Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

IMF and Eurogroup Fall out Over Greece Debt to GDP Ratio Reduction Timing

Politics / Eurozone Debt Crisis Nov 13, 2012 - 08:01 AM GMT

By: Ian_R_Campbell

Politics

Best Financial Markets Analysis ArticleAn article today reports on an apparent disagreement that arose last night between Jean-Claude Juncker, President of the Eurogroup of Finance Ministers, and Christine Lagarde, Managing Director of the International Monetary Fund. Mr. Juncker is reported as having said that Greece will be given two additional years - to 2022 from 2020 - to meet its debt reduction target of 120% of GDP. Ms. Lagarde is reported as having taken exception to this saying she and Mr. Juncker "clearly have different views" on Greek debt.


Consider from 10,000 feet what is being said here:

  • first, 2020 is eight years from now;

  • second, eight years ago in 2004, American banks were well into the process of indiscriminant lending and packaging 'residential loan packages' that three years later led to the U.S. sub-prime crisis that contributed hugely to current U.S. fiscal cliff and debt ceiling issues;

  • third, given the current economic circumstances of several European Union/Eurozone countries, the United States, and perhaps now Japan, who is able to predict what world economic circumstances will be one year from now, let alone what they will be in eight years time;

  • fourth, Greece is not isolated, and is not an isolated economic problem in an inter-dependent globalized world that seemingly has come to emphasize short-term 'trading' and not long-term 'investing' world. Even if Greece wanted to 'control its own economic destiny', it can't do that; and,

  • fifth, most of the debate by politicians, the IMF, and the like seems to be among 'hopeful' world leaders who seem either not to be prepared to make the hard decisions that might 'reset the economic game' in the developed countries, or world leaders that have concluded they can't do that for fear of the consequences - hence they adopt a continuous postponement strategy which, without sustained real GDP growth, at some point presumably will have to come crashing down around them and all of us.

So, does it really matter in November, 2012 whether Greece is given to 2022 or 2020 to meet a sovereign debt:GDP ratio that I think it is unlikely to achieve in the end in any event?

A second unrelated article yesterday reported that since the beginning of its financial crisis (or more likely recognition of its financial crisis):

  • Greece has "cut $80 billion in spending and its economy has shrunk by 18%"; and,

  • Greece's small and medium sized businesses account for 90% of all jobs, and currently are struggling to survive austerity measures and a sharp decrease in consumer demand.

As I see things, austerity programs and real GDP growth are not bedfellows. Accordingly, I suggest you watch Greece going forward as a litmus test as to what may happen to economic 'growth' in other countries that face similar austerity pressures.

The important question is: Are we watching an unraveling of developed country economies and standards of living that, much like a landslide starts slowly, become unstoppable as it gains momentum?

I sincerely hope the answer to that question is 'no'. However, I do believe that the question is one traders, investors, and every other thinking person ought to focus on, monitor, and continuously consider as they each go about their day/day activities.

Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining and Oil & Gas Companies listed on the Toronto and Venture Exchanges. Ian can be contacted at icampbell@srddi.com

© 2012 Copyright Ian R. Campbell - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in