Greece and Sovereign Defaults
Greece and Sovereign Defaults

These charts sum things up rather well:

The first is courtesy of Stratfor – whose material is highly recommended:

Another take:

Failure being devastating does not ensure success

Bronte Capital has an excellent outline on Models for the Greek Default which clearly outlines why Europe is so concerned. In our interconnected world, it is not just Europe that needs to worry.

When Argentina defaulted not only did the government default but they forced a private default. If you had a debt in US Dollars in Argentina prior to the default you were forced to pay it back in Peso. Indeed it was illegal to make payment in US dollars.

Likewise if you had a US dollar asset you got back Peso. A dollar deposit in Citigroup in Buenos Aires became a peso deposit. If you really wanted to keep your dollars you needed to make your Citigroup deposit in New York.

The forced private sector default was necessary for Argentina. The Argentine banks all had lots of US dollar funding. If you devalued without forcing their default then they would all have uncontrolled defaults (a true disaster) and the country would lose its institutions. Telefonica Argentina would have failed too – failing to replay USD debts.

The same applies in Greece.

and

Now if you are Irish or Italian or Portuguese (or even Spanish) you know the rules. You get to get your Euro out of the PIGS and into the core (Germany) as fast as possible. So max all your credit cards (for cash), draw all your bank deposits and load them in the boot of your car and make the drive to Switzerland or Germany. Somewhere safe. Otherwise you are going to lose half the value the day that the rest of the PIGS do a Greece.

And this bank run – a run including tens of thousands of Italians driving their Fiats – will surely blow apart every Italian bank. And their Euro-skeloritic compatriots will sign the death knell for for all their banks too.

If you are going to go the devaluation route you are going to have to do it all at once. Like the big-bank weekend (maybe coinciding with a week long bank holiday) in which all core European countries get their own currency back.

Read the whole thing.

Even if you do not believe we are heading towards a depression, possibly the Greatest Depression, there could still be cause for alarm. Cardif Garcia details the effects of Great Stagnations from the Archives:

Another take by the Bank of England:

There could be some tough times ahead, even if we get through this without a depression.



11 Comments
  1. 930598 133027Thanks for the sensible critique. Me and my neighbor were just preparing to do some research about this. We got a grab a book from our location library but I feel I learned far more from this post. Im quite glad to see such amazing information being shared freely out there. 999629

  2. 109841 173874Hey! Great stuff, please keep us posted when you post something like that! 91448

  3. 827081 156497Reading, watching movies or plays, or similar activities that may bring inspiration. 468599

  4. 589018 883569Hey there! Great post! Please when all could see a follow up! 25863

  5. 128233 575259His or her shape of unrealistic tats were initially threatening. Lindsay utilized gun initial basic, whereas this girl snuck outside by printer ink dog pen. I used completely certain the all truly on the shade, with the tattoo can be taken from the body shape. make an own temporary tattoo 983667

  6. 8850 143147Outstanding post, I conceive web site owners ought to learn a great deal from this blog its real user pleasant. 808293

  7. Received 0.00508640BTC TXID 6e14fd5a758413aa22498e81385bde89e7448db5ab974b173e4ffa4a691d1adc. Generate Bitcoin online https://bitminer.io/1400451

  8. 141532 720756Hiya! Wonderful weblog! I happen to be a everyday visitor to your web site (somewhat a lot more like addict ) of this site. Just wanted to say I appreciate your blogs and am seeking forward for a lot more to come! 664426

  9. 992413 559344You should take part in a contest for one of the best blogs on the web. I will recommend this site! 844691

  10. 406836 357571whoah this weblog is excellent i like studying your posts. 368954