Grexit still a possibility

Protest have erupted in Greece over Austerity measures and have heightened after Chancellor Angela Merkel's vistit.   Merkel has been a long time critic of Greece and it's inability to meet it's fiscal targets.  She is very much hated in Greece.

 

Her visit was met with wide-scale massive protest that have in some cases turned violent with protesters pelting Greece police with homemade maltalv firebombs.

Protesters burned swastikas and chanted “Merkel, out of Greece!” Greek unions have also called for a 24 hr strike.
 

Greece is plagued with Wiemar Republic like unemployment.   

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

FOMC signals QE3

Quantitative Easing made the news on Wednesday as Bernanke decided that QE3 might be in the cards. Even though Bernanke is pushing for QE, not all FOMC members agree with it but many did agree with the notion. At this point however it could just be some fancy jawboning to stimulate the market so while it's in the card - it's not a sure thing.

The current Fed pledge is to keep rates at “exceptionally low levels” through at least late 2014 will not change and may extend further into 2015.

The jawboning by the FOMC did little to move the markets but there was a jolt against the USD and Gold made new short-term highs in anticipation of the move which will not occur until September (if it does).

Stay tuned!

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Perhaps the US is similar to the Roman Empire when it was about to collapse?

The United States currently is deployed in over 150 countries around the world according to wikipedia:

United States military deployments
Map of U.S. Military bases around the world
The current benchmark rate is 0.25 (nearly zero) and on top of the loose monetary policy there's additional manipulation in the form of Quantitative Easing - currently there has been 2 stages of QE (QE1 and QE2) and Operation Twist.

The Roman Empire (like the United States) had it's empire spread out all over the known world (Map of the Roman Empire).
Like the US the Roman Empire had a currency problem. The empire faced hyperinflation caused by years of coinage devaluation. The problem was so intense that the currency had very little value and a bartering system was often used making the ease of trade difficult. It wasn't long after Roman coins had virtually no value that the empire itself collapsed.

With a spread out military and a debased currency that is mocked by other countries is the US leading down the path of a total collapse?

Fed Continues Operation Twist
United States loses prized AAA credit rating from S&P

Those that don't learn from history are doomed to repeat it.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Max Keiser : European big banks technically insolvent

France, back in a recession for the 2nd time in 3 years. Italy's economy contracting point seven percent in the last quarter:

And for the powerhouse, Germany: its Industrial, construction and manufacturing all slumped for June: The euro- zone debt crisis continues to threaten the survival of the 17-nation currency bloc, affecting non-Eurozone members, like the UK, where the Bank of England said it did not expect the UK to grow out of a recession. But the more alarming picture: the lack of growth, whether its for each country, developing countries, or the global economy as a whole.

Neal Vanderstelt - Currency AnalystPlease rate & recommend:

Spain cut just 2 notches higher than junk status

Fitch Ratings downgraded the country’s credit rating from A to BBB, with a negative outlook. The BBB credit rating is just two notches higher than junk status.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Greece & Spain on the ropes, Operation Twist ends...

Extreme pressure on the Euro followed by extreme pressure on the global economy. After last week’s disappointing NFP, the FED(US) will look for dovish measures to stimulate the economy as operation twist (program to lengthen maturities of debt on the central bank's balance sheet) comes to an end this month. Operation twist could be extended according to Federal Reserve Bank of Atlanta President Dennis Lockhart.

All eyes will be on FED Chairman Ben Bernanke with a policy-setting FOMC meeting June 19-20 to consider if more stimulus is needed after the economy added the fewest jobs in a year in May.

European economy is still in turmoil with struggling Greece and Spain highlighting the Euro's weakness. Meanwhile investors eye the key Greek election in June which will decide the flavor of the "new" Greek government.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Bank Runs In Greece - so in the face - Even Fox News Reports it

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

What is a Grexit and why? Bad English or......

Well it's not as bad as a Spexit lol. A Grexit *Gr-Exit* is a pun word for a Greek exit out of the Euro-zone. The Spexit *Sp-Exit* --- you guessed it!! Is a Spanish exit out of the Euro-zone. People got bored of talking about Greek exiting the euro-zone because it's meantioned so much that they made pun word out of it.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

The Euro-Zone Report: Technically The Euro in Downtrend since mid-2008

The Euro-Zone Report: Technically The Euro in Downtrend since mid-2008: While the Euro has been in trading news everyday over Greece and Spain - technically the Euro has been in a major down-trend since July 2008...

Neal Vanderstelt - Currency AnalystPlease rate & recommend:

Technically The Euro in Downtrend since mid-2008

While the Euro has been in trading news everyday over Eurozone countries like Greece or Spain - technically the Euro has been in a major down-trend since July 2008 when the EUR/USD made it's last poke higher - peaking at the 1.6000 level. The chances of the Euro going back above that level anytime soon are slim to none and the currency pair will stay below that peak for some time to come.

The weekly chart below clearly shows a strong long-term and medium-term downtrend:


If there was ever a "contrarian trade" now would be the time if the Euro is to recover because it would be very oversold if there's a case for recovery in June. However should the debt crisis lead to a member(s) to exit the Euro, it is quite possible the Euro could continue to slide, and it could slide to it's demise because there are many holes in the Eurozone economy.

One has to weigh several factors and consider:
1. just how much of an impact the weaker countries in the Euro have to the overall value of the Euro;
2. what it means to the stronger members if a weaker member defaults or continues to need bailouts (perhaps a default or two would be good because of the bailout burden but it would likely effect the exchange rate - the fear is a landslide collapse and domino effect from other eurozone countries that might decide to leave while the door is open);
3. the state of the global economy and the prospects of the Euro-zone being able to pull out of Europe's recessionary conditions in a weak global environment;
4. if the weaker members do not leave the Euro what it will mean to stronger members (primarily Germany, 2ndly France - the largest EU countries) who have to carry the smaller members weight by providing them "large" bailouts (the bailout problem is worse the longer the economy does not recover and should larger medium size members need bailouts (likely they will especially after it all tanks) it will be tougher bailing them out than bailing out a little country/economy like Greece - which has already made the Germans angry - when the bigger one's need the same type of stimulus the show could likely be over because they will need much more than Greece).

June seems to be a very critical month with risk assets (major equities in particular and commodities) gaining selling momentum which spurs concerns of a major collapse; combined with the turmoil in Greece, trouble in Spanish bond market (a banking sector saddled with toxic loans), weak US non-farm payrolls, weak US jobs market data, the Greek election in June, and the US FOMC meeting; it is a long list of things to consider that could either make or break the market this month.

Should it be that the data is at it's lowest point for the year and the FOMC pumps the market there could be a considerable bounce. But if the turmoil is too strong it could tip the risk markets for a deeper fall.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

The Euro-Zone Report: Euro in big trouble US markets crash

The Euro-Zone Report: Euro in big trouble US markets crash: US stock markets crashed as fear controlled the market over global economic concerns and weak domestic data. The market feel sharply after ...

Neal Vanderstelt - Currency AnalystPlease rate & recommend:

Euro in big trouble US markets crash

US stock markets crashed as fear controlled the market over global economic concerns and weak domestic data. The market feel sharply after weak jobs data hit the market but the market was already sliding/weak. It was the worst day in 6-months providing market contagion concerns.

Crude oil also came crashing down with equites but the gold commodity went opposite to oil suggesting there is a great amount of fear to currencies and the looming fed meeting which could signal more injections via quantitive easing speculations to prop the economy/stock market.

U.S. nonfarm payrolls and jobs data were the key concerns in US markets which turned out to have a negative influence on the market. The Labor Department said 69,000 jobs were created during May, the smallest increase in a year and well short of economists’ forecasts. The unemployment rate rose to 8.2 percent from 8.1 percent in April, the first increase in 11 months. Analysts had expected U.S. non-farm payrolls to rise 150K last month. The data provided evidence that the economy is still deteriorating.

The drop in equities is particularly concerning in that it wipes out yearly gains.

Gold may be providing a safe haven to investors with uncertainty (if not out right fear) in the cash markets.

Unemployment in the euro zone has reached 11% in April and March, the highest since the data started in 1995.

The EUR/USD finished it's last hours of the trading week with a dramatic bounce during the US close from the 1.2280's but the 2010 June low (1.1870's) has yet to be tested. If the US props the market or Euro confidence is restored we might not see this low.

European sovereign debt crisis continued to be a shadow of every market fall with Greece and Spain on the forefront of EU woes to haunt the Euro lower - just when you think they are out of the news they come back in with more gloom.

Greece will elect a new government this month. Coupled with the FOMC meeting in the US it could lead to some very difficult and perhaps a turbulent month if issues are not resolved regarding European unity and the health of the US economy.

Crude oil ended the week down 8% coupled with weak global data out of US, China, and Europe falling in tandem.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

What is The Euro-Zone Report

The Euro-Zone Report is a blog for analyzing economic developments in Europe. Put in critical focus are: 1) any political developments which effect the economy such as elections or changes that effect the economic policy such as bank meetings; 2. Economic data (such as sentiment, factory data, economic studies/reports) that gauges the current state of the European economy, the past state, and possible future state; 3. Evaluation of the Euro currency.

The purpose of The Euro-Zone Report is for use by forex traders, stock traders, and investors.

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

The fate of the Euro weeks away - June 17th Greek elections

Radical Left vs The New Democracy:

Of course one might say the fate of Greece; but if Greece leaves the Euro-zone it could lead to a domino effect, which ultimately could crash the union.

New Election Polls show the SYRIZA is losing ground to the New Democracy. The SYRIZA are a radical left and Anti-Austerity party vs the conservative and pro-austerity (ND) New Democracy party.

Greek surveys suggested conservatives could form a coalition government with socialist PASOK, which have also pledged to stick to Greece's austerity commitments.

Because of austerity the previous May 6 elections proved inconclusive. With none of the parties able to form a coalition government - another ballot was scheduled for June.

Levant Partners (a Greek fund manager) predicts a 70% chance of a Euro exit if Syriza comes first in the elections. Support for Greece will stop if the Greek government does not accept the unpopular and harse austerity measures.

Basically there are 3 parties in the race: The New Democracy, The SYRIZA, and The PASOK. The only leading anti-austerity party is The SYRIZA; the race is neck and neck between pro-Austerity parties and the anti-austerity SYRIZA.

Poll conducted by ALCO for newspaper PROTO THEMA:
ND 25.6% – SYRIZA 22.9% – PASOK 14% – INDEPENDENT GREEKS 6.4% – KKE 5.6% – CHRYSI AVGI 4.6% -DEMOCRATIC LEFT 4.6%

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Will Greece Leave the Euro?

Greece could leave the Euro over Austerity measures which would chop down Greek government saleries and benefits. The alternative to not accepting EU and IMF demands is to leave the Euro and have a dramatically reduced Drachma (the previous currency).

IMF head Christine Lagarde warned that the IMF had no intention for softening terms for Greek bailouts. Greek elections are to take place in mid-June which will be pivital to what type of government and path Greece will go down; a path that is either pro-Austerity or anti-Austerity and anti-Euro.

In France Anti-Austerity Hollande (a Socialist) has already won the heart of the French.

George Papandreou (former Prime Minister of Greece), was forced to resign six months ago after protests, strikes and riots against pay cuts, tax hikes, and slashed pensions demanded by international lenders in return for $325 billion in two bailouts.

While the political change caused some temporary euphoria the problem is hardly solved.

New elections for Greece are set for June 17, 2012 and is tied between the SYRIZA (who are against the austerity, led by Alexis Tsipras) and the PASOK (led by Evangelos Venizelos).

On 18 March 2012, Evangelos Venizelos (new PASOK leader) was elected unopposed to replace George Papandreou as PASOK president and led the party in the May 2012 general election.

7 countries are officially in a recession in the Euro-zone. Only Germany showed growth in the 1st quarter. Meanwhile the European Union seems to be more divided rather than in agreement on issues; specifically what to do about the sovereign debt crisis, and Greece is the weakest link that could soon snap under the face of drastic austerity measures. Anything could happen!

related video:


Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Marc Faber says European Austerity is a joke on CNBC see video

According to Faber, Euro-zone government spending has increased by 76%. But, the Greeks don't want to take the 50% Austerity measures that would cut saleries and benefits. The alternative to Austerity is leaving the Euro; and having a Drachma that is worth 70% less than the Euro. Faber however says, Greece should leave the Euro right away to avoid commitments outside of Greece. On China Faber says the slow down is greater than analyst suggest, according to commodity weakness; the logic is that if China was strong so would commodity prices - which have faltered.



Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Euro Parity to US dollar 2012?

A cheaper currency would make an export country more competetive. It would not necessarily be a bad thing in that case as long as inflation didn't get out of control. Recent weak factory data and business sentiment data shows the Germany (the euro's largest economy) is struggling.

Widespread European debt and unemployment woes only make the situation worse in a slow global economy. Also, Greece is not the only country that requires support from the Euro. The pot is pretty thick when you throw in Spain, Ireland, Portugal, along with Greece. Did I miss any?

If Greece exits the Euro, parity (or less) could happen sooner rather than later. Currently there's an increased chance that Greece will leave the euro voluntarily or by being booted for not adhearing to EU austerity demands.

Greece however does not like the idea of strick austerity (even if it brought it on itself) because it means too many cut backs in the public service sector and less room to function as a government. With less room to function comes more turmoil for Greece but still it may be a lessor devil to deal with if it were to abruptly leave the Euro. It is a very unromantic relationship with lots of possibility for heartache.

As if it isn't enough to deal with in Greece with high unemployment, unsustainable debt, and a long list of overall instability in Greece; there is also the Greek election on June 17th, 2012. With the austerity being cosidered too strick Greece might vote in an anti-austerity government which would be considered to be anti-Euro. No matter how you spin it the debt is here to stay for a long time to come and a near-term solution to fix Greeces problems just does not exist at this point.

China has tried to support the Euro because a devalued Euro would hurt China. China's support may explain the Euro's "slow" fall when ecomomically things seem out of control. Perhaps no amount of propping will stop a greater fall with the Euro slipping through key support levels at the same time the global economy seems to be slipping.

The real shock would be if Germany decides to go it alone without the Euro. Many Germans feel this is actually the route to go since they are the leading European economy; perhaps, Germany does't need the Euro for stability especially since Germany is picking up the bill for Greece and other debt-stricken countries.

Euro Data this week:
EUR Euro-Zone Current Account s.a. (euros) (MAR) 9.1B Previous: -1.2B
EUR German IFO - Business Climate (MAY) 106.9 Forecast: 109.4 Previous: 109.9
EUR German IFO - Expectations (MAY) 100.9 Forecast: 102 Previous 102.7
EUR German Gross Domestic Product w.d.a. (YoY) (1Q F) 1.2% Forecast: 1.2% Previous: 1.2%

Neal Vanderstelt - Currency Analyst
Please rate & recommend:

Article Notes from BBC Story: "What happens next if Greece leaves the eurozone?"

The Euro-Zone Report: Article Notes from BBC Story: "What happens next i... euro-zone-report.blogspot.com/2012/05/articl…

— Neal Vanderstelt (@nealthetrader) May 25, 2012

Link to Original Article: What happens next if Greece leaves the eurozone?


1. Greece has been Unable to form a government.
2. the type of government that will be put in power will determine if Greece is to stay in the Euro - in other words; the choice is A) a government that is for austerity or B) a government against the austerity (eg not willing to pay back the Euro back for bailouts). If the government is not going to accept the austerity it is likely Greece will have to leave the Euro. Austerity is a strict form of government cut-backs which are usually considered undesirable.
3. Greece has such high debt, high unemployment, and other problems; that it has to rely on bailouts to function at it's most basic level of governing (eg pay government public service workers of whom also have to accept cut backs as part of the austerity plans).
4. The Greece problem is multi-faceted (having many aspects). In the beginning Greece did not even qualify to be in the Euro because it joined while already having debt that was higher than the Euro-Zone's standards. So this problem didn't exactly happen overnight and the contagion has spread throughout Greece; and even throughout the EuroZone because of bailouts and investments from other countries that have took major losses with investment in Greece. Greek investors already had to take major losses on their investments earlier this year and technically it was at that point the Greek had already defaulted on their debt in the form of massive write-downs.
5. Some think a default is in the books. However, if Greece defaults now the problems they have now may be 2-fold. For one they will not be able to borrow to sustain their government. Then when a new currency is established it is very likely it will be highly devauled because it will have to borrow against itself to sustain the new government. There will be a lack of confidence for a long time to come before new investors will invest again in Greece because it would be like a gift investing with more turmoil very likely to come - at least in the short-term to medium-term most are going to stay away from Greece investment. In the long term there may be hope for Greece but not until there are signs of stability.

Neal Vanderstelt - Currency Analyst

Related Videos:






Please rate and recommend: