trotsky, 10:19:21 02/12/10 Fri
i have a feeling it's time someone called BS on all that handwringing and apocalyptic nonsense spewed over Greece.
first of all, California is de facto bankrupt too. so is Michigan, New Jersey, New York, etc.,etc.
Greece is a little over 2% of the euro-area's GDP - think that can be handled?
California, by contrast is i believe the 5th largest economy in the world - maybe that should be a reason to worry? maybe everybody should dump the dollar?
the line of argument - that central planners everywhere are in love with - goes that 'because there is no EU political union a Greek default would be extra bad'. this is a continuation of the stratfor/neo-con line that 'the euro-area is not an ideal common currency area because it doesn't have a central government'.
this is utter crap.
let me see - Panama and Zimbabwe are currently both using the US dollar as their currency. are the US, Panama and Zimbabwe an 'ideal currency area'? gosh i don't know, doesn't sound so ideal, does it? maybe we should sell the dollar?
let me explain where i'm going with this. contrary to current 'market consensus' it is NOT bad for a currency when fiscal offenders lack their own printing press. if they had one, they would obviously try to print their way out of their dilemma, a la what the Fed has been and is doing in the US. as flawed as the euro is (obviously all fiat currencies are flawed), the central bank issuing it has only ONE mandate: namely to keep the internal and external value of the currency stable. that's it. no fantasies about 'keeping unemployment low' at the same time. it also doesn't say anywhere in its statutes that it must bail out profligate member states.
the best thing that could happen to the euro in the long term would be for the EU core to tell the Greeks to either shape up or risk a debt default. promising them support is already a mistake.
of course, Greece's overall prospective debt levels are not as bad as those of Japan, the US or the UK. it is relatively speaking in better shape than all of those, so there is not even a theoretical need for a bail-out (even from the PoV of those favoring one) at this stage anyway.
the whole thing gets blown out of proportion by the press and those with an agenda (said agenda can be gleaned from their filings showing what positions they have in the market). at present speculators hold record net long positions in the dollar and record net short positions in the euro, so obviously there is a fairly large contingent of well-heeeled market participants that is greatly interested in getting the Greek story blown up into the balloon it has become. it's not as if Greece's debt woes were 'news' after all. the problem has been well known for over a year now.
naturally, Greece (and the other members of the PIGS club, and Japan, and the UK, and the US, and, and...) is symptomatic for what is a global problem: after four decades of a pure fiat money system, the debt-berg has become so monstrous that it is now in danger of imploding. historians will likely look back at the 2008 crisis as the moment in time when the end of the irredeemable currency system based on dollar IOU 'reserves' began. it is fairly ridiculous to worry about Greece when what we should really worry about is the elephant in the room - the beginning collapse of the modern-day fiat money system.
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