Grayling

Why would I want to work

spartacus

To keep the wolf from the door.

renth

Life is full of ups and downs.

Amazulu

French or Italian potato pie, yum.

slapphead_otool

Using the 3/5 process:

A) Best scenario: Greece defaults. Slips out of the Euro, but the rest of the Eurozone supports each other, the IMF steps in and damage is contained. Slight dip in confidence, but everyone slips pro rata, based upon their exposure. Lots of back slapping and everyone saying it was inevitable. Rates all move in co-ordination, so no big changes. Banks suffer but get over it.

AUD/UKP slips a little lower - maybe even 1.3 in the initial days, then over the next five years recovers to around 1.6 to 1.8.

B) most likely scenario: Greece defaults, followed by the rest of the PIGS over the next year or so, as they take advantage of the opportunity to get out and take contol of their currencies. Major players like IMF, USA and China try to cushion the impacts, as does the EU. Runs on banks, some fail. Governments resolve to QE, and try to print their way out. Globally we stagnate for 10 years, with large cuts in standards of living. During this time the world restructures and the old powers become less important.

AUD/UKP falls, maybe even to parity. It recovers slowly but steadily as confidence in Europe recovers.

C) Worst scenario: utter chaos. Ones Greece defaults others fall like dominos. The Euo is abandoned by most countries, leaving it as the Mark by another name.
Confidence in Europe fails, and brings down global confidence. Confidence in all currencies and nations erodes. Massive depression, cut off money supply, raging inflation to counter it. Huge cutbacks in government spending across the wold. The socialist concept of the state as a protector and provider vanishes.
Massive runs on banks all over the world. This hits London very badly. AUD remains stronger than most, due to less exposure at first. China finds its markets decimated, and cuts back on manufacturing. China collapses, and the outcome hits Australian minerals. AUD falls but later and not as badly as other currencies.

AUD/UKP rates fall alarmingly in the first 2 years, far lower than parity, then the AUD falls back and the UKP starts to climb, but not back to the same levels seen today.

Using the 3/5 rule, the most probable results fit somewhere between A and B, if we are lucky, and B and C if we are not.

Just my opion, and there are a lot of experts onBE who can and will contradict me....

renth

Good reply slapphead.

I think the disaster scenario is not so much whether Greece defaults because to all intents and purposes they already have.

I think the powers that be will do everything to prevent the associated credit default swaps from triggering which, if happens means game over, probably for the entire global economy, it will be chaos.

For the CDS' not to trigger then I think Greece cannot "default" in the old fashioned way. The Europeans are going to have to keep printing money until the Greek debt magics itself away through inflation.

Beoz

Backslapping for you Slapphead. You seem to have covered all angles.

Beoz

Are there any safe banks?

commonwealth

China will probably do whatever it can to avoid a hard landing. Should be somehow thankful they have authoritarian govt.

commonwealth

Federal Reserve Bank

chris955

It's the best way to be spot on

slapphead_otool

Agreed - especially about already defaulting. They are offering 15% cash on the due date, and 35% extended payments to some point in the future. The other 50% of the investment is lost altogether. Thats not a haircut, it's a vasectomy

Even worse, I seem to recall reading that they can't even meet those terms, so you may well get 15% (or less) and a worthless IOU for the rest. What a way to run a country

The problem with the situation is the level of multidimensional interdependencies, rather like a giant house of cards with no one really knowing what happens if one is removed. The CDSs add another level of complexity.

The other problem is no matter what the facts are, individuals act on instinct and behave like sheep. Once confidence is lost, it's open season and no amount of common sense will prevail.

Many years ago I worked on a market risk analysis system for a major Asian bank. It worked ok, sort of. But the dealers completely ignored it - preferring gut instinct and relying on the advice of mates. Which is pretty well how we got into this mess in the first place.....

ozzieeagle

I've been looking for histories lessons of a Meglomaniac to surface... none thus far thank xrist.

If I were a youngster inheriting this mess I would be extremely peeved with my Elders.

Put 2 and 2 together with the above.

slapphead_otool

I hadn't considered that, but historically someone pops up and "fixes" everything with a bit of muscle and tough love.

I do see an end to free trade and a rise in protectionism - when countries are paupers everyone exploits them.

Anyone want of buy s Greek island?

ozzieeagle

With Countries borders and nationalities being so homogonised now., Possibly the most homogonised in history making it very hard to find a traditional enemy.. Combine that with the mess that youngsters are inheriting from what they would presumably see as pure greed on our parts ... being property and material owners. I'm wondering if there has ever been a full on generational war in history. With the oldies or the property owners being seen as the enemy ? It's just a niggle I've got. Like a world wide Sandanista movement, which was very much a young peoples struggle.