THE Eurozone Economics Thread pt 1 (merged) Archived

[Daniel_Plainview]

Banks and Europe at loggerheads over Greek debt deal
Leading banks are at loggerheads with European leaders after lenders offered to accept losses of up to 40pc on their Greek debt holdings, a proposal seen as insufficient by politicians.

The offer – an increase on the banks' previous proposal of a 21pc 'haircut' – is set to trigger a tense period of negotiations and could determine the success of a crucial European summit on Wednesday. The IMF is thought to be calling for a 60pc haircut while Europe's leaders are demanding at least 50pc, but bankers have warned that anything over 40pc risks setting off a 'credit event', triggering credit default swaps.

David Cameron travelled to Brussels for the conclusion of a weekend of talks between European leaders but, as feared, politicians were unable to agree definitive moves to halt the crisis. ... Mr Cameron yesterday called on his European peers to redouble their efforts: "The crisis in the eurozone is having a chilling effect, not just on eurozone economies, not just on market confidence but on the British economy too. They need to come together and take responsibility for their currency."

...In a victory for Germany, leaders agreed that the European Central Bank would not play a role in boosting the EFSF's firepower. The agreement, a blow for France which had been hoping to use the ECB to lend potentially limitless funds, will raise further questions as to how politicians will boost the EFSF's strength. The focus appears now to rest on the EFSF being used to guarantee government bond sales....

[peripato]

Parasitic too big to fail banks don't want to suffer any significant losses, whilst domestic populations, either tired of austerity or with continued bank bailouts, or both, are increasingly growing exasperated with governments' who are in bed with these fraudsters and seem intent on throwing whole countries under the bus, instead of making them eat their insolvency shit sandwiches which are growing in stench.

Of course this will end so very sweetly and growth, swindling and pimping will resume shortly, the Eurozone hawks would have us believe.

[rangerone314]

Sys, good luck there in France. Though my comments about Euro socialism were pretty nasty, I wish you guys the best of luck. Every time oil tops about 90 dollars , the economies drop. Those countries that had the most debt like Greece are suffering the most,... at present. History is full of economic downturns with the four horsemen right behind. Perhaps fracking will help for a while , but who knows.

Our economy tanks at not much after 90 dollars.

The first stage will be Africa dying off first. You can pretty much write off east Africa first.

Stage two will be the Middle East and probably much of Southeast Asia. The Arab Spring cannot do much more than delay die off there, if that. Probably die off in Yemen and Egypt first.

Stage three will see large scale die off in China and India and much of South America, too. Also Mexico and Central America.

The last stage, you see a die off in Europe, Japan and North America.

[Daniel_Plainview]

Parasitic too big to fail banks don't want to suffer any significant losses, whilst domestic populations, either tired of austerity or with continued bank bailouts, or both, are increasingly growing exasperated with governments' who are in bed with these fraudsters and seem intent on throwing whole countries under the bus, instead of making them eat their insolvency shit sandwiches which are growing in stench.

Whilst the IMF wants banks to take a haircut of 60%, the fact that banks have upped their willingness to take haircuts from 21% to 40% shows that the banks now finally realize that the sovereigns are OUT OF MONEY and can no longer bail them out.

The problem is that once banks are forced to take a haircut greater than 40%, then a "credit event" will be triggered ... and the dominoes will begin to fall. Because banks are leveraged 25:1, the contagion will quickly turn into a blazing inferno.

So the banks are at their limit.

The sovereigns are at their limit.

The taxpayers are at their limit.

The bailouts are at their limit.

The citizens' appetites for austerity are at their limit.

And this is just for Greece. If Europe manages to solve the Greek crisis, then there's Italy, Spain, Portugal ... etc ...



The only solution may be to print money (even though this is illegal under the Eurozone) ... or to keep buying time by kicking the can on a daily basis. If Merkel and Sarkozy will be meeting on a daily basis, maybe they should move in together.

[Plantagenet]

The only solution may be to print money (even though this is illegal under the Eurozone) ...

Thats not going to happen----Germany has an extreme aversion to printing money willy nilly. Its something about wheelbarrows filled with Deutschmarks, Weimar and Hitler.

[dolanbaker]

Most of the "printed" money would never reach the real economy, so little danger there.
Too many black holes to fill!

[peripato]

The only solution may be to print money (even though this is illegal under the Eurozone) ...

Thats not going to happen----Germany has an extreme aversion to printing money willy nilly. Its something about wheelbarrows filled with Deutschmarks, Weimar and Hitler.

Everyone (i.e. the markets and banksters) wants to get back to "partying" so it's a given that eventually the Germans will relent on the question of money-printing (as this is highly inflationary), despite an historical aversion, especially as the former can apply continued pressure through the bond markets, by say, increasing the yields on Italian debt. This naturally sets the stage for some enormous calamity to occur some time in the future, as everything is teetering on the "precipice".

[prajeshbhat]

Picture the SCO (China, Russia, Kazakh, Tadzikistan, Uzbeckistan etc) becoming a military alliance like NATO. Now imagine India, Pakistan and Iran join the SCO. Now you got a lot of manpower and a lot of money to buy technology.

Looking like the West DIDN'T win the Cold War after all. Kruschev lied though. He said "We will bury you." He didn't say "YOU will bury you."

It is hard to imagine India and Pakistan in the same military unit. Or India and China. India had had wars with both these countries. This will only happen if the western countries one large alliance and start targeting the East. I hope a situation like this never arises.

D-U-E-N-D-E
Now that was a much better post on your part, you actually articulated a point. Agreed Germany is more socialist than the US (was). But Germany's industrial base is much larger than the socialist tendencies of its government. That's certainly not true of Greece.
Novus, help me out, the bankers lent Greece the money. Did they force Greece to take it? If I lend you money, should I expect it back at the rate we agreed upon? If yes, Greece will have to face strong austerity to pay their debt. If no, don't expect me to lend you more money. Then Greece faces strong austerity because of their spending habits. If you want to take my money, just say so. "Round here we call that thievery

I don't think any government in the world really cares about you or your money. You probably don't have that much.
But let's take the banks. Are they really lending their own money. Where did they get the money from? In fact, they create money out of thin air, lend it to the safest institutions (governments) and charge an interest from the Taxpayers. That's what I call thievery. If that's all they are going to do, how about nationalizing these banks. That way, the interest paid on the loans goes back to the people. Do you agree?
You want to know why the capitalist bankers are so terrified of socialist Greece going under? Because they will instantly lose their ability to create money out of thin air if the governments collapse. That's the End of Capitalism.

[Daniel_Plainview]

The only solution may be to print money (even though this is illegal under the Eurozone) ...

Thats not going to happen----Germany has an extreme aversion to printing money willy nilly. Its something about wheelbarrows filled with Deutschmarks, Weimar and Hitler.

Everyone (i.e. the markets and banksters) wants to get back to "partying" so it's a given that eventually the Germans will relent on the question of money-printing (as this is highly inflationary), despite an historical aversion, especially as the former can apply continued pressure through the bond markets, by say, increasing the yields on Italian debt. This naturally sets the stage for some enormous calamity to occur some time in the future, as everything is teetering on the "precipice".

I agree. If Germany is confronted with only two options -- (1) to print; or (2) to collapse the global economy -- Germany will relent and fire up the printer ...

[dolanbaker]

I agree. If Germany is confronted with only two options -- (1) to print; or (2) to collapse the global economy -- Germany will relent and fire up the printer ...

Or they could surprise everyone and just nationalize the banks and send in the barbers and force severe haircuts on the investors, then only allow the banks to operate under very strict rules to prevent them ever getting in this mess again.

flying pigs maybe, but stranger things have happened!

[Daniel_Plainview]

I agree. If Germany is confronted with only two options -- (1) to print; or (2) to collapse the global economy -- Germany will relent and fire up the printer ...

Or they could surprise everyone and just nationalize the banks and send in the barbers and force severe haircuts on the investors, then only allow the banks to operate under very strict rules to prevent them ever getting in this mess again.

Nationalizing the banks would work for Germany and France, and other countries that could afford to assume the banks' liabilities (Austria, Netherlands, Scandinavia)... but could it also work for the bankrupt PIIGS countries?

flying pigs maybe, but stranger things have happened!

It's a possible solution to utter collapse ... and your statement that it would force the banks "to operate under very strict rules" is a great idea.

[peripato]

I agree. If Germany is confronted with only two options -- (1) to print; or (2) to collapse the global economy -- Germany will relent and fire up the printer ...

Or they could surprise everyone and just nationalize the banks and send in the barbers and force severe haircuts on the investors, then only allow the banks to operate under very strict rules to prevent them ever getting in this mess again.

flying pigs maybe, but stranger things have happened!

I think this would require "more stringent" popular dissent to sway their hand, if you get my drift. Of course, if push comes to shove and it's a question of say "saving Germany" (meaning German banks) or saving spendthrift France or America (meaning Goldman Sachs and all its derivations), then they will jettison the latter in a heartbeat.

[Ibon]

No. No. No. the first die-off will occur in French Guyana, then we will see massive starvation happening in Luxemburg, followed by devastating epidemics in South Dakota, while Polynesia will fight a brutal resource war over squid. This die-off will radiate out to all corners of the planet but fortunately a small settlement just north of Hobart Tasmania will be spared.

[Mesuge]

Euro is already doomed.
We just don't know how long before things turn really bad where I live (France).

I used to envy the french banknotes design as well as that yellowish tint of front headlights on every car or these pre-internet "minitel" home terminals, not mentioning the supreme cinema, music, arts. France was a very unique place till early 90s and that freaky onslaught of harmonization of every facets of our lives.

[Sixstrings]

But let's take the banks. Are they really lending their own money. Where did they get the money from? In fact, they create money out of thin air, lend it to the safest institutions (governments) and charge an interest from the Taxpayers. That's what I call thievery. If that's all they are going to do, how about nationalizing these banks. That way, the interest paid on the loans goes back to the people. Do you agree?

You want to know why the capitalist bankers are so terrified of socialist Greece going under? Because they will instantly lose their ability to create money out of thin air if the governments collapse. That's the End of Capitalism.

This ^^

Banks dump all their derivatives and toxic bad debt onto the Federal Reserve.. then the Fed counts this crap as "assets" and prints new money based on that.. loans the money out to to banks at 0%.. the banks make more bad loans / greek bonds / derivative products and dump them back onto the Fed when it goes sour.. and then get clean laundered new money in return, cycle repeats.

To infinity and beyond.. this is either all very bad stuff or it's brilliant sometimes I don't know.

[Fishman]

Ibon
+1
So how will Panama do in your senario? Will they ban the transport of squid through the canal?

[EnergyUnlimited]

I agree. If Germany is confronted with only two options -- (1) to print; or (2) to collapse the global economy -- Germany will relent and fire up the printer ...

...and that will also collapse global economy.
You have essentially 2 choices:

1. Deflationary collapse.
2. Weimar type of collapse.

[Cog]

I'll take a little of 1 followed by an attempt at 2.

[smiley]

If anyone has a better take on this than me, please have at it.

To see the various goverments around the world handling economic issues reminds me of that famous scene with mickey mouse and the magic broomsticks (for those too young to remember: http://www.youtube.com/watch?v=XChxLGnIwCU ). The governments created debt, this created the financial superinstitutions as we know them. And in a desperate effort to get them under control they are creating more broomsticks.

I don't have a link but I've read something about how we've also passed the point where new debt creates new money -- if that's true, then this is end stage capitalism and it all ends in tears eventually.

Things usually don't stay on a exponential trajectory forever and when they do fall of the trend it is usually not the most subtle event.


For me the financial world has become something of parallel universe. One where you take a real world number and multiply it by a factor of 1000 and you get the financial universe equivalent. As soon as you start applying this metic it starts making sence.

Then you can understand how the banckruptcy of a large bank (Lehman) can cost 631 billion dollar (2x Greece) where as the bankruptcy of the worlds largest car maker (GM) only costs 18 billion dollar.

Then you cal also understand the fuzz the markets make about Greece, not because the Greece debt is really that large, it is the fact that this debt has be cut and resold like bad cocaine throughout the system which is the problem

The only hope I have is that when this world collapses (when and not if) it will mostly be contained in in this shadowy world of financial institutions and doesn't spill over too much to the real world.

[Sixstrings]

Looks like the Franco-Prussian Empire wants to shut the UK out..

Nicolas Sarkozy tells David Cameron: 'We’re sick of you telling us what to do'

David Cameron clashed repeatedly with Nicolas Sarkozy today after the French President tried to exclude Britain and non-eurozone countries from a critical Brussels summit to rescue European banks.

”We’re sick of you criticising us and telling us what to do. You say you hate the euro, you didn’t want to join and now you want to interfere in our meetings,” the French leader told Mr Cameron, according to diplomats.

Mr Cameron supports steps that the eurozone is taking to boost its banks and bailouts funds as part of wider moves towards closer fiscal union in order to avert a European debt crisis that has threatened to plunge the global economy into a slump.
But he fears that regular meetings of the euro’s 17 governments will lead to the creation of a Franco-Greman dominated “caucus” or a bloc that could hijack the EU’s single market for its own ends
http://www.telegraph.co.uk/news/worldnews/europe/eu/8844773/Nicolas-Sarkozy-tells-David-Cameron-Were-sick-of-you-telling-us-what-to-do.html