The tragedy and the farce of the eurozone

mike65

Yet again a meeting (ecofin) to cobble together a formula to save the eurozone area has been postponed abandoned as the major players refuse to co-operate and wait for something to turn up (and not just the Italian governments plan to save itself). The working committee are meeting this evening in what's surely the last chance saloon for a credible response. Our glorious leaders will still be having a long dinner tomorrow evening. Here's hoping they don't suffer indigestion due to failure of nerve.

Godge

And the point of your blog post is?

Dob74

The euro has been a total failure.
It was designed to please everyone but you cant please everyone.
Time to make decesion, who is in and who is out. Germany to take the lead in a strong Euro. The PIIGS to have there(our) own currency.
Wont happen yet unless we arrive at the brink of complete finanical meltdown.

murphaph

Dob74 wrote: »

The euro has been a total failure.

Disagree that it has been a total failure. It has been spectacularly badly implemented and far too much trust was put in the individual member states to act responsibly with far too few checks and balances. The northern European states could quite happily continue in fiscal union.

The Euro is literally too big to fail IMO. If it does, we'll have a world depression that will make the 1930s look positive. It's sickening that so much taxpayers' money has to now be used to shore up reckless member states who either borrowed too much themselves or allowed their banks go virtually unregulated and borrow and lend money like it was going out of fashion.

The Germans know that walking away from the Euro is probably not even an option as the collapse of the Euro would cause such a depression on a world scale that German companies (who depend heavily on export markets) would be laying off workers en masse within a week.

ardmacha

The Euro is like people who got married and who expect to continue to live as if they are single, without compromise. The likes of the Irish carried on as if living in a high inflation place where property prices go up forever, while the Germans have no concept of a virtual revaluation. Unfortunately this marriage cannot be easily annulled, instead a reaffirmation of vows is needed.

andrew

There's the eurozone which everyone in the euro would like, and then there's the euozone which actually has to exist in order to make it a success. This crisis is the process by which people's conception of what it is to have a eurozone will change. You can't have a monetary union without a fiscal union. Unless countries get to have a say about other country's spending decisions before they're implemented, then the euro probably will fail, at some point. But it need not fail now.

Dob74

murphaph wrote: »

Disagree that it has been a total failure. It has been spectacularly badly implemented and far too much trust was put in the individual member states to act responsibly with far too few checks and balances. The northern European states could quite happily continue in fiscal union.

The Euro is literally too big to fail IMO. If it does, we'll have a world depression that will make the 1930s look positive. It's sickening that so much taxpayers' money has to now be used to shore up reckless member states who either borrowed too much themselves or allowed their banks go virtually unregulated and borrow and lend money like it was going out of fashion.

The Germans know that walking away from the Euro is probably not even an option as the collapse of the Euro would cause such a depression on a world scale that German companies (who depend heavily on export markets) would be laying off workers en masse within a week.

Nothing is too big to fail. A few years ago Anglo and Lehman's where too big to fail.
As for the Depression we re in the middle of it. It started in 2007 and will continue for the forseeable future as long as politicians fail to make the tough decisions.
Germany will have to make the decision as to what happens next. Merkel doesnt seem to want to pull the trigger just yet. She is just denying the inevitable that Grecce and germany can not share the same currency. So does Germany through all the PIIGS out our just one or two.
If the PIIGS keep the euro and Germany leads the new euro.
The PIIGS could de-value and Germany along with the more prudent countries can continue with business usual.
We would have to pay more for consumer goods and our debt would be written down.
Do politicians have the balls for such decsions, I doubt it.




P.S. October always a month for large stock crashes(29,87)

Sudsy86

The 1 question in my mind evertime I read post on THE EU CRISIS is!

Where is all the money gone?

Some1 must have it, but if the EU is broke and America is broke, who has all the money that was there?

ei.sdraob

Sudsy86 wrote: »

Some1 must have it, but if the EU is broke and America is broke, who has all the money that was there?

Its sloshing around China nowadays creating a bubble there

Scofflaw

Sudsy86 wrote: »

The 1 question in my mind evertime I read post on THE EU CRISIS is!

Where is all the money gone?

Some1 must have it, but if the EU is broke and America is broke, who has all the money that was there?

It's in private hands, basically. Governments borrow first and foremost from the private sector, which includes all the large money pots like pension funds, banks, and insurance funds.

cordially,
Scofflaw

foxyboxer

Dob74 wrote: »

Nothing is too big to fail. A few years ago Anglo and Lehman's where too big to fail.

It did fail. And look what happened. A US Investment bank. 3 years and there is still a crisis. Imagine if a country fails/defaults.

Sand

foxyboxer wrote: »

It did fail. And look what happened. A US Investment bank. 3 years and there is still a crisis. Imagine if a country fails/defaults.

The narrative that everything would have been fine - or better - if only Lehmans had been rescued at any cost by the US taxpayer is a narrative that suits the banks and investors.

Lehmans continued to pay out bumper bonuses right up to the end. By September 2008, the size of the Lehman bonus pool exceeded the value of the bank itself. Rescuing such an institution would have been incredibly dangerous.

This crisis afterall is built on the shoulders of all the previous bailouts of badly run banks.

Scofflaw

Sand wrote: »

The narrative that everything would have been fine - or better - if only Lehmans had been rescued at any cost by the US taxpayer is a narrative that suits the banks and investors.

Lehmans continued to pay out bumper bonuses right up to the end. By September 2008, the size of the Lehman bonus pool exceeded the value of the bank itself. Rescuing such an institution would have been incredibly dangerous.

This crisis afterall is built on the shoulders of all the previous bailouts of badly run banks.

And there's the problem - banks are always bailed out where possible, and it's the badly run ones that need it most. Yet we let them run themselves like private institutions the rest of the time.

cordially,
Scofflaw

Sand

Banks are not always bailed out. They are bailed out where its chosen to bail them out.

And its badly run banks that need to left to die as a priority.

As for government run banks - NAMA is going to be a hilarious lesson in why you dont give the government a bank.

Scofflaw

Sand wrote: »

Banks are not always bailed out. They are bailed out where its chosen to bail them out.

Which, for banks over a certain size, is almost always. Apart from Lehmans and the Icelandic banks, the banks that have been allowed fail are small in relation to the size of the national banking sector they were part of.

Sand wrote: »

And its badly run banks that need to left to die as a priority.

As for government run banks - NAMA is going to be a hilarious lesson in why you dont give the government a bank.

Luckily NAMA isn't really a bank, so there's some limit to the damage it can do.

cordially,
Scofflaw

cml387

I'm not sure if it's been quoted elsewhere in these threads,but William Hague (UK Foreign Sec.) described the Euro area as a burning building with no exits.

Anything done this evening will cause great harm,the trick is finding the solution that causes the least great harm.

Dob74

foxyboxer wrote: »

It did fail. And look what happened. A US Investment bank. 3 years and there is still a crisis. Imagine if a country fails/defaults.

Lehman's is not the cause of the crisis.
The decade of unregulated borrowing is the cause of the crisis.
Same thing that happened in the 1920's has happened in the 00's.
Too much borrowing.

aidan24326

Scofflaw wrote: »

Yet we let them run themselves like private institutions the rest of the time.

And despite the billions pumped into our main banks, and their effective natioalisation, they're still basically running themselves like a private business. The government should have been WAY tougher and harder on the banks rather than cowtowing to them. It's ridiculous really. Now we have AIB moaning they can't attract the right 'talent' with a 500K per year salary cap, further evidence that these people still aren't living on the same planet as the rest of us, and should have been reined in alot more than they have been.

Sticky_Fingers

cml387 wrote: »

I'm not sure if it's been quoted elsewhere in these threads,but William Hague (UK Foreign Sec.) described the Euro area as a burning building with no exits.

Anything done this evening will cause great harm,the trick is finding the solution that causes the least great harm.

I'd go a step further and say we're all trapped in the building and the Chuckle Brothers are the ones manning the fire hose.

nommm

What can we actually expect to happen when the Euro does fail? I don't really understand how all this works.

Sand

Nobody knows for sure what a Euro breakup will look like - but it will probably mean an extreme shakeup of power and wealth, which is why those with the power and wealth are so against it. You can be sure its being wargamed in more than a few capitals across Europe and the world though.

Dob74

Sand wrote: »

Nobody knows for sure what a Euro breakup will look like - but it will probably mean an extreme shakeup of power and wealth, which is why those with the power and wealth are so against it. You can be sure its being wargamed in more than a few capitals across Europe and the world though.

Is the Greek referendum being called by Merkel and Sark on the qt?
Or is the Greek PM doing a solo run?
Euro has dropped from 1.41 to 1.36 against the USD since yesterday.
Interesting times we live in.

coolshannagh28

The Greek PM is playing a blinder , Merkel and Sarkosy will have to throw the kitchen sink at Greece to ensure the referendum is passed .We are talking 100 % writedown on debt and a new peripheral strategy ,hopefully our bozos are clued in and can piggyback on this strategy to our benefit.

FreudianSlippers

Dob74 wrote: »

Lehman's is not the cause of the crisis.
The decade of unregulated borrowing is the cause of the crisis.
Same thing that happened in the 1920's has happened in the 00's.
Too much borrowing.

I disagree. I think there are multiple factors in play.

1) The US government really hyper-inflated the US housing market through Fannie Mae and Freddie Mac housing subsidies.
2) US policy, or more correctly Wall Street's influence on US policy, allowed firms to make irresponsible gambles, to erroneously rate very risky securities as safe investments, held too little capital to cover the failure of these risks and also that bets were made on who would default on their mortgages and insured their losses with companies like AIG.

Ireland's issue is that we ran with the excessive credit that was given out and bought into the property bubble. When things started to go south in the US, it was only a matter of time before confidence lowered here and the bubble burst.

Amberman

coolshannagh28 wrote: »

The Greek PM is playing a blinder , Merkel and Sarkosy will have to throw the kitchen sink at Greece to ensure the referendum is passed .We are talking 100 % writedown on debt and a new peripheral strategy ,hopefully our bozos are clued in and can piggyback on this strategy to our benefit.

I think they are clued in enough...everyones watching and expects nothing less than an orderly queue of PIIGS calling the shots to the increasingly furious and desperate Merkozy.

Heres a decent article on the decision of G-Pap to wash his hands and throw it all over to the people to decide. Note, he has just lost his majority after 2 defections today.

I have a sneaky suspicion the Greeks will surprise everyone and go along with the deal as presented.

The entire global banking system blows up if Greece hard-defaults as a credit event is triggered.

If a credit event isn't triggered, CDS contracts essentially become meaningless and bond yields surge to make up the shortfall in hedging strategies...which makes the debt even more unsustainable in PIIGS and simply makes the Euro circus lurch onto the next, much more dangerous target...Italy.

Rock + Hard place.

Voltex

I think we are in a very bad place righrt now. Papandreou has blindsided not only Merkel and Sarks, but his own party by the sounds of it.

Until the polls start coming through as to how this referendum will go, we are going to see huge risk aversion on the markets; Yen, Chf, US$ going through the roof, US treasuries and bunds gaining, gold soaring

I think youll also see the ECB very active in the market buying up Italian debt, because at yields above 6.25 this is actually addding to the National debt and we will be moving very quickly towards bailout territory.

Scary times ahead Im afraid!

flutered

no one can accuse the greeks of not playing hardball, if they are to get shafted they will have plenty e.u. lube to ease it, it seems that our guys should not be allowed near a monopoly table never mind sitting in with the sharks.

Dob74

FreudianSlippers wrote: »

I disagree. I think there are multiple factors in play.

1) The US government really hyper-inflated the US housing market through Fannie Mae and Freddie Mac housing subsidies.
2) US policy, or more correctly Wall Street's influence on US policy, allowed firms to make irresponsible gambles, to erroneously rate very risky securities as safe investments, held too little capital to cover the failure of these risks and also that bets were made on who would default on their mortgages and insured their losses with companies like AIG.

Ireland's issue is that we ran with the excessive credit that was given out and bought into the property bubble. When things started to go south in the US, it was only a matter of time before confidence lowered here and the bubble burst.

Dem American's are to blame? You may think this if you are a member of orga Fianna Fail.
We(our government) let the Banks go unregulated.
We let the price of houses reach unrealistic prices
We let banks borrow on international markets with no capital to back it up.
We let the banks dole out money to developers with no real means to cover there massive debts.
We turned a blind eye to all this and anyone who spoke out was told to go kill themselves.
We are to blame.

If it wasnt a US banking problem, there would have been anther problem some where else in our globalised unregulated banking industry.
We where stupid enough to think we where rich when we where just borrowing money from the international market and not thinking of the day that we would have to pay this money back.

FreudianSlippers

Dob74 wrote: »

Dem American's are to blame? You may think this if you are a member of orga Fianna Fail.
We(our government) let the Banks go unregulated.
We let the price of houses reach unrealistic prices
We let banks borrow on international markets with no capital to back it up.
We let the banks dole out money to developers with no real means to cover there massive debts.
We turned a blind eye to all this and anyone who spoke out was told to go kill themselves.
We are to blame.

If it wasnt a US banking problem, there would have been anther problem some where else in our globalised unregulated banking industry.
We where stupid enough to think we where rich when we where just borrowing money from the international market and not thinking of the day that we would have to pay this money back.

um... you're the one who brought up Lehman and the US.

There is a problem in the global unregulated banking industry. All countries sell bonds on the international bond market!