Archive for May 19, 2012

Latest on the Greek Debt Crisis

If you want decent, impartial advice regarding the European Debt crisis then you won’t go far wrong with the BBC.  I was able to catch Robert Pestons excellent documentary last week – “The Great Euro Crash’.  Incidentally other people have asked how I am able to watch BBC shows online when I’m in Turkey and the answer is that I use one of these security proxies to hide my location – the one I use is here.

ipad VPN

The crux of the problem seemed to be not specifically the Greece leaving  the Euro, but rather what would follow it.  Once one country has left an Exit sign is displayed to the others who are being crippled by sovereign debt.  Also the idea that debts can be avoided like this will lead to instability in the banking sector especially when individuals start to withdraw huge amounts of cash from their accounts.

If Greece renaged on it’s debts, then people would start to look expectantly at other countries in crisis like Spain, Italy and Portugal. Individuals and companies would get nervous and start to withdraw their money and transfer to safer banks in different countries.  A perception of financial weakness will soon become very real and the banks in these countries would come under enormous pressure.  These of course are financial institutions who are already under severe stress from billions in bad debts.

Without some serious lending by the European Central Bank, any Greek departure from the Euro would likely see the very existence of several large European banks put into question.  Anyway if you want you can still pick up this fascinating documentary on the BBC Iplayer.  It should be available for another week or so and the ’Great Euro Crash’ is certainly worth a viewing.

 

Debt and Wineries

Wineries aren’t one of the businesses that most of us think would be in an inordinate amount of debt are they?

In fact, the process of growing grapes isn’t extraordinarily expensive.  The most expensive wine gift in California can cost hundreds of dollars per bottle, but it only costs the winery about $4,000 to farm an acre of land.

So where does all the debt come from?

Land of course.  It’s easy and cheap to farm, but you’ve got to buy that land from someone and most wine regions are already well established. In Napa Valley less than an acre of land will cost you about a million bucks.

Now, does it make sense where the debt comes from?  When it comes to wine, land costs are the eqivalent to government entitlement programs like social security and medicare.