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Thread: SURVEY - Will The Euro Survive ?

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    Banned Eric Stoner's Avatar
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    Default SURVEY - Will The Euro Survive ?

    I am honestly trying to make up my mind. The latest news from Europe is NOT good as the E.U. and ECB have both admitted that there are "difficulties" in implementing reforms in Greece. To me, that is "diplo-speak" for Greece saying "go fuck yourselves " ; "we don't wanna" etc.

    I have long thought that the ONLY sensible course is for Greece to leave the E. U. and bring back the drachma. Almost every other report from Europe documents the tremendous tensions between Northern and Southern Europe in general and Greece and Germany in particular. It seems to me that these tensions are being aggravated by efforts to hold the E.U. together ( more and more with duct tape lol ). The very means of bailing out Greece and keeping it in the E.U. seem to be doing nothing more than increasing resentments.

    As much as I can't stand the little asswipe, "Krugie" is partially correct that A way out of the current mess is more money printing by the ECB. This is anathema for the Germans and other relatively solvent E.U. members aren't crazy about it either. While the Greeks are busy blaming the "haves" for their mostly self-inflicted wounds, the "haves" are just as busy assigning too much blame to Greece. I'm sorry but there are only what , 10 million Greeks ? Their economy and even their debt is puny compared to a lot of other European countries.

    So I am throwing out the question : What is most likely to happen with Greece ? Not as a poll but more as a survey. I would appreciate responses with the underlying reasoning included e.g. " Greece will accept the austerity and stay in the E.U. because .... " ; "Greece will be kicked out because " ; " they will leave voluntarily because ".

    I am serious. Obviously I do not have all the answers and what will happen matters to all of us. Europe is a major market for the U.S. , Canada, Australia etc.
    So what do my fellow Dollar Denners think ?
    Last edited by Eric Stoner; 09-10-2012 at 07:20 AM.

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    Default Re: SURVEY - Will The Euro Survive ?

    No.... I don't think the currency can survive..... Maybe the entire union will disappear.... At the very least a smaller union.
    The country has been looted.

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    Default Re: SURVEY - Will The Euro Survive ?

    A Handful of pundits share the opinion that the 'productive' countries in the EuroZone, most notably Germany, France, Finland etc. will keep the Euro and keep trading among themselves and with other countries using the Euro as the medium of exchange, while the 'non-productive' EuroZone countries i.e. Greece, Spain, Portugal, possibly Italy will be kicked out of the Euro or elect to dump the Euro.

    From the point of view of the 'producer' countries, this will hold down potential increases in 'input costs' for their industries, will preserve the 'purchasing power' of producer countries citizens and business bank accounts, as well as ending outflows of 'bailout' cash.

    From the point of view of 'non-productive' countries, devaluation of the successor currencies will essentially reduce the size of debts already owed to manageable levels via repayment 'in full' but with a greatly devalued currency, which will also destroy the 'purchasing power' of the 'non-productive' countries' citizens and businesses in the short term via price inflation. In a similar manner, 'debts' owed to gov't retirees and pensioners will also be reduced in size via payment 'in full' but with a greatly devalued currency.

    In the longer term, the devalued successor currencies will give the 'non-productive' countries a chance to regain global economic competitiveness based on greatly reduced labor costs ( as measured globally in terms of equivalent cost in Euros, US dollars, Japanese Yen etc. ) And in both the shorter and longer term, standards of living for citizens in the 'non-productive' countries will drop to a level that is much more commeasurate with their actual (in)ability to produce !!!
    Last edited by Melonie; 08-30-2012 at 01:50 PM.

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    Default Re: SURVEY - Will The Euro Survive ?

    More food for thought on this issue - From the front page of today's N.Y. Times : In July, Spaniards withdrew a record 75 billion Euros ( $94 billion ) from Spanish banks.The withdrawls accelerated a trend that started last year. Now everyone is waiting for the August numbers.

    In addition to the money, Spain is experiencing a "brain drain" as members of the educated and professional classes are leaving in droves. 30,000 Spaniards, AND THEIR MONEY, have relocated to Britain just in the last year. That's just one year and one country. By an amazing coincidence, Britain does NOT use the Euro.

    The wealthy removed their money long ago. Now the upper middle class with skills in demand elsewhere are following suit.

    On Monday, Moody's changed its outlook on the AAA rating of the EU to negative.

    Interestingly, Greece has seen a return of deposits and there is relative stability of deposits in Italy, Ireland and Portugal. For now.

    Many Spaniards fear that Spain will be like Argentina in 2001 when peso accounts denominated in dollars were frozen to stem capital flight. Some 1 million Argentines have since immigrated to Spain and shared gory stories of wiped out savings.
    Last edited by Eric Stoner; 09-05-2012 at 08:29 AM.

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    Default Re: SURVEY - Will The Euro Survive ?

    ^^^ also by 'pure coincidence', Spain's plans to enact much higher income tax rates on 'higher earning' Spaniards ( 56% actually ), like France's plans to enact much higher income tax rates on 'higher earning' French, have both prompted higher earning citizens to look favorably on the UK's significantly lower 40% income tax rates ( before tax shelters ) as a major incentive to emigrate while they can still get their money out of their home country.

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    Default Re: SURVEY - Will The Euro Survive ?

    For the Euro to survive, Germany needs to leave. Otherwise, Greece leaves followed by a severe but short Greek recession and a longer but not as deep European recession. Then Italy and Spain leave which lead to severe but short recessions for them but a continuing European recession. Finally, France, Germany, Austria, Finland, the low countries and perhaps Poland shore up the Euro as a Norther European League currency to finally recover from the long dark recession foist upon them by their southern neighbors who are enjoying the fruits of a quick devaluation and have inflated away their debts. Spain is especially prosperous as their economics are essentially not as bad as the rest of the Southern League.

    Z

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    Default Re: SURVEY - Will The Euro Survive ?

    ^^^ while that might be theoretically true, major player Germany does NOT want to risk a return to a DeutscheMark which will wind up being extremely strong in terms of exchange rate / 'purchasing power'. In an economic environment that is 'genetically' programmed to abhor money printing / inflation ( result of Weimar ), such a 'strong' DeutscheMark is a very real possibility. However, a 'strong' DeutscheMark would also kill the global economic competitiveness of German exports ... which the future health of the German economy is heavily dependent on.

    Agreed that Greece, Spain, Portugal, perhaps Italy, perhaps Ireland will have little choice but to exit the Euro as leaders find it politically impossible to 'sell' their citizens on the tax increases and gov't / social welfare spending cuts being mandated by the EU/ECB in order to continue bailout funding.

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    Default Re: SURVEY - Will The Euro Survive ?

    Let's not forget one big reason for the EU was past German aggression.... The idea of having Germany close and friendly is better for most of Europe.... Than a return to everyone for themself.
    The country has been looted.

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    Default Re: SURVEY - Will The Euro Survive ?

    Quote Originally Posted by mikef View Post
    Let's not forget one big reason for the EU was past German aggression.... The idea of having Germany close and friendly is better for most of Europe.... Than a return to everyone for themself.
    I have heard that argument for quite some time and just do not get it. We're talking about German behavior from over 70 years ago. Yes, yes, I know Europeans have long memories and LOVE to rehash past grievances and relive stuff that happened centuries ago. More's the pity. Ignorance, willful or not, of such things as German memories of Weimar hyper-inflation is one reason why the "Krugie" prescription is so "pie in the sky".

    The fact remains that Germany has been democratic for over 60 years i.e. more than two generations. Nobody has been more cooperative and integrative than the Germans. Now what some Europeans regard as German economic "aggression" ( and some certainly do ) is really just hard work, thrift and a sound fiscal policy. They make good stuff and have for decades.

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    Default Re: SURVEY - Will The Euro Survive ?

    [QUOTE=Zofia;2396285]For the Euro to survive, Germany needs to leave. Otherwise, Greece leaves followed by a severe but short Greek recession and a longer but not as deep European recession. Then Italy and Spain leave which lead to severe but short recessions for them but a continuing European recession. Finally, France, Germany, Austria, Finland, the low countries and perhaps Poland shore up the Euro as a Norther European League currency to finally recover from the long dark recession foist upon them by their southern neighbors who are enjoying the fruits of a quick devaluation and have inflated away their debts. Spain is especially prosperous as their economics are essentially not as bad as the rest of the Southern League.


    Bring back the Hanseatic League ? Lol. Maybe. There is definitely a split in outlook, culture and lifestyle between Northern and Southern Europe and that is a BIG part of the problem. It is also the inherent tension between capitalism and socialism. Throw in basic nationalism and historical differences and it is easy to see why the EU in general and Euro in particular were so inherently flawed and doomed to ultimate failure. Even if we assume that the concepts of European unity and integration somehow survive, at least in part, the consensus appears to be that change is essential and that the current forms cannot continue.

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    Default Re: SURVEY - Will The Euro Survive ?

    Today everyone is waiting for the latest announcement from the ECB as to how many bonds they're going to buy from the spendthrift nations of Europe. Sorry to ask a stupid question but is Draghi really unable to see how well such a program has worked out for us ? Sigh.

    And here it is - Hot of the presses from Reuters - Over vehement opposition from the Bundesbank, Draghi has just announced an "unlimited" program of bond buying by the ECB to backstop government bonds in the secondary markets. First, this is a clear violation of the long held taboo at the ECB about buying government debt. Secondly, it is clearly targeted at helping Spain and Italy by lowering the interest they have to pay on their debt. Third, it does NOT come with a clear set of strings attached. At least with Greece, there were clear budgetary targets and other conditions that Greece was SUPPOSED to meet. They haven't of course but why be picky ? Draghi said there were things that those countries and other beneficiaries were supposed to do but didn't give out a clue what any of them might be. Sigh.

    Afaic, Draghi might just as well have parroted JFK's Inaugural Address of 1961 : "We will pay any price, bear any burden, endure any hardship, support any friend ( Italy and Spain ), screw any foe ( Germany ) to assure the success and survival of spendthrift and irresponsible borrowing and spending by some of our member nations. " Krugie probably came in his pants. Sigh.

    Oh btw, economic growth for the EU is DOWN .2% for the latest quarter. Sigh.

    Now it is REALLY starting to get interesting. Is it possible ... could it be... that Germany will be the one to say "Fuck this , you guys are crazy " and THEY will leave the EU ? And maybe lead a few other nations out with them ? Zofia's idea of a new "Hanseatic League" type arrangement is starting to look a little more viable and likely. Isn't it ?
    Last edited by Eric Stoner; 09-06-2012 at 08:10 AM.

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    Default Re: SURVEY - Will The Euro Survive ?

    from


    (snip)"New car sales in Germany had been holding up well through June—a miracle in face of the fiasco playing out in the Eurozone’s auto industry. But they caved in July; and instead of miraculously recovering in August, they caved again: down 4.7% from August 2011 and down 8.6% from July. Ominously, sales of medium-heavy and heavy trucks, a thermometer of the business investment climate, fell off a cliff: -18.8% for trucks over 12 metric tons, -15.1% for trucks over 20 tons, and -9.4% for tractors (now down 5% for the year!).

    Retail sales, which had been on a roll through May, stalled in June, and skidded in July. Early indications are even worse for August: retailers’ negative sentiment worsened for the fourth month in a row. They suffered from a nasty margin squeeze, given the dual pressures of wholesale price inflation that “increased sharply,” and heavy discounting, as Germans struggle to make ends meet [read.... The “Pauperization of Europe”].

    And manufacturing, the vaunted engine of the German economy, after a rout in July, was hit by another “deterioration in business conditions” in August. It recorded the fifth month in a row of job losses. And export orders plummeted at the “steepest rate since April 2009.”

    Alas, 2009 brings up horrid memories. In the first quarter that year, GDP plunged 3.8% from the fourth quarter of 2008, when it had already plunged 2.1% from the third quarter. Annualized, those two quarters added up to a double-digit collapse in GDP, the worst in the history of the Federal Republic. The German economy, which lives and dies by its exports, was saved not by hard-working Germans or smart managers or a superior system, but by the drunken stimulus frenzy in the US and China. German companies and their suppliers sucked with all their might on a wide variety of programs, from green-energy boondoggles to the cash-for-clunkers fiasco.

    But now, without such foreign deus ex machina, Germany’s ability to bail out the Eurozone is more than ever in doubt. So, the ECB’s latest machinations hit fertile ground when they were leaked after ECB President Mario Draghi outlined them to the European Parliament late Monday: buy up Spanish and Italian debt with maturities of up to three years—up from the six to 12 months proposed at his last press conference. It worked. Italian and Spanish yields on two-year debt dropped below 2.8%, down from over 7.5% and 6.9% respectively this summer. Central-bank market manipulation at is best. Crisis solved. In phantasy land. Until reality sets in.

    Namely a rift in Germany. Chancellor Angela Merkel and a slew of other politicians support it more or less tacitly. But the Bundesbank is having conniptions; printing money to fund government deficits violates EU treaties that limit the ECB to the single mandate of price stability. It just can’t find, not even between the lines, any traces of a hidden second mandate, such as funding government deficits. Bundesbank President Jens Weidmann—”I cannot see how you can ensure the stability of a monetary union by violating its legal provisions,” he’d said last November—has hardened his attacks on bond buying programs. With broad public support in Germany. And Merkel, who wants to hang on to her job more than anything else, will tread carefully. Yet, if Germany skids into a deep export-driven recession, all bets are off.

    The world is becoming “less stable,” with a “bloated” financial sector, “bankrupt governments” looking for ever more revenues, and the possibility of a “gold mania,” said Doug Casey, chairman of Casey Research"(snip)


    Zofia may very well turn out to be correct that Germany may make the 'first move' away from the Euro ... and possibly the EU itself ... to avoid German taxpayers being stuck with never-ending bailout costs for their spendthrift EuroZone neighbors.

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    Default Re: SURVEY - Will The Euro Survive ?

    ^^^^ That's the trillion dollar question, isn't it ? Where does all of this end ? Just how much are the Germans ( and other solvent EU members ) supposed to do ?

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    Default Re: SURVEY - Will The Euro Survive ?

    Who could have seen this comming?


    IMF Official: Greece Will Need Third Bailout

    Greece will need a third bailout package from the euro zone, and the country's European creditors will have to find the money for it, according to a senior International Monetary Fund official.

    "Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favorable terms," Thanos Catsambas, an IMF alternate executive director, who represents Greece at the Fund's board, said in an interview

    http://online.wsj.com/article/SB1000...NewsCollection
    The country has been looted.

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