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Thread: Trader on the BBC says Eurozone Market WILL Crash

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    Default Trader on the BBC says Eurozone Market WILL Crash

    http://www.youtube.com/watch?feature...&v=aC19fEqR5bA

    This has been a widely discussed topic over here in the UK for the last week or so.
    What to do with savings etc.

    On the subject of the Euro :

    Personally (not politically!Just personally )I always thought the Euro was just a nice idea and that it would have some serious problems.
    I have heard a lot of discussion about whether the Euro should be scrapped altogether.
    I doubt that will happen.

    If it did what would the ramifications of it be ?

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    This story has been unfolding for well over a year now..... Crisis followed by rescue plan..... Followed by crisis..... Followed by rescue plan...... The banks will have to take a hit.

    Iceland was able to tell the banks to get lost and they have come out of their crisis pretty well..... The Irish should have done the same..... Now the Greeks..... Soon the Italians.

    There isn't enough will or fiat money (yet created) to bail out all the countries.

    This one is very funny.... And not far from the truth.

    http://www.youtube.com/watch?v=OvBQwcsVu_w

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by mikef View Post

    This one is very funny.... And not far from the truth.

    http://www.youtube.com/watch?v=OvBQwcsVu_w
    That's good I like it !

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    ( walking on tiptoes to try and discuss this issue without running afoul of the politics ban ) ...

    Essentially, the countries who chose to join the EuroZone gave up their right / ability to 'print money' on their own. In pre-EuroZone days, exporting countries like Germany would price their products in D-Marks and importing countries like Greece would purchase German products with Drachmas exchanged for D-Marks. When economic forces became unbalanced ( i.e. Greece began to run up huge gov't and private debts via imports without matching exports ), the exchange rate of the Drachma could have been reduced via the 'printing' of more Drachmas out of 'thin air' ... which would force a reduction in the amount of German exports that Greeks could purchase, which would also allow the Greeks to repay their debts more easily, and would also force the Germans ( and any other foreign countries who had loaned Greece money ) to take a 'haircut' since they were being paid back in devalued Drachmas.

    However, if importing and exporting countries are both locked into using the same currency, the relative devaluation 'trick' / 'scam' cannot be used. The exporting / loan originating countries must be paid back in currency of equal value. The importing / loan recipient countries must make payments in currency of equal value. Thus eventually the standard of living of the importing / loan recipient countries must decline to the point where a balance is again restored between the real value of imported items consumed that must equal the real value that the importing / loan recipient country can generate.

    Generally speaking, the Greeks, the Portuguese, the Spaniards, and to some extent the Italians and the Irish have been the beneficiaries of an inflated standard of living for years since the advent of the EuroZone, since the real value of the goods they were able to import could exceed the real value of the goods they were able to produce and export thanks to ever-growing EuroZone loans. But the point has now been reached where other EuroZone members as well as international financial institutions do not want to make additional loans for fear said loans cannot ever be paid back.

    And without ever-growing new loans, the 'artificially inflated' standard of living of the Greeks, Portuguese, Spaniards etc. must immediately revert to a level where the real value of the goods they are able to import in the future equals the real value of the good they are able to produce / export ... MINUS whatever amount of production / export income must be redirected towards repayment of pre-existing loans. This immediate reversion may actually be on the order of a 30-40-50% reduction in standard of living. And THAT LARGE of an 'immediate' reduction in standard of living is a reason for 'working class' people to start taking to the streets, for the 'rich' to start seeking safe havens, for politicians to start running from the torches and pitchforks etc. !!!

    In many ways the USA has a similar relationship with China that Greece has with Germany ... i.e. a large import / export imbalance, large debts held by the exporting country etc. However, unlike Greece, the USA still has the ability to 'print money out of nowhere'. However, the Chinese also have the ability to counteract US dollar money printing via selling US dollar assets they hold from decades of trade surplus, and/or printing Yuan out of nowhere, to maintain a 'soft peg' between US dollar and Chinese Yuan exchange rates.

    As far as ramifications go, in real world terms there is no way that the Greeks can ever pay off pre-existing debts at full value. Thus the Germans and any other countries that have loaned Greece money are going to take a 'haircut' by one means or another, and Greek citizens are going to see their standard of living immediately fall by 30-40-50% by one means or another - UNLESS some 'greater fool' can be pursuaded to loan Greece yet more money that is also unlikely to ever be repaid at full value. This is the present situation, with the ECB, the IMF, with EuroZone export countries etc. all trying to find a way to loan Greece yet more money in order to perpetuate the trade imbalance and the 'artificially inflated' Greek standard of living ... which will also perpetuate the non-acknowledgement of losses on Greek loans by financial institutions who had previously loaned Greece money.

    Arguably, the least 'painful' alternative is for the ECB to 'print Euros out of nowhere' which can then be loaned / given to Greece. This would also have the effect of devaluing the Euro versus other world currencies ... which has widespread ramifications from 'screwing' German producers / savers, to lowering US dollar price levels for oil / food / precious metals, to tipping trillions of dollars worth of currency exchange rate and/or interest rate based derivatives held by GS, Citi, SG, Dexia et al into cataclysmic loss valuation levels ( thus threatening a second Lehman Brothers-esque global financial system 'freeze' scenario ... times 10 or more ! ).

    On the flip side, if Greece decides to pull out of the EuroZone and revert to the Drachma ... which it could 'print out of nowhere' ad infinitum to pay off pre-existing loans at greatly reduced real value, then a Pandora's Box of possibilities would emerge. Most of these are still bad for countries / financial institutions who loaned Greece money, and most of these will also result in the Greek standard of living immediately falling by 30-40-50%. The Pandora's Box could get even larger if other EuroZone members also decided to revert to their own currencies, with a subsequent wave of 'protectionism' being one likely result.

    And of course under those scenarios there would undoubtedly be some highly placed but publicly whispered voices who would call for the 'collection of unpaid / repudiated debts' by force ... which in the past has arguably resulted in such events as WW2.

    ~
    Last edited by Melonie; 09-27-2011 at 09:18 AM.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Ugghhh it's a real mess isn't it

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    ^^^ some 'experts' see a mess of major global proportion on the horizon.

    For example ... from


    (snip)"So... here's what will happen next. Soon, Greece will default. This will begin a chain reaction of European bank failures, because most banks in Europe have only written off a small portion (21%) of the value of the Greek bonds they hold. French banks are particularly vulnerable right now. This, in turn, will cause banks to stop lending to each other out of fear.

    It will also lead to big losses in the commercial paper market. That's how the crisis will spread to the U.S. – our money-market funds still hold roughly 42% of the assets in loans to Europe's banks. Companies with exposure to European financial assets (like GE) and those that depend heavily on the commercial paper market for funding (like Capital One) will see their share prices plummet. As the global economy stalls and then moves into recession, unemployment will worsen… and political tensions will greatly increase. I expect large-scale civil unrest in both Europe and the U.S.

    In the short term, commodities are also likely to fall sharply. The crisis is nearing a breaking point. Europe represents the world's largest economic area. I expect oil will fall at least in half from its peak. You could see silver fall, temporarily, by maybe another 30%. Gold could fall by maybe 25% from its peak. Base metal and energy commodities – stuff like copper and coal – will get crushed, like they did in 2008. In short, this is Europe's turn to have a Lehman Brothers-like banking collapse. Only this time, it will involve dozens of huge banks and several different countries, all of which have different ideas about how the crisis should be solved.

    And that means it will probably be a longer and deeper crisis than Lehman Brothers. But... sooner or later... we're going to see a massive reversal. The Fed will step in to support the ECB, and a tremendous amount of new euro will be issued. I expect the euro to fall to parity – 1:1 – with the dollar before this crisis is over.

    The hard part will be knowing when the time comes to jump back into blue-chip stocks, strategic commodities (like oil shale assets), discounted corporate debt (which I believe will get much, much cheaper from here), and strategic metals (like gold, silver, copper, and iron). During the Lehman crisis, the peak interest rate spread between junk bonds and U.S. Treasurys was around 22%. The spread on European bank debt could get at least that high, as will most of the sovereign debt of the peripheral nations. And we're just not there yet.

    Is there a chance I'm wrong? Is there any realistic way to solve this crisis without a Greek default and a European banking crisis? I don't see how. Germany is the only truly solvent, large European country left. And the German voters continue to hand the ruling party loss after loss in local elections, specifically because the public is almost unanimously against Germany bailing out the rest of Europe. Likewise, the German representative of the ECB resigned last week out of protest against any future quantitative easing, aka money-printing."(snip)

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by Melonie View Post

    The hard part will be knowing when the time comes to jump back into blue-chip stocks, strategic commodities (like oil shale assets), discounted corporate debt (which I believe will get much, much cheaper from here), and strategic metals (like gold, silver, copper, and iron). During the Lehman crisis, the peak interest rate spread between junk bonds and U.S. Treasurys was around 22%. The spread on European bank debt could get at least that high, as will most of the sovereign debt of the peripheral nations. And we're just not there yet.
    So for someone in the adult industry who saves the bulk of their earnings, would the smart thing be to sit tight watch stocks/metals/commodities plumet and wait to invest ?

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    'sit tight' holding what ? Euros ? UK Pounds ? US dollars ? Swiss francs ? All are at varying degrees of risk of losing real value / purchasing power. Earlier, I was a strong proponent of Swiss Francs as the 'least of the evils' fiat currencies. However, a policy change by the Swiss gov't / SNB to establish a 'soft peg' to the Euro via SNB intervention in international currency markets cost me a 10% single day loss ( cutting my overall gains down to a paltry 20%+ over the course of the past year LOL ). Right now US dollars are serving as the world's 'least evil' fiat currency. But tomorrow it could be Brazilian reals for all I know !!! The point of course is that, in today's zero interest rate environment, 'sitting tight' equals losing money too !

    If you seriously think that Greece is going to default and that as a result the european banks with huge exposure to Greek debt are going to take a 'haircut', you could always buy some put options on the shares of said european banks with the highest percentage exposure like Dexia or SG. Investors holding Lehman puts prior to the last crisis profited big time !!!

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    All I can say is (personally, not politically) is thank god the uk dont have euros as main currency and we stuck to sterling. Whilst our pound is that strong it would be stronger if we were not busy bailing out other countries every two minutes. We have too much of our own debt to be trying to solve other countries debts. Its very obvious the greece are going to default and they will be taking the rest of europe with them and whilst the uk pay a whopping 40 million a day into that now pratically non exisistant club we are getting the least out of it. As a uk citizen the best that we can hope for is for cameron to announce that we are pulling out and then for greece to default so we can cover our backsides whilst not having to spend silly money on thin air. We will then not really be hit as we are pretty self sificent and only international goods like oil will drop but it would be for the better in the long run if that did happen

    Of course the better thing for us is to pull out of europe tommorow but make a treaty with germany in terms of trade and then neither country would really suffer as we are the twp proping up a very poor europe and only really trade with each other within europe

    Also how did those who had shares in leamans before it dropped off the earth make a profit? Surely all that was wiped when the bank crashed as they couldnt afford the payouts for it!

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    So it turns out the guy is more of a public speaker than a trader, and is an "attention seeker" in his own words
    http://www.telegraph.co.uk/finance/e...-a-trader.html

    I want some attention too - why won't some journo interview me while I spout off marketable soundbites about whatever?
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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by person View Post
    So it turns out the guy is more of a public speaker than a trader, and is an "attention seeker" in his own words
    http://www.telegraph.co.uk/finance/e...-a-trader.html

    I want some attention too - why won't some journo interview me while I spout off marketable soundbites about whatever?

    But does that mean that he is incorrect ?

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by Melonie View Post
    'sit tight' holding what ? Euros ? UK Pounds ? US dollars ? !!!
    That was going to be the next part of my question.
    Which currency ?
    The US dollar might be strong now but undoubtedly contagion is a real risk.

    Put options are part of spread betting is that correct ?
    I have a big old book on it here - time to dust that off me thinks.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    While joining hands with Melonie in trying to tiptoe through the tulips as far as Politics is concerned, the hypocrisy and double talk coming from Europe is past ridiculous. The bottom line is that the Euro has to go. Everyone knows it. It's just a question of when. Sooner would be better. Instead they all just keep postponing the inevitable. The interest yield on Greek debt is currently about 25%. Would someone come up with a historical example of any country being able to pay off similar type debt ? How does anybody seriously expect them to be able to pay that off ? Throw ideology and all other political influences as far away as you can and you are still left with common sense and basic practicalities.

    One proposed solution is that Europe double down and have a unified fiscal policy. Does anyone seriously think that the Germans are going to pay for Italian traffic cops in towns where only ten people own cars ? Or Greeks who retired at 45 ?

    To keep this at least parallel to the stated purposes and aims of Dollar Den : Be vewy careful about investing in Europe and just as careful about investing in financial stocks. Generally speaking, the further north you go, the more sensible the investment. Europe has effectively been divided into the "haves" ( Germany, Austria, Switzerland, Scandinavia ) and "have-nots" ( Portugal, Italy, Greece, Spain ) with a few countries in between ( The U.K. , France, Belgium ). For the U.S. it makes a recession more likely.
    Last edited by Eric Stoner; 09-28-2011 at 08:27 AM.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Put options are part of spread betting is that correct ?
    I have a big old book on it here - time to dust that off me thinks.
    Actually, 'spreads' involve the use of more than one put or call option contract and are far more complicated than a basic 'put' option contract.

    Basically, buying a put contract gives the owner the right to 'sell' 100 shares of a particular company's stock ( which the owner doesn't actually own ) at a particular price on or before a particular date. I can give you an example of a particular US bank stock, say Bank of America. Today 100 shares is selling for $6.40 a share or $640 for 100 shares, but a $6.00 a share 100 share put option good through October is selling for $34. So if one is inclined to believe that Bank of America's share price is going to drop significantly ... to say $5.40 by the end of october, a $34 initial investment could earn you $0.60 * 100 = $60 ( net $26 profit ). If the price were to drop all the way to $5.00 by the end of october, that $340 investment could earn you $1.00 * 100 = $100 ( net $64 profit ). Of course if the shares wind up closing at or above $6.00 at the end of october, the put option would be worthless and you'd be out the $34 cost.

    You're probably working with european bank stocks and options on the London exchange instead of American bank stocks on the New York exchange, but the principal is the same.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Which currency ?
    Hoo boy ... I'm going to wind up in 'hot water' again, but IMHO every major currency is now far more subject to gov't / central bank policy than it is to 'world market' forces or 'real' valuation levels.

    My best hope was the Swiss Franc ... which was recently 'trashed' via a decision by the Swiss gov't / SNB to establish a 'soft peg' on exchange rate relative to the Euro via money printing / intervention in global currency markets. I can understand why the Swiss did this ... it's hard to sell chocolate bars when the de-facto price for european / american / asian customers is increasing by 5-10% per month on the basis of seller's currency versus buyer's currency exchange rates. So under this new policy the Swiss Franc isn't any better than the Euro.

    After the Swiss policy change, international hot money started flying towards US dollars. But that was only as good as the future probabilities that the US Fed won't start QE money printing again. Over the past couple of days, that international hot money has been selling out of US Treasury bonds big time ... but nobody has yet figured out exactly where it is going to instead. Maybe Norwegian / Swedish Krones, based on comparatively low gov't debt levels and comparatively low bank exposure to the PIIG's.

    In point of fact, your UK pounds have already taken a beating ... so they may be as good of a store of value as any other fiat currency right now !

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Not wanting to get into the politics either but....... There are historical reasons (think of the millions who died in european wars) for these countries to want union...... And a common currency is needed for union..... I'm not arguing for or against the EURO..... But we tend to forget one of the reasons France, Germany and others wanted union.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by mikef View Post
    Not wanting to get into the politics either but....... There are historical reasons (think of the millions who died in european wars) for these countries to want union...... And a common currency is needed for union..... I'm not arguing for or against the EURO..... But we tend to forget one of the reasons France, Germany and others wanted union.
    Why is a common currency needed for union ?
    Can there not just be a European Parliment and abolsih the common currency ....or am I being really thick here ?

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by Citychick View Post
    Why is a common currency needed for union ?
    Can there not just be a European Parliment and abolsih the common currency ....or am I being really thick here ?

    The original Mastrich treaty called for a common currency..... Not only does it make things easier not having competing currencies..... It allows for these countries to own reserve currencies.... (some still own gold too )

    The problem of course is it's all fiat money anyway...... And if you are stuck..... You wish you could just create more.

    The commonality of the money is a necessary part of the entire system of union. Both practical and psycological.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by mikef View Post
    There are historical reasons (think of the millions who died in european wars) for these countries to want union...... And a common currency is needed for union

    The commonality of the money is a necessary part of the entire system of union. Both practical and psycological.


    So does that mean that (in your opinion) if the Euro were abolished/collapsed that the countries unified through a common Parliment & currency would then reignite hostility ?
    Surely this seems unlikely, and they could just go back to their own currencies and breathe a collective sigh of friendly relief.

    *Cue : Walt Disney Bluebirds holding a 'The End' Banner*

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    its not a question of if its going to crash its a question of WHEN especially here in america when all our fed is doing in printing out money after money with nothing to show for it!!
    slut it out responsibly and don't forget to smile while you're whoring out!!

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    So does that mean that (in your opinion) if the Euro were abolished/collapsed that the countries unified through a common Parliment & currency would then reignite hostility ?
    Trying to remain strictly on the financial side, the use of the Euro throught the EuroLand countries allows Greece and Spain etc. ... countries who produce little relative to their consumption ... to enjoy a 'subsidized' high standard of living. On the flip side it effectively forces Germany, Austria and eastern european countries to live at a 'depressed' standard of living relative to their relatively large ability to produce. This happens because, in the absence of individual currencies, the 'purchasing power' of the Euro is essentially based on the EuroLand-wide average of exports versus imports, the EuroLand-wide average levels of gov't debt / spending etc. Those countries far above the averages get 'screwed' while those countries far below the averages get 'subsidized'.

    Already the Germans, Dutch, Belgians etc. are expressing great displeasure over being forced to further 'subsidize' their less productive, freer spending EuroLand neighbors directly via the ECB / ESFS etc. bailout plans. I obviously can't go into details here in Dollar Den, but the Greek debt crisis appears to be indirectly bringing a large number of other issues to a 'head' as well ... some of which have already been the source of hostility on a small scale and have the potential to become the source of hostility on a much greater scale.


    There are historical reasons (think of the millions who died in european wars) for these countries to want union...... And a common currency is needed for union
    This is certainly arguable ... given the fact that highly productive Sweden, Norway, Switzerland, Poland etc. don't participate in the EuroZone. And when some of the former Soviet Satellite countries sought entry into EuroLand, it was from the economic position of them receiving 'subsidies' from the adoption of the Euro versus their own distressed currencies. Germany et al arguably assented to EuroLand because it provided them a guaranteed 'export' market right next door. France arguably assented to EuroLand because it provided French banks a guaranteed 'subprime loan' market right next door.

    I have to make the case that the creation of EuroLand had much to do with economic self-interest even though other pablum reasons were disseminated to the general public to justify it's formation. However, with globalization, the underlying former mutual advantages of EuroLand have been steadily eroded. Exports become far less valuable when they must be purchased via money loaned by the producer country that is never likely to be paid back. Subprime loans become less valuable when the borrower's credit rating / ability to repay reaches levels that international financial markets consider to be a 'joke'.

    ~
    Last edited by Melonie; 09-29-2011 at 03:29 AM.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Merging European debt markets to make Euro Bonds would solve all problems like this in the future but it would be a step away from national sovregnity and a step towards a Federal UK state like America.

    Sounds smart to me but people are stupid and prefer to think of themselves as English, French, American etc rather than think we should be 1 big country since we are all human.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    ^^^ yes, but some 'humans' are more productive than others ! Again speaking purely economically, enacting a financial system that averages worker productivity worldwide and equalizes consumption worldwide will have SERIOUS consequences on the standard of living currently enjoyed by the English, French, Americans etc.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by Citychick View Post
    So does that mean that (in your opinion) if the Euro were abolished/collapsed that the countries unified through a common Parliment & currency would then reignite hostility ?
    Surely this seems unlikely, and they could just go back to their own currencies and breathe a collective sigh of friendly relief.

    *Cue : Walt Disney Bluebirds holding a 'The End' Banner*
    It agree it would be easier to break away and repay some/all of the debt in a cheaper sovereign currency..... Melonie has described how the union has helped the PIIGS.... But France and Germany made out in the arrangement as well...... In some respects the PIGGS were treated like colonies by them.

    I can't say what the future of hostilities in Europe will be.... But it was one of the reasons used to form the union, we shouldn't forget that.

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    Default Re: Trader on the BBC says Eurozone Market WILL Crash

    Quote Originally Posted by mikef View Post
    I can't say what the future of hostilities in Europe will be.... But it was one of the reasons used to form the union, we shouldn't forget that.
    Surely the more productive countries will be happily relieved to be out of the Euro and have little time for war.
    The less productive ones would have to work at being more productive to pay back their debts.

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