Bankers, governments and investors are preparing for Greece to stop using the euro as its currency, a move that could spread turmoil throughout the global financial system.
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GLOBAL ECONOMIC COLLAPSE – STARTING WITH GREECE
How shock waves will reach the US if Greece drops the euro
Greeks will have to wrestle with a crucial dilemma when they go to the polls for the second time in as many months on June 17 to elect a new government.
Greeks will have to wrestle with a crucial dilemma when they go to the polls for the second time in as many months on June 17 to elect a new government.
A Greek election on Sunday will determine whether it happens. Syriza, a party opposed to the restrictions placed on Greece in exchange for a bailout from European neighbors, could do well.
If Syriza gains power and rejects the terms of the bailout, Greece could lose its lifeline, default on its debt and decide that it must print its own currency, the drachma, to stay afloat.
No one is sure how that would work because there is no mechanism in the European Union charter for a country leaving the euro. In the meantime, banks and investors have sketched out the ripple effects.
They think the path of a full-blown crisis would start in Greece, quickly move to the rest of Europe and then hit the U.S. Stocks and oil would plunge, the euro would sink against the U.S. dollar, and big banks would suffer losses on complex trades.
ACT I
What would Greece’s exit look like? In the worst case, it starts off messy.
The government resurrects the drachma, the currency Greece used before the euro, and says each drachma equals one euro. But currency markets would treat it differently. Banks’ foreign-exchange experts expect the drachma would plunge to half the value of the euro soon after its debut.
For Greeks, that would likely mean surging inflation — 35 percent in the first year, according to some estimates. The country is a net importer and would have to pay more for oil, medical equipment and anything else it imports.
Greece’s government and banks currently survive on international loans, and if it dropped the euro, the country would probably be locked out of lending markets, says Athanasios Vamvakidis, foreign-exchange strategist at Bank of America-Merrill Lynch in London. So the Greek central bank would need to print more drachmas to make up for what it could no longer borrow from abroad.
That’s one reason analysts say the switch to a drachma would lead the country to default on its government debt, possibly triggering losses for the European Central Bank and other international lenders.
Most assume foreign banks would have to write off loans to Greek businesses, too. Why would Greeks pay off foreign debts that effectively double when the drachma drops by half?
Say a small shop owner in Athens has a €50,000 business loan from a French bank. She also has €50,000 in savings in a Greek bank. The Greek government turns her savings into 50,000 drachma.
If the new currency fell by 50 percent to the euro as expected, her savings would suddenly be worth €25,000. But she would still owe €50,000 to the French bank.
European banks would take a direct blow. They’ve managed to shed much of their Greek debt but still held $65 billion, mainly in loans to Greek corporations, at the end of last year, according to an analysis by Nomura, a financial services company. French banks have the most to lose.
Apocalypse NOW! Surviving the Doomsday Polar Shift in an Inland Lifeboat
Because the STATIM pods are modular, you can customize them for your particular nightmare scenario.
First things first. Before worrying about food storage or access to clean water during a major disaster, you need to make sure you get through the first wave safely. But never fear: When the next big tsunami hits, a water-ready modular bunker called the STATIM pod aims to float you above the flooding.
Invented by Miguel Serrano, President at Brahman Industries, the STATIM (Storm, Tornado And Tsunami Interconnected Modules) pods are designed to withstand the awesome power of tsunamis, while giving survivors a fighting chance in the aftermath.
Brahman Industries calls the pods “inland lifeboats.” The reason: they’re buoyant and self-righting, so when the floods come, they will bob to the surface. They’re also low-tech, easy to maintain, and easy to construct, which means there’s a possibility for wide deployment. The company’s plan is to install and anchor them in flood-prone areas so when the alarm bells ring, those most at risk can rush to the safety of the pods. Inside, up to 50 people can cling to secure seating arrangements.
It’s the end of the world, but this guy is feeling fine.
The biggest issue with rescue-shelter design is always cost. We already know how to make structures that can withstand natural disasters; it’s just incredibly expensive. The key to keeping costs down is using concrete, a cheap and well-understood building material. “We’re addressing a high-priority need with a low tech approach,” says Serrano. When STATIM reaches scale, Serrano aims to offer the 50-person pod at around $1,800 a head.
The tubular hull is made from a series of pre-cast concrete modules. The modules can be created at local factories, shipped separately, and then aligned and winched together on site to create a watertight seal. “Everyone knows how to do this,” says Serrano. According to the company, the assembly process for the pre-cast parts requires about the same amount of knowledge as installing a drain system.
A STATIM pod waits to be assembled.
The pod continues to serve the people inside long after the first wave of disaster. “After Katrina, they spent three weeks just rescuing people with helicopters,” Serrano says. Because the pods are buoyant and equipped with communications devices, rescuers will be able to easily meet up with the pods to tow them away. A boat or helicopter can transport 50 people at a time to safety.
And because the parts are modular, the pods are customizable. By including different segments equipped with all kinds of survival gear, your personal STATIM pod can be modded to your anticipated needs.
The next step, says Serrano, is creating pods that house critical infrastructure. The company has proposed a variation on STATIM called the Genset, which houses working generators. Having survivable power sources would have prevented the Fukushima meltdown, Serrano says, by providing power to the nuclear plant’s critical systems after the tsunami. Other variations include pods with desalination facilities and a version of the pod that can withstand an EMP blast, ensuring that critical electronics would survive a nuclear strike.
The eerily calm diagrammatic disaster illustration. Not pictured: STATIM occupants bracing before nature’s fury.
While the intention of the STATIM system is that they be temporary shelters, let’s indulge ourselves in a little bit of design fiction for a moment. What about the pod’s potential to facilitate long-term living in environmentally extreme places?
As the seas rise and cities fall, imagine a community of these built and arranged in new flood zones, perhaps for scientists seeking to learn about new littoral urban ecosystems or salvagers prospecting for the remaining treasures of a lost civilization. Every night, the tribe would return to their STATIM homes, sleeping soundly with the confident knowledge that when the next flood happens, everyone will be all right.
As an area becomes picked over, helicopter scouts are dispatched to the horizon to find new fields of discovery. When a suitable destination is discovered, the helicopters return, towing the community to their coordinates. In this way, the group slowly makes their way along America’s flooded coastline, passing by long lost levies and through once thriving port towns. Thanks to an accompanying desalination pod, the group can remain operational away from freshwater for a long, long time.
Back in the present, Brahmin’s disaster-related design pulled in seed funding earlier this year. Serrano says that they anticipate the first demonstration units will be available in early 2014. In the meantime, keep watching the horizon.
An exploded view shows how the modules of a STATIM pod are assembled.
Images courtesy of Brahman Industries.