Greece Has Trump Card…USE IT!!!

Germany, as I have stated on many occasions, starting with  =”The Elephant in the Room.”  (June 2012) and again in =”Kurzarbeit achieved where Blitzkrieg failed!”  (January 2013)… is hiding in a weak economic zone to conquer the export world with an unfair advantage.

Heads up to IGINDEX and other Spread betting companies….trading idea : Short EURO notes with the GREEK suffix of Y  vs  Long EURO notes suffix X (Germany)…just an idea in the run up to 25th Jan election….I digress, back to GERPEL…

Todays move by the Swiss National Bank just reinforces just how important it is to the German economy to be linked with basket cases such as Greece. To put it mildly, Germany is a parasite of Europe. Its fortunes in economic terms are going from strength to strength. The weaker the Euro gets, the better its globally dominant export industry gets. So, Greece has a chance to play dare with Germany. As I write, the DAX is nearing 10,000 which is not far from an all time high. If the Greek elections go according to the polls and we have a new government hell bent on refusing to play by the debt rules set out by the Troika ..EU..IMF…ECB… it will lead to a Mexican Standoff between Greece the EU and Germany (not the IMF). The EU has stated that it will not renegotiate the terms of the bailout, primarily due to the snowball effect of demands from Spain, Portugal and Ireland should it do so. If Greece decides to leave the EURO as a result, the economic implications for Spain and Portugal, would be significant as they share similar economic profiles.

The mere hint of the basket cases leaving the Euro would, potentially, imply that a REVALUATION of the Euro could take place. This could result in a 30% appreciation once the anchors are removed from the economic group remaining. Excluding Greece, Portugal, Spain, Cyprus, Malta and possibly Ireland the focus would be squarely on a more solid economic footing. Sadly, such a currency move would prove fatal to the newer members situated in Eastern Europe and they would need to think seriously about membership of a club which is dominated by the German export machine.

So, Greece really has the entire German economic testicles in its hand. If they look squarely in Angela Dorothea Merkels eyes and say goodbye! The DAX would fall dramatically and all hell would be let loose. France would fall into a steep recession and Italy would itself consider bringing back the Lira as unemployment would be out of control. Interestingly, German bonds would be very volatile. Who knows where investors would go to find sanctuary. Negative interest rates in the EURO region could be the norm. Bonds markets would be in disarray as no one would know how to value. Shares, Property and other assets, in the countries leaving the Euro, would be bid up. Greek ship owners would repatriate the huge hoards of money they transferred to Northern European banks at the outset of the Greek crisis.

Currency printers like DeLaRue could make a fortune if national printers could not cope. It currently prints for UK, Finland, Portugal, Holland and Ireland (Not Greece). There is around 16bn banknotes in Euorland worth around Eur 1 trillion…

With reference to the various banknotes in the EURO: Y= Greece, M=Portugal, V=Spain. I have no idea what would happen to the value if a country left the EURO block but I would rather not have Y denominated Euros just in case….The country letter is part of the 12 digit code NOT the six digit code which just identifies who printed it.

 

 

 

 

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Thursday, January 15th, 2015 Euro, Predictions

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