Never, never a dull moment in Europe. As Grexit would be upon us, at least predicted by most economists, investment brokers and other ‘gurus’, Greece handed in yet another bail out proposal. One that was actually on time!
EUREKA! In time! #Greece twitter.com/yannikouts/sta…
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jeroen blokland (@jsblokland) July 09, 2015
And by the looks of it, Greece seems to have enticed European creditors to consider giving the country a new bail out. That it ‘redefined’ democracy while doing so, seems to be of no major concern for now. The latest reform proposal actually goes a bit further than the original one that was ‘OXI-ed’ in the Greek referendum. I really can’t think of a way to explain this back home. But anyway, the Greek 2-year government bond yield fell by over 20 percentage points on Friday!
Wow! #Greece's two year government bond rate falls 20 percentage points(!) as debt deal looms. #Grescue http://t.co/RAuaR4PrhV
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jeroen blokland (@jsblokland) July 10, 2015
Moreover, European creditors seem to like the ‘final’ Greek proposal so much, that the Sunday EU summit could be off. If that were only true. A Greece free weekend! It has been a while.
A #Greece free weekend? twitter.com/FGoria/status/…
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jeroen blokland (@jsblokland) July 10, 2015
The prospect of a definite deal between Greece and Europe should also entice the ECB to maintain, or perhaps even increase, ELA to Greek banks. But then again, the ECB was already stretching it.
It seems the #ECB is already stretching it concerning #ELA... #GreeceCrisis
ecb.europa.eu/pub/pdf/other/… http://t.co/zXpGpu7OJc
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jeroen blokland (@jsblokland) July 07, 2015
Any deal holds a downside for the Greek people of course. The economy will continue in recession-mode for some time to come as the government shores up its budget. Pensions will be cut and jobs will be lost. To make things worse: history shows there have been several GDP meltdowns bigger than Greece’s current one.
Is this only the beginning for #Greece? History shows there have been much bigger meltdowns of real #GDP! http://t.co/nAbVHXbKIW
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jeroen blokland (@jsblokland) July 07, 2015
Interestingly though, there is number of countries that has a bigger government debt per capita level than Greece. And these are not some minor, obscure countries either, as the chart below shows.
ICYMI! There are countries that have a HIGHER government #debt per capita than #Greece! via @OECD http://t.co/pgJnIg1Sxf
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jeroen blokland (@jsblokland) July 09, 2015
Also interesting is that the price of bitcoin popped as markets are pricing in an ultimate debt deal for Greece. That’s in contrast with the notion that bitcoin was positively influenced by the Greek bank holiday. There have been no signs that the Greek people were collectively switching to the digital currency, and the latest price spike confirms this.
#Bitcoin pops! Where's your #Greece story now? http://t.co/gngCV73bao
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jeroen blokland (@jsblokland) July 10, 2015
Let’s move over to the other ‘problem child’, China. As the first series of measures, to stop mainland share prices from sliding, didn’t work, the Chinese government switched to panic mode. Over half of shares were halted and major shareholders were forbidden (just imagine that) to sell any of their stocks for the next six months.
#China is in PANIC MODE. Major shareholders are now banned from selling any of their stakes for six months. http://t.co/jRimgik9y4
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jeroen blokland (@jsblokland) July 08, 2015
Meanwhile, volatility spiked to even higher levels. Intraday moves are just massive!
#Volatility in one graph! #China's intraday stock market moves are just huge compared to those of the S&P 500 index. http://t.co/oErtpxdDqM
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jeroen blokland (@jsblokland) July 09, 2015
China’s bear market has started to effect other Asian countries as well. Throughout the continued equities got hammered as Chinese measures did not seem to work.
Asian stock markets are getting hammered today! #China http://t.co/8A1s2dAcbk
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jeroen blokland (@jsblokland) July 08, 2015
But, if you halt stocks people really want to get rid of, and if you forbid major shareholders to sell, while ordering others to buy, you are destined to reach a tipping point at some point. Hence, this week China A-shares plunged 16% one day, while rising 18% the next. MADNESS!
MADNESS! The FTSE #China A50 A-share index, which was down 16% yesterday, is now up 18%! http://t.co/FDJXzgEV0T
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jeroen blokland (@jsblokland) July 09, 2015
By the way, did you know? China has more individual stock trading accounts than countries like Indonesia or Japan have individuals.
#China has more individual stock trading accounts than Indonesia and Japan have individuals. via @themoneygame http://t.co/Yzn74p4pBT
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jeroen blokland (@jsblokland) July 09, 2015
Compared to Greece and China, The US is an oasis of rest. Steady as she goes. Yes, the Fed mentioned both Greece and China in its statement, but this should not be exaggerated, at least for now. The Atlanta GDPNow model predicts a decent 2.3% growth for Q2, which should make Yellen comfortable enough to raise rates. Especially when the Europeans and Chinese get a little bit less crazy.
The @AtlantaFed #GDPNow model estimates growth of 2.3% in the second quarter. Rate hike still on track. #Fed http://t.co/gGudqznxO7
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jeroen blokland (@jsblokland) July 08, 2015
Thanks for reading the Week End Blog. And if Greece allows it, enjoy your weekend!