It could not happen to a nicer country. 2500 years ago Greece was the center of Democratic humanity. Remember Solon’s reforms? Old glory. Today, the country Greece is for sale. What’s next? Endorsement rights for the Parthenon? Pay attention since this actually matters to the domain name asset class.
Why it matters?
This is not going to impact only Greece. It is going to hit right at the heart of the European Monetary Union — which is a fiat currency backed by nothing, and governed by a monetary policy that has no binding influence on national fiscal policy. As for Greek fiscal policy, a promise made was a promise broken. The 3% EMU budget deficit maximum was never even achieved during the boom times, and is now completely toast in the bad times. It was a whopping 13.9% of GDP in 2009.
So, unfortunately for Prime Minister “G-Pap”, the Greek credit card has been shredded. The IMF is orchestrating what is effectively “Debtor in Possession” financing for the country’s assets. That would technically include historic treasures like The Parthenon and a bunch of nice islands in The Aegean Sea.
The European Union, just recovering from the “EuroKill” volcanic ash-induced chaos, is scrambling to contain the collateral damage before it spreads to Spain, Portugal, Italy and Ireland. A re-financing of Greece spares other countries — notably France and Germany — from having to write down the principal on their Greek debt holdings. Bankers call this practice “Extend and Pretend” or “Mark to Fantasy” (as opposed to “Mark to Market”).
Meanwhile, the EMU policy coordination efforts go something like this:
The EMU will be the first to go — and I actually believe it will go. This is one reason why we see the inexorable rise in the price of gold, particularly if you look at it denominated in Euros:
Fiat currencies in general are at risk as central banks continually debase their currencies, effectively accepting asset reflation (some would say levitation!) as the price of wholesale currency debasement. The US is by no means out of the woods here but it is a beneficiary of “flight to quality” in large measure because major commodities are priced in dollars and there is no credible alternative reserve currency, at least for the moment.
The stakes for the global economy are high and going higher. US budget challenges notwithstanding, the US dollar will continue to benefit from being “backed” by the world’s most powerful armed forces, which provides some assurance of continued access to strategic natural resources, notably Middle East oil, which are to be paid for in … US Dollars. Google “The Great Game” for more context on that topic. Here is a politically incorrect primer on where Greece fits into the sequence of dominoes.
Although the timing of the next major bout of economic volatility is not entirely known, certain financial markets are functioning as a “Prediction Market” (anyone want to develop Prediction-Markets.com?). Two of the more notable prediction markets are VIX — an index of volatility — and Credit Default Swaps. The VIX index was up 30% yesterday:
And then BAM, Greek Credit Default Swap spiked higher again today (chart) while 2 year Greek Sovereign bonds are being placed with 20% interest rates. Ouch! Greek bonds are now officially Junk status, otherwise known as “not investment grade”. The smart money knew this long before.
There was a good panel today at the Milken Global Conference if you want more.
The Bottom line: Expect the Unexpected.
I stand by my theory that Domains are better than Dollars which I argued here and here. And even though your personal financial advisor might beg to differ on this advice, I would use any strength in the US dollar to consolidate a position in development-worthy domain names.
At Epik we are also putting our money where our mouth is and are buying domains every day. If you want to know what we buy (and sell), you can request to receive our Daily Acquisition Report by contacting me at rob -at- epik.com.
In the meantime, expect the unexpected.