Friday, May 6, 2011

Aaah

Der Spiegel:
Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.

Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Ch√Ęteau de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.

and
It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.

What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy.

"The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states. In addition, the country would also be cut off from capital markets for years to come.

In addition, the withdrawal of a country from the common currency union would "seriously damage faith in the functioning of the euro zone," the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. "That would lead to contagion in the euro zone," the paper continues.
I wonder if markets got wind of this yesterday, and that had something to do with the drop in oil prices.

Update: Probably not on that last sentence, as there wasn't much of a move in the euro-dollar exchange rate yesterday, that came today (and wasn't nearly as big as yesterday's oil movement):

2 comments:

The Arthurian said...

Everything is oil with you.
:)

(Everything is monetary imbalance with me.)
ArtS

bordoe said...

Stuart>I wonder if markets got wind of this yesterday, and that had something to do with the drop in oil prices.

Update: Probably not on that last sentence, as there wasn't much of a move in the euro-dollar exchange rate yesterday, that came today (and wasn't nearly as big as yesterday's oil movement):

=-=

And of course ice cream sales from trucks are going up because people are watching all those extra murders on the street.

--

Of course; hot weather is causing both of these phenomenon.

Classic case of causation vs correlation.

-=-=

I think both (all three) of the things you noted can be CAUSED/explained by a general rolling over/contraction or at least a slow down in the rate of growth in, credit; what in our system is 'money' to varying degrees depending on sentiment for varying assets.

What I'm saying is; oil markets didnt need to know or care about Greece (true or not) to go down. Just like Silver didnt need to know or care about Bin Laden's 'death' to crash. Both were overextended markets supported by leverage (look up what a margin requirement is) and basically this is what happens to them periodically. We'll overshoot on the other side too when specs go short; then they'll eventually put a floor in when they short cover.

So goes the market. There's no such thing as equilibrium/stability/continuity. All flows to the whims of the Great Magnet as HST used to say.