towards a sort of heaven on earth: a fully-integrated European federal state. The fact that economic considerations (of an optimal currency area character) were wholly subordinated to political considerations (wanting to be fully paid up members of the European club) in establishing EMU is symptomatic of the messianic-lite nature of the project. What started out as an economically sensible (and economically flexible) free-trade zone (EEC) has been transmogrified into a nascent superstate (EU) which promotes boom and bust through its economically inappropriate monetary union. Any failure to keep Greece within the monetary subproject would call into question the full viability of the wider project and could cause a crisis of faith among devout Eurocrats. The key risk to the Euro project if Greece were to exit is political.

The Euro is a monetary subset of the greater European project. For some this project has elements of a pseudo-religion. It is supposed to move steadily and inexorably towards a sort of heaven on earth: a fully-integrated European federal state.

The fact that economic considerations (of an optimal currency area character) were wholly subordinated to political considerations (wanting to be fully paid up members of the European club) in establishing EMU is symptomatic of the messianic-lite nature of the project.

What started out as an economically sensible (and economically flexible) free-trade zone (EEC) has been transmogrified into a nascent superstate (EU) which promotes boom and bust through its economically inappropriate monetary union.

Any failure to keep Greece within the monetary subproject would call into question the full viability of the wider project and could cause a crisis of faith among devout Eurocrats.

]]> By: Michael Hennigan - Finfacts http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41515 Michael Hennigan - Finfacts Sat, 27 Mar 2010 01:54:33 +0000 http://www.irisheconomy.ie/?p=6075#comment-41515 @ David O'Donnell A lot of the green relates to the IFSC - - German banks lending to themselves! Greece only defaulted five times since its independence in 1829 according to the Reinhart/Rogoff study <i>This Time Is Different</i>. This compares to eight times for Germany and France and 13 times for Spain since these countries gained independence (I'm not sure who G/F and S gained independence from!). Some more data here: http://www.finfacts.ie/irishfinancenews/article_1019110.shtml @ David O’Donnell

A lot of the green relates to the IFSC - - German banks lending to themselves!

Greece only defaulted five times since its independence in 1829 according to the Reinhart/Rogoff study This Time Is Different. This compares to eight times for Germany and France and 13 times for Spain since these countries gained independence (I’m not sure who G/F and S gained independence from!).

Some more data here:

http://www.finfacts.ie/irishfinancenews/article_1019110.shtml

]]> By: David O'Donnell http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41463 David O'Donnell Fri, 26 Mar 2010 19:00:52 +0000 http://www.irisheconomy.ie/?p=6075#comment-41463 @Karl Whelan & take a scan at this graphic - posted a while back ...... not only Greeks! http://economicresources.blogspot.com/2010/02/europes-bank-exposure.html From Bloomberg: Feb 28, 2010 “German and French banks’ “enormous” exposure to Portugal, Ireland, Greece and Spain explains why Europe’s biggest economies are moving to rescue their southern neighbors, Societe General SA said today in a report titled “Shotgun Greek Wedding.” The CHART OF THE DAY shows how much money German, French, Swiss and U.K. banks have at stake in the so-called PIGS countries. Banks in Germany and France alone have a combined exposure of $119 billion to Greece and $909 billion to the four countries, according to data from the Bank for International Settlements. Overall, European banks have $253 billion in Greece and $2.1 trillion in the so-called PIGS.” Lots of Green in there - Yes, we too are EUROPEAN …. an punching above our weight !!! I support Solidarity Bond - in the national interests! Post German election in May - expect further moves .......... @Karl Whelan

& take a scan at this graphic - posted a while back …… not only Greeks!

http://economicresources.blogspot.com/2010/02/europes-bank-exposure.html
From Bloomberg:
Feb 28, 2010

“German and French banks’ “enormous” exposure to Portugal, Ireland, Greece and Spain explains why Europe’s biggest economies are moving to rescue their southern neighbors, Societe General SA said today in a report titled “Shotgun Greek Wedding.” The CHART OF THE DAY shows how much money German, French, Swiss and U.K. banks have at stake in the so-called PIGS countries. Banks in Germany and France alone have a combined exposure of $119 billion to Greece and $909 billion to the four countries, according to data from the Bank for International Settlements. Overall, European banks have $253 billion in Greece and $2.1 trillion in the so-called PIGS.”

Lots of Green in there - Yes, we too are EUROPEAN …. an punching above our weight !!! I support Solidarity Bond - in the national interests! Post German election in May - expect further moves ……….

]]> By: David O'Donnell http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41462 David O'Donnell Fri, 26 Mar 2010 18:55:00 +0000 http://www.irisheconomy.ie/?p=6075#comment-41462 @Karl Whelan Maintaining the 'solidarity bond', which is largely psychological, is a prerequisite to any future fiscal/monetary or institutional reform - break this psychological 'bond' and the possibility of cross-EZ cooperation on such major reforms, which is extremely difficult as the Greek saga shows, drifts towards zero - which presents a much, much, much bigger problem than sorting out Greece, or Spain, or Portugal, or Italy. Or sorting out German imbalances from an internal EZ perspective. @Karl Whelan

Maintaining the ’solidarity bond’, which is largely psychological, is a prerequisite to any future fiscal/monetary or institutional reform - break this psychological ‘bond’ and the possibility of cross-EZ cooperation on such major reforms, which is extremely difficult as the Greek saga shows, drifts towards zero - which presents a much, much, much bigger problem than sorting out Greece, or Spain, or Portugal, or Italy. Or sorting out German imbalances from an internal EZ perspective.

]]> By: karl deeter http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41459 karl deeter Fri, 26 Mar 2010 18:17:29 +0000 http://www.irisheconomy.ie/?p=6075#comment-41459 the anti dollar has a chance of being a reserve currency, but not with the the threat of greek default, hence they have opted for IMF style management but with EMU backing. I actually see german influence as being a key risk in the future more than that of european wide currency collapse, perhaps germany at last will be ze king of europe without firing a single shot. the anti dollar has a chance of being a reserve currency, but not with the the threat of greek default, hence they have opted for IMF style management but with EMU backing. I actually see german influence as being a key risk in the future more than that of european wide currency collapse, perhaps germany at last will be ze king of europe without firing a single shot.

]]> By: Paul Hunt http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41448 Paul Hunt Fri, 26 Mar 2010 17:04:15 +0000 http://www.irisheconomy.ie/?p=6075#comment-41448 The Euro (and the EMU) was always as much a political as an economic project - if not more. Within the confines of the G&SP it was assumed that fiscal harmonisation - and, perhaps, a measure of economic policy harmonisation - would evolve. The values and disciplines of the core would radiate outwards. All this, with increased co-ordination in policing, criminal justice, security, immigration policy and defence, would advance political integration. There was no expectation, or fall-back position in the event, that the PIIGS would lie, cheat, lose the run of themselves or all three. An appeal to EU solidarity is unlikely to rally the masses in Germany or France to the cause of a Greek bail-out; political intregration has always been pursued surreptitiously; and now is not the time to raise that flag. So, perhaps, we should not be surprised that all sorts of non-reasons are being trotted out. The Euro (and the EMU) was always as much a political as an economic project - if not more. Within the confines of the G&SP it was assumed that fiscal harmonisation - and, perhaps, a measure of economic policy harmonisation - would evolve. The values and disciplines of the core would radiate outwards. All this, with increased co-ordination in policing, criminal justice, security, immigration policy and defence, would advance political integration. There was no expectation, or fall-back position in the event, that the PIIGS would lie, cheat, lose the run of themselves or all three.

An appeal to EU solidarity is unlikely to rally the masses in Germany or France to the cause of a Greek bail-out; political intregration has always been pursued surreptitiously; and now is not the time to raise that flag.

So, perhaps, we should not be surprised that all sorts of non-reasons are being trotted out.

]]> By: yoganmahew http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41446 yoganmahew Fri, 26 Mar 2010 17:01:10 +0000 http://www.irisheconomy.ie/?p=6075#comment-41446 Even if Greek sovereign debt was no longer acceptable, it could be rolled into Asset Backed Securities and over-collateralised to reach an acceptable rating... it would mean a lower return/higher cost, but it could be done. No? It would probably be a boost for exporters, but what of imports? In particular, oil and gas? Even if Greek sovereign debt was no longer acceptable, it could be rolled into Asset Backed Securities and over-collateralised to reach an acceptable rating… it would mean a lower return/higher cost, but it could be done. No?

It would probably be a boost for exporters, but what of imports? In particular, oil and gas?

]]> By: Brian Lucey http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41444 Brian Lucey Fri, 26 Mar 2010 16:53:38 +0000 http://www.irisheconomy.ie/?p=6075#comment-41444 Bags I drag the (as usual excellent) thread off topic . I gotta disagree with Karl on one issue "psychological key level of $1.35”!" Theres a good deal of evidence, some of it from my own fair hands, that (for whatever reason) markets do behave differently around 0 and 5 ending points. As so often with moderately efficient markets, these then disappear when identified as traders act on same. See references below A mor epertinent issue is raised by Karl in the bottom : we export (as per the CSO 2008 data) 86b , of which 37 was to "other eu" which we can read as mainly within the Eurozone. Commentary in the msm on the benefits of a "strong" or "weak" (versus whom?) currency rarely note the divergent effects Dorfleitner, G., Klein, C. Psychological barriers in European stock markets: Where are they? (2009) Global Finance Journal, 19 (3), pp. 268-285 Aggarwal, R., Lucey, B.M. Psychological barriers in gold prices? (2007) Review of Financial Economics, 16 (2), pp. 217-230 Mitchell, J., Izan, H.Y. Clustering and psychological barriers in exchange rates (2006) Journal of International Financial Markets, Institutions and Money, 16 (4), pp. 318-344 Doucouliagos, H. Number preference in Australian stocks (2004) Applied Financial Economics, 14 (1), pp. 43-54 Mitchell, J. Clustering and psychological barriers: The importance of numbers (2001) Journal of Futures Markets, 21 (5), pp. 395-428. Cited 14 times. Cyree, K.B., Domian, D.L., Louton, D.A., Yobaccio, E.J. Evidence of psychological barriers in the conditional moments of major world stock indices (1999) Review of Financial Economics, 8 (1), pp. 73-91 De Ceuster, M.J.K., Dhaene, G., Schatteman, T. On the hypothesis of psychological barriers in stock markets and Benford's Law (1998) Journal of Empirical Finance, 5 (3), pp. 263-279. Bags I drag the (as usual excellent) thread off topic . I gotta disagree with Karl on one issue “psychological key level of $1.35”!”
Theres a good deal of evidence, some of it from my own fair hands, that (for whatever reason) markets do behave differently around 0 and 5 ending points. As so often with moderately efficient markets, these then disappear when identified as traders act on same. See references below
A mor epertinent issue is raised by Karl in the bottom : we export (as per the CSO 2008 data) 86b , of which 37 was to “other eu” which we can read as mainly within the Eurozone. Commentary in the msm on the benefits of a “strong” or “weak” (versus whom?) currency rarely note the divergent effects

Dorfleitner, G., Klein, C.
Psychological barriers in European stock markets: Where are they?
(2009) Global Finance Journal, 19 (3), pp. 268-285

Aggarwal, R., Lucey, B.M.
Psychological barriers in gold prices?
(2007) Review of Financial Economics, 16 (2), pp. 217-230

Mitchell, J., Izan, H.Y.
Clustering and psychological barriers in exchange rates
(2006) Journal of International Financial Markets, Institutions and Money, 16 (4), pp. 318-344

Doucouliagos, H.
Number preference in Australian stocks
(2004) Applied Financial Economics, 14 (1), pp. 43-54

Mitchell, J.
Clustering and psychological barriers: The importance of numbers
(2001) Journal of Futures Markets, 21 (5), pp. 395-428. Cited 14 times.

Cyree, K.B., Domian, D.L., Louton, D.A., Yobaccio, E.J.
Evidence of psychological barriers in the conditional moments of major world stock indices
(1999) Review of Financial Economics, 8 (1), pp. 73-91

De Ceuster, M.J.K., Dhaene, G., Schatteman, T.
On the hypothesis of psychological barriers in stock markets and Benford’s Law
(1998) Journal of Empirical Finance, 5 (3), pp. 263-279.

]]> By: Kevin O'Rourke http://www.irisheconomy.ie/index.php/2010/03/26/greece-and-the-threat-to-the-euro/#comment-41441 Kevin O'Rourke Fri, 26 Mar 2010 16:42:34 +0000 http://www.irisheconomy.ie/?p=6075#comment-41441 There were defaults of individual states within the USA in the 19th century and this did not lead to the break-up of the dollar zone. On the other hand, playing devil's advocate, one could argue à la Eichengreen (in a piece linked to often on this blog) that exiting the euro is de facto impossible since it would bring about a financial collapse -- sovereign default plus banking collapse. If this is accepted, then would the cost-benefit calculus of staying in the eurozone change once such a financial crisis had already occurred? (I should add that perhaps this calculus might be more likely to take place in Spain, say, or Ireland, than in Greece -- in which case to make the argument fly you might want to argue that contagion would be a risk.) There were defaults of individual states within the USA in the 19th century and this did not lead to the break-up of the dollar zone.

On the other hand, playing devil’s advocate, one could argue à la Eichengreen (in a piece linked to often on this blog) that exiting the euro is de facto impossible since it would bring about a financial collapse — sovereign default plus banking collapse. If this is accepted, then would the cost-benefit calculus of staying in the eurozone change once such a financial crisis had already occurred? (I should add that perhaps this calculus might be more likely to take place in Spain, say, or Ireland, than in Greece — in which case to make the argument fly you might want to argue that contagion would be a risk.)

]]>