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BBC News has this on the subject: http://news.bbc.co.uk/1/hi/business/10101581.stm http://news.bbc.co.uk/1/hi/business/10101581.stm Seems to be about Greece.

by ElliotH 16y ago

tptacek 16y ago
Greece may default. Sovereign default, lagging the initial market crash by a couple years, was a feature of the Great Depression, so there's an emotional component. Greece's economy may not be compatible with the Eurozone; because they can't control their money supply, they can't make their exports competitive. So they may eventually jettison the Euro. There's concerns that Portugal and Spain could follow. So then there's also drama with the currency market. There are 100 people on HN that know this stuff better than I do, but maybe by babbling I'll irritate one of them enough to explain.
- baguasquirrel 16y ago
  I don't think I'm one of those 100 people, but from what I've been reading, many European banks (particularly the German, French and British banks) have more exposure to Greek, Portuguese and Spanish debt than they ought to. If any of those countries (Spain in particular) were to default, the losses at the big banks would be so great that people may want to pull their money out for now, just in case. And you know what happens next.
  - rjett 16y ago
    http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html http://www.nytimes.com/interactive/2010/05/02/weekinreview/0...
- ErrantX 16y ago
  The other big issue that is causing concern is that there is a very volatile populace in Greece. There have already been riots/protest over the proposed cuts... A major problem is that the Euro covers a very wide and very variable region; some economies are on the tipping point already. (and I am so glad we (UK) didn't jump into bed with the Euro now! :D)
  - sx 16y ago
    This is not as bad as presented, this is a good article about the situation in Greece: http://www.guardian.co.uk/commentisfree/2010/may/04/greece-dont-believe-fights http://www.guardian.co.uk/commentisfree/2010/may/04/greece-d...
    - ErrantX 16y ago
      Absolutely. However a) anything even slightly divisive could be a problem and b) it is all about what it reported. If the media scares the market that is the same effect.
  - Silhouette 16y ago
    Don't feel so glad to be in the UK. We're almost as stuffed as the Greeks, but we're not really going to know about it for a few days while the results of today's general election are digested. Just wait for the emergency budget from whoever wins. :-(
- Silhouette 16y ago
  I doubt I'm one of those 100 people either, but FWIW... Greece is in fairly immediate danger because of a combination of three things: (a) a large quantity of government bonds are up in a few days (19 May IIRC), (b) they just don't have the money to honour the promises at present, and (c) they have lost much of the ability to borrow that money from the usual market sources due to the downgrades in their credit rating a few days ago. Because the Greek economy is tied to the Euro-zone, if Greece goes down it's a very serious problem for the other Euro nations as well. Thus we see some of the more financially powerful nations like Germany stumping up billions of Euros to avoid Greece defaulting, as long as Greece agrees to some pretty heavy "austerity measures" over the coming months and years so the money isn't just being thrown away because they're going to default eventually anyway. Those measures in turn have already led to fatal riots in the streets, as to the average non-economist citizen, taxes are about to skyrocket, pension/retirement arrangements are getting significantly worse, etc. and no-one really knows why. The trouble has actually been brewing for several years, since things like the Olympics broke their budget dramatically, but it's only with the recent worldwide economic conditions that it has become really obvious. That's my understanding of why Greece in particular is in trouble today, but a somewhat similar story could be told about several other European nations, hence the general malaise in the markets. I suspect this is a bit of a mountains and molehills situation. The odds of the rest of the Euro-zone actually allowing Greece to go bankrupt must be fairly slim, but of course the price of bailing them out is then being carried by those other countries and it's not loose change, so the markets are going to take a substantial hit all the same.
  - lutorm 16y ago
    I remember that when Sweden ultimately voted to not get the Euro, this scenario was one that was discussed. It was claimed something to the effect that never in history has a situation where a sovereign country has control over economic policy but not monetary policy worked for more than a decade or so.
    - rdtsc 16y ago
      I always wondered, how come other countries didn't just unanimously vote to jump right in? EU just seemed to make a lot of sense. Well now I know why. Good for the Swedes. Another problem with EU is that it seems to lack a clear external policy. The E in the EU might as well stand for 'Economic' as in 'Economic Union', as politically these countries still have different & sometimes divergent interests (both externally and internally). Especially, as some members are also in NATO while other aren't. At the end of the day, it is not possible isolate the economy from politics and social issues. They are intertwined too tightly. It is like co-signing loans for the neighbors that you don't completely know that can go and spend as they please then you are stuck with paying for their extravagance.
CWuestefeld 16y ago
Which, a little while after the fact, now underscores the fact that the market does what it does, and nobody can explain its movements with real confidence. All those newspapers headlines trumpeting "Dow falls X points on blah blah" is just a bunch of crap to make it sound like they've got a clue.
- eru 16y ago
  Yes. It's funny seeing all the analysts on TV and in the newspapers, `explaining' why the market moved this or that direction today. They can always come up with a story after the fact.

BBC News has this on the subject: http://news.bbc.co.uk/1/hi/business/10101581.stm http://news.bbc.co.uk/1/hi/business/10101581.stm Seems to be about Greece.

by ElliotH 16y ago

BBC News has this on the subject: http://news.bbc.co.uk/1/hi/business/10101581.stm http://news.bbc.co.uk/1/hi/business/10101581.stm Seems to be about Greece.

tptacek 16y ago

Greece may default. Sovereign default, lagging the initial market crash by a couple years, was a feature of the Great Depression, so there's an emotional component. Greece's economy may not be compatible with the Eurozone; because they can't control their money supply, they can't make their exports competitive. So they may eventually jettison the Euro. There's concerns that Portugal and Spain could follow. So then there's also drama with the currency market. There are 100 people on HN that know this stuff better than I do, but maybe by babbling I'll irritate one of them enough to explain.

baguasquirrel 16y ago
I don't think I'm one of those 100 people, but from what I've been reading, many European banks (particularly the German, French and British banks) have more exposure to Greek, Portuguese and Spanish debt than they ought to. If any of those countries (Spain in particular) were to default, the losses at the big banks would be so great that people may want to pull their money out for now, just in case. And you know what happens next.
- rjett 16y ago
  http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html http://www.nytimes.com/interactive/2010/05/02/weekinreview/0...
ErrantX 16y ago
The other big issue that is causing concern is that there is a very volatile populace in Greece. There have already been riots/protest over the proposed cuts... A major problem is that the Euro covers a very wide and very variable region; some economies are on the tipping point already. (and I am so glad we (UK) didn't jump into bed with the Euro now! :D)
- sx 16y ago
  This is not as bad as presented, this is a good article about the situation in Greece: http://www.guardian.co.uk/commentisfree/2010/may/04/greece-dont-believe-fights http://www.guardian.co.uk/commentisfree/2010/may/04/greece-d...
  - ErrantX 16y ago
    Absolutely. However a) anything even slightly divisive could be a problem and b) it is all about what it reported. If the media scares the market that is the same effect.
- Silhouette 16y ago
  Don't feel so glad to be in the UK. We're almost as stuffed as the Greeks, but we're not really going to know about it for a few days while the results of today's general election are digested. Just wait for the emergency budget from whoever wins. :-(
Silhouette 16y ago
I doubt I'm one of those 100 people either, but FWIW... Greece is in fairly immediate danger because of a combination of three things: (a) a large quantity of government bonds are up in a few days (19 May IIRC), (b) they just don't have the money to honour the promises at present, and (c) they have lost much of the ability to borrow that money from the usual market sources due to the downgrades in their credit rating a few days ago. Because the Greek economy is tied to the Euro-zone, if Greece goes down it's a very serious problem for the other Euro nations as well. Thus we see some of the more financially powerful nations like Germany stumping up billions of Euros to avoid Greece defaulting, as long as Greece agrees to some pretty heavy "austerity measures" over the coming months and years so the money isn't just being thrown away because they're going to default eventually anyway. Those measures in turn have already led to fatal riots in the streets, as to the average non-economist citizen, taxes are about to skyrocket, pension/retirement arrangements are getting significantly worse, etc. and no-one really knows why. The trouble has actually been brewing for several years, since things like the Olympics broke their budget dramatically, but it's only with the recent worldwide economic conditions that it has become really obvious. That's my understanding of why Greece in particular is in trouble today, but a somewhat similar story could be told about several other European nations, hence the general malaise in the markets. I suspect this is a bit of a mountains and molehills situation. The odds of the rest of the Euro-zone actually allowing Greece to go bankrupt must be fairly slim, but of course the price of bailing them out is then being carried by those other countries and it's not loose change, so the markets are going to take a substantial hit all the same.
- lutorm 16y ago
  I remember that when Sweden ultimately voted to not get the Euro, this scenario was one that was discussed. It was claimed something to the effect that never in history has a situation where a sovereign country has control over economic policy but not monetary policy worked for more than a decade or so.
  - rdtsc 16y ago
    I always wondered, how come other countries didn't just unanimously vote to jump right in? EU just seemed to make a lot of sense. Well now I know why. Good for the Swedes. Another problem with EU is that it seems to lack a clear external policy. The E in the EU might as well stand for 'Economic' as in 'Economic Union', as politically these countries still have different & sometimes divergent interests (both externally and internally). Especially, as some members are also in NATO while other aren't. At the end of the day, it is not possible isolate the economy from politics and social issues. They are intertwined too tightly. It is like co-signing loans for the neighbors that you don't completely know that can go and spend as they please then you are stuck with paying for their extravagance.

CWuestefeld 16y ago

Which, a little while after the fact, now underscores the fact that the market does what it does, and nobody can explain its movements with real confidence. All those newspapers headlines trumpeting "Dow falls X points on blah blah" is just a bunch of crap to make it sound like they've got a clue.

eru 16y ago
Yes. It's funny seeing all the analysts on TV and in the newspapers, `explaining' why the market moved this or that direction today. They can always come up with a story after the fact.