Tags: Greece | Fed | rate | bubble

Grexit Would Be 'Too Disruptive'

By    |   Thursday, 28 May 2015 11:07 AM

Dariusz Kowalczyk, senior economist at Credit Agricole, gave away the ending of the ongoing Greek drama by predicting that there will be no Grexit, because such an outcome would be "too disruptive." He predicted that the euro will drop to parity with the dollar before it rallies after the turn of the years, a prediction based in part on the expectation of a September rate hike.

The European Central Bank (ECB)'s Ewald Nowotny, governor of the National Bank of Austria, decried the "psychological warfare" that has marked the debate over how to deal with Greece and focused instead on the conditions of a deal, such as "whether we can accept Greek bonds as collateral, the answer is, for the time being, no"; whether there are other ways of financing, such a "emergency liquidity assistance," backed by the Bank of Greece but subject to "clear rules." Nowotny insisted there is "no legal possibility" of creating some sort of stopgap arrangement outside of the rules, but at the same time he stated that the ECB is "not involved in any political bargaining process." This writer would suggest that a cynical observer would be concerned that some sort of process may be occurring behind the curtain that will result in just the sort of arrangement Nowotny opposes, backed directly or indirectly by the Federal Reserve.

A contrary view on the widely held assumption that the Fed will act in September to raise interest rates comes from Uwe Parpart, managing director of Reorient Capital Markets, who warned that the actual performance of the U.S. economy "should make the Fed extremely cautious about any sort of premature tightening into a possible slowdown in the economy that lasts well beyond the first and second quarter." He called this "a bad situation for the market, because in anticipation of a liftoff, the dollar will continue to show some strength," depressing U.S. earnings and stocks. This writer would add that the Fed wants to avoid any slowdown before the 2016 elections.

Finally, Christina Warren, a correspondent for Mashable, warned of a tech bubble in companies with no earnings and no business plans, while Ari Zoldan, CEO of Quantum Networks, sees the industry as "in a good safe place" because companies like Uber and Airbnb are truly disrupting their industries. They agreed that companies are not rushing to go public as they were 15 years ago, but Warren takes little comfort from this because it implies a bubble in private companies.

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Robert-Feinberg
Dariusz Kowalczyk, senior economist at Credit Agricole, gave away the ending of the ongoing Greek drama by predicting that there will be no Grexit, because such an outcome would be "too disruptive."
Greece, Fed, rate, bubble
416
2015-07-28
Thursday, 28 May 2015 11:07 AM
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