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The EU break up (taking all bets)
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Hawkeye_a
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May 10, 2012, 07:54 AM
 
Last december I thought it would be June, but considering the EU zone bailout went through(surprisingly), I revise my prediction to October.

Dominos.... first Greece, then Italy and then Spain.

On a parallel path, watch capital and investment flee France. (If the GOP wins the election at the end of the year, you can look for an influx of foreign capital from the EU fallout).
     
turtle777
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May 10, 2012, 08:24 AM
 
Greece will leave by end of June. IMO, next is Spain, but I'm not sure if later this year, or 2013.
Most likely, 2013 will see multiple dominos to fall...

-t
     
mduell
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May 11, 2012, 11:31 AM
 
I never thought it would last this long, but European institutions keep prolonging it. With another LTRO or similar it could easily last through the summer.
     
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May 13, 2012, 01:43 PM
 
Do you really think that anyone will lead the EU in a few months? Greece might levee the Euro, but that's not the same thing.
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el chupacabra
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May 15, 2012, 01:45 AM
 
It would be best if it fell apart. But my bet is on the EU staying together. Generally when things go bad it's used as an excuse for an even bigger badder more powerful dictatorship, and that's how I envision the future EU. Countries in need of bailouts (or maybe just everybody) will cede certain liberties to the more powerful new EU, it will be marketed as a solution that prevents similar catastrophes in the future. It will appear as though some wealthy entity is taking one for the team when in reality that entity will just use smoke and mirrors to offset the burdens on to the little guy slowly over time. For "fixing" the problem that entity or entities will want just a few.. sacrifices, in return. They will want this in advance of course. People will cheer and think what a great solution it is; but even if they don't, what are they going to do.

"So this is how liberty dies...with thunderous applause."
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May 15, 2012, 05:13 AM
 
What liberty would Greece be giving up - the liberty to live beyond their means? They will do that anyway if they go bankrupt, because noone will loan them another drachma. For those that didn't pay attention back when the euro was formed - the rules were set explicitly to avoid this situation, and Greece got in by lying.

"So this is how liberty dies...with thunderous applause."
- Lucas reads his history well
Right. Who is Octavian in the eurozone story?
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May 15, 2012, 08:27 AM
 
Originally Posted by P View Post
For those that didn't pay attention back when the euro was formed - the rules were set explicitly to avoid this situation, and Greece got in by lying.
And all the other members of the club are such choir boys !!!!
     
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May 15, 2012, 09:30 AM
 
Originally Posted by el chupacabra View Post
It would be best if it fell apart. But my bet is on the EU staying together. Generally when things go bad it's used as an excuse for an even bigger badder more powerful dictatorship, and that's how I envision the future EU.
The European unification is the reason this continent hasn't seen wars amongst its members since WW2. Countries no longer aspire to change their borders at the expense of their neighbors. And it has led to many decades of economic prosperity.

To put that in the vicinity of dictatorships is ludicrous, nobody is enslaving anyone.
Originally Posted by el chupacabra View Post
Countries in need of bailouts (or maybe just everybody) will cede certain liberties to the more powerful new EU, it will be marketed as a solution that prevents similar catastrophes in the future.
Structurally, the EU is to individual member nation what the federal government is to individual states which make up that nation – and nobody is claiming that the existence of a German or French national government is enslaving the people.

The EU is based on contracts that each member nation has ratified, i. e. the rules of the EU have become national law. There is nothing nefarious about it.
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May 15, 2012, 09:37 AM
 
Originally Posted by mattyb View Post
And all the other members of the club are such choir boys !!!!
Not necessarily, but we're neighbors whether we want to or not. And it's good to have something in place to settle disputes and work towards common goals -- especially when Europe is confronted with global problems.
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el chupacabra
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May 15, 2012, 12:48 PM
 
Originally Posted by OreoCookie View Post

To put that in the vicinity of dictatorships is ludicrous, nobody is enslaving anyone.

Structurally, the EU is to individual member nation what the federal government is to individual states which make up that nation – and nobody is claiming that the existence of a German or French national government is enslaving the people.
Not now. Not yet. My bet is it's going to happen. Ideally if the EU just stayed the way it is forever things would probably be dandy. Unfortunately with politics things have to be either moving forward or backward, they cant just stay the same. All things government lead to dictatorships of some form over time. The EU has only gained power and made more and more laws always extending its bounds little by little. These current events are an opportunity for it to make some major strides.

Look that's just my bet; if I'm wrong you can all laugh at me and make me eat my words, it's just my prediction. Of course it'll probably just be a case where you all just don't notice or acknowledged that it's happening
     
mduell
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May 16, 2012, 12:54 PM
 
Originally Posted by P View Post
What liberty would Greece be giving up - the liberty to live beyond their means?
The freedom to set their own fiscal policy is a big one.

Originally Posted by OreoCookie View Post
The EU is based on contracts that each member nation has ratified, i. e. the rules of the EU have become national law. There is nothing nefarious about it.
"Member nation" is an important distinction - every joining has been by politicrats, never by the people (referendum).
     
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May 25, 2012, 10:21 AM
 
Europe: "It's Like Asking A Bicycle Repairman To Fix A Jet Engine"



h/t: ZH

-t
     
OreoCookie
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May 28, 2012, 05:54 AM
 
Originally Posted by mduell View Post
The freedom to set their own fiscal policy is a big one.
That doesn't imply giving up certain powers in favor of other powers and benefits is a bad deal per se. Greece would have collapsed some time ago without the help of the EU. We don't need to argue that the reaction of the Euro zone to the crisis in Greece has been a series of horrible mistakes. But if the crisis were handled correctly, it could have lessened the severity of the blow to the Greek economy.
Originally Posted by mduell View Post
"Member nation" is an important distinction - every joining has been by politicrats, never by the people (referendum).
That's the way representative democracies work: people legitimize the power of politicians via elections. If the treaties are ratified by the parliaments, they are a national law just like any other.

Of course, you do have a point that a referenda would lend additional credence to the idea of European unification. I am in favor of holding referenda to approve important European treaties, but the constitutions of some European countries do not allow for referenda (in Germany, for instance, there are no referenda on the federal level).

The problem of the EU is not the legitimization of the contracts per se, it's the legitimization of actual European politics: the standing of the European Parliament is quite weak and leads to the disconnect you allude to.
( Last edited by OreoCookie; May 28, 2012 at 09:08 AM. )
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May 28, 2012, 08:34 AM
 
Originally Posted by mduell View Post
The freedom to set their own fiscal policy is a big one.
If they can't loan any more money, they can't set the policy as they'd like anyway.

Originally Posted by mduell View Post
"Member nation" is an important distinction - every joining has been by politicrats, never by the people (referendum).
Incorrect. Sweden, Norway and Finland all held referendums on joining the EU. Norway voted no and stayed out. I'm sure that there are many more examples. There have also been specific referendums on the Euro in many cases.
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May 28, 2012, 11:22 AM
 
Originally Posted by OreoCookie View Post
That's the way representative democracies work: people legitimize the power of politicians via elections. If the treaties are ratified by the parliaments, they are a national law just like any other.
You forgot to mention the last step:

And then politicians ignore the law and keep acting in their and big bank's self-interest.

It was known even before Greece joined that they were cooking the books. By EU law, Greece should not have been allowed to join in the first place.

-t
     
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May 28, 2012, 12:14 PM
 
Originally Posted by turtle777 View Post
You forgot to mention the last step:

And then politicians ignore the law and keep acting in their and big bank's self-interest.
In what way is that a peculiarity of the EU?
With few exceptions, the countries themselves have bailed out banks against the will of the people, the fact that they did it on a European level as well means this is just a continuation of failed national policies and not that something qualitatively different is happening on the European level.
Originally Posted by turtle777 View Post
It was known even before Greece joined that they were cooking the books. By EU law, Greece should not have been allowed to join in the first place.
You're absolutely correct. Similarly, some Eastern European countries (Romania, Bulgaria) shouldn't have been welcomed in the EU so hastily.

But now Greece is (still) a Euro nation and we need to deal with the crisis.
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turtle777
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May 28, 2012, 01:26 PM
 
Originally Posted by OreoCookie View Post
In what way is that a peculiarity of the EU?
I didn't say it was, and didn't want to imply it was.

Originally Posted by OreoCookie View Post
But now Greece is (still) a Euro nation and we need to deal with the crisis.
How many lefts make a right ?

Not enough. There's no way to fix this cluster&ck other than letting countries exit the Euro Zone and devalue their debt through a new currency. It is the ONLY option, and the markets will bear it out.
Just look at all the denying over the past years about Greek's exit, and how Europe could fix it. All bullshit and propaganda. It's been clear for years that Greece will have to leave the Euro Zone eventually. It's just the everybody thought putting their collective heads in the sand would fix things.

-t
     
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May 29, 2012, 04:32 AM
 
Originally Posted by turtle777 View Post
Not enough. There's no way to fix this cluster&ck other than letting countries exit the Euro Zone and devalue their debt through a new currency. It is the ONLY option, …
No, it's not the only option. We could have just cut their debt by some fixed amount when the crisis started. It's not as if we're going to see the money anyway.
Originally Posted by turtle777 View Post
… and the markets will bear it out.
Eff the markets. Seriously. They have significantly contributed to this mess and profited from the rescue efforts. The developments of the markets has to a large degree decoupled from the actual economic development, so I expect more bubbles to burst.

Banks, it seems, are not considered part of the infrastructure necessary to let companies thrive and breathe, but they have taken on a life of their own. The sooner we realize they are no different from gas and electric companies, the better we are off. If some bubbles need to burst, so be it.
Originally Posted by turtle777 View Post
Just look at all the denying over the past years about Greek's exit, and how Europe could fix it. All bullshit and propaganda. It's been clear for years that Greece will have to leave the Euro Zone eventually. It's just the everybody thought putting their collective heads in the sand would fix things.
I agree with you that politicians have been ignoring this issue for years and that admitting Greece to the Euro zone has been a mistake from the start. However, we cannot turn back the hands of time and restart from scratch, that's not the way the world works. There are so many other issues (e. g. SOPA-/PIPA-type legislation and the out-of-control patent system) where we could complain that politicians are so far removed from reality and/or motivated by third-parties rather than fighting for the interests of the people they are supposed to represent.

I wish politicians in Europe would start being visionaries and work on ways how to improve the EU. A more tightly knit European Union can help buffer the impact of such disruptions as the bankruptcy of a member state. Cutting ties with the EU will only lead to disaster since trade within the EU is one of the most important sources of income.

The problems of Greece are not fundamentally different from those, states within a country face (e. g. certain US States which are almost bankrupt). With very few exceptions (such as Norway), all Western countries (+ Japan) have a looming debt crisis, and the only difference to Greece is that we're just a few years behind.
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May 29, 2012, 05:39 AM
 
Originally Posted by OreoCookie View Post
The problems of Greece are not fundamentally different from those, states within a country face (e. g. certain US States which are almost bankrupt). With very few exceptions (such as Norway), all Western countries (+ Japan) have a looming debt crisis, and the only difference to Greece is that we're just a few years behind.
Not sure I agree here. Greece has a fundamental problem in that it has a primary deficit, and seem to lack the political will to do anything about it. The rest of us have a new problem in that there is a real fear that a developed western country will actually default, which will increase the risk for everyone's loans, but we can handle it if we have to. Besides, the capital has to go somewhere - if western national debt is no longer safe, what is?
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May 29, 2012, 06:01 AM
 
Originally Posted by P View Post
Not sure I agree here. Greece has a fundamental problem in that it has a primary deficit, and seem to lack the political will to do anything about it.
I don't quite understand how you draw the distinction here: Of course, the situations in other countries vary, e. g. Japan has a higher debt than Greece, but the vast majority of it is domestic. But my point is that almost all Western nations (and Japan) have a very large national debt and none of them are reducing their debt currently. That means we will eventually run into the same problem (albeit later on in time), because it's not sustainable to increase the debt year-by-year.
Originally Posted by P View Post
The rest of us have a new problem in that there is a real fear that a developed western country will actually default, which will increase the risk for everyone's loans, but we can handle it if we have to. Besides, the capital has to go somewhere - if western national debt is no longer safe, what is?
That's actually a very good point: the capital has nowhere to go. China's growth is very much dependent on the ability of Westerners to buy gadgets and electronic toys.
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May 29, 2012, 07:02 AM
 
Originally Posted by OreoCookie View Post
I don't quite understand how you draw the distinction here: Of course, the situations in other countries vary, e. g. Japan has a higher debt than Greece, but the vast majority of it is domestic. But my point is that almost all Western nations (and Japan) have a very large national debt and none of them are reducing their debt currently. That means we will eventually run into the same problem (albeit later on in time), because it's not sustainable to increase the debt year-by-year.
A primary deficit is a deficit after removing the interest paid on the debt. Any country without a primary deficit can basically flip the bird at its creditors and be better off. The downside is obviously that they're not going to lend you any more in the future, but it's a powerful threat to have. Greece is so badly off because they don't have that option - they have a primary deficit, so until they have their finances in better shape, they can't even default.
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turtle777
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May 29, 2012, 09:06 AM
 
Originally Posted by OreoCookie View Post
No, it's not the only option. We could have just cut their debt by some fixed amount when the crisis started. It's not as if we're going to see the money anyway.
At current prices of the new Greek bonds, Greek debt holder already took a 85% haircut.
Uhm, yeah, and Greece's debt is still more than 160% of GDP.

The debt is only the symptom. Greece is essentially a failed state. There is no debt cutting that can fix that, and now money shoving up their asses.

Originally Posted by OreoCookie View Post
The problems of Greece are not fundamentally different from those, states within a country face (e. g. certain US States which are almost bankrupt). With very few exceptions (such as Norway), all Western countries (+ Japan) have a looming debt crisis, and the only difference to Greece is that we're just a few years behind.
Very true, and we're going to see something similar play out in those countries, too. Because then, there will be no bigger country to even attempt to fix it by bailing out Japan, the UK or the US.

-t
     
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May 29, 2012, 12:54 PM
 
Originally Posted by OreoCookie View Post
That doesn't imply giving up certain powers in favor of other powers and benefits is a bad deal per se. Greece would have collapsed some time ago without the help of the EU. We don't need to argue that the reaction of the Euro zone to the crisis in Greece has been a series of horrible mistakes. But if the crisis were handled correctly, it could have lessened the severity of the blow to the Greek economy.
These statements are all orthogonal to the question I was replying to.

Originally Posted by P View Post
If they can't loan any more money, they can't set the policy as they'd like anyway.
The ability to control what you use your last Euro, or hundred million Euros, or ten billion Euros to purchase is an important liberty. The priorities and preferences of the members vary widely, from bailing out northern banks to Greek worker pensions.

Originally Posted by turtle777 View Post
It was known even before Greece joined that they were cooking the books. By EU law, Greece should not have been allowed to join in the first place.
A law the EU declined to enforce.

Originally Posted by turtle777 View Post
Not enough. There's no way to fix this cluster&ck other than letting countries exit the Euro Zone and devalue their debt through a new currency. It is the ONLY option, and the markets will bear it out.
It's not the only option; there's also the option of an exit by the productive northern countries, allowing the farked southern countries to remain in the Euro and print away some QE.
     
mduell
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May 29, 2012, 01:22 PM
 
An interesting disconnect: Greeks think they're the hardest working in the union and they have the worst corruption. No other country in the union shares that view.


Could contribute to the rioting/protesting if the populous feels they're doing all they can and are being held down by a corrupt government.
     
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May 29, 2012, 01:25 PM
 
Originally Posted by mduell View Post
It's not the only option; there's also the option of an exit by the productive northern countries, allowing the farked southern countries to remain in the Euro and print away some QE.
While I agree that this is an option for Germany, it still won't help Greece, Spain or Italy.

See, even if Germany left the EU, it would be hard to convince other EU (still-)members to accept printing w/o abandon by the ECB. At the point of Germany leaving, Greece, Italy or Spain still couldn't just issue their own devalued currency, which would be the most effective tool helping them to regain competitiveness.

They'd be stuck in a paralized EU that would lack even the faintest intelligence and leadership.
In short: a complete EU zone breakup would ensue shortly after.

Therefore, I revise my statement: there are two options:

1) Greece (and Spain, Italy etc...) leaving the EU Zone
2) The EU Zone breaking up

I'd argue that I'm still right saying there is no "fix", because either of these two options can hardly qualify to be called a fix.

-t
     
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May 29, 2012, 02:47 PM
 
Originally Posted by turtle777 View Post
While I agree that this is an option for Germany, it still won't help Greece, Spain or Italy.

See, even if Germany left the EU, it would be hard to convince other EU (still-)members to accept printing w/o abandon by the ECB. At the point of Germany leaving, Greece, Italy or Spain still couldn't just issue their own devalued currency, which would be the most effective tool helping them to regain competitiveness.
I didn't mean just Germany, I mean Germany and France and the Netherlands and Finland, etc.

With only distressed countries left in the Euro, controlling they Euro, they can devalue the Euro.

I view a Greek exit as more likely, since all the distressed countries have different issues and would want different devaluation/mechanisms, but it is not the only option.
     
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May 30, 2012, 05:13 PM
 
Originally Posted by P View Post
A primary deficit is a deficit after removing the interest paid on the debt. Any country without a primary deficit can basically flip the bird at its creditors and be better off.
But I wonder whether this distinction matters much in this context: of course, I understand that Greece and Spain are much worse off than, say, The Netherlands or Germany, but in the long run, doesn't the phrases »paid off its debt« or »give the creditors the finger« lose their meaning since everybody has borrowed from everybody else?

The point is that I doubt that any of these countries will ever significantly decrease or even pay off their debts (unless there is significant inflation, of course, which devalues the debt).

Originally Posted by turtle777 View Post
The debt is only the symptom. Greece is essentially a failed state. There is no debt cutting that can fix that, and now money shoving up their asses.
I remember an article in the FAZ which printed a letter of a French writer from 150 years ago. The parallels to the situation today were striking.
Originally Posted by turtle777 View Post
While I agree that this is an option for Germany, it still won't help Greece, Spain or Italy.

See, even if Germany left the EU, it would be hard to convince other EU (still-)members to accept printing w/o abandon by the ECB. At the point of Germany leaving, Greece, Italy or Spain still couldn't just issue their own devalued currency, which would be the most effective tool helping them to regain competitiveness.
That'd be a catastrophe for Germany and other rich nations whose economic prosperity depends on trade with other European nations.
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May 30, 2012, 05:32 PM
 
Originally Posted by OreoCookie View Post
That'd be a catastrophe for Germany and other rich nations whose economic prosperity depends on trade with other European nations.
What do you mean by "that WOULD be" ?

The catastrophe is already underway, and has been for years.
Germany is selling all these broke states and people stuff they can't afford. It's being sold on credit, and at some point, Germany is gonna have to write down massive amounts of receivables because those countries either go broke, or implement their own devalued currency.

This process can NOT be avoided. Germany is going to be in trouble one way or another.
So far, Germany's plan was to give them broke PIIGS money, so that they could buy German stuff. It's pretty obvious that this is a dumb plan, and only works for a while. It's somewhat like a ponzi scheme.

The good news is, after an initial hit to Germany's export and a recession, Germany will recover, because there will always be a need for high quality goods from Germany.

-t
     
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May 31, 2012, 07:13 AM
 
Originally Posted by mduell View Post
The ability to control what you use your last Euro, or hundred million Euros, or ten billion Euros to purchase is an important liberty. The priorities and preferences of the members vary widely, from bailing out northern banks to Greek worker pensions.
The Greeks are free to spend the money they do have - what they are not free to do is spend money they don't have. The requirements from the lenders are that the deficit is to be shrunk along a certain roadmap, in return for which they will be given more money. If they get back to not spending money they do not have, they do not need to borrow anything, and so are free from any requirements the lenders might have.
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May 31, 2012, 10:47 AM
 
Originally Posted by P View Post
The Greeks are free to spend the money they do have - what they are not free to do is spend money they don't have. The requirements from the lenders are that the deficit is to be shrunk along a certain roadmap, in return for which they will be given more money. If they get back to not spending money they do not have, they do not need to borrow anything, and so are free from any requirements the lenders might have.
Re: "freedom to set their own fiscal policy"

The issue is that fiscal policy w/o any monetary policy is very restricted, or even impossible.
Greece has painted itself in a corner where they have no ability to alter fiscal policies (because their whole economy and government is based on debt and money from the EU), and the only "normal" way out of that kind of problem would be monetary policy (i.e. money printing), which Greece doesn't have.

There is no way out for Greece othern than to leave the Euro Zone.

-t
     
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May 31, 2012, 10:52 AM
 
EU finance makes me head hurt. I think SJ would characterize it as a bag of hurt.

Of course, most governments in general suck on the fiscal policy side. Why is it that my state has a balanced budget Constitutional requirement that it never meets? Most other states have balanced budget requirements but only a minority of southern and mid-western states ever run budget surpluses.
( Last edited by Big Mac; May 31, 2012 at 10:58 AM. )

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May 31, 2012, 10:57 AM
 
Originally Posted by Big Mac View Post
EU finance makes me head hurt. I think SJ would characterize it as a bag of hurt.
I'd call it a Bag of Crap™

-t
     
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May 31, 2012, 11:15 AM
 
An interesting perspective on this situation .....

Could Germany save eurozone by leaving it? - CNN.com

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May 31, 2012, 11:20 AM
 
"Save" is the wrong word.

Even *IF* Germany left the Euro Zone and issued a New Deutsche Mark, how would that "save" the rest of Europe ?
In order to deal with their debt, they would print money like there is no tomorrow.
That would lead to less pressure to get their fiscal houses in order, and the debt (or fiat) fueled governments would start growing again w/o restraint.

The result, for sure, would be hyperinflation in the Rest-Euro Zone.

To call that "saving" is downright idiotic.

-t
     
OAW
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May 31, 2012, 11:42 AM
 
^^^^^

The alternative is for Germany to revert to the deutsche mark. That would immediately result in appreciation of the German currency and competitive devaluation of the euro for the remaining eurozone countries. Germany would tend to buy more while selling less, and vice versa for the rest of the eurozone. The extra consumption that Germany will not deliver via stimulus policies would be automatically delivered by currency revaluation.
It doesn't appear that the proposal is to deal with the public debt of the weaker Eurozone nations by printing more currency. They wouldn't be able to do that anyway since they would all still be utilizing the Euro. Rather, the proposal is to deal with it by growing their economies vis a vis exports to the stronger German economy.

OAW
     
Big Mac
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May 31, 2012, 11:47 AM
 
There are weaker and stronger US states, but the US doesn't suffer despite its uniform currency. A dollar buys you less in the costliest coastal states. Some states have much stronger economies than others. But other than that everyone uses the same dollar.

What does the EU need to do to achieve that type of stability? Eurobonds? Something else?

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
turtle777
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May 31, 2012, 12:09 PM
 
Originally Posted by OAW View Post
It doesn't appear that the proposal is to deal with the public debt of the weaker Eurozone nations by printing more currency. They wouldn't be able to do that anyway since they would all still be utilizing the Euro. Rather, the proposal is to deal with it by growing their economies vis a vis exports to the stronger German economy.
This doesn't make sense.

Of course, the only reason to get Germany out of the Euro Zone would be so the ECB could print money. The ONLY thing keeping the ECB in check right now is Germany. There is NO POINT at all in Germany leaving the Euro Zone, if the rest of the Euro coutnries would be interested in a HARD EURO.

Re: growing their way out of debt



What's holding them back to do it RIGHT NOW ?
This is utter nonsense. The only thing that can make the broke Euro states competitive again is drastic devaluation of their production cost. You need to lower wages, pensions, government cost etc. This can only be done by devaluing the Euro.

-t
     
OAW
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May 31, 2012, 12:24 PM
 
Originally Posted by Big Mac View Post
There are weaker and stronger US states, but the US doesn't suffer despite its uniform currency. A dollar buys you less in the costliest coastal states. Some states have much stronger economies than others. But other than that everyone uses the same dollar.

What does the EU need to do to achieve that type of stability? Eurobonds? Something else?
The US has economic as well as political union. The Eurozone only has the former. Major difference when it comes to policy implementation.

OAW
     
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May 31, 2012, 12:48 PM
 
Originally Posted by turtle777 View Post
This doesn't make sense.

Of course, the only reason to get Germany out of the Euro Zone would be so the ECB could print money. The ONLY thing keeping the ECB in check right now is Germany.
Remember that you just made this point.

Originally Posted by turtle777 View Post
There is NO POINT at all in Germany leaving the Euro Zone, if the rest of the Euro coutnries would be interested in a HARD EURO.
No modern nation state utilizes the gold standard for its currency. And to my knowledge none are interested in returning to it. I think you are really spitting into the wind on this one.

Originally Posted by turtle777 View Post
Re: growing their way out of debt



What's holding them back to do it RIGHT NOW ?
Germany! As you just said earlier.

Originally Posted by turtle777 View Post
This is utter nonsense. The only thing that can make the broke Euro states competitive again is drastic devaluation of their production cost. You need to lower wages, pensions, government cost etc. This can only be done by devaluing the Euro.

-t
How is it "utter nonsense" when you have just stated what the author of the article proposed? Again this is what he proposed:

The alternative is for Germany to revert to the deutsche mark. That would immediately result in appreciation of the German currency and competitive devaluation of the euro for the remaining eurozone countries. Germany would tend to buy more while selling less, and vice versa for the rest of the eurozone. The extra consumption that Germany will not deliver via stimulus policies would be automatically delivered by currency revaluation.
The point the author is making is that the currency devaluation that is needed for the competitively weaker Eurozone states to grow their way out of their internal debt crises simply cannot happen as long as the competitively stronger states (e.g. Germany) remain part of the Eurozone. Because as you yourself have indicated ... the Germans won't allow it because it's not in their national interest to do so. But if the Germans had their own currency, then the value of the Euro could depreciate relative to the Deutschmark on the international FOREX market. Allowing for greater export opportunities for nations like Greece within the Eurozone. You seem to be taking the position that the only way a currency can be devalued is by "printing money". Then again perhaps not. I certainly don't want to put words in your mouth. My point here is that a "currency devaluation" is always relative to something else. Currencies appreciate and depreciate relative to each other all the time in the FOREX markets. And that doesn't necessarily mean that an individual nation has flooded the market with more of its currency in order to achieve a devaluation. Say Germany said "To hell with the Eurozone!" and bounced tomorrow? Don't you think its currency would immediately have a higher valuation than the Euro because of the competitive edge its economy enjoys?

OAW
( Last edited by OAW; May 31, 2012 at 01:05 PM. )
     
turtle777
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May 31, 2012, 01:12 PM
 
Seriously, you don't make any sense at all in the responses to what I wrote. I don't even know where to start. That's why I wont.

Originally Posted by OAW View Post
But if the Germans had their own currency, then the value of the Euro could depreciate relative to the Deutschmark on the international FOREX market. Allowing for greater export opportunities for nations like Greece within the Eurozone. You seem to be taking the position that the only way a currency can be devalued is by "printing money". Then again perhaps not. I certainly don't want to put words in your mouth. My point here is that a "currency devaluation" is always relative to something else.
Of course there are many resons for currencies to rise or fall.
I agree that a non-German Euro would devalue partially on initial competitiveness reasons (rest euro being less competitive than Germany).

However, printing money will be a BIG part of the devalutation. There is mathematically no other way to recapitalize the banking system and keep the governments spending money they don't have.
Just look at the massive balance sheets ("assets") of those crappy banks in the EU. Many of them have "assets" that represent 200-300% of GDP of their respective countries. And it's all grabage that hasn't been marked to market. There is NO WAY to just grow out of this.

-t
     
mduell
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May 31, 2012, 03:00 PM
 
Originally Posted by turtle777 View Post
"Save" is the wrong word.

Even *IF* Germany left the Euro Zone and issued a New Deutsche Mark, how would that "save" the rest of Europe ?
In order to deal with their debt, they would print money like there is no tomorrow.
That would lead to less pressure to get their fiscal houses in order, and the debt (or fiat) fueled governments would start growing again w/o restraint.

The result, for sure, would be hyperinflation in the Rest-Euro Zone.

To call that "saving" is downright idiotic.
Southern Europe has to devalue the currency to recover. They recover if that devalued currency is the Euro or the Drachma/Lira/Peseta.

Originally Posted by Big Mac View Post
There are weaker and stronger US states, but the US doesn't suffer despite its uniform currency. A dollar buys you less in the costliest coastal states. Some states have much stronger economies than others. But other than that everyone uses the same dollar.

What does the EU need to do to achieve that type of stability? Eurobonds? Something else?
A few things the US states have the EU members lack:
- Net transfer payments via the federal government (NY pumps money into MS).
- Constitutional mandates not to run a deficit (shenanigans happen, but no state has Greek-like debt).
- Banks backed by federal organizations (Fed, Treas, FDIC) rather than individual states.
     
OAW
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May 31, 2012, 04:16 PM
 
Originally Posted by turtle777 View Post
Seriously, you don't make any sense at all in the responses to what I wrote. I don't even know where to start. That's why I wont.
It's really not all that complicated ... and I suspect you already know that. But for the sake of discussion ... let's just presume that you are NOT ducking the fact that you contradicted yourself in a single post and are transparently trying to draw attention away from that little faux pas with a dismissal instead of a rebuttal. The question really comes down to how is this ....

Originally Posted by turtle777
This is utter nonsense. The only thing that can make the broke Euro states competitive again is drastic devaluation of their production cost. You need to lower wages, pensions, government cost etc. This can only be done by devaluing the Euro.
... materially different than this ....

Originally Posted by Clyde Prestowitz and John Prout
The alternative is for Germany to revert to the deutsche mark. That would immediately result in appreciation of the German currency and competitive devaluation of the euro for the remaining eurozone countries. Germany would tend to buy more while selling less, and vice versa for the rest of the eurozone. The extra consumption that Germany will not deliver via stimulus policies would be automatically delivered by currency revaluation.
?????

You called it "utter nonsense" .... but then turned right around and claimed that this could only be done by "devaluing the Euro" even though that's precisely what the authors advocated!

Originally Posted by turtle777
Of course there are many resons for currencies to rise or fall.
I agree that a non-German Euro would devalue partially on initial competitiveness reasons (rest euro being less competitive than Germany).
Ahhhh ... so you are actually capable of conceding a point. Now that wasn't so bad was it?

Originally Posted by turtle777
However, printing money will be a BIG part of the devalutation. There is mathematically no other way to recapitalize the banking system and keep the governments spending money they don't have.
Just look at the massive balance sheets ("assets") of those crappy banks in the EU. Many of them have "assets" that represent 200-300% of GDP of their respective countries. And it's all grabage that hasn't been marked to market. There is NO WAY to just grow out of this.

-t
And that may very well be true. But the point the authors are making is that the needed devaluation ... whether due to competitiveness reasons and/or deliberate increases in the currency supply ... simply can't take place if the stronger economies in the Eurozone like Germany won't allow it. Why should they take a hit like that to prop up debt-ridden countries like Greece right? So there's really only three options it seems:

A) Greece remains in the Eurozone and accepts harsh austerity measures that have shown no signs of restoring economic growth for generations ... despite the social costs to and political backlash from its citizenry.

B) Greece exists the Eurozone and issues a devalued Drachma ... helping itself out but leaving the Eurozone in the same boat with the other weaker economies (e.g. Italy, Spain, Portugal and Ireland).

C) Germany exits the Eurozone which would allow the remaining nations to value the Euro on a basis more in line with the strength of their economies.

The authors are advocating C because in their estimation, the strength of Germany's economy is more out of step with the other nations in the Eurozone than Greece's. There may be some merit to that idea.

OAW

PS: As for the "garbage assets" (e.g. credit default swaps, etc.) that haven't been "marked to market"? Well there'd actually have to be an official market to do all that n'est-ce pas? Which would of course necessitate some form of regulation over such instruments. Unfortunately, our good friends on the right have a distinct lack of enthusiasm for such notions even in the most obvious scenarios. But that's a discussion for another thread.
     
turtle777
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May 31, 2012, 05:07 PM
 
Originally Posted by OAW View Post
PS: As for the "garbage assets" (e.g. credit default swaps, etc.) that haven't been "marked to market"? Well there'd actually have to be an official market to do all that n'est-ce pas? Which would of course necessitate some form of regulation over such instruments. Unfortunately, our good friends on the right have a distinct lack of enthusiasm for such notions even in the most obvious scenarios. But that's a discussion for another thread.
No, CDS and derivatives are not what I was talking about. I'm talking about old-fashioned non-performing loans.

It's funny the the likes of you still yap for more regulation, when the SEC and FASB decided to allow mark-to-fiction in the aftermath of the financial crisis.

Methinks you really don't understand what the whole "regulation" thing is all about. Regulation is NOT used to make the markets more fair, more predictible, or more stable. Regulation is used to reward the crony friends of politicians, in most cases, TBTF banks.

Don't you find it very odd that there hasn't been a SINGLE ciminal case brought against any of the big banks that f*cked up during the financial crisis ?
See, regulation or not, there are laws, and those laws were blatently ignored.
Where is our great (LOL) AG Holder prosecuting any of this ? Where is Obama, pressing to hold accountable those that committed fraud ?

Why the f*ck would you want more regulation, if the politicians aren't even willing to prosecute ?

-t
     
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May 31, 2012, 05:38 PM
 
Originally Posted by turtle777 View Post
No, CDS and derivatives are not what I was talking about. I'm talking about old-fashioned non-performing loans.
Fair enough.

Originally Posted by turtle777 View Post
It's funny the the likes of you still yap for more regulation, when the SEC and FASB decided to allow mark-to-fiction in the aftermath of the financial crisis.
It's called the undue influence of the Big Banks and Wall Street that enabled them to ensure legislation like Dodd-Frank was watered down to their liking.

Originally Posted by turtle777 View Post
Methinks you really don't understand what the whole "regulation" thing is all about. Regulation is NOT used to make the markets more fair, more predictible, or more stable. Regulation is used to reward the crony friends of politicians, in most cases, TBTF banks.
While I won't disagree that this is sometimes the effect that doesn't mean one should throw out the baby with the bath water. IMO, the answer isn't to eliminate regulations because they get corrupted by politicians. Instead, the answer should be to implement common sense campaign finance reforms to restrain the undue influence of concentrated wealth in the political system. I also think that if a financial institution is "too big to fail" then it's "too big to exist". But I think you'd acknowledge that if the government had tried to break up the big banks or even reinstitute Glass-Steagall the political right would have fought it tooth and nail.

Originally Posted by turtle777 View Post
Don't you find it very odd that there hasn't been a SINGLE ciminal case brought against any of the big banks that f*cked up during the financial crisis ?
See, regulation or not, there are laws, and those laws were blatently ignored.
Where is our great (LOL) AG Holder prosecuting any of this ? Where is Obama, pressing to hold accountable those that committed fraud ?

Why the f*ck would you want more regulation, if the politicians aren't even willing to prosecute ?

-t
I do and I don't find it odd. It seems likely that when the economy went off the rails in 2007-2008 some of the titans of the financial industry were doing something dirty. The question is if it was criminal. My gut tells me probably so. But OTOH, these are the guys that finance political careers on both sides of the aisle. So neither party is very anxious to bite the hands that feed them and haul one of these guys into court. Until those hands are subject to the same restraints as the average voter when it comes to campaign finance then such foolishness will continue unfortunately. But again, we shouldn't throw out the baby with the bath water. If there were existing laws that should have covered it that weren't enforced then I'd argue that there is no need to add new ones to cover the same thing. But that's generally not how these things go down. Big banks have entire departments whose sole purpose is to figure out ways around regulations. Either by developing dubious but legal mechanisms to skirt the intent of the law ... or simply by utilizing the gaping loopholes that were put in the legislation intentionally as a result of their lobbying efforts. Regardless, people disobey traffic laws all day every day but that doesn't mean we should just toss them all aside because the system is not perfect when it comes to enforcement.

OAW
     
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Jun 2, 2012, 07:38 PM
 
Originally Posted by Hawkeye_a View Post
Last december I thought it would be June, but considering the EU zone bailout went through(surprisingly), I revise my prediction to October.

Dominos.... first Greece, then Italy and then Spain.

On a parallel path, watch capital and investment flee France. (If the GOP wins the election at the end of the year, you can look for an influx of foreign capital from the EU fallout).
Is this like a dead pool?

I'm betting June 30, no sooner.
     
finboy
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Jun 2, 2012, 07:46 PM
 
Originally Posted by turtle777 View Post

Why the f*ck would you want more regulation, if the politicians aren't even willing to prosecute ?

-t
Problem is that you can't prosecute people for being stupid (bank managers, regulators). That, and if they figured out ways to prosecute people they'd have to prosecute a whole lot of people. There's lots of dumb folks driving the markets, people who consistently lack the imagination to prepare for risk adequately. There are lots of dumb people running the big banks at the whims of government regulators, and there are lots of us out here who think that regulation can somehow save us from the uncertainty inherent in investing in capital on any scale. Regulation creates false hope.

To some extent everyone who has a 401(k) is stupid for enabling those morons in the first place - and most of us, me included, have paid the price for being enablers. The media have been enablers too, causing folks to believe that investment return stems from luck (the "it takes money to make money" bullsh*t) and heritage, when we know that anyone can succeed with any amount of money by starting out with the right consumption ideas in mind.

The really scary thing is that surveys show that most consumers in this country are just as oblivious as the average moron in Greece, and our future is tied to the future of the average sheep who gets dragged to the polls. That's the scary part. When you consider that sometimes it makes it hard to hope.

More regulation? Right, sign me up.
     
turtle777
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Jun 9, 2012, 03:08 PM
 
Well, the next shoe dropped. As predicted a month ago, Spain is the next big battle. The 100B bailout will cost them the last AAA rating (Moody's), next is a step increase in borrowing rates, coupled with economic depression and continuing bank runs.

Spain is dead. This will become obvious over the next months. They will leave the Euro Zone eventually. Next up: Italy.

-t
     
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Jun 10, 2012, 03:23 AM
 
Given the current state of affairs this spaniard has to ask you a couple of questions:
- Are my life savings insured at BBVA and Santander or are they at a risk.?
- Should I switch banks.? If so, any suggestions.?

TIA.
     
turtle777
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Jun 10, 2012, 10:21 AM
 
Originally Posted by angelmb View Post
Given the current state of affairs this spaniard has to ask you a couple of questions:
- Are my life savings insured at BBVA and Santander or are they at a risk.?
- Should I switch banks.? If so, any suggestions.?
From all that I read, there is NO deposit insurance in Europe (yet). I don't know if Spain has something on their own, but I doubt it.

IMO, you should pull any money that you can not afford to lose out of the Spanish banks.
Smart money has been doing this in Greece, Spain and Italy for quite a while.

-t
     
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Jun 10, 2012, 12:42 PM
 
Thanks turtle, much appreciated.

I have a Barclays office nearby. Is it any good.?
     
 
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