If Greece left the Euro, how many Drachma to the Euro would there be?

[Dauphin]

by re-denominating them in drachmas and then watching the new currency slide, so the 'value' of the debt relative to other currencies falls.

you have a debt of 100 euros. the day the new drachma is launched 100 drachmas = 100 euros, all debts are re-denominated, after a few months your 100 drachma debt is now worth 25 euros.

my guess. 1:1 at launch then falling rapidly, eventually becoming steady at 4/5 drachmas = 1 euro.

I understand your point, but I was getting at the nominal values used. You could start of at €1 : Dr 2,000 and still have the same effect.

I was arguing with someone who was obstinant that if the drachma were introduce at €1 : Dr 1 it would result in massive economic upheaval if the "market rate" said it should be €1 : Dr 3. I asked him, ok, what if the "market rate" (a term that is meaningless by my reckoning in this scenario) was €1 : Dr 3, and they set the rate at €1 : Dr 10, would it result in the market moving in Greece's favour to a rate of €1 : Dr 3. He said yes, at least in the short term. I hung my head as he failed to grasp the point. He then cited Black Wednesday, and how an arbitrary exchange rate resulted in a massive economic catastrophe for the UK. I hung my head again.

[Dauphin]

capital markets' e/valuation process will influence exchange rates, and the ratio is also dependent on circulation rates and printing speed. so it's not arbitrary

I will change all Dr1 notes to Dr 10. I have just increased printing speed by 10 fold, probably circulation by the same amount.

[Provost Harrison]

Yes, it shows that the new currency's ratio is a totally arbitrary choice.

Read this Zoet...this is the principle point you are missing. They can have a New Drachma worth 1000€ or 100 trillion to the € Zimbabwean style. It doesn't matter.

[Provost Harrison]

capital markets' e/valuation process will influence exchange rates, and the ratio is also dependent on circulation rates and printing speed. so it's not arbitrary

It IS arbitrary...you can convert to whatever you want. And devaluation will occur by the same proportion too.

[KrazyHorse]

loling at zjsjdhdejddjfdjdj and cockney.

At least cockney doesn't claim to work in finance...

[KrazyHorse]

My guess would be whatever ratio they converted into the euro at.

[KrazyHorse]

the closer they can negotiate to 1:1 initially the better. it means they can print 1 drachme per 1 euro. they would stop printing when they cover the debt. at the same time, they would devalue their currency, which is actually good for them. it means labour will become cheap, relatively.

of course, ECB would not be happy to guarantee such an exchange rate, as effectively they'd be devaluing the euro and paying off the greek debt with their own money. so this will never happen. besides, do you know how 'expensive' it is to introduce, let alone change a national currency? everything has to be changed (back)! designing/printing/distributing money is no small feat... and nobody would have any faith in it, so it would not circulate widely.

even if something like this happens, this is a frankenstein solution that is not good for them in the long run. but hey, you can't accuse the mediterranean cultures of thinking beyond today too far.

You really are a ****ing idiot, you know...

[KrazyHorse]

the closer they can negotiate to 1:1 initially the better. it means they can print 1 drachme per 1 euro. they would stop printing when they cover the debt. at the same time, they would devalue their currency, which is actually good for them. it means labour will become cheap, relatively.

of course, ECB would not be happy to guarantee such an exchange rate, as effectively they'd be devaluing the euro and paying off the greek debt with their own money. so this will never happen. besides, do you know how 'expensive' it is to introduce, let alone change a national currency? everything has to be changed (back)! designing/printing/distributing money is no small feat... and nobody would have any faith in it, so it would not circulate widely.

even if something like this happens, this is a frankenstein solution that is not good for them in the long run. but hey, you can't accuse the mediterranean cultures of thinking beyond today too far.

You really are a ****ing idiot, you know...

[Dinner]

Most of the debts are written in Euro denominations and I'd guess those debts contracts would remain in Euro denominations no matter what happened. So even if they convert back to a national currency they'd still be screwed because their debts would remain fixed. Devaluing the new local currency would at least get export sales up and make it a cheap place for vacations both of which should increase employment but they'll still find it almost impossible to service their debts especially with poor credit so bond holders are going to be forced to accept write downs.

[Zoetstofzoetje]

thanks! i appreciate comments from the omnipotent all-knowing KH. such a swell fellar.

[KrazyHorse]

I don't give a flying **** what you appreciate. You are a posturing moron who doesn't understand the first thing about finance, economics or even basic mathematics.

[KrazyHorse]

Most of the debts are written in Euro denominations and I'd guess those debts contracts would remain in Euro denominations no matter what happened. So even if they convert back to a national currency they'd still be screwed because their debts would remain fixed. Devaluing the new local currency would at least get export sales up and make it a cheap place for vacations both of which should increase employment but they'll still find it almost impossible to service their debts especially with poor credit so bond holders are going to be forced to accept write downs.

Oerdin, the assumption behind any talk of greece leaving the euro as precipitated by a debt crisis is that they would redenominate debts in the new currency in order to allow themselves to inflate away debt (both for sovereign debt as well as debt issued by their banks and individuals' debt)

[KrazyHorse]

awesome; phone dping again...

[Provost Harrison]

KH, you've acquired an echo

[Zoetstofzoetje]

i *so* aspire to be you KH! a self-righteous, vain, immature, disrespectful moron with a lack of self-confidence that is projected at others to make you feel better. way to go!