Kyle Bass: Greece a failed state, Euro will collapse, Japan debt crisis next

[© tweed]

http://www.cnbc.com/id/47376043

I love this dude, easily one of my favorite capitalists.  he is morbidly pessimistic all of the time. but,

 

http://en.wikipedia.org/wiki/Depressive_realism

[Beet]

Japan really needs to print more money, have more babies, and rediscover entrepreneurship and innovation. Its problems may lead to what Bass says, but they are fundamentally different from Greece.

As for Greece, it will survive.

It is remarkable that there is more wealth today than ever in history, and our fundamental problem is that there isn't enough work for people to do. Just think of it! Yet we act as if the problem is that we don't have enough stuff, rather than that the system that we ourselves designed, created, and support is sending us signals that we dislike. Mostly it is the bottom billion in the world that knows of want.

[Simfan34]

Japan really needs to print more money, have more babies, and rediscover entrepreneurship and innovation. Its problems may lead to what Bass says, but they are fundamentally different from Greece.

As for Greece, it will survive.

It is remarkable that there is more wealth today than ever in history, and our fundamental problem is that there isn't enough work for people to do. Just think of it! Yet we act as if the problem is that we don't have enough stuff, rather than that the system that we ourselves designed, created, and support is sending us signals that we dislike. Mostly it is the bottom billion in the world that knows of want.

Actualization of the Luddite "fallacy", sir...

[© tweed]

Japan really needs to print more money, have more babies, and rediscover entrepreneurship and innovation. Its problems may lead to what Bass says, but they are fundamentally different from Greece.

As for Greece, it will survive.

It is remarkable that there is more wealth today than ever in history, and our fundamental problem is that there isn't enough work for people to do. Just think of it! Yet we act as if the problem is that we don't have enough stuff, rather than that the system that we ourselves designed, created, and support is sending us signals that we dislike. Mostly it is the bottom billion in the world that knows of want.

all systemic crises are not crises of want but of overproduction/profitability.  leading to the irrational and gasp-inefficient situation, stores of capital and unemployed labor side-by-side. Marx figured this out 150 years ago.

[Joe Biden is your president. Deal with it.]

Wow that dude is sucha Debbie Downer.

[Yelnoc]

This is the guy who "bet against the US housing market and won" so I wouldn't discount his take on things.

[Grumpier Than Thou]

The unfortunate thing is, he's right.

[Middle-aged Europe]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

[Beet]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

[opebo]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

Really the Euro's survival simply depends on your government's willingness to allow monetization of the debt, and printing in general.  Will they? 

[True Federalist (진정한 연방 주의자)]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Spain and Portugal might fall out as well, but I don't think we'll see a complete collapse of the Euro.

[Beet]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Spain and Portugal might fall out as well, but I don't think we'll see a complete collapse of the Euro.

If Spain falls out, Italy will too. If Italy falls out, so will France. If France falls out, the entire point of the project is finished.

[Middle-aged Europe]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Apples and oranges.

[Beet]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Apples and oranges.

Not at all. Exactly the same.

[True Federalist (진정한 연방 주의자)]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Spain and Portugal might fall out as well, but I don't think we'll see a complete collapse of the Euro.

If Spain falls out, Italy will too. If Italy falls out, so will France. If France falls out, the entire point of the project is finished.

Nah.  Once it gets to the point that countries Germany actually cares about might be forced to leave the Euro, Germany will agree to step in and backstop the Euro more.  Germany has no reason to care about Greece or Portugal.  It definitely cares about France and Italy, but I'm not certain about Spain.

[Beet]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

If Greece leaves it will trigger contagion. Look what happened when Lehman Brothers collapsed.

Spain and Portugal might fall out as well, but I don't think we'll see a complete collapse of the Euro.

If Spain falls out, Italy will too. If Italy falls out, so will France. If France falls out, the entire point of the project is finished.

Nah.  Once it gets to the point that countries Germany actually cares about might be forced to leave the Euro, Germany will agree to step in and backstop the Euro more.  Germany has no reason to care about Greece or Portugal.  It definitely cares about France and Italy, but I'm not certain about Spain.

Except that markets will see the logic that Germany also agreed to backstop Greece, then went back on its word when the price became too high, and the Greeks didn't implement enough austerity. It would be the same eventually with Italy or France. Italy won't tolerate being Greecified either. It's really a domino effect here. The logic is the same for all countries. You either agree to open-ended transfers and expansionary policies which are democratically sustainable, or you don't.

[ag]

You either agree to open-ended transfers and expansionary policies which are democratically sustainable, or you don't.

They aren't democratically sustainable. In Germany.

The entire situation is not democratically sustainable, because of a design flaw: there is no European finance ministry responsible to a democratically elected European legislature with a direct taxation authority throughout the euro zone. Until and unless this is rectified (of which there seems to be no sign) it cannot be made democratically sustainable. Period. Therefore, the only thing that's democratically sustainable is a more homogenous euro zone.

Anyways, the consequences of any unilateral steps by a Greek government will be fairly direct and easy to observe, both for the Greek citizenry, and for that of the other countries. They won't be pretty: and they will involve much worse effective cuts then those demanded by Germany today.

[Beet]

You either agree to open-ended transfers and expansionary policies which are democratically sustainable, or you don't.

They aren't democratically sustainable. In Germany.

So you assert, but there's no evidence for that yet (unlike in the periphery). Merkel's approved every bailout to date, and her rating remains pretty high. And the SPD also supports the same policy and is doing fine.

The thing with monetary transfers is that people don't really feel it when the government prints money and hands it out. People only feel the effect of monetary expansion if it's inflationary. Yet in the case of Germany, any inflation would be accompanied by rising wages, since the German labor market is and will remain tight so long as there is no crisis, and the Euro remains in place.

If on the other hand, the EZ collapsed, Germany would be forced to depreciate the DM by printing money (or face a reversal of its employment gains, which Germans would feel), and the effect on inflation would be the same.

[SPQR]

The Euro will (probably) not collapse. It seems likely that Greece is going the leave the Eurozone though. (And it will be for the best of both Greece and the rest of the Euro states.)

The best for the rest of the Euro states (except Germany) is a change in attitude by Merkel and the hawks at the Bundesbank.

[ag]

By the looks of it, a bank run in Greece is starting (according to BBC 0.75% of deposits have been withdrawn just over two days, Monday and Tuesday this week). So, looks like the issue may be mute long before the new election.

[Beet]

The issue will not be "rendered moot", because even if the banking system did collapse, Greece would still need an expasionary fiscal and monetary policy. As would the rest of Europe. What I have been bleating on and on about here, repetitively and to no end for the past two years does not change one iota.

The issue will be rendered moot when policymakers adopt expansionary policies. So long as they continue to adopt contractionary policies, the situation will get worse (note here that I am including labor market reforms under expansionary category. Unlike simple austerity, which contracts aggregate demand, labor market reforms that break downward wage rigidities can increase employment and thus increase aggregate demand over time).

[Torie]

By the looks of it, a bank run in Greece is starting (according to BBC 0.75% of deposits have been withdrawn just over two days, Monday and Tuesday this week). So, looks like the issue may be mute [moot] long before the new election.

Sorry, but this error drives me nuts. I guess it's because I'm a lawyer.

[ag]

By the looks of it, a bank run in Greece is starting (according to BBC 0.75% of deposits have been withdrawn just over two days, Monday and Tuesday this week). So, looks like the issue may be mute [moot] long before the new election.

Sorry, but this error drives me nuts. I guess it's because I'm a lawyer.

Shoot. I am an idiot )

Not too bad though: it's such a native-speaker error, I should be almost proud )

[ag]

even if the banking system did collapse, Greece would still need an expasionary fiscal and monetary policy. As would the rest of Europe.

Well, after the collapse of the banking system and the consequent reintroduction of the drachma, Greece will be free to adopt the policy it needs, won't it?

The issue here is that, whatever the policy that Greece needs, it is not the same policy that Germany needs - or, for that matter, not even the same policy that Italy needs. Greece needs to get out from under a mountain of obligations it cannot fulfill and it needs to become a lot more competitive. No plausible fiscal or monetary policy, expansionary or otherwise, is going to do the trick, I am afraid, at this point. The more money you try to pump into the European economy, the more of it is going to wind up in Germany. Some of it might go under an occasional Greek mattrass, but that isn't going to do much good either.

[True Federalist (진정한 연방 주의자)]

even if the banking system did collapse, Greece would still need an expansionary fiscal and monetary policy. As would the rest of Europe.

Well, after the collapse of the banking system and the consequent reintroduction of the drachma, Greece will be free to adopt the policy it needs, won't it?

The issue here is that, whatever the policy that Greece needs, it is not the same policy that Germany needs - or, for that matter, not even the same policy that Italy needs. Greece needs to get out from under a mountain of obligations it cannot fulfill and it needs to become a lot more competitive. No plausible fiscal or monetary policy, expansionary or otherwise, is going to do the trick, I am afraid, at this point. The more money you try to pump into the European economy, the more of it is going to wind up in Germany. Some of it might go under an occasional Greek mattress, but that isn't going to do much good either.

With the bank run that has begun, the return of the drachma is inevitable now.  People aren't going to keep euros in Greek banks when they fear they'll be turned in drachmas overnight.  I can't see the current Greek non-government being in a position to halt the run anytime soon, and by the time something could be done, it will be too late, as there will not be the necessary trust for people to put the money back even when what needed to be done to stop the run has been done.