Euro Area

[gaelic cowboy]

for sure it is far simpler, beign able to ignore the will of your people and do as you please is so much easier.

that said, it gets a little awkward when you have to explain to lots of people (germans) who think they exist within a representative democracy (and don't want a debt-union)......

remember that we approach this coming crisis in large part because no one is certain that greek people can tolerate an additional ten years of grinding recession without seeing the country fall to extreme-populist politics and/or revolution!

greece was supposed to be able to return to the markets in short order, but the yield remains punishingly high because markets don't have confidence that greece won't default.

this is not some dry economic argument, no indeed, it is raw visceral emotion which is the heart of all politics.

[edit]

this pic amusingly demonstrates the core of the problem:

http://blogs.telegraph.co.uk/news/da...rozone-crisis/

I wish someone would explain to these "Germans" the papers keep referencing that worrying about hyperinflation in a balance sheet recession is daft. Everything keeps coming back to how a few greedy banks dont want to be held accountable for there own poor investments.

Allied with spineless eurocrats and a laughable central bank structure were in basically the black hole of calcutta.

If the system is devised to to prevent aid then it also should be designed to prevent capital flows. (but then it wouldnt be a common currency then now would it)

[Furunculus]

I wish someone would explain to these "Germans" the papers keep referencing that worrying about hyperinflation in a balance sheet recession is daft. Everything keeps coming back to how a few greedy banks dont want to be held accountable for there own poor investments.

Allied with spineless eurocrats and a laughable central bank structure were in basically the black hole of calcutta.

If the system is devised to to prevent aid then it also should be designed to prevent capital flows. (but then it wouldnt be a common currency then now would it)

i think this paradox is what the "taregt2" payment regime was designed for; to slide these balance of payments issues under the radar of the german electorate.

[Brenus]

@ furunculus: All is good. The Euro zone is made by Countries that signed a Treaty.
No Country is more equal than another.
If Greece tell bankers “I will not pay the debt” others counties can’t kick Greeks out.
If others Countries( their banks) said "all right we cut the money", Greeks can says “just do it and we will have fun” as this will be the immediate collapse of 3 majors French Banks and 2 Germans.
And Greece still will be in Euro.

[Furunculus]

So is Germany trying to keep these countries in the Euro to artificially keep the price of their exports down? It seems like their products would get a lot more expensive if the Euro shed the dead weight.

not quite so explicitly as far as the german electorate is concerned, but to paraphrase boris johnson; they are pro cake, and pro eating it!

[Furunculus]

@ furunculus: All is good. The Euro zone is made by Countries that signed a Treaty.
No Country is more equal than another.
If Greece tell bankers “I will not pay the debt” others counties can’t kick Greeks out.
If others Countries( their banks) said "all right we cut the money", Greeks can says “just do it and we will have fun” as this will be the immediate collapse of 3 majors French Banks and 2 Germans.
And Greece still will be in Euro.

but there is no common liability allowed in the treaty, and cash (the printing thereof) is managed by the ECB.

greece won't have a choice when it doesn't receive its next tranche of bailout cash in june................. and then can't pay hundreds of thousands of civil servants in july.

the answer to that being: default, exit euro, allow newly sovereign greek central bank to print cash.

again, this is not a good solution, or an easy one, but it might be the least bad solution.

[Brenus]

Well, Greece has the choice to refuse to pay the debt. This would greatly improve its finances balance. Then what? General Collapse of the Euro, including the German one (domino effect).
Going out of the Euro in keeping the debt makes no sense for Greece. The problem is not the Euro, the problem is the debt. Leaving the Euro won't resolve the problem of the debt.
So, solution is political.

[rory_20_uk]

Well, yes. Getting into the mess political as the politicians spent money they didn't have. Sorting it out is at least in the medium / long term is getting into the habit of not doing this again. Even if the Germans et al do decide to support their economy ad infinitum where they lend money so they can be paid back their existing loans and also pay salaries - technically not loosing money as long as the Ponzi scheme continues - they'll be unlikely to do is a second time.

[Furunculus]

Default sarmatian, default.

It 'probably' won't kill the euro, and if it does then the euro didn't not have the commitment necessary for a future anyway. Europe's fault, not greece's.

[Brenus]

"as the politicians spent money they didn't have": You mean, as the banks did? Because, if I remember well, the Politicians had to bail out the Banking Private Sector, the House Market System in USA, and Private Pensions Companies (at least to pick up the bills for the ones who trust Eron). To easy to blame the "states". The Private Market was too greedy, and Politicians too incompetent... Common point: They all believe in Capitalism and Free Market

[Fragony]

Well you heard wrong, people tend to forget that banks weren't allowed to refuse risky mortages in problematic area's according to the community reinvestment act.

[rory_20_uk]

When governments give out their bonds and guilts, what happens to them? Banks buy them! Often the banks are required to do so.

Then a Government with what not so long ago had been a AAA rating cuts their money by 70%. And guess what? They need a bail out!

They believe in the illusion of a free market. They don't want one. Everyone blames the rating agencies for cutting levels too late, but all the nations make a massive fuss when theirs are cut. Few countries should ever be on AAA - as if everyone is the same until a few months before a selective default and massive bail out, what is the point?

Free Markets would require lean economies to compete against others. We may be more developed and efficient, and we have a much higher standard of living. As others develop and invest we have to do something beyond increase Social Service and pension payouts as all this does is make what we do more expensive.

If we don't want a free market, I take it we focus internally? That would require a massive reduction in the style of living as the cost of most things rockets. But like the greeks the concensus is for bigger handouts from the states (money, education, healthcare, housing), lower taxes, lower prices and of course ideally a reduction in the deficit.

[Furunculus]

Well you heard wrong, people tend to forget that banks weren't allowed to refuse risky mortages in problematic area's according to the community reinvestment act.

In addition to keeping interest rates too low thus fueling booms in countries that didn't need them. Ireland, Spain, and arguably Britain spring to mind.

[Philippus Flavius Homovallumus]

Well, Greece has the choice to refuse to pay the debt. This would greatly improve its finances balance. Then what? General Collapse of the Euro, including the German one (domino effect).
Going out of the Euro in keeping the debt makes no sense for Greece. The problem is not the Euro, the problem is the debt. Leaving the Euro won't resolve the problem of the debt.
So, solution is political.

The problem is actually that the debt in in Euro's, it's like Greece having it in Marks.

If it was in Drachmas they could print them and that would have lowered the debts two years ago.

The problem is the same as it always was - the solution is the same as it was 2 years ago.

[Furunculus]

another classic for the "BigF" is always right library:

http://www.nytimes.com/2012/05/26/wo...?smid=fb-share

“The limit of German brotherhood extended to East Germany, and they saw what happened with two trillion euros over the past 20 years,” said Michael C. Burda, an economics professor at Humboldt University in Berlin. “And these are people they love. They don’t consider the Greeks their brothers.”

ARE YOU MY FAMILY?

[gaelic cowboy]

Well you heard wrong, people tend to forget that banks weren't allowed to refuse risky mortages in problematic area's according to the community reinvestment act.

Doesn't matter Frag they wouldn't have refused giving the mortgage anyway.

The banks believed they had found a way to mitigate the risk by selling on these subprime mortgages on the open market.

[Philippus Flavius Homovallumus]

ARE YOU MY FAMILY?

Look - we all get the point, will you stop saying it now please?

Like all slogans it has passed it's sellby date.

[Fragony]

Doesn't matter Frag they wouldn't have refused giving the mortgage anyway.

The banks believed they had found a way to mitigate the risk by selling on these subprime mortgages on the open market.

I am sure the sales-guys had a good laugh, but these mortages would have been denied otherwise. To blame the market to be causing this is kinda off, it were the politicians who set it in motion

If there is no consequence there can be no free market, hands off and we will be fine

Leave us alone

[Furunculus]

Look - we all get the point, will you stop saying it now please?

Like all slogans it has passed it's sellby date.

sure d00d, you only needed to ask. :)

................... now for all of the rest of you! :x

[gaelic cowboy]

I am sure the sales-guys had a good laugh, but these mortages would have been denied otherwise. To blame the market to be causing this is kinda off, it were the politicians who set it in motion

If there is no consequence there can be no free market, hands off and we will be fine

Leave us alone

No they wouldn't have got denied Frag.

You have to remember back to what was really going on here plus people who are not prime candidates are not always a bad investment.

The banks needed to grow and one area that was badly served was in subprime which often this includes the self employed. The bank knew these were risky-ish but then figured we will sell the mortgages on the open market and essentially hive off the risk.

The problem was and is that no one really knew the risk and so therefore they couldnt possibly know a fair price for the contracts.

Governments essentially decided to not regulate these things because essentially it was felt the market knew best.

In effect they did leave them alone.

[Fragony]

No they wouldn't have got denied Frag.

You have to remember back to what was really going on in this case remeber People who are not prime candidates are not always a bad investment.

The banks needed to grow and one area that was badly served was subprime often this includes people the self employed. The bank knew these were risky but then they hit on a new plan we will sell the mortgages on the open market and essentially hive off the risk.

The problem was and is no one really knew what the risk really was and so thereefore they couldnt possibly know a fair price for the contracts.

Governments essentially decided to not regulate these thing in reality because essentially it was felt the market knew best.

In effect they did leave them alone.

Of course they would have denied these loans, why would you put money where there is hardly a chance you will get it back. Banks don't play dice, it is the government that is guilty

[gaelic cowboy]

Of course they would have denied these loans, why would you put money where there is hardly a chance you will get it back. Banks don't play dice, it is the government that is guilty

Your forgetting that by selling them as mortgage backed securities they didnt have any risk anymore, unfortunately the banks often bought these type of contracts from other banks. Essentially they all ended up buying contracts they couldnt know the risk on which meant there were unknown ticking timebombs left everywhere.

They were of course supposed to be rated by the various agencies like Moodys or Fitch etc etc but they couldn't possibly know what the correct risk was. Also the banks tended to chop up both high grade to low grade loans and then sell them together. This was basically an impossible thing to rate or as near as makes no difference anyway.

I know you want to blame governments for subprime mortgages etc etc but in reality there were really only guilty of not regulating. Essentially the Financial industry believed they had lessened the risk so there was no need for any regulation.

And also just because a loan is not prime does not mean it is automatically risky Frag.

[Fragony]

You are much more knowledgable about the subject so I won't argue with you

[Kagemusha]

with your

We should extend this line to American policy as well? Oh, that's right, the complete collapse of your economy would impact us, just like the ramifications of our economic and foreign policy affect you and give you a reasonable right to comment on them. Nope, we should keep posting. There is more than one reason why the British decided to stay out of this system, maybe you should have listened to them a bit more in the first place.

So, when do the fireworks start? I've got my popcorn in the microwave.

Didn't we solve similar problems by allowing Hamilton's plan to take on all State debts as Federal? That was a rather simple move, it just required sacrifice from the responsible economies and a loss of free will from the profligate, moronic State economies. You shouldn't have gotten involved in the common currency market unless you wanted to lose you national identity and sovereignty at some point, so what's the hold-up now? Wistfulness or just denialism?

With your monopoly money how do you even dare to interfere. Dollar is bancrupt.Even with its current low point euro/emu area is stronger then dollar. You invented this idea of living of debt and likes of fururnculus still continue shouting the mantra. US debt will be equal to US GDP in less then 10 years and everybody and few others know it already.

So i understand that you would like nothing better then euro to fail, but its not happening anytime soon.

Just take good care of yourselfs my big brother from other side of pond when china owns 2/3rds of your national debt.

[Philippus Flavius Homovallumus]

with your

With your monopoly money how do you even dare to interfere. Dollar is bancrupt.Even with its current low point euro/emu area is stronger then dollar. You invented this idea of living of debt and likes of fururnculus still continue shouting the mantra. US debt will be equal to US GDP in less then 10 years and everybody and few others know it already.

So i understand that you would like nothing better then euro to fail, but its not happening anytime soon.

Just take good care of yourselfs my big brother from other side of pond when china owns 2/3rds of your national debt.

The Euro area is in recession, the US is recovering.

The US Dollar is also a reserve currency.

The US has viable natural resources to exploit - and a strong industrial base (not as strong as it was, admittedly).

The Euro-Area is much weaker than the US, it lacks political cohesion, economic output is depressed and falling, and it is not a reserve currency.

In other words: You're wrong, which is why everyone will by Us Bonds and nobody wants Greek ones, or Italian, Spanish, Portugese, or Irish ones much either.

[Kagemusha]

it is not chilish at all, and my view is not based on some abstract in economic dualism, it boils down to this.

are you my family.
will germany pay for greece in perpetuity
will greeks accept grinding austerity for the next decade to please the germans
if the answer to both the above is not "yes" then a currency union won't work at the bottom of the economic cycle.
because there is no mandate for contentious policy.

------------------------------------------------------------

two good quotes from non-tory (since that clarification seems necessary for people to look at it without shouting "tory stooge"):

nick clegg -


ed balls -

http://www.telegraph.co.uk/news/worl...-eurozone.html

Yes.

You are definitely not my family. I dont give a shite about you. Although i do give for my countrymen and even europeans in general, not just leeeches like you.

B) Germany and not just germany is and has been paying and continues to pay.

c) my question is, are you a leech like Irish right wing capitalist or a English one?
If English. Il atleast have some respect for you. If I rish none.

[Kagemusha]

The Euro area is in recession, the US is recovering.

The US Dollar is also a reserve currency.

The US has viable natural resources to exploit - and a strong industrial base (not as strong as it was, admittedly).

The Euro-Area is much weaker than the US, it lacks political cohesion, economic output is depressed and falling, and it is not a reserve currency.

In other words: You're wrong, which is why everyone will by Us Bonds and nobody wants Greek ones, or Italian, Spanish, Portugese, or Irish ones much either.

Economical strength is compared by GDP, please take a look.You think continental europe and its holdings is bare wasteland? Like is said, please join the US. British products will get cheaper along the way.

[Kagemusha]

The Euro area is in recession, the US is recovering.

The US Dollar is also a reserve currency.

The US has viable natural resources to exploit - and a strong industrial base (not as strong as it was, admittedly).


The Euro-Area is much weaker than the US, it lacks political cohesion, economic output is depressed and falling, and it is not a reserve currency.

In other words: You're wrong, which is why everyone will by Us Bonds and nobody wants Greek ones, or Italian, Spanish, Portugese, or Irish ones much either.

btw who is buying US bonds? please elaborate?Except china ofcourse

[Furunculus]

Yes.

You are definitely not my family. I dont give a shite about you. Although i do give for my countrymen and even europeans in general, not just leeeches like you.

B) Germany and not just germany is and has been paying and continues to pay.

c) my question is, are you a leech like Irish right wing capitalist or a English one?
If English. Il atleast have some respect for you. If I rish none.

gee kage, that's a lot of anger right there.

i'm not sure why it is aimed at me, as i am only pointing out the flaws in a political project that was masquerading as an economic one...................... and i grant you; then saying "i told you so" when collapse arises from the contradictions.

i realise being smug isn't a very attractive character trait, but i don't see how i merit so much vitriol?

you do realise my most of my objection to 'the project' was precisely because i didn't see other people inventing a family identity they didn't have, and thus the euro would create precisely the ill-feeling that we are watching spread across the continent right now.

if ever-closer-union had stopped with mastricht then we might instead be happy neighbours right now rather than resented drunk uncles/feared violent patriarchs.

but i truly feel if this foolishness is not publicly ridiculed then we will continue on chasing our tails inventing ever more elaborate post-national constructs to circumvent the even-mounting public discontent at illegitimate government. someone has to do it, and i have manfully signed up for the job. to much opprobrium it might be added! :)

this is my objection.

so tell me why my (english) ingrate self generates such ill-feeling? is it because the emperor does not like being told that he is wearing no clothes......

[edit] and why am i a leech? my country signed up to the single market, not a federal union. [/edit]

[InsaneApache]

The banks needed to grow and one area that was badly served was in subprime which often this includes the self employed. The bank knew these were risky-ish but then figured we will sell the mortgages on the open market and essentially hive off the risk.

This.

Aided and abetted by all those 'loveable progressive' politicians. Nincompoops the lot of them.

[Philippus Flavius Homovallumus]

Economical strength is compared by GDP, please take a look.You think continental europe and its holdings is bare wasteland? Like is said, please join the US. British products will get cheaper along the way.

GDP measures output not base strength. In any case the US is still the world's largest economy and the Eurozone's GDP is currently contracting, Europe is getting poorer, US GDP is expanding, the US is getting richer.

China is buying US bonds, yes, but so is Norway, Britain - everyone is buying them.

They are buying them quicker even than they are buying German debt.

The US has also not seen governmental collapse, like Greece, Italy and the Netherlands.

The US has economic problems - but it also has a responsible Federal Bank and it issues only one bond for it's debts vs the 17 for the Eurozone.

Edit: Oh, and "European Union GDP" includes we British "leeches" - given that Britain alone accounts for over 2.4 billion of EU GDP "Continental" Europe is a palty ~150,000 ahead of the US, and falling.

Edit 2:

Link: http://en.wikipedia.org/wiki/List_of...y_GDP_(nominal)