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On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen.
We can only hope! 
Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones.
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On July 25 2012 12:21 hzflank wrote:Show nested quote +On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen. We can only hope! Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones.
It is not a blessing though, devaluation is not a fix to an economy. It is simply weird that countries run on the principle that they spend more than the country receives in income. This is not how you want to run your finances as an individual, a company, and no, also not as a country. Individuals get in trouble, companies go bankrupts, but for countries it is somehow common practice. The EU made it one of their main goals to break this ever increasing debt cycle (and obviously failed), but it should still be strived for.
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On July 26 2012 04:55 Domus wrote:Show nested quote +On July 25 2012 12:21 hzflank wrote:On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen. We can only hope! Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones. It is not a blessing though, devaluation is not a fix to an economy. It is simply weird that countries run on the principle that they spend more than the country receives in income. This is not how you want to run your finances as an individual, a company, and no, also not as a country. Individuals get in trouble, companies go bankrupts, but for countries it is somehow common practice. The EU made it one of their main goals to break this ever increasing debt cycle (and obviously failed), but it should still be strived for.
Countries are special because their 'income' can comes from two sources: 1) international trade 2) taxes.
So a country that has a large public surplus has one of two things happen: it runs a large trade surplus vs everyone else, like Germany/China, and to continue to run that surplus they have to turn around and let the people they trade against borrow money to continue to buy the surplus goods
or 2) have a successful tax policy that transfers national wealth from citizens/corporations to the central government. Debt financing is no different from taxes, except that in some ledger the national wealth is now located with the Treasury Department instead of with individuals of that country.
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On July 26 2012 05:10 Sub40APM wrote:Show nested quote +On July 26 2012 04:55 Domus wrote:On July 25 2012 12:21 hzflank wrote:On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen. We can only hope! Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones. It is not a blessing though, devaluation is not a fix to an economy. It is simply weird that countries run on the principle that they spend more than the country receives in income. This is not how you want to run your finances as an individual, a company, and no, also not as a country. Individuals get in trouble, companies go bankrupts, but for countries it is somehow common practice. The EU made it one of their main goals to break this ever increasing debt cycle (and obviously failed), but it should still be strived for. Countries are special because their 'income' can comes from two sources: 1) international trade 2) taxes. So a country that has a large public surplus has one of two things happen: it runs a large trade surplus vs everyone else, like Germany/China, and to continue to run that surplus they have to turn around and let the people they trade against borrow money to continue to buy the surplus goods or 2) have a successful tax policy that transfers national wealth from citizens/corporations to the central government. Debt financing is no different from taxes, except that in some ledger the national wealth is now located with the Treasury Department instead of with individuals of that country.
Debt is very different from taxes, because you have to pay back debt, and not taxes. Borrowing money should be a thing of last resort. It has become far to common to borrow money in the first place. Just because everybody is doing it, does not make it a good thing. The EU acknowledges that it is not a good thing, that is why the first goal was to get it below 3%, and below 60% of a countries income.
In the end borrowed money costs the taxpayer more.
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On July 26 2012 04:55 Domus wrote:Show nested quote +On July 25 2012 12:21 hzflank wrote:On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen. We can only hope! Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones. It is not a blessing though, devaluation is not a fix to an economy. It is simply weird that countries run on the principle that they spend more than the country receives in income. This is not how you want to run your finances as an individual, a company, and no, also not as a country. Individuals get in trouble, companies go bankrupts, but for countries it is somehow common practice. The EU made it one of their main goals to break this ever increasing debt cycle (and obviously failed), but it should still be strived for.
If the problem are TRADE IMBALANCES then this exactly is the solution. Because it rises the cost to buy from other countries and lowers the cost to buy at home (in case of deficite country). And it lowers the cost of other countries to buy the stuff your country produces.
The same is true for the exporter if his currency gains value, just exactly inverse. Cheaper to import, more expensive to export.
If you don't believe trade imbalances are a problem you should look at the target 2 balances since the credit market broke down and much fewer new loans where made to the southern countries.
So when this happens :
"A Greek importer, for example, might place an order with a German company. Payments to and from the accounts of the buyer and seller are channeled via central banks, so the German exporter's bank gets a credit with the Bundesbank, which in turn has a claim on the ECB. The Greek importer's bank owes its local central bank, leaving the Bank of Greece with a debit at the ECB.[1]"
and if no transaction (new loan / trade in the other direction) is made from the German to the greek bank it will pile up on the balance sheet of the ECB ... and look what it does :
explanation from wiki:
"TARGET2 provides "automatic central bank funding for EMU countries suffering capital outflows provided through it". In the context of the European sovereign debt crisis (2009- ), these TARGET2 balances have grown, and gained attention. Financial commentator David Marsh, writing in early 2012, noted the balances would "have to be shared out by central banks throughout the Eurosystem ... if EMU fragments into constituent parts. So the pressure on Germany is to keep the balances growing, in order to avoid crystallization of losses that would be hugely damaging not just to Berlin but also to central banks and governments in Paris and Rome".[3] According to a study of the German Ifo Institute for Economic Research IFO the TARGET2 system may be one of the mechanisms by which Eurozone deficit countries have been fighting their financing problems during the debt crisis. [4] In early 2012, Bundesbank chief Jens Weidmann wrote a letter to ECB head Mario Draghi on the subject which "found its way into the columns of the conservative Frankfurter Allgemeine Zeitung newspaper[. It] appeared to suggest more secure collateralization for the overall ECB credits to weaker EMU central banks, which now amount to more than €800 billion under the ESCB’s TARGET2 electronic payment system," Marsh noted in his subsequent column.[5] "
![[image loading]](http://upload.wikimedia.org/wikipedia/commons/thumb/d/da/TARGET2_balances.png/800px-TARGET2_balances.png)
problems with an exit are different ones ... massive defaults for example ... when your assets fall in price but your depts stay stable your fucked which will for example happen when greece leaves ... but thats the ultimate consequence i don't think we can avoid to face them by delaying bankruptcy of countries and their banks.
To dept of countries ... i think goverments shouldn't be allowed to go into debt because that makes them dependant. If they want to spend more then they get from taxes they should (for example in emergencies to stay capable of acting) print it and spend it. Wich is also a form of taxation in the shape of inflation. But at least they don't get dependant on financiers... which dictate policies ... greece anyone ?
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Oh, I definetely believe trade imbalances are a problem. Because it means a country is buying more than it can afford, which in return means that a country is living above its current standard. You are right, devaluation does mean things are more expensive abroad, and cheaper at home, but that does not mean it is a good thing. It is a short-term fix that causes more problems in the long term. Why? Because devaluation only makes sense when you are in debt (country, business, individual), and it does not force a government to have a healthy financial balance.
A healthy financial balance is always better, because a high debt has a big impact on how much money a country can spend. Countries like Italy, Spain and Greece will be far more competitive when they are operating on 60% debt, instead of 120% debt. Why? Because paying off debt puts pressure on the individuals and businesses in a country. They will need to pay more taxes to cover the debt of the government, or the government will be able to do less with similar taxes because they need to cover the debt.
So yes, I know that countries like Italy and Greece used this tool, but I think it is a dumb and lazy tool which contributes to these countries being less competitive today.
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On July 26 2012 06:43 Domus wrote:
Oh, I definetely believe trade imbalances are a problem. Because it means a country is buying more than it can afford, which in return means that a country is living above its current standard. You are right, devaluation does mean things are more expensive abroad, and cheaper at home, but that does not mean it is a good thing. It is a short-term fix that causes more problems in the long term. Why? Because devaluation only makes sense when you are in debt (country, business, individual), and it does not force a government to have a healthy financial balance.
A healthy financial balance is always better, because a high debt has a big impact on how much money a country can spend. Countries like Italy, Spain and Greece will be far more competitive when they are operating on 60% debt, instead of 120% debt. Why? Because paying off debt puts pressure on the individuals and businesses in a country. They will need to pay more taxes to cover the debt of the government, or the government will be able to do less with similar taxes because they need to cover the debt.
So yes, I know that countries like Italy and Greece used this tool, but I think it is a dumb and lazy tool which contributes to these countries being less competitive today.
Yeah ... i agree ... but its better than to let the problem spiral out of control
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I think we are well past any real solution atm and the reason was one from the beggining.
Europe isnt u.s
Countries in the end need their sovereign identities no matter what. In order for europe to existed it must be liked the u.s thus a unified debt and banking system same monetary but also fiscla policy , a central goverment etc etc.
I dont think Countries like Greece and Italy with 5k and 2.5k years of history , or countries with high chauvinism like French and germans want to do that.
No way , in fact some of them didnt even had a referendum in order to join let alone pan european referendum for the real union and all the fuss required.
So inevitably e.e will collapse , Friedman said that years ago , delor also said the same
In a moment of crisis they either gonna fix it or let it fall apart.
guess is gonna be the latter
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I feel no bailouts should be put in place. We need to let the countries learn from their mistakes, including mine (U.S.). It doesn't matter if multiple countries split in two, we need to steer away from the 1 world currency thing.
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Spanish unemployment rate has hit record levels, with nearly one quarter of the labour force unable to find work and young people fearing the worst.
The unemployment rate rose in the second quarter to 24.63 per cent and a huge 53 per cent among the young, despite the start of the tourist season, official figures showed on Friday.
The increase in the overall jobless numbers was smaller than in the first quarter, with the number of eligible people out of work rising to nearly 5.7 million people.
Between April and June, 53,500 people lost their jobs, compared with 365,900 in the first quarter, the national statistics office said.
The unemployment rate rose from 24.4 per cent recorded in the first quarter - already the highest in the industrial world - as Spain entered its third straight quarter of economic contraction.
Among those aged 16 to 24, the rate rose to a huge 53.27 per cent from 52.01 per cent the previous quarter, reflecting the ongoing impact of Spain's double-dip recession following the collapse of a construction boom in 2008.
The number of households in which all eligible members are unemployed rose by 9,300, reaching more than 1.73 million overall.
The country is in its second recession in four years, hit hard by the bursting of the property bubble that threw millions out of work and badly affected the country's banks.
On Monday the Bank of Spain will publish its provisional estimate of economic output in the second quarter, expected to show a contraction of 0.4 per cent, compared with a 0.3 per cent decrease in the first three months.
Under pressure from European authorities, Spain's conservative government has approved tens of billions of euros' worth of spending cuts, tax hikes and other measures.
The latest set of measures announced by Prime Minister Mariano Rajoy on July 11 aimed to save $80bn over three years.
Rajoy says the steps will help cut the public deficit in line with targets agreed with the European Union and strengthen the economy in the long term.
Critics say the measures will make the poor suffer unfairly from moves such as a public sector bonus cut and a rise in sales tax that together will hit consumption.
Hundreds of thousands of Spaniards have marched over recent weeks in protest at the measures.
The Spanish region hardest hit by rising unemployment was Catalonia in the northeast with a rate of 33.92 per cent, Friday's figures showed. The lowest rate was 14.56 per cent in the affluent Basque Country.
Source
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Has anyone been watching series called "Continuum" I find their vision of future quite justified. According to it in time governments had such huge debts that they couldn't pay them back. So huge company concerns payed out their debts and bought rights to rule countries. Dont you think that with this current view "debt is solution to everything" some countries are getting in over their heads?
If countries have negative balance, what organizations have positive? Yeah its those large companies that earn trilions and bilions a year. Do you think its possible that 10 years after now Greece could be called Walmartia ?
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On July 29 2012 08:37 M4nkind wrote:
Has anyone been watching series called "Continuum" I find their vision of future quite justified. According to it in time governments had such huge debts that they couldn't pay them back. So huge company concerns payed out their debts and bought rights to rule countries. Dont you think that with this current view "debt is solution to everything" some countries are getting in over their heads?
If countries have negative balance, what organizations have positive? Yeah its those large companies that earn trilions and bilions a year. Do you think its possible that 10 years after now Greece could be called Walmartia ?
Probably not. People forget that kind of circumvention of democratic process would certainly lead to a lot of social unrest. We should always remind ourselves that the political class are a very, very small minority.
And as I've said in this thread before to people who tell me I have no idea and claim European officials are 'scrambling to solves the debt crisis,' this isn't going to end soon.
Mass debt monetization inc bro's.
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Unfortunately electors tend to elect "free lunch for everybody"-parties. So they elect politicians who finance those "free lunches" by debt instead of taxes. This is more imminent in south europe, however at a somewhat slower pace the same in the northern countries. But: there is no free lunch :-), so we get a giant mess sooner or later. The final solution will always be default on debt or massive devaluation.
If you compare bondholders with 'normal' tax payers, you'll notice that bond-holders are the wealthier/rich people. So public debt installs a permanent money transfer (by paying interest) from the poorer part of society to the richer part. So the difference between poor and rich widens permanently. From a certain point the tax system (taxing the rich more) cannot compensate anymore, so the problem deepens. Increasing public debt is very antisocial in the long run, but frequently promoted by socialist parties.
Regarding the euro-zone: the current structure of the Euro zone cannot be saved, as we need national currencies to compensate for trade deficits. Without that mechanism we have the option of
a) permanent recession because there is no buy power anymore
b) default on debt of the trade-deficit countries
c) establish a permanent money transfer system from the surplus countries to the deficit countries
A fix would be permanent transfers from the surplus countries to the deficit countries, however this will not be accepted by the rich countries voters.
However if you look inside germany, there are massive finance transfers between the poorer and the richer parts of germany (e.g. from south to north and west to east). Else we would have similar problems inbetween the german states as we have now inside EU.
The main problem of german voters regarding permanent money transfer is the fear, that those transfers will permanently finance inefficient, corrupt structures and a level of social welfare we even cannot afford for our "own" people.
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On July 25 2012 12:21 hzflank wrote:Show nested quote +On July 25 2012 00:30 Yuljan wrote:
I really hope our politicians are preparing to leave the euro in secret but knowing angie and the pro-euro radical schäuble this wont happen. We can only hope! Germany leaving the Euro might be the best solution to the problem. The euro would devalue, which would be bad for the wealthier eurozone countries but would be a blessing for the poorer ones.
Germany wont leave alone.
If germany leaves the netherlands and finland and austria will also leave.
Then suddenly its france that has to play the part germany did till now (paying for everyone)
France cant (nor want) to do that.
If germany leaves its the end of the euro.
Instead of all this talk about countrys leaving, maybe we should get more countrys to join.
What about england?
Its pretty rich so am sure it could contribute
"If you compare bondholders with 'normal' tax payers, you'll notice that bond-holders are the wealthier/rich people. So public debt installs a permanent money transfer (by paying interest) from the poorer part of society to the richer part. So the difference between poor and rich widens permanently. From a certain point the tax system (taxing the rich more) cannot compensate anymore, so the problem deepens. Increasing public debt is very antisocial in the long run, but frequently promoted by socialist parties."
Verry good point (your whole post btw) and i completely agree.
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why would england be so dumb to pay for other countries?
germany wont leave tho..at least not with merkel.
unfortunately (maybe luckily?) im no expert ,but how is this mess going to end
if things go on like this? the minority pays the majority because they dont want
to change stuff? thats so stupid (on this scale at least)
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If they disband euro, heavy export countries such as Germany will suffer hard. And poor countries would do well, that's why Germany is not giving up on helping those poor countries. Since if they leave Deutch mark would rise high so that their exports would be screwed and they would get insane recession.
Thats the highest problem of euro - since we have no centralized government and all counties are on their own doing whatever they like they can easily make others suffer. US has same currency same government and thats why its better then Europe situation. Now we just dont know what to do, either we need to make agreements on some governing guidelines or disband euro - thats why Merkel is pushin greeks and spain politically. Some countries made crap desicions and now we all have to suffer, but its ok since we are union.
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On July 30 2012 02:22 M4nkind wrote:
If they disband euro, heavy export countries such as Germany will suffer hard. And poor countries would do well, that's why Germany is not giving up on helping those poor countries. Since if they leave Deutch mark would rise high so that their exports would be screwed and they would get insane recession.
Thats the highest problem of euro - since we have no centralized government and all counties are on their own doing whatever they like they can easily make others suffer. US has same currency same government and thats why its better then Europe situation. Now we just dont know what to do, either we need to make agreements on some governing guidelines or disband euro - thats why Merkel is pushin greeks and spain politically. Some countries made crap desicions and now we all have to suffer, but its ok since we are union.
If Germany would go back to the Deutschmark, it could also inflate it's own currency, therefore getting money AND keeping the DM from getting a too high value.
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On July 30 2012 01:23 Caryc wrote:
why would england be so dumb to pay for other countries?
germany wont leave tho..at least not with merkel.
unfortunately (maybe luckily?) im no expert ,but how is this mess going to end
if things go on like this? the minority pays the majority because they dont want
to change stuff? thats so stupid (on this scale at least)
The likely end game solution is either dissolution, a richer Country leaving the Euro or mass debt monetization (judging from the respones of German and other Northern European posters in this threat, I don't think politcians could sell money printing to their populations, but who knows - nobody circumvents democratic process like unelected EU leaders). Who knows which one is most likely - what is clear is that the European bureaucrats are way out of their depth; they literally have no fucking clue as to what they are doing. Proof of this is that Merkel, who really is the power player in Europe, is a chemist. How can you expect a fucking chemist to solve a sovereign debt crisis which affects 550 million people. Its just farcical, and the EU from the very begining has been a serious of incompetent, unaccountable politicans making terrible decisions with absolutely no thought as to what affect they have on their populations.
Rassy - the U.K government isn't very wealthy at this stage, and any contribution from the UK would have to come through taxation. We're ruinning a ridiculousssss deficit (£160 billion a year, eek!), we have the balance sheets of two failed banks on the books of the taxper (£2 Trillion +, not including the bail out money) and a massive underclass - seriously, its huge and its entrenched. The Tories talk about austerity, yet our deficit is increasing! Mad times! Europe wouldn't want us mate haha.
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On July 30 2012 02:22 M4nkind wrote:
If they disband euro, heavy export countries such as Germany will suffer hard. And poor countries would do well, that's why Germany is not giving up on helping those poor countries. Since if they leave Deutch mark would rise high so that their exports would be screwed and they would get insane recession.
Thats the highest problem of euro - since we have no centralized government and all counties are on their own doing whatever they like they can easily make others suffer. US has same currency same government and thats why its better then Europe situation. Now we just dont know what to do, either we need to make agreements on some governing guidelines or disband euro - thats why Merkel is pushin greeks and spain politically. Some countries made crap desicions and now we all have to suffer, but its ok since we are union.
that's a myth. Germany has 0 natural resources. Everything we export in machinery/chemistry was imported as raw material or machine part. -> if exports get more expensive imports would get cheaper as well. We did well with the strong DM as well, remember ?
and right now our export surplus hurts us as well. Because in reality that means we deliver real goods while getting credit that probably won't be paid back.
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EPT
