Why Poland will also crash 2011 the economy is in bad shape

Greece, as every other state in the world, borrows money to cover its national debt. Markets seem to estimate that the way Greece currently operates its economy does not guarantee that it will be in a position to pay off interests on its debt accrued over time by May 19, 2010. In market-lingo this translates to higher interest rates when a state asks for a loan. With Greece the situation got so bad that the interest rates requested by the markets to approve loans for Greece got to all-time highs. Moreover, Greece’s economy devaluation by organizations such as Moody’s et al. only led to a vicious circle leading the country to higher and higher loan interest rates.

hereas some of the market practices in the situation described above may be questionable, the pressing issue was to restore trust to the markets that Greece will be able to pay off its debt. What became apparent, unfortunately not as fast as it should have been, was that Greece was not the only party affected by this crisis. Euro was also affected and exchange rates with USD and other currencies started falling. This in turn affected the economies of core Euro zone countries.

In an effort to avert dissemination of the crisis to the weakest economy links in Euro zone (see PIGS) the European Commission approved a close to 120 billion Euro loan for Greece to be distributed in installments till 2014. As know-how to handle such crisis was not available within the Euro zone, the International Monetary Fund (IMF) was called in to help with setting up the framework that would secure Greece receiving support but at the same time ensuring Greece would be in a position to pay it off as well through a number of changes in its economy and public sector. The latter may be viewed as part of the causes, which led to the demonstrations, protest marches and events in Athens last week.

Even though the press followed the clashes with the police, which certainly provided a first-class attraction for viewers over the world, they did not follow up the reforms that passed as law by the Greek Parliament. Nor did the press follow up the peaceful demonstrations that followed last week’s events. And of course no attempt was made to actually talk to people and get first hand news on who or what they feel is responsible for the dire financial situation they have to face.

Anchormen drafted fast comparisons between Argentina’s situation in 1999 and Greece in 2010. However, such comparisons are probably meaningless in view of the different financial contexts and economic blocks each country is to be considered part of.

Fragments from the publication:

Polish public debt revaluation
Poland's public debt, but also the citizens' has been growing like an avalanche in the most recent period. Poles' debt increased to 500 billion zloty, but the most important is the dynamics of the increase of the debt. Due to mortgage credits the private debt of the Poles grew from 34.5 billion PLN in March 2005 to the amount of 286 billion PLN in May 2011, so within 6 years, the mortgage debt of the Poles grew by 728%. It is the dynamics of debt increase translates into the dynamics of disposalble income of households.
For many years Poland will feel a great increase of obligations due to the increase of mortgage debt of its citizens. Every crisis and even a period of poorer market lookout will remind the Poles of the credit boom of the past 6 years. Even in the United States or Spain there has not been a similar percentage of increase of debt of the citizens resulting from mortgage credits.
The situation is even more dramatic in Poland because more than half of the value of mortgage credits is denominated in Swiss franc. The borrowers, apart from the purchase of the house, they have taken speculative positions in foreign exchange market. However, mortgage credit for a house or an apartment is not the best instrument to invest in the Forex market. (...)

Margin Analysis in Economy
The Union's expenses for Poland in the amount of 2.3 percent of the Polish GDP influence the growth of the GDP by at least 6 percentage points. It is one of the symptoms of the multiplier effect of one event on another. However, the influence of the economic stimulus may be more diversified. (...)
Therefore if the increase of assistance from the Union had a multiplier effect on the growth of the GDP in Poland, there is probably also a reverse dependency. The fact that one is a net payer by Germany or France limits their GDP much more significantly than it appears from the amounts transferred. In case of Germany who pays the most into the Union budget, the net spending of 12 billion euro annually means that, already with the view of the perspective of next year, this expense lessens the GDP of Germany by about 40 billion euro. Since it is the life cycle of analysis, then the lack of means translates in a multiplier effect into subsequent years, etc. The final effect means that the long-term contribution of Germany may turn out to be an excessive burden that is visible only in 10-15 years. The amounts that the Germans are giving away to the Union budget now plus the multiplier effect in long-term may bring about the fact that the Germans will pay for the Union several hundred billion euro (near one trillion) expressed in current euro - this is the power of the multiplier effect in a long period of time. (...)

• 1989 ARGENTINIAN

• 1997 THAILAND

• 1998 RUSSIA

• 1999 ECUADOR

• 2001 ARGENTINIAN

China in June 2010 have revalued theior yuan which is good but the country is slowing down. As at May 2010 China is starting to spread inflation to other Western countries. China has borrowed $8 for every dollar of GDP growth so have a credit problem. We loved the cheap goods but now China is flooding the markets via exports to the rest of the world. NZs Reserve Bank cannot stop this. Remember the US was borrowing $6 for every dollar before the subprime crash & Kiwis are borrowing still well beyond there means. Kiwi Banks keep pampering depsoitors with small loans and credit and debit cards to try to indebt you.

Some of the world's largest hedge funds are even saying that the Euro currency will sink to trade at an even level with the U.S. dollar.

The most terrifying prediction for 2010 involves Nostradamus "Satan's arch of fury". Although the precise nature of this prediction is left open to interpretation -could it be a comet, a war but definitely a disaster???