Join our investing community

Britain may follow Greece...

Discussion in 'The Economy' started by Tropo, 29th Apr, 2010.

  1. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    You wouldn't think that the UK would be "next".

    Of course they will no doubt have issue if they continue on their curent path, but they probably do have quite a few months, if not a couple of years to start implementing some serious spending cuts and revenue raising to avoid bond holder's wrath.

    It's just whether they will have the political will to implement such changes.
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    I doubt that anyone can attack the UK financial system and get away with it.
    The UK also have their own currency and can control many levers so if anyone tries to tacke them they are likely to feel pain.

    The small EU Member countries are easier targets so now that Greece is out of the picture the vampires will have to turn to their next victim, perhaps Portugal?
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    The EU countries inside the Euro zone are such an easy target because being different they are not united and they have no real mechanism to stop speculators.

    And Ofcourse the hedge funds and large financial institutions are always looking for higher returns so something has to happen to give them those returns and what's safer than a government guaranteed bond at double the German interest rates?

    Why shouldnt the poorest people in the EU pay a premium to the Germans for saving them? It's not the rich German pension funds profiteering from any unrest in the European financial system are they?
     
  5. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Tell that to George Soros.

    :p

    You can always stop speculators by running a fiscally sound country...

    Not to mention that you can't demand that people invest in bad institutions. If there were people or institutions out there that genuinely thought that Greek debt was good value at current prices they'd be buying the lot.
     
  6. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    There is a rumour flying around - that Spain is asking for money now (around 280 bln euro !!). :eek:
    Spanish banks down near 5%...
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    The ECB will have to start printing money soon.
    However, there is nothing wrong with printing money, many others are doing it and getting away with it...:D
     
  8. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    Printing Money
     
  9. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Thanks Troppo

    I know how it works.
    The problem the Greeks and other EU members face is that they have not control of the printing press. It's now controlled by the ECB. But in the past few days the ECB realising the extend of the problem is changing its policy and started supporting individual member countries.

     
  10. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    Enjoy :p
    Could Continent-Wide Bank Runs Collapse the Eurozone?

    The unfolding eurozone sovereign debt crisis highlights the fatal flaw of Keynesian economics. Upon looking closer, we find the same old culprits at the heart of the trouble - the banks.
    The eurozone's woes are giving us a preview of what could eventually happen in the United States (but not before Europe is engulfed first).
    As fears of sovereign debt crisis mount, the debt "contagion" spreads. It is not just Greece that has investors afraid, but Portugal. And Spain... and Italy... and so on.
    The problem is classic, and long ago highlighted by Austrian economics. Building up a lot of debt, to make a slightly crass analogy, is like putting on a bunch of weight. It's hard work getting the debt off - the same as it is taking weight off.
    The way to lose weight is to eat right and exercise. The way to get out of debt is to cut back on spending and increase productivity.
    But when an economy is already weak and sick, it's very hard, if not impossible, to cut back on spending easily... just as it's very hard for an obese person to put in vigorous exercise when they are ill.
    This is why IMF "austerity measures" have proven so disastrous in the past. To lose weight (or debt), you need vigorous exercise (or spending cuts).
    But when you are sick, you need the opposite thing - rest and nourishment. Exercise is no good for a sick man. It only makes him sicker.
    And so, asking a country like Greece to clamp down harshly on spending, even as their economy reels, is like asking a heavyset man with mild pneumonia and fluid in his lungs to start running five miles a day.
    Harsh cutbacks at the wrong time become a recipe for collapse.
    This extends back to the central failing of Keynesian economics. Keynesians argue with gusto that government should act as a counterbalance to the free market economy, spending in hard times and saving in good times to keep things balanced.
    This sounds reasonable in theory. In the real world, though, the government only gets half the equation right. Itnever saves in the good times. It only spends, spends, spends.
    And so Keynesian economies inevitably find themselves in the most vulnerable position... indebted and sick at the same time......
    Could Continent-Wide Bank Runs Collapse the Eurozone?
     
  11. dudek

    dudek Well-Known Member

    Joined:
    10th Sep, 2008
    Posts:
    199
    Location:
    Sydney
    Nice one Torpo, two days to late but :)
     
  12. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    Well...it was yesterday's information.
    Are you a clairvoyant by profession? :rolleyes:
     
  13. dudek

    dudek Well-Known Member

    Joined:
    10th Sep, 2008
    Posts:
    199
    Location:
    Sydney
    I wish I was I would start selling stock two days ago... :mad:
     
  14. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    I see...but two days ago was too late already.:eek:
     
  15. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Have you sold your bank stocks yet?
    When Rudd finishes with the resources sector he'll be tackling the banks.
    Normally he wouldn't need to but he's got big appetite for spending...:D
     
  16. dudek

    dudek Well-Known Member

    Joined:
    10th Sep, 2008
    Posts:
    199
    Location:
    Sydney
    I know and I hope he will run out of time :D
     
  17. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    Hope is a 4 letter word...
     
  18. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    UK budget deficit 'to be worse than any country in the EU - even Greece'

    The UK budget deficit will outstrip any other country in the EU this year and will be even worse than Greece, according to figures from the European Commission today.
    The group's spring forecast puts UK borrowing at 12 per cent of GDP for 2010 - more than that of any of the 27 other EU countries and far worse than Greece's 9.3 per cent.
    The gloomy prediction will mean that it is even more important that any incoming government reacts quickly to tackle Britain's mountain of debt.
    more...General Election 2010: UK budget deficit 'to be worst of any country in the EU' | Mail Online
     
  19. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    What do you mean "start" they already have been...


    Tell me this was just a flippant off the cuff statement and that you don't really believe this...

    :eek:

    And rightly so the finance sector is way too big big and adds no "real" value - it just shuffles numbers and makes people "feel" rich.

    I'm not saying we need to eliminate the fractional reserve banking system or go back to the gold standard, but we definitely need to reign the industry in massively and make sure they know they only have a role in our economy if they serve the public interest along side their own.

    This reform is way more needed than a tax on internationally owned mining companies. Hell if we had worked our finance and debt issues out we would have probably never let our best companies be bought out.

    Three days, if you consider I started the rumour. Muhahaha.

    :D

    You gotta love financial terrorism.

    :cool:
     
  20. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW