29-Apr-10 News-Desperate Europeans try to save euro

[John]

29-Apr-10 News -- Desperate Europeans try to stave off euro currency collapse

** 29-Apr-10 News -- Desperate Europeans try to stave off euro currency collapse
** http://www.generationaldynamics.com/cgi ... 29#e100429

Contents:
"Spain's debt is downgraded, as Greece's bailout requirements triple"
"Germany is increasingly in the spotlight"
"New violence as Bangkok, Thailand, red-shirt protests continue"
"Additional links"

[OLD1953]

At least they got original, instead of rediscovering the two on Mount Ararat that were built as monuments during the Crusades. Those get "discovered" every couple of years.

Wonder if they'll ever get around to "discovering" that batch of similar monuments the Mormons built, about halfway down the Grand Canyon, at the river level.
(Hey, I should find those on google maps satellite view and post the location in a religous forum. It'd start a real ruckus. LOL)

Thanks for posting the important news every day John. It saves me a lot of time searching.

[mannfm11]

At your urging, I read "The Bubble That Broke the World". France and England demanded and got their pound of flesh out of Germany until there was nothing left. In fact, Germany never paid anything, as it was all loaned to them by the US so France and England could pay the debts owed by the US. It was still a net loss to the US, as the reparations from Germany were greater than the payments to the US and the US ended up taking the loss in the end.

I believe Germany is the only country in Europe that is a net creditor, as virtually all the others, save maybe Switzerland, which kept its own currency run some kind of deficits. Thus, it is really Germany being asked to do the bailing out. The French screwed, not only Germany, but despite owing the US a sizable sum, their corporations drew much of the gold out of the US banking system, thus depriving it of its money. Let the French write the IOU's. I am sure Germany has plenty of money loaned out in the southern region of Europe, as they have had to finance their trade.

I posted on Mish's site about the nonsense of Roubini. Roubini got the housing bust right, but he was really about 5 years late on that, as Doug Noland was calling it in real time since 2000, if not before. Home equity financed the trade deficit with the world for the US and excess credit creation has a way of causing that to occur. We are seeing all kinds of thing going on that would never go on if we weren't headed to a Great Depression. The US complaining about the value of China's currency, depsite the fact that the Chinese currency has little value outside of its exchangability into dollars in the first place. If the US wants to balance trade, cut down on government spending and that will do it. China has so much surplus capacity already that it could very well fall apart if it did anything to slow its economy. There is going to be hell freezing over when that bubble bursts, mainly due to the fact that so much of China's reserves are hot money in the first place, chasing the next big deal over there. The overextention of credit has already wiped out the Chinese trade balance and they are planning another stimulus. They are doing little other than leasing labor to the world at discount rates as it is.

I do believe we are watching a world changing event in progress. My mother and niece are going to Paris early next month and I have advised her to take some US currency with her, just in case. It is entirely possible the Euro could implode that fast or at least cease to become the currency of Germany defacto. Deflation is going to occur whether they want it to or not. Money market funds in the US have had a decline close to $1 trilion over the past year and M-2 had barely budged, showing a YTD decline as well. Not a recipe for a recovery as is being preached. The US government is going to have to pull in its horns or maybe cease to exist as well. The breakup of the US isn't beyone the realm of possibility. That event would take down the entire world currency system.

[thomasglee]

If one listens to Shep Smith on FOX, it has already been agreed that the IMF / EU is 100% sure going to bail out Greece. A matter-of-fact, yesterday he even said the bailout was already under way. Where do our pundits get their news?

In regards to Thailand, one thing that keeps bothering me is that the General that took over a few years ago is Muslim. That hasn't received a lot of attention in the media, but when you combine that with the murder (by Muslims) in Southern Thailand (near the Malay border) of Buddhist Monks, it makes you wonder if Islam isn't being surreptitiously spread to Thailand. Black-hooded thugs are known for operating in other nations too.... namely Iran, Iraq, etc.

[thomasglee]

Roubini: Euro Zone May Collapse Within Days

It looks like it's really happening! I'm amazed that it is - right before our eyes even though I knew it would - and I' more amazed that the media, for all intents and purposes, it just ignoring it (or at most, acting like it's no big deal).

New York University economist Nouriel Roubini says the euro zone’s days may be numbered, and he’s not talking about some day far off in the future.

“In a few days, there might not be a euro zone for us to discuss,” he said at a Los Angeles conference sponsored by the Milken Institute, Reuters reports.

European policy makers may have to fork over 600 billion euros ($794 billion) in aid or buy government bonds to erase the debt crisis, economists tell Bloomberg.

Roubini says Greece can’t come up with the 10 percent spending reduction necessary to prevent its debt from exploding out of control.

And even if it could, its economy would get ruined in the process, he maintains.

Roubini compares Greece to Argentina in 2001, shortly before it defaulted on its debt.

Greece’s budget deficit, at 13.6 percent of GDP, is much higher than Argentina’s back then. Greece’s debt-to-GDP ratio and current account deficit also are much higher, Roubini points out.

The solution, Roubini says: a debt restructuring that reduces interest rates and extends maturities. In addition, Greece should exit the euro, he says.

Roubini’s not the only one calling for drastic measures.

“It may now be time for the euro area to do something much more dramatic in order to prevent the stress from creating another broad-based financial crisis which pushes the region back into recession.”David Mackie, chief European economist at JPMorgan, told Bloomberg.

© Moneynews. All rights reserved.

[JLak]

What do you mean by currency collapse? I contend that the PIIGS will fail, and the Euro will deflate significantly. The more member nations that fail, the stronger it gets. How can it be any other way? Nothing will be able to replace it. Once the major banks realize this, the US dollar and treasuries will suffer dramatically. The subtle difference between the two systems is about to become very clear. The only thing that holds up the USD strength facade is the Saudi oil window, just as it used to be the Bretton Woods gold window.

[thomasglee]

What do you mean by currency collapse? I contend that the PIIGS will fail, and the Euro will deflate significantly. The more member nations that fail, the stronger it gets. How can it be any other way? Nothing will be able to replace it. Once the major banks realize this, the US dollar and treasuries will suffer dramatically. The subtle difference between the two systems is about to become very clear. The only thing that holds up the USD strength facade is the Saudi oil window, just as it used to be the Bretton Woods gold window.

What is going to make the Euro stronger when the PIIGS that are collapsing are using the Euro? Are you suggesting (and possibly rightly so; I don't know and that's why I'm asking) that the PIIGS will drop out of the Euro and therefore the Euro will become more valuable?

[Guest]

What do you mean by currency collapse? I contend that the PIIGS will fail, and the Euro will deflate significantly. The more member nations that fail, the stronger it gets. How can it be any other way? Nothing will be able to replace it. Once the major banks realize this, the US dollar and treasuries will suffer dramatically. The subtle difference between the two systems is about to become very clear. The only thing that holds up the USD strength facade is the Saudi oil window, just as it used to be the Bretton Woods gold window.

What is going to make the Euro stronger when the PIIGS that are collapsing are using the Euro? Are you suggesting (and possibly rightly so; I don't know and that's why I'm asking) that the PIIGS will drop out of the Euro and therefore the Euro will become more valuable?

No. These debts secure huge amounts of credit. When they are wiped out, the whole system will freeze up in a classic credit deflation. This will be like the mortgage collapse in the US except that the ECB doesn't have the same tools as the fed, so it will really hit them hard. There is a possibility of USD adoption (Chilean-style reform and currency pegs), but any new single-state fiat has a snowball's chance in hell against the Euro. I'm, of course, hoping for USD adoption, but I think in the long run we will end up with an independent multilateral fiat like the Euro, with the commodity backing of the USD.

I'd like to take this opportunity to posit a thesis on the value of a fiat currency. The dialectic between supply and demand is what determines the value. Supply is mostly affected by credit, and demand is mostly affected by confidence in the central bank. Economists are classically trained to look only on the supply side, which gives us the current Keynsian policy. Citizens, however, are mostly concerned with the demand side, which gives us the Tea Party and endless gold commercials. The Fed is designed to control the supply side. The ECB is designed to control the demand side. Therefore, the same crisis will affect the US and Europe differently. In conclusion: Bush sucks. Can I have my Nobel prize in economics now?

[thomasglee]

In conclusion: Bush sucks. Can I have my Nobel prize in economics now?

Not a fan of Bush myself, but that ending made the rest of what you wrote meaningless as your digression into juvenility makes me doubt the sincerity of anything else you've proffered.

[JLak]

In conclusion: Bush sucks. Can I have my Nobel prize in economics now?

Not a fan of Bush myself, but that ending made the rest of what you wrote meaningless as your digression into juvenility makes me doubt the sincerity of anything else you've proffered.

This is something of a running gag on GenerationalDynamics.

Krugman won the Nobel Prize last year because he had the major qualification that the Nobel committee was looking for: He hated George Bush.

http://www.generationaldynamics.com/cgi ... gd.e100125